Title: On Remand from U.S. Supreme Court, Utah Supreme Court Orders Punitive Damages of $9 Million against State Farm in Bad Faith Case
Abstract: Campbell v. State Farm Mutual Automobile Ins. Co., 2004 Utah LEXIS 62 (Utah Supreme Court--April 23, 2004); cert. denied, 2004 U.S. LEXIS 6620 (Oct. 4, 2004) In April 2003, the U.S. Supreme Court made news when, during the course of setting aside a $145 million punitive damages award against State Farm, it also set forth new, restrictive rules for awarding punitive damages. Acting pursuant to the Due Process Clause of the Fourteenth Amendment, the Court held that state courts were restricted in awarding punitive damages based on reprehensibility to actions of a defendant bearing sufficient connection to the state in question. The court further suggested that determining a reasonable relationship between an award of compensatory damages and a punitive damages award, courts should consider the size of the compensatory award. Although a small compensatory award accompanied by really reprehensible conduct might support a relatively high, double-digit multiple of punitive damages, large compensatory awards probably could not sustain such multiples. In particular, the Court suggested that only in rare cases could a large compensatory award be accompanied by a punitive damages award that was than a single-digit multiple of the compensatory award. See State Farm Mut. Auto. Ins. Co., 538 U.S. 408 (2003). The Campbell v. State Farm case, which arose out of a 1981 auto accident, resulted in a than $1 million compensatory award to the Campbells (and effectively to their assignees, others involved in the accident) based on the emotional distress inflicted on the Campbells when State Farm failed to settle claims against them within the policy limits of the Campbells' auto policy and then failed to post bond or pay the amount of the excess judgment until years later. The Utah Supreme Court had found State Farm's conduct sufficiently blameworthy that it approved a jury's award of $145 million in punitive damages. The U.S. Supreme Court reversed and remanded for further consideration, holding that the 145 : 1 ratio was simply too much and that the large award was tainted by the Utah courts' consideration of State Farm conduct that took place outside Utah and that appeared to have little or no impact within Utah. On remand before the Utah Supreme Court, the antagonists recurred to the battle, with State Farm arguing that the proper reading of the U.S. Supreme Court's decision required a maximum ceiling on punitive damages at a 1 : 1 ratio in view of the large compensatory award to the Campbells (actually to Mrs. Campbell and to others who had been injured by Mr. Campbell's negligence in the 1981 accident; Mr. Campbell passed away in 2001). Counsel for the Campbells argued that the record in the case justified a 9 : 1 ratio, an argument that prevailed with the Utah Supreme Court. In an opinion displaying some barely concealed distaste for the U.S. High Court's second-guessing of its earlier decision, the Utah Supreme Court approved a $9 million punitive damages award. Along the way, the Utah Court found that this high an award was justified by the degree of misconduct by the defendant even without consideration of activity outside Utah. The Supreme Court stopped well short ... of punctuating its disagreement with the evidence we considered in our analysis by pinning State Farm's behavior to a particular location along the reprehensibility continuum. It instead simply issued the mandate that a more modest punishment for this reprehensible conduct would have satisfied the State's legitimate objectives, and the Utah courts should have gone no further. See 2004 Utah LEXIS 62 at *11 (citing U.S. Supreme Court opinion, 538 US. at 419-20). The Utah Court then reviewed the three guideposts for assessing the reasonableness of punitive damages under the Due Process Clause as set forth in the Supreme Court's Campbell opinion and its progeny: reprehensibility of defendant conduct; ratio of compensatory damages to punitive damage; and comparable civil and criminal penalties. …
Publication Year: 2004
Publication Date: 2004-12-01
Language: en
Type: article
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