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Revisiting the landmark State Farm case, in which the U.S. Supreme Court reiterated the message that the due process clause puts a cap on verdicts, Utah’s highest court slashed punitive damages from $145 million to just above $9 million. Even so, tort reform proponents have been quick to portray the Utah Supreme Court’s April 23 decision as a betrayal of State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003). “I think it was an act of state defiance,” said Robin Conrad, noting that the U.S. Supreme Court had suggested that a $1 million punitive award (representing a 1-to-1 ratio of punitive to compensatory damages) would be appropriate. Conrad is senior vice president of the National Chamber Litigation Center, an affiliate of the U.S. Chamber of Commerce. The center filed an amicus brief with the U.S. Supreme Court last year. Karra J. Porter of Salt Lake City’s Christensen & Jensen, who represented Inez and Curtis B. Campbell in their suit against the insurer, disagreed: “In my mind, [the Utah Supreme Court] could have gone higher.” Among other things, the Campbells accused State Farm of assuring them that Curtis Campbell’s automobile insurance would cover his liability for an accident, but then suggesting that they sell their house to meet a verdict that went $136,000 above the policy limit. “The U.S. Supreme Court expressly said the final figure should be determined by the Utah courts,” she said. The high court recognized that the states’ interests in punishing misconduct may vary and “wasn’t in the business of imposing a federal standard,” Porter said. MAKE LEMONADE The Utah Supreme Court’s decision, Campbell v. State Farm Mut. Auto. Ins. Co., No. 981564, could be read as an illustration of the adage, “If life hands you lemons, make lemonade.” In his opinion for a five-member majority, U.S. Supreme Court Justice Anthony M. Kennedy chided the Utah courts for factoring certain State Farm actions into the $145 million punitive award even though the actions took place outside of Utah and might not even be considered misconduct by the states in which they occurred. “[E]ach state alone can determine what measure of punishment, if any, to impose on a defendant who acts within its jurisdiction,” he wrote. The Utah Supreme Court took Kennedy at his word, arguing that the same state sovereignty concerns that made the $145 million award invalid also meant that the state could give what weight it deemed appropriate — consistent with the due process clause — to misconduct that occurred within its borders. The court concluded that Kennedy had understated State Farm’s wrongdoing. Although the court did not say so, its 9-to-1 ratio probably reflects mindfulness of Kennedy’s statement that “few awards exceeding a single-digit ratio between punitive and compensatory damages … will satisfy due process.” State Farm’s attorney, Sheila L. Birnbaum, head of the products liability department at New York’s Skadden, Arps, Slate, Meagher & Flom, said that the Utah court deviated from its mandate. “The U.S. Supreme Court said that where there are substantial compensatory damages, the ratio should be close to 1-to-1 and in most cases 4-to-1 is close to the line of what due process allows,” she said. State Farm has not yet decided how it will respond, Birnbaum said. Conrad called the decision “a good candidate for summary reversal.” Harvard Law School Professor Laurence H. Tribe, who argued for the Campbells in both courts, lauded the Utah court’s “care and precision” in showing how it had to depart from Kennedy’s predictions about appropriate damages because he did not take account of relevant circumstances.

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