Scott Lemieux

Calculations and the Constitution: Punitive Damages

The New York Times has an excellent article about businesses trying to shield themselves from civil lawsuits and--in the other half of the classic bait-and-switch--also lessen the regulations placed on business in wake of Enron and other scandals. In addition to Congress, however, business groups will also be seeking help this month from the Supreme Court.

In the case that will be argued this week, Philip Morris USA v. Mayola Williams, the Supreme Court is likely to further protect business from "unreasonable" punitive damage awards. As Prof. Morrison recently argued in detail (What Is The Supreme Court Doing Deciding How Much Is Too Much for Punitive Damages?), there is no good reason to believe that the jury award is legally "unreasonable.”

The case concerns a decision by the Oregon Supreme Court that--notwithstanding recent holdings by the Supreme Court that some "grossly excessive" punitive damage awards--a $79.5 million award against Phillip Morris was consistent with due process, because the company's misconduct caused physical harm and affected a group of Oregonians much larger than the plaintiff. If the Supreme Court reverses, the effects could be considerable.

The Supreme Court has, as mentioned, already ruled that some punitive damage awards determined by juries and upheld by state courts can be unconstitutional under the due process clause of the 14th Amendment. These decisions are not, to put it mildly, models of legal clarity. (As Justice Scalia said in his dissent in BMW v. Gore, "One might understand the Court's eagerness to enter this field, rather than leave it with the state legislatures, if it had something useful to say. In fact, however, its opinion provides virtually no guidance to legislatures, and to state and federal courts, as to what a "constitutionally proper" level of punitive damages might be.") When exactly does a judgment reached by the system become unconstitutional? Justice Kennedy made the following argument in State Farm v. Campbell:

...we have been reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award. ("[W]e have consistently rejected the notion that the constitutional line is marked by a simple mathematical formula, even one that compares actual and potential damages to the punitive award"); We decline again to impose a bright-line ratio which a punitive damages award cannot exceed. Our jurisprudence and the principles it has now established demonstrate, however, that, in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.

I certainly have nothing against consequentialism and empirical analysis when applying vague constitutional provisions. Ruling punitive damages unconstitutional apparently because a ratio of 10-1 or greater doesn't feel right (because the human finger only has 10 hands?) is a different issue. These precedents could lead to further federal interventions to protect companies from meritorious claims based on exceptionally dubious legal reasoning.

As you may have already deduced, the coalitions in these cases have been unusual, with Justice Stevens (generally the Court's most liberal member) writing one major opinion, and Justice Ginsburg joining the staunch conservatives Justices Scalia and Thomas in dissent. This may provide some measure of hope that the new appointments to the court may prove less favorable to these precedents. This is, however, unlikely. Scalia and Thomas have displayed an (admittedly highly sporadic) commitment to theories of constitutional interpretation that produce "liberal" results in some cases. Justices Roberts and Alito are more pragmatic, and Alito in particular has a remarkably slavish pro-business voting record. The Supreme Court, alas, is likely to expand the State Farm precedent to awards for physical injuries, and to continue to be an ally to lawbreaking businesses for many years to come.

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Posted at 11:01 AM, Oct 31, 2006 in
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