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When the U.S. Supreme Court decided State Farm Mutual Automobile Insurance Co. v. Campbell, 123 S.Ct. 1513, in April, it said some punitive damages awards far exceed what is reasonable in light of the compensatory damages. But far from drawing a line in the sand, the Supreme Court left a lot to be interpreted. In Campbell, the court held that the punitive award — 145 times the compensatory award — was neither “reasonable nor proportionate to the wrong committed, and it was an irrational and arbitrary deprivation of the property of the defendant.” The court recommended punitive damages in an amount “at or near” the compensatories in this case, and no more than a “single-digit multiple” generally. In 1981, Curtis Campbell drove the wrong way on a two-lane highway. The ensuing collision left one person dead and another paralyzed. Campbell and his wife, who was also in the car, were not hurt. State Farm Mutual Automobile Insurance Co. assumed the Campbells’ defense but, against the advice of its investigator, refused to settle within the $50,000 policy limits before a larger judgment was entered. The insurer refused to pay the excess for some 18 months. The Campbells sued for bad faith, saying that this treatment by their insurer was part of a nationwide, decades-long scam by the insurer to defraud insureds and courts by not paying legitimate claims. It was alleged that the insurer targeted the scam at those most vulnerable, such as the poor, elderly and sick. The jury awarded $1 million in compensatories and $145 million in punitives, which the Utah Supreme Court approved. Justice Anthony Kennedy, writing for the majority, reversed, remanded and scolded: “This case is neither close nor difficult.” The court, in a 6-3 vote, applied three “guideposts” in determining what is “reasonable and proportionate”: “(1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.” After Campbell, significant questions remain: � Is a “single-digit multiplier” something that is “at or near the amount of compensatory damages,” or are these separate tests for proportionality? Perhaps the latter, near-equivalency ratio is appropriate for “merely economic” harms, while the court would allow ratios up to a “single-digit multiplier” for other harms. � Do the Campbell limits (whether “single-digit multiplier” or “at or near � compensator[ies]“) apply in cases involving physical injury, not just economic injury? The court suggests so by emphasizing that this case involved mere economic injury. But the type of injury seems more properly relevant to determining the “reprehensibility” of a defendant’s conduct, not the “proportionality” of compensatory and punitive damages. The court may have revealed its thinking, while ducking the opportunity to specifically address this issue, when it denied certiorari in Ford Motor Co. v. Romo, 02-1097, vacating judgment in a wrongful death and physical injury case with a $290 million punitive damages award and $6 million in compensatories and remanding for determination “in light of” Campbell. � ; Do the Campbell limits (whether “single-digit multiplier” or “at or near � compensator[ies]“) apply where the injury is long term or continuing? The court justified limits in this case by pointing out that the Campbells’ discomfort was limited to some 18 months. But that seems irrelevant to whether the punitive award is “proportionate” to the compensatory award, which presumably factors in the length of the injury. � Can there be any more nominal compensation/large punitive damages suits? Campbell suggests not, at least not for economic injury cases. � How similar or “related” must wrongful conduct be to the acts giving rise to the compensatory awards? Much of the court’s “reprehensibility” analysis seems little more than disagreeing with the Utah courts about relevance. Justice Ruth Bader Ginsburg’s dissent identifies much evidence that the Utah Supreme Court found powerful enough to justify this extraordinary award, but the U.S. Supreme Court declared irrelevant. Justices Antonin Scalia and Clarence Thomas filed separate dissents. � ; “A jury must be instructed� that it may not use evidence of out-of-state conduct to punish a defendant for conduct that was lawful in the jurisdiction where it occurred,” Justice Kennedy wrote. This may mean that in-state conspiracies can be fully vetted and punished, but decisions made in a remote corporate office that affect multiple states may not. � ; Many statutes providing for treble or quadruple damages for economic harms may now be constitutionally suspect. Although they are within Campbell‘s “single-digit” range, they exceed the “at or near the amount of compensatory damages” that the court recommended would be appropriate in this case. They will likely survive nevertheless for a variety of historical and doctrinal reasons. � ; How much does a defendant’s wealth matter? Does the Constitution require courts, and juries, to act on the assumption that a given award will have the same deterrent effect regardless of the defendant’s wealth? If not, then a lower multiple for less wealthy defendants should pass constitutional muster. � Most corporate conduct will be, or can be made to appear to be, far less “reprehensible” than the decades-long, nationwide scam in evidence here. So defendants can be expected to argue that punitives in their cases should not be in a greater punitive-compensatory ratio than the court recommended here — “at or near” 1-to-1. � “In the context of this case, we have no doubt that there is a presumption against an award that has a 145-to-1 ratio,” the opinion concluded. Does that mean that, in another context, there is not such a presumption? What contexts might that be? Don Willenburg is of counsel at Carroll, Burdick & McDonough in San Francisco. He can be reached at [email protected] cbmlaw.com. Views expressed are the author’s, not necessarily those of the firm or its clients, and are definitely not shared by some of his colleagues.

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