Case brief summary
Due process stops states from punishing a company with punitive damages so large they're way out of line with the state's real interest in punishing and discouraging bad conduct.
Facts
BMW secretly repainted a car before selling it, following a policy of not disclosing minor damage repairs. The buyer sued and won $4,000 in actual damages plus $4 million in punitive damages.
Procedural history
The trial judge kept the $4 million award. Alabama's Supreme Court upheld it but cut it to $2 million, since the jury wrongly counted BMW's nationwide sales instead of just Alabama's. BMW appealed further.
Issue
Did the two million dollar punitive damages award violate due process because it was grossly excessive compared to Alabama's legitimate interest in punishing BMW's conduct within the state?
Holding
Yes, the two million dollar punitive damages award was grossly excessive and violated due process, so the judgment was reversed and sent back to the Alabama courts to decide the proper remedy.
Reasoning
States can only punish for harm to their own citizens, not nationwide conduct. Weighing how harmful the conduct was, how the award compared to actual harm, and similar penalties elsewhere, the Court found the $2 million award excessive and unfair.
Opinions
Majority (Stevens): A punitive damages award must be judged only by harm to in-state consumers, and this two million dollar award was grossly excessive and unconstitutional.
Concurrences (Breyer): Agreed the award lacked meaningful standards to guide the jury and failed to give BMW fair notice of the possible penalty.
Dissent (Scalia): The Constitution does not give federal courts power to second-guess the size of state court punitive damages awards as excessive.
Dissent (Ginsburg): The Court wrongly turned itself into a national board reviewing state punitive damages instead of leaving this to state courts and legislatures.