Txo Prod. Corp. v. All. Res. Corp. - 509 U.S. 443, 113 S. Ct. 2711 (1993)

Rule:

In determining whether a particular award is so "grossly excessive" as to violate the Due Process Clause of the Fourteenth Amendment, a court need not, and indeed cannot, draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case. However, a general concern of reasonableness properly enters into the constitutional calculus. U.S. Const. amend. XIV.

Facts:

In a common-law slander of title action in West Virginia state court, respondents obtained a judgment against petitioner TXO Production Corp. for $19,000 in actual damages and $10 million in punitive damages. Accepting respondents' version of disputed issues of fact, the record showed that TXO knew that respondent Alliance Resources Corp. had good title to the oil and gas development rights at issue; that TXO acted in bad faith by advancing a claim on those rights on the basis of a worthless quitclaim deed in an effort to renegotiate its royalty arrangement with Alliance; that the anticipated gross revenues from oil and gas development -- and therefore the amount of royalties that TXO sought to renegotiate – were substantial; that TXO was a large, wealthy company; and that TXO had engaged in similar nefarious activities in other parts of the country. Petitioner argued that the punitive damages award violated the due process clause of the Federal Constitution's Fourteenth Amendment, but the trial court denied the motions without opinion. The Supreme Court of Appeals affirmed. Petitioner appealed. 

Issue:

Did the punitive damages award violate the Due Process Clause of the Fourteenth Amendment, U.S. Const. amend. XIV? 

Answer:

No.

Conclusion:

The United States Supreme Court affirmed the award, holding that while no mathematical bright line could be drawn between the constitutionally acceptable and the constitutionally unacceptable punitive award, a general concern of reasonableness properly entered into the constitutional calculus. Thus, the Court rejected petitioner's U.S. Const. amend. XIV substantive due process challenge to the award, ruling that it was not so grossly excessive as to violate due process because the jury could have reasonably determined that petitioner acted in bad faith, in a scheme that was part of a larger pattern of fraud, trickery, and deceit, and in light of the large amount of money at stake with respect to the oil and gas rights at issue, along with petitioner's own sizable wealth, the award was not beyond the power of the State to allow.