Appellate Law

Alabama Will Not Follow Federal Common Law Punitive Damages Rule

Last June, the United States Supreme Court adopted common law standards for assessing punitive damages in Exxon Shipping Co. v. Baker, 128 S. Ct. 2605 (2008), a federal maritime case.  After reviewing the purpose of punitive damages awards, examining a host of state court punitive damages schemes and noting the "stark unpredictability" of punitive damages awards, the Court turned to "several studies . . . showing the median ratio of punitive to compensatory verdicts, reflecting what juries and judges have considered reasonable across many hundreds of awards."  The Court found that, "[t]he data put the median ratio of the entire gamut of circumstances at less than 1:1, meaning that the compensatory award exceeds the punitive award in most cases.  . . . On these assumptions, a median ratio of punitive to compensatory damages of about .65:1 probably marks the line near which cases like this one largely should be grouped.  Accordingly, given the need to protect against the possibility (and the disruptive cost to the legal system) of awards that are unpredictable and unnecessary, we consider that a 1:1 ratio, which is above the median award, is a fair upper limit in such maritime cases."  The defendant in Line v. Ventura, No. 1070736 (Ala. May 22, 2009), argued that the .65:1 ratio that the United States Supreme Court identified in Baker established a constitutional limit on punitive damages, and he asked the Alabama Supreme Court to apply that ratio to reduce the $550,000 punitive damages award against him in light of the jury's $200,000 compensatory damages award.  The Alabama Supreme Court noted that Baker did not address constitutional limit on punitive damages.  The Court explained, "[w]e reject Line's argument in light of the Baker Court's explicit limitation of its holding to federal maritime common law. The appropriate standard for considering the excessiveness of the punitive-damages award is set out in State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), and BMW of North America v. Gore, 517 U.S. 559 (1996)."  Applying the criteria from Gore and Campbell,  the Court affirmed the $550,000 punitive damages award:  "[t]his case presents an example of a conscious disregard of fiduciary duty that resulted in financial losses to a minor who was certainly financially vulnerable. Those losses, and this controversy, were not a mere accident. Under these circumstances we will not hold the trial court in error for refusing to grant the remittitur."      

Full post as published by Alabama Appellate Watch on June 02, 2009 (boomark / email).