Beyond State Farm: due process constraints on noneconomic compensatory damages.

• Author: DeCamp, Paul

INTRODUCTION I. THE HISTORY OF JUDICIAL REVIEW OF NONECONOMIC COMPENSATORY DAMAGES AWARDS A. The Origins of Judicial Review of Damages Awards for Excessiveness in the English Courts B. English Decisions Recognize the Conceptual Differences Between Reviewing Economic and Noneconomic Damages C. American Courts Adopt "Passion or Prejudice" or "Shock the Conscience" Approaches to Judicial Review D. To Compare or Not to Compare Awards in Other Cases E. Compensatory Damages and the Seventh Amendment II. THE INADEQUACY OF TRADITIONAL PROCEDURES FOR AWARDING NONECONOMIC COMPENSATORY DAMAGES AND REVIEWING VERDICTS A. Jurors Receive Inadequate Guidance or Evidence to Enable Them to Render an Informed Verdict B. Judicial Review of Awards of Noneconomic Compensatory Damages for Excessiveness Generally Lacks Principle or Predictability III. THE SUPREME COURT'S PUNITIVE DAMAGES JURISPRUDENCE A. Pacific Mutual Life Insurance Co. v. Haslip: The Court's First Procedural Due Process Evaluation of Punitive Damages 1. The Majority Upholds Common-Law Punitive Damages Procedures 2. Justice O'Connor's Dissent B. TXO Production Corp. v. Alliance Resources Corp.: A Plurality Recognizes a Substantive Due Process Prohibition of Grossly Excessive Punitive Damages 1. The Plurality Upholds the Verdict Under Substantive and Procedural Due Process Standards 2. Justice O'Connor's Dissent C. Honda Motor Co. v. Oberg: Procedural Due Process Mandates Judicial Review of the Amount of Punitive Damages Awards for Excessiveness D. BMW of North America, Inc. v. Gore: The Court Provides Substantive Due Process "Guideposts" to Determine Excessiveness E. Cooper Industries, Inc. v. Leatherman Tool Group, Inc.: The Court Requires De Novo Appellate Review of Excessiveness Analysis F. State Farm Mutual Automobile Insurance Co. v. Campbell: The Court Suggests a Constitutional Limiting Ratio of Nine-To-One IV. DUE PROCESS REQUIRES MEANINGFUL GUIDANCE TO JURIES AND MEANINGFUL JUDICIAL REVIEW OF NONECONOMIC COMPENSATORY DAMAGES AWARDS A. Trial Courts Should Inform Jurors of a Range of Noneconomic Compensatory Damages Awards in Factually Comparable Cases B. Trial Courts Should Exercise a Two-Tiered Review of Noneconomic Compensatory Damages Awards for Excessiveness C. Appellate Courts Should Exercise a Two-Tiered Review of Trial Court Rulings Regarding Excessiveness CONCLUSION INTRODUCTION

Punitive damages and noneconomic compensatory damages (1) share much in common. In the seventeenth, eighteenth, and nineteenth centuries, such damages were largely undifferentiated and, in some respects, interchangeable, with punitive damages serving in part as an avenue of recovery for types of intangible harms not yet expressly recognized as compensable. Unlike economic damages, which have long been subject to relatively robust judicial scrutiny, judges traditionally have left determination of punitive and noneconomic compensatory damages almost exclusively to juries, subject only to review under such amorphous standards as abuse of discretion, passion or prejudice, or "shocks the conscience."

Since 1991, however, the Supreme Court of the United States has decided a line of cases interpreting the Due Process Clause of the Fourteenth Amendment (2) as imposing limits, both substantive and procedural, on awards of punitive damages. Primarily in response to a concern that traditional modes of review were increasingly failing to reign in "runaway" punitive damages awards, the Court has dramatically increased the scope of judicial involvement in reviewing punitive damages awards for excessiveness. The Court's decision in State Farm Mutual Automobile Insurance Co. v. Campbell (3) is the latest and perhaps most far-reaching of these punitive damages decisions, imposing for all intents and purposes a presumptive nine-to-one maximum ratio of punitive to compensatory damages in most cases, and arguably a one-to-one maximum ratio in cases involving substantial compensatory damages awards.

The question remains, however, whether the due process concern for avoiding arbitrary deprivations of property requires similar scrutiny of noneconomic compensatory damages. This is especially true given the largely common origins of punitive damages and noneconomic compensatory damages, as well as the concerns regarding the manner in which punitive damages are awarded that led the Court to break from historical practice and to ratchet up the level of judicial scrutiny for such awards. As with punitive damages, juries have increasingly awarded--and courts have upheld--unusually large awards of noneconomic compensatory damages. Although appellate decisions involving million-dollar noneconomic compensatory damages awards were rare fifteen or twenty years ago, today courts have begun to affirm eight-figure awards casually in unpublished opinions that simply repeat the mantra that every case is unique and that the court cannot say that the verdict is beyond the range permitted by the evidence. The same flaws in common-law punitive damages procedure that led to the Supreme Court's current due process jurisprudence, including inadequate guidance to juries, lack of objective criteria against which to measure outcomes, and the absence of principled bases for judicial review, have now been exposed with regard to the procedures by which juries award and courts review noneconomic compensatory damages.

Part I of this article examines the history of judicial review of noneconomic damages awards for excessiveness, tracing the development of judicial review from English common law through the widespread adoption in the United States of the prevailing standards for evaluating such awards. Part II examines why the current standards of judicial review for evaluating excessiveness of noneconomic compensatory damages are inadequate. Part III provides an overview of the Supreme Court's punitive damages jurisprudence, with emphasis on statements by the justices reflecting concerns that also apply with respect to noneconomic compensatory damages.

Part IV argues that the due process principles that have informed the Court's punitive damages decisions require similarly enhanced procedural safeguards with respect to noneconomic compensatory damages. The article proposes modifying current practice in three respects to ensure that awards of noneconomic compensatory damages comport with the Due Process Clause. First, juries should be informed of the range of previous awards for comparable cases. Providing that objective information should enhance the ability of juries to reach informed and appropriate determinations. Second, trial courts should exercise a two-tiered review of noneconomic compensatory damages verdicts. Where a verdict is within the range established by prior comparable cases, traditional deference to jury fact-finding is appropriate. Where, however, a verdict exceeds awards in comparable cases, trial courts should treat the award as presumptively excessive and should remit the verdict unless the record contains a clear and objective basis warranting the departure. Third, appellate courts should review for abuse of discretion a trial court's selection of comparable cases, as well as a trial court's decision to uphold a verdict that falls within the range established by those comparable cases, but should review de novo a decision allowing noneconomic compensatory damages that exceed that range. These proposed changes would bring the law of noneconomic compensatory damages into line with current punitive damages jurisprudence and would protect the rights of all litigants to be free of arbitrary deprivations of property while still preserving the unobjectionable aspects of the common-law system for awarding damages and respecting the jury's role in this process.

1. THE HISTORY OF JUDICIAL REVIEW OF NONECONOMIC COMPENSATORY DAMAGES AWARDS

   As discussed below, early English courts considered their role in reviewing damages awards to be limited to determining whether the jury's verdict had been tainted by misconduct. Beginning in the middle of the seventeenth century, however, the courts began to examine damages awards purely on the ground that a party contended that the verdict was too large. The English courts used various formulations of the test for excessiveness and did not differentiate between compensatory and punitive damages for these purposes. The reported decisions also use similar terminology when analyzing economic and noneconomic compensatory damages, although the courts quickly recognized that reviewing these various types of damages involved very different inquiries and afforded greater deference to verdicts involving noneconomic damages. American decisions followed these English precedents, eventually settling into a pattern of reviewing all types of damages for "passion or prejudice" or inquiring whether the verdict "shocks the conscience." In addition, the right to a jury trial embodied in the Seventh Amendment to the United States Constitution (4) affects in some respects how courts have approached review of compensatory damages.

   1. The Origins of Judicial Review of Damages Awards for Excessiveness in the English Courts

      As Lord Kenyon noted in 1792, "[t]he ancient method of correcting the errors of juries was by the harsh proceeding of attaint, which was productive of no remedy to the aggrieved party." (5) In his view, "the Courts did wisely to rid themselves of such an inconvenience in the administration of justice, by the milder remedy of setting aside an erroneous verdict, and sending the case back to the revision of another jury." (6) Thus arose the procedural device of awarding a new trial. Before the middle of the seventeenth century, however, the English courts appear to have construed their authority in ruling on a motion for new trial as confined to the question whether misconduct during the trial or on the part of the jury had corrupted the verdict, not whether the damages...