State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003)

Issue: Whether $145 million in punitive damages (in relation to $1 million in compensatory damages) is excessive and in violation of the Due Process Clause of the 14th Amendment.

Facts: $145 million in punitive damages and $1 million in compensatory awarded to Campbell. Campbell was insured by State Farm and after being involved in a tragic accident, and at fault, was found liable for $185,849. Before the trial, State Farm informed Campbell that he would not be personally liable for any of the damages and that there was no need for him to get his own attorney. After the verdict, State Farm told him to “put a for sale sign on [his] property to get things moving.” The Campbells instituted an action against State Farm for bad faith, fraud, and intentional infliction of emotional distress.

Procedural Posture: “The jury awarded the Campbells $2.6 million in compensatory damages and $145 million in punitive damages which the trial court reduced to $1 million and $25 million respectively. Both parties appealed. The Utah Supreme Court reinstate the $145 million punitive damages award.”

Holding: The punitive damages away 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 stated that “few awards exceeding a single-digit ration between punitive and compensatory damages, to a significant degree, will satisfy due process.”

Reasoning: This Court continues to state that the Due Process Clause of the 14th Amendment prohibits states from imposing grossly excessive punishments on a tortfeasor. It spoke about the “three guideposts” from BMW of North America, Inc. v. Gore. It went on to address each guidepost in detail.

In considering the degree of reprehensibility of the defendant’s conduct, a court should consider whether:

1. The harm cause was physical as opposed to economic;

2. The tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others;

3. The target of the conduct had financial vulnerability;

4. The conduct involved repeated actions or was an isolated incident; and

5. The harm was the result of intentional malice, trickery, or deceit, or mere accident.

The absence of any one of these factors renders any award suspect.

Again, the Utah Supreme Court made clear that State Farm was being condemned for its nationwide policies rather than for the conduct directed toward the Campbells.

Judgment: The Court stated that the punitive damages award should be at or near the amount of compensatory damages but the calculation should be done by the Utah courts; under the principles of the Supreme Court.

Scalia’s dissent: Reiterated his dissenting opinion from BMW of North America, Inc. v. Gore.

Thomas’ dissent: The Constitution does not constrain the size of punitive damages awards.

Ginsburg’s dissent: “The law of the particular State must suffice until judges or legislators authorized to do so initiate system-wide change.” Ginsburg goes on to tell the whole story about State Farm’s fraudulent practices and bad faith that the majority left out in its analysis of “reprehensibility.” She ended her dissent that she “would not join the Court’s swift conversion of [the three guideposts] into instructions that begin to resemble marching orders.”