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Six-Pack of Tactics To Prevent Runaway Punitive Damages

This month we address the recent decision by the U.S. Supreme Court on punitive damages, State Farm Mutual Automobile Insurance Co. v. Campbell, 123 S.Ct. 1513 (U.S. Apr. 7, 2003). In State Farm, the court found a Utah state court violated Due Process by permitting a punitive damage verdict of $145 million against the company.

Due Process prohibits grossly excessive or arbitrary punishments, but courts have wrestled with the meaning of those words. In BMW of North America v. Gore, 517 U.S. 559 (1996), the court had provided "guideposts." But following those guideposts has been a challenge, especially when faced with concerns like deference to the trier of fact, and protection of state court prerogatives (not to mention state financial interest in the proceeds, in those jurisdictions ” like Illinois ” where a part of the punitive damage award may go to the state).

The result has been a number of enormous "runaway" jury verdicts for punitive damages.

So in State Farm, the "guideposts" of Gore became "instructions" to the lower courts, or what the dissent calls "instructions that begin to resemble marching orders." 123 S.Ct. at 1531. What practical implications do these have for trial lawyers? Here are six specific steps that trial lawyers for a defendant are likely to take.

1.  Motion in limine regarding defendant's "dissimilar" misconduct.

Since a defendant's reprehensibility for the purpose of punitive damages cannot be proven through conduct that is dissimilar to the conduct that harmed the plaintiff, 123 S.Ct. at 1523, we can expect motions seeking to bar introduction of evidence regarding dissimilar misconduct. If such motions fail, expect proposed jury instructions regarding the limitations on consideration of such evidence.

2.  Motion in limine regarding out of state acts.

Since punishment cannot be imposed for out of state acts whether they were lawful or unlawful in those states when they occurred, 123 S.Ct. at 1522, expect motions seeking to bar introduction of such evidence, or, again, limiting instructions.

3.  Motion in limine regarding relation to harm to plaintiff.

Due Process requires that punitive damages must be tied to the harm to the plaintiff only, not the harm which others may have suffered. 123 S.Ct. at 1523. So harm to others should be inadmissible for this purpose and, if admitted for some other purpose, a limiting instruction should be provided.

4.  Motion in limine regarding wealth of the defendant.

Wealth of the defendant does not justify an otherwise unreasonable punitive award. 123 S.Ct. at 1525. While State Farm does not render wealth irrelevant to punitive damages, financial statements and other such evidence cannot be used gratuitously to inflame the jury. Again, if a motion in limine fails to keep such evidence out, a limiting instruction may be necessary. The objective will be to preclude arguments that attempt to justify punitive damages based on wealth that have "little to do with the actual harm sustained"

5.  Instruction and closing argument regarding presumption.

Compensatory damages are presumed to fully compensate a successful plaintiff, especially where the compensatory damages are substantial. 123 S.Ct. at 1521. Closing argument should thus focus on the point that compensatory damages are more than enough.

6.  Post trial motion.

The necessity of a reasonable relationship between any punitive damage award and actual harm of the plaintiff means that the ratio between punitive damages and compensatory damages should ordinarily be in single digits (less than 10:1), 123 S.Ct. at 1524. Higher than single digit ratios may still be justified when the compensatory award is small or nominal, or where the harm is hard to detect or measure. Nevertheless, when the earlier motions in limine and instructions fail to prevent a runaway punitive verdict, expect a post trial motion to set it aside or reduce it, to satisfy Due Process.

Contact: Michael D. Freeborn