OCTOBER TERM, 1995
Syllabus
BMW OF NORTH AMERICA, INC.
v. GORE
CERTIORARI TO THE SUPREME COURT OF ALABAMA No. 94-896. Argued
October 11, 1995-Decided May 20,1996
After respondent Gore purchased a new BMW automobile from an
authorized Alabama dealer, he discovered that the car had been
repainted. He brought this suit for compensatory and punitive
damages against petitioner, the American distributor of BMW's,
alleging,
inter alia, that the failure to disclose the
repainting constituted fraud under Alabama law. At trial, BMW
acknowledged that it followed a nationwide policy of not advising
its dealers, and hence their customers, of pre delivery damage to
new cars when the cost of repair did not exceed 3 percent of the
car's suggested retail price. Gore's vehicle fell into that
category. The jury returned a verdict finding BMW liable for
compensatory damages of $4,000, and assessing $4 million in
punitive damages. The trial judge denied BMW's post-trial motion to
set aside the punitive damages award, holding, among other things,
that the award was not "grossly excessive" and thus did not violate
the Due Process Clause of the Fourteenth Amendment. See,
e. g.,
TXO Production Corp. v.
Alliance Resources Corp.,
509 U. S. 443,
454. The Alabama Supreme Court agreed, but reduced the award to $2
million on the ground that, in computing the amount, the jury had
improperly multiplied Gore's compensatory damages by the number of
similar sales in all States, not just those in Alabama.
Held: The $2 million punitive damages award is grossly
excessive and therefore exceeds the constitutional limit. Pp.
568-586.
(a) Because such an award violates due process only when it can
fairly be categorized as "grossly excessive" in relation to the
State's legitimate interests in punishing unlawful conduct and
deterring its repetition, cf.
TXO, 509 U. S., at 456, the
federal excessiveness inquiry appropriately begins with an
identification of the state interests that such an award is
designed to serve. Principles of state sovereignty and comity
forbid a State to enact policies for the entire Nation, or to
impose its own policy choice on neighboring States. See,
e. g.,
Healy v.
Beer Institute, 491 U. S. 324, 335-336.
Accordingly, the economic penalties that a State inflicts on those
who transgress its laws, whether the penalties are legislatively
authorized fines or judicially imposed punitive damages, must be
supported by the State's interest in protecting its own consumers
and economy, rather than those of other States or the entire
Nation. Gore's award must therefore be analyzed in the light of
conduct that
560
occurred solely within Alabama, with consideration being given
only to the interests of Alabama consumers. Pp.568-574.
(b) Elementary notions of fairness enshrined in this Court's
constitutional jurisprudence dictate that a person receive fair
notice not only of the conduct that will subject him to punishment
but also of the severity of the penalty that a State may impose.
Three guideposts, each of which indicates that BMW did not receive
adequate notice of the magnitude of the sanction that Alabama might
impose, lead to the conclusion that the $2 million award is grossly
excessive. Pp.574-575.
(c) None of the aggravating factors associated with the first
(and perhaps most important) indicium of a punitive damages award's
excessiveness-the degree of reprehensibility of the defendant's
conduct, see,
e. g., Day v.
Woodworth,
13 How. 363, 371-is present here. The harm BMW inflicted on Gore
was purely economic; the presale repainting had no effect on the
car's performance, safety features, or appearance; and BMW's
conduct evinced no indifference to or reckless disregard for the
health and safety of others. Gore's contention that BMW's
nondisclosure was particularly reprehensible because it formed part
of a nationwide pattern of tortious conduct is rejected, because a
corporate executive could reasonably have interpreted the relevant
state statutes as establishing safe harbors for nondisclosure of
presumptively minor repairs, and because there is no evidence
either that BMW acted in bad faith when it sought to establish the
appropriate line between minor damage and damage requiring
disclosure to purchasers, or that it persisted in its course of
conduct after it had been adjudged unlawful. Finally, there is no
evidence that BMW engaged in deliberate false statements, acts of
affirmative misconduct, or concealment of evidence of improper
motive. Pp. 575-580.
(d) The second (and perhaps most commonly cited) indicium of
excessiveness-the ratio between the plaintiff's compensatory
damages and the amount of the punitive damages, see,
e.
g., TXO, 509 U. S., at 459also weighs against Gore,
because his $2 million award is 500 times the amount of his actual
harm as determined by the jury, and there is no suggestion that he
or any other BMW purchaser was threatened with any additional
potential harm by BMW's nondisclosure policy. Although it is not
possible to draw a mathematical bright line between the
constitutionally acceptable and the constitutionally unacceptable
that would fit every case, see,
e. g., id., at 458,
the ratio here is clearly outside the acceptable range. Pp.
580-583.
(e) Gore's punitive damages award is not saved by the third
relevant indicium of excessiveness-the difference between it and
the civil or criminal sanctions that could be imposed for
comparable misconduct, see,
e. g., Pacific Mut. Life Ins.
Co. v.
Has lip, 499 U. S. 1, 23-because
561
$2 million is substantially greater than Alabama's applicable
$2,000 fine and the penalties imposed in other States for similar
malfeasance, and because none of the pertinent statutes or
interpretive decisions would have put an out-of-state distributor
on notice that it might be subject to a multimillion dollar
sanction. Moreover, in the absence of a BMW history of
noncompliance with known statutory requirements, there is no basis
for assuming that a more modest sanction would not have been
sufficient. pp. 583-585.
(f) Thus, BMW's conduct was not sufficiently egregious to
justify the severe punitive sanction imposed against it. Whether
the appropriate remedy requires a new trial or merely an
independent determination by the Alabama Supreme Court of the award
necessary to vindicate Alabama consumers' economic interests is a
matter for that court to address in the first instance. Pp.
585-586.
646 So. 2d 619, reversed and remanded.
STEVENS, J., delivered the opinion of the Court, in which
O'CONNOR, KENNEDY, SOUTER, and BREYER, JJ., joined. BREYER, J.,
filed a concurring opinion, in which O'CONNOR and SOUTER, JJ.,
joined,
post, p. 586. SCALIA, J., filed a dissenting
opinion, in which THOMAS, J., joined,
post, p. 598.
GINSBURG, J., filed a dissenting opinion, in which REHNQUIST, C.
J., joined,
post, p. 607.
Andrew L. Frey argued the cause for petitioner. With him on the
briefs were Kenneth S. Geller, Evan M. Tager, Michael C. Quillen,
Dennis
J. Helfman, and David Cordero.
Michael H. Gottesman argued the cause for respondent.
With him on the brief were Jonathan S. Massey, Andrew W Bolt II,
John W Haley, Bruce
J. McKee, Kenneth
J. Chesebro,
and Stephen K. Wollstein.
*
*Briefs of
amici curiae urging reversal were filed for
the American Automobile Manufacturers Association et al. by
Kenneth W Starr, Paul T. Cappuccio, Christopher Landau, Richard
A. Cordray, and
Phillip D. Brady; for the American
Council of Life Insurance et al. by
Patricia A. Dunn,
Stephen J. Goodman, Phillip E. Stano, and
Theresa L. Sorota; for the American Tort Reform Association
et al. by
Victor E. Schwartz, Scott L. Winkelman, Sherman
Joyce, and
Fred J. Hiestand; for the
Business Council of Alabama by
Forrest S.
Latta; for
the Center for Claims Resolution by
John D. Aldock and
Frederick C.
Schafrick; for the Chamber of Commerce
of the United States of America by
Timothy B. Dyk, Stephen A.
Bokat, and
Robin S.
Conrad; for the Farmers
Insurance Exchange
562
JUSTICE STEVENS delivered the opinion of the Court.
The Due Process Clause of the Fourteenth Amendment prohibits a
State from imposing a " 'grossly excessive'" punishment on a
tortfeasor.
TXO Production Corp. v.
Alliance Resources
Corp., 509 U. S.
443, 454 (1993) (and cases cited). The wrongdoing involved in
this case was the decision by a national distributor of automobiles
not to advise its dealers, and hence their customers, of
predelivery damage to new cars when the cost of repair amounted to
less than 3 percent of the car's suggested retail price. The
question presented
et al. by Irving H. Greines, Robin Meadow, Barbara W Ravitz, and
Robert A. Olson; for the Life Insurance Company of Georgia et al.
by Theodore B. Olson, Larry L. Simms, Theodore
J. Boutrous,
Jr., John K. Bush, Theodore
J. Fischkin, and Marcus Bergh;
for the National Association of Manufacturers by Carter G. Phillips
and Jan Amundson; for the New England Council et al. by Stephen S.
Ostrach; for Owens-Corning Fiberglas Corporation by Charles Fried,
Michael W Schwartz, and Karen I. Ward; for Owens-Illinois, Inc., by
Griffin B. Bell and David L. Gray; for Pharmaceutical Research and
Manufacturers of America by Andrew T. Berry; for the Product
Liability Advisory Council, Inc., et al. by Malcolm E. Wheeler; for
the TIG Insurance Company by Ellis
J. Horvitz, Barry R.
Levy, Frederic D. Cohen, and Mitchell C. Tilner; and for the
Washington Legal Foundation et al. by Arvin Maskin, Steven Alan
Reiss, Katherine Oberlies, Daniel
J. Popeo, and Paul D.
Kamenar.
Briefs of
amici curiae urging affirmance were filed for
the Alabama Trial Lawyers Association by
Russell J.
Drake; for the Association of Trial Lawyers of America by
Jeffrey Robert White, Cheryl Flax-Davidson, and
Larry
S.
Stewart; and for the National Association of Securities
and Commercial Law Attorneys by
Kevin P. Roddy, James P.
Solimano, Steve W Berman, and
Jonathan W Cuneo.
Briefs of amici curiae were filed for CBS, Inc., et al. by P.
Cameron De Yore, Marshall
J. Nelson, Douglas P. Jacobs,
Jonathan E. Thackeray, John C. Fontaine, Cristina L. Mendoza,
William A. Niese, Karlene Goller, Susan Weiner, Richard M. Schmidt,
Jr., R. Bruce Rich, Slade R. Metcalf, Jane E. Kirtley, Bruce W
Sanford, and Henry S. Hoberman; for Trial Lawyers for Public
Justice, P. C., by Leslie A. Brueckner and Arthur H. Bryant; for
Richard L. Blatt et al. by Mr. Blatt, pro se, and Robert W
Hammesfahr, pro se; for James D. A. Boyle et al. by Arthur F.
McEvoy III, pro se; and for Law and Economics Scholars et al. by
Mark M. Hager, pro se.
563
is whether a $2 million punitive damages award to the purchaser
of one of these cars exceeds the constitutional limit.
I
In January 1990, Dr. Ira Gore, Jr. (respondent), purchased a
black BMW sports sedan for $40,750.88 from an authorized BMW dealer
in Birmingham, Alabama. After driving the car for approximately
nine months, and without noticing any flaws in its appearance, Dr.
Gore took the car to "Slick Finish," an independent detailer, to
make it look" 'snazzier than it normally would appear.'" 646 So. 2d
619, 621 (Ala. 1994). Mr. Slick, the proprietor, detected evidence
that the car had been repainted.1 Convinced that he had been
cheated, Dr. Gore brought suit against petitioner BMW of North
America (BMW), the American distributor of BMW automobiles.2 Dr.
Gore alleged,
inter alia, that the failure to disclose that
the car had been repainted constituted suppression of a material
fact.3 The complaint prayed for $500,000 in compensatory and
punitive damages, and costs.
At trial, BMW acknowledged that it had adopted a nationwide
policy in 1983 concerning cars that were damaged in the course of
manufacture or transportation. If the cost of repairing the damage
exceeded 3 percent of the car's sug-
1 The top, hood, trunk, and quarter panels of Dr. Gore's car
were repainted at BMW's vehicle preparation center in Brunswick,
Georgia. The parties presumed that the damage was caused by
exposure to acid rain during transit between the manufacturing
plant in Germany and the preparation center.
2 Dr. Gore also named the German manufacturer and the Birmingham
dealership as defendants.
3 Alabama codified its common-law cause of action for fraud in a
1907 statute that is still in effect.
Hackmeyer v.
Hackmeyer, 268 Ala. 329, 333, 106 So. 2d 245, 249 (1958).
The statute provides: "Suppression of a material fact which the
party is under an obligation to communicate constitutes fraud. The
obligation to communicate may arise from the confidential relations
of the parties or from the particular circumstances of the case."
Ala. Code § 6-5-102 (1993); see Ala. Code § 4299 (1907).
564
gested retail price, the car was placed in company service for a
period of time and then sold as used. If the repair cost did not
exceed 3 percent of the suggested retail price, however, the car
was sold as new without advising the dealer that any repairs had
been made. Because the $601.37 cost of repainting Dr. Gore's car
was only about 1.5 percent of its suggested retail price, BMW did
not disclose the damage or repair to the Birmingham dealer.
Dr. Gore asserted that his repainted car was worth less than a
car that had not been refinished. To prove his actual damages of
$4,000, he relied on the testimony of a former BMW dealer, who
estimated that the value of a repainted BMW was approximately 10
percent less than the value of a new car that had not been damaged
and repaired.4 To support his claim for punitive damages, Dr. Gore
introduced evidence that since 1983 BMW had sold 983 refinished
cars as new, including 14 in Alabama, without disclosing that the
cars had been repainted before sale at a cost of more than $300 per
vehicle.5 U sing the actual damage estimate of $4,000 per vehicle,
Dr. Gore argued that a punitive award of $4 million would provide
an appropriate penalty for selling approximately 1,000 cars for
more than they were worth.
In defense of its disclosure policy, BMW argued that it was
under no obligation to disclose repairs of minor damage to new cars
and that Dr. Gore's car was as good as a car with the original
factory finish. It disputed Dr. Gore's assertion that the value of
the car was impaired by the repainting and argued that this
good-faith belief made a punitive award inappropriate. BMW also
maintained that transactions in jurisdictions other than Alabama
had no relevance to Dr. Gore's claim.
4 The dealer who testified to the reduction in value is the
former owner of the Birmingham dealership sued in this action. He
sold the dealership approximately one year before the trial.
5 Dr. Gore did not explain the significance of the $300
cutoff.
565
The jury returned a verdict finding BMW liable for compensatory
damages of $4,000. In addition, the jury assessed $4 million in
punitive damages, based on a determination that the nondisclosure
policy constituted "gross, oppressive or malicious" fraud.6 See
Ala. Code §§ 6-11-20, 6-11-21 (1993).
BMW filed a post-trial motion to set aside the punitive damages
award. The company introduced evidence to establish that its
nondisclosure policy was consistent with the laws of roughly 25
States defining the disclosure obligations of automobile
manufacturers, distributors, and dealers. The most stringent of
these statutes required disclosure of repairs costing more than 3
percent of the suggested retail price; none mandated disclosure of
less costly repairs.7 Relying on these statutes, BMW contended that
its conduct was lawful in these States and therefore could not
provide the basis for an award of punitive damages.
BMW also drew the court's attention to the fact that its
nondisclosure policy had never been adjudged unlawful before this
action was filed. Just months before Dr. Gore's case went to trial,
the jury in a similar lawsuit filed by another Alabama BMW
purchaser found that BMW's failure to disclose paint repair
constituted fraud.
Yates v.
BMWof North America,
Inc., 642 So. 2d 937 (Ala. 1993).8 Before the
6 The jury also found the Birmingham dealership liable for Dr.
Gore's compensatory damages and the German manufacturer liable for
both the compensatory and punitive damages. The dealership did not
appeal the judgment against it. The Alabama Supreme Court held that
the trial court did not have jurisdiction over the German
manufacturer and therefore reversed the judgment against that
defendant.
7 BMW acknowledged that a Georgia statute enacted
after
Dr. Gore purchased his car would require disclosure of similar
repairs to a car before it was sold in Georgia. Ga. Code Ann.
§§40-1-5(b)-(e) (1994).
8 While awarding a comparable amount of compensatory damages,
the
Yates jury awarded no punitive damages at all. In
Yates, the plaintiff also relied on the 1983 nondisclosure
policy, but instead of offering evidence of 983 repairs costing
more than $300 each, he introduced a bulk exhibit
566
judgment in this case, BMW changed its policy by taking steps to
avoid the sale of any refinished vehicles in Alabama and two other
States. When the $4 million verdict was returned in this case, BMW
promptly instituted a nationwide policy of full disclosure of all
repairs, no matter how minor.
In response to BMW's arguments, Dr. Gore asserted that the
policy change demonstrated the efficacy of the punitive damages
award. He noted that while no jury had held the policy unlawful,
BMW had received a number of customer complaints relating to
undisclosed repairs and had settled some lawsuits.9 Finally, he
maintained that the disclosure statutes of other States were
irrelevant because BMW had failed to offer any evidence that the
disclosure statutes supplanted, rather than supplemented, existing
causes of action for common-law fraud.
The trial judge denied BMW's post-trial motion, holding,
inter alia, that the award was not excessive. On appeal, the
Alabama Supreme Court also rejected BMW's claim that the award
exceeded the constitutionally permissible amount. 646 So. 2d 619
(1994). The court's excessiveness inquiry applied the factors
articulated in
Green Oil Co. v.
Hornsby, 539 So. 2d
218, 223-224 (Ala. 1989), and approved in
Pacific Mut.
Life Ins. Co. v.
Haslip, 499 U. S. 1, 21-22 (1991).
646 So. 2d, at 624-625. Based on its analysis, the court concluded
that BMW's conduct was "reprehensible"; the nondisclosure was
profitable for the company; the judgment "would not have a
substantial impact upon [BMW's] financial position"; the litigation
had been expensive; no criminal sanctions had been imposed on BMW
for the same conduct; the award of
no pu-
containing 5,856 repair bills to show that petitioner had sold
over 5,800 new BMW vehicles without disclosing that they had been
repaired.
9 Prior to the lawsuits filed by Dr. Yates and Dr. Gore, BMW and
various BMW dealers had been sued 14 times concerning presale paint
or damage repair. According to the testimony of BMW's in-house
counsel at the post judgment hearing on damages, only one of the
suits concerned a car repainted by BMW.
567
nitive damages in
Yates reflected "the inherent
uncertainty of the trial process"; and the punitive award bore a
"reasonable relationship" to "the harm that was likely to occur
from [BMW's] conduct as well as ... the harm that actually
occurred." 646 So. 2d, at 625-627.
The Alabama Supreme Court did, however, rule in BMW's favor on
one critical point: The court found that the jury improperly
computed the amount of punitive damages by multiplying Dr. Gore's
compensatory damages by the number of similar sales in other
jurisdictions.
Id., at 627. Having found the verdict
tainted, the court held that "a constitutionally reasonable
punitive damages award in this case is
$2,000,000," id., at
629, and therefore ordered a remittitur in that amount.10 The
court's discussion of the amount of its remitted award expressly
disclaimed any reliance on "acts that occurred in other
jurisdictions"; instead, the court explained that it had used a
"comparative analysis" that considered Alabama cases, "along with
cases from other jurisdictions, involving the sale of an automobile
where the seller misrepresented the condition of the vehicle and
the jury awarded punitive damages to the purchaser." 11
Id.,
at 628.
10 The Alabama Supreme Court did not indicate whether the $2
million figure represented the court's independent assessment of
the appropriate level of punitive damages, or its determination of
the maximum amount that the jury could have awarded consistent with
the Due Process Clause.
11 Other than
Yates v.
BMW of North America, Inc.,
642 So. 2d 937 (1993), in which no punitive damages were awarded,
the Alabama Supreme Court cited no such cases. In another portion
of its opinion, 646 So. 2d, at 629, the court did cite five Alabama
cases, none of which involved either a dispute arising out of the
purchase of an automobile or an award of punitive damages. G.
M.
Mosley Contractors, Inc. v.
Phillips, 487 So. 2d 876,
879 (1986);
Hollis v.
Wyrosdick, 508 So. 2d 704
(1987);
Campbell v.
Burns, 512 So. 2d 1341, 1343
(1987);
Ashbee v.
Brock, 510 So. 2d 214 (1987); and
Jawad v.
Granade, 497 So. 2d 471 (1986). All of these
cases support the proposition that appellate courts in Alabama
presume that jury verdicts are correct. In light of the Alabama
Supreme Court's conclusion that (1) the jury had computed its award
by multiplying $4,000 by the number of refinished vehicles sold in
the United States and
568
Because we believed that a review of this case would help to
illuminate "the character of the standard that will identify
unconstitutionally excessive awards" of punitive damages, see
Honda Motor Co. v.
Oberg, 512 U. S. 415, 420
(1994), we granted certiorari, 513 U. S. 1125 (1995).
II
Punitive damages may properly be imposed to further a State's
legitimate interests in punishing unlawful conduct and deterring
its repetition.
Gertz v.
Robert Welch, Inc., 418 U. S. 323, 350
(1974);
Newport v.
Fact Concerts, Inc., 453 U. S.
247, 266-267 (1981);
Has lip, 499 U. S., at 22. In our
federal system, States necessarily have considerable flexibility in
determining the level of punitive damages that they will allow in
different classes of cases and in any particular case. Most States
that authorize exemplary damages afford the jury similar latitude,
requiring only that the damages awarded be reasonably necessary to
vindicate the State's legitimate interests in punishment and
deterrence. See
TXO, 509 U. S., at 456;
Has lip, 499
U. S., at 21, 22. Only when an award can fairly be categorized as
"grossly excessive" in relation to these interests does it enter
the zone of arbitrariness that violates the Due Process Clause of
the Fourteenth Amendment. Cf.
TXO, 509 U. S., at 456. For
that reason, the federal excessiveness inquiry appropriately begins
with an identification of the state interests that a punitive award
is designed to serve. We therefore focus our attention first on the
scope of Alabama's legitimate interests in punishing BMW and
deterring it from future misconduct.
No one doubts that a State may protect its citizens by
prohibiting deceptive trade practices and by requiring auto-
(2) that the award should have been based on Alabama conduct,
respect for the error-free portion of the jury verdict would seem
to produce an award of $56,000 ($4,000 multiplied by 14, the number
of repainted vehicles sold in Alabama).
569
mobile distributors to disclose presale repairs that affect the
value of a new car. But the States need not, and in fact do not,
provide such protection in a uniform manner. Some States rely on
the judicial process to formulate and enforce an appropriate
disclosure requirement by applying principles of contract and tort
law.12 Other States have enacted various forms of legislation that
define the disclosure obligations of automobile manufacturers,
distributors, and dealers.13
12 See,
e. g., Rivers v.
BMW of North
America, Inc., 214 Ga. App. 880, 449 S. E. 2d 337 (1994)
(nondisclosure of pres ale paint repairs that occurred before state
disclosure statute enacted);
Wedmore v.
Jordan Motors,
Inc., 589 N. E. 2d 1180 (Ind. App. 1992) (same).
13 Four States require disclosure of vehicle repairs costing
more than 3 percent of suggested retail price. Ariz. Rev. Stat.
Ann. § 28-1304.03 (1989); N. C. Gen. Stat. § 20-305. 1 (d)(5a)
(1995); S. C. Code § 56-32-20 (Supp. 1995); Va. Code Ann.
§46.2-1571(D) (Supp. 1995). An additional three States mandate
disclosure when the cost of repairs exceeds 3 percent or $500,
whichever is greater. Ala. Code §8-19-5(22)(c) (1993); Cal. Veh.
Code Ann. §§ 9990-9991 (West Supp. 1996); Okla. Stat., Tit. 47, §
1112.1 (1991). Indiana imposes a 4 percent disclosure threshold.
Ind. Code §§ 9-23-4-4, 9-23-4-5 (1993). Minnesota requires
disclosure of repairs costing more than 4 percent of suggested
retail price or $500, whichever is greater. Minn. Stat. §
325 F.6d
4 (1994). New York requires disclosure when the cost of repairs
exceeds 5 percent of suggested retail price. N. Y. Gen. Bus. Law §§
396-p(5)(a), (d) (McKinney Supp. 1996). Vermont imposes a 5 percent
disclosure threshold for the first $10,000 in repair costs and 2
percent thereafter. Vt. Stat. Ann., Tit. 9, § 4087(d) (1993).
Eleven States mandate disclosure only of damage costing more than 6
percent of retail value to repair. Ark. Code Ann. §23-112-705
(1992); Idaho Code § 49-1624 (1994); Ill. Compo Stat., ch. 815, §
710/5 (1994); Ky. Rev. Stat. Ann. § 190.0491(5) (Baldwin 1988); La.
Rev. Stat. Ann. §32:1260 (West Supp. 1995); Miss. Motor Vehicle
Comm'n, Regulation No. 1 (1992); N. H. Rev. Stat. Ann.
§357-C:5(III)(d) (1995); Ohio Rev. Code Ann. §4517.61 (1994); R. I.
Gen. Laws §§31-5.1-18(d), (f) (1995); Wis. Stat. §218.01(2d)(a)
(1994); Wyo. Stat. §31-16-115 (1994). Two States require disclosure
of repairs costing $3,000 or more. See Iowa Code Ann. § 321.69
(Supp. 1996); N. D. Admin. Code §37-09-01-01 (1992). Georgia
mandates disclosure of paint damage that costs more than $500 to
repair. Ga. Code Ann. §§ 40-15(b)-(e) (1994) (enacted after
respondent purchased his car). Florida re-
570
The result is a patchwork of rules representing the diverse
policy judgments of lawmakers in 50 States.
That diversity demonstrates that reasonable people may disagree
about the value of a full disclosure requirement. Some legislatures
may conclude that affirmative disclosure requirements are
unnecessary because the self-interest of those involved in the
automobile trade in developing and maintaining the goodwill of
their customers will motivate them to make voluntary disclosures or
to refrain from selling cars that do not comply with self-imposed
standards. Those legislatures that do adopt affirmative disclosure
obligations may take into account the cost of government
regulation, choosing to draw a line exempting minor repairs from
such a requirement. In formulating a disclosure standard, States
may also consider other goals, such as providing a "safe harbor"
for automobile manufacturers, distributors, and dealers against
lawsuits over minor repairs.14
We may assume,
arguendo, that it would be wise for every
State to adopt Dr. Gore's preferred rule, requiring full disclosure
of every presale repair to a car, no matter how trivial and
regardless of its actual impact on the value of the car.
quires dealers to disclose paint repair costing more than $100
of which they have actual knowledge. Fla. Stat. § 320.27(9)(n)
(1992). Oregon requires manufacturers to disclose all
"postmanufacturing" damage and repairs. It is unclear whether this
mandate would apply to repairs such as those at issue here. Ore.
Rev. Stat. § 650.155 (1991).
Many, but not all, of the statutes exclude from the computation
of repair cost the value of certain components-typically items such
as glass, tires, wheels and bumpers-when they are replaced with
identical manufacturer's original equipment.
E. g.,
Cal. Veh. Code Ann. §§ 9990-9991 (West Supp. 1996); Ga. Code Ann.
§§40-1-5(b)-(e) (1994); Ill. Compo Stat., ch. 815, § 710/5 (1994);
Ky. Rev. Stat. Ann. § 190.0491(5) (Baldwin 1988); Okla. Stat., Tit.
47, § 1112.1 (1991); Va. Code Ann. §46.2-1571(D) (Supp. 1995); Vt.
Stat. Ann., Tit. 9, § 4087(d) (1993).
14 Also, a state legislature might plausibly conclude that the
administrative costs associated with full disclosure would have the
effect of raising car prices to the State's residents.
571
But while we do not doubt that Congress has ample authority to
enact such a policy for the entire Nation, 15 it is clear that no
single State could do so, or even impose its own policy choice on
neighboring States. See
Bonaparte v.
Tax Court,
104 U. S. 592,
594 (1881) ("No State can legislate except with reference to its
own jurisdiction .... Each State is independent of all the others
in this particular").16 Similarly, one State's power to impose
burdens on the interstate market for automobiles is not only
subordinate to the federal power over interstate commerce,
Gibbons v.
Ogden, 9 Wheat. 1, 194-196 (1824), but is
also constrained by the need to respect the interests of other
States, see,
e. g., Healy v.
Beer Institute, 491 U. S. 324, 335-336
(1989) (the Constitution has a "special concern both with the
maintenance of a national economic union unfettered by
state-imposed limitations on
15 Federal disclosure requirements are, of course, a familiar
part of our law. See,
e. g., the Federal Food, Drug,
and Cosmetic Act, as added by the Nutrition Labeling and Education
Act of 1990, 104 Stat. 2353, 21 U. S. C. § 343; the Truth In
Lending Act, 82 Stat. 148, as amended, 15 U. S. C. § 1604; the
Securities Exchange Act of 1934, 48 Stat. 892, 894, as amended, 15
U. S. C. §§ 781-78m; Federal Cigarette Labeling and Advertising
Act, 79 Stat. 283, as amended, 15 U. S. C. § 1333; Alcoholic
Beverage Labeling Act of 1988, 102 Stat. 4519, 27 U. S. C. §
215.
16 See also
Bigelow v.
Virginia, 421 U. S. 809, 824 (1975)
("A State does not acquire power or supervision over the internal
affairs of another State merely because the welfare and health of
its own citizens may be affected when they travel to that State");
New York Life Ins. Co. v.
Head, 234 U. S. 149, 161 (1914)
("[I]t would be impossible to permit the statutes of Missouri to
operate beyond the jurisdiction of that State ... without throwing
down the constitutional barriers by which all the States are
restricted within the orbits of their lawful authority and upon the
preservation of which the Government under the Constitution
depends. This is so obviously the necessary result of the
Constitution that it has rarely been called in question and hence
authorities directly dealing with it do not abound");
Huntington v.
Attrill, 146 U. S. 657, 669 (1892)
("Laws have no force of themselves beyond the jurisdiction of the
State which enacts them, and can have extra-territorial effect only
by the comity of other States").
572
interstate commerce and with the autonomy of the individual
States within their respective spheres" (footnote omitted));
Edgar v.
MITE Corp., 457 U. S. 624, 643
(1982).
We think it follows from these principles of state sovereignty
and comity that a State may not impose economic sanctions on
violators of its laws with the intent of changing the tortfeasors'
lawful conduct in other States.17 Before this Court Dr. Gore argued
that the large punitive damages award was necessary to induce BMW
to change the nationwide policy that it adopted in 1983.18 But by
attempting to alter BMW's nationwide policy, Alabama would be
infringing on the policy choices of other States. To avoid such
encroachment, the economic penalties that a State such as Alabama
inflicts on those who transgress its laws, whether the penalties
take the form of legislatively authorized fines or judicially
imposed punitive damages, must be supported by the State's interest
in protecting its own consumers and its own economy. Alabama may
insist that BMW adhere to a particular disclosure policy in that
State. Alabama does not
17 State power may be exercised as much by a jury's application
of a state rule of law in a civil lawsuit as by a statute. See
New York Times Co. v.
Sullivan, 376 U. S. 254, 265 (1964)
("The test is not the form in which state power has been applied
but, whatever the form, whether such power has in fact been
exercised");
San Diego Building Trades Council v.
Garmon, 359 U.
S. 236, 247 (1959) ("[RJegulation can be as effectively exerted
through an award of damages as through some form of preventive
relief").
18Brief for Respondent 11-12, 23, 27-28; Tr. of Oral Arg. 50-54.
Dr.
Gore's interest in altering the nationwide policy stems from his
concern that BMW would not (or could not) discontinue the policy in
Alabama alone. Brief for Respondent 11. "If Alabama were limited to
imposing punitive damages based only on BMW's gain from fraudulent
sales in Alabama, the resulting award would have no prospect of
protecting Alabama consumers from fraud, as it would provide no
incentive for BMW to alter the unitary, national policy of
nondisclosure which yielded BMW millions of dollars in profits."
Id., at 23. The record discloses no basis for Dr. Gore's
contention that BMW could not comply with Alabama's law without
changing its nationwide policy.
573
have the power, however, to punish BMW for conduct that was
lawful where it occurred and that had no impact on Alabama or its
residents.19 Nor may Alabama impose sanctions on BMW in order to
deter conduct that is lawful in other jurisdictions.
In this case, we accept the Alabama Supreme Court's
interpretation of the jury verdict as reflecting a computation of
the amount of punitive damages "based in large part on conduct that
happened in other jurisdictions." 646 So. 2d, at 627. As the
Alabama Supreme Court noted, neither the jury nor the trial court
was presented with evidence that any of BMW's out-of-state conduct
was unlawful. "The only testimony touching the issue showed that
approximately 60% of the vehicles that were refinished were sold in
states where failure to disclose the repair was not an unfair trade
practice."
Id., at 627, n. 6.20 The Alabama Supreme Court
therefore properly eschewed reliance on BMW's out-of-state conduct,
id., at 628, and based its remitted award solely on
19 See
Bordenkircher v.
Hayes, 434 U. S. 357, 363 (1978)
("To punish a person because he has done what the law plainly
allows him to do is a due process violation of the most basic
sort"). Our cases concerning recidivist statutes are not to the
contrary. Habitual offender statutes permit the sentencing court to
enhance a defendant's punishment for a crime in light of prior
convictions, including convictions in foreign jurisdictions. See
e. g., Ala. Code § 13A-5-9 (1994); Cal. Penal Code
Ann. §§ 667.5(f), 668 (West Supp. 1996); Ill. Compo Stat., ch. 720,
§ 5/33B-1 (1994); N. Y. Penal Law §§ 70.04, 70.06, 70.08, 70.10
(McKinney 1987 and Supp. 1996); Tex. Penal Code Ann. § 12.42 (1994
and Supp. 1995-1996). A sentencing judge may even consider past
criminal behavior which did not result in a conviction and lawful
conduct that bears on the defendant's character and prospects for
rehabilitation.
Williams V.
New York, 337 U. S. 241 (1949). But
we have never held that a sentencing court could properly
punish lawful conduct. This distinction is precisely the one
we draw here. See n. 21,
infra.
20 Given that the verdict was based in part on out-of-state
conduct that was lawful where it occurred, we need not consider
whether one State may properly attempt to change a tortfeasor's
unlawful conduct in another State.
574
conduct that occurred within Alabama.21 The award must be
analyzed in the light of the same conduct, with consideration given
only to the interests of Alabama consumers, rather than those of
the entire Nation. When the scope of the interest in punishment and
deterrence that an Alabama court may appropriately consider is
properly limited, it is apparent-for reasons that we shall now
address-that this award is grossly excessive.
III
Elementary 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.22 Three
guideposts, each of which indicates that BMW did not receive
adequate notice of the magnitude of the sanction that Alabama might
impose for adhering to the nondisclosure policy adopted in 1983,
lead us to the conclusion that
210f course, the fact that the Alabama Supreme Court correctly
concluded that it was error for the jury to use the number of sales
in other States as a multiplier in computing the amount of its
punitive sanction does not mean that evidence describing
out-of-state transactions is irrelevant in a case of this kind. To
the contrary, as we stated in
TXO Production Corp. v.
Alliance Resources Corp., 509 U. S. 443, 462, n. 28
(1993), such evidence may be relevant to the determination of the
degree of reprehensibility of the defendant's conduct.
22 See
Miller v.
Florida, 482 U. S. 423 (1987)
(Ex Post Facto Clause violated by retroactive imposition of
revised sentencing guidelines that provided longer sentence for
defendant's crime);
Bouie v.
City of Columbia,
378 U. S. 347
(1964) (retroactive application of new construction of statute
violated due process);
id., at 350-355 (citing cases);
Lankford v.
Idaho, 500 U. S. 110 (1991) (due
process violated because defendant and his counsel did not have
adequate notice that judge might impose death sentence). The strict
constitutional safeguards afforded to criminal defendants are not
applicable to civil cases, but the basic protection against
"judgments without notice" afforded by the Due Process Clause,
Shaffer v.
Heitner, 433 U. S. 186, 217 (1977)
(STEVENS, J., concurring in judgment), is implicated by civil
penalties.
575
the $2 million award against BMW is grossly excessive: the
degree of reprehensibility of the nondisclosure; 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. We
discuss these considerations in turn.
Degree of Reprehensibility
Perhaps the most important indicium of the reasonableness of a
punitive damages award is the degree of reprehensibility of the
defendant's conduct.23 As the Court stated nearly 150 years ago,
exemplary damages imposed on a defendant should reflect "the
enormity of his offense."
Day v.
Woodworth, 13 How.
363, 371 (1852). See also
St. Louis, 1. M. & S.
R.
Co. v.
Williams, 251 U. S. 63, 66-67 (1919)
(punitive award may not be "wholly disproportioned to the
offense");
Browning-Ferris Industries of Vt., Inc. v.
Kelco Disposal, Inc., 492 U. S. 257, 301 (1989)
(O'CONNOR, J., concurring in part and dissenting in part)
(reviewing court "should examine the gravity of the defendant's
conduct and the harshness of the award of punitive damages").24
This principle reflects the accepted view that some wrongs are more
blameworthy than others. Thus, we have said that
23 "The flagrancy of the misconduct is thought to be the primary
consideration in determining the amount of punitive damages." Owen,
A Punitive Damages Overview: Functions, Problems and Reform, 39
Vill. L. Rev. 363, 387 (1994).
24 The principle that punishment should fit the crime "is deeply
rooted and frequently repeated in common-law jurisprudence."
Solem v.
Helm, 463 U. S. 277, 284
(1983). See
Burkett v.
Lanata, 15 La. Ann. 337, 339
(1860) (punitive damages should be "commensurate to the nature of
the offence");
Blanchard v.
Morris, 15 Ill. 35, 36
(1853) ("[W]e cannot say [the exemplary damages] are excessive
under the circumstances; for the proofs show that threats,
violence, and imprisonment, were accompanied by mental fear,
torture, and agony of mind");
Louisville &
Northern
R. Co. v.
Brown, 127 Ky. 732, 749, 106 S. W. 795, 799
(1908) ("We are not aware of any case in which the court has
sustained a verdict as large as this one unless the injuries were
permanent").
576
"nonviolent crimes are less serious than crimes marked by
violence or the threat of violence."
Solem v.
Helm,
463 U. S. 277,
292-293 (1983). Similarly, "trickery and deceit,"
TXO, 509
U. S., at 462, are more reprehensible than negligence. In
TXO, both the West Virginia Supreme Court and the Justices
of this Court placed special emphasis on the principle that
punitive damages may not be "grossly out of proportion to the
severity of the offense." 25
Id., at 453, 462. Indeed, for
JUSTICE KENNEDY, the defendant's intentional malice was the
decisive element in a "close and difficult" case.
Id., at
468.26
In this case, none of the aggravating factors associated with
particularly reprehensible conduct is present. The harm BMW
inflicted on Dr. Gore was purely economic in nature. The presale
refinishing of the car had no effect on its performance or safety
features, or even its appearance for at least nine months after his
purchase. BMW's conduct evinced no indifference to or reckless
disregard for the health and safety of others. To be sure,
infliction of economic injury, especially when done intentionally
through affirmative acts of misconduct,
id., at 453, or when
the target is financially vulnerable, can warrant a substantial
penalty. But this observation does not convert all acts that cause
economic harm into torts that are sufficiently reprehensible to
justify a significant sanction in addition to compensatory
damages.
Dr. Gore contends that BMW's conduct was particularly
reprehensible because nondisclosure of the repairs to his car
formed part of a nationwide pattern of tortious conduct. Certainly,
evidence that a defendant has repeatedly engaged in prohibited
conduct while knowing or suspecting that it was unlawful would
provide relevant support for an argu-
25 Pacific Mut. Life Ins. Co. v. Haslip,
499 U. S. 1,22 (1991).
26 The dissenters also recognized that "TXO's conduct was
clearly wrongful, calculated, and improper .... "
TXO, 509
U. S., at 482 (opinion of O'CONNOR, J.).
577
ment that strong medicine is required to cure the defendant's
disrespect for the law. See
id., at 462, n. 28. Our holdings
that a recidivist may be punished more severely than a first
offender recognize that repeated misconduct is more reprehensible
than an individual instance of malfeasance. See
Gryger v.
Burke, 334 U.
S. 728, 732 (1948).
In support of his thesis, Dr. Gore advances two arguments.
First, he asserts that the state disclosure statutes supplement,
rather than supplant, existing remedies for breach of contract and
common-law fraud. Thus, according to Dr. Gore, the statutes may not
properly be viewed as immunizing from liability the nondisclosure
of repairs costing less than the applicable statutory threshold.
Brief for Respondent 18-19. Second, Dr. Gore maintains that BMW
should have anticipated that its failure to disclose similar repair
work could expose it to liability for fraud.
Id., at
4-5.
We recognize, of course, that only state courts may
authoritatively construe state statutes. As far as we are aware, at
the time this action was commenced no state court had explicitly
addressed whether its State's disclosure statute provides a safe
harbor for nondisclosure of presumptively minor repairs or should
be construed instead as supplementing common-law dutiesP A review
of the text of the stat-
27 In
Jeter v.
M &
M Dodge, Inc., 634
So. 2d 1383 (La. App. 1994), a Louisiana Court of Appeals suggested
that the Louisiana disclosure statute functions as a safe harbor.
Finding that the cost of repairing presale damage to the
plaintiff's car exceeded the statutory disclosure threshold, the
court held that the disclosure statute did not provide a defense to
the action.
Id., at 1384.
During the pendency of this litigation, Alabama enacted a
disclosure statute which defines "material" damage to a new car as
damage requiring repairs costing in excess of 3 percent of
suggested retail price or $500, whichever is greater. Ala. Code
§8-19-5(22) (1993). After its decision in this case, the Alabama
Supreme Court stated in dicta that the remedies available under
this section of its Deceptive Trade Practices Act did not displace
or alter pre-existing remedies available under either the common
law or other statutes.
Hines v.
Riverside Chevrolet-Olds,
Inc., 655 So. 2d 909, 917, n. 2 (1994). It refused, however, to
"recognize, or impose on
578
utes, however, persuades us that in the absence of a statecourt
determination to the contrary, a corporate executive could
reasonably interpret the disclosure requirements as establishing
safe harbors. In California, for example, the disclosure statute
defines "material" damage to a motor vehicle as damage requiring
repairs costing in excess of 3 percent of the suggested retail
price or $500, whichever is greater. Cal. Veh. Code Ann. § 9990
(West Supp. 1996). The Illinois statute states that in cases in
which disclosure is not required, "nondisclosure does not
constitute a misrepresentation or omission of fact." Ill. Compo
Stat., ch. 815, § 710/5 (1994).28 Perhaps the statutes may also be
interpreted in another way. We simply emphasize that the record
contains no evidence that BMW's decision to follow a disclosure
policy that coincided with the strictest extant state statute was
sufficiently reprehensible to justify a $2 million award of
punitive damages.
automobile manufacturers, a general duty to disclose every
repair of damage, however slight, incurred during the manufacturing
process."
Id., at 921. Instead, it held that whether a
defendant has a duty to disclose is a question of fact "for the
jury to determine."
Id., at 918. In reaching that conclusion
it overruled two earlier decisions that seemed to indicate that as
a matter of law there was no disclosure obligation in cases
comparable to this one.
Id., at 920 (overruling
Century
21-Reeves Realty, Inc. v.
McConnell Cadillac, Inc., 626
So. 2d 1273 (1993), and
Cobb v.
Southeast Toyota
Distributors, Inc., 569 So. 2d 395 (1990)).
28 See also Ariz. Rev. Stat. Ann. § 28-1304.03 (1989) ("[I]f
disclosure is not required under this section, a purchaser may not
revoke or rescind a sales contract due solely to the fact that the
new motor vehicle was damaged and repaired prior to completion of
the sale"); Ind. Code § 9-23-4-5 (1993) (providing that "[r]epaired
damage to a customer-ordered new motor vehicle not exceeding four
percent (4%) of the manufacturer's suggested retail price does not
need to be disclosed at the time of sale"); N. C. Gen. Stat. §
20-305.1(e) (1993) (requiring disclosure of repairs costing more
than 5 percent of suggested retail price and prohibiting revocation
or rescission of sales contract on the basis of less costly
repairs); Okla. Stat., Tit. 47, § 1112.1 (1991) (defining
"material" damage to a car as damage requiring repairs costing in
excess of 3 percent of suggested retail price or $500, whichever is
greater).
579
Dr. Gore's second argument for treating BMW as a recidivist is
that the company should have anticipated that its actions would be
considered fraudulent in some, if not all, jurisdictions. This
contention overlooks the fact that actionable fraud requires a
material misrepresentation or omission.29 This qualifier
invites line-drawing of just the sort engaged in by States with
disclosure statutes and by BMW We do not think it can be disputed
that there may exist minor imperfections in the finish of a new car
that can be repaired (or indeed, left unrepaired) without
materially affecting the car's value.30 There is no evidence that
BMW acted in bad faith when it sought to establish the appropriate
line between presumptively minor damage and damage requiring
disclosure to purchasers. For this purpose, BMW could reasonably
rely on state disclosure statutes for guidance. In this regard, it
is also significant that there is no evidence that BMW persisted in
a course of conduct after it had been adjudged unlawful on even one
occasion, let alone repeated occasions.31
Finally, the record in this case discloses no deliberate false
statements, acts of affirmative misconduct, or concealment of
evidence of improper motive, such as were present in
Haslip
and
TXO. Has lip, 499 U. S., at 5;
TXO, 509 U. S., at
453. We accept, of course, the jury's finding that BMW
suppressed
29 Restatement (Second) of Torts § 538 (1977); W. Keeton, D.
Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts
§ 108 (5th ed.1984).
30 The Alabama Supreme Court has held that a car may be
considered "new" as a matter of law even if its finish contains
minor cosmetic flaws.
Wilburn v.
Larry Savage Chevrolet,
Inc., 477 So. 2d 384 (1985). We note also that at trial
respondent only introduced evidence of undisclosed paint damage to
new cars repaired at a cost of $300 or more. This decision suggests
that respondent believed that the jury might consider some repairs
too
de minimis to warrant disclosure.
31 Before the verdict in this case, BMW had changed its policy
with respect to Alabama and two other States. Five days after the
jury award, BMW altered its nationwide policy to one of full
disclosure.
580
a material fact which Alabama law obligated it to communicate to
prospective purchasers of repainted cars in that State. But the
omission of a material fact may be less reprehensible than a
deliberate false statement, particularly when there is a good-faith
basis for believing that no duty to disclose exists.
That conduct is sufficiently reprehensible to give rise to tort
liability, and even a modest award of exemplary damages does not
establish the high degree of culpability that warrants a
substantial punitive damages award. Because this case exhibits none
of the circumstances ordinarily associated with egregiously
improper conduct, we are persuaded that BMW's conduct was not
sufficiently reprehensible to warrant imposition of a $2 million
exemplary damages award.
Ratio
The second and perhaps most commonly cited indicium of an
unreasonable or excessive punitive damages award is its ratio to
the actual harm inflicted on the plaintiff. See
TXO, 509 U.
S., at 459;
Haslip, 499 U. S., at 23. The principle that
exemplary damages must bear a "reasonable relationship" to
compensatory damages has a long pedigree.32 Scholars have
identified a number of early English statutes authorizing the
32 See,
e. g., Grant v.
McDonogh, 7 La. Ann. 447,
448 (1852) ("[E]xemplary damages allowed should bear some
proportion to the real damage sustained");
Saunders v.
Mullen, 66 Iowa 728, 729, 24 N. W. 529 (1885) (''When the
actual damages are so small, the amount allowed as exemplary
damages should not be so large");
Flannery v.
Baltimore &
Ohio R. Co., 15 D. C. 111, 125 (1885)
(when punitive damages award "is out of all proportion to the
injuries received, we feel it our duty to interfere");
Houston & Texas Central R. Co. v.
Nichols, 9 Am. & Eng. R. R. Cas. 361, 365 (Tex. 1882)
("Exemplary damages, when allowed, should bear proportion to the
actual damages sustained");
McCarthy v.
Niskern, 22
Minn. 90, 91-92 (1875) (punitive damages "enormously in excess of
what may justly be regarded as compensation" for the injury must be
set aside "to prevent injustice").
581
award of multiple damages for particular wrongs. Some 65
different enactments during the period between 1275 and 1753
provided for double, treble, or quadruple damages.33 Our decisions
in both
Haslip and
TXO endorsed the proposition that
a comparison between the compensatory award and the punitive award
is significant.
In
Haslip we concluded that even though a punitive
damages award of "more than 4 times the amount of compensatory
damages" might be "close to the line," it did not "cross the line
into the area of constitutional impropriety." 499 U. S., at 23-24.
TXO, following dicta in
Haslip, refined this analysis
by confirming that the proper inquiry 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.'"
TXO, 509 U.
S., at 460 (emphasis in original), quoting
Haslip, 499 U.
S., at 21. Thus, in upholding the $10 million award in
TXO,
we relied on the difference between that figure and the harm to the
victim that would have ensued if the tortious plan had succeeded.
That difference suggested that the relevant ratio was not more than
10 to 1.34
33 Owen,
supra n. 23, at 368, and n. 23. One English
statute, for example, provides that officers arresting persons out
of their jurisdiction shall pay double damages. 3 Edw., I., ch. 35.
Another directs that in an action for forcible entry or detainer,
the plaintiff shall recover treble damages. 8 Hen. VI, ch. 9, §
6.
Present-day federal law allows or mandates imposition of
multiple damages for a wide assortment of offenses, including
violations of the antitrust laws, see § 4 of the Clayton Act, 38
Stat. 731, as amended, 15 U. S. C. § 15, and the Racketeer
Influenced and Corrupt Organizations Act, see 18 U. S. C. § 1964,
and certain breaches of the trademark laws, see § 35 of the
Trademark Act of 1946, 60 Stat. 439, as amended, 15 U. S. C. §
1117, and the patent laws, see 66 Stat. 813, 35 U. S. C. § 284.
34 "While petitioner stresses the shocking disparity between the
punitive award and the compensatory award, that shock dissipates
when one considers the potential loss to respondents, in terms of
reduced or eliminated royalties payments, had petitioner succeeded
in its illicit scheme. Thus, even if the actual value of the
'potential harm' to respondents is not be-
582
The $2 million in punitive damages awarded to Dr. Gore by the
Alabama Supreme Court is 500 times the amount of his actual harm as
determined by the jury.35 Moreover, there is no suggestion that Dr.
Gore or any other BMW purchaser was threatened with any additional
potential harm by BMW's nondisclosure policy. The disparity in this
case is thus dramatically greater than those considered in
Haslip and
TXO.36
Of course, we have consistently rejected the notion that the
constitutional line is marked by a simple mathematical formula,
even one that compares actual
and potential damages to the
punitive award.
TXO, 509 U. S., at 458.37 Indeed, low awards
of compensatory damages may properly support a higher ratio than
high compensatory awards, if, for example, a particularly egregious
act has resulted in only a small amount of economic damages. A
higher ratio may also be justified in cases in which the injury is
hard to detect or the monetary value of noneconomic harm might have
been difficult to determine. It is appropriate, therefore, to
reiterate our rejection of a categorical approach. Once again, "we
return to what we said ... in
Haslip: 'We need not, and
tween $5 million and $8.3 million, but is closer to $4 million,
or $2 million, or even $1 million, the disparity between the
punitive award and the potential harm does not, in our view, 'jar
one's constitutional sensibilities.'''
TXO, 509 U. S., at
462, quoting
Haslip, 499 U. S., at 18.
35 Even assuming each repainted BMW suffers a diminution in
value of approximately $4,000, the award is 35 times greater than
the total damages of all 14 Alabama consumers who purchased
repainted BMW's.
36 The ratio here is also dramatically greater than any award
that would be permissible under the statutes and proposed statutes
summarized in the appendix to JUSTICE GINSBURG'S dissenting
opinion.
Post, at 615-616.
37 Conceivably the Alabama Supreme Court's selection of a
500-to-1 ratio was an application of JUSTICE SCALIA'S
identification of one possible reading of the plurality opinion in
TXO: Any future due process challenge to a punitive damages
award could be disposed of with the simple observation that "this
is no worse than
TXO." 509 U. S., at 472 (SCALIA, J.,
concurring in judgment). As we explain in the text, this award is
significantly worse than the award in
TXO.
583
indeed we cannot, draw a mathematical bright line between the
constitutionally acceptable and the constitutionally unacceptable
that would fit every case. We can say, however, that [a] general
concer[n] of reasonableness ... properly enteres] into the
constitutional calculus.'"
Id., at 458 (quoting
Has
lip, 499 U. S., at 18). In most cases, the ratio will be within
a constitutionally acceptable range, and remittitur will not be
justified on this basis. When the ratio is a breathtaking 500 to 1,
however, the award must surely "raise a suspicious judicial
eyebrow."
TXO, 509 U. S., at 481 (O'CONNOR, J.,
dissenting).
Sanctions for Comparable Misconduct
Comparing the punitive damages award and the civil or criminal
penalties that could be imposed for comparable misconduct provides
a third indicium of excessiveness. As JusTICE O'CONNOR has
correctly observed, a reviewing court engaged in determining
whether an award of punitive damages is excessive should "accord
'substantial deference' to legislative judgments concerning
appropriate sanctions for the conduct at issue."
Browning-Ferris
Industries of Vt., Inc. v.
Kelco Disposal, Inc., 492 U.
S., at 301 (opinion concurring in part and dissenting in part). In
Haslip, 499 U. S., at 23, the Court noted that although the
exemplary award was "much in excess of the fine that could be
imposed," imprisonment was also authorized in the criminal
context.38 In this
38 Although the Court did not address the size of the punitive
damages award in
Silkwood v.
Kerr-McGee Corp.,
464 U. S. 238
(1984), the dissenters commented on its excessive character, noting
that the "$10 million [punitive damages award] that the jury
imposed is 100 times greater than the maximum fine that may be
imposed ... for a single violation of federal standards" and "more
than 10 times greater than the largest single fine that the
Commission has ever imposed."
Id., at 263 (BLACKMUN, J.,
dissenting). In
New York Times Co. v.
Sullivan,
376 U. S. 254
(1964), the Court observed that the punitive award for libel was
"one thousand times greater than the maximum fine provided by the
Alabama criminal statute," and concluded that the "fear of damage
awards under a rule such as
584
case the $2 million economic sanction imposed on BMW is
substantially greater than the statutory fines available in Alabama
and elsewhere for similar malfeasance.
The maximum civil penalty authorized by the Alabama Legislature
for a violation of its Deceptive Trade Practices Act is $2,000; 39
other States authorize more severe sanctions, with the maxima
ranging from $5,000 to $10,000.40 Significantly, some statutes draw
a distinction between first offenders and recidivists; thus, in New
York the penalty is $50 for a first offense and $250 for subsequent
offenses. None of these statutes would provide an out-of-state
distributor with fair notice that the first violation-or, indeed
the first 14 violations-of its provisions might subject an offender
to a multimillion dollar penalty. Moreover, at the time BMW's
policy was first challenged, there does not appear to have been any
judicial decision in Alabama or elsewhere indicating that
application of that policy might give rise to such severe
punishment.
The sanction imposed in this case cannot be justified on the
ground that it was necessary to deter future misconduct without
considering whether less drastic remedies could be expected to
achieve that goal. The fact that a multimillion dollar penalty
prompted a change in policy sheds no light on the question whether
a lesser deterrent would have adequately protected the interests of
Alabama consumers. In
that invoked by the Alabama courts here may be markedly more
inhibiting than the fear of prosecution under a criminal statute."
Id., at 277.
39 Ala. Code §8-19-11(b) (1993).
40 See,
e. g., Ark. Code Ann. § 23-112-309(b)
(1992) (up to $5,000 for violation of state Motor Vehicle
Commission Act that would allow suspension of dealer's license; up
to $10,000 for violation of Act that would allow revocation of
dealer's license); Fla. Stat. § 320.27(12) (1992) (up to $1,000);
Ga. Code Ann. §§40-1-5(g), 1O-1-397(a) (1994 and Supp. 1996) (up to
$2,000 administratively; up to $5,000 in superior court); Ind. Code
§ 9-23-6-4 (1993) ($50 to $1,000); N. H. Rev. Stat. Ann. §§
357-C:15, 651:2 (1995 and Supp. 1995) (corporate fine of up
to $20,000); N. Y. Gen. Bus. Law § 396-p(6) (McKinney Supp. 1995)
($50 for first offense; $250 for subsequent offenses).
585
the absence of a history of noncompliance with known statutory
requirements, there is no basis for assuming that a more modest
sanction would not have been sufficient to motivate full compliance
with the disclosure requirement imposed by the Alabama Supreme
Court in this case.
IV
We assume, as the juries in this case and in the
Yates
case found, that the undisclosed damage to the new BMW's affected
their actual value. Notwithstanding the evidence adduced by BMW in
an effort to prove that the repainted cars conformed to the same
quality standards as its other cars, we also assume that it knew,
or should have known, that as time passed the repainted cars would
lose their attractive appearance more rapidly than other BMW's.
Moreover, we of course accept the Alabama courts' view that the
state interest in protecting its citizens from deceptive trade
practices justifies a sanction in addition to the recovery of
compensatory damages. We cannot, however, accept the conclusion of
the Alabama Supreme Court that BMW's conduct was sufficiently
egregious to justify a punitive sanction that is tantamount to a
severe criminal penalty.
The fact that BMW is a large corporation rather than an
impecunious individual does not diminish its entitlement to fair
notice of the demands that the several States impose on the conduct
of its business. Indeed, its status as an active participant in the
national economy implicates the federal interest in preventing
individual States from imposing undue burdens on interstate
commerce. While each State has ample power to protect its own
consumers, none may use the punitive damages deterrent as a means
of imposing its regulatory policies on the entire Nation.
As in
Haslip, we are not prepared to draw a bright line
marking the limits of a constitutionally acceptable punitive
damages award. Unlike that case, however, we are fully convinced
that the grossly excessive award imposed in this
586
case transcends the constitutional limitY Whether the
appropriate remedy requires a new trial or merely an independent
determination by the Alabama Supreme Court of the award necessary
to vindicate the economic interests of Alabama consumers is a
matter that should be addressed by the state court in the first
instance.
The judgment is reversed, and the case is remanded for further
proceedings not inconsistent with this opinion.
It is so ordered.
JUSTICE BREYER, with whom JUSTICE O'CONNOR and JUSTICE SOUTER
join, concurring.
The Alabama state courts have assessed the defendant $2 million
in "punitive damages" for having knowingly failed to tell a BMW
automobile buyer that, at a cost of $600, it had repainted portions
of his new $40,000 car, thereby lowering its potential resale value
by about 10%. The Court's opinion, which I join, explains why we
have concluded that this award, in this case, was "grossly
excessive" in relation to legitimate punitive damages objectives,
and hence an arbitrary deprivation of life, liberty, or property in
violation of the Due Process Clause. See
TXO Production
Corp. v.
Alliance Resources Corp., 509 U. S. 443, 453, 454
(1993) (A "grossly excessive" punitive award amounts to an
"arbitrary deprivation of property without due process of law")
(pluralityopinion). Members of this Court have generally thought,
however, that if "fair procedures were followed, a judgment that is
a product of that process is entitled to a strong pre-
41JUSTICE GINSBURG expresses concern that we are "the
only federal court policing" this limit.
Post, at
613. The small number of punitive damages questions that we have
reviewed in recent years, together with the fact that this is the
first case in decades in which we have found that a punitive
damages award exceeds the constitutional limit, indicates that this
concern is at best premature. In any event, this consideration
surely does not justify an abdication of our responsibility to
enforce constitutional protections in an extraordinary case such as
this one.
587
sumption of validity."
Id., at 457. See also
Pacific
Mut. Life Ins. Co. v.
Has lip, 499 U. S. 1, 40-42 (1991)
(KENNEDY, J., concurring in judgment). And the Court also has found
that punitive damages procedures very similar to those followed
here were not, by themselves, fundamentally unfair.
Id., at
15-24. Thus, I believe it important to explain why this presumption
of validity is overcome in this instance.
The reason flows from the Court's emphasis in
Haslip upon
the constitutional importance of legal standards that provide
"reasonable constraints" within which "discretion is exercised,"
that assure "meaningful and adequate review by the trial court
whenever a jury has fixed the punitive damages," and permit
"appellate review [that] makes certain that the punitive damages
are reasonable in their amount and rational in light of their
purpose to punish what has occurred and to deter its repetition."
Id., at 20-21. See also
id., at 18 ("[U]nlimited jury
discretion-or unlimited judicial discretion for that matter-in the
fixing of punitive damages may invite extreme results that jar
one's constitutional sensibilities").
This constitutional concern, itself harkening back to the Magna
Carta, arises out of the basic unfairness of depriving citizens of
life, liberty, or property, through the application, not of law and
legal processes, but of arbitrary coercion.
Daniels v.
Williams, 474
U. S. 327, 331 (1986);
Dent v.
West Virginia,
129 U. S. 114,
123 (1889). Requiring the application of law, rather than a
decisionmaker's caprice, does more than simply provide citizens
notice of what actions may subject them to punishment; it also
helps to assure the uniform general treatment of similarly situated
persons that is the essence of law itself. See
Railway Express
Agency, Inc. v.
New York, 336 U. S. 106, 112 (1949)
(Jackson, J., concurring) ("[T]here is no more effective practical
guaranty against arbitrary and unreasonable government than to
require that the principles of law which officials would impose
upon a minority must be imposed generally").
588
Legal standards need not be precise in order to satisfy this
constitutional concern. See
Haslip, supra, at 20 (comparing
punitive damages standards to such legal standards as "reasonable
care," "due diligence," and "best interests of the child")
(internal quotation marks omitted). But they must offer some kind
of constraint upon a jury or court's discretion, and thus
protection against purely arbitrary behavior. The standards the
Alabama courts applied here are vague and open ended to the point
where they risk arbitrary results. In my view, although the
vagueness of those standards does not, by itself, violate due
process, see
Has lip, supra, it does invite the kind of
scrutiny the Court has given the particular verdict before us. See
id., at 18 ("[C]oncerns of ... adequate guidance from the
court when the case is tried to a jury properly enter into the
constitutional calculus");
TXO, supra, at 475 ("[I]t cannot
be denied that the lack of clear guidance heightens the risk that
arbitrariness, passion, or bias will replace dispassionate
deliberation as the basis for the jury's verdict") (O'CONNOR, J.,
dissenting). This is because the standards, as the Alabama Supreme
Court authoritatively interpreted them here, provided no
significant constraints or protection against arbitrary
results.
First, the Alabama statute that permits punitive damages does
not itself contain a standard that readily distinguishes between
conduct warranting very small, and conduct warranting very large,
punitive damages awards. That statute permits punitive damages in
cases of "oppression, fraud, wantonness, or malice." Ala. Code
§6-11-20(a) (1993). But the statute goes on to define those terms
broadly, to encompass far more than the egregious conduct that
those terms, at first reading, might seem to imply. An intentional
misrepresentation, made through a statement or silence, can easily
amount to "fraud" sufficient to warrant punitive damages. See §
6-11-20(b)(1) ("Fraud" includes "intentional ... concealment of a
material fact the concealing party had a
589
duty to disclose, which was gross,
oppressive, or
malicious and committed with the intention ... of thereby
depriving a person or entity of property") (emphasis added); §
6-1120(b)(2) ("Malice" includes
any "wrongful act without
just cause or
excuse ... [w]ith an intent to injure the ...
property of another") (emphasis added); § 6-11-20(b)(5)
("Oppression" includes "[sJubjecting a person to ... unjust
hardship in conscious disregard of that person's rights"). The
statute thereby authorizes punitive damages for the most serious
kinds of misrepresentations, say, tricking the elderly out of their
life savings, for much less serious conduct, such as the failure to
disclose repainting a car, at issue here, and for a vast range of
conduct in between.
Second, the Alabama courts, in this case, have applied the
"factors" intended to constrain punitive damages awards in a way
that belies that purpose.
Green Oil Co. v.
Hornsby,
539 So. 2d 218 (Ala. 1989), sets forth seven factors that appellate
courts use to determine whether or not a jury award was "grossly
excessive" and which, in principle, might make up for the lack of
significant constraint in the statute. But, as the Alabama courts
have authoritatively interpreted them, and as their application in
this case illustrates, they impose little actual constraint.
(a)
Green Oil requires that a punitive damages award
"bear a reasonable relationship to the harm that is likely to occur
from the defendant's conduct as well as to the harm that actually
has occurred."
Id., at 223. But this standard does little to
guide a determination of what counts as a "reasonable"
relationship, as this case illustrates. The record evidence of
past, present, or likely future harm consists of (a) $4,000 of harm
to Dr. Gore's BMW; (b) 13 other similar Alabama instances; and (c)
references to about 1,000 similar instances in other States. The
Alabama Supreme Court, disregarding BMW's failure to make relevant
objection to the out-of-state instances at trial (as was the
court's right), held that the last mentioned, out-of-state
instances did
not
590
count as relevant harm. It went on to find "a reasonable
relationship" between the harm and the $2 million punitive damages
award
without "consider[ing] those acts that occurred in other
jurisdictions." 646 So. 2d 619, 628 (1994) (emphasis added).
For reasons explored by the majority in greater depth, see
ante, at 574-586, the relationship between this award and
the underlying conduct seems well beyond the bounds of the
"reasonable." To find a "reasonable relationship" between purely
economic harm totaling $56,000, without significant evidence of
future repetition, and a punitive award of $2 million is to empty
the "reasonable relationship" test of meaningful content. As thus
construed, it does not set forth a legal standard that could have
significantly constrained the discretion of Alabama
factfinders.
(b)
Green Oil's second factor is the "degree of
reprehensibility" of the defendant's conduct.
Green Oil,
supra, at 223. Like the "reasonable relationship" test, this
factor provides little guidance on how to relate culpability to the
size of an award. The Alabama court, in considering this factor,
found "reprehensible" that BMW followed a conscious policy of not
disclosing repairs to new cars when the cost of repairs amounted to
less than 3% of the car's value. Of course,
any conscious
policy of not disclosing a repair-where one knows the nondisclosure
might cost the customer resale value-is "reprehensible" to
some degree. But, for the reasons discussed by the majority,
ante, at 575-580, I do not see how the Alabama courts could
find conduct that (they assumed) caused $56,000 of relevant
economic harm
especially or
unusually reprehensible
enough to warrant $2 million in punitive damages, or a significant
portion of that award. To find to the contrary, as the Alabama
courts did, is not simply unreasonable; it is to make
"reprehensibility" a concept without constraining force, i.
e., to deprive the concept of its constraining power to
protect against serious and capricious deprivations.
591
(c)
Green Oil's third factor requires "punitive damages"
to "remove the profit" of the illegal activity and "be in excess of
the profit, so that the defendant recognizes a loss."
Green
Oil, 539 So. 2d, at 223. This factor has the ability to limit
awards to a fixed, rational amount. But as applied, that concept's
potential was not realized, for the court did not limit the award
to anywhere near the $56,000 in profits evidenced in the record.
Given the record's description of the conduct and its prevalence,
this factor could not justify much of the $2 million award.
(d)
Green Oil's fourth factor is the "financial position"
of the defendant.
Ibid. Since a fixed dollar award will
punish a poor person more than a wealthy one, one can understand
the relevance of this factor to the State's interest in retribution
(though not necessarily to its interest in deterrence, given the
more distant relation between a defendant's wealth and its
responses to economic incentives). See
TXO, 509 U. S., at
462, and n. 28 (plurality opinion);
id., at 469 (KENNEDY,
J., concurring in part and concurring in judgment);
Has lip,
499 U. S., at 21-22;
Browning-Ferris Industries of Vt., Inc.
v.
Kelco Disposal, Inc., 492 U. S. 257, 300 (1989)
(O'CONNOR, J., concurring in part and dissenting in part). This
factor, however, is not necessarily intended to act as a
significant
constraint on punitive awards. Rather, it
provides an open-ended basis for inflating awards when the
defendant is wealthy, as this case may illustrate. That does not
make its use unlawful or inappropriate; it simply means that this
factor cannot make up for the failure of other factors, such as
"reprehensibility," to constrain significantly an award that
purports to punish a defendant's conduct.
(e)
Green Oil's fifth factor is the "costs of litigation"
and the State's desire "to encourage plaintiffs to bring wrongdoers
to trial." 539 So. 2d, at 223. This standard provides meaningful
constraint to the extent that the enhancement it authorized is
linked to a fixed, ascertainable amount approximating actual costs,
even when defined generously to reflect
592
the contingent nature of plaintiffs' victories. But as this case
shows, the factor cannot operate as a constraint when an award much
in excess of costs is approved for other reasons. An additional
aspect of the standard-the need to "encourage plaintiffs to bring
wrongdoers to trial"-is a factor that does not constrain, but
enhances, discretionary power-especially when unsupported by
evidence of a
special need to encourage litigation (which
the Alabama courts here did not mention).
(f)
Green Oil's sixth factor is whether or not "criminal
sanctions have been imposed on the defendant for his conduct."
Ibid. This factor did not apply here.
(g)
Green Oil's seventh factor requires that "other civil
actions" filed "against the same defendant, based on the same
conduct," be considered in mitigation.
Id., at 224. That
factor did not apply here.
Thus, the first, second, and third
Green Oil factors, in
principle, might sometimes act as constraints on arbitrary
behavior. But
as the Alabama courts interpreted those standards
in this case, even taking those three factors together, they
could not have significantly constrained the court system's ability
to impose "grossly excessive" awards.
Third, the state courts neither referred to, nor made any effort
to find, nor enunciated any other standard that either directly, or
indirectly as background, might have supplied the constraining
legal force that the statute and
Green Oil standards (as
interpreted here) lack. Dr. Gore did argue to the jury an economic
theory based on the need to offset the totality of the harm that
the defendant's conduct caused. Some theory of that general kind
might have provided a significant constraint on arbitrary awards
(at least where confined to the relevant harm-causing conduct, see
ante, at 570-574). Some economists, for example, have argued
for a standard that would deter illegal activity causing solely
economic harm through the use of punitive damages awards that, as a
whole, would take from a wrongdoer the total cost of the
593
harm caused. See,
e. g., S. Shavell, Economic
Analysis of Accident Law 162 (1987) ("If liability equals losses
caused multiplied by ... the inverse of the probability of suit,
injurers will act optimally under liability rules despite the
chance that they will escape suit"); Cooter, Punitive Damages for
Deterrence: When and How Much, 40 Ala. L. Rev. 1143, 1146-1148
(1989). My understanding of the intuitive essence of some of those
theories, which I put in crude form (leaving out various
qualifications), is that they could permit juries to calculate
punitive damages by making a rough estimate of global harm,
dividing that estimate by a similarly rough estimate of the number
of successful lawsuits that would likely be brought, and adding
generous attorney's fees and other costs. Smaller damages would not
sufficiently discourage firms from engaging in the harmful conduct,
while larger damages would "over-deter" by leading potential
defendants to spend more to prevent the activity that causes the
economic harm, say, through employee training, than the cost of the
harm itself. See Galligan, Augmented Awards: The Efficient
Evolution of Punitive Damages, 51 La. L. Rev. 3, 17-20, 28-30
(1990). Larger damages might also "double count" by including in
the punitive damages award some of the compensatory, or punitive,
damages that subsequent plaintiffs would also recover.
The record before us, however, contains nothing suggesting that
the Alabama Supreme Court, when determining the allowable award,
applied
any "economic" theory that might explain the $2
million recovery. Cf.
Browning-Ferris, supra, at 300 (noting
that the Constitution "does not incorporate the views of the Law
and Economics School," nor does it " 'require the States to
subscribe to any particular economic theory''') (O'CONNOR, J.,
concurring in part and dissenting in part) (quoting
CTS
Corp. v.
Dynamics Corp. of America, 481 U. S. 69, 92
(1987)). And courts properly tend to judge the rationality of
judicial actions in terms of the reasons that were given, and the
facts that were before the court, cf.
TXO,
594
509 U. S., at 468 (KENNEDY, J., concurring in part and
concurring in judgment), not those that might have been given on
the basis of some conceivable set of facts (unlike the rationality
of economic statutes enacted by legislatures subject to the
public's control through the ballot box, see,
e. g.,
FCC v.
Beach Communications, Inc., 508 U. S. 307, 315
(1993)). Therefore, reference to a constraining "economic" theory,
which might have counseled more deferential review by this Court,
is lacking in this case.
Fourth, I cannot find any community understanding or historic
practice that this award might exemplify and which, therefore,
would provide background standards constraining arbitrary behavior
and excessive awards. A punitive damages award of $2 million for
intentional misrepresentation causing $56,000 of harm is
extraordinary by historical standards, and, as far as I am aware,
finds no analogue until relatively recent times.
Amici for
Dr. Gore attempt to show that this is not true, pointing to various
historical cases which, according to their calculations,
represented roughly equivalent punitive awards for similarly
culpable conduct. See Brief for James D. A. Boyle et al. as
Amici Curiae 4-5 (hereinafter Legal Historians' Brief).
Among others, they cite
Wilkes v.
Wood, Lofft 1, 98
Eng. Rep. 489 (C. P. 1763) (£1,000 said to be equivalent of $1.5
million, for warrantless search of papers);
Huckle v.
Money, 2 Wills. 205, 95 Eng. Rep. 768 (K. B. 1763) (£300,
said to be $450,000, for 6-hour false imprisonment);
Hewlett
v.
Cruchley, 5 Taunt. 277, 128 Eng. Rep. 696 (C. P. 1813)
(£2,000, said to be $680,000, for malicious prosecution);
Merest v.
Harvey, 5 Taunt. 442, 128 Eng. Rep. 761 (C.
P. 1814) (£500, said to be $165,000, for poaching). But
amici apparently base their conversions on a mathematical
assumption, namely, that inflation has progressed at a constant 3%
rate of inflation. See Legal Historians' Brief 4. In fact,
consistent, cumulative inflation is a modern phenomenon. See
McCusker, How Much Is That in Real Money? A Historical Price Index
for Use as a Deflator
595
of Money Values in the Economy of the United States, 101
Proceedings of American Antiquarian Society 297, 310, 323332
(1992). Estimates based on historical rates of valuation, while
highly approximate, suggest that the ancient extraordinary awards
are small compared to the $2 million here at issue, or other modern
punitive damages figures. See Appendix to this opinion,
infra, at 597-598 (suggesting that the modern equivalent of
the awards in the above cases is something like $150,000, $45,000,
$100,000, and $25,000, respectively). And, as the majority opinion
makes clear, the record contains nothing to suggest that the
extraordinary size of the award in this case is explained by the
extraordinary wrongfulness of the defendant's behavior, measured by
historical or community standards, rather than arbitrariness or
caprice.
Fifth, there are no other legislative enactments here that
classify awards and impose quantitative limits that would
significantly cabin the fairly unbounded discretion created by the
absence of constraining legal standards. Cf.,
e. g.,
Tex. Civ. Prac. & Rem. Code Ann. § 41.008 (Supp. 1996)
(punitive damages generally limited to greater of double damages,
or $200,000, except cap does not apply to suits arising from
certain serious criminal acts enumerated in the statute); Conn.
Gen. Stat. § 52-240b (1995) (punitive damages may not exceed double
compensatory damages in product liability cases); Fla. Stat. §
768.73(1) (Supp. 1993) (punitive damages in certain actions limited
to treble compensatory damages); Ga. Code Ann. § 51-12-5.1(g)
(Supp. 1995) ($250,000 cap in certain actions).
The upshot is that the rules that purport to channel discretion
in this kind of case, here did not do so in fact. That means that
the award in this case was both (a) the product of a system of
standards that did not significantly constrain a court's, and hence
a jury's, discretion in making that award; and (b) grossly
excessive in light of the State's legitimate punitive damages
objectives.
596
The first of these reasons has special importance where courts
review a jury-determined punitive damages award. That is because
one cannot expect to direct jurors like legislators through the
ballot box; nor can one expect those jurors to interpret law like
judges, who work within a discipline and hierarchical organization
that normally promotes roughly uniform interpretation and
application of the law. Yet here Alabama expects jurors to act, at
least a little, like legislators or judges, for it permits them, to
a certain extent, to create public policy and to apply that policy,
not to compensate a victim, but to achieve a policy-related
objective outside the confines of the particular case.
To the extent that neither clear legal principles nor fairly
obvious historical or community-based standards (defining, say,
especially egregious behavior) significantly constrain punitive
damages awards, is there not a substantial risk of outcomes so
arbitrary that they become difficult to square with the
Constitution's assurance, to every citizen, of the law's
protection? The standards here, as authoritatively interpreted, in
my view, make this threat real and not theoretical. And, in these
unusual circumstances, where legal standards offer virtually no
constraint, I believe that this lack of constraining standards
warrants this Court's detailed examination of the award.
The second reason-the severe disproportionality between the
award and the legitimate punitive damages objectivesreflects a
judgment about a matter of degree. I recognize that it is often
difficult to determine just when a punitive award exceeds an amount
reasonably related to a State's legitimate interests, or when that
excess is so great as to amount to a matter of constitutional
concern. Yet whatever the difficulties of drawing a precise line,
once we examine the award in this case, it is not difficult to say
that this award lies on the line's far side. The severe lack of
proportionality between the size of the award and the underlying
punitive damages objectives shows that the award falls into the
cate-
597
gory of "gross excessiveness" set forth in this Court's prior
cases.
These two reasons
taken together overcome what would
otherwise amount to a "strong presumption of validity."
TXO,
509 D. S., at 457. And, for those two reasons, I conclude that the
award in this unusual case violates the basic guarantee of
nonarbitrary governmental behavior that the Due Process Clause
provides.
APPENDIX TO OPINION OF BREYER, J.
Although I recognize that all estimates of historic rates of
inflation are subject to dispute, including, I assume, the sources
below, those sources suggest that the value of the 18th and 19th
century judgments cited by
amici is much less than the
figures
amici arrived at under their presumption of a
constant 3% rate of inflation.
In 1763, £1 (Eng.) was worth £1.73 Pennsylvania currency.
See D. S. Bureau of the Census, Historical Statistics of the
United States: Colonial Times to 1970, Series Z-585, p. 1198
(Bicentennial ed. 1975). For the period 1766-1772, £1 (Penn.) was
worth $45.99 (D. S. 1991). See McCusker, How Much Is That in Real
Money? A Historical Price Index for Use as a Deflator of Money
Values in the Economy of the United States, 101 American
Antiquarian Society 297, 333 (1992). Thus, £1 (Eng. 1763) is worth
about $79.56 (D. S. 1991). Accounting for the 12% inflation of the
D. S. dollar between 1991 and 1995 (when
amici filed their
brief), see Economic Indicators, 104th Cong., 2d Sess., p. 23 (Feb.
1996), £1 (Eng. 1763) is worth about $89.11 (D. S. 1995).
Calculated another way, £1 (Eng. 1763) is worth about £72.84
(Eng. 1991). See McCusker,
supra, at 312, 342, 350. And £1
(Eng. 1991) is worth $1.77 (D. S. 1991). See 78 Fed. Reserve
Bulletin A68 (Feb. 1992). Thus, £1 (Eng. 1763) amounts to about
$128.93 (D. S. 1991). Again, accounting for inflation between 1991
and 1995, this amounts to about $144.40 (D. S. 1995).
598
Thus, the above sources suggest that the £1,000 award in
Wilkes in 1763 roughly amounts to between $89,110 and
$144,440 today, not $1.5 million. And the £300 award in
Huckle that same year would seem to be worth between $26,733
and $43,320 today, not $450,000.
For the period of the
Hewlett and
Merest
decisions, £1 (Eng. 1813) is worth about £25.3 (Eng. 1991). See
McCusker,
supra, at 344, 350. U sing the 1991 exchange rate,
£1 (Eng. 1813) is worth about $44.78 (D. S. 1991). Accounting for
inflation between 1991 and 1995, this amounts to about $50.16 (D.
S. 1995).
Thus, the £2,000 and £500 awards in
Hewlett and
Merest would seem to be closer to $100,320 and $25,080,
respectively, than to
amici's estimates of $680,000 and
$165,000.
JUSTICE SCALIA, with whom JUSTICE THOMAS joins, dissenting.
Today we see the latest manifestation of this Court's recent and
increasingly insistent "concern about punitive damages that 'run
wild.'"
Pacific Mut. Life Ins. Co. v.
Has lip, 499 D.
S. 1, 18 (1991). Since the Constitution does not make that concern
any of our business, the Court's activities in this area are an
unjustified incursion into the province of state governments.
In earlier cases that were the prelude to this decision, I set
forth my view that a state trial procedure that commits the
decision whether to impose punitive damages, and the amount, to the
discretion of the jury, subject to some judicial review for
"reasonableness," furnishes a defendant with all the process that
is "due." See
TXO Production Corp. v.
Alliance Resources
Corp., 509 D. S. 443, 470 (1993) (SCALIA, J., concurring in
judgment);
Haslip, supra, at 25-28 (SCALIA, J., concurring
in judgment); cf.
Honda Motor Co. v.
Oberg, 512 D. S.
415, 435-436 (1994) (SCALIA, J., concurring). I do not regard the
Fourteenth Amendment's Due Process Clause as a secret repository of
substantive guarantees against
599
"unfairness"-neither the unfairness of an excessive civil
compensatory award, nor the unfairness of an "unreasonable"
punitive award. What the Fourteenth Amendment's procedural
guarantee assures is an opportunity to contest the reasonableness
of a damages judgment in state court; but there is no federal
guarantee a damages award actually
be reasonable. See
TXO, supra, at 471 (SCALIA, J., concurring in judgment).
This view, which adheres to the text of the Due
Process
Clause, has not prevailed in our punitive damages cases. See
TXO, 509 U. S., at 453-462 (plurality opinion);
id.,
at 478481 (O'CONNOR, J., dissenting);
Haslip, supra, at 18.
When, however, a constitutional doctrine adopted by the Court is
not only mistaken but also insusceptible of principled application,
I do not feel bound to give it
stare decisis effectindeed, I
do not feel justified in doing so. See,
e. g., Witte v.
United States, 515 U. S. 389, 406 (1995)
(SCALIA, J., concurring in judgment);
Walton v.
Arizona, 497
U. S. 639, 673 (1990) (SCALIA, J., concurring in judgment in
part and dissenting in part). Our punitive damages jurisprudence
compels such a response. The Constitution provides no warrant for
federalizing yet another aspect of our Nation's legal culture (no
matter how much in need of correction it may be), and the
application of the Court's new rule of constitutional law is
constrained by no principle other than the Justices' subjective
assessment of the "reasonableness" of the award in relation to the
conduct for which it was assessed.
Because today's judgment represents the first instance of this
Court's invalidation of a state-court punitive assessment as simply
unreasonably large, I think it a proper occasion to discuss these
points at some length.
I
The most significant aspects of today's decision-the
identification of a "substantive due process" right against a
"grossly excessive" award, and the concomitant assumption
600
of ultimate authority to decide anew a matter of
"reasonableness" resolved in lower court proceedings-are of course
not new.
Haslip and
TXO revived the notion, moribund
since its appearance in the first years of this century, that the
measure of civil punishment poses a question of constitutional
dimension to be answered by this Court. N either of those cases,
however, nor any of the precedents upon which they relied, actually
took the step of declaring a punitive award unconstitutional simply
because it was "too big."
At the time of adoption of the Fourteenth Amendment, it was well
understood that punitive damages represent the assessment by the
jury, as the voice of the community, of the measure of punishment
the defendant deserved. See,
e. g., Barry v.
Edmunds, 116
U. S. 550, 565 (1886);
Missouri Pacific R. Co. v.
Humes, 115 U.
S. 512, 521 (1885);
Day v.
Woodworth, 13 How.
363, 371 (1852). See generally
Haslip, supra, at 25-27
(SCALIA, J., concurring in judgment). Today's decision, though
dressed up as a legal opinion, is really no more than a
disagreement with the community's sense of indignation or outrage
expressed in the punitive award of the Alabama jury, as reduced by
the State Supreme Court. It reflects not merely, as the concurrence
candidly acknowledges, "a judgment about a matter of degree,"
ante, at 596; but a judgment about the appropriate degree of
indignation or outrage, which is hardly an analytical
determination.
There is no precedential warrant for giving our judgment
priority over the judgment of state courts and juries on this
matter. The only support for the Court's position is to be found in
a handful of errant federal cases, bunched within a few years of
one other, which invented the notion that an unfairly severe civil
sanction amounts to a violation of constitutionalliberties. These
were the decisions upon which the
TXO plurality relied in
pronouncing that the Due Process Clause "imposes substantive limits
'beyond which penalties may not go,'" 509 U. S., at 454 (quoting
Seaboard Air Line R. Co. v.
Seegers, 207 U. S. 73, 78 (1907));
see also 509 U. S.,
601
at 478-481 (O'CONNOR, J., dissenting);
Has lip, supra, at
18. Although they are our precedents, they are themselves too
shallowly rooted to justify the Court's recent undertaking. The
only case relied upon in which the Court actually invalidated a
civil sanction does not even support constitutional review for
excessiveness, since it really concerned the validity, as a matter
of
procedural due process, of state legislation that imposed
a significant penalty on a common carrier which lacked the means of
determining the legality of its actions before the penalty was
imposed. See
Southwestern Telegraph &
Telephone
Co. v.
Danaher, 238 U. S. 482, 489-491
(1915). The
amount of the penalty was not a subject of
independent scrutiny. As for the remaining cases, while the
opinions do consider arguments that statutory penalties can, by
reason of their excessiveness, violate due process, not a single
one of these judgments invalidates a damages award. See
Seaboard, supra, at 78-79;
Waters-Pierce Oil Co. v.
Texas (No.1), 212 U. S. 86, 111-112
(1909);
Standard Oil Co. of Ind. v.
Missouri,
224 U. S. 270,
286, 290 (1912);
St. Louis,
More importantly, this latter group of cases-which again are the
sole precedential foundation put forward for the rule of
constitutional law espoused by today's Court-simply fabricated the
"substantive due process" right at issue.
Seaboard assigned
no precedent to its bald assertion that the Constitution imposes
"limits beyond which penalties may not go," 207 U. S., at 78.
Waters-Pierce cited only
Coffey v.
County of
Harlan, 204 U. S.
659 (1907), a case which inquired into the constitutionality of
state
procedure, id., at 662-663.
Standard Oil simply
cited
Waters-Pierce, and
St. Louis, 1. M. & S.
R. Co. offered in addition to these cases only
Collins v.
Johnston, 237 U. S. 502 (1915),
which said nothing to support the notion of a "substantive due
process" right against excessive civil penalties, but to the
contrary asserted that the prescribing and imposing of criminal
punishment were "functions peculiarly belonging to the several
States,"
602
id., at 509-510. Thus, the only authority for the Court's
position is simply not authoritative. These cases fall far short of
what is needed to supplant this country's longstanding practice
regarding exemplary awards, see,
e. g., Has
lip, 499 U. S., at 15-18;
id., at 25-28 (SCALIA, J.,
concurring in judgment).
II
One might understand the Court's eagerness to enter this field,
rather than leave it with the state legislatures, if it had
something useful to say. In fact, however, its opinion provides
virtually no guidance to legislatures, and to state and federal
courts, as to what a "constitutionally proper" level of punitive
damages might be.
We are instructed at the outset of Part II of the Court's
opinion-the beginning of its substantive analysis-that "the federal
excessiveness inquiry ... begins with an identification of the
state interests that a punitive award is designed to serve."
Ante, at 568. On first reading this, one is faced with the
prospect that federal punitive damages law (the new field created
by today's decision) will be beset by the sort of "interest
analysis" that has laid waste the formerly comprehensible field of
conflict of laws. The thought that each assessment of punitive
damages, as to each offense, must be examined to determine the
precise "state interests" pursued, is most unsettling. Moreover, if
those "interests" are the most fundamental determinant of an award,
one would think that due process would require the assessing jury
to be
instructed about them.
It appears, however (and I certainly hope), that all this is a
false alarm. As Part II of the Court's opinion unfolds, it turns
out to be directed, not to the question "How much punishment is too
much?" but rather to the question "Which acts can be punished?"
"Alabama does not have the power," the Court says, "to punish BMW
for conduct that was lawful where it occurred and that had no
impact on Alabama or its residents."
Ante, at 572-573. That
may be true, though
603
only in the narrow sense that a person cannot be
held liable
to be punished on the basis of a lawful act. But if a person
has been held subject to punishment because he committed an
unlawful act, the
degree of his punishment assuredly
can be increased on the basis of any other conduct of his
that displays his wickedness, unlawful or not. Criminal sentences
can be computed, we have said, on the basis of "information
concerning every aspect of a defendant's life,"
Williams v.
New York, 337 U. S. 241, 250-252
(1949). The Court at one point seems to acknowledge this, observing
that, although a sentencing court "[cannot] properly
punish
lawful conduct," it may in assessing the penalty "consider ...
lawful conduct that bears on the defendant's character."
Ante, at 573, n. 19. That concession is quite incompatible,
however, with the later assertion that, since "neither the jury nor
the trial court was presented with evidence that any of BMW's
out-of-state conduct was unlawful," the Alabama Supreme Court
"therefore properly eschewed reliance on BMW's outof-state conduct,
... and based its remitted award solely on conduct that occurred
within Alabama."
Ante, at 573-574. Why could the Supreme
Court of Alabama not consider lawful (but disreputable) conduct,
both inside and outside Alabama, for the purpose of assessing just
how bad an actor BMWwas?
The Court follows up its statement that "Alabama does not have
the power ... to punish BMW for conduct that was lawful where it
occurred" with the statement: "Nor may Alabama impose sanctions on
BMW in order to deter conduct that is lawful in other
jurisdictions."
Ante, at 572-573. The Court provides us no
citation of authority to support this proposition-other than the
barely analogous cases cited earlier in the opinion, see
ante, at 571-572-and I know of none.
These significant issues pronounced upon by the Court are not
remotely presented for resolution in the present case. There is no
basis for believing that Alabama has sought to control conduct
elsewhere. The statutes at issue merely
604
permit civil juries to treat conduct such as petitioner's as
fraud, and authorize an award of appropriate punitive damages in
the event the fraud is found to be "gross, oppressive, or
malicious," Ala. Code § 6-11-20(b)(1) (1993). To be sure,
respondent did invite the jury to consider out-of-state conduct in
its calculation of damages, but any increase in the jury's initial
award based on that consideration is not a component of the
remitted judgment before us. As the Court several times recognizes,
in computing the amount of the remitted award the Alabama Supreme
Court-whether it was constitutionally required to or not-"expressly
disclaimed any reliance on acts that occurred in other
jurisdictions."
Ante, at 567 (internal quotation marks
omitted); see also
ante, at 573-574.* Thus, the only
question presented by this case is whether that award, limited to
petitioner's Alabama conduct and viewed in light of the factors
identified as properly informing the inquiry, is excessive. The
Court's sweeping (and largely unsupported) statements regarding the
relationship of punitive awards to lawful or unlawful out-of-state
conduct are the purest dicta.
III
In Part III of its opinion, the Court identifies "[t]hree
guideposts" that lead it to the conclusion that the award in this
case is excessive: degree of reprehensibility, ratio between
punitive award and plaintiff's actual harm, and legisla-
*The Alabama Supreme Court said:
"[W]e must conclude that the award of punitive damages was based
in large part on conduct that happened in other jurisdictions ....
Although evidence of similar acts in other jurisdictions is
admissible as to the issue of 'pattern and practice' of such acts,
... this jury could not use the number of similar acts that a
defendant has committed in other jurisdictions as a multiplier when
determining the
dollar amount of a punitive damages award.
Such evidence may not be considered in setting the size of the
civil penalty, because neither the jury nor the trial court had
evidence before it showing in which states the conduct was
wrongful." 646 So. 2d 619, 627 (1994).
605
tive sanctions provided for comparable misconduct.
Ante,
at 574-585. The legal significance of these "guideposts" is nowhere
explored, but their necessary effect is to establish federal
standards governing the hitherto exclusively state law of damages.
Apparently (though it is by no means clear) all three federal
"guideposts" can be overridden if "necessary to deter future
misconduct,"
ante, at 584-a loophole that will encourage
state reviewing courts to uphold awards as necessary for the
"adequat[e] protect[ion]" of state consumers,
ibid. By
effectively requiring state reviewing courts to concoct
rationalizations-whether within the "guideposts" or through the
loophole-to justify the intuitive punitive reactions of state
juries, the Court accords neither category of institution the
respect it deserves.
Of course it will not be easy for the States to comply with this
new federal law of damages, no matter how willing they are to do
so. In truth, the "guideposts" mark a road to nowhere; they provide
no real guidance at all. As to "degree of reprehensibility" of the
defendant's conduct, we learn that "'nonviolent crimes are less
serious than crimes marked by violence or the threat of violence,'"
ante, at 576 (quoting
Solem v.
Helm, 463 U. S. 277, 292-293
(1983)), and that "'trickery and deceit'" are "more reprehensible
than negligence,"
ante, at 576. As to the ratio of punitive
to compensatory damages, we are told that a "'general concer[n] of
reasonableness ... enter[s] into the constitutional calculus,'"
ante, at 583 (quoting
TXO, 509 U. S., at 458)-though
even "a breathtaking 500 to 1" will not necessarily do anything
more than "'raise a suspicious judicial eyebrow,'"
ante, at
583 (quoting
TXO, supra, at 481 (O'CONNOR, J., dissenting),
an opinion which, when confronted with that "breathtaking" ratio,
approved it). And as to legislative sanctions provided for
comparable misconduct, they should be accorded "'substantial
deference,'"
ante, at 583 (quoting
Browning-Ferris
Industries of Vt., Inc. v.
Kelco Disposal, Inc.,
492 U. S. 257,
301 (1989) (O'CONNOR, J., concurring in part and dissenting
606
in part)). One expects the Court to conclude: "To thine own self
be true."
These crisscrossing platitudes yield no real answers in no real
cases. And it must be noted that the Court nowhere says that these
three "guideposts" are the
only guideposts; indeed, it makes
very clear that they are not-explaining away the earlier opinions
that do not really follow these "guideposts" on the basis of
additional factors, thereby "reiterat[ing] our rejection of
a categorical approach."
Ante, at 582. In other words, even
these utter platitudes, if they should ever happen to produce an
answer, may be overridden by other unnamed considerations. The
Court has constructed a framework that does not genuinely
constrain, that does not inform state legislatures and lower
courts-that does nothing at all except confer an artificial air of
doctrinal analysis upon its essentially ad hoc determination that
this particular award of punitive damages was not "fair."
The Court distinguishes today's result from
Haslip and
TXO partly on the ground that "the record in this case
discloses no deliberate false statements, acts of affirmative
misconduct, or concealment of evidence of improper motive, such as
were present in
Haslip and
TXO." Ante, at 579. This
seemingly rejects the findings necessarily made by the jury-that
petitioner had committed a fraud that was "gross, oppressive, or
malicious," Ala. Code §6-11-20(b)(1) (1993). Perhaps that rejection
is intentional; the Court does not say.
The relationship between judicial application of the new
"guideposts" and jury findings poses a real problem for the Court,
since as a matter of logic there is no more justification for
ignoring the jury's determination as to
how reprehensible
petitioner's conduct was (i.
e., how much it deserves to be
punished), than there is for ignoring its determination that it was
reprehensible
at all (i.
e., that the wrong was
willful and punitive damages are therefore recoverable). That the
issue has been framed in terms of a constitutional right against
unreasonably
excessive awards should not obscure
607
the fact that the logical and necessary consequence of the
Court's approach is the recognition of a constitutional right
against unreasonably
imposed awards as well. The 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. Indeed,
if the Court is correct, it must be that every claim that a state
jury's award of
compensatory damages is "unreasonable"
(because not supported by the evidence) amounts to an assertion of
constitutional injury. See
TXO, supra, at 471 (SCALIA, J.,
concurring in judgment). And the same would be true for
determinations of liability. By today's logic,
every dispute
as to evidentiary sufficiency in a state civil suit poses a
question of constitutional moment, subject to review in this Court.
That is a stupefying proposition.
For the foregoing reasons, I respectfully dissent.
JUSTICE GINSBURG, with whom THE CHIEF JUSTICE joins,
dissenting.
The Court, I am convinced, unnecessarily and unwisely ventures
into territory traditionally within the States' domain, and does so
in the face of reform measures recently adopted or currently under
consideration in legislative arenas. The Alabama Supreme Court, in
this case, endeavored to follow this Court's prior instructions;
and, more recently, Alabama's highest court has installed further
controls on awards of punitive damages (see
infra, at
613-614, n. 6). I would therefore leave the state court's judgment
undisturbed, and resist unnecessary intrusion into an area
dominantly of state concern.
I
The respect due the Alabama Supreme Court requires that we strip
from this case a false issue: No impermissible
"extraterritoriality" infects the judgment before us; the
exces-
608
siveness of the award is the sole issue genuinely presented. The
Court ultimately so recognizes, see
ante, at 573-574, but
further clarification is in order.
Dr. Gore's experience was not unprecedented among customers who
bought BMW vehicles sold as flawless and brand-new. In addition to
his own encounter, Gore showed, through paint repair orders
introduced at trial, that on 983 other occasions since 1983, BMW
had shipped new vehicles to dealers without disclosing paint
repairs costing at least $300, Tr. 585-586; at least 14 of the
repainted vehicles, the evidence also showed, were sold as new and
undamaged to consumers in Alabama. 646 So. 2d 619, 623 (Ala. 1994).
Sales nationwide, Alabama's Supreme Court said, were admissible "as
to the issue of a 'pattern and practice' of such acts."
Id.,
at 627. There was "no error," the court reiterated, "in the
admission of the evidence that showed how pervasive the
nondisclosure policy was and the intent behind BMW NA's adoption of
it."
Id., at 628. That determination comports with this
Court's expositions. See
TXO Production Corp. v.
Alliance
Resources Corp., 509 U. S. 443, 462, and
n. 28 (1993) (characterizing as "well-settled" the admissibility of
"evidence of [defendant's] alleged wrongdoing in other parts of the
country" and of defendant's "wealth"); see also Brief for
Petitioner 22 (recognizing that similar acts, out-of-state,
traditionally have been considered relevant "for the limited
purpose of determining that the conduct before the [c]ourt was
reprehensible because it was part of a pattern rather than an
isolated incident").
Alabama's highest court next declared that the
"jury could not use the number of similar acts that a defendant
has committed in other jurisdictions as a multiplier when
determining the dollar amount of a punitive damages award.
Such evidence may not be considered in setting the size of the
civil penalty, because neither the jury nor the trial court had
evidence before it showing in which states the conduct was
wrong-
609
ful." 646 So. 2d, at 627 (emphasis in original) (footnote
omitted).
Because the Alabama Supreme Court provided this clear statement
of the State's law, the multiplier problem encountered in Gore's
case is not likely to occur again. Now, as a matter of Alabama law,
it is plainly impermissible to assess punitive damages by
multiplication based on out-of-state events not shown to be
unlawful. See,
e. g., Independent Life and Accident Ins. Co.
v.
Harrington, 658 So. 2d 892, 902-903 (Ala. 1994) (under
BMW v.
Gore, trial court erred in relying on
defendant insurance company's out-of-state insurance policies in
determining harm caused by defendant's unlawful actions).
No Alabama authority, it bears emphasis-no statute, judicial
decision, or trial judge instruction-ever countenanced the jury's
multiplication of the $4,000 diminution in value estimated for each
refinished car by the number of such cars (approximately 1,000)
shown to have been sold nationwide. The sole prompt to the jury to
use nationwide sales as a multiplier came from Gore's lawyer during
summation. App. 31, Tr. 812-813. Notably, counsel for BMW failed to
object to Gore's multiplication suggestion, even though BMW's
counsel interrupted to make unrelated objections four other times
during Gore's closing statement. Tr. 810811, 854-855, 858, 870-871.
Nor did BMW's counsel request a charge instructing the jury not to
consider out-of-state sales in calculating the punitive damages
award. See Record 513-529 (listing all charges requested by
counsel).
Following the verdict, BMW's counsel challenged the
admission of the paint repair orders, but not,
alternately, the jury's apparent use of the orders in a
multiplication exercise. Curiously, during postverdict argument,
BMW's counsel urged that if the repair orders were indeed
admissible, then Gore would have a "full right" to suggest a
multiplier-based disgorgement. Tr. 932.
610
In brief, Gore's case is idiosyncratic. The jury's improper
multiplication, tardily featured by petitioner, is unlikely to
recur in Alabama and does not call for error correction by this
Court.
Because the jury apparently (and erroneously) had used acts in
other States as a multiplier to arrive at a $4 million sum for
punitive damages, the Alabama Supreme Court itself determined" 'the
maximum amount that a properly functioning jury could have
awarded.'" 646 So. 2d, at 630 (Houston, J., concurring specially)
(quoting
Big B, Inc. v.
Cottingham, 634 So. 2d 999,
1006 (Ala. 1993)). The
per curiam opinion emphasized that in
arriving at $2 million as "the
amount of punitive damages to
be awarded in this case, [the court did] not consider those acts
that occurred in other jurisdictions." 646 So. 2d, at 628 (emphasis
in original). As this Court recognizes, the Alabama high court
"properly eschewed reliance on BMW's out-of-state conduct and based
its remitted award solely on conduct that occurred within Alabama."
Ante, at 573-574 (citation omitted). In sum, the Alabama
Supreme Court left standing the jury's decision that the facts
warranted
an award of punitive damages-a determination not
contested in this Court-and the state court concluded that,
considering only acts in Alabama, $2 million was "a
constitutionally reasonable punitive damages award." 646 So. 2d, at
629.
II A
Alabama's Supreme Court reports that it "thoroughly and
painstakingly" reviewed the jury's award,
ibid., according
to principles set out in its own pathmarking decisions and in this
Court's opinions in
TXO and
Pacific Mut. Life Ins.
Co. v.
Has lip, 499 U. S. 1, 21 (1991). 646
So. 2d, at 621. The Alabama court said it gave weight to several
factors, including BMW's deliberate ("reprehensible") presentation
of refinished cars as new and undamaged, without disclosing that
the value of those cars had been reduced by an estimated
611
10%,1 the financial position of the defendant, and the costs of
litigation.
Id., at 625-626. These standards, we previously
held, "impos[e] a sufficiently definite and meaningful constraint
on the discretion of Alabama factfinders in awarding punitive
damages."
Has lip, 499 U. S., at 22; see also
TXO,
509 U. S., at 462, n. 28. Alabama's highest court could have
displayed its labor pains more visibly,2 but its judgment is
nonetheless entitled to a presumption of legitimacy. See
Rowan v.
Runnels, 5 How. 134, 139 (1847) ("[T]his
court will always feel itself bound to respect the decisions of the
State courts, and from the time they are made will regard them as
conclusive in all cases upon the construction of their own
constitution and laws.").
We accept, of course, that Alabama's Supreme Court applied the
State's own law correctly. Under that law, the State's
objectives-"punishment and deterrence"-guide punitive damages
awards. See
Birmingham v.
Benson, 631 So. 2d 902, 904
(Ala. 1994). Nor should we be quick to find a constitutional
infirmity when the highest state court endeavored a corrective for
one counsel's slip and the other's oversight-counsel for
plaintiff's excess in summation, unobjected to by counsel for
defendant, see
supra, at 609-and when the state court did so
intending to follow the process approved in our
Haslip and
TXO decisions.
B
The Court finds Alabama's $2 million award not simply excessive,
but grossly so, and therefore unconstitutional.
1 According to trial testimony, in late May 1992, BMW began
redirecting refinished cars out of Alabama and two other States.
Tr. 964. The jury returned its verdict in favor of Gore on June 12,
1992. Five days later, BMW changed its national policy to one of
full disclosure.
Id., at 1026.
2 See,
e. g., Brief for Law and Economics Scholars
et al. as
Amici Curiae 6-28 (economic analysis demonstrates
that Alabama Supreme Court's judgment was not unreasonable); W.
Landes & R. Posner, Economic Structure of Tort Law 160-163
(1987) (economic model for assessing propriety of punitive damages
in certain tort cases).
612
The decision leads us further into territory traditionally
within the States' domain,3 and commits the Court, now and again,
to correct "misapplication of a properly stated rule of law." But
cf. this Court's Rule 10 ("A petition for a writ of certiorari is
rarely granted when the asserted error consists of erroneous
factual findings or the misapplication of a properly stated rule of
law.").4 The Court is not well equipped
3 See
ante, at 568 ("In our federal system, States
necessarily have considerable flexibility in determining the level
of punitive damages that they will allow in different classes of
cases and in any particular case.");
Browning-Ferris Industries
of Vt., Inc. v.
Kelco Disposal, Inc., 492 U. S. 257, 278 (1989)
(In any "lawsuit where state law provides the basis of decision,
the propriety of an award of punitive damages for the conduct in
question, and the factors the jury may consider in determining
their amount, are questions of state law.");
Silkwood v.
Kerr-McGee Corp., 464 U. S. 238, 255 (1984) ("Punitive
damages have long been a part of traditional state tort law.").
4 Petitioner invites the Court to address the question of
multiple punitive damages awards stemming from the same alleged
misconduct. The Court does not take up the invitation, and rightly
so, in my judgment, for this case does not present the issue. For
three reasons, the question of multiple awards is hypothetical, not
real, in Gore's case. First, the punitive damages award in favor of
Gore is the only such award yet entered against BMW on account of
its nondisclosure policy.
Second, BMW did not raise the issue of multiple punitives below.
Indeed, in its reply brief before the Alabama Supreme Court, BMW
stated:
"Gore confuses our point about fairness among plaintiffs. He
treats this point as a premature 'multiple punitive damages'
argument. But, contrary to Gore's contention, we are not asking
this Court to hold, as a matter of law, that a 'constitutional
violation occurs when a defendant is subjected to punitive damages
in two separate cases.''' Reply Brief for Appellant in Nos.
1920324, 1920325 (Ala. Sup. Ct.), p. 48 (internal citations
omitted).
Third, if BMW had already suffered a punitive damages judgment
in connection with its nondisclosure policy, Alabama's highest
court presumably would have taken that fact into consideration. In
reviewing punitive damages awards attacked as excessive, the
Alabama Supreme Court considers whether "there have been other
civil actions against the same defendant, based on the same
conduct." 646 So. 2d 619, 624 (1994) (quoting
Green Oil Co.
v.
Hornsby, 539 So. 2d 218, 224 (Ala. 1989)). If so,
"this
613
for this mission. Tellingly, the Court repeats that it brings to
the task no "mathematical formula,"
ante, at 582, no
"categorical approach,"
ibid., no "bright line,"
ante, at 585. It has only a vague concept of substantive due
process, a "raised eyebrow" test, see
ante, at 583, as its
ultimate guide.5
In contrast to habeas corpus review under 28 U. S. C. § 2254,
the Court will work at this business alone. It will not be aided by
the federal district courts and courts of appeals. It will be the
only federal court policing the area. The Court's readiness
to superintend state-court punitive damages awards is all the more
puzzling in view of the Court's longstanding reluctance to
countenance review, even by courts of appeals, of the size of
verdicts returned by juries in federal district court proceedings.
See generally 11 C. Wright, A. Miller, & M. Kane, Federal
Practice and Procedure § 2820 (2d ed. 1995). And the reexamination
prominent in state courts 6 and in legislative arenas, see
Appendix,
should be taken into account in mitigation of the punitive
damages award." 646 So. 2d, at 624. The Alabama court accordingly
observed that Gore's counsel had filed 24 other actions against BMW
in Alabama and Georgia, but that no other punitive damages award
had so far resulted.
Id., at 626.
5JUSTICE BREYER'S concurring opinion offers nothing more
solid.
Under
Pacific Mut. Life Ins. Co. v.
Haslip,
499 U. S. 1 (1991),
he acknowledges, Alabama's standards for punitive damages, standing
alone, do not violate due process.
Ante, at 588. But they
"invit[e] the kind of scrutiny the Court has given the particular
verdict before us."
Ibid. Pursuing that invitation, JUSTICE
BREYER concludes that, matching the particular facts of this case
to Alabama's "legitimate punitive damages objectives,"
ante,
at 596, the award was" 'gross[ly] excessiv[e],'"
ante, at
597. The exercise is engaging, but ultimately tells us only this:
too big will be judged unfair. What is the Court's measure of too
big? Not a cap of the kind a legislature could order, or a
mathematical test this Court can divine and impose. Too big is, in
the end, the amount at which five Members of the Court bridle.
6 See,
e. g., Distinctive Printing and Packaging Co. v.
Cox, 232 Neb. 846, 857, 443 N. W. 2d 566, 574 (1989)
(per
curiam) ("[P]unitive, vindictive, or exemplary damages
contravene Neb. Const. art. VII, § 5, and thus are not allowed in
this jurisdiction.");
Santana v.
Registrars of Voters of
Worcester, 398 Mass. 862, 502 N. E. 2d 132 (1986) (punitive
damages are not permitted, unless expressly authorized by statute);
Fisher Properties, Inc. v.
614
infra this page, serves to underscore why the Court's
enterprise is undue.
For the reasons stated, I dissent from this Court's disturbance
of the judgment the Alabama Supreme Court has made.
APPENDIX TO OPINION OF GINSBURG, J.
STATE LEGISLATIVE ACTIVITY REGARDING PUNITIVE DAMAGES
State legislatures have in the hopper or have enacted a variety
of measures to curtail awards of punitive damages. At least one
state legislature has prohibited punitive damages altogether,
unless explicitly provided by statute. See N. H. Rev. Stat. Ann. §
507:16 (1994). We set out in this appendix some of the several
controls enacted or under consideration in the States. The measures
surveyed are: (1) caps on awards; (2) provisions for payment of
sums to state agencies rather than to plaintiffs; and (3) mandatory
bifurcated trials with separate proceedings for punitive damages
determinations.
Arden-Mayfair, Inc., 106 Wash. 2d 826, 852, 726 P. 2d 8,
23 (1986) (en bane) (same).
In
Life Ins. Co. of Georgia v.
Johnson, No.
1940357 (Nov. 17, 1995), the Alabama Supreme Court revised the
State's regime for assessments of punitive damages. Henceforth,
trials will be bifurcated. Initially, juries will be instructed to
determine liability and the amount of compensatory damages, if any;
also, the jury is to return a special verdict on the question
whether a punitive damages award is warranted. If the jury answers
yes to the punitive damages question, the trial will be resumed for
the presentation of evidence and instructions relevant to the
amount appropriate to award as punitive damages. After postverdict
trial court review and subsequent appellate review, the amount of
the final punitive damages judgment will be paid into the trial
court. The trial court will then order payment of litigation
expenses, including the plaintiff's attorney's fees, and instruct
the clerk to divide the remainder equally between the plaintiff and
the State General Fund. The provision for payment to the State
General Fund is applicable to all judgments not yet satisfied, and
therefore would apply to the judgment in Gore's case.
615
1. CAPS ON PUNITIVE DAMAGES AWARDS
• Colorado-Colo. Rev. Stat. §§ 13-21-102(1)(a) and (3)
(1987) (as a main rule, caps punitive damages at amount of actual
damages).
• Connecticut-Conn. Gen. Stat. § 52-240b (1995) (caps
punitive damages at twice compensatory damages in products
liability cases).
• Delaware-H. R. 237, 138th Gen. Ass. (introduced May 17,
1995) (would cap punitive damages at greater of three times
compensatory damages, or $250,000).
• Florida-Fla. Stat. §§ 768.73(1)(a) and (b) (Supp. 1992)
(in general, caps punitive damages at three times compensatory
damages).
• Georgia-Ga. Code Ann. §51-12-5.1 (Supp. 1995) (caps
punitive damages at $250,000 in some tort actions; prohibits
multiple awards stemming from the same predicate conduct in
products liability actions).
• Illinois-H. 20, 89th Gen. Ass. 1995-1996 Reg. Sess.
(enacted Mar. 9, 1995) (caps punitive damages at three times
economic damages).
• Indiana-H. 1741, 109th Reg. Sess. (enacted Apr. 26,
1995) (caps punitive damages at greater of three times compensatory
damages, or $50,000).
• Kansas-Kan. Stat. Ann. §§ 60-3701(e) and (f) (1994) (in
general, caps punitive damages at lesser of defendant's annual
gross income, or $5 million).
• Maryland-S. 187, 1995 Leg. Sess. (introduced Jan. 27,
1995) (in general, would cap punitive damages at four times
compensatory damages).
• Minnesota-S. 489, 79th Leg. Sess., 1995 Reg. Sess.
(introduced Feb. 16, 1995) (would require reasonable relationship
between compensatory and punitive damages).
• Nevada-Nev. Rev. Stat. §42.005(1) (1993) (caps punitive
damages at three times compensatory damages if compensatory damages
equal $100,000 or more, and at $300,000 if the compensatory damages
are less than $100,000).
616
• New Jersey-S. 1496, 206th Leg., 2d Ann. Sess. (1995)
(caps punitive damages at greater of five times compensatory
damages, or $350,000, in certain tort cases).
• North Dakota-N. D. Cent. Code §32-03.2-11(4) (Supp.
1995) (caps punitive damages at greater of two times compensatory
damages, or $250,000).
• Oklahoma-Okla. Stat., Tit. 23, §§ 9.1(B)-(D) (Supp.
1996) (caps punitive damages at greater of $100,000, or actual
damages, if jury finds defendant guilty of reckless disregard; and
at greatest of $500,000, twice actual damages, or the benefit
accruing to defendant from the injury-causing conduct, if jury
finds that defendant has acted intentionally and maliciously).
• Texas-S. 25, 74th Reg. Sess. (enacted Apr. 20, 1995)
(caps punitive damages at twice economic damages, plus up to
$750,000 additional noneconomic damages).
• Virginia-Va. Code Ann. §8.01-38.1 (1992) (caps punitive
damages at $350,000).
II. ALLOCATION OF PUNITIVE DAMAGES TO STATE AGENCIES
• Arizona-H. R. 2279, 42d Leg., 1st Reg. Sess.
(introduced Jan. 12, 1995) (would allocate punitive damages to a
victims' assistance fund, in specified circumstances).
• Florida-Fla. Stat. §§ 768.73(2)(a)-(b) (Supp. 1992)
(allocates 35% of punitive damages to General Revenue Fund or
Public Medical Assistance Trust Fund); see
Gordon v.
State, 585 So. 2d 1033, 1035-1038 (Fla. App. 1991), aff'd,
608 So. 2d 800 (Fla. 1992) (upholding provision against due process
challenge).
• Georgia-Ga. Code Ann. §51-12-5.1(e)(2) (Supp. 1995)
(allocates 75% of punitive damages, less a proportionate part of
litigation costs, including counsel fees, to state treasury); see
Mack Trucks, Inc. v.
Conkle, 263 Ga. 539, 540-543,
436 S. E. 2d 635, 637-639 (Ga. 1993) (upholding provision against
constitutional challenge).
617
• Illinois-Ill. Compo Stat., ch. 735, § 5/2-1207 (1994)
(permits court to apportion punitive damages among plaintiff,
plaintiff's attorney, and Illinois Department of Rehabilitation
Services).
• Indiana-H. 1741, 109th Reg. Sess. (enacted Apr. 26,
1995) (subject to statutory exceptions, allocates 75% of punitive
damages to a compensation fund for violent crime victims).
• Iowa-Iowa Code § 668A.l(2)(b) (1987) (in described
circumstances, allocates 75% of punitive damages, after payment of
costs and counsel fees, to a civil reparations trust fund); see
Shepherd Components, Inc. v.
Brice PetridesDonohue
&
Assoc., Inc., 473 N. W. 2d 612, 619 (Iowa 1991)
(upholding provision against constitutional challenge).
• Kansas-Kan. Stat. Ann. § 60-3402(e) (1994) (allocates
50% of punitive damages in medical malpractice cases to state
treasury).
• Missouri-Mo. Rev. Stat. § 537.675 (1994) (allocates 50%
of punitive damages, after payment of expenses and counsel fees, to
Tort Victims' Compensation Fund).
• Montana-H. 71, 54th Leg. Sess. (introduced Jan. 2,
1995) (would allocate 48% of punitive damages to state university
system and 12% to school for the deaf and blind).
• New Jersey-S. 291, 206th Leg., 1994-1995 1st Reg.
Sess. (introduced Jan. 18, 1994); A. 148, 206th Leg., 19941995
1st Reg. Sess. (introduced Jan. 11, 1994) (would allocate 75% of
punitive damages to New Jersey Health Care Trust Fund).
• New Mexico-H. 1017, 42d Leg., 1st Sess. (introduced
Feb. 16, 1995) (would allocate punitive damages to LowIncome
Attorney Services Fund).
• Oregon-So 482, 68th Leg. Ass. (enacted July 19, 1995)
(amending Ore. Rev. Stat. §§ 18.540 and 30.925, and repealing Ore.
Rev. Stat. § 41.315) (allocates 60% of punitive damages to Criminal
Injuries Compensation Account).
618
• Utah-Utah Code Ann. § 78-18-1(3) (1992) (allocates 50%
of punitive damages in excess of $20,000 to state treasury).
III. MANDATORY BIFURCATION OF LIABILITY AND PUNITIVE DAMAGES
DETERMINATIONS
• California-Cal. Civ. Code Ann. § 3295(d) (West Supp.
1995) (requires bifurcation, on application of defendant, of
liability and damages phases of trials in which punitive damages
are requested).
• Delaware-H. R. 237, 138th Gen. Ass. (introduced May 17,
1995) (would require, at request of any party, a separate
proceeding for determination of punitive damages).
• Georgia-Ga. Code Ann. §51-12-5.1(d) (Supp. 1995) (in
all cases in which punitive damages are claimed, liability for
punitive damages is tried first, then amount of punitive
damages).
• Illinois-H. 20, 89th Gen. Ass., 1995-1996 Reg. Sess.
(enacted Mar. 9, 1995) (mandates, upon defendant's request,
separate proceeding for determination of punitive damages).
•
Kansas-Kan. Stat. Ann. §§ 60-3701(a) and (b) (1994) (trier of
fact determines defendant's liability for punitive damages, then
court determines amount of such damages).
• Missouri-Mo. Rev. Stat. §§ 510.263(1) and (3) (1994)
(mandates bifurcated proceedings, on request of any party, for jury
to determine first whether defendant is liable for punitive
damages, then amount of punitive damages).
• Montana-Mont. Code Ann. § 27-1-221(7) (1995) (upon
finding defendant liable for punitive damages, jury determines the
amount in separate proceeding).
• Nevada-Nev. Rev. Stat. §42.005(3) (1993) (if jury
determines that punitive damages will be awarded, jury then
determines amount in separate proceeding).
• New Jersey-N. J. Stat. Ann. §§ 2A:58C-5(b) and (d)
(West 1987) (mandates separate proceedings for determination of
compensatory and punitive damages).
619
• North Dakota-N. D. Cent. Code §32-03.2-11(2) (Supp.
1995) (upon request of either party, trier of fact determines
whether compensatory damages will be awarded before determining
punitive damages liability and amount).
• Oklahoma-Okla. Stat., Tit. 23, §§ 9.1(B)-(D) (Supp.
1995-1996) (requires separate jury proceedings for punitive
damages); S. 443, 45th Leg., 1st Reg. Sess. (introduced Jan. 31,
1995) (would require courts to strike requests for punitive damages
before trial, unless plaintiff presents
prima facie evidence
at least 30 days before trial to sustain such damages; provide for
bifurcated jury trial on request of defendant; and permit punitive
damages only if compensatory damages are awarded).
• Virginia-H. 1070, 1994-1995 Reg. Sess. (introduced Jan.
25, 1994) (would require separate proceedings in which court
determines that punitive damages are appropriate and trier of fact
determines amount of punitive damages).
Comments
Be the first to comment
Leave a Comment