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U.S. SUPREME COURT AFFIRMS $10 MILLION PUNITIVE DAMAGES AWARD

 WASHINGTON, June 25 /PRNewswire/ -- By a vote of six to three, the U.S. Supreme Court has affirmed a $10 million punitive damages award, where there were only $19,000 in actual damages, in TXO Production Corp. v. Alliance Resources Corp., et. al. (No. 92-479).
 In it's opinion, the court determined that this particular award was not "grossly excessive" because TXO's scheme to defraud was part of a larger pattern of fraud, trickery and deceit and could have created million or even multi-million harm. The court declined to develop standards or a "mathematical bright line between constitutionally acceptable and constitutionally unacceptable" rules that would fit every case.
 However, Justice Kennedy, concurring in part and concurring in the judgment, wrote, "when a punitive damages award reflects bias, passion, or prejudice by the jury, rather than a rational concern for deterrence and retribution, the Constitution has been violated, no matter what the absolute or relative size of the award."
 According to liability expert Victor Schwartz, author of the principal Amicus brief for the business community, "the Court maintained that the Constitution provides at least some check on excessive damages. Its reluctance to set precise rules leaves that task to legislatures and lower courts. There is no doubt that punitive damages have and will continue to run wild.
 "The serious nature of TXO's fraudulent conduct was found to justify this award. Unfortunately, punitive damages are often imposed when a company's conduct has not been wrongful and when the harm it has caused is not great. That is when the Constitution must provide protection. The court's decision signals the need for state legislatures and courts to establish fair and predictable rules for punitive damages," Schwartz concluded.
 In dissenting, Justice O'Connor, joined by Justices White and Souter, believed the $10 million punitive damages award exceeded constitutional bounds. Referring to the court's previous decision in Pacific Mutual Life Insurance Co. v. Haslip, (499 U.S. 1 (1991)), O'Connor wrote, "This court held out the promise that punitive damages awards would receive sufficient constitutional scrutiny to restore fairness in what is rapidly becoming an arbitrary and oppressive system ... The (majority's) opinion erects not a single guidepost to help other courts find their way through this area."
 Punitive damages are awarded to punish a defendant for misconduct and to deter that misconduct in the future. Punitive damages are separate from awards for compensatory (out-of-pocket) or pain and suffering damages.
 -0- 6/25/93
 /CONTACT: Rose Marshall of Legal PR for Punitive Damages Update, 703-538-6977/


CO: Punitive Damages Update ST: District of Columbia IN: SU:

KD-DS -- DC029 -- 5892 06/25/93 17:16 EDT
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Publication:PR Newswire
Date:Jun 25, 1993
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