write out the FACTS/ISSUE/RULING and REASONING

Page 1 > of 3 ........ ZOOM + whereas every other state allows such a review. It was Oregon's denial of judi- cial review of the amount of punitive damages that the high court said violated the Due Process Clause. Because of its unusual facts. Honda r. Oberg was not very instructive as to when punitive damages are so excessive as to violate due process. In the following case. the Supreme Court finally set forth a workable test. CASE 12-1 BMW of North America, Inc. v. Gore, Jr. United States Supreme Court 116 S. Ct. 1589 (1995) Plaintiff Ira Gore, Jr., brought an action against BMW's For that reason, the federal excessiveness inquiry American distributor and the dealer who had sold him appropriately begins with an identification of the state in- a car, alleging that the dealer's failure to disclose that the terests that a punitive award is designed to serve. We there car had been repainted after being damaged before delive fore focus our attention first on the scope of Alabama's ery constituted suppression of a material fact. The failure legitimate interests in punishing BMW and deterring it to notify the plaintiff was consistent with the company from future misconduct. policy not to advise its dealers, and hence the dealers No one doubts that a State may protect its citizens by customers, of predelivery damage to new cars when the prohibiting deceptive trade practices and by requiring au- cost of repair amounted to less than 3 percent of the car's tomobile distributors to disclose presale repairs that affect suggested retail price. The jury returned a verdict finding the value of a new car. But the States need not, and in fact BMW liable for compensatory damages of $4.000. In ad- do not, provide such protection in a uniform manner. That dition. the jury assessed $4 million in punitive damages. diversity demonstrates that reasonable people may dis- based on a determination that the nondisclosure policy agree about the value of a full disclosure requirement. constituted "gross, oppressive or malicious" fraud. The We may assume, arguendo, that it would be wise for Alabama circuit court affirmed. The distributor and man every State to adopt Dr. Gore's preferred rule, requiring ufacturer appealed. The Alabama Supreme Court condi- full disclosure of every presale repair to a car, no matter tionally affirmed the punitive damages award after how trivial and regardless of its actual impact on the value reducing it to $2 million. of the car. But while we do not doubt that Congress has am ple authority to enact such a policy for the entire Nation. Justice Stevens it is clear that no single State could do so, or even impose its own policy choice on neighboring States. Similarly, one The Due Process Clause of the Fourteenth Amendment pro- State's power to impose burdens on the interstate market hibits a State from imposing a "grossly excessive" punish- for automobiles is not only subordinate to the federal ment on a tortfeasor. The question presented is whether a power over interstate commerce, but is also constrained $2 million punitive damages award . . . exceeds the consti- by the need to respect the interests of other States. We tutional limit. think it follows from these principles of state sovereignty Punitive damages may properly be imposed to further and comity that a btate may not impose economic sanc a State's legitimate interests in punishing unlawful con- tions on violators of its laws with the intent of changing duct and deferring its repetition. In our federal system. the tortfeasors' lawful conduct in other States. States necessarily have considerable flexibility in deter- The award must be analyzed in the light of the same mining the level of punitive damages that they will allow conduct, with consideration given only to the interests of in different classes of cases and in any particular case. Alabama consumers, rather than those of the entire Na- Most States that authorize exemplary damages afford the tion. When the scope of the interest in punishment and jury similar latitude, requiring only that the damages deterrence that an Alabama court may appropriately con- awarded be reasonably necessary to vindicate the State's sider is properly limited, it is apparent for reasons that we legitimate interests in punishment and deterrence. Only shall now address that this award is grossly excessive. when an award can fairly be categorized as "grossly ex- Elementary notions of fairness enshrined in our constitu- cessive" in relation to these interests does it enter the zone tional jurisprudence dictate that a person receive fair no- of arbitrariness that violates the Due Process Clause of the tice not only of the conduct that will subject him to Fourteenth Amendment. punishment but also of the severity of the penalty that aPage of 3 ZOOM + CHAPTER 12 . The Law of Torts '/ 313 State may impose. Three guideposts, each of which indi- Finally, the record in this case discloses no deliberate cates that BMW did not receive adequate notice of the false statements, acts of affirmative misconduct, or con magnitude of the sanction that Alabama might impose for cealment of evidence of improper motive. adhering to the nondisclosure policy, lead us to the con- We accept, of course, the jury's finding that BMW sup- clusion that the $2 million award against BMW is gros material fact which Alabama law obligated it to excessive: the degree of reprehensibility of the nondisclo- communicate to prospective purchasers of repainted cars sure; the disparity between the harm or potential harm suf- sion of a material fact may be less fered by Dr. Gore and his punitive damages award; and the reprehensible than a deliberate false statement, particu- difference between this remedy and the civil pen larly when there is a good faith basis for believing that no thorized or imposed in comparable cases, duty to disclose exists. That conduct is sufficiently repre- Perhaps the most important indicium of the reason- ability, and even a modest ableness of a punitive damages award is the degree of rep- award of exemplary damages, does not establish the high rehensibility of the defendant's degree of culpability that warrants a substantial punitive stated nearly 150 years ago, exemplary damages imposed damages award. Because this case exhibits none of the cir- on a defendant should reflect "the enormity ordinarily associated with egregiously im- Thus, we have said that "nonviolent crimes are less serious proper conduct, we are persuaded that BMW's conduct than crimes marked by violence or the threat of vi was not sufficiently reprehensible to warrant imposit Similarly, "trickery and deceit" are more reprehensible than a $2 million exemplary damages award. negligence. The second and perhaps most commonly cited indi- "In this case, none of the aggravating factors associated cium of an unreasonable or excessive punitive damages with particularly reprehensible conduct is it. The award is its ratio to the actual harm inflicted on the plain- harm BMW inflicted on Dr. Gore was purely economic in tiff. The principle that exemplary damages must bear a rea- nature. The presale refinishing of the car had no effect on sonable relationship to compensatory damages has a long its performance or safety features, or even its pedigree. ance for at least nine months after his purchase. BMW's In Haslip we concluded that even though a punitive conduct evinced no indifference to or re damages award of "more than four times the amount of for the health and safety of others. To be sure, infliction compensatory damages" might be "close to the line," it did of economic injury, especially al impropri- through affirmative acts of misconduct, or when the ety. TXO refined this analysis by confirming that the proper get is financially vulnerable, can w inquiry is. penalty. But this observation does not convert all acts that tween the punitive damages award and the harm likely to cause economic harm into torts that are sufficiently rep- result from the defendant's conduct as well as the harm that rehensible to justify a significant san addition to actually has occurred." Thus, in upholding the $10 compensatory damages. award in TXO, we relied on the difference between that fig- Dr. Gore contends that BMW's conduct was particularly ure and the harm to the victim that wou reprehensible because nondisclosure of the repairs to his the tortious plan had succeeded. That difference suggested car formed part of a nationwide pattern of torti duct. Certainly, evidence that a defendant has repeatedly The $2 million in punitive damages awarded to Dr. Gore engaged in prohibited conduct while knowing or suspect- by the Alabama Supreme mes the amount of ing that it was unlawful would provide relevant support for his actual harm as determined by the jury. Moreover, there an argument that suving medicine is required to cure the is no suggestion that Dr. Gore or any other BMW purchaser defendant's disrespect for the law: was threatened with any additional potential harm by Dr. Gore's second argument for treating BMW as a re- BMW's nondisclosure policy. The disparity in this case is cidivist is that the company should have ant thus dramatically greater than those considered in Hastip actions would be considered fraudulent in some, if not all. and TXO. jurisdictions. This contention overloc Of course, we have consistently rejected the notion that tionable fraud requires a material misrepresentation or the constitutional line is marked by a simple mathematical omission. This qualifier invites line formula, even one that compares actual and potential dam- engaged in by States with disclosure statutes and by BMW. ages to the punitive award. Indeed, low awards of com- We do not think it can be disp may properly support a higher ratio nor imperfections in the finish of a new car that can be re- than high compensatory awards, if, for example, a particu- paired (or indeed, left unrepair materially larly egregious act has resulted in only a small amount of affecting the car's value. There is no evidence that BMW economic damages. A higher ratio may also be justified in acted in bad faith when it sought to e cases in which the injury is hard to detect or the monetary priate line between presumptively minor damage and dam- value of noneconomic harm might have been difficult to age requiring disclosure to purchasers. For this purp determine. BMW could reasonably rely on state disclosure statutes for Comparing the punitive damages award and the civil or guidance. In this regard, it is also sig that there is no criminal penalties that could be imposed for comparable evidence that BMW persisted in a course of conduct after misconduct provides a third indicium of excessiveness. [A] it had been adjudged unlawful on even one occasion, let reviewing court should "accord "substantial deference' to alone repeated occasions. legislative judgments concerning appropriate sanctions forPage