Constitutional Limits of Punitive Damages Awards
By Gino J. Rossini • Dec 14, 2022 • In Dallas Bar Association Headnotes
Texas-sized punitive damages findings have grabbed the headlines, recently including $7 billion against Spectrum (Charter Communications) and $45.2 million against Alex Jones. This article provides an overview of the constitutional limits of punitive damages awards to aid the practitioner in obtaining, defending, keeping, or overturning an award. It does not address any particular case, whether punitive damages are authorized for a particular cause of action, or any statutory considerations, including those in
the Texas Damages Act, when awarding punitive damages.
In 1996, the U.S. Supreme Court in BMW of North America, Inc. v. Gore provided three standards, or “guideposts,” that should be used when determining whether the size of a punitive damages award violates a defendant’s substantive due process rights: (1) the reprehensibility of the defendant’s conduct; (2) the ratio of punitive damages to the actual harm inflicted on the plaintiff; and (3) the comparability of punitive damages and other civil or criminal penalties that could be imposed for comparable misconduct.
(1) Reprehensibility. This is perhaps the most important guidepost, and is measured based upon the following five, nonexclusive factors:
- Whether the harm caused was physical as opposed to economic. The degree of harm suffered may also be considered.
- Whether the tortious conduct demonstrated an indifference to or a reckless disregard for the health or safety of others.
- Whether the target of the conduct was financially vulnerable.
- Whether the conduct involved repeated actions or was an isolated incident. Repeated conduct known or suspected to be unlawful is more reprehensible.
- Whether the harm was the result of intentional malice, trickery, or deceit, or of mere accident. Evidence of deliberate false statements, acts of affirmative misconduct, or concealment of evidence of improper motive may also be relevant.
The existence of any one of these factors may not be sufficient to sustain a punitive damages award; the more factors that the evidence supports, the more likely it is that an award will be upheld.
(2) Ratio. This guidepost considers the ratio of the punitive damages to the actual harm inflicted on, or that was likely to result to, the plaintiff, usually but not necessarily measured in terms of the actual damages award. Courts reject a simple mathematical formula for determining an appropriate or excessive ratio. Correlation to the number of reprehensibility factors present, whether the actual damages suffered were nominal or substantial, and any particularly egregious characteristics of the defendant’s behavior
should be considered.
Courts have signaled that, in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process. By way of guidance, a ratio of 4.41:1 has been upheld with two reprehensibility factors and evidence of egregious conduct present. A higher ratio may be supported with lower actual damages resulting from a particularly egregious act, and a lessor ratio may be appropriate with larger compensatory damages. Review must be based upon a case-specific inquiry of the defendant’s conduct and the harm to plaintiff.
(3) Comparability. This guidepost compares the size of the punitive damages award and the civil or criminal penalties that could be imposed for comparable misconduct,
allowing the court to give deference to legislative judgments concerning appropriate sanctions for the conduct at issue. Personal injury and wrongful death, however, do not readily lend themselves to a comparison with statutory penalties. In Owens-Corning Fiberglas Corp. v. Malone, the Texas Supreme Court framed the relevant question in such cases as whether the defendant, an asbestos manufacturer/supplier, had reasonable notice at the time that its failure to provide the warnings at issue could result in substantial punishment in the form of punitive damages.
Adequate evidentiary support for a punitive damages award. Before the U.S. Supreme Court addressed constitutional limits of punitive awards, the Texas Supreme Court separately held that a punitive damages award must be reasonably proportional to actual damages. The following factors enumerated in Alamo National Bank v. Kraus provide a framework for analysis under a factual sufficiency review: (1) the nature of the wrong, (2) the character of the conduct involved, (3) the degree of culpability of the wrongdoer, (4) the situation and sensibilities of the parties concerned, and (5) the extent to which such conduct offends a public sense of justice and propriety. These factors are used in Texas Pattern Jury Charge 28.7. 29.7, 30.4, 85.3 and 115.38.
Determination of the excessiveness of damages as a factual matter in Texas is final in the courts of appeals. The constitutionality of exemplary damages (discussed above) is a legal question the Texas Supreme Court may review. The Court also has jurisdiction to determine whether the courts of appeals reviewed factual inquiries under the proper framework. To facilitate this review, courts of appeals must explain why the evidence does or does not support the exemplary damages amount considering each of the Kraus factors.