State Farm v. Campbell
In a decision issued on April 7, 2003, the United States Supreme Court re-emphasized the principles by which punitive damage awards must be scrutinized. Those criteria are (1) the degree of reprehensibility of the defendantís misconduct; (2) the disparity between the actual or potential harm suffered by plaintiff and the punitive damages award; and (3) the difference between the punitive damages award and the civil penalties imposed in comparable cases. The Court held that a US$145 million punitive damages award rendered in a case in which compensatory damages of US$1 million had been awarded was grossly excessive and violated the Due Process Clause of the Fourteenth Amendment to the United States Constitution.
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Case Note contributed by Thomas H. Belknap Jr., attorney with the law firm Healy & Baillie LLP, New York, Contributors to the Website for the United States
The Court made clear that "[i]t should be presumed a plaintiff has been made whole for his injuries by compensatory damages, so punitive damages should only be awarded if the defendantís culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence." Significantly, the Court noted that "nor, as a general rule, does a State have a legitimate concern in imposing punitive damages to punish a defendant for unlawful acts committed outside of the Stateís jurisdiction." Moreover, "Due Process does not permit courts, in the calculation of punitive damages, to adjudicate the merits of other partiesí hypothetical claims against a defendant under the guise of the reprehensibility analysis. . . ." Importantly, "[a] defendantís dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages."
As to the second factor, that is, the permissible size of a
punitive damages award, the Supreme Court noted as follows:
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