CHAPTER 12 CONTROL ON PUNITIVE DAMAGES

• Jurisdiction: United States
• Publication year: 2018

The U.S. Supreme Court has clearly stated that "[p]unitive damages may properly be imposed to further a State's legitimate interests in punishing unlawful conduct and deterring its repetition."¹ These damages often exceed the fines assessed by the state if the same person had acted criminally to damage the plaintiff.

The skills of plaintiff's trial lawyers have convinced juries to award damages in sums that exceed the annual budget of Greece. The jury assesses the enormous damages because it becomes inflamed by the wrongful conduct of the defendant and agrees with the lawyer's suggestion that the jury "teach the defendant a lesson" to stop it from doing the same to others. The argument has been successful in thousands of suits, from Vermont to California.

For years punitive damage awards were unlimited. A $40 compensatory damage award resulted in a $5,000,000.00 punitive damages verdict. Some juries assessed billions of dollars in punitive damages with no constraint from the courts other than the wealth of the defendant.

In 2003 the U.S. Supreme Court put limited punitive damages in the United States when State Farm Mutual Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003) (State Farm or Campbell)² by a 6-3 vote, overturned a $145 million verdict against an insurer. The Supreme Court concluded that a punitive damages award of $145 million, where full compensatory damages were $1 million, is excessive and violates the Due Process Clause of the Fourteenth Amendment.

Justice Kennedy, writing for the majority, limited the ability of state and federal courts to award huge punitive damages awards and concluded that a punitive damage award more than a single digit multiplier of the compensatory damages award would seldom, if ever, pass the due process test. The Supreme Court, in BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996), set forth specific tests that must be met before punitive damages could fulfill the requirements of due process.

Campbell created a major, precedent changing, limitation on the right of a jury to assess punitive damages, setting limits on total amounts that can be assessed and the types of wrongful conduct a jury can consider.

In Nickerson v. Stonebridge Life Ins. Co., 5 Cal. App. 5th 1 (Cal. Ct. App. 2016), applying the State Farm precedent and the California Supreme Court precedent in Simon v. San Paolo U.S. Holding Co., Inc., 35 Cal. 4th 1159 (2005), the court was asked to deal with a punitive damage award the trial court found to be excessive.

The sole issue raised by both parties concerned the punitive damage award, specifically, whether the trial court's remittitur of that award from $19 million to $350,000 based on a ratio of punitive to compensatory damages of 10 to 1

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