Necessary Protection: An Examination of the State Farm v. Campbell Standards Test and Why Economically Efficient Rules Do Not Work at the Intersection Between Due Process and Punitive Damages
This paper analyzes recent Supreme Court precedent curtailing the level of punitive damages awardable to plaintiffs through application of a balancing test predicated on the Due Process Clause of the Fourteenth Amendment. The author tracks the Supreme Court cases leading up to BMW v. Gore, the case in which the Supreme Court laid down its guidelines for examining punitive damages awards, and continues by providing detailed analysis of the next major judicial excursion into the punitive damages and due process intersection, State Farm v. Campbell.
The author urges the need for BMW/State Farm test, emphasizing the general trend towards higher awards and the many problems caused by these often excessive awards. More specifically, it is the author’s position that the BMW/State Farm test: a) adequately protects a defendant’s due process rights in providing him with the requisite notice regarding wrongful conduct and the potential sanctions that flow from such conduct; b) contrary to some contentions has not abrogated state control over punitive awards; c) has not eviscerated the power of punitive damages by couching such awards in terms of the harm to the individual plaintiff but rather, allows punitive damages to remain a powerful jurisprudential tool and; d) does not mandate a single-digit ratio between punitive and compensatory awards.
Furthermore, the author refutes the argument that the BMW/State Farm test ignores the economic reality of litigation through its use of a balancing analysis rather than some bright-line mathematical formula contending, instead, that a mathematical approach to punitive awards is infeasible given the circumstantial analyses that both due process and the imposition of punitive damages awards require. The author concludes his analysis with an examination of the BMW/State Farm test in light of the long-running rules versus standards debate, positing here that bright-line rules would effect arbitrary and capricious punitive awards thereby further violating the defendant’s due process. Moreover, the author contends, a standards test effects the only means of adequately balancing the many contending forces where due process and punitive awards intersect.