(Please note: the names and locations of all parties have been changed to protect the confidentiality of this wrongful death case and its proceedings.)
1. State Farm v. Campbell
The first case to explicitly discuss the use of other acts evidence for purposes of assessing reprehensibility in punitive damages trials was the United States Supreme Court’s decision in State Farm. That case was a suit against an insurance company brought by one of its former policyholders for bad-faith failure to settle a personal-injury claim against the policyholder.
The jury found for the plaintiff on compensatory liability and damages. During the punitive phase, State Farm defended by asserting that its initial refusal to settle was an honest mistake. The plaintiff countered by introducing evidence showing that State Farm had a policy of stonewalling in cases like his: the plaintiff alleged that for 20 years, State Farm had engaged in a national scheme to meet corporate fiscal goals by capping payouts on claims company wide. (538 U.S. at 415.) Over State Farm’s objections, the trial judge allowed this evidence so that the jury could determine whether State Farm’s conduct in the Campbell case was indeed intentional and sufficiently egregious to warrant punitive damages – i.e., because the court thought it bore on the reprehensibility of State Farm’s conduct toward the Campbells. Id. The jury evidently believed that State Farm’s conduct was reprehensible: it returned a $145 million punitive damages award.
After several levels of appeals, the U.S. Supreme Court granted certioriari and vacated the punitive award. The Court did not question the jury’s evident conclusion that State Farm’s corporate practices were reprehensible, but it held that the Constitution does not permit juries to use punitive damages awards in individual lawsuits to punish nationwide behavior directed at large groups of theoretical plaintiffs.
Other acts evidence may have been relevant at the margins, the Supreme Court held, but it was improper for the trial court to allow the plaintiffs to overwhelm the jury with evidence of conduct that did not harm them directly. Just like the plaintiff in this case, the plaintiffs in State Farm used [their lawsuit] as a platform to expose, and punish, the perceived deficiencies of State Farm’s operations throughout the country, the Court wrote. 538 U.S. at 420. Clearly unhappy with that expansion of the proper role of punitive damages, the Court reversed the award, admonishing that [d]ue process does not permit courts, in the calculation of punitive damages, to adjudicate the merits of other parties’ hypothetical claims against a defendant under the guise of the reprehensibility analysis. State Farm, 538 U.S. at 423-24.
In order to guide lower courts faced with evidentiary challenges in punitive damages cases, the Court explained that for a defendant to be treated as a recidivist warranting heightened punishment, courts must ensure the conduct in question replicates the prior transgressions. The Court further emphasized that [t]he reprehensibility guidepost does not permit courts to expand the scope of the case so that a defendant may be punished for any malfeasance, which in this case extended for a 20-year period. Id. (See Part 3 of 7.)
For more information you are welcome to contact Sacramento personal injury lawyer, Moseley Collins.