The Foggy Road for Evaluating Punitive Damages: Lifting the Haze from the BMW/State Farm Guideposts

Steven L. Chanenson, Villanova University School of Law
John Y. Gotanda, Villanova University School of Law

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The final version of this working paper is forthcoming as a publication of the University of Michigan Journal of Law Reform, Volume 37, Issue 2 (2004).

Abstract

In light of increasing punitive damages awards, the United States Supreme Court formulated criteria for evaluating whether a punitive damages award is so unreasonably large that it violates substantive due process. Unfortunately, these "guideposts," which were first erected in BMW v. Gore and applied last term in State Farm v. Campbell, are difficult to use and have resulted in inconsistent decisions. Indeed, Justice Scalia stated that they "mark a road to nowhere." The authors argue that the problems with the guideposts can be fixed by refining the third guidepost, which compares the punitive damages award to the criminal (or civil) sanctions that could be imposed for comparable misconduct. To date, the Court's decisions have obfuscated this guidepost and, not surprisingly, it has largely been ignored by courts and commentators. The authors propose that courts, in applying the third guidepost, view comparable criminal (and civil) sanctions as a "presumptive limit" on punitive damages. This approach is consistent with the Court's views on the subject, satisfies the due process need for notice, is respectful of federalism concerns, and allows for greater proportionality and nuance while evaluating punitive damages awards. Most importantly, it should be easy to apply and result in more uniform decisions.