Summary of BMW v. Gore, S. Ct U.S. [1996]

Punitive Damages

Relevant Facts: Dr.  Gore purchased a BMW for $40K from an authorized BMW dealer in AL.  After driving it for 9 mos and w/o noticing any flaws, he took the car in to get it detailed at Slick Finish.  Mr. Slick noticed that the car had been repainted to repair acid rain damage while the car was in transit.  BMW acknowledged at trial that it adopted a nationwide policy to sell the cars as new if the damages was less than 3%; and if more to sell them as used after service.  If sold as new the purchaser was not advised of any repairs.  Dr. Gore’s witness est the value of a repainted BMW was approx 10% less than the value of a new car; $4000.00

Legal Issue(s): Whether a $2 million punitive damages award to the purchaser of a new BMW that had been deceived about the condition of the car when it was purchased exceeds the constitutional limit?

Court’s Holding: Yes

Procedure: Jury trial verdict comp damages $4000, punitives $4 million; Judge denied DF Motion to set aside punitive award; Df appealed, AL S. Ct reduced to $2 million. S. Ct reversed and remand with instructions for remittur.

Law or Rule(s): The D P Clause of the 14^th prohibits a State from imposing a grossly excessive punishment on a tortfeasor.  Punitive damages may properly be imposed to further a State’s legitimate interests in punishing unlawful conduct and deterring its repetition.

Court Rationale: The Fed excessiveness inquiry begins with an i/d of the state’s interests that a punitive award is designed to serve.  AL does not have the power to punish BMW for conduct that was unlawful where it occurred and that had no impact on AL or its residents, nor to deter conduct in other jurisdictions. A person has to receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose. The ct uses three guideposts in determining whether the award was grossly excessive; Degree of Reprehensibility, BMW’s conduct evinced no indifference to or reckless disregard for the health and safety of others.  There were no deliberate false statements, no evidence of bad faith, or that BMW persisted in a course of unlawful conduct after it was adjudged unlawful.  Ratio of actual harm inflicted upon Pl; damages must bear a ‘reasonable relationship’ to compensatory, there is no mathematical formula, but 500 times the actual harm must surely ‘raise a suspicious judicial eyebrow.  Sanctions for Comparable Misconduct; comparing the puni award and civil or criminal penalties that could be imposed for comparable misconduct, (max Al civil penalty $2000), this sanction cannot be justified on the ground that it was necessary to deter future misconduct w/o considering less drastic remedies.  No State may use puni damages as a deterrent means of imposing its regulatory policies on the entire Nation.  The grossly excessive award transcends the constitutional limit.

Plaintiff’s Argument: A punitive award of $4million will provide an appropriate penalty for selling 1000 cars for more than they were worth.

Defendant’s Argument: The award was grossly excessive and unconstitutional