CHAPTER 13 THE PUNITIVE DAMAGES TEST

• Jurisdiction: United States
• Publication year: 2018

The test to determine if punitive damages assessed were calculated within the requirements of the due process clause of the Fifth and Fourteenth Amendments to the U.S. Constitution was established by BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996). It requires the trial court to consider, after concluding that the plaintiff was wronged by the defendant and that the plaintiff is entitled to compensatory damages, when assessing punitive damages:

1. The degree of reprehensibility of the defendant's misconduct;

2. The disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and

3. The difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.

The test requires the plaintiff to present evidence that establishes more than a wrong perpetrated by the defendant on the plaintiff. The plaintiff must prove that the misconduct was reprehensible, that the disparity between the actual damages and the punitive award are reasonable and that they fit within the civil penalties authorized in other cases.

A. Torts for Which Punitive Damages May be Awarded

It is a well-established principle of the common law, that a jury may impose punitive or exemplary damages in suits alleging:

• Trespass,

• Improper or false pleading,

• Default,

• Failure to appear,

• Economic wrongs,

• Crimes,

• The tort of bad faith, and

• All intentional torts.

It is clear that, regardless of the tort involved, the availability of punitive damages is reserved for the most reprehensible, outrageous, or insulting acts. All acts that cause economic harm by tortious conduct are not sufficiently reprehensible to justify a significant sanction in addition to compensatory damages.

Punitive damages may be awarded for conduct that is outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others. Punitive damages in tort cases may be awarded, not only for actual intent to injure or evil motive, but also for recklessness, serious indifference to or disregard for the rights of others, or even gross negligence. ¹

The U.S. Supreme Court believes that the application of the doctrine is proper. By the common law as well as by statute, people are often punished for aggravated misconduct or lawless acts, by means of a civil action, and the damages, inflicted by way of penalty or punishment, given to the party injured.² Although the court recognized that the power of assessing punitive damages may be improperly assessed and the desire of litigants for a test that would allow them to determine whether the punitive award was proper, the court concluded that it "cannot, draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case."³

Punitive damages are not limited to the individual participating in reprehensible conduct. His employer or principal can be assessed punitive damages because of the actions of an agent or employee, but only if:

1. the principal authorized the doing and the manner of the act, or

2. the agent was unfit and the principal was reckless in employing him, or

3. the agent was employed in a managerial capacity and was acting in the scope of employment, or

4. the principal or a managerial agent of the principal ratified or approved the act." ⁴

A corporation can be punished, therefore, for actions of employees. A principal can be punished for acts of an agent, even if the corporation or the principal had no knowledge of the acts and would have prohibited the act had they known of them.

B. Evidence Must Be Limited to Wrongs Against the Plaintiff

The methodology used by plaintiffs' lawyers to convince a jury to award punitive damages is, and has been, to compare the wrongful conduct to conduct that not only harms the plaintiff but the entire world. The U.S. Supreme Court was offended by, and found wrongful, the position taken by such plaintiffs' lawyers. For...