It is often the case that juries are only too eager to award punitive damages that are excessively large when compared to the potential damages or actual damage done. In 1996, the Supreme Court made an effort in BMW of North America, Inc. v. Gore, 517 U.S. 559, to curb the effects of this behavior by imposing territorial limitations on the conduct that juries may consider when calculating the size of punitive damages. Specifically, the Court held that states could not consider out-of-state conduct in punitive damages calculations when such conduct was legal in other states. The BMW decision was based on principles of state sovereignty, comity, federalism, and the Due Process Clause of the 14th Amendment.
Recently, a potentially landmark opinion, White v. Ford Motor Co., 2 Cal. Daily Op. Serv. 11 (9th Cir. 2002), came down from the Ninth Circuit Court of Appeals. White applies the policies underlying the BMW decision to extend the territorial limitation on punitive damages. The White court held that, in addition to being barred from considering out-of-state conduct when such conduct is legal in other states, a state is barred from considering extraterritorial conduct even when such conduct is illegal in other states. A petition for rehearing the White case is currently pending in the Ninth Circuit. Depending upon whether rehearing is granted and, if so, how the rehearing is decided, the decision in White to mandate jury instructions on extraterritorial limitations could become settled Ninth Circuit law.
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