The U.S. Supreme Court and punitive damages: on the road to reform: after years of developing its jurisprudence, the Supreme Court in State Farm signals that the days of runaway, irrational punitive damages may be ending.

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State Farm Mutual Automobile Insurance Co.

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The U.S. Supreme Court and punitive damages: on the road to reform: after years of developing its jurisprudence, the Supreme Court in State Farm signals that the days of runaway, irrational punitive damages may be ending.

LAST APRIL, the U.S. Supreme Court issued what may be the most important punitive damage ruling ever to come from that Court--State Farm Mutual Automobile Insurance Co. v. Campbell. (1) First, the Court set a single-digit multiplier as the ordinary constitutional limit for the permissible ratio between compensatory damages and punitive damages. Second, it also dealt a body blow to the pattern-and-practice cases by imposing a "similarity to the conduct that caused the harm" test on the admissibility of evidence that can be used to prove malice or reprehensibility. It stated: "A defendant's dissimilar acts, independent from the acts upon which liability was premised, may not serve as a basis for punitive damages." (Emphasis supplied.)

The Court set the foundation for both these rules in the procedural and substantive constitutional limitations imposed by the due process clause of the 14th Amendment. That clause, the Court stated, "prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor."

In addition, the court made a number of other important comments:

* The wealth of the defendant cannot justify an otherwise unconstitutional punitive damage award.

* The disparity between pe...

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