What Arguments Can I Use to Challenge a Punitive Damages Award on Appeal?
May 20, 2020
Courts often assess punitive damages, also known as exemplary damages, against defendants who engaged in egregious behavior. The purpose of punitive damages is to punish misconduct and deter future misconduct.
Unlike compensatory damages, plaintiffs cannot recover punitive damages as a matter of right. The jury has discretion over the amount of the punitive damages’ award, or whether to award anything at all. The punitive damages award does not compensate a plaintiff for his or her injuries, but instead focuses entirely on punishment and deterrence.
Not surprisingly, defendants will often challenge an award of punitive damages on appeal, particularly when facing a large award. Importantly, if you have just received a punitive-damages award against you, contact appellate counsel right away, so your post-trial briefing preserves the right arguments on appeal.
Below are the primary arguments that defendants argue on appeal against a punitive damages award:
Was a Recovery Made Under a Tort Theory or Statute that Permits Punitive Damages?
State laws often limit punitive damages to either tort claims or claims under specific statutes. Thus, a court that allows punitive damages for a claim that is neither in tort nor expressly permitted by statute commits legal error. Whether a plaintiff can recover punitive damages for a breach of contract claim varies based on the jurisdiction.
Additionally, many states do not allow a finding of simple negligence to support a punitive damages award. Thus, a defendant might challenge a punitive damages award by arguing that the theory under which the plaintiff prevailed does not support punitive damages.
Were Compensatory Damages Awarded?
In many jurisdictions, punitive damages are inappropriate if there was no award of compensatory damages. Many appellate courts have ruled that a simple liability finding without an award of compensatory damages is not enough to support a punitive damages award. For example, in Cheung v. Daley, a California appellate court restated an earlier California Supreme Court ruling that actual damages must be found to award punitive or exemplary damages.
Plaintiff’s Request for Punitive Damages
In many courts, a plaintiff must request punitive damages in the complaint. If there is no prayer for punitive damages in the pleadings before trial, an appellate court may reverse a punitive damages award.
Common Law Excessiveness
It is possible to challenge a punitive damages award on the basis that it is excessive under common law. The standard for making this determination varies somewhat by state, but generally a punitive damages award may be found excessive under common law if it exceeds an amount justified by the evidence or is a result of bias or prejudice.
Constitutional Due Process Challenges
Large punitive damages awards may implicate federal constitutional standards. Defendants frequently challenge these damage awards in appellate courts as excessive under the Fourteenth Amendment’s Due Process Clause, both substantively and procedurally (more on this below).
Substantive Due Process
Under a substantive due process theory, the defendant asks the Court to examine the punitive damages award itself: whether the government has an adequate basis for taking away someone’s property. A court can review the size of a punitive damages award under a substantive due process analysis. The court will look at whether the award is excessive, asking whether it does more than what is justified by the government’s interest in punishing and deterring misconduct.
Under BMW of North America, Inc. v. Gore, the U.S. Supreme Court found that there were three constitutional guideposts for analyzing whether a punitive damages award is excessive under the Due Process Clause. These are (1) how reprehensible the defendant’s conduct was, (2) the disparity between the harm experienced by the plaintiff and the punitive damages award, and (3) the difference between the punitive damages award and the civil penalties and remedies imposed in similar cases. The most important of these guideposts is the reprehensibility of the defendant’s actions. Larger punitive damages awards may be justified if there are aggravating factors, such as intentional misconduct, repeated misconduct, fraudulent conduct, concealment of evidence or lying, misconduct by a fiduciary, or a continuing course of misconduct.
In State Farm Mut. Automobile Ins. Co. v. Campbell, the U.S. Supreme Court held that a punitive damages award of $145 million was excessive and violated the Due Process Clause when the compensatory damages were $1 million. Although it declined to impose a bright-line rule, the Court reasoned that few punitive damages awards that significantly exceed a single-digit ratio between punitive and compensatory damages will satisfy due process.
Procedural Due Process
Procedural due process looks at the fairness of the procedures used to impose punitive damages against a defendant. In other words, a procedural due process analysis is concerned with whether there was fair notice and a fair hearing, and whether the procedures used to impose punitive damages were fair. Even when punitive damages are not substantively excessive, they can be unconstitutional if they are imposed without proper procedures.
The appellate court will review several factors in a procedural due process challenge to punitive damages, including, for example, whether there were adequate instructions to the jury on punitive damages that made clear the purpose of punitive damages.
The consequences of whether a punitive damages award violates substantive or procedural due process are different. If the court holds that the damages award violates substantive due process, that specific award is unconstitutional, and the consequences of the finding are restricted to that award.
But if a court finds a procedural due process violation, any punitive damages award rendered under those procedures is defective.