Due Process & Punitive Damages
BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996)
SUPREME COURT OF THE UNITED STATES
517 U.S. 559
October 11, 1995
May 20, 1996
CERTIORARI TO THE SUPREME COURT OF ALABAMA
After respondent Gore purchased a new BMW automobile from an authorized Alabama dealer, he discovered that the car had been repainted. He brought this suit for compensatory and punitive damages against petitioner, the American distributor of BMW's, alleging, inter alia, that the failure to disclose the repainting constituted fraud under Alabama law. At trial, BMW acknowledged that it followed a nationwide policy of not advising its dealers, and hence their customers, of predelivery damage to new cars when the cost of repair did not exceed 3 percent of the car's suggested retail price. Gore's vehicle fell into that category. The jury returned a verdict finding BMW liable for compensatory damages of $4,000, and assessing $4 million in punitive damages. The trial judge denied BMW's post-trial motion to set aside the punitive damages award, holding, among other things, that the award was not “grossly excessive” and thus did not violate the Due Process Clause of the Fourteenth Amendment. See, e.g., TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 454. The Alabama Supreme Court agreed, but reduced the award to $2 million on the ground that, in computing the amount, the jury had improperly multiplied Gore's compensatory damages by the number of similar sales in all States, not just those in Alabama.
Held: The $2 million punitive damages award is grossly excessive and therefore exceeds the constitutional limit. Pp. 7-26.
(a) Because such an award violates due process only when it can fairly be categorized as “grossly excessive” in relation to the State's legitimate interests in punishing unlawful conduct and deterring its repetition, cf. TXO, 509 U.S., at 456, the federal excessiveness inquiry appropriately begins with an identification of the state interests that such an award is designed to serve. Principles of state sovereignty and comity forbid a State to enact policies for the entire Nation, or to impose its own policy choice on neighboring States. See e.g., Healy v. Beer Institute, 491 U.S. 324, 335-336. Accordingly, the economic penalties that a State inflicts on those who transgress its laws, whether the penalties are legislatively authorized fines or judicially imposed punitive damages, must be supported by the State's interest in protecting its own consumers and economy, rather than those of other States or the entire Nation. Gore's award must therefore be analyzed in the light of conduct that occurred solely within Alabama, with consideration being given only to the interests of Alabama consumers. Pp. 7-13.
(b) Elementary notions of fairness enshrined in this Court's constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to punishment but also of the severity of the penalty that a State may impose. Three guideposts, each of which indicates that BMW did not receive adequate notice of the magnitude of the sanction that Alabama might impose, lead to the conclusion that the $2 million award is grossly excessive. Pp. 13-14.
(c) None of the aggravating factors associated with the first (and perhaps most important) indicium of a punitive damages award's excessiveness—the degree of reprehensibility of the defendant's conduct, see e.g., Day v. Woodworth, 13 How. 363, 371—is present here. The harm BMW inflicted on Gore was purely economic; the presale repainting had no effect on the car's performance, safety features, or appearance; and BMW's conduct evinced no indifference to or reckless disregard for the health and safety of others. Gore's contention that BMW's nondisclosure was particularly reprehensible because it formed part of a nationwide pattern of tortious conduct is rejected, because a corporate executive could reasonably have interpreted the relevant state statutes as establishing safe harbors for nondisclosure of presumptively minor repairs, and because there is no evidence either that BMW acted in bad faith when it sought to establish the appropriate line between minor damage and damage requiring disclosure to purchasers, or that it persisted in its course of conduct after it had been adjudged unlawful. Finally, there is no evidence that BMW engaged in deliberate false statements, acts of affirmative misconduct, or concealment of evidence of improper motive. Pp. 14-20.
(d) The second (and perhaps most commonly cited) indicium of excessiveness—the ratio between the plaintiff's compensatory damages and the amount of the punitive damages, see e.g., TXO, 509 U.S., at 459—also weighs against Gore, because his $2 million award is 500 times the amount of his actual harm as determined by the jury, and there is no suggestion that he or any other BMW purchaser was threatened with any additional potential harm by BMW's nondisclosure policy. Although it is not possible to draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case, see, e.g., id., at 458, the ratio here is clearly outside the acceptable range. Pp. 20-23.
(e) Gore's punitive damages award is not saved by the third relevant indicium of excessiveness—the difference between it and the civil or criminal sanctions that could be imposed for comparable misconduct, see, e.g., Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 23—because $2 million is substantially greater than Alabama's applicable $2,000 fine and the penalties imposed in other States for similar malfeasance, and because none of the pertinent statutes or interpretive decisions would have put an out-of-state distributor on notice that it might be subject to a multimillion dollar sanction. Moreover, in the absence of a BMW history of noncompliance with known statutory requirements, there is no basis for assuming that a more modest sanction would not have been sufficient. Pp. 23-25.
(f) Thus, BMW's conduct was not sufficiently egregious to justify the severe punitive sanction imposed against it. Whether the appropriate remedy requires a new trial or merely an independent determination by the Alabama Supreme Court of the award necessary to vindicate Alabama consumers' economic interests is a matter for that court to address in the first instance. Pp. 25-26.
646 So. 2d 619, reversed and remanded.
STEVENS, J., delivered the opinion of the Court, in which O'CONNOR, KENNEDY, SOUTER, and BREYER, JJ., joined. BREYER, J., filed a concurring opinion, in which O'CONNOR and SOUTER, JJ., joined. SCALIA, J., filed a dissenting opinion, in which THOMAS, J., joined. GINSBURG, J., filed a dissenting opinion, in which REHNQUIST, C. J., joined.
STEVENS, J., Opinion of the Court
JUSTICE STEVENS delivered the opinion of the Court.
The Due Process Clause of the Fourteenth Amendment prohibits a State from imposing a “`grossly excessive'” punishment on a tortfeasor. TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 454 (1993) (and cases cited). The wrongdoing involved in this case was the decision by a national distributor of automobiles not to advise its dealers, and hence their customers, of predelivery damage to new cars when the cost of repair amounted to less than 3 percent of the car's suggested retail price. The question presented is whether a $2 million punitive damages award to the purchaser of one of these cars exceeds the constitutional limit.
In January 1990, Dr. Ira Gore, Jr. (respondent), purchased a black BMW sports sedan for $40,750.88 from an authorized BMW dealer in Birmingham, Alabama. After driving the car for approximately nine months, and without noticing any flaws in its appearance, Dr. Gore took the car to “Slick Finish,” an independent detailer, to make it look "'snazzier than it normally would appear.'" 646 So. 2d 619, 621 (Ala. 1994). Mr. Slick, the proprietor, detected evidence that the car had been repainted. [n1] Convinced that he had been cheated, Dr. Gore brought suit against petitioner BMW of North America (BMW), the American distributor of BMW automobiles. [n2] Dr. Gore alleged, inter alia, that the failure to disclose that the car had been repainted constituted suppression of a material fact. [n3] The complaint prayed for $500,000 in compensatory and punitive damages, and costs.
At trial, BMW acknowledged that it had adopted a nationwide policy in 1983 concerning cars that were damaged in the course of manufacture or transportation. If the cost of repairing the damage exceeded 3 percent of the car's suggested retail price, the car was placed in company service for a period of time and then sold as used. If the repair cost did not exceed 3 percent of the suggested retail price, however, the car was sold as new without advising the dealer that any repairs had been made. Because the $601.37 cost of repainting Dr. Gore's car was only about 1.5 percent of its suggested retail price, BMW did not disclose the damage or repair to the Birmingham dealer.
Dr. Gore asserted that his repainted car was worth less than a car that had not been refinished. To prove his actual damages of $4,000, he relied on the testimony of a former BMW dealer, who estimated that the value of a repainted BMW was approximately 10 percent less than the value of a new car that had not been damaged and repaired. [n4] To support his claim for punitive damages, Dr. Gore introduced evidence that since 1983 BMW had sold 983 refinished cars as new, including 14 in Alabama, without disclosing that the cars had been repainted before sale at a cost of more than $300 per vehicle. [n5] Using the actual damage estimate of $4,000 per vehicle, Dr. Gore argued that a punitive award of $4 million would provide an appropriate penalty for selling approximately 1,000 cars for more than they were worth.
In defense of its disclosure policy, BMW argued that it was under no obligation to disclose repairs of minor damage to new cars and that Dr. Gore's car was as good as a car with the original factory finish. It disputed Dr. Gore's assertion that the value of the car was impaired by the repainting and argued that this good-faith belief made a punitive award inappropriate. BMW also maintained that transactions in jurisdictions other than Alabama had no relevance to Dr. Gore's claim.
The jury returned a verdict finding BMW liable for compensatory damages of $4,000. In addition, the jury assessed $4 million in punitive damages, based on a determination that the nondisclosure policy constituted “gross, oppressive or malicious” fraud. [n6] See Ala. Code §§6-11-20, 6-11-21 (1993).
BMW filed a post-trial motion to set aside the punitive damages award. The company introduced evidence to establish that its nondisclosure policy was consistent with the laws of roughly 25 States defining the disclosure obligations of automobile manufacturers, distributors, and dealers. The most stringent of these statutes required disclosure of repairs costing more than 3 percent of the suggested retail price; none mandated disclosure of less costly repairs. [n7] Relying on these statutes, BMW contended that its conduct was lawful in these States and therefore could not provide the basis for an award of punitive damages.
BMW also drew the court's attention to the fact that its nondisclosure policy had never been adjudged unlawful before this action was filed. Just months before Dr. Gore's case went to trial, the jury in a similar lawsuit filed by another Alabama BMW purchaser found that BMW's failure to disclose paint repair constituted fraud. Yates v. BMW of North America, Inc., 642 So. 2d 937 (Ala. 1993). [n8] Before the judgment in this case, BMW changed its policy by taking steps to avoid the sale of any refinished vehicles in Alabama and two other States. When the $4 million verdict was returned in this case, BMW promptly instituted a nationwide policy of full disclosure of all repairs, no matter how minor.
In response to BMW's arguments, Dr. Gore asserted that the policy change demonstrated the efficacy of the punitive damages award. He noted that while no jury had held the policy unlawful, BMW had received a number of customer complaints relating to undisclosed repairs and had settled some lawsuits. [n9] Finally, he maintained that the disclosure statutes of other States were irrelevant because BMW had failed to offer any evidence that the disclosure statutes supplanted, rather than supplemented, existing causes of action for common-law fraud.
The trial judge denied BMW's post-trial motion, holding, inter alia, that the award was not excessive. On appeal, the Alabama Supreme Court also rejected BMW's claim that the award exceeded the constitutionally permissible amount. 646 So. 2d 619 (1994). The court's excessiveness inquiry applied the factors articulated in Green Oil Co. v. Hornsby, 539 So. 2d 218, 223-224 (Ala. 1989), and approved in Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 21-22 (1991). 646 So. 2d, at 624-625. Based on its analysis, the court concluded that BMW's conduct was “reprehensible”; the nondisclosure was profitable for the company; the judgment “would not have a substantial impact upon [BMW's] financial position”; the litigation had been expensive; no criminal sanctions had been imposed on BMW for the same conduct; the award of no punitive damages in Yates reflected “the inherent uncertainty of the trial process”; and the punitive award bore a “reasonable relationship” to “the harm that was likely to occur from [BMW's] conduct as well as . . . the harm that actually occurred.” Id., at 625-627.
The Alabama Supreme Court did, however, rule in BMW's favor on one critical point: The court found that the jury improperly computed the amount of punitive damages by multiplying Dr. Gore's compensatory damages by the number of similar sales in other jurisdictions. Id., at 627. Having found the verdict tainted, the court held that “a constitutionally reasonable punitive damages award in this case is $2,000,000,” id., at 629, and therefore ordered a remittitur in that amount. [n10] The court's discussion of the amount of its remitted award expressly disclaimed any reliance on “acts that occurred in other jurisdictions”; instead, the court explained that it had used a “comparative analysis” that considered Alabama cases, “along with cases from other jurisdictions, involving the sale of an automobile where the seller misrepresented the condition of the vehicle and the jury awarded punitive damages to the purchaser.” [n11] Id., at 628.
Because we believed that a review of this case would help to illuminate “the character of the standard that will identify constitutionally excessive awards” of punitive damages, see Honda Motor Co. v. Oberg, 512 U.S. ___, ___ (1994) (slip op., at 4), we granted certiorari, 513 U.S. ___ (1995).
Punitive damages may properly be imposed to further a State's legitimate interests in punishing unlawful conduct and deterring its repetition. Gertz v. Robert Welch, Inc., 418 U.S. 323 , 350 (1974); Newport v. Fact Concerts, Inc., 453 U.S. 247, 266-267 (1981); Haslip, 499 U.S., at 22. In our federal system, States necessarily have considerable flexibility in determining the level of punitive damages that they will allow in different classes of cases and in any particular case. Most States that authorize exemplary damages afford the jury similar latitude, requiring only that the damages awarded be reasonably necessary to vindicate the State's legitimate interests in punishment and deterrence. See TXO, 509 U.S., at 456; Haslip, 499 U.S., at 21, 22. Only when an award can fairly be categorized as “grossly excessive” in relation to these interests does it enter the zone of arbitrariness that violates the Due Process Clause of the Fourteenth Amendment. Cf. TXO, 509 U.S., at 456. For that reason, the federal excessiveness inquiry appropriately begins with an identification of the state interests that a punitive award is designed to serve. We therefore focus our attention first on the scope of Alabama's legitimate interests in punishing BMW and deterring it from future misconduct.
No one doubts that a State may protect its citizens by prohibiting deceptive trade practices and by requiring automobile distributors to disclose presale repairs that affect the value of a new car. But the States need not, and in fact do not, provide such protection in a uniform manner. Some States rely on the judicial process to formulate and enforce an appropriate disclosure requirement by applying principles of contract and tort law. [n12] Other States have enacted various forms of legislation that define the disclosure obligations of automobile manufacturers, distributors, and dealers. [n13] The result is a patchwork of rules representing the diverse policy judgments of lawmakers in 50 States.
11. Other than Yates v. BMW of North America, Inc., 642 So. 2d 937 (Ala. 1993), in which no punitive damages were awarded, the Alabama Supreme Court cited no such cases. In another portion of its opinion, 646 So. 2d, at 629, the court did cite five Alabama cases, none of which involved either a dispute arising out of the purchase of an automobile or an award of punitive damages. G. M. Mosley Contractors, Inc. v. Phillips, 487 So. 2d 876, 879 (Ala. 1986); Hollis v. Wyrosdick, 508 So. 2d 704 (Ala. 1987); Campbell v. Burns, 512 So. 2d 1341, 1343 (Ala. 1987); Ashbee v. Brock, 510 So. 2d 214 (Ala. 1987); and Jawad v. Granade, 497 So. 2d 471 (Ala. 1986). All of these cases support the proposition that appellate courts in Alabama presume that jury verdicts are correct. In light of the Alabama Supreme Court's conclusion that (1) the jury had computed its award by multiplying $4,000 by the number of refinished vehicles sold in the United States and (2) that the award should have been based on Alabama conduct, respect for the error-free portion of the jury verdict would seem to produce an award of $56,000 ($4,000 multiplied by 14, the number of repainted vehicles sold in Alabama).
12. See, e.g., Rivers v. BMW of North America, Inc., 214 Ga. App. 880, 449 S. E. 2d 337 (1994) (nondisclosure of presale paint repairs that occurred before state disclosure statute enacted); Wedmore v. Jordan Motors, Inc., 589 N. E. 2d 1180 (Ind. App. 1992) (same).
13. Four States require disclosure of vehicle repairs costing more than 3 percent of suggested retail price. Ariz. Rev. Stat. Ann. §28-1304.03 (1989); N. C. Gen. Stat. §20-305.1(d)(5a) (1995); S. C. Code §56-32-20 (Supp. 1995); Va. Code Ann. §46.2-1571(D) (Supp. 1995). An additional three States mandate disclosure when the cost of repairs exceeds 3 percent or $500, whichever is greater. Ala. Code §8-19-5(22)(c) (1993); Cal. Veh. Code Ann. §§9990-9991 (West Supp. 1996); Okla. Stat., Tit. 47, §1112.1 (1991). Indiana imposes a 4 percent disclosure threshold. Ind. Code §§9-23-4-4, 9-23-4-5 (1993). Minnesota requires disclosure of repairs costing more than 4 percent of suggested retail price or $500, whichever is greater. Minn. Stat. §325F.664 (1994). New York requires disclosure when the cost of repairs exceeds 5 percent of suggested retail price. N. Y. Gen. Bus. Law §§396-p(5)(a), (d) (McKinney Supp. 1996). Vermont imposes a 5 percent disclosure threshold for the first $10,000 in repair costs and 2 percent thereafter. Vt. Stat. Ann., Tit. 9, §4087(d) (1993). Eleven States mandate disclosure only of damage costing more than 6 percent of retail value to repair. Ark. Code Ann. §23-112-705 (1992); Idaho Code §49-1624 (1994); Ill. Comp. Stat., ch. 815, §710/5 (1994); Ky. Rev. Stat. Ann. §190.0491(5) (Baldwin 1988); La. Rev. Stat. Ann §32:1260 (Supp. 1995); Miss. Motor Vehicle Comm'n, Regulation No. 1 (1992); N. H. Rev. Stat. Ann. §357-C:5(III)(d) (1995); Ohio Rev. Code Ann. §4517.61 (1994); R. I. Gen. Laws §§31-5.1-18(d), (f) (1995); Wis. Stat. §218.01(2d)(a) (1994); Wyo. Stat. §31-16-115 (1994). Two States require disclosure of repairs costing $3,000 or more. See Iowa Code Ann. §321.69 (Supp. 1996); N. D. Admin. Code §37-09-01-01 (1992). Georgia mandates disclosure of paint damage that costs more than $500 to repair. Ga. Code Ann. §§40-1-5(b)-(e) (1994) (enacted after respondent purchased his car). Florida requires dealers to disclose paint repair costing more than $100 of which they have actual knowledge. Fla. Stat. §320.27(9)(n) (1992). Oregon requires manufacturers to disclose all “post-manufacturing” damage and repairs. It is unclear whether this mandate would apply to repairs such as those at issue here. Ore. Rev. Stat. §650.155 (1991).
Many, but not all, of the statutes exclude from the computation of repair cost the value of certain components—typically items such as glass, tires, wheels and bumpers—when they are replaced with identical manufacturer's original equipment. E.g., Cal. Veh. Code Ann. §§9990-9991 (West Supp. 1996); Ga. Code Ann. §§40-1-5(b)-(e) (1994); Ill. Comp. Stat., ch. 815, §710/5 (1994); Ky. Rev. Stat. Ann. §190.0491(5) (Baldwin 1988); Okla. Stat., Tit. 47, §1112.1 (1991); Va. Code Ann. §46.2-1571(D) (Supp. 1995); Vt. Stat. Ann., Tit. 9, §4087(d) (1993).
14. Also, a state legislature might plausibly conclude that the administrative costs associated with full disclosure would have the effect of raising car prices to the State's residents.
15. Federal disclosure requirements are, of course, a familiar part of our law. See, e.g., the Federal Food, Drug, and Cosmetic Act, as added by the Nutrition Labeling and Education Act of 1990, 104 Stat. 2353, 21 U.S.C. §343; the Truth In Lending Act, 82 Stat. 148, as amended, 15 U.S.C. §1604; the Securities and Exchange Act of 1934, 48 Stat. 892, 894, as amended, 15 U.S.C. §§78l-78m; Federal Cigarette Labeling and Advertising Act, 79 Stat. 283, as amended, 15 U.S.C. §1333; Alcoholic Beverage Labeling Act of 1988, 102 Stat. 4519, 27 U.S.C. §215.
16. See also Bigelow v. Virginia, 421 U.S. 809 , 824 (1975) (“A State does not acquire power or supervision over the internal affairs of another State merely because the welfare and health of its own citizens may be affected when they travel to that State”); New York Life Ins. Co. v. Head, 234 U.S. 149, 161 (1914) (“[I]t would be impossible to permit the statutes of Missouri to operate beyond the jurisdiction of that State . . . without throwing down the constitutional barriers by which all the States are restricted within the orbits of their lawful authority and upon the preservation of which the Government under the Constitution depends. This is so obviously the necessary result of the Constitution that it has rarely been called in question and hence authorities directly dealing with it do not abound”); Huntington v. Attrill, 146 U.S. 657, 669 (1892) (“Laws have no force of themselves beyond the jurisdiction of the State which enacts them, and can have extra-territorial effect only by the comity of other States”).
17. State power may be exercised as much by a jury's application of a state rule of law in a civil lawsuit as by a statute. See New York Co. Times v. Sullivan, 376 U.S. 254 , 265 (1964) (“The test is not the form in which state power has been applied but, whatever the form, whether such power has in fact been exercised”); San Diego Building Trades Council v. Garmon, 359 U.S. 236, 247 (1959) (“regulation can be as effectively exerted through an award of damages as through some form of preventive relief”).
18. Brief for Respondent 11-12, 23, 27-28; Tr. of Oral Arg. 50-54. Dr. Gore's interest in altering the nationwide policy stems from his concern that BMW would not (or could not) discontinue the policy in Alabama alone. Id., at 11. “If Alabama were limited to imposing punitive damages based only on BMW's gain from fraudulent sales in Alabama, the resulting award would have no prospect of protecting Alabama consumers from fraud, as it would provide no incentive for BMW to alter the unitary, national policy of nondisclosure which yielded BMW millions of dollars in profits.” Id., at 23. The record discloses no basis for Dr. Gore's contention that BMW could not comply with Alabama's law without changing its nationwide policy.
19. See Bordenkircher v. Hayes, 434 U.S. 357, 363 (1978) (“To punish a person because he has done what the law plainly allows him to do is a due process violation of the most basic sort”). Our cases concerning recidivist statutes are not to the contrary. Habitual offender statutes permit the sentencing court to enhance a defendant's punishment for a crime in light of prior convictions, including convictions in foreign jurisdictions. See e.g., Ala. Code §13A-5-9 (1994); Cal. Penal Code Ann. §§667.5(f), 668 (West Supp. 1996); Ill. Comp. Stat., ch. 720, §5/33B-1 (1994); N. Y. Penal Law §§70.04, 70.06, 70.08, 70.10 (McKinney 1987 and Supp. 1996); Tex. Penal Code Ann. §12.42 (1994 and Supp. 1995-1996). A sentencing judge may even consider past criminal behavior which did not result in a conviction and lawful conduct that bears on the defendant's character and prospects for rehabilitation. Williams v. New York, 337 U.S. 241 (1949). But we have never held that a sentencing court could properly punish lawful conduct. This distinction is precisely the one we draw here. See n. 21, infra.
20. Given that the verdict was based in part on out-of-state conduct that was lawful where it occurred, we need not consider whether one State may properly attempt to change a tortfeasors' unlawful conduct in another State.
21. Of course, the fact that the Alabama Supreme Court correctly concluded that it was error for the jury to use the number of sales in other States as a multiplier in computing the amount of its punitive sanction does not mean that evidence describing out-of-state transactions is irrelevant in a case of this kind. To the contrary, as we stated in TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 462, n. 28 (1993), and discuss more fully infra, at 16-19, such evidence is relevant to the determination of the degree of reprehensibility of the defendant's conduct.
22. See Miller v. Florida, 482 U.S. 423 (1987) (Ex Post Facto Clause violated by retroactive imposition of revised sentencing guidelines that provided longer sentence for defendant's crime); Bouie v. City of Columbia, 378 U.S. 347 (1964) (retroactive application of new construction of statute violated due process); id., at 350-355 (citing cases); Lankford v. Idaho, 500 U.S. 110 (1991) (due process violated because defendant and his counsel did not have adequate notice that judge might impose death sentence). The strict constitutional safeguards afforded to criminal defendants are not applicable to civil cases, but the basic protection against “judgments without notice” afforded by the Due Process Clause, Shaffer v. Heitner, 433 U.S. 186, 217 (1977) (STEVENS, J., concurring in judgment), is implicated by civil penalties.
23. “The flagrancy of the misconduct is thought to be the primary consideration in determining the amount of punitive damages.” Owen, A Punitive Damages Overview: Functions, Problems and Reform, 39 Vill. L. Rev. 363, 387 (1994).
24. The principle that punishment should fit the crime “is deeply rooted and frequently repeated in common-law jurisprudence.” Solem v. Helm, 463 U.S. 277, 284 (1983). See Burkett v. Lanata, 15 La. Ann. 337, 339 (1860) (punitive damages should be “commensurate to the nature of the offence”); Blanchard v. Morris, 15 Ill. 35, 36 (1853) (“[W]e cannot say [the exemplary damages] are excessive under the circumstances; for the proofs show that threats, violence, and imprisonment, were accompanied by mental fear, torture, and agony of mind”); Louisville & Northern R. Co. v. Brown, 127 Ky. 732, 749, 106 S. W. 795, 799 (1908) (“We are not aware of any case in which the court has sustained a verdict as large as this one unless the injuries were permanent”).
25. Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 22 (1991).
26. The dissenters also recognized that “TXO's conduct was clearly wrongful, calculated, and improper . . . .” TXO, 509 U.S., at 482 (O'CONNOR, J., dissenting).
27. In Jeter v. M & M Dodge, Inc., 634 So. 2d 1383 (La. App. 1994), a Louisiana court of appeals suggested that the Louisiana disclosure statute functions as a safe harbor. Finding that the cost of repairing presale damage to the plaintiff's car exceeded the statutory disclosure threshold, the court held that the disclosure statute did not provide a defense to the action. Id., at 1384.
During the pendency of this litigation, Alabama enacted a disclosure statute which defines “material” damage to a new car as damage requiring repairs costing in excess of 3 percent of suggested retail price or $500, whichever is greater. Ala. Code §8-19-5(22) (1993). After its decision in this case, the Alabama Supreme Court stated in dicta that the remedies available under this section of its Deceptive Trade Practices Act did not displace or alter pre-existing remedies available under either the common law or other statutes. Hines v. Riverside Chevrolet-Olds, Inc., 655 So. 2d 909, 917, n. 2 (Ala. 1994). It refused, however, to “recognize, or impose on automobile manufacturers, a general duty to disclose every repair of damage, however slight, incurred during the manufacturing process.” Id., at 921. Instead, it held that whether a defendant has a duty to disclose is a question of fact “for the jury to determine.” Id., at 918. In reaching that conclusion it overruled two earlier decisions that seemed to indicate that as a matter of law there was no disclosure obligation in cases comparable to this one. Id., at 920 (overruling Century 21-Reeves Realty, Inc. v. McConnell Cadillac, Inc., 626 So. 2d 1273 (Ala. 1993), and Cobb v. Southeast Toyota Distributors, Inc., 569 So. 2d 395 (Ala. 1990)).
28. See also Ariz. Rev. Stat. Ann. §28-1304.03 (1989) (“[I]f disclosure is not required under this section, a purchaser may not revoke or rescind a sales contract due solely to the fact that the new motor vehicle was damaged and repaired prior to completion of the sale”); Ind. Code §9-23-4-5 (1993) (providing that “[r]epaired damage to a customer-ordered new motor vehicle not exceeding four percent (4%) of the manufacturer's suggested retail price does not need to be disclosed at the time of sale”); N. C. Gen. Stat. §20-305.1(e) (1993) (requiring disclosure of repairs costing more than 5 percent of suggested retail price and prohibiting revocation or rescission of sales contract on the basis of less costly repairs); Okla. Stat., Tit. 47, §1112.1 (1991) (defining “material” damage to a car as damage requiring repairs costing in excess of 3 percent of suggested retail price or $500, whichever is greater).
29. Restatement (Second) of Torts §538 (1977); W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts §108 (5th ed. 1984).
30. The Alabama Supreme Court has held that a car may be considered “new” as a matter of law even if its finish contains minor cosmetic flaws. Wilburn v. Larry Savage Chevrolet, Inc., 477 So. 2d 384 (Ala. 1985). We note also that at trial respondent only introduced evidence of undisclosed paint damage to new cars repaired at a cost of $300 or more. This decision suggests that respondent believed that the jury might consider some repairs too de minimis to warrant disclosure.
31. Before the verdict in this case, BMW had changed its policy with respect to Alabama and two other States. Five days after the jury award, BMW altered its nationwide policy to one of full disclosure.
32. See, e.g., Grant v. McDonogh, 7 La. Ann. 447, 448 (1852) (“[E]xemplary damages allowed should bear some proportion to the real damage sustained”); Saunders v. Mullen, 66 Iowa 728, 729, 24 N. W. 529 (1885) (“When the actual damages are so small, the amount allowed as exemplary damages should not be so large”); Flannery v. Baltimore & Ohio R. Co., 15 D. C. 111, 125 (1885) (when punitive damages award “is out of all proportion to the injuries received, we feel it our duty to interfere”); Houston & Texas Central R. Co. v. Nichols, 9 Am. & Eng. R. R. Cas. 361, 365 (Tex. 1882) (“Exemplary damages, when allowed, should bear proportion to the actual damages sustained”); McCarthy v. Niskern, 22 Minn. 90, 91-92 (1875) (punitive damages “enormously in excess of what may justly be regarded as compensation” for the injury must be set aside “to prevent injustice”).
33. Owen, supra n. 23, at 368, and n. 23. One English statute, for example, provides that officers arresting persons out of their jurisdiction shall pay double damages. 3 Edw., I., ch. 35. Another directs that in an action for forcible entry or detainer, the plaintiff shall recover treble damages. 8 Hen. VI, ch. 9, §6.
Present-day federal law allows or mandates imposition of multiple damages for a wide assortment of offenses, including violations of the antitrust laws, see §4 of the Clayton Act, 38 Stat. 731, as amended, 15 U.S.C. §15, and the Racketeer Influenced and Corrupt Organizations Act, see 18 U.S.C. §1964, and certain breaches of the trademark laws, see §35 of the Trademark Act of 1946, 60 Stat. 439, as amended, 15 U.S.C. §1117, and the patent laws, see 66 Stat. 813, 35 U.S.C. §284.
34. “While petitioner stresses the shocking disparity between the punitive award and the compensatory award, that shock dissipates when one considers the potential loss to respondents, in terms of reduced or eliminated royalties payments, had petitioner succeeded in its illicit scheme. Thus, even if the actual value of the `potential harm' to respondents is not between $5 million and $8.3 million, but is closer to $4 million, or $2 million, or even $1 million, the disparity between the punitive award and the potential harm does not, in our view, `jar one's constitutional sensibilities.'” TXO, 509 U.S., at 462, quoting Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S., at 18.
35. Even assuming each repainted BMW suffers a diminution in value of approximately $4,000, the award is 35 times greater than the total damages of all 14 Alabama consumers who purchased repainted BMW's.
36. The ratio here is also dramatically greater than any award that would be permissible under the statutes and proposed statutes summarized in the appendix to JUSTICE GINSBURG's dissenting opinion. Post, at 9-11.
37. Conceivably the Alabama Supreme Court's selection of a 500 to 1 ratio was an application of JUSTICE SCALIA's identification of one possible reading of the plurality opinion in TXO: any future due process challenge to a punitive damages award could be disposed of with the simple observation that “this is no worse than TXO.” 509 U.S., at 472 (SCALIA, J., concurring in judgment). As we explain in the text, this award is significantly worse than the award in TXO.
38. Although the Court did not address the size of the punitive damages award in Silkwood v. Kerr-McGee Corp., 464 U.S. 238 (1984), the dissenters commented on its excessive character, noting that the “$10 million [punitive damages award] that the jury imposed is 100 times greater than the maximum fine that may be imposed . . . for a single violation of federal standards” and “more than 10 times greater than the largest single fine that the Commission has ever imposed.” Id., at 263 (BLACKMUN, J., dissenting). In New York Times Co. v. Sullivan, 376 U.S. 254 (1964), the Court observed that the punitive award for libel was “one thousand times greater than the maximum fine provided by the Alabama criminal statute,” and concluded that the “fear of damage awards under a rule such as that invoked by the Alabama courts here may be markedly more inhibiting than the fear of prosecution under a criminal statute.” Id., at 277 .
39. Ala. Code §8-19-11(b) (1993).
40. See, e.g., Ark. Code Ann. §23-112-309(b) (1992) (up to $5,000 for violation of state Motor Vehicle Commission Act that would allow suspension of dealer's license; up to $10,000 for violation of Act that would allow revocation of dealer's license); Fla. Stat. §320.27(12) (1992) (up to $1,000); Ga. Code Ann. §§40-1-5(g), 10-1-397(a) (1994 and Supp. 1996) (up to $2,000 administratively; up to $5,000 in superior court); Ind. Code Ann. §9-23-6-4 (1993) ($50 to $1,000); N. H. Rev. Stat. Ann. §§357-C:15, 651:2 (1995 and Supp. 1995) (corporate fine of up to $20,000); N. Y. Gen. Bus. Law §396-p(6) (McKinney Supp. 1995) ($50 for first offense; $250 for subsequent offenses).
41. JUSTICE GINSBURG expresses concern that we are “the only federal court policing” this limit. Post, at 7. The small number of punitive damages questions that we have reviewed in recent years, together with the fact that this is the first case in decades in which we have found that a punitive damages award exceeds the constitutional limit, indicates that this concern is at best premature. In any event, this consideration surely does not justify an abdication of our responsibility to enforce constitutional protections in an extraordinary case such as this one.
*** Any law, statute, regulation or other precedent is subject to change at any time ***
Index | Home