NCPA - National Center for Policy Analysis

Supreme Court Ignored In Damage Awards

March 13, 2000

In 1996, the Supreme Court ruled in BMW of North America Inc. v. Gore that excessive punitive damages had become a threat to the viability of our legal system. A jury had earlier slapped the car company with $2 million in punitive damages for performing an unacknowledged touch-up paint job.

Having so ruled, the justices established a set of guideline they hoped would bring damages back in touch with reality. For one thing, lower courts were admonished that consideration of a defendant's aggregate wealth should not be considered in setting punitive damages. The court also found that punitive damages 500 times the actually harm to the plaintiff must "surely raise a judicial eyebrow" so as to "enter the zone of arbitrariness that violates the Due Process Clause" of the Constitution.

But legal observers report that even that warning has done little to stop plaintiff's lawyers, juries and courts from awarding outlandish sums in subsequent cases.

  • In 1999 alone, the top 10 verdicts totaled $9 billion -- triple the amount for 1998 and 12 times the amount for 1997.
  • In California, General Motors was hit with a $4.8 billion award -- later reduced to $1.09 billion -- after a drunk drivers struck another vehicle, severely injuring four passengers.
  • DaimlerChrysler was socked with a $250 million punitive verdict because an unbuckled child was killed after his mother ran a red light and was hit by another car.
  • A case against Ford Motor Co. resulted in a $290 million punitive verdict -- although that was eventually overturned on grounds of jury misconduct.

Legal experts point out that juries are still being asked to consider the worth of companies with deep pockets, in express contradiction to the guidelines of the Supreme Court. In a case involving Waffle House, it was noted that the company "had total revenues of $283 million." And in the DaimlerChrysler case, the fact that the company had "$6.9 billion cash on hand" made its way into the record.

Source: Dick Thornburgh (former U.S. Attorney General), "No End in Sight as Punitive Damages Go Up, Up, UP," Wall Street Journal, March 13, 2000.


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