BMW of North America, Inc. v. Gore - 517 U.S. 559 (1996)

BMW of North America, Inc. v. Gore

517 U.S. 559 (1996)

I. Issue

Whether a $2 million punitive damages award to the purchaser of one of the cars exceeds the constitutional limit.

II. Fact

P bought a car that had been unknowingly repainted from D.  P found the evidence after nine months from the purchase.  D had adopted a nationwide policy in 1983 concerning cars that were damaged in the course of manufacture or transportation.  If the repair cost did not exceed 3 percent of the suggested retail price, the car was sold as new without advising the dealer that any repairs had been made.  To support his claim for punitive damages, P introduced evidence that since 1983 BMW had sold 983 refinished cars as new, without disclosing that the cars had been repainted before sale.

III. Procedure

The jury returned a verdict finding BMW liable for compensatory damages of $4,000 and punitive damages of $4 million, based on a determination that the nondisclosure policy constituted "gross, oppressive or malicious" fraud.  D filed a post-trial motion to set aside the punitive damages award.  The trial judge denied D's post-trial motion, and the Alabama Supreme Court also rejected BMW's claim that the award exceeded the constitutionally permissible amount.  However, the court found that the jury improperly computed the amount of punitive damages by multiplying P's compensatory damages by the number of similar sales in other jurisdictions.  The court ordered remittitur in $2 million.  

IV. Reasoning

Punitive damages may properly be imposed to further a Sate's legitimate interests in punishing unlawful conduct and deterring its repetition.  P argued that the large punitive damages award was necessary to induce BMW to change the nationwide policy, but by attempting to alter BMW's nationwide policy, Alabama would be infringing on the policy choices of other States.  The award must be analyzed in the light of conduct that occurred within Alabama, with consideration given only to the interests of Alabama consumers.

Elementary notions of fairness enshrined in our constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose.  Three guideposts lead us to the conclusion that the $2 million award is grossly excessive: the degree of reprehensibility of the nondisclosure the disparity between the harm or potential harm suffered by P and his punitive damages award; and the difference between this remedy and the civil penalties authorized or imposed in comparable cases.  

V. Holding

The award is grossly excessive.  REVERSED and REMANDED.