Are constitutional challenges to punitive damages still available?

• Author: Diveley, E. Marie Tucker

I join the Court's opinion on the understanding that it leaves the door open for a holding that the due process clause constrains the imposition of punitive damages in civil cases brought by private parties.

-- Justice Brennan, concurring in Browning-Ferris Industries v. Kelco Disposal Inc., 492 U.S. 257, 280 (1989).

IN JUNE 1993, in TXO Production Corp. v. Alliance Resources Corp.,(1) the U.S. Supreme Court had the opportunity to swing open the door for due process challenges to punitive damages by holding that the punitive award in that case violated due process. But the plurality decision produced four separate opinions from the justices, showing that there is no discernible coalition on the Court on this issue. TXO also continued the High Court's record of never having overturned a punitive damage award. Although the net decision in TXO found that the Constitution places substantive limits on punitive damage awards, it appears to retreat from the more definitive position the Court announced a year earlier in Pacific Mutual Life Insurance Co. v. Haslip.(2)

Then a year later, in June 1994, the Court reviewed another case involving a constitutional challenge to a punitive damages award. In Honda Motor Co. v. Oberg(3) the Court reversed and remanded based on a procedural due process challenge to a punitive damages award. Although the Court reversed on procedural grounds, it continued to acknowledge that excessive verdicts could occur, but again it refused to create standards to determine excessiveness.

PUNITIVE DAMAGES

1. Historical Perspective

   Punitive damages are meant to punish defendants or to deter the likelihood of the wrongful conduct being repeated. The concept of punitive damages has long been a part of our legal history. Predecessors of modem punitive damages can be traced to the Bible, the Hindu Code and the Babylon Code.(4) In English common law, punitive damages were used to supplement criminal law and were imposed "against antisocial conduct that was otherwise undeterred by the criminal law."(5)

   In England and originally in the United States, punitive damages were confined to the narrow group of intentional torts. In the United States the first case to award exemplary damages was Genay v. Norris,(6) in which the South Carolina Supreme Court upheld "vindictive damages" against a physician who spiked the wine of the person with whom he was to duel with very powerful drugs.

   In the early decisions, punitive damages were awarded for conduct that was willful and wanton, but not usually for gross negligence. However, in the past few decades, the application of punitive damages has grown dramatically. Many commentators believe that they are "out of control."(7) At least one ties the punitive damages explosion to these legal developments: (1) the expansion from intentional torts to product liability; (2) mass torts, where one defendant can repeatedly be found liable for punitive damages for basically the same conduct; and (3) their award in some contract cases contrary to the settled law.(8)

2. Constitutional Challenges

   Under traditional common law, the Supreme Court said in Haslip, juries award punitive damages, if applicable, after being instructed to consider the "gravity of the wrong and the need to deter similar wrongful conduct." Punitive damages awards then are reviewed by the trial court and appropriate appellate courts. Justice Blackmun, in his opinion for the Court in Haslip, noted "every state and federal court that has considered the question has ruled that the common law method for assessing punitive damages does not in itself violate due process." However, he also acknowledged that unlimited jury or judicial discretion in awarding punitive damages could "invite extreme results that jar one's constitutional sensibilities."

   The constitutional arguments most frequently raised are founded on either the Eighth Amendment's excessive fines prohibition or the 14th Amendment's due process clause, which prohibits depriving "any person of life, liberty or property without due process of law."

   1. Excessive Fines Clause

      The argument based on the Eighth Amendment was rejected by the Supreme Court in Browning-Ferris Industries v. Kelco Disposal Inc.,(9) the Court holding that the excessive fines clause did not apply to cases between private parties, even though punitive damages are imposed through the aegis of courts and serve to advance governmental interests.

      This decision appears to have settled the issue, although the objection is still raised in punitive damage appeals.(10)

      In addition, Browning-Ferris potentially leaves an argument based on the excessive fines prohibition in the light of a recent development wherein states share in punitive awards to private parties. At least six states have enacted statutes that require a specific percentage of punitive damage awards to be tendered to the state.

      Support for this argument derives from the fact that Justice Blackmun's rejection of the excessive fines argument in Browning-Ferris focused on the state's not taking any affirmative step to punish or, to use his words, extract "large payments or forfeitures." Therefore, it could be argued that where the state shares the punitive award, the state's involvement is sufficient to justify imposition of the excessive fines prohibition.

   2. Due Process

      The other constitutional argument against punitive damages is based on due process and, in effect, subsumes the objection based on excessive fines since the concept of due process requires that legal proceedings be "consistent with `fundamental fairness' . . . [and] consonant with `ordinary notions of fair play and settled rules of law' . . . and that they not offend 'the community's sense of fair play and decency."'(11)

      Due process protects both procedural and substantive rights. In punitive award cases, procedural challenges usually are directed to the "amount of guidance provided to the jury, the level of post-trial protections and the standard of proof."(12) Substantive due process focuses on the award itself. The arguments usually are that the amount awarded is out of touch with the compensatory award or that multiple awards for a single wrongful conduct are constitutionally excessive.

      As Justice Brennan noted in Browning-Ferris, there is no dispute that a jury award would be overturned if it were the "product of bias or passion or if it was reached in proceedings lacking basic elements of fundamental fairness."(13)

      Specific application of these constitutional objections is addressed in the following sections.

      THE DECISIONS

1. Haslip

   In Haslip, the Supreme Court addressed the issue of whether the due process clause of the 14th Amendment places any restraints on punitive damage awards. The case involved a claim by employees of a municipality for insurance fraud against an insurance company, Pacific Mutual, and one of its agent. The jury awarded a total of $1.04 million, of which $840,000 apparently was punitive, an amount more than four times the compensatory award and 200 times the plaintiff's expenses.

   With two justices dissenting and one concurring separately, the Alabama Supreme Court affirmed,(14) and the U.S. Supreme Court also affirmed in an opinion by Justice Blackmun. Justice O'Connor dissented, and Justices Scalia and Kennedy concurred in the judgment on separate grounds.

   Pacific Mutual argued that the punitive damage award was the product of "unbridled jury discretion" and violated due process, focusing on the open-ended jury instructions used in the trial court, which, it contended, left the award to the standardless discretion of the jury.

   Although the majority upheld the award, Justice Blackmun expressed concern that punitive damages have "run wild," but he concluded that the Court could not draw a mathematical bright line between what is constitutionally acceptable and what is not. He emphasized that "general concerns of reasonableness and adequate guidance from the [trial] court" should enter into the constitutional calculus."(15)

   The Court followed three different paths. The majority recognized that the Constitution places limits on punitive damage awards but held that those limits were not exceeded in the case before it. Justice Blackmun announced a two-part test for determining whether the procedures employed satisfy common law requirements and thereby the procedural due process requirements as well.

   First, the state must provide the jury with "adequate guidance" as to the nature and intent of punitive damages. Justice Blackmun found that the discretion given the jury in Haslip was not unlimited and did not violate due process.

   Second, the post-verdict judicial review...