25.9 Constitutional Limitations on Punitive Damages

• Jurisdiction: Arizona

25.9 Constitutional Limitations on Punitive Damages. Prior to the more recent Supreme Court decisions (discussed below) which clarified the constitutional protections and limitations, Arizona nevertheless maintained several procedural protections to assure that an award of punitive damages was justified and reasonable.⁷⁵

In particular, the plaintiff had to survive a motion for directed verdict, the jury had to exercise its discretion to award punitive damages, the verdict was subject to post-trial motions and review by the trial judge, and the judgment was subject to appeal.⁷⁶ Upon review, the appellate court would then apply the following criteria to evaluate punitive damage awards: (1) the proportionality of the award to the wrongdoer’s financial position to ensure that the goals of punishment and deterrence are served without financially devastating the defendant⁷⁷; (2) the reprehensibility of the defendant’s conduct,⁷⁸ including the duration of the misconduct, the defendant’s awareness of the risk of harm, and any concealment; and (3) the profitability to the defendant of the wrongful conduct.⁷⁹

In addition to the protections afforded by Arizona precedent, additional constitutional protections afforded by the Due Process Clause of the Fourteenth Amendment have been applied in the context of punitive damages.⁸⁰ Specifically, awards of punitive damages are subject to constitutional restraints,⁸¹ as a grossly excessive punitive damages award violates the Due Process Clause of the Fourteenth Amendment to the United States Constitution because the defendant did not have “fair notice” of its exposure to the extent of punishment that could be imposed.⁸²

In evaluating the constitutionality of a punitive damages award, which is reviewed on appeal de novo,⁸³ there are three specific considerations: (1) the degree of reprehensibility of the defendant’s misconduct; (2) the ratio between compensatory and punitive damages; and (3) how the award compares with other penalties.⁸⁴

The degree of reprehensibility of a defendant’s misconduct is the most important indication of the reasonableness of the punitive damages award.⁸⁵ In assessing where misconduct falls on the reprehensibility scale, the court must consider a number of factors, with no single element being conclusive:

· Whether the harm caused was physical as opposed to economic;

· Whether the tortious conduct evinced an indifference to or reckless disregard of the health or safety of others;

· Whether the target of the conduct had financial vulnerability;

· Whether the conduct involved repeated actions or was an isolated incident; and

· Whether the harm was the result of intentional malice, trickery, or deceit, or mere accident.⁸⁶

Acts of violence or threats of bodily harm are the most reprehensible, followed by acts taken in reckless disregard for others’ health or safety, then, affirmative acts of trickery and deceit, and finally, acts or omissions and mere negligence.⁸⁷ The existence of any one of these factors weighing in favor of a plaintiff may not be sufficient to sustain a punitive damages award; and, the absence of all of them renders any award suspect.⁸⁸ The Arizona Court of Appeals has held that even the middle to high range of reprehensible conduct is subject to a 4:1 ratio in awarding punitive damages.⁸⁹

Examining the reasonableness of the ratio between compensatory and punitive damages is fact intensive and specific to each case.⁹⁰ In calculating the ratio, a specific mathematical formula has been consistently rejected; however, while single-digit multipliers are more likely to comport with due process, a factor more than four comes “close to the line” of constitutional impropriety.⁹¹ The proper inquiry is “whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant’s conduct as well as the harm that has actually occurred.”⁹² A high ratio may be justified if a particular egregious act results in a small amount of damages or such damages are difficult to compute.⁹³

Conversely, when compensatory damages are adequate, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee.⁹⁴ In fact, Arizona is “guided by the Supreme Court’s suggestion in State Farm that when the compensatory damage award is substantial, a punitive damages award equal to the compensatory award ‘may reach the...