BMW of N. Am. v. Gore

517 U.S. 559 (1996)

 

RULE:

Three guideposts are used to determine whether a punitive damages award is grossly excessive: (1) the degree of reprehensibility of the nondisclosure; (2) the disparity between the harm or potential harm suffered and the punitive damages award; and (3) the difference between this remedy and the civil penalties authorized or imposed in comparable cases.

FACTS:

Respondent discovered that his new car had been repainted. He brought suit against petitioner distributor alleging that its failure to disclose the repair constituted suppression of a material fact. Evidence was introduced at trial that petitioner had a policy of nondisclosure where pre-delivery repairs amounted to less than 3 percent of the retail price of the car. The jury awarded actual damages of $4,000 and punitive damages of $4,000,000. Petitioner's motion to set aside the punitive damages award was denied by both the trial court and the appellate court. However, the appellate court reduced the award to $2,000,000 because it was inaccurately calculated. The Supreme Court granted certiorari.

ISSUE:

Is a state court's punitive damages award of $2 million to a customer who purchased a car for $40,750.88 grossly excessive and does it exceed the limit under the due process clause of the Fourteenth Amendment?

ANSWER:

Yes.

CONCLUSION:

Only when an award can fairly be categorized as "grossly excessive" in relation to a state’s legitimate interests in punishing unlawful conduct and deterring its repetition does it enter the zone of arbitrariness that violates the Due Process Clause. For that reason, the federal excessiveness inquiry appropriately begins with an identification of the state interests that a punitive award is designed to serve. Three guideposts are used to determine whether a punitive damages award is grossly excessive: (1) the degree of reprehensibility of the nondisclosure; (2) the disparity between the harm or potential harm suffered and the punitive damages award; and (3) the difference between this remedy and the civil penalties authorized or imposed in comparable cases. The Court held that petitioner's conduct was not particularly reprehensible because it only caused minor economic harm and the 500 to 1 ratio of punitive damages to compensatory damages was not reasonable. Therefore, the denial of a motion to set aside the punitive damages award was REVERSED and REMANDED.

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