In discussing potential settlements for clients seeking compensation for injuries, especially those which are life-altering, or have resulted in the death of a loved one, New Hampshire lawyers are often questioned about large, multimillion-dollar verdicts or settlements. In most cases, those are based on awards for “punitive damages,” a category of damages which has been rejected by both the New Hampshire courts and legislature.
In the case of BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996) our United States Supreme Court, overturned a lower court award on the basis that it was so excessive that it violated the Due Process Clause of the United States Constitution. The facts of the case are a classic example of the saying that “bad facts make bad law.” Rather than a plaintiff who was horribly injured and disfigured by outrageously negligent conduct, the plaintiff in this case was a doctor who bought a new BMW, drove it for nine months without any problems, but, after taking it to a detailer to make it look “snazzier,” was informed that the car had been repainted.
Outraged, Dr. Gore returned to the dealer and learned that the repainting had not been disclosed at the time of purchase based on a BMW policy of not disclosing that a car sold as new had been repaired unless the cost of repair exceeded 3% of its retail value. In this case, the cost of repainting was approximately 1.5% of the car’s value. Dr. Gore sued BMW in Alabama state court, and the jury returned a verdict of $4,000 in “compensatory” damages, based on the reduced value of the car, and $4 million dollars in punitive damages. That amount was based on evidence that BMW had sold approximately 1,000 cars with similar repairs without disclosing them to the buyers.
The case reminds me of one I defended early in my career. We represented a local dealer which sold an Audi to a Manchester lawyer. He became upset that it did not get the advertised gas mileage. He sued the dealer, and I was assigned to defend the dealer. The case was amicably settled for far less than Dr. Gore’s recovery, because New Hampshire does not allow punitive damages and we knew a New Hampshire jury would not look favorably on the case.
The U.S. Supreme Court was not sympathetic to Dr. Gore’s case. The court recognized that a state may impose punitive damages to further its legitimate interest in punishing misconduct and deterring a repetition of that conduct. But, while a state has flexibility in determining the level of punitive damages, an award is arbitrary, and violates the Due Process Clause when that award can be fairly categorized as “grossly excessive.” The court set out three guideposts to help determine 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.
Based on the rules governing appellate review of a trial court decision, the case was sent back to the Alabama Supreme Court, which found that a fair punitive damages award was $50,000.
In a subsequent case, the Supreme Court further expanded its list of guideposts:
(1) whether the harm caused was physical as opposed to economic; (2) whether the conduct causing the plaintiff’s harm showed “indifference to or a reckless disregard of the health or safety of others;” (3) whether the “target of the conduct” was financially vulnerable; (4) whether the defendant’s conduct involved repeated actions as opposed to an isolated incident; and (5) whether the harm caused was the result of “intentional malice, trickery, or deceit, or mere accident.”
The New Hampshire courts had decided long before these cases that punitive damages intended only to punish wrongful conduct as opposed to compensating the person wronged, are not allowed. Our Supreme Court quoted language in Vratsenes v. N.H. Auto, Inc., 112 N.H. 71 (1972) “In New Hampshire, the punitive function of exemplary damages has been rejected in forceful language. ‘The idea is wrong. It is a monstrous heresy. It is an unsightly and an unhealthy excrescence, deforming the symmetry of the body of the law.’”
The court further explained that, while damages could not be used to punish conduct, if that conduct was “wanton, malicious, or oppressive, the compensatory damages for the resulting actual material loss can be increased to compensate for the vexation and distress caused the plaintiff by the character of defendant’s conduct.”
There are some exceptions to New Hampshire’s prohibition of punitive damages, where the legislature has determined that an award of compensatory damages alone would not be sufficient to deter wrongful conduct, for example violation of the consumer credit reporting laws, and violation of wiretapping and eavesdropping laws. New Hampshire’s prohibition also does not apply in cases under Federal laws such as those prohibiting racial or sexual discrimination in employment. But for the most part, Yankee frugality applies to legal awards as much as it does to other aspects of life in New Hampshire.
