Procedural Due Process – review pursuant to the 14th amendment to
ensure appropriate procedural safeguards
o Jury instructions must have sufficient guidance and there must be some sort
of post verdict judicial review
Substantive Due Process – review for excessiveness
o BMW v. Gore’s three guideposts for determining whether punitive damages
are excessive under the 14 th amendment:
• Reprehensibility of D
• Ratio of punitives damages to likely/actual harm caused by D
• Other civil/criminal penalties available for D’s conduct
State Farm majority held that the 1st Gore guidepost (D’s
reprehensibility) was the most important indicium of whether punitive
damages are reasonable.
What are indicia of reprehensibility?
How does the Court believe State Farm fared under these indicia? Do
What role does the out-of-state conduct or dissimilar conduct play in
the Court’s decision that punitive damages are excessive? Do you
Regarding Gore’s 2nd guidepost – what presumption regarding the ratio
between punitive and compensatory damages does the Court
When is this Court likely to see deviation from single digit multipliers as
Is D’s wealth a legitimate consideration?
What is the relevance of the 3 rd guidepost – other fines/penalties?
P’s husband died of lung cancer after smoking. P sued D for fraud claiming D
had known for 40 years that cigarettes caused cancer but concealed
information from the public and/or lied about it (decedent relied on those lies to
continue smoking). Jury awarded $525,000 in compensatories (after
remittance) and $79.5 million in punitives. Oregon SCT upheld award after
applying Gore’s guideposts. D challenged the lower court’s jury instructions.
P’s attorney told jury to “think about how many other Jesse Williams in the last
40 years in the State of Oregon there have been….”
Jury instruction: “Punitive damages are awarded against a D to punish misconduct and
to deter misconduct” and “are not intended to compensate P or anyone else for
damages caused by the D’s conduct.”
State court rejected D’s request for a different instruction telling jury they could
consider harm suffered by others in determining relationship of D’s conduct to P’s harm
BUT that it could not punish D for the impact of its alleged misconduct on other persons
who may bring lawsuits of their own
Why does the SCT reverse the award – i.e., what does the jury
instruction allow the jury to do?
Is this a procedural due process (lack of adequate safeguards)
problem or a substantive due process (direct review of excessiveness)
After Williams, can juries still take into account the harm D has
caused to other people D in determining the reprehensibility of D’s
conduct (Gore guidepost #1)?
What must lower courts do to ensure that juries seek “simply to
determine reprehensibility ” but not “punish for harm caused
General Rule: No punitive damages for breach of contract unless there
is an independent tort in the contract setting that can be the basis of
the punitive damages award.
WHY this general hostility to punitive damages in breach of contract?
o Tradition – forms of action are separate
o Hostility to punitive damages – courts don’t want to extend beyond torts
and “open the floodgates” of litigation
o Deterrent effect on entering contracts could be too significant
o Examples – Formosa, Haslip, State Farm, Gore
o Haslip (alternative theory)
Bad-Faith Breach (insurance only?)
o State Farm – excellent example
Tortious Interference with contract/business relations
o Courts usually require that D’s breach of contract w/ P have the purpose of
interfering w/ P’s other relationships – NOT enough that D knew could hurt other
Gross Negligence (?)
o Usually not a basis for punitives in breach of contract UNLESS there is some physical
harm to person or property other than that under the contract
o Ordinary negligence is never the basis for punitives (contract or not)
Formosa invited Presidio to bid on a construction project for concrete foundations. Sent a
bid package w/ representations re each parties’ obligations on (1) ordering & delivery of
material, (2) work schedule, (3) beginning/end dates.
o Presidio relied on these representations to enter a bid, which was accepted.
o Job was substantially delayed, ended up costing far more than estimated.
o Presidio discovered that Formosa intentionally lied about the bid package & ran a scheme
to induce contractors to make low bids & then stay in the game even after the Formosa
breached its obligations
o Jury found fraud and awarded punitive damages. Texas SCT upheld despite Formosa’s
argument that this was merely breach of K. Fraud was an independent tort.
Doesn’t most of Presidio’s damage come from breach of contract? What is it about
fraudulent inducement that makes us so willing to award punitives?
What if D intentionally began scheduling deliveries or multiple workmen after the project
began? Is that fraud or just intentional breach? Is timing everything on these sorts of
claims for punitive damages? Why?