Working the Unworkable Rule Established in Philip Morris: Acknowledging the Difference Between Actual and Potential Injury to Nonparties

Brigham Young University Law Review, 2007 by Agle, Daniel Sulser

Of further importance, the plurality considered all of the surrounding circumstances when looking at the reasonableness of the punitive damages award. It recognized that the award was very large; however, it commented that:

in light of the amount of money potentially at stake, the bad faith of petitioner, the fact that the scheme employed in this case was part of a larger pattern of fraud, trickery and deceit, and petitioner's wealth, we are not persuaded that the award was so "grossly excessive" as to be beyond the power of the State to allow.93

Additionally, Justice Kennedy, concurring with this part of the plurality opinion, explained that "it was rational for the jury to place great weight on the evidence of TXO's deliberate, wrongful conduct in determining that a substantial award was required in order to serve the goals of punishment and deterrence."94 In light of the foregoing analysis, the Court affirmed the decision of the Supreme Court of Appeals of West Virginia, thereby upholding the entire punitive damages award despite the fact that it represented a 526:1 ratio of punitive to compensatory damages.95

2. BMW: Guideposts offered to determine constitutionality

In 1996, the Supreme Court decided BMW v. Gore, another case dealing with the award of substantial punitive damages.96 BMW provided the Court with an opportunity to clarify two parts of its constitutional analysis that prove useful in obtaining an understanding of its decision in Williams: reprehensibility and ratio.

a. Facts. In BMW, the Court was faced with a disgruntled Alabama consumer. In early 1990, Mr. Gore purchased a brand new BMW from an authorized dealer; however, nine months later Mr. Slick-the man providing Gore with car customization services-informed Gore that the BMW had previously been repainted.97 Shortly thereafter, Gore filed suit against BMW of North America alleging that "failure to disclose that the car had been repainted constituted suppression of a material fact."98

At trial, BMW acknowledged its nationwide policy to withhold information concerning repair to a car if the damage occurred during the course of manufacture or transportation and the cost of repair was less than three percent of the car's suggested retail price.99 If the cost of repair exceeded three percent of the suggested retail price, "the car was placed in company service for a period of time and then sold as used."100 Gore argued that the policy effected widespread consumer fraud and asserted that $4 million was an adequate measure for punitive damages since BMW of North America sold-nationwide-983 used cars as new.101

The jury found that BMW was liable for $4000 in compensatory damages and $4 million in punitive awards.102 The jury based its determination of punitive damages on its conclusion that BMW's nondisclosure policy "constituted gross, oppressive or malicious fraud."103 In response to this award, BMW filed a post-trial motion requesting that the punitive damages be set aside.104 Although that motion was denied,105 the Alabama Supreme Court held that the punitive damages award was inappropriate because the jury considered "acts that occurred in other jurisdictions" when calculating the amount of punitive damages it would award against BMW.106 Ultimately, the Alabama Supreme Court reduced the punitive damages award to $2 million-an amount the court considered constitutionally reasonable.107 BMW then filed a petition for certiorari and the Supreme Court granted review108 to help "illuminate 'the character of the standard that will identity unconstitutionally excessive awards' of punitive damages."109