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Punitives should reflect actual loss, ATLA argues.

ATLA members continue to deal with defense efforts to capitalize on the U.S. Supreme Court's 2003 decision in State Farm Mutual Automobile Insurance Co. v. Campbell. Justice Anthony Kennedy suggested that "in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages" will satisfy due process. Defendants have seized on this dictum to shield themselves against jury verdicts based on the facts.

An example is Simon v. San Paolo U.S. Holding Co., a California case in which the plaintiff alleged that he was defrauded in a real estate deal. (No. S121933 (Cal. filed Oct. 8, 2004).) Although the deal that went sour would have yielded a $400,000 profit for Simon, California law limited his recovery to his out-of-pocket expenses: $5,000. However, the jury also awarded punitive damages of $1.7 million. The defendant is arguing in the California Supreme Court that the 340-to-1 ratio violates due process.

In October, ATLA filed an amicus curiae brief, prepared by Jeffrey White of the Center for Constitutional Litigation, arguing that when assessing punitive damages the appropriate comparison is with the plaintiff's $400,000 actual loss.

Courts have reviewed punitive damages for excessiveness--at least since their inception in English law and throughout the 19th century--by looking for a reasonable relationship to the actual harm done to the plaintiff, not to the compensatory award. In fact, courts often upheld punitive damages precisely because compensatory damages in that era did not fully compensate a plaintiff for intangible harms such as emotional distress or outrage.

The law today generally aims to make the plaintiff whole. In such cases, the jury's compensatory award is a reliable measure of the harm the defendant caused. But in some instances compensatory damages undervalue the actual harm--for example, in wrongful-death or injury cases where tort "reform" statutes cap damages.

In such cases, due process does not limit the court to a ratio of punitive to compensatory damages, but allows it to ask whether the relationship between punitive damages and the actual harm to the plaintiff is reasonable. ATLA is arguing that this reasoning applies in Simon.
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Title Annotation:Association of Trial Lawyers of America
Publication:Trial
Date:Dec 1, 2004
Words:350
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