Recent Trends in Punitive Damages Awards

The Supreme Court's decision in State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), addressing punitive damage awards was a culminating moment in a decade of high court jurisprudence reigning in multimillion dollar runaway awards. Following the decision, there was a flurry of activity by the Supreme Court itself, and in many lower courts, to remand, conform, and examine current cases in light of the Court's new guidance. With several exceptions where the compensatory damages are nominal or the conduct is particularly reprehensible, court after court is quoting the high court's language regarding ratios and remanding or reducing awards with double-digit ratios. The reasons vary, but include factors such as whether the plaintiff suffered physical or economic injury, the degree of the defendant's determined reprehensibility, wealth, and the ratio of punitive to compensatory damages. In general, the most successful strategies used by defendants to reduce punitive awards are: 1) under the reprehensibility guidepost, to exclude collateral evidence based on an insufficient nexus between the alleged bad conduct and the injury suffered by the plaintiff; and 2) to focus on the ratio between compensatory and punitive damages when it exceeds a single-digit ratio.

Reprehensibility of the Defendant's Conduct

The State Farm Court cautioned against using a single case as a “platform to expose, and punish, the perceived deficiencies” of a defendant's operations throughout the country. It reiterated that a “state cannot punish a defendant for conduct that may have been lawful where it occurred.” The Court rejected the idea that State Farm could be “condemned for its nationwide policies rather than for the conduct direct[ed] toward the Campbells.” Evidence of State Farm's unrelated national policies should therefore have been excluded because “dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages. A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business.” Id. at 422-3.

In a recent products liability case, Boeken v. Phillip Morris, Inc., 122 Cal. App. 4th 684 (Cal. Ct. App. 2004), a ratio of 545-to-1 was reduced to 9-to-1. The jury awarded $5.5 million in compensatory damages and $3 billion in punitive damages to a long-time smoker who died of lung cancer. The trial court reduced the punitive damages award to $100 million, and the California appeals court halved the award to $50 million, saying a 9-to-1 ratio satisfied due process. The court found the defendant's conduct reprehensible under all of the factors to be considered. The plaintiff's injuries were physical, not merely economic. The court found that although the health risks may have been publicized, the defendant created a false controversy with its advertising, and the plaintiff failed to understand and appreciate the risks. The court also found that the jury properly considered harm to others. The defendant argued that the nexus was not sufficient because there was no evidence that its lawful sales practices in other states caused any injury to specific persons in other states. The court disagreed, stating that State Farm does not require proof of injury to any specific person other than the plaintiff when the conduct is identical. It held that similar out-of-state conduct may be relevant to the issue of reprehensibility when it demonstrates deliberateness and culpability of the acts committed in the state where they are tortious as long as the conduct has a “nexus to the specific harm suffered by the plaintiff.” 122 Cal. App. 4th at 735. With respect to ratios, the court rejected the defendant's argument for a 1-to-1 ratio or at a minimum a 5-to-1 ratio, applied in Romo v. Ford Motor Co., 6 Cal. Rptr. 3d 793 (Cal. Ct. App. 2003), because the defendant's reprehensible conduct spanned 4 decades, and the resultant personal injury and death “justifies the highest single digit ratio that will satisfy due process while furthering California's policy of punishment and deterrence.” 122 Cal. App. 4th at 741.

Emphasis on 'Ratio'

The Supreme Court stressed that “in practice few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.” Awards within this single-digit ratio range were more likely to “comport with due process, while still achieving the State's goals of deterrence and retribution, than awards with ratios in [the] range of 500-to-1.” State Farm, supra. at 425. While the Court did not create a “rigid benchmark” for evaluating awards, it found that an award having a 145-to-1 ratio like the one in State Farm is presumptively unconstitutional.

Thus, for example, in Alfa Life Ins. Corp. v. Jackson, 2004 Ala. LEXIS 118 (Ala. May 7, 2004), a ratio of 10-to-1 was reduced to 3-to-1 based almost entirely on an evaluation of ratios. The jury awarded plaintiffs $500,000 in compensatory damages and $5 million in punitive damages for fraud, breach of contract, and wanton failure to procure life insurance. The trial court reduced the punitive award to $1.5 million. Although the court considered the defendant's conduct highly reprehensible, it found both the $5 million and $1.5 million awards excessive. The court remitted the compensatory damages amount to $100,000, making the ratios 50-to-1 or 15-to-1 under the remitted amount.

Keep in mind, however, that the Supreme Court is not focusing on absolute dollar amounts. Rather, it is the ratio between the two awards that is critical. For instance, although the jury in Time Warner Entertainment v. Six Flags Over Georgia, 563 S.E.2d 178 (Ga. Ct. App. 2002), cert. denied, 538 U.S. 977 (2003), awarded $197 million in compensatory damages and $257 million in punitive damages, the Supreme Court denied certiorari, sending the message that it does not matter how high the award is as long as the ratio is a single digit (1.5-to-1). See also Union Pacific Railroad Co. v. Barber, 2004 Ark. LEXIS 128, cert. denied, 2004 U.S. LEXIS 6916 (Oct. 12, 2004) (Supreme Court denied certiorari in case with 5-to-1 ratio despite the reviewing court's reliance, at least in part, on defendant's net worth of $9.6 billion in upholding the damage award).

We would be remiss if we did not report on the few courts that have rebelled against the Supreme Court's suggested ratios where they found the defendant's conduct especially reprehensible or the compensatory damages nominal. Perhaps most notably, the Utah Supreme Court in State Farm on remand from the U.S. Supreme Court rejected defendant's argument that a 1-to-1 ratio represented the upper constitutional limit permissible due to the size of the compensatory award. 98 P.3d 409.

Also, in Williams v. Phillip Morris, Inc., 92 P.3d 126 (Or. Ct. App. 2004), the Oregon Court of Appeals reconsidered its decision to uphold a 96-to-1 ratio after State Farm, which decision awarded the plaintiff $79.5 million in punitive damages. The court affirmed its earlier decision even after remand, basing its decision on what it considered the extreme reprehensibility of the defendant's conduct and wealth. In this products liability case, the jury had awarded compensatory damages of $21,000 for economic loss, $800,000 in non-economic loss, and $79.5 million in punitives. The trial court reduced the non-economic loss to $500,000 and the punitive award to $32 million. The Oregon Court of Appeals reversed the trial court's reduction of the punitive damages award and remanded the case with instructions for the trial court to enter the judgment on the verdict. The Supreme Court vacated this decision and remanded the case for consideration in light of State Farm. The Oregon Court of Appeals discussed at length Supreme Court and state law precedent on punitive damages and affirmed its previous decision of $79.5 million as consistent with the due process guarantees outlined in State Farm. The court found the defendant's conduct extremely reprehensible, including repeated misconduct over a 40-year period. Regarding ratios, the court found that the defendant's conduct far exceeded previous cases approving 10-to-1 and 7-to-1 ratios because “the number of potentially defrauded and injured victims is much greater.” Id. at 145. The court also considered the defendant's wealth of more than $17 billion and yearly profit of $1.6 billion. It held that the jury could have properly considered that a lower award would have been an “insignificant nuisance” and that a large award would force the defendant to disgorge some of its profit gained over several decades of misconduct directed at plaintiff and other Oregonians. “[A]fter reconsidering our previous opinion in light of State Farm, we believe that our original decision was correct.” Id. at 146.

Moreover, in Sherman v. Kasotakis, 314 F. Supp. 2d 843 (N.D. Iowa 2004), a ratio of 12,500-to-1 was upheld in a racial discrimination case. The jury awarded nominal damages of $1 to each of the plaintiffs and $12,500 each in punitive damages. With respect to the proportionality, the court noted that “[b]ecause actions seeking vindication of constitutional rights are more likely to result only in nominal damages, strict proportionality would defeat the ability to award damages at all.” Id. at 875. Applying a “strict mathematical formula … would leave unpunished the egregious conduct of defendants where the civil rights violation has resulted in injuries that are difficult to quantify.” Id.

Furthermore, in Myers v. Workmen's Auto Ins. Co., 95 P.3d 977 (Idaho 2004), a ratio of 408-to-1 was upheld against an insurance company that failed to settle or defend suits filed against its insured following an auto accident. The insured was given a nominal damages award, and the court noted that a consideration of ratios is of “no real assistance” in a case where only nominal damages are sought. Id. at 992. In such cases, an award tied to ratios would defeat the salutary purposes of punitive damages.

Trial courts may also attempt to sidestep due process protections. For example, in Willow Inn, Inc. v. Public Service Mut. Ins. Co., 2003 U.S. Dist. LEXIS 9558 (E.D. Pa. May 30, 2003), the district court was able to manipulate the figures so that it appeared to be only a single digit ratio when in reality the ratio between compensatory and punitive damages was 75-to-1. Also, in Werremeyer v. K.C. Auto Salvage Co., 2003 Mo. App. LEXIS 1074 at *31 (Mo. Ct. App. June 30, 2003), the court justified upholding a punitive damage to compensatory damage ratio of 13.5-to-1, because the harm suffered by the plaintiff was difficult to detect. The court read State Farm as providing an exception in circumstances where fraud is alleged. Thus, when the conduct of the defendant is particularly egregious or when the monetary value of non-economic harm is difficult to establish, some believe a higher ratio ' ie., in excess of 1-to-9 ' may be tolerated. Williams, supra. at 126.

Relevant Punishment-Setting Factors (Comparison of Civil or Criminal Sanctions)

Punitive damages and compensatory damages serve distinct purposes. Compensatory damages are intended to redress a specific loss that the plaintiff has suffered as a result of defendant's wrongful conduct. Punitive damages, on the other hand, operate as private fines and are intended to punish the defendant and deter future wrongdoing. Regardless, “[p]unitive damages are not a substitute for the criminal process, and the remote possibility of a criminal sanction does not automatically sustain a punitive damages award.” 538 U.S. at 428. For example, the most relevant civil sanction under Utah law for the wrong done to the Campbells is a $10,000 fine for fraud, an amount “dwarfed” by the $145 million punitive damages award. Also, in Gibson v. Total Car Franchising Corp., 223 F.R.D. 265 (M.D.N.C. 2004), the court upheld a jury award for fraudulent business transaction of $176,124 in compensatory damages and $550,000 in punitive damages. The court found the defendant's conduct sufficiently reprehensible and that the 3.12-to-1 ratio was within the guidelines of State Farm in part because it was roughly equivalent to trebled damages for deceptive conduct under the codes for Tennessee, North Carolina, South Carolina, and Virginia.

Conclusion

In the first 2 years, courts across the country have responded to the Supreme Court's mandate by remanding cases with a great disparity between punitive and compensatory awards, excluding evidence of a defendant's out-of-state unrelated conduct, and generally exercising more vigilance when reviewing punitive damages awards. Although significant inconsistencies remain in the application of State Farm's due process principles, State Farm has nevertheless had considerable effect in narrowing the focus of reprehensibility analysis and permissible ratios.

Recent Federal Court Decisions

Richardson v. Tricom Pictures & Prods., Inc., 2004 U.S. Dist. LEXIS 18897 (S.D. Fla. Aug. 24, 2004) (ratio 2.5-to-1 reduced to 1-to-1 in sexual harassment case).

Willow Inn, Inc. v. Public Service Mut. Ins. Co., 2003 U.S. Dist. LEXIS 9558 (E.D. Pa. May 30, 2003) (ratio 75-to-1 upheld by manipulating numbers).

Gibson v. Total Car Franchising Corp., 223 F.R.D. 265 (M.D.N.C. 2004) (ratio 3.12-to-1 upheld in business fraud case).

Eden Elec., Ltd. v. Amana Co., 370 F.3d 824 (8th Cir. 2004) (ratio 8.5-to-1 reduced to 4.5-to-1 in business fraud case).

Conseco Fin. Servicing Corp. v. North Am. Mortgage Co., 381 F.3d 811 (8th Cir. 2004) (ratio 5.14-to-1 reduced to 2-to-1 in trade secret case).

Williams v. ConAgra Poultry Co., 378 F.3d 790 (8th Cir. 2004) (ratio 6-to-1 reduced to 1-to-1 in employment discrimination case).

MacGregor v. Mallinckrodt, Inc., 373 F.3d 923 (8th Cir. 2004) (ratio 5-to-1 reduced to 2-to-1 in age discrimination case).

Hangarter v. Provident Life and Accident Ins. Co., 373 F.3d 998 (9th Cir. 2004) (ratio 2.6-to-1 upheld in benefits dispute).

Recent State Court Decisions

Alfa Life Ins. Corp. v. Jackson, 2004 Ala. LEXIS 118 (Ala. May 7, 2004) (ratio 10-to-1 reduced to 3-to-1 in fraud/breach of contract case).

Union Pacific Railroad Co. v. Barber, 2004 Ark. LEXIS 128, cert. denied, 2004 U.S. LEXIS 6916 (Oct. 12, 2004) (ratio 5-to-1 upheld on appeal in personal injury case).

Bardis v. Oates, 114 Cal. Rptr. 3d 89 (Cal. Ct. App. 2004) (ratio 42-to-1 reduced to 9-to-1 in fraud case).

Fin. Corp. v. Nat'l Union Fire Ins. Co., 13 Cal. Rptr. 3d 586 (Cal. Ct. App. 2004) (ratio 50-to-1 reduced to 4-to-1 in fraud/breach of contract case).

Boeken v. Phillip Morris, Inc., 122 Cal. App. 4th 684 (Cal. Ct. App. 2004) (ratio 545-to-1 reduced to 9-to-1 in product liability case).

Jones v. Delaware Cmty. Corp. for Individual Dignity, 2004 Del. Super. LEXIS 133 (Del. Super. Ct. Apr. 29, 2004) (ratio 9.63-to-1 when averaged as to two defendants in sexual assault case).

Sand Hill Energy, Inc. v. Smith, 142 S.W.3d 153 (Ky. 2004) (ratio 5-to-1 vacated and remanded in product liability case involving pickup truck)

Sufix, U.S.A., Inc. v. Cook, 128 S.W.3d 838 (Ky. Ct. App. 2004) (ratio 1-to-1 upheld in product liability case).

Werremeyer v. K.C. Auto Salvage Co., 2003 Mo. App. LEXIS 1074 (Mo. Ct. App. June 30, 2003) (ratio 13.5-to-1 upheld in fraud case).

Blust v. Lamar Adver. Co., 813 N.E.2d 902 (Ohio Ct. App. 2004) (ratio 70-to-1 reversed and vacated in trespass case).

Waddell v. Roxane Labs., Inc., 2004 Ohio App. LEXIS 2021 (Ohio Ct. App. May 6, 2004) (ratio 2-to-1 upheld in wrongful termination case).

Foote v. Fleet Fin. Group, 2004 R.I. Super. LEXIS 117 (R.I. Super. Ct. June 25, 2004) (ratio 37-to-1 reversed and new trial on enhanced compensatory damages ordered in consumer protection/fraud case).

Frazier v. Badger, 2004 S.C. LEXIS 232 (Sept. 27, 2004) (ratio 1-to-1 upheld).

Durham v. Vinson, 2004 S.C. LEXIS 219 (Sept. 13, 2004) (ratio 2-to-1 upheld in medical malpractice action).

Citizens Nat'l Bank v. Allen Rae Invs., Inc., 142 S.W.3d 459 (Tex. App. 2004) (ratio 2.5-to-1 upheld in business fraud case).

State Farm Mut. Ins. Co. v. Campbell, 2004 Utah LEXIS 62, cert. denied, 2004 U.S. LEXIS 6620 (Oct. 4, 2004) (denying State Farm's second petition for writ of certiorari appealing the decision of the Utah Supreme Court which set a 9-to-1 ratio).

The Supreme Court's decision in State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), addressing punitive damage awards was a culminating moment in a decade of high court jurisprudence reigning in multimillion dollar runaway awards. Following the decision, there was a flurry of activity by the Supreme Court itself, and in many lower courts, to remand, conform, and examine current cases in light of the Court's new guidance. With several exceptions where the compensatory damages are nominal or the conduct is particularly reprehensible, court after court is quoting the high court's language regarding ratios and remanding or reducing awards with double-digit ratios. The reasons vary, but include factors such as whether the plaintiff suffered physical or economic injury, the degree of the defendant's determined reprehensibility, wealth, and the ratio of punitive to compensatory damages. In general, the most successful strategies used by defendants to reduce punitive awards are: 1) under the reprehensibility guidepost, to exclude collateral evidence based on an insufficient nexus between the alleged bad conduct and the injury suffered by the plaintiff; and 2) to focus on the ratio between compensatory and punitive damages when it exceeds a single-digit ratio.

Reprehensibility of the Defendant's Conduct

The State Farm Court cautioned against using a single case as a “platform to expose, and punish, the perceived deficiencies” of a defendant's operations throughout the country. It reiterated that a “state cannot punish a defendant for conduct that may have been lawful where it occurred.” The Court rejected the idea that State Farm could be “condemned for its nationwide policies rather than for the conduct direct[ed] toward the Campbells.” Evidence of State Farm's unrelated national policies should therefore have been excluded because “dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages. A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business.” Id. at 422-3.

In a recent products liability case, Boeken v. Phillip Morris, Inc., 122 Cal. App. 4th 684 (Cal. Ct. App. 2004), a ratio of 545-to-1 was reduced to 9-to-1. The jury awarded $5.5 million in compensatory damages and $3 billion in punitive damages to a long-time smoker who died of lung cancer. The trial court reduced the punitive damages award to $100 million, and the California appeals court halved the award to $50 million, saying a 9-to-1 ratio satisfied due process. The court found the defendant's conduct reprehensible under all of the factors to be considered. The plaintiff's injuries were physical, not merely economic. The court found that although the health risks may have been publicized, the defendant created a false controversy with its advertising, and the plaintiff failed to understand and appreciate the risks. The court also found that the jury properly considered harm to others. The defendant argued that the nexus was not sufficient because there was no evidence that its lawful sales practices in other states caused any injury to specific persons in other states. The court disagreed, stating that State Farm does not require proof of injury to any specific person other than the plaintiff when the conduct is identical. It held that similar out-of-state conduct may be relevant to the issue of reprehensibility when it demonstrates deliberateness and culpability of the acts committed in the state where they are tortious as long as the conduct has a “nexus to the specific harm suffered by the plaintiff.” 122 Cal. App. 4th at 735. With respect to ratios, the court rejected the defendant's argument for a 1-to-1 ratio or at a minimum a 5-to-1 ratio, applied in Romo v. Ford Motor Co., 6 Cal. Rptr. 3d 793 (Cal. Ct. App. 2003), because the defendant's reprehensible conduct spanned 4 decades, and the resultant personal injury and death “justifies the highest single digit ratio that will satisfy due process while furthering California's policy of punishment and deterrence.” 122 Cal. App. 4th at 741.

Emphasis on 'Ratio'

The Supreme Court stressed that “in practice few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.” Awards within this single-digit ratio range were more likely to “comport with due process, while still achieving the State's goals of deterrence and retribution, than awards with ratios in [the] range of 500-to-1.” State Farm, supra. at 425. While the Court did not create a “rigid benchmark” for evaluating awards, it found that an award having a 145-to-1 ratio like the one in State Farm is presumptively unconstitutional.

Thus, for example, in Alfa Life Ins. Corp. v. Jackson, 2004 Ala. LEXIS 118 (Ala. May 7, 2004), a ratio of 10-to-1 was reduced to 3-to-1 based almost entirely on an evaluation of ratios. The jury awarded plaintiffs $500,000 in compensatory damages and $5 million in punitive damages for fraud, breach of contract, and wanton failure to procure life insurance. The trial court reduced the punitive award to $1.5 million. Although the court considered the defendant's conduct highly reprehensible, it found both the $5 million and $1.5 million awards excessive. The court remitted the compensatory damages amount to $100,000, making the ratios 50-to-1 or 15-to-1 under the remitted amount.

Keep in mind, however, that the Supreme Court is not focusing on absolute dollar amounts. Rather, it is the ratio between the two awards that is critical. For instance, although the jury in Time Warner Entertainment v. Six Flags Over Georgia , 563 S.E.2d 178 (Ga. Ct. App. 2002), cert. denied , 538 U.S. 977 (2003), awarded $197 million in compensatory damages and $257 million in punitive damages, the Supreme Court denied certiorari, sending the message that it does not matter how high the award is as long as the ratio is a single digit (1.5-to-1). See also Union Pacific Railroad Co. v. Barber, 2004 Ark. LEXIS 128, cert. denied, 2004 U.S. LEXIS 6916 (Oct. 12, 2004) (Supreme Court denied certiorari in case with 5-to-1 ratio despite the reviewing court's reliance, at least in part, on defendant's net worth of $9.6 billion in upholding the damage award).

We would be remiss if we did not report on the few courts that have rebelled against the Supreme Court's suggested ratios where they found the defendant's conduct especially reprehensible or the compensatory damages nominal. Perhaps most notably, the Utah Supreme Court in State Farm on remand from the U.S. Supreme Court rejected defendant's argument that a 1-to-1 ratio represented the upper constitutional limit permissible due to the size of the compensatory award. 98 P.3d 409.

Also, in Williams v. Phillip Morris, Inc., 92 P.3d 126 (Or. Ct. App. 2004), the Oregon Court of Appeals reconsidered its decision to uphold a 96-to-1 ratio after State Farm, which decision awarded the plaintiff $79.5 million in punitive damages. The court affirmed its earlier decision even after remand, basing its decision on what it considered the extreme reprehensibility of the defendant's conduct and wealth. In this products liability case, the jury had awarded compensatory damages of $21,000 for economic loss, $800,000 in non-economic loss, and $79.5 million in punitives. The trial court reduced the non-economic loss to $500,000 and the punitive award to $32 million. The Oregon Court of Appeals reversed the trial court's reduction of the punitive damages award and remanded the case with instructions for the trial court to enter the judgment on the verdict. The Supreme Court vacated this decision and remanded the case for consideration in light of State Farm. The Oregon Court of Appeals discussed at length Supreme Court and state law precedent on punitive damages and affirmed its previous decision of $79.5 million as consistent with the due process guarantees outlined in State Farm. The court found the defendant's conduct extremely reprehensible, including repeated misconduct over a 40-year period. Regarding ratios, the court found that the defendant's conduct far exceeded previous cases approving 10-to-1 and 7-to-1 ratios because “the number of potentially defrauded and injured victims is much greater.” Id. at 145. The court also considered the defendant's wealth of more than $17 billion and yearly profit of $1.6 billion. It held that the jury could have properly considered that a lower award would have been an “insignificant nuisance” and that a large award would force the defendant to disgorge some of its profit gained over several decades of misconduct directed at plaintiff and other Oregonians. “[A]fter reconsidering our previous opinion in light of State Farm, we believe that our original decision was correct.” Id. at 146.

Moreover, in Sherman v. Kasotakis , 314 F. Supp. 2d 843 (N.D. Iowa 2004), a ratio of 12,500-to-1 was upheld in a racial discrimination case. The jury awarded nominal damages of $1 to each of the plaintiffs and $12,500 each in punitive damages. With respect to the proportionality, the court noted that “[b]ecause actions seeking vindication of constitutional rights are more likely to result only in nominal damages, strict proportionality would defeat the ability to award damages at all.” Id. at 875. Applying a “strict mathematical formula … would leave unpunished the egregious conduct of defendants where the civil rights violation has resulted in injuries that are difficult to quantify.” Id.

Furthermore, in Myers v. Workmen's Auto Ins. Co., 95 P.3d 977 (Idaho 2004), a ratio of 408-to-1 was upheld against an insurance company that failed to settle or defend suits filed against its insured following an auto accident. The insured was given a nominal damages award, and the court noted that a consideration of ratios is of “no real assistance” in a case where only nominal damages are sought. Id. at 992. In such cases, an award tied to ratios would defeat the salutary purposes of punitive damages.

Trial courts may also attempt to sidestep due process protections. For example, in Willow Inn, Inc. v. Public Service Mut. Ins. Co., 2003 U.S. Dist. LEXIS 9558 (E.D. Pa. May 30, 2003), the district court was able to manipulate the figures so that it appeared to be only a single digit ratio when in reality the ratio between compensatory and punitive damages was 75-to-1. Also, in Werremeyer v. K.C. Auto Salvage Co., 2003 Mo. App. LEXIS 1074 at *31 (Mo. Ct. App. June 30, 2003), the court justified upholding a punitive damage to compensatory damage ratio of 13.5-to-1, because the harm suffered by the plaintiff was difficult to detect. The court read State Farm as providing an exception in circumstances where fraud is alleged. Thus, when the conduct of the defendant is particularly egregious or when the monetary value of non-economic harm is difficult to establish, some believe a higher ratio ' ie., in excess of 1-to-9 ' may be tolerated. Williams, supra. at 126.

Relevant Punishment-Setting Factors (Comparison of Civil or Criminal Sanctions)

Punitive damages and compensatory damages serve distinct purposes. Compensatory damages are intended to redress a specific loss that the plaintiff has suffered as a result of defendant's wrongful conduct. Punitive damages, on the other hand, operate as private fines and are intended to punish the defendant and deter future wrongdoing. Regardless, “[p]unitive damages are not a substitute for the criminal process, and the remote possibility of a criminal sanction does not automatically sustain a punitive damages award.” 538 U.S. at 428. For example, the most relevant civil sanction under Utah law for the wrong done to the Campbells is a $10,000 fine for fraud, an amount “dwarfed” by the $145 million punitive damages award. Also, in Gibson v. Total Car Franchising Corp., 223 F.R.D. 265 (M.D.N.C. 2004), the court upheld a jury award for fraudulent business transaction of $176,124 in compensatory damages and $550,000 in punitive damages. The court found the defendant's conduct sufficiently reprehensible and that the 3.12-to-1 ratio was within the guidelines of State Farm in part because it was roughly equivalent to trebled damages for deceptive conduct under the codes for Tennessee, North Carolina, South Carolina, and Virginia.

Conclusion

In the first 2 years, courts across the country have responded to the Supreme Court's mandate by remanding cases with a great disparity between punitive and compensatory awards, excluding evidence of a defendant's out-of-state unrelated conduct, and generally exercising more vigilance when reviewing punitive damages awards. Although significant inconsistencies remain in the application of State Farm's due process principles, State Farm has nevertheless had considerable effect in narrowing the focus of reprehensibility analysis and permissible ratios.

Recent Federal Court Decisions

Richardson v. Tricom Pictures & Prods., Inc., 2004 U.S. Dist. LEXIS 18897 (S.D. Fla. Aug. 24, 2004) (ratio 2.5-to-1 reduced to 1-to-1 in sexual harassment case).

Willow Inn, Inc. v. Public Service Mut. Ins. Co., 2003 U.S. Dist. LEXIS 9558 (E.D. Pa. May 30, 2003) (ratio 75-to-1 upheld by manipulating numbers).

Gibson v. Total Car Franchising Corp., 223 F.R.D. 265 (M.D.N.C. 2004) (ratio 3.12-to-1 upheld in business fraud case).

Eden Elec., Ltd. v. Amana Co., 370 F.3d 824 (8th Cir. 2004) (ratio 8.5-to-1 reduced to 4.5-to-1 in business fraud case).

Conseco Fin. Servicing Corp. v. North Am. Mortgage Co., 381 F.3d 811 (8th Cir. 2004) (ratio 5.14-to-1 reduced to 2-to-1 in trade secret case).

Williams v. ConAgra Poultry Co., 378 F.3d 790 (8th Cir. 2004) (ratio 6-to-1 reduced to 1-to-1 in employment discrimination case).

MacGregor v. Mallinckrodt, Inc., 373 F.3d 923 (8th Cir. 2004) (ratio 5-to-1 reduced to 2-to-1 in age discrimination case).

Hangarter v. Provident Life and Accident Ins. Co., 373 F.3d 998 (9th Cir. 2004) (ratio 2.6-to-1 upheld in benefits dispute).

Recent State Court Decisions

Alfa Life Ins. Corp. v. Jackson, 2004 Ala. LEXIS 118 (Ala. May 7, 2004) (ratio 10-to-1 reduced to 3-to-1 in fraud/breach of contract case).

Union Pacific Railroad Co. v. Barber, 2004 Ark. LEXIS 128, cert. denied, 2004 U.S. LEXIS 6916 (Oct. 12, 2004) (ratio 5-to-1 upheld on appeal in personal injury case).

Bardis v. Oates, 114 Cal. Rptr. 3d 89 (Cal. Ct. App. 2004) (ratio 42-to-1 reduced to 9-to-1 in fraud case).

Fin. Corp. v. Nat'l Union Fire Ins. Co., 13 Cal. Rptr. 3d 586 (Cal. Ct. App. 2004) (ratio 50-to-1 reduced to 4-to-1 in fraud/breach of contract case).

Boeken v. Phillip Morris, Inc., 122 Cal. App. 4th 684 (Cal. Ct. App. 2004) (ratio 545-to-1 reduced to 9-to-1 in product liability case).

Jones v. Delaware Cmty. Corp. for Individual Dignity, 2004 Del. Super. LEXIS 133 (Del. Super. Ct. Apr. 29, 2004) (ratio 9.63-to-1 when averaged as to two defendants in sexual assault case).

Sand Hill Energy, Inc. v. Smith, 142 S.W.3d 153 (Ky. 2004) (ratio 5-to-1 vacated and remanded in product liability case involving pickup truck)

Sufix, U.S.A., Inc. v. Cook, 128 S.W.3d 838 (Ky. Ct. App. 2004) (ratio 1-to-1 upheld in product liability case).

Werremeyer v. K.C. Auto Salvage Co., 2003 Mo. App. LEXIS 1074 (Mo. Ct. App. June 30, 2003) (ratio 13.5-to-1 upheld in fraud case).

Blust v. Lamar Adver. Co., 813 N.E.2d 902 (Ohio Ct. App. 2004) (ratio 70-to-1 reversed and vacated in trespass case).

Waddell v. Roxane Labs., Inc., 2004 Ohio App. LEXIS 2021 (Ohio Ct. App. May 6, 2004) (ratio 2-to-1 upheld in wrongful termination case).

Foote v. Fleet Fin. Group, 2004 R.I. Super. LEXIS 117 (R.I. Super. Ct. June 25, 2004) (ratio 37-to-1 reversed and new trial on enhanced compensatory damages ordered in consumer protection/fraud case).

Frazier v. Badger, 2004 S.C. LEXIS 232 (Sept. 27, 2004) (ratio 1-to-1 upheld).

Durham v. Vinson, 2004 S.C. LEXIS 219 (Sept. 13, 2004) (ratio 2-to-1 upheld in medical malpractice action).

Citizens Nat'l Bank v. Allen Rae Invs., Inc., 142 S.W.3d 459 (Tex. App. 2004) (ratio 2.5-to-1 upheld in business fraud case).

State Farm Mut. Ins. Co. v. Campbell, 2004 Utah LEXIS 62, cert. denied, 2004 U.S. LEXIS 6620 (Oct. 4, 2004) (denying State Farm's second petition for writ of certiorari appealing the decision of the Utah Supreme Court which set a 9-to-1 ratio).