BMW of North America, Inc. v. Gore: Due Process Protection Against Excessive Punitive Damages Awards

I.  Introduction

Tort reform proponents, defendants, and the business community received the long awaited answer they had been hoping for the day the United States Supreme Court handed down its decision in BMW of North America, Inc. v. Gore.⁽¹⁾ The Gore decision came in the wake of Congress' failed attempt to "cap punitive damages awards across the country" through the congressional tort reform effort.⁽²⁾ The decision thus revived the spirits of tort reformers that at least the United States Supreme Court will recognize limits on punitive damages awards.⁽³⁾ The Court thereby filled a void in the tort reform movement by holding that punitive damages awards which are "`"grossly excessive"'" will be struck down as violating substantive due process rights found in the Due Process Clause of the Fourteenth Amendment.⁽⁴⁾

Prior to 1989, the United States Supreme Court had not definitively answered whether the Due Process Clause of the Fourteenth Amendment constrained the size of punitive damages awards.⁽⁵⁾ However, due to the recent publicity surrounding several notable cases involving substantial punitive damages awards, there has arisen a general perception that juries are "out of control"⁽⁶⁾ in awarding punitive damages in ever increasing amounts,⁽⁷⁾ despite the results of studies that indicate "the jury system in America is working."⁽⁸⁾

Because of the current concern that juries are unable to reach equitable results,⁽⁹⁾ the Supreme Court became willing to allow defendants claim that the size of punitive damages awards "deprive[d them] of life, liberty, or property, without due process of law."⁽¹⁰⁾

This Comment examines the Gore decision.⁽¹¹⁾ Part II addresses the historical development and rationales for the issuance of punitive damages,⁽¹²⁾ as well as the Court's decisions which have led up to the decision in Gore.⁽¹³⁾ Part III sets out the statement of the Gore case, the procedural history, and the majority, concurring, and dissenting opinions.⁽¹⁴⁾ Part IV analyzes the Court's rationale for holding the punitive damages award unconstitutionally excessive, the test it created for reviewing the excessiveness of a punitive damages award, the problems created by this new test, and how this test may be applied in the future.⁽¹⁵⁾

II.  Overview of Punitive Damages

A.  Historical Development of the Law of Punitive Damages

In their early form, punitive damages were known as multiple damages, and were found in the legal systems and traditions of civilizations from around the world.⁽¹⁶⁾ However, the doctrine of punitive damages, as it is known today, is attributed to the developments that occurred in thirteenth century England.⁽¹⁷⁾

England was one of the earliest countries to adopt the doctrine of punitive damages into its legal system when, in 1278, it implemented a statute providing for the assessment of multiple damages.⁽¹⁸⁾ England also developed a system in which amercements, or "monetary penalties," were assessed against wrongdoers.⁽¹⁹⁾ Amercements were "used to punish both civil and criminal wrongdoing."⁽²⁰⁾ In 1763, the courts of England were called upon to further clarify and define the doctrine through the companion cases of Wilkes v. Wood,⁽²¹⁾ and Huckle v. Money.⁽²²⁾ Through these two decisions the modern doctrine of punitive damages was born.⁽²³⁾

Borrowing from the Common Law system in England, the United States incorporated the doctrine of punitive damages into its own legal system and tradition.⁽²⁴⁾ Two of the earliest recorded cases discussing punitive damages in the United States were Genay v. Norris,⁽²⁵⁾ in 1784, and Coryell v. Colbaugh,⁽²⁶⁾ in 1791. By the end of the nineteenth century, punitive damages had become a solid "fixture of American common law."⁽²⁷⁾

B.  Rationales and Conduct Required for Assessing Punitive Damages

The current debate surrounding the propriety of punitive damages stems from the issue of "whether [they] remain a sound remedy" in society today.⁽²⁸⁾ Several policies have been traditionally put forth in support of assessing punitive damages. The primary rationales are that they serve to punish⁽²⁹⁾ and deter⁽³⁰⁾ wrongdoers from engaging in conduct society has deemed unacceptable.⁽³¹⁾ In addition, punitive damages have been justified, to a lesser extent, as a mechanism to protect consumers from fraudulent and deceptive trade practices,⁽³²⁾ and to provide compensation for otherwise uncompensable loss.⁽³³⁾

Opponents of punitive damages contend that they fail to deter some wrongdoers as there are some individuals who will never be deterred even when punitive damages are assessed against them.⁽³⁴⁾ Additionally, in some instances, punitive damages punish a defendant twice for the same offense or misconduct.⁽³⁵⁾ Opponents of punitive damages further argue that if the actions of a defendant do not constitute a crime than there should not be an award of punitive damages through the civil law.⁽³⁶⁾

However, the most widely held criticism of punitive damages is that juries are given too much discretion in determining the amount of punitive damages to assess, which violates a defendant's due process rights, as there are no guidelines in place to constrain a jury's discretion.⁽³⁷⁾

Despite these competing policies for and against punitive damages, such a remedy is available to plaintiffs in forty-seven states.⁽³⁸⁾ The three remaining states, Nebraska, New Hampshire, and Washington, have either prohibited or outlawed their assessment.⁽³⁹⁾ In states which allow punitive damages, the conduct required of a defendant before they may be assessed varies from state to state. However, a defendant's conduct must be shown to be one of the following (in order of the most difficult to least difficult to prove): (1) malice, (2) conduct exceeding gross negligence, but not requiring malice, (3) gross negligence, or (4) as defined by various statutory provisions.⁽⁴⁰⁾

Although a majority of states allow for the assessment of punitive damages, many states have implemented procedural reforms limiting the amount of punitive damages that can be assessed.⁽⁴¹⁾ For example, a majority of states have limited the amount of punitive damages a plaintiff can receive by raising the standard of proof required from a preponderance of evidence to a more stringent standard of "clear and convincing" proof.⁽⁴²⁾ Additionally, some states utilize a bifurcated trial wherein "a jury would first determine a defendant's liability and assess compensatory damages before determining punitive damages."⁽⁴³⁾ As a result, "punitive damages would not become part of the process unless the defendant has been found liable."⁽⁴⁴⁾

In addition to these procedural reforms, some states have required "that a portion of the award be paid to a state fund,"⁽⁴⁵⁾ and a minority of states have enacted legislation placing statutory caps on punitive damages awards.⁽⁴⁶⁾ Critics, opposed to placing limits on punitive damages, argue that caps "lend predictability to a doctrine whose real value lies in [its] unpredictability."⁽⁴⁷⁾ When an award becomes predictable, defendants, especially corporate defendants, are able to add the cost of potential damage awards to the cost of doing business, resulting in a failure to deter production of unsafe products.⁽⁴⁸⁾ Moreover, small businesses would be disadvantaged as they would pay the same amount in punitive damages as large businesses.⁽⁴⁹⁾ Despite these arguments, due to the failure of the congressional tort reform effort, many states have taken measures to statutorily limit the amount of punitive damages a plaintiff may recover.⁽⁵⁰⁾

When punitive damages are requested, a jury is normally instructed that it may assess punitive damages "in an amount sufficient to punish or deter, if it finds the defendant acted with the required culpability."⁽⁵¹⁾ Critics of punitive damages argue that such an instruction gives the jury broad and unbridled discretion which leads to inefficient results, and fails to uphold the purposes of punishment and deterrence, which punitive damages were designed to achieve.⁽⁵²⁾ This concern led defendants to challenge the constitutionality of punitive damages awards under the Due Process Clause of the Fourteenth Amendment.⁽⁵³⁾

C.  Constitutional Challenges to Punitive Damages

Defendants have put forth two main constitutional challenges to punitive damages awards. First, defendants have claimed that punitive damages awards violate the Excessive Fines Clause of the Eighth Amendment.⁽⁵⁴⁾ Second, defendants have challenged punitive damages as violating both procedural⁽⁵⁵⁾ and substantive rights⁽⁵⁶⁾ found in the Due Process Clause of the Fourteenth Amendment.⁽⁵⁷⁾

The United States Supreme Court has addressed constitutional challenges to punitive damages awards seven times in the past eleven years.⁽⁵⁸⁾ Despite the Court's willingness to address such challenges, "[t]he Court . . . has struggled with [definitively answering the constitutional implications of such awards], moving in incremental, and often confusing, steps toward formulating guidelines governing the imposition of punitive awards."⁽⁵⁹⁾ In 1986, the Court heard a challenge to a punitive damages award under the Due Process Clause in the case of Aetna Life Insurance Co. v. Lavoie.⁽⁶⁰⁾ However, in that case, the Court chose not to address the due process challenge and left it for another case.⁽⁶¹⁾ Subsequently, in Bankers Life & Casualty Co. v. Crenshaw,⁽⁶²⁾ and in Browning-Ferris Industries of Vermont, Inc. v. Kelco Disposal, Inc.,⁽⁶³⁾ the Court again declined to rule on due process rights since they were not raised in either lower court.⁽⁶⁴⁾ However, the Court in Browning-Ferris noted that:

[t]here is some authority in our opinions for the view that the Due Process Clause places outer limits on the size of a civil damages award made pursuant to a statutory scheme, but we have never addressed the precise question presented here: whether due process acts as a check on undue jury discretion to award punitive damages in the absence of any express statutory limit. That inquiry must await another day.⁽⁶⁵⁾

Although the Browning-Ferris Court did not address the due process challenge, the decision ended a defendant's ability to challenge a punitive damages award, in a private lawsuit, under the Eighth Amendment.⁽⁶⁶⁾ Justice Brennan, in a concurring opinion, felt that this decision "le[ft] the door open for a holding that the Due Process Clause constrains the imposition of punitive damages in civil cases brought by private parties,"⁽⁶⁷⁾ and further remarked his belief that the "Due Process Clause forbids damages awards that are `grossly excessive'<sup>(68)</sup> or `so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.'"⁽⁶⁹⁾

The Court finally rendered a full opinion to a due process challenge against a punitive damages award when it granted certiorari in Pacific Mutual Life Insurance Co. v. Haslip.⁽⁷⁰⁾

1.  Pacific Mutual Life Insurance Co. v. Haslip

In Haslip, the Court was faced with a due process challenge to an $840,000 punitive damages award, when only $200,000 was awarded as compensatory damages.⁽⁷¹⁾ In particular, the defendant challenged the punitive damages award on procedural grounds, arguing that the amount the jury awarded was arrived at through a process that gave the jury "unbridled . . . discretion."⁽⁷²⁾

Justice Blackmun began the decision by stating that "[t]his Court and individual Justices thereof on a number of occasions in recent years have expressed doubts about the constitutionality of certain punitive damages awards."⁽⁷³⁾ Although ultimately agreeing with the defendant that there are constitutional limits on the procedures states could utilize in assessing punitive damages, the Court was unwilling to "draw a mathematical bright line between the constitutionally acceptable and constitutionally unacceptable that would fit every case."⁽⁷⁴⁾ Instead, the Court felt the proper test for determining the appropriate measure of punitive damages was the "reasonableness" of the award.⁽⁷⁵⁾ Moreover, there should be "adequate guidance from the court when the case is tried to a jury."⁽⁷⁶⁾

With these standards in mind, the Court held that as the common law method of assessing punitive damages existed prior to the adoption of the Fourteenth Amendment, the assessment of "punitive damages [wa]s not so inherently unfair as to deny due process and be per se unconstitutional."⁽⁷⁷⁾ The Court further noted that Pacific Mutual received all the benefits of Alabama's procedural protections.⁽⁷⁸⁾

First, the jury was properly instructed even though it was granted substantial discretion.⁽⁷⁹⁾ Second, the Court approved of the two step post-trial procedures Alabama courts employed for reviewing a punitive damages award assessed by a jury.⁽⁸⁰⁾ The first step of the post-trial review required the trial court to conduct a post-verdict hearing that conformed with the standards developed in Hammond v. City of Gadsden,⁽⁸¹⁾ approved of by the Alabama Supreme Court in Green Oil Co. v. Hornsby.⁽⁸²⁾ The trial court conducted the hearing and found that the defendant's conduct "evidenced intentional malicious, gross, or oppressive fraud[,]" and held the amount to be reasonable in light of the purposes served by punitive damages.⁽⁸³⁾ The second step in the post-trial procedure was met as Pacific Mutual received the benefit of appropriate review by the Alabama Supreme Court which applied the Hammond factors.⁽⁸⁴⁾

Although the Court acknowledged that at some point an award of punitive damages may violate a defendant's substantive due process rights if the ratio between compensatory and punitive damages was too high,⁽⁸⁵⁾ in this case, since the award was only four times the compensatory award and within limits authorized under Alabama law for insurance fraud, it did not "cross the line into the area of constitutional impropriety."⁽⁸⁶⁾ By stating this, the Court implicitly acknowledged a defendant's right to challenge a punitive damages award as violating substantive due process rights as the ratio of four to one was "close to the [excessiveness] line."⁽⁸⁷⁾

2.  TXO Production Corp. v. Alliance Resources Corp.

Because of the uncertainties left after Haslip, the Court reconsidered another due process challenge two years later in TXO Production Corp. v. Alliance Resources Corp.⁽⁸⁸⁾

The Court granted certiorari to answer the question of "whether [the] punitive damages award violate[d] the Due Process Clause of the Fourteenth Amendment, either because its amount [wa]s excessive or because it [wa]s the product of an unfair procedure."⁽⁸⁹⁾ The Court, in a plurality decision, began its opinion by first stating "that the Due Process Clause of the Fourteenth Amendment imposes substantive limits `beyond which penalties may not go.'"<sup>(90)</sup> However, instead of developing a "`bright line'" test for determining when a punitive damages award is excessive, the plurality reaffirmed the standard articulated in Haslip that "`[a] general concer[n] of reasonableness . . . enter[s] into the constitutional calculus.'"⁽⁹¹⁾

Relying on this standard, the plurality rejected the defendant's substantive due process claim recognizing that although the award was large, 526 times the compensatory damages,⁽⁹²⁾ "over 20 times greater than any punitive damages award in West Virginia history, and 10 times greater than the largest punitive damages award for slander of title in any jurisdiction,"⁽⁹³⁾ the relationship between the punitive damages award and the actual harm was only one factor to be considered.⁽⁹⁴⁾ Based on "the amount of money potentially at stake, [TXO's] bad faith, the fact that the scheme employed in this case was part of a larger pattern of fraud, trickery and deceit, and [TXO's] wealth," the award was not "`grossly excessive.'"⁽⁹⁵⁾

TXO further argued that the punitive damages award was the product of unfair procedures, and therefore violated procedural due process because the jury was not properly instructed, there was insufficient review by the trial and appellate court, and TXO had no notice that the jury could assess such a large punitive damages award.⁽⁹⁶⁾ The plurality rejected these arguments and held the jury instruction, and post-trial procedures constitutional, thus recognizing that the three-part procedural due process analysis articulated in Haslip should be applied in every state.⁽⁹⁷⁾ However, in approving the appellate court review in TXO, the plurality indicated that less factors than identified in Haslip could be looked at when a court is reviewing the excessiveness of a punitive damages award.⁽⁹⁸⁾

The plurality disposed of TXO's final argument that it had no notice that the award could be so large, by stating that the notice requirement of the Due Process Clause "is satisfied if prior law fairly indicate[s] that a punitive damages award might be imposed in response to egregiously tortious conduct."⁽⁹⁹⁾

Although badly split in this decision, the plurality explicitly recognized substantive limits on punitive damages awards.⁽¹⁰⁰⁾ However, by reaffirming the standard articulated in Haslip that "`[a] general concer[n] of reasonableness . . . enter[s] into the constitutional calculus,'"⁽¹⁰¹⁾ and by relying on different factors in its excessiveness review, lower courts were left to guess at what constituted a reasonable punitive damages award.⁽¹⁰²⁾

3.  Honda Motor Co. v. Oberg

One year after it handed down its decision in TXO, the Court again took up the punitive damages discussion in Honda Motor Co. v. Oberg.⁽¹⁰³⁾

In Oberg, the Supreme Court granted certiorari to consider the procedural due process challenge of whether the Due Process Clause required judicial review of a punitive damages award.⁽¹⁰⁴⁾ The Court did not address the appropriate standard that should be applied in determining whether a punitive damage award is excessive, as that issue was not before the Court.⁽¹⁰⁵⁾

The Court began its opinion by recognizing that, in light of its prior decisions in Haslip and TXO, there were "substantive limit[s] on the size of punitive damage awards,"⁽¹⁰⁶⁾ and that having procedural safeguards to protect against arbitrary deprivations of property was important.⁽¹⁰⁷⁾ The Court held that as "judicial review of the size of punitive damage awards has been a safeguard against excessive verdicts for as long as punitive damages have been awarded,"⁽¹⁰⁸⁾ and courts that follow common law and every state recognizing punitive damages have allowed judicial review of an award, Oregon's denial of judicial review violated the defendant's procedural due process rights.⁽¹⁰⁹⁾ The Court reversed and remanded the case to the Oregon Supreme Court.⁽¹¹⁰⁾

The Court again declined to establish a bright line test to determine when a punitive damage award violates a defendant's due process rights,⁽¹¹¹⁾ and did not hold that the award in this case "was so excessive as to violate Honda's due process rights."⁽¹¹²⁾ Instead, the Court recognized that the Due Process Clause required that a defendant be afforded the procedural protection of judicial review when a jury awards punitive damages.⁽¹¹³⁾

Through these pre-Gore decisions, the Court clarified the procedural requirements that were necessary to satisfy due process--there must be "reasonable constraints" on a jury's discretion,⁽¹¹⁴⁾ and the punitive damages award must be subjected to post-verdict review.⁽¹¹⁵⁾ The Court further recognized that there were substantive due process limitations--a punitive damages award must be reasonable, and not "`grossly excessive.'"<sup>(116)</sup> However, what constituted a "`grossly excessive'" award and the factors that a reviewing court must consider when making its excessiveness inquiry were not definitively answered by the Court.⁽¹¹⁷⁾ It was from this backdrop that the Court granted certiori to a fourth case this decade in an attempt to resolve the confusion surrounding substantive due process challenges by clarifying "`the character of the standard that w[ould] identify unconstitutionally excessive awards' of punitive damages."⁽¹¹⁸⁾

III.  The Supreme Court's Decision In BMW of North America, Inc. v. Gore

In BMW of North America, Inc. v. Gore,⁽¹¹⁹⁾ the Court took up the due process discussion again as it was faced with a punitive damages award assessed against a large corporation.⁽¹²⁰⁾

A. Facts

In January 1990, Dr. Ira Gore, Jr. purchased what he believed to be a new BMW from a dealer in Alabama for $40,000.⁽¹²¹⁾ At the time of the sale, Dr. Gore signed two documents indicating that he agreed to accept the car even if it was damaged during delivery.⁽¹²²⁾ However, unknown and undisclosed to Dr. Gore was the fact that the BMW he purchased had been damaged while en route from Germany to the United States, a type of damage not listed on the documents Dr. Gore had signed.⁽¹²³⁾

Gore drove the car for approximately nine months without noticing any problem with the car's appearance.⁽¹²⁴⁾ However, when he took the car to a detailer "`to make it look snazzier than it normally would appear,'"⁽¹²⁵⁾ to his surprise, he learned that his car had been previously repainted.⁽¹²⁶⁾

B.  Procedural History

Gore brought suit against BMW of North America, the American distributor of BMW automobiles,⁽¹²⁷⁾ alleging that the failure to disclose that his car had been repainted constituted fraud, the suppression of a material fact, in violation of Alabama Code section 6-5-102.⁽¹²⁸⁾ At trial, Gore argued that his car had been decreased in value by $4000 due to the repainting, and asked for an additional $4 million dollars in punitive damages as BMW had sold 983 other refinished cars as new in the United States.⁽¹²⁹⁾ In response, BMW argued that it had no duty to disclose minor damage that occurred to cars while in transit, and that it acted in accordance with an internal policy that it would not disclose to either the dealer or customer that the car had been damaged and subsequently repaired if the cost of repairing the damage was less than three percent of the manufacturer's suggested retail price.⁽¹³⁰⁾ As the cost of repairing Gore's car was $600, or 1.5% of the suggested retail price, the distributor did not disclose to the dealer that the car had been repainted.⁽¹³¹⁾

The jury found that BMW's non-disclosure policy was "gross, oppressive or malicious" fraud⁽¹³²⁾ and awarded Gore ten percent of the value of a new car, $4000, in compensatory damages, and $4 million in punitive damages.⁽¹³³⁾ The jury arrived at the $4 million figure by multiplying $4000 with 983, the number of repainted cars that BMW sold in the last ten years as new in the United States, fourteen having been sold in Alabama.⁽¹³⁴⁾

The trial court, in applying the Hammond/Green Oil factors pursuant to the Court's decision in Haslip,⁽¹³⁵⁾ upheld the jury's award.⁽¹³⁶⁾ In its appeal, BMW claimed that the award was excessive in violation of the Due Process Clause.⁽¹³⁷⁾ In its excessiveness inquiry, the Alabama Supreme Court rejected BMW's argument that the award exceeded the constitutionally permissible punitive damage amount.⁽¹³⁸⁾ However, the Alabama Supreme Court agreed with BMW that the jury had incorrectly arrived at the $4 million figure by multiplying 983, the number of repainted cars BMW sold as new in the United States, with $4000, Gore's compensatory damages award.⁽¹³⁹⁾ As a result, the Alabama Supreme Court ordered a remittitur and held "that a constitutionally reasonable punitive damages award in this case is $2,000,000."⁽¹⁴⁰⁾ In remitting the award to $2 million, the court "expressly disclaimed any reliance on `acts that occurred in other jurisdictions.'"⁽¹⁴¹⁾

C.  The Supreme Court's Decision

The United States Supreme Court granted certiorari in an effort to "illuminate `the character of the standard that w[ould] identify unconstitutionally excessive awards' of punitive damages."⁽¹⁴²⁾ In a 5-4 decision, the Court held the assessment of a $2 million punitive damages award "grossly excessive" in violation of BMW's substantive due process rights of the Fourteenth Amendment.⁽¹⁴³⁾

Writing for the majority, Justice Stevens, joined by Justices O'Connor, Kennedy, Souter, and Breyer, stated "that the federal excessiveness inquiry . . . begins with an identification of the state interests that a punitive award is designed to serve."⁽¹⁴⁴⁾ Stevens acknowledged that the State of Alabama had an interest in protecting its citizens by prohibiting deceptive trade practices, however "no single State [can] impose its own policy choice on neighboring States."⁽¹⁴⁵⁾ Although the Alabama Supreme Court expressly stated that they did not rely on BMW's out-of-state conduct in awarding the $2 million punitive damages award,⁽¹⁴⁶⁾ the Court held that a punitive damages award must reflect the state's interest in protecting its own consumers and economy and not "conduct that was lawful where it occurred and which had no impact on Alabama or its residents."⁽¹⁴⁷⁾ As a result, the jury should have only considered BMW's conduct that had an impact on Alabama citizens.⁽¹⁴⁸⁾

In examining the excessiveness of the punitive damage award, Justice Stevens asserted that "[e]lementary notions of fairness enshrined in our 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."⁽¹⁴⁹⁾ In making its excessiveness inquiry, the Court identified "[t]hree guideposts" which showed that BMW had insufficient notice that Alabama could assess such a large punitive damages award for adhering to its nondisclosure policy.⁽¹⁵⁰⁾ The "[t]hree guideposts" identified by the Court were: "the degree of reprehensibility of the [defendant's conduct]; the disparity between the harm or potential harm suffered by Dr. Gore and his punitive damages award; and the difference between this remedy and the civil penalties authorized or imposed in comparable cases."⁽¹⁵¹⁾

For the Court, the most important factor in determining the reasonableness of a punitive damages award was the degree of reprehensibility of the defendant's conduct.⁽¹⁵²⁾ The Court noted that it is essential for a punitive damages award to reflect the severity of the defendant's conduct.⁽¹⁵³⁾ As "none of the aggravating factors associated with particularly reprehensible conduct [were] present,⁽¹⁵⁴⁾ the Court determined that "BMW's conduct was not sufficiently reprehensible to warrant imposition of a $2 million [punitive] damages award.⁽¹⁵⁵⁾

The Court considered the second factor of the ratio between compensatory and punitive damages as the "second and . . . most commonly cited indicium of an unreasonable or excessive punitive damages award."⁽¹⁵⁶⁾ In discussing this factor, the Court noted that a punitive damages award must be "reasonabl[y] relat[ed]" to the actual harm suffered by the plaintiff.⁽¹⁵⁷⁾ The Court, however, was quick to point out that it was not "`draw[ing] a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case.'"<sup>(158)</sup> But, in this case, where the ratio of compensatory to punitive damages was 500 to one, the magnitude of the award as compared to the compensatory damage award, caused the Court to "`raise a suspicious judicial eyebrow.'"⁽¹⁵⁹⁾

The final factor the Court looked at in its excessiveness review was the difference between the punitive damages award and the "civil or criminal penalties that could be imposed for comparable misconduct."⁽¹⁶⁰⁾ Based on this factor, as the punitive damages award was substantially greater than any statutory fine available in Alabama or in any other state for BMW's nondisclosure policy,⁽¹⁶¹⁾ and as there was no proof that a lesser amount "would have adequately protected the interests of Alabama consumers,"⁽¹⁶²⁾ the Court held the award to be unconstitutionally excessive.⁽¹⁶³⁾

Although the Court acknowledged that the state of Alabama had an interest in protecting its citizens from deceptive trade practices, it held that BMW's conduct was not sufficiently egregious to warrant a $2 million award.⁽¹⁶⁴⁾ As a result, the award went beyond constitutional limits as BMW did not have fair notice that its nondisclosure policy would result in such a large punitive award.⁽¹⁶⁵⁾ Consequently, the Court reversed and remanded the case to the Alabama Supreme Court for either a new trial or reconsideration.⁽¹⁶⁶⁾

D.  Justice Breyer's Concurring Opinion

Justice Breyer, joined by Justices O'Connor and Souter, agreed with the majority that the award was "`grossly excessive' in relation to" Alabama's interest in assessing punitive damages.<sup>(167)</sup> As a result, the award constituted "an arbitrary deprivation of life, liberty, or property in violation of the Due Process Clause."<sup>(168)</sup> Breyer recognized that a punitive damages award that was based on fair procedures was deserving of "`a strong presumption of validity.'"⁽¹⁶⁹⁾ However, he wrote separately to explain that this presumption was overcome as the standards applied by the jury as well as the Alabama courts were vague, open-ended, and failed to protect against arbitrary results.⁽¹⁷⁰⁾

First, Justice Breyer noted that the Alabama statute did not distinguish between conduct deserving of small and large punitive damages awards.⁽¹⁷¹⁾ Second, the Alabama Supreme Court applied the seven factors articulated in Green Oil Co. v. Hornsby,⁽¹⁷²⁾ in such a way that the factors lost their constraining effect.⁽¹⁷³⁾ Third, Justice Breyer asserted that the Alabama courts failed to refer to or look for other standards which could have constrained the punitive damages award, as the statute and Green Oil factors lacked such a constraining mechanism.⁽¹⁷⁴⁾ Fourth, Justice Breyer noted that no "community understanding or historic practice" justified assessing such a large punitive damages award based on the defendant's conduct.⁽¹⁷⁵⁾ Finally, Breyer pointed out that Alabama had not enacted any additional legislation "that classif[ied] awards and imposed quantitative limits that would significantly" limit the discretion of the jury and reviewing court and thus prevent arbitrary results.⁽¹⁷⁶⁾

Justice Breyer concluded by stating that the mechanisms developed to limit the discretion of the court and jury in assessing punitive damages did not work in this case.⁽¹⁷⁷⁾ As such, the award "was grossly excessive" in violation of the Due Process Clause.⁽¹⁷⁸⁾

E.  Justice Scalia's Dissent

Justice Scalia, joined by Justice Thomas, dissented because he disagreed with the Court that the $2 million award exceeded a constitutionally reasonable amount.⁽¹⁷⁹⁾ According to Scalia, the majority had entered an area of law that was traditionally left to the states.⁽¹⁸⁰⁾ Scalia felt that the Court had no business addressing whether there were substantive limits on punitive damages awards as there was no guarantee in the Due Process Clause that a damages award be "reasonable."⁽¹⁸¹⁾ Instead, Scalia believed the Due Process Clause only provided a defendant substantive protection against excessive punitive damages in state courts, and not at the federal level.⁽¹⁸²⁾

Scalia listed three reasons to support his assertion that the substantive review by the Court was improper.⁽¹⁸³⁾ First, Scalia noted that neither historical practice nor prior case law supported the review of the excessiveness of a punitive damages award.⁽¹⁸⁴⁾ According to Scalia, the notion of challenging a punitive damages award on substantive grounds was simply "fabricated" by the Court when it made the assertion, in Seaboard Air Line R. Co. v. Seegers,⁽¹⁸⁵⁾ "that the Constitution imposes `limits beyond which penalties may not go.'"⁽¹⁸⁶⁾

The second reason Scalia felt substantive review was improper was that the Court based part of its decision on an issue that had no bearing on the remitted amount of punitive damages awarded by the Alabama Supreme Court.⁽¹⁸⁷⁾ Finally, Scalia believed that the three guideposts offered by the Court for determining the excessiveness of a punitive damages award were nothing more than the "Justices' subjective assessment of the `reasonableness' of the award in relation to the conduct for which it was assessed,"⁽¹⁸⁸⁾ and served to federalize an area of law that was traditionally left to the states.⁽¹⁸⁹⁾

Scalia concluded his dissent by stating that "[t]he elevation of `fairness' in punishment to a principle of `substantive due process' means that every punitive award unreasonably imposed is unconstitutional."⁽¹⁹⁰⁾ Based on the Court's establishment of a substantive right against an excessive award, Scalia remarked that defendants could claim that every time punitive damages were awarded the amount was unreasonable, which resulted in a constitutional violation subject to review by this Court.⁽¹⁹¹⁾

F.  Justice Ginsburg's Dissent

Justice Ginsburg, joined by Chief Justice Rehnquist, dissented because she believed the Court entered an area of law that was traditionally left to state control.⁽¹⁹²⁾ In addition, as the sole issue before the Court was the excessiveness of the punitive damages award, the Court improperly addressed the "`extraterritoriality'" issue as the Alabama Supreme Court had stated that the remitted award was not based on any of BMW's out of state conduct.⁽¹⁹³⁾ Moreover, Alabama juries will no longer award punitive damages by completing a simple mathematical equation as "it is plainly impermissible to assess punitive damages by multiplication based on out-of-state events not shown to be unlawful."⁽¹⁹⁴⁾

Ginsburg believed the Court showed a lack of respect for the decision rendered by Alabama's highest court which, in her opinion, deserved a strong presumption of validity.⁽¹⁹⁵⁾ Due to the fact that the Court has traditionally been reluctant to review punitive damage awards issued by federal district courts, and due to the recent activity by state legislatures in enacting legislation directed at punitive damages, Ginsburg believed the Court should have left the issue of excessive punitive damages solely to the states.⁽¹⁹⁶⁾

IV.  Analysis

The Gore decision was significant as an effort by the Court to clarify "`the standard that will identify unconstitutionally excessive awards' of punitive damages."⁽¹⁹⁷⁾ In essence, the test developed by the Court requires reviewing courts to undergo a two step analysis in their excessiveness inquiry.⁽¹⁹⁸⁾ The first step requires a court to identify the "state interests that a punitive [damages] award is designed to serve" to see if those interests justify the amount awarded by the jury.⁽¹⁹⁹⁾ Second, a court must determine whether the defendant was on "notice" that its conduct could subject it to the amount of punitive damages assessed.⁽²⁰⁰⁾ In determining if a defendant had constitutionally sufficient notice, the Court set forth "[t]hree guideposts" for courts to apply: "the degree of reprehensibility of the [defendant's conduct]; the disparity [or ratio] between the harm or potential harm suffered by [the plaintiff] and his punitive damages award; and the difference between this remedy and the civil penalties authorized or imposed in comparable cases."⁽²⁰¹⁾ Although this two-part test was meant to provide the much needed framework for courts to be able to distinguish between excessive and reasonable awards of punitive damages, it nonetheless will fall short of providing the constraining mechanisms the Court felt were lacking in the current state standards.⁽²⁰²⁾

A.  The Gore Test

1.  Step One: Determining a State's Interest in Punitive Damages

In future cases involving punitive damages, the first step for a court to follow when reviewing the excessiveness of a punitive damages award will be to identify the "state interests that a punitive award is designed to serve."⁽²⁰³⁾ In identifying a state's interest, a court may no longer uphold a punitive damages award "`with the intent of changing the tortfeasor's lawful conduct in other States.'"<sup>(204)</sup> As such, a punitive damages award must be "supported by [a state's] `interest in protecting its own consumers and its own economy.'"⁽²⁰⁵⁾ If it is not, the award overstates the state's interest in assessing punitive damages and cannot be upheld.⁽²⁰⁶⁾

Justice Scalia believed the Court to be prohibiting the use of lawful conduct that occurred in other states for any purpose.⁽²⁰⁷⁾ However, this is not the case. Although lawful out-of-state conduct can no longer serve as a basis for assessing punitive damages, such conduct is still relevant when a jury is examining "the degree of reprehensibility of the defendant's conduct."⁽²⁰⁸⁾ The reason is that, although a state may not punish "`what the law plainly allows him to do,'"⁽²⁰⁹⁾ a jury may still look at "lawful conduct that bears on the defendant's character and prospects for rehabilitation" when determining the appropriate amount of punitive damages to assess.⁽²¹⁰⁾ Thus, punitive damages cannot be assessed to punish lawful out-of-state conduct, however, such conduct can be looked at to inflate an award so long as the amount does not exceed a state's interest in punishing and deterring the defendant.

Applying the state interest analysis in Gore, the Court held that although the Alabama Supreme Court relied exclusively on conduct that occurred in Alabama in remitting the award to $2 million, that amount exceeded Alabama's interests in punishing and deterring BMW.⁽²¹¹⁾ As a result, the award constituted an excessive penalty in light of Alabama's interest in protecting its citizens.⁽²¹²⁾

An issue left unanswered by the Court was "whether one State may properly attempt to change a tortfeasors' unlawful conduct in another State."⁽²¹³⁾ Based on subsequent cases interpreting the Gore decision, it has been held that a state may not use punitive damages as a basis to punish unlawful conduct that occurred in other states, but like lawful conduct, may be looked at by the jury when considering the reprehensibility of the defendant's conduct.⁽²¹⁴⁾ Adhering to the discussion of lawful out-of-state conduct, it would follow then that a similar limitation would be applied to unlawful conduct. That is, unlawful out-of-state conduct may be used to inflate an award so long as the amount does not exceed a state's interest in punishing and deterring a defendant.⁽²¹⁵⁾

The ability of future courts to apply the state interest part of the Gore test is uncertain. The most significant reason is that it is difficult to determine precisely what amount of punitive damages would be adequate to fulfill a state's interest without taking that role away from the jury.⁽²¹⁶⁾ One explanation for the Court's substantial discussion of state interests is that the jury, in Gore, relied primarily on out-of-state conduct in arriving at the $4 million figure.⁽²¹⁷⁾ Moreover, the Alabama Supreme Court provided no significant justification for finding $2 million to be a reasonable amount to award the plaintiff.⁽²¹⁸⁾ As a result, the Court was most likely sending a signal to lower courts that it will no longer tolerate a simple rubberstamp approval of the jury's decision without providing legitimate reasons for upholding the punitive damages award.⁽²¹⁹⁾ Instead, the Court is requiring lower courts to review questionable punitive damages awards to be certain that the amount is no greater than necessary to uphold a state's interests.⁽²²⁰⁾

In the few decisions that have applied this part of the Gore test, the courts have taken greater steps not only to identify the state's interest, but to ensure that the award was based on conduct that only had an impact on the state and its citizens.⁽²²¹⁾ However, of these decisions, none have held the punitive damages award unsupported by the state's interest.⁽²²²⁾ Yet, if the Court's mission was to get lower courts to take greater steps to evaluate the punitive damages award to ensure that it was no greater than necessary to meet the state's interest, the Court has, to this point, succeeded.

Another issue left unanswered by the Court was why the jury is not instructed to consider only conduct that had an impact on the state or its citizens.⁽²²³⁾ By not requiring a jury to be so instructed and leaving it to a reviewing court to resolve in its post-verdict review, the Court failed to remedy the problem of having a jury's award overrepresent a state's interest as the jury is not told what conduct is proper to consider.⁽²²⁴⁾ To resolve this problem, one court stated that "[w]ith hindsight provided by the BMW opinion it might have been desirable to instruct the jury to restrict its consideration to [the state's] `interest in protecting its own [citizens] and its own economy.'"⁽²²⁵⁾ Thus, to avoid this problem in the future, lower courts should instruct the jury to only consider the state's own interest in protecting its citizens when determining the appropriate amount of punitive damages to award.

2.  Step Two: Notice and the Three Guideposts

The second step in the Gore test requires "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."⁽²²⁶⁾ To determine if a defendant had sufficient notice to satisfy the requirements of due process, the Court identified "[t]hree guideposts" to assess if a punitive damages award was "grossly excessive."⁽²²⁷⁾ The "guideposts" were: "the degree of reprehensibility of the [defendant's tortious conduct]; the disparity between the harm or potential harm suffered by [the plaintiff] and his punitive damages award; and the difference between this remedy and the civil penalties authorized or imposed in comparable cases."⁽²²⁸⁾

a. Notice: The Court's Inconsistent Treatment

Before addressing the guideposts, it is important to consider how the Court reviewed the punitive damages award. Although not explicitly stated by the Court, the $2 million award must have been reviewed as a substantive due process challenge as the discussion focused on the excessiveness of the punitive damages award.⁽²²⁹⁾ The significance of the type of review undertaken by the Court is that by framing the second step in terms of notice to the defendant, the Court failed to address the fact that such an argument was "traditionally associated with procedural due process" challenges.⁽²³⁰⁾ Although the Court approved of the procedures the state of Alabama utilized in its post-verdict review,⁽²³¹⁾ the Court, by couching its analysis in terms of a procedural due process argument, has inadequately distinguished between substantive and procedural due process challenges.

A second problem is that the Court failed to reconcile or even address the fact that a plurality of the Court in TXO found no merit in the defendant's argument that it "had no notice of the possibility that the award of punitive damages might be divorced from an award of compensatory damages."⁽²³²⁾ Although discussed in TXO as a procedural due process challenge, the plurality remarked that "the notice component of the Due Process Clause is satisfied if prior law fairly indicated that a punitive damages award might be imposed in response to egregiously tortious conduct."⁽²³³⁾

Although the plurality in TXO did not explicitly state what it meant by "prior law,"⁽²³⁴⁾ Alabama had seemingly met this requirement as it had two statutes in place explicitly stating: (1) the conduct required of a defendant before punitive damages could be assessed,⁽²³⁵⁾ and (2) how much could be assessed against a defendant whose conduct fell into one of the prescribed categories.⁽²³⁶⁾ Thus, Alabama's prior law seemingly provided BMW with the requisite notice the Gore Court felt was lacking in this case.⁽²³⁷⁾

In addition, a subsequent case applying the notice requirement of Gore indicated that the defendant had sufficient notice that a $6 million award could be assessed as the state consistently punished "particularly egregious" conduct with punitive damages.⁽²³⁸⁾ In addition, the statute in that case "permitted punitive damages to exceed the amount of the actual damages if the judge made a finding of `clear and convincing evidence that the defendant is guilty of conduct evincing a wanton or reckless disregard for the rights of another, oppression, fraud or malice, actual or presumed.'"⁽²³⁹⁾ As a result, the court held that the defendant had "fair notice that punitive damages could be awarded if plaintiffs proved the contentions in their complaint to the satisfaction of the jury."⁽²⁴⁰⁾

As the state of Alabama had a statute in place that resembled the statute the court in the Tenth Circuit said afforded the defendant sufficient notice,⁽²⁴¹⁾ it would seem that BMW had sufficient notice to fulfill constitutional requirements.

In addition, two other facts of the case, although not "prior law," indicated that BMW did have notice that punitive damages could be assessed against them.⁽²⁴²⁾ First, an Alabama jury prior to Gore, in Yates v. BMW of North America, Inc.,⁽²⁴³⁾ determined that BMW's decision to withhold the fact that a customer's BMW had been repainted constituted fraud in violation of Alabama state law.⁽²⁴⁴⁾ Second, before the judgment came down in Gore, BMW avoided selling any refinished cars in Alabama and in two other states, and after the $4 million award was issued, implemented a full disclosure policy of all repairs regardless of the severity.⁽²⁴⁵⁾ These facts would seem to indicate that BMW had notice that punitive damages could have been assessed against them for adhering to a nondisclosure policy.

As the Court failed to address the contrary holding found in TXO regarding notice,⁽²⁴⁶⁾ and the subsequent decision that has held a defendant to have sufficient notice based on a similar statute as that of Alabama, it is uncertain how lower courts will be able to reconcile the Court's own inconsistent treatment of this issue. However, it is unlikely that the "notice" requirement will play a major role in the future.⁽²⁴⁷⁾ For, even if a defendant had notice that a punitive damages award could be disproportionate to an award of compensatory damages, the three factors identified by the Court would still be applied to ensure that the amount was not unconstitutionally excessive.⁽²⁴⁸⁾

One court, in applying the notice standard, has held "that BMW's guideposts are applicable even when the defendant has adequate notice of the amount at issue."⁽²⁴⁹⁾ It follows that in determining if a punitive damages award is excessive, the notice a defendant had is irrelevant to the inquiry. If an award is excessive, it "remains excessive even if the party to be penalized has been informed of the magnitude of the potential sanction."⁽²⁵⁰⁾ Thus, although the Court framed the second part of the test in terms of notice, the real inquiry will most likely center on whether the amount awarded was "grossly excessive" as determined by the application of the "[t]hree guideposts."⁽²⁵¹⁾

b. The Three Guideposts

Through the "[t]hree guideposts," the Court effectively limited the number of factors a court may utilize in determining whether a defendant had constitutionally sufficient notice of the size of the punitive damages award.⁽²⁵²⁾ Although the Court clarified which factors a lower court must consider when reviewing the excessiveness of a punitive damages award, the test will prove problematic for a number of reasons.

First, by relying on three factors that have traditionally been applied by courts when reviewing the reasonableness of a punitive damages award,⁽²⁵³⁾ the Court's test was merely a restatement of current practice.⁽²⁵⁴⁾ Second, by not giving sufficient guidance as to what would be a reasonable amount in this case, the Court's application of these factors will be difficult to apply consistently by lower courts in the future.

i.  Degree of Reprehensibilty

According to the Court, "the most important indicium of the reasonableness of a punitive damages award [wa]s the degree of reprehensibility of the defendant's conduct."⁽²⁵⁵⁾ To help guide reviewing courts in the future, the Court noted that certain conduct and crimes were more deserving of punitive damage awards than others.⁽²⁵⁶⁾ For example, "`nonviolent crimes are less serious than crimes marked by violence or threat of violence,'"<sup>(257)</sup> and that crimes involving "`trickery and deceit' are more reprehensible than negligence."⁽²⁵⁸⁾ Although crimes that involve only economic harm "may warrant less punishment than harm to the health or safety of individuals,"⁽²⁵⁹⁾ when an economic injury was intentionally caused "through affirmative acts of misconduct, or when the target is financially vulnerable," a court would be justified in upholding a large penalty.⁽²⁶⁰⁾ Also relevant in the reprehensibility analysis is "evidence that a defendant has repeatedly engaged in prohibited conduct while knowing or suspecting that it was unlawful."⁽²⁶¹⁾ In addition, it is appropriate to examine both lawful and unlawful out-of-state conduct committed by the defendant.⁽²⁶²⁾

These standards undoubtedly will provide lower courts with some guidance when determining the reasonableness of a punitive damages award based on the reprehensibility of the defendant's conduct. These standards set forth a range of conduct that are deserving of either higher or lower punitive awards. For example, a defendant whose conduct is violent is deserving of a higher punitive sanction than a defendant whose conduct caused purely economic harm.⁽²⁶³⁾ In Gore, the Court held that because the defendant's conduct only caused economic harm, the $2 million award was excessive.⁽²⁶⁴⁾

The problem not addressed by the Court is how much is too much? Is $1 million, $250,000, $50,000, or $1000 the appropriate amount based on conduct that only caused economic harm? Another issue not addressed by the Court is how courts should determine the proper amount of punitive damages to assess when the defendant's conduct falls between the ranges of violence and pure economic harm. The most likely answer, though somewhat troubling, is that a reviewing court is granted broad discretion in determining the appropriate amount when conduct falls in between the standards developed by the Court. As the Court failed to address this concern, "the only predictable cases are those that land at the extremes of the reprehensibility scale."⁽²⁶⁵⁾

A second problem raised by this factor is that the decision to assess punitive damages and the amount assessed is inherently a subjective determination. In applying this factor, one court has stated that "`reprehensibility' is not a question of whether the conduct is acceptable or unacceptable; the jury's finding of liability has already settled that question."⁽²⁶⁶⁾ However, by re-examining the defendant's conduct and finding it undeserving of such an award, the jury's role and function is being usurped by the court.⁽²⁶⁷⁾

When a reviewing court disagrees with the jury's decision that the defendant's conduct was undeserving of such an award, the court, in effect, becomes both judge and jury.⁽²⁶⁸⁾ This may result in inconsistent decisions among the states. For example, one court may believe that a defendant's conduct is not deserving of the amount the jury determined was reasonable in the circumstances, while another court may believe that, based on the same conduct, the award was within the constitutional limits. Thus, "[o]ne judge's excess very well may be another's moderation."⁽²⁶⁹⁾

ii.  Ratio

The second guidepost offered by the Court to help determine the reasonableness of a punitive damages award was "its ratio to the actual harm inflicted on the plaintiff."⁽²⁷⁰⁾ In applying this factor, the appropriate question for a lower court to address is "`"whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant's conduct as well as the harm that actually has occurred."'"⁽²⁷¹⁾

Although the ratio between compensatory and punitive damages is relevant in the excessiveness inquiry, the Court refused to draw a "`"mathematical bright line between the constitutionally acceptable and . . . unacceptable that would fit every case."'"<sup>(272)</sup> Instead, the Court noted that when the ratio is "a breathtaking 500 to 1, . . . the award must `raise a suspicious judicial eyebrow.'"⁽²⁷³⁾

The problem raised by the Court finding a 500 to one ratio excessive is that it did not adequately reconcile the similarity between the ratio it deemed unconstitutional in Gore, and the ratio it considered within constitutional limits in TXO.⁽²⁷⁴⁾ In TXO, a plurality of the Court upheld a ratio of punitive damages to compensatory damages of 526 to one.⁽²⁷⁵⁾ The Court in Gore stated that the ratio upheld in TXO was only ten to one.⁽²⁷⁶⁾ However, a ten to one ratio is true only to the extent that the award was ten times greater than any other award for slander of title in any jurisdiction.⁽²⁷⁷⁾

Although the ratio between compensatory and punitive damages is one "indicium of the reasonableness" of an award,⁽²⁷⁸⁾ the Court, by striking down an award which was 500 times greater than the compensatory damages, and upholding an award that was 526 times greater in TXO, has not established meaningful guidelines to help reviewing courts determine when an award is unreasonable based on the ratio between compensatory and punitive damages.⁽²⁷⁹⁾ By leaving it to future courts to make sense out of the Court's own inconsistencies, the Court has not provided reviewing courts sufficient guidance on how to apply this factor consistently and intelligently in the future.

Another problem raised by the Court's treatment of ratio is that reviewing courts, like the Alabama Supreme Court in this case,⁽²⁸⁰⁾ may differ as to what ratio constitutes a constitutionally reasonable amount. This may result in a lack of uniformity among the states, as one court may believe a 500 to one ratio causes it to "`raise a suspicious judicial eyebrow,'" while another state may deem it constitutionally reasonable.⁽²⁸¹⁾

In jurisdictions which have compared the ratio of the compensatory to punitive damages, the results have been far from consistent. For example, one court upheld a ratio of 200,000 to one,⁽²⁸²⁾ while another court found a 6.5 to one ratio excessive.⁽²⁸³⁾ Whereas Justice Scalia remarked after TXO that substantive due process challenges could be disposed of by the simple observation that "`[it] [wa]s no worse than TXO,'" future courts will have a difficult time determining whether a punitive damages award is unreasonable based on the Court's own inconsistent treatment of the ratios in TXO and Gore.⁽²⁸⁴⁾ Moreover, courts that have applied this factor have not rendered decisions that can easily be reconciled.⁽²⁸⁵⁾

iii. Comparable Civil and Criminal Sanctions

The final guidepost offered by the Court compares the punitive damages award with other civil or criminal penalties which the defendant could have been subjected to for its unlawful conduct.⁽²⁸⁶⁾ As guidance for future courts, the Court stated that if a punitive damages award is "substantially greater than the statutory fines available" for the defendant's conduct,⁽²⁸⁷⁾ then it can "be said that the tortfeasor lacked `fair notice' that the wrongful conduct could entail a substantial punitive award."⁽²⁸⁸⁾

This factor may prove to be the most helpful for future courts when reviewing the excessiveness of a punitive damages award. Statutory sanctions represent the dollar amount the state determined was necessary to adequately punish and deter a defendant's conduct.⁽²⁸⁹⁾ However, by failing to specifically state what dollar amount would have been reasonable in this case, the Court failed to provide the necessary guidance to make this factor completely useful. For example, as the statute in Alabama would have only sanctioned BMW with a $2000 penalty for adhering to its nondisclosure policy,⁽²⁹⁰⁾ it is uncertain whether a $10,000, $100,000, $1 million, or higher punitive damages award would be reasonable when compared to the $2000 statutory penalty.⁽²⁹¹⁾

This factor will provide lower courts with an objective manner to determine if a punitive damages award correlates with the state's interest in punishing and deterring a defendant's conduct. However, by not indicating how close a punitive damages award must correlate with the state's statutory penalties, the Court failed to provide sufficient guidance for lower courts when considering this factor. Despite this problem, courts have been able to glean some guidance as to how this factor should be applied. For example, in cases where substantial penalties could have been assessed against the defendant for its conduct, a substantial punitive damages award was upheld.⁽²⁹²⁾ On the other hand, where the punitive damages award was much greater than the possible criminal or civil sanctions, the award was held excessive.⁽²⁹³⁾

B.  Post-Gore Outlook: Problems and Uncertainties for the Future

As in Haslip and TXO, the Court again declined to establish a "`"bright line [test] between the constitutionally acceptable and the constitutionally unacceptable that would fit every case."'"⁽²⁹⁴⁾ Instead, the Court left the inquiry to the reasonableness of the punitive damages award.⁽²⁹⁵⁾ However, the Court retreated from its prior decisions in TXO and Haslip by limiting the number of factors a reviewing court may look at when determining the reasonableness of a punitive damages award to the "[t]hree guideposts."⁽²⁹⁶⁾

As the guidelines offered by the Court will suffer substantial problems in creating predictability and uniformity among the states, the Court will most likely be criticized as harkening back to the jurisprudence characteristic of the "Lochner era"⁽²⁹⁷⁾ wherein the Court actively engaged in substituting its own subjective opinion for that of the jury, lower courts, and states.⁽²⁹⁸⁾ The primary reason for this claim is that the Court disregarded the jury's, as well as Alabama's highest court's opinions as to what the reasonable punishment was based on the defendant's conduct.⁽²⁹⁹⁾ Additionally, the Court broke new ground as this decision was the first time the Court has invalidated a punitive damages award because the amount was "unreasonably large."⁽³⁰⁰⁾

However, in the area of punitive damages, discovering what constitutes a reasonable award may require some subjectivity. Although the Court's analysis suffers from the problems previously mentioned, most people would probably agree that Gore should not receive $2 million for being the person lucky enough to buy a repainted car as new.⁽³⁰¹⁾ Thus, like the Court, the award most likely "`raise[d] a suspicious . . . eyebrow'" over the public's eye as well.⁽³⁰²⁾ However, a reviewing court, unlike the public, should not find a punitive damages award unconstitutionally excessive simply because it disagrees with the decision made by the jury or lower court, lest the reasonableness determination be reduced to the standard Justice Potter Stewart relied on when defining obscenity, "I know it when I see it."⁽³⁰³⁾

If the Court, as well as future reviewing courts, will simply substitute their opinion as to the proper amount of punitive damages for that of the jury, there is no need to have a jury assess punitive damages in the first place.⁽³⁰⁴⁾ Courts should not even bother to have juries consider punitive damages if the decision it eventually arrives at will be overlooked by the reviewing court.⁽³⁰⁵⁾

However, judicially imposed punitive damages awards have not taken hold in the american judicial system, and juries are still looked upon to determine if a defendant's conduct warrants a punitive remedy.⁽³⁰⁶⁾ As such, a court, in its excessiveness review, should not simply replace the jury's decision with its opinion as to the reasonable amount of punitive damages in the circumstances, but should serve as a check to ensure that the evidence supports the amount awarded and was not arbitrary or based on any bias towards the defendant.⁽³⁰⁷⁾ If the reviewing court subjects the award to post-verdict review (applying the "three guideposts" in the excessiveness inquiry) and correctly applies the underlying state law, as the Alabama Supreme Court did in this case, the award should receive a very "strong presumption of validity."⁽³⁰⁸⁾ This sort of review would leave the decision to assess punitive damages with the jury, the body that has traditionally been trusted to be the "`guarantor of fairness, a bulwark against tyranny, and a source of civic values.'"⁽³⁰⁹⁾

One problem raised by the Court's discussion of the "[t]hree guideposts" is that the trial court, as well as Alabama Supreme Court, applied the Hammond/Green Oil factors in reviewing the award, which included an analsyis of the three factors the Court relied on in finding the award unconstitutionally excessive.⁽³¹⁰⁾ However, the Court overlooked the Alabama Supreme Court's determination without offering any reasons as to why that court's decision was faulty.⁽³¹¹⁾ Thus, the Court seemingly retreated from its prior approval in Haslip of a multi- factor evaluation (seven factors) in determining the reasonableness of a punitive damages award.⁽³¹²⁾ The problem the Court failed to recognize is that:

"[w]hen a jury is the trier of fact, it is not for the trial judge, nor an appellate court, to determine with mathematical certainty that all of the various elements of evidence offered by the parties regarding specific costs and credits precisely equal the amount of the jury's verdict. We do not have a trial by computer, nor do we have post-trial, or appellate review by the computer. The reviewing court does not substitute its own judgment as to the amount of damages for that of the trier of fact."⁽³¹³⁾

However, according to the Court, if the award causes at least five Justices or a reviewing court to "`raise a suspicious judicial eyebrow,'" the punitive damages award, as determined by the jury, must be invalidated.⁽³¹⁴⁾ In the words of Justice Scalia, this is "a stupefying proposition."⁽³¹⁵⁾

One explanation for the Court's willingness to place substantive limits on punitive damages awards is the current distrust in a jury's ability to "assess appropriate awards."⁽³¹⁶⁾ As such, the problem the Court has been struggling to remedy may not lie in the substantive due process realm of excessive damages. Rather, the reason there are excessive punitive damages awards may be caused by the nonspecific and broad instructions a jury is given on how to determine the proper amount of punitive damages to assess against a defendant; a procedural due process issue.⁽³¹⁷⁾ For example, the Court in Haslip found the jury instruction given in that case sufficient to withstand a procedural due process challenge.⁽³¹⁸⁾ However, such a broad instruction does little more "than adivis[e] the jury to `do the right thing.'"⁽³¹⁹⁾ The Court may have been better served by requiring a jury to be given detailed instructions on the factors that it should consider in arriving at a proper punitive damages award.⁽³²⁰⁾

However, the Court remained silent on whether the jury should be instructed to consider the three factors of reprehensibility, ratio, and comparable civil and criminal penalties when determining the amount of punitive damages to assess, or whether to leave the application of these factors to post-verdict review.⁽³²¹⁾ One court has stated that "`"surely there must be an upper limit [to punitive damage awards], and whether that has been surpassed is not a question of fact with respect to which reasonable men may differ, but a question of law."'"⁽³²²⁾ As such, one option is to leave the application of the Gore factors to post-verdict review.

Another court, in Geressy v. Digital Equipment Corp.,⁽³²³⁾ has held differently. In that case, the court stated that "[t]he Second Circuit's approach to the Gore factors, as well as its conclusion that whether a punitive damage award is excessive is `a question of law,' does not require district courts to ignore the Gore factors in charging the jury."⁽³²⁴⁾ As such, the better alternative would be to have the jury instructed on the Gore factors. The jury should be given the tools necessary to make the initial decision on what amount of punitive damages would be reasonable in the circumstances. If a reviewing court will rely on these factors to determine the reasonableness of the award, it makes sense to give the jury, the body vested with the initial duty to assess punitive damages, the first chance to arrive at a proper award.⁽³²⁵⁾

Based on the Court's discussion of state interests and the three guideposts, the Alabama Supreme Court, on remand, held that $2 million was "grossly excessive" and that Gore was entitled to either $50,000 in punitive damages or a new trial.⁽³²⁶⁾ Interestingly, this amount was hinted at by the Court as the acceptable amount of punitive damages to award in this case.⁽³²⁷⁾ The reason for this amount is that BMW had sold fourteen repainted cars as new in Alabama.⁽³²⁸⁾ As the Court stated that Alabama could only punish conduct that had an affect on its own citizens, $56,000, or $4000 multiplied by fourteen, would be the amount that would accomplish this purpose.⁽³²⁹⁾ However, by awarding $50,000, the Alabama Supreme Court has created a fundamental problem. As the Alabama Supreme Court originally held that the jury improperly arrived at $4 million by multiplying $4000 by 1000, the Alabama Supreme Court has arrived at an amount by using the same mathematical equation the jury had; one that it originally deemed unacceptable and improper.

Another significant shortcoming of the Court's opinion was the complete failure to address the fact that the Alabama statute did not cap the amount of punitive damages a jury could assess against a defendant where its conduct was the result of "gross, oppressive, or malicious fraud."⁽³³⁰⁾ According to this statute, if the jury found that BMW's conduct fell into one of these categories, it could assess an amount it believed appropriate to punish and deter that conduct.⁽³³¹⁾

By invalidating the jury's award, the Court has shown a lack of deference to states which have adopted legislation granting a jury broad discretion in awarding punitive damages.⁽³³²⁾ The Court even recognized this principle when it stated that "[s]tates 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."⁽³³³⁾ However, the Court did not follow its own statement by disregarding Alabama's determination that punitive damages are not limited when the defendant engaged in conduct it deemed unacceptable.⁽³³⁴⁾

A more far reaching implication of the Court's decision is that if a punitive damages award is assessed according to a state statute which limits or caps a punitive damage award,⁽³³⁵⁾ the award may still violate a defendant's substantive due process rights "if . . . a court finds that the reprehensibility of the defendant's conduct does not merit such an award."⁽³³⁶⁾ The problem in this situation is that the state legislature determined that "a punitive award authorized [under] its guidelines [wa]s not excessive in any case."⁽³³⁷⁾

In Virginia, for example, the legislature determined that a plaintiff could not recover punitive damages in excess of $350,000.⁽³³⁸⁾ If a jury decided to assess the maximum amount allowable under this statute, $350,000, on review, based on the Gore test, a court could strike down this award simply because it believed, in its own opinion, that the defendant's conduct did not warrant such an award.⁽³³⁹⁾ The problem with this is that a court would be disregarding a state's effort to statutorily limit punitive damages awards, which is a proper function of the states.

One effect of the Gore decision is to encourage litigation. As Justice Scalia remarked in his dissent:

[t]he elevation of "fairness" in punishment to a principle of "substantive due process" means that every punitive award unreasonably imposed is unconstitutional; such an award is by definition excessive, since it attaches a penalty to conduct undeserving of punishment. . . . [Thus,] every dispute as to evidentiary sufficiency in a state civil suit poses a question of constitutional moment, subject to review in this Court.⁽³⁴⁰⁾

As a result, in cases where a jury has decided that the defendant has committed an act constituting gross, oppressive, or malicious fraud,⁽³⁴¹⁾ and is therefore assessed any amount of punitive damages, it is in the defendant's best interest to appeal the decision in the hopes that the reviewing court will find the award excessive.⁽³⁴²⁾

Another problem the Court did not address was whether the guideposts it identified were the only factors a reviewing court could look at when reviewing the excessiveness of a punitive damages award.⁽³⁴³⁾ Justice Breyer, in his concurring opinion,⁽³⁴⁴⁾ stated that the way in which "the Alabama courts interpreted th[e Haslip factors] . . . could not have significantly constrained the court system's ability to impose `grossly excessive' awards."⁽³⁴⁵⁾ However, nowhere in his nor in the majority opinion was it mentioned if other factors could be looked at by a court when making its excessiveness review.⁽³⁴⁶⁾

Justice Scalia, in his dissent, was the only Justice to recognize this new problem created by the Court.⁽³⁴⁷⁾ Because of the majority's silence on this issue, lower courts have read the Gore decision to stand for two separate propositions. Some courts have read the decision to mean that the three factors of reprehensibility, ratio, and civil and criminal sanctions, are the only factors a court can look at when reviewing the excessiveness of a punitive damages award.⁽³⁴⁸⁾ Other courts have read the opinion to mean that the guideposts are only some of the factors a court may look at when making its excessiveness review.⁽³⁴⁹⁾

Other factors that have been looked at by reviewing courts were whether the defendant profited from its misconduct, and the defendant's wealth.⁽³⁵⁰⁾

By far one of the most important factors the Court did not look at, which was approved of by the Court previously in TXO⁽³⁵¹⁾ and Haslip,⁽³⁵²⁾ was the defendant's wealth.⁽³⁵³⁾ Though not addressing this factor, the Court hinted that the wealth of a defendant was an inappropriate factor for a reviewing court to consider.⁽³⁵⁴⁾

However, a subsequent court, in discussing Gore, has held that a defendant's wealth is an appropriate factor for a jury as well as a reviewing court to consider when determining the appropriate size for a punitive damages award.⁽³⁵⁵⁾ In addition, Justice Breyer, in his concurring opinion, noted that the defendant's wealth is an appropriate factor to look at to inflate a punitive damages award when the three guideposts support the award; however, it cannot be used to justify a high punitive damages award "to make up for the failure of [the three guideposts]."⁽³⁵⁶⁾ Although there is some merit in the argument that a jury or reviewing court will assess or uphold an extremely large punitive damages award simply because the defendant will be able to absorb the award due to its wealth,⁽³⁵⁷⁾ this argument, however, has not been the prevailing view.⁽³⁵⁸⁾ It seems logical that if a punitive damages award is not commensurate with a defendant's ability to pay, the award will not adequately serve to deter and punish that defendant.⁽³⁵⁹⁾ Thus, a jury as well as a reviewing court should be entitled to look at the wealth of the defendant as one factor to ensure that both small and large companies receive "equitable punishment."⁽³⁶⁰⁾

If this factor had been applied by the Court in this case, it would seem that, due to BMW's wealth and the size of the company, a $2 million punitive damages award would sufficiently punish BMW as it would amount to more than just a simple slap on the wrist.

A second factor previously deemed appropriate by the Court to look at when determining the reasonableness of a punitive damages award was the profits the defendant received from its misconduct.⁽³⁶¹⁾ The Alabama Supreme Court believed that BMW was profiting from its wrongful conduct,⁽³⁶²⁾ and the facts seem to indicate that BMW was making considerable profits from its nondisclosure policy.⁽³⁶³⁾ As such, it would have been appropriate for the Court to look at this factor when reviewing the excessiveness of the punitive damages award.⁽³⁶⁴⁾ When a defendant has profited from its wrongful conduct, it is appropriate to assess punitive damages in an amount which would effectively take away the company's incentive to continue committing this wrongful conduct.⁽³⁶⁵⁾

If this factor had been applied by the Court, although it appeared as if BMW was making substantial profits from adhering to its nondisclosure policy, a $2 million punitive damages award would take away too much from BMW.⁽³⁶⁶⁾ As BMW's conduct was not illegal in other states, the profits it had obtained in such other states were acquired legally. Thus, this factor would weigh in favor of not taking away all of the profits BMW made in such other states.

A multi-factor evaluation was clearly an important safeguard to the Alabama Supreme Court,⁽³⁶⁷⁾ as well as to the Court itself in TXO and Haslip.⁽³⁶⁸⁾ If courts will review the excessiveness of a punitive damages award, instead of limiting a court's ability to review the reasonableness of an award to only three factors, it would be more appropriate to allow courts the flexibility of looking at many factors in determining whether a punitive damages award tips the excessiveness scale.

V.  Conclusion

As tort reform proponents "hail BMW as the beginning of the end of an age of confusion in the punitive damages arena," because "the Supreme Court has finally tendered clear, understandable guideposts by which reviewing courts can measure the excessiveness of punitive damage awards,"⁽³⁶⁹⁾ many others will view this decision in a different light. Although the Court initially set out to "illuminate `the character of the standard that will identify unconstitutionally excessive awards' of punitive damages,"⁽³⁷⁰⁾ reviewing courts may be left in the dark as to how to apply the guideposts when making an excessiveness inquiry in the future.⁽³⁷¹⁾

The most significant problem reviewing courts may have with this test is that the Court failed to answer what amount would be reasonable in this case. By not indicating what amount would be reasonable in this case, the Court has developed standards that will most likely result in inconsistent application by lower courts. Thus, this decision will not fulfill the Court's hopes of clarifying "`the character of the standard that will identify unconstitutionally excessive awards' of punitive damages.'"⁽³⁷²⁾ Instead, the Court has set forth a new two-part test that is vague and imprecise, and will encourage every defendant to appeal whenever punitive damages are awarded in the hopes that a reviewing court will disagree with the jury and find the award "grossly excessive."⁽³⁷³⁾

Additionally, the new test will do little, if anything, to remedy the problem of excessive punitive damages awards or cure the perception that juries are unable to reach equitable results.⁽³⁷⁴⁾ The reason for this is that juries are neither instructed on the state interests a punitive damages award is intended to vindicate, nor told of the factors a reviewing court will look at in determining if award the is within constitutional limits.⁽³⁷⁵⁾ As some courts have read Gore to mean that the three factors are only some factors a court should look at, while other courts have read it to mean these are the only factors a reviewing court may look at, the Court will most likely be forced to grant certiorari to a fifth case this decade to shed light on the shadows these guideposts have cast.⁽³⁷⁶⁾

John Zenneth Lagrow^(*)

1. 116 S. Ct. 1589 (1996); see also Barbara K. Bucholtz, 32 Tulsa L.J. 449, 454 (1997) (stating that the Gore decision "gave the business community comfort"); Timothy J. Mulloney, Court Limit on Punitive Damages Clouds Product Liability Cases, The Baltimore Sun, June 2, 1996, at 1L ("BMW . . . gave the political right one of its fondest wishes--tougher, but still unclear, limits on punitive damages in product-liability cases.").

2. See Common Sense Legal Standards Reform Act of 1995, H.R. 956, 104th Cong. (1995) (proposing to limit punitive damages awards to "3 times the amount of damages awarded to the claimant for the economic loss on which the claimant's action is based, or $250,000 whichever is greater. The requirements of this subsection shall be applied by the court and shall not be disclosed to the jury"); see also Michael Tonsing, 43 Fed. Law. 8, 8 (Feb. 1996) (stating that the congressional debates have focused primarily on "complaints by business that high punitive damages awards stifle economic growth"); James Cahoy, Tort Reform Legislation Since 1994, West's Legal News, Dec. 6, 1996, available in 1996 WL 699299 (stating that President "Clinton vetoed this bill in May 1996 [because] the legislation would `mean more unsafe products in our homes' and `would let wrongdoers off the hook'").

3. See Peter A. Antonucci, BMW v. Gore: What Signal is the Supreme Court Really Sending on Punitive Damages?, West's Legal News, Nov. 22, 1996, available in 1996 WL 672396 ("Before BMW, manufacturers hung their greatest hopes on legislative attempts to curtail the runaway nature of punitive damage awards and President Clinton's most recent veto of such attempts had virtually dashed those hopes. Now, the playing field has shifted and defendants have finally received the explicit and affirmative assistance they have so long awaited from the judiciary.").

4. Gore, 116 S. Ct. at 1592 (quoting TXO Prod. Corp. v. Alliance Resources Corp., 509 U.S. 443, 454 (1993) (Stevens, J., plurality opinion) (quoting Waters-Pierce Oil Co. v. Texas (No. 1), 212 U.S. 86, 111 (1909))); see also Stephanie L. Nagel, BMW v. Gore: The United States Supreme Court Overturns An Award Of Punitive Damages as Violative of the Due Process Clause of the Constitution, 71 Tul. L. Rev. 1025, 1040 (1997); infra Part IV.

5. See Browning-Ferris Indus. of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 280-81 (1989) (Brennan, J., concurring). Although Justice Brennan remarked that "[s]everal of our decisions indicate that . . . the Due Process Clause forbids damages awards that are `grossly excessive,' or `so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable,'" Id. (Brennan, J., concurring) (citations omitted), none of the cases Justice Brennan cited to had either "defined or enforced that standard." Darryl K. Brown, Structure and Relationship in the Jurisprudence of Juries: Comparing the Capital Sentencing and Punitive Damages Doctrines, 47 Hastings L.J. 1255, 1256 (1996).

6. Bruce J. Mckee, The Implications of BMW v. Gore For Future Punitive Damages Litigation: Observations From a Participant, 48 Ala. L. Rev. 175, 175 (1996); see also Richard Thornburgh, Want To Win a Big Suit? Go to Alabama Changes are Needed; Just Look at the Damages Juries There Hand Down, U.S.A. Today, June 27, 1996, at 13A ("Alabama `tort' law isn't just `very close' to [being] out of control anymore. You can't get much closer than this.").

7. See, e.g., BMW of N. Am. v. Gore, 646 So. 2d 619, 629 (Ala. 1994) (awarding $2 million in punitive damages when the plaintiff only suffered $4000 in actual damages); Liebeck v. McDonald's Restaurants, No. CV-93-02419, 1994 WL 782090, at *1 (LRP Jury) (D.N.M. 1994) (awarding a woman $2.7 million in punitive damages who suffered severe burns as a result of spilling a cup of hot coffee on her lap); Andrew M. Sims, Food Lion and the Media's Liability for Newsgathering Torts: A Symposium Preview, 7 Fordham Intell. Prop. Media & Ent. L.J. 389, 389-90 (1997) (discussing Food Lion, Inc. v. Capital Cities/ABC, Inc., in which the plaintiff was awarded $5.5 million in punitive damages when only $1400 were awarded in compensatory damages); see also Michele M. Jochner, Punitive Damages: The United States Supreme Court's Meandering Path, Ill. B.J., Nov. 1995, at 576; Michael Rustad & Thomas Koenig, The Historical Continuity of Punitive Damages Awards: Reforming the Tort Reformers, 42 Am. U. L. Rev. 1269, 1285 (1993); Charles D. Stewart & Philip G. Piggot, Punitive Damages Since Pacific Mutual Life Insurance Co. v. Haslip, 16 Am. J. Trial Advoc. 693, 697 (1993).

8. Julie Brienza, Punitive Damages Rare, Independent Study Shows, Trial, Aug. 1996, at 14. Brienza notes that in a recent study conducted by several professors from Cornell University and the National Center for State Courts, it was found "that public commotion over punitive damages awards is simply that--a lot of noise." Id. In that study, the authors discovered that punitive damages awards usually "correlate to the amount of compensatory damages." Id. As proof for such a claim, the authors found "that where compensatory damages were $10,000, punitive damages averaged $10,860; where compensatory damages were $100,000, punitive damages averaged $65,720; and where compensatory damages were $1 million, punitive damages averaged $397,810." Id. As a result, the authors concluded that "[t]he argument that punitive damages awards `are randomly plucked out of the air and bear no relation to compensatory damages, can be firmly rejected,'" and they further "dismiss[ed] critics' contentions that punitive damages awards have gotten out of hand-especially in relation to the amount of compensatory damages awarded." Id.

Another study found "that punitive damages are awarded in only a small percentage of civil actions, and half of these are for less than $50,000." Jochner, supra note 7, at 577 n.19.

9. See Brown, supra note 5, at 1259 ("Formerly, the jury engendered little distrust and consequently had tremendous legitimacy. As skepticism of its capacities increased, its role changed, its authority dwindled, and its place in the institutional hierarchy slipped."). The role of the jury further lost legitimacy as those "on both sides of the law, [lost the] longstanding trust [each had with respect to] the appropriateness of the jury's broad discretion." Id. at 1257 (emphasis added). Moreover, once the public's trust and confidence in the jury system was diminished, "the less competent it appears--the less legitimate it is." Id. at 1259.

10. U.S. Const. amend. XIV, § 1. For a discussion of the most recent cases the United States Supreme Court has heard involving due process challenges to punitive damages, see BMW of N. Am., Inc. v. Gore, 116 S. Ct. 1589 (1996); Honda Motor Co. v. Oberg, 512 U.S. 415 (1994); TXO Prod. Corp. v. Alliance Resources Corp., 509 U.S. 443 (1993); Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1 (1991); Browning-Ferris Indus. of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257 (1989).

11. See infra notes 119-96 and accompanying text.

12. See infra notes 16-53 and accompanying text.

13. See infra notes 54-118 and accompanying text.

14. See infra notes 119-96 and accompanying text.

15. See infra notes 197-368 and accompanying text.

16. See 1 Linda L. Schlueter & Kenneth R. Redden, Punitive Damages § 1.0, at 1 (3d ed. 1995). The earliest known legal code, the Code of Hammurabi, dating back to 2000 B.C., provided for multiple damages, which were damages that exceeded compensation for actual harm suffered. See id. § 1.1, at 1-2. Other ancient codes also provided for punitive damages, such as the Hindu Code of Manu, and the Hittite Law. See id. at 2. Multiple damages were also included in the text of the Bible in the Hebrew Covenant Code of Mosaic Law. See id. at 3, 3 n.7 ("`If a man shall steal an ox, or a sheep, and kill it, or sell it; he shall restore five oxen for an ox, and four sheep for a sheep.'" (quoting Exodus 22:1)). See generally 1 Albert Kocourek & John H. Wigmore, Sources of Ancient and Primitive Law (1915) (discussing the historical development of punitive damages).

17. See Robert G. Schloerb et al., Punitive Damages: A Guide to the Insurability of Punitive Damages in the United States and its Territories 13 (PRSS, 1988).

18. See Nathan C. Prater, Comment, Punitive Damages in Alabama: A Proposal for Reform, 26 Cumb. L. Rev. 1005, 1008 (1995-96).

19. Schloerb et al., supra note 17, at 13.

20. Prater, supra note 18, at 1008 (citation omitted). Such monetary penalties were assessed for "various kinds of conduct and were payable to the king or his representative." Id. (citation omitted).

21. 98 Eng. Rep. 489 (K.B. 1763). Both the Wilkes and Huckle cases resulted from the government's suppression of the "North Briton," a newspaper critical of King George II's Secretary, Lord Halifax. Id. at 493-94; Huckle v. Money, 95 Eng. Rep. 768, 768 (K.B. 1763); see also Rustad & Koenig, supra note 7, at 1287-88. In Wilkes, John Wilkes brought suit against a member of Parliament for trespass. See Wilkes, 98 Eng. Rep. at 489. Wilkes requested exemplary damages as he argued that actual damages would not fully deter future misconduct. See id. at 490. As a result, the jury awarded Wilkes 1000 pounds in punitive damages. See id at 499; see also Stephen Daniels & Joanne Martin, Myth and Reality in Punitive Damages, 75 Minn. L. Rev. 1, 6-7 (1990) (discussing the historical development of punitive damages).

22. 95 Eng. Rep. 768 (K.B. 1763). In Huckle, the publisher's employee brought suit alleging false imprisonment, trespass, and assault. See id. at 768. Lord Camden introduced the phrase "exemplary damages," when he stated "I think they have done right in giving exemplary damages. To enter a man's house by virtue of a nameless warrant, in order to procure evidence, is worse than the Spanish Inquisition." Id. at 769; see also Rustad & Koenig, supra note 7, for a general discussion of the rise of punitive damages in England.

23. See Prater, supra note 18, at 1008. Lord Chief Justice Pratt stated that:

a jury have it in their power to give damages for more than the injury received. Damages are designed not only as a satisfaction to the injured person, but likewise as a punishment to the guilty, to deter from any such proceeding for the future, and as a proof of the detestation of the jury to the action itself.Wilkes, 98 Eng. Rep. at 498-99.

24. See Daniels & Martin, supra note 21, at 7; see also Michael J. King, Punitive Damages & Due Process: Pacific Mutual Life Insurance Company v. Haslip, 25 Creighton L. Rev. 323, 335 (1991).

25. 1 S.C.L. (1 Bay) 6 (1784). In Genay, the plaintiff and defendant agreed to settle their dispute by drawing pistols against one another. See id. However, before dueling, the defendant asked the plaintiff to drink a reconciling toast, but had secretly placed something in the plaintiff's drink which caused the plaintiff to suffer great pain. See id. at 7. As a result, the court held that the plaintiff was entitled to exemplary damages. See id.

26. 1 N.J.L. 77 (1791). In Coryell, the defendant broke his promise to marry the plaintiff and as a result "[t]he judge instructed the jury `not to estimate the damages by any particular proof of suffering or actual loss; but to give damages for example's sake, to prevent such offenses in the future.'" Id. at 77. The court went on to say that "such a sum . . . would mark [the jury's] disapprobation, and be an example to others." Id. at 91.

27. Angela Harris, Rereading Punitive Damages: Beyond the Public/Private Distinction, 40 Ala. L. Rev. 1079, 1086 (1989); see also Jochner, supra note 7, at 577. In 1818, the United States Supreme Court recognized the importance of punishing and deterring misconduct through its decision in The Amiable Nancy, 16 U.S. (3 Wheat.) 546, 558 (1818) (stating that courts may assess "exemplary damages, the proper punishment which belongs to such lawless misconduct"); see also Jacqueline Perczek, Comment, On Efficiency, Punishment, Deterrence, and Fairness: A Survey of Punitive Damages Law and a Proposed Jury Instruction, 27 Suffolk U. L. Rev. 825, 832-33 (1993) (discussing the development of the doctrine of punitive damages in the United States).

In 1851, the Supreme Court reiterated its approval of assessing punitive damages and recognized them as "an integral part of the American justice system." Day v. Woodworth, 54 U.S. (13 How.) 363, 371 (1851) ("[A] jury may inflict what are called exemplary, punitive, or vindictive damages upon a defendant, having in view the enormity of his offence rather than the measure of compensation to the plaintiff."); see also Prater, supra note 18, at 1009.

28. Jochner, supra note 7, at 577.

29. See 1 James D. Ghiardi & John J. Kircher, Punitive Damages: Law and Practice ch. 2, § 2.02, at 4 (1985); see also Honda Motor Co. v. Oberg, 512 U.S. 415, 429 (1994) ("What we are concerned with is the possibility that a culpable defendant may be unjustly punished . . . .").

30. See Brian Timothy Beasley, Note, North Carolina's New Punitive Damages Statute: Who's Being Punished, Anyway?, 74 N.C. L. Rev. 2174, 2188 (1996).

31. See id. at 2175 n.17 ("Courts widely agree that these two purposes are the definitive goals of punitive damages."); see also Restatement (Second) of Torts  § 908 (1979) ("(1) Punitive damages are damages, other than compensatory or nominal damages, awarded against a person to punish him for his outrageous conduct and to deter him and others like him from similar conduct in the future. (2) Punitive damages may be awarded for conduct that is outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others. . . ."); Andrea A. Curcio, Painful Publicity--An Alternative Punitive Damage Sanction, 45 DePaul L. Rev. 341, 344 (1996) (discussing the difference between compensatory and punitive damages).

32. See Prater, supra note 18, at 1035. Punitive damages provide consumers protection from businesses which engage in fraudulent business practices. See id. 1036-37.

33. See id. at 1034-35. For example, two states, Michigan and Connecticut, "regard compensation for otherwise uncompensable losses as the primary purpose of punitive damages." Id. at 1034; see also Dorsey D. Ellis, Jr., Fairness and Efficiency in the Law of Punitive Damages, 56 S. Cal. L. Rev. 1, 3-12 (1982) (discussing the purposes and functions of punitive damages).

34. See Ghiardi & Kircher, supra note 29, ch. 2, § 2.07, at 15. Psychologists and psychiatrists are in agreement that in a few cases it is impossible for some people to be deterred and, thus, the assessment of punitive damages has no effect on individual recidivism. See id. Moreover, in civil cases, unlike in criminal cases, there is no mechanism to isolate these people from society so that they will not continue to cause harm to society. See id. Moreover, the deterrence effect of punitive damages is lessened where vicarious liability, or liability insurance, shifts the burden of damages away from the wrongdoer to those who did no wrong at all. See id. Critics further argue that the assessment of punitive damages undermines the purpose of civil law to indemnify the plaintiff and not deter the defendant. See id. at 16.

35. See Kenneth R. Redden, Punitive Damages § 2.4(A), at 33-34 (1980).

36. See Schlueter & Redden, supra note 16, § 2.2(A)(2), at 32. Furthermore, if a person's conduct does not constitute a crime, then punitive damages should not be awarded "on an ad hoc basis." Id.

Proponents of punitive damages respond by arguing that assessing punitive damages in civil actions reaches conduct such as "`slanders, assaults, minor oppressions and cruelties'" which are rarely enforced by criminal prosecutors. Id. § 2.2(A)(1), at 29 (quoting Charles T. McCormick, Some Phases of the Doctrine of Exemplary Damages, 8 N.C. L. Rev. 129, 130 (1929-1930)).

37. See Beasley, supra note 30, at 2188 (citing Amelia J. Toy, Comment, Statutory Punitive Damage Caps and the Profit Motive: An Economic Perspective, 40 Emory L.J. 303, 323-24 (1991)). Moreover, the United States Supreme Court has held that a defendant's due process rights may be violated if juries are given inadequate guidance as to how to arrive at an appropriate amount and also if there is inadequate post-trial review by courts. See Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 23 (1991); see also infra Part II.C.

38. See Schloerb et al., supra note 17, at 15. See generally Beasley, supra note 30 (discussing each state's standard of proof, caps and exceptions, money received by the state from an award, and the conduct required of a defendant before allowing a punitive damages award); Perczek, supra note 27 (listing the defendant's conduct which will subject him/her to a punitive damages award, the burden of proof, and statutory restrictions).

39. See Neb. Const. art. VIII, § 5 (prohibiting punitive damage awards); N.H. Rev. Stat. Ann. § 507:16 (1986) (outlawing punitive damages); Spokane Truck & Dray Co. v. Hoefer, 25 P. 1072, 1073-74 (Wash. 1891) (prohibiting punitive damages). See generally Richard L. Blatt et al., Punitive Damages: A State-by-State Guide to Law and Practice (1991) (listing states which do and do not allow for a punitive damages award); Schloerb et al., supra note 17 (discussing same); Beasley, supra note 30 (discussing same); Perczek, supra note 27 (discussing same).

40. For a state by state listing of the conduct required before a jury may assess punitive damages against the defendant, see Schloerb et al., supra note 17, at 16-26; Beasley, supra note 30, app. at 2202-13; Perczek, supra note 27, app. at 878-903.

41. See Curcio, supra note 31, at 353.

42. Ala. Code § 6-11-20 (1993); Alaska Stat. § 09.17.020 (Michie 1996); Cal. Civ. Code § 3294(a) (West Supp. 1997); Ga. Code Ann. § 51-12-5.1(b) (1982); Ind. Code Ann. § 34-4-34-2 (Michie 1986 & Supp. 1997); Iowa Code Ann. § 668A.1(1)(a) (West 1987 & Supp. 1997); Kan. Stat. Ann. § 60-3702(c) (1994); Ky. Rev. Stat. Ann. § 411.184(2) (Michie 1992); Minn. Stat. Ann. § 549-20(1) (West 1988 & Supp. 1997); Mont. Code Ann. § 27-1-221(5) (1995); Nev. Rev. Stat. Ann. § 42.005(1) (Michie 1996); N.J. Stat. Ann. § 2A:15-5.12a (West 1987); N.D. Cent. Code § 32-03.2-11(1) (1987); Ohio Rev. Code Ann. § 2315.21(C)(3) (Anderson 1995); Okla. Stat. tit. 23, § 9 (1986); Or. Rev. Stat. § 18.537(1) (1995); S.C. Code Ann. § 15-33-135 (Law. Co-op. 1997); S.D. Codified Laws § 21-1-4.1 (Michie 1987); Tex. Civ. Prac. & Rem. Code Ann. § 41.003(a) (West 1987 & Supp. 1996); Utah Code Ann. § 78-18-1(1)(a) (1996); Linthicum v. Nationwide Life Ins. Co., 723 P.2d 675, 681 (Ariz. 1986); Masaki v. General Motors Corp., 780 P.2d 566, 575 (Haw. 1989); Tuttle v. Raymond, 494 A.2d 1353, 1363 (Me. 1989); Owens-Illinois, Inc. v. Zenobia, 601 A.2d 633, 657 (Md. 1992); Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 901 (Tenn. 1992); Great Coastal Express, Inc. v. Ellington, 334 S.E.2d 846, 855 (Va. 1985); Wangen v. Ford Motor Co., 294 N.W.2d 437, 457-58 (Wis. 1980); see also Curcio, supra note 31, at 353.

43. King, supra note 24, at 337-38.

44. Id. at 338.

45. Curcio, supra note 31, at 353.

46. See Ala. Code § 6-11-21 (1993) (stating an award of punitive damages may not exceed $250,000 unless the defendant displayed a pattern or practice of wrongful conduct, actual malice, libel, slander, or defamation); Colo. Rev. Stat. § 13-21-102(1)(a)(3) (1987) (stating punitive damages may not exceed actual damages unless the judge finds that the defendant either continued or aggravated the injury to the plaintiff during the trial, in which case punitive damages may not exceed three times the plaintiff's actual damages); Conn. Gen. Stat. Ann. § 52-240b (West 1997) (stating that punitive damages may not exceed two times the plaintiff's actual damages in products liability suits); Fla. Stat. Ann. § 768.73(1)(a)-(b) (West 1997) (stating punitive damages cannot exceed three times compensatory damages without clear and convincing evidence that the award was not excessive); Ga. Code Ann. § 51-12-5.1(g) (Supp. 1995) (stating that punitive damages are limited to $250,000, except in products liability suits and intentional torts); Ind. Code Ann. § 34-4-34-4 (Michie 1986) (stating that punitive damages are limited to three times actual damages or $50,000, whichever is greater); Kan. Stat. Ann. § 60-3702(e)(1)-(2) (1994) (stating that punitive damages limited to the lesser amount of either the defendant's adjusted gross income over the previous five years or five million dollars unless the defendant profited from the conduct in question); Nev. Rev. Stat. § 42.005(a)-(e) (1981) (limiting punitive damages to three times compensatory damages or $300,000 if award is $100,000 or less, but does not apply to insurance bad faith, products liability, defamation, drunk driving, toxic substances, or housing discrimination actions); N.J. Stat. Ann. § 2A:15-5.14(b) (West 1987) (limiting punitive damages to five times compensatory damages or $350,000, but does not apply to discrimination, civil rights, AIDS testing, sexual abuse, bias, or drunk driving cases); Okla. Stat. tit. 23, § 9.1(A)-(D) (1986) (limiting punitive damages based on the burden of proof and type of defendant); Tex. Civ. Prac. & Rem. Code Ann. § 41.008 (West 1987 & Supp. 1996) (limiting punitive damages to $200,000 or two times the plaintiff's economic damages, plus up to $750,000 of awarded non-economic damages, but does not apply to intentional torts or when the defendant acted with malice); Va. Code Ann. § 8.01-38.1 (Michie 1992) (limiting punitive damages to $350,000); see also Alan Calnan, Ending the Punitive Damage Debate, 45 DePaul L. Rev. 101, 102 (1995); Beasley, supra note 30, at 2202-13.

47. Beasley, supra note 30, at 2198 (citing Sandra N. Hurd & Frances E. Zollers, State Punitive Damages Statutes: A Proposed Alternative, 20 J. Legis. 191, 200 (1994)); see also Toy, supra note 37, at 324-26 (arguing that the goal of deterrence may only be accomplished by the inherent unpredictability of punitive damages awards).

48. See Beasley, supra note 30, at 2198.

49. See id. at 2198-99.

50. See supra note 46 and accompanying text.

51. Bradley D. Toney, Comment, The Chaotic and Uncertain Due Process Challenge to Punitive Damages, 30 Willamette L. Rev. 635, 641-42 (1994).

52. See id. at 642; see also supra notes 29-31 and accompanying text.

53. See Toney, supra note 51, at 642. Professor Ellis argued that a jury's broad

discretion leads to inefficient results and that "the common law system of imposing punitive damages, under which jury's are provided with little guidance and awards are subject to minimal judicial review, is `so lacking in fundamental fairness as to deny defendant, . . . the due process guaranteed by the Fifth and Fourteenth Amendments.'" Id. at 642-43 (quoting Dorsey D. Ellis, Jr., Punitive Damages, Due Process, and the Jury, 40 Ala. L. Rev. 975, 990 (1989)).

54. U.S. Const. amend. VIII ("Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishment inflicted.").

55. See David F. Cutter, Note, TXO Production Corp. v. Alliance Resources Corp.: A Failure to Create True Constitutional Protection Against Excessive Punitive Damages, 44 Cath. U. L. Rev. 631, 635 (1995). Challenges based on procedural due process argue that the "method [or procedures] by which courts assess and review punitive damages" are insufficient. Id.

56. See id. A substantive due process challenge questions whether a punitive damages award exceeded constitutional limits as "an unreasonable and arbitrary taking of property that no rational state purpose can justify." Id.

57. U.S. Const. amend. XIV, § 1 ("[N]or shall any State deprive any person of life, liberty, or property, without due process of law . . . .").

58. See BMW of N. Am., Inc. v. Gore, 116 S. Ct. 1589 (1996); Honda Motor Co. v. Oberg, 512 U.S. 415 (1994); TXO Prod. Corp. v. Alliance Resources Corp., 509 U.S. 443 (1993); Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1 (1991); Browning-Ferris Indus. of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257 (1989); Bankers Life & Cas. Co. v. Crenshaw, 486 U.S. 71 (1988); Aetna Life Ins. Co. v. Lavoie, 475 U.S. 813 (1986).

59. Jochner, supra note 7, at 580.

60. 475 U.S. 813 (1986).

61. See id. at 828.

62. 486 U.S. 71 (1988). Crenshaw involved a challenge to a punitive damages award as violating both the Excessive Fines Clause of the Eighth Amendment and the Due Process Clause of the Fourteenth Amendment. See id. at 76.

63. 492 U.S. 257 (1989). Browning-Ferris involved a challenge to a punitive damages award as violating both the Excessive Fines Clause and the Due Process Clause. See id. at 259, 276. The plaintiff was awarded $6 million in punitive damages, which was 120 times the amount of compensatory damages. See id. at 262.

64. See id. at 276-77; Crenshaw, 486 U.S. at 76.

65. Browning-Ferris, 492 U.S. at 277. In passing on the due process issue, the Court implicated that excessive awards violated due process rights by stating "it is not disputed that a jury award may not be upheld if it was the product of bias or passion, or if it was reached in proceedings lacking basic elements of fundamental fairness." Id. at 276-77. Thus, although not answering the due process issue, the Court seemed "troubled by the punitive damages system." Jochner, supra note 7, at 580.

66. See Browning-Ferris, 492 U.S. at 260; see also Racich v. Celotex Corp., 887 F.2d 393, 397 (2d Cir. 1989) (holding that Browning-Ferris disposed of Eighth Amendment challenges to punitive damages).

67. Browning-Ferris, 492 U.S. at 280 (Brennan, J., concurring).

68. Id. at 280-81 (Brennan, J., concurring) (quoting Waters-Pierce Oil Co. v. Texas, 212 U.S. 86, 111 (1909) (upholding a jury award of approximately $1.6 million for violating anti-trust laws)).

69. Id. (quoting St. Louis, I. M. & S. R. Co. v. Williams, 251 U.S. 63, 66-67 (1919) (upholding a severe penalty against the railroad for overcharging a passenger)).

70. 499 U.S. 1, 7-8 (1991). The facts established that Haslip was hospitalized, and as the hospital could not verify her health insurance, it obtained a judgment against her. See id. at 5. Haslip brought suit alleging fraud on Pacific Mutual's part

because an agent of Pacific's failed to remit premiums to Pacific Mutual which caused her health insurance to lapse. See id. at 6. The jury found Pacific Mutual liable based on respondeat superior and awarded Haslip approximately $200,000 in compensatory damages and $840,000 in punitive damages. See id. at 7. On appeal, the Alabama Supreme Court affirmed the verdict. See id.

71. See id. at 6 n.2.

72. Id. at 7.

73. Id. at 9.

74. Id. at 18.

75. Id.

76. Haslip, 499 U.S. at 18.

77. Id. at 17. Under the Common Law method of assessing punitive damages, the amount is "determined by a jury instructed to consider the gravity of the wrong and the need to deter similar wrongful conduct. The jury's determination is then reviewed by trial and appellate courts to ensure that it is reasonable." Id. at 15.

78. See id. at 23.

79. See id. at 19 ("[T]he instructions gave the jury significant discretion in its determination of punitive damages. But that discretion was not unlimited. It was confined to deterrence and retribution, the state policy concerns sought to be advanced. . . . The instructions thus enlightened the jury as to the punitive damages' nature and purpose, identified the damages as punishment for civil wrongdoing of the kind involved, and explained that their imposition was not compulsory.").

80. See id. at 20-23.

81. 493 So. 2d 1374 (Ala. 1986).

82. 539 So. 2d 218 (Ala. 1989). In Green Oil, the Alabama Supreme Court refined the Hammond standards, and announced that the following factors could be taken into account in determining whether an award of punitive damages was excessive or inadequate:

(a) whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant's conduct as well as the harm that actually has occurred; (b) the degree of reprehensibility of the defendant's conduct, the duration of that conduct, the defendant's awareness, any concealment, and the existence and frequency of similar past conduct; (c) the profitability to the defendant of the wrongful conduct and the desirability of removing that profit and of having the defendant also sustain a loss; (d) the "financial position" of the defendant; (e) all the costs of litigation; (f) the imposition of criminal sanctions on the defendant for its conduct, these to be taken in mitigation; and (g) the existence of other civil awards against the defendant for the same conduct, these also to be taken in mitigation.Id. at 223-24.

83. Haslip, 499 U.S. at 23.

84. See id. The Court held that the Hammond standards, as refined in Green Oil, were sufficiently definite to constrain the discretion of an Alabama factfinder so as to ensure that a punitive damage award was no greater than necessary to punish and deter a defendant. See id. at 20-22.

85. See id. at 23-24.

86. Id. at 24.

87. Id. at 27 (Scalia, J., concurring) (stating that the decision left open the possibility of challenging the reasonableness of a punitive damages award); see also Toney, supra note 51, at 673-74.

88. 509 U.S. 443 (1993). Alliance brought suit against TXO for slander of title as TXO attempted to create a cloud on Alliance's title so as to save TXO millions of dollars in royalty payments. See id. at 447-51 (Stevens, J., plurality opinion). A jury awarded Alliance Resources, Corp. $19,000 in actual damages and another $10 million in punitive damages. See id. at 451 (Stevens, J., plurality opinion). On appeal