Supreme Court strikes down punitive award; judicial review required.

After twice upholding punitive damages verdicts against constitutional challenge in recent years, the U.S. Supreme Court in June sided with Honda Motor Co. and struck down a punitive award because it had not been subject to judicial review. (Honda Motor Co. v. Oberg, No. 93-644, 1994 WL 276687 (U.S. June 24, 1994).)

The case came from Oregon, where an amendment to the state constitution prohibits courts from reviewing the amount of punitive damages awarded "unless the court can affirmatively say there is no evidence to support the verdict." Oregon is the only state that does not provide judicial review of punitive awards.

In a 7-2 decision, the justices held that the lack of review of the award against Honda violated the company's due process rights. "Punitive damages pose an acute danger of arbitrary deprivation of property.... Judicial review of the amount awarded was one of the few procedural safeguards which the common law provided against that danger," Justice John Paul Stevens wrote for the majority. "Oregon has removed that safeguard without providing any substitute procedure and without any indication that the danger of arbitrary awards has in any way subsided over time."

The Court overruled the Oregon Supreme Court, which last year upheld the punitive damages awarded to Karl Oberg, a Salem man who was injured when his Honda all-terrain vehicle overturned on him while he was driving up an embankment. The Oregon court held that other measures used in the state--including detailed jury instructions and a requirement of clear and convincing evidence for punitive damages--protect defendants adequately against excessive awards. (Oberg v. Honda Motor Co., 851 P.2d 1084 (Or. 1993).)

The U.S. Supreme Court disagreed, saying that Oregon's deviation from the long-established common law principle of judicial review "raises a presumption that its procedures violate the Due Process Clause."

Justice Stevens expressed concern that "a guilty party may be unjustly punished" because Oregon courts can throw out awards only when there is no evidence to support any punitive damages at all. "Oregon, unlike the common law, provides no assurance that those whose conduct is sanctionable by punitive damages are not subject to punitive damages of arbitrary amounts," he wrote. The justices also briefly noted their fear that "juries will use their verdicts to express biases against big business, particularly those without strong local presences."

Justice Ruth Bader Ginsburg, joined by Chief Justice William Rehnquist, dissented, saying that Oregon's pre-verdict procedures provide adequate protection against arbitrary punitive awards. They said Oregon's procedures meet the due process requirements the Court outlined in Pacific Mutual Life Insurance Co. v. Haslip (499 U.S. 1 (1991)) and TXO Production Corp. v. Alliance Resources Corp. (113 S. Ct. 2711 (1993)).

Ginsburg cited an Oregon law that sets out seven criteria for juries to examine in considering whether to award punitive damages. "These substantive criteria, and the precise instructions detailing them, gave the jurors 'adequate guidance' in making their award, far more guidance than their counterparts in Haslip and TXO received," she wrote.

Kenneth Chesebro, a Cambridge, Massachusetts, attorney who helped write an amicus brief on behalf of Oberg, said the decision would not significantly limit punitive damages because it requires only minimal post-verdict review by judges. "The most that can be constitutionally required is for the judge to review the evidence and see that what the jury did was rational," he said.

Chesebro acknowledged that "it would have been nice" if the Court had agreed with Oberg that the rationality of the verdict had been guaranteed by Oregon's pre-verdict procedures. But he noted that the Court declined to adopt the more rigorous scrutiny of punitive damages that the defense had sought.

"I consider that a substantial achievement" he said.