BMV v. Gore - Case brief PDF

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Punitive Damages I.

BMW of North America, Inc. v. Gore a. Facts: Gore purchased a BMW sports sedan for forty thousand dollars from an authorized BMW dealer in Alabama. Nine months later, he found his car had been repainted by BMW and sued for suppression of a material fact and asked for $500,000 in compensatory and punitive damages. BMW acknowledged that it had a nationwide policy that if a car was damaged in the course of manufacturing and the cost of repairing the damage exceeded 3 percent of the car’s retail price, the car would be sold as used. If the repair cost did not exceed 3 percent of the suggested retail price, it would be sold as new without advising the dealer that any repairs had been made. The cost of repainting Gore’s car was only 1.5 percent of the retail price, repainted and sold to plaintiff as new. Gore asserted that the repainted car was worth less than a car which had not been refinished and thus was awarded $4,000 in compensatory damages. For punitive damages, Gore introduced evidence of BMW selling 983 refinished cars since 1983 (only 14 were sold within Alabama) without disclosing that the cars had been repainted. The plaintiff was awarded punitive damages in the amount of $ 4 million, which the Alabama Supreme Court reduced to $ 2 million. b. Issue: Whether a $2 million punitive damages award to the purchaser of one car exceeds the constitutional limit created by the Due Process Clause of the 14th Amendment which prohibits a State from imposing a “grossly excessive” punishment on a tortfeasor. c. Rule: Punitive damages may be imposed for the purpose of deterring unlawful conduct, but such damages shall not be grossly excessive punishments on tortfeasors (protected by the Fourteenth Amendment's due process) The following three "guideposts" are to be used by a reviewing court in determining whether a punitive damages award is constitutionally excessive: (1) the degree of reprehensibility of the defendant's conduct; (2) the ratio between the plaintiff's award of compensatory damages and the amount of the punitive damages; and (3) the difference between the punitive damages award and the civil or criminal sanctions that could be imposed for comparable misconduct. d. Analysis:  By attempting to alter BMW’s nationwide policy, Alabama would be infringing on the policy choices of other states. Alabama does not have the power, however, to punish BMW for conduct that was lawful where it occurred and that had no impact on Alabama or its residents. One state cannot impose economic sanctions on violators of its laws with the “intent of changing the tortfeasor’s lawful conduct in other States.”  In addition, the Court gave three guideposts for reviewing punitive damages: 1. the degree of reprehensibility of the defendant’s misconduct,  The non-disclosure caused only minor economic harm to the Respondent and provided no harm to the health and safety

of others. Therefore, the reprehensibility was low. 2. the ratio of punitive damages to actual damages  (here the amount of punitive damages awarded is 500 times the compensatory damages  punitive damage award of $ 2 million was excessive where the plaintiff sustained only $ 4,000 in actual damages when he purchased a car without notice the car had been repainted prior to sale. 3. the difference between punitive damages awarded by the jury and civil penalties authorized or imposed in comparable cases (civil penalties that could be levied for this kind of behavior)  he $2 million economic sanction imposed on BMW is substantially greater than the statutory fines available in Alabama and elsewhere for similar malfeasance.  here, Alabama’s Legislature authorizes a maximum $2,000 penalty of $2,000 through its Deceptive Trade Practices Act. In Alabama, there were only 14 violations). e. Conclusion: The purpose of punitive damages is for a state to further its legitimate interests in punishing unlawful conduct and deterring the repetition of unlawful conduct. This is a constitutional exercise of state police power. However, when an award of punitive damages can be characterized as “grossly excessive” in relation to a state’s interests, it risks becoming arbitrary and violates the Due Process Clause of the Fourteenth Amendment....