More on the Oregon Supreme Court's Opinion in Goddard
As reported earlier by Mike Aylward below, the Oregon Supreme Court ruled on Thursday that the maximum constitutionally acceptable punitive damages award is four times the amount of compensatory damages. The case, Goddard v. Farmers Insurance Co. of Oregon, concerns Farmers’ claims handling with respect to a car accident that occurred in 1987and the resultant wrongful death action filed against Farmers’ insured. Farmers undertook the insured’s defense but failed to settle Goddard’s wrongful death action within policy limits, after which a jury returned a verdict that resulted in a judgment against the insured for $863,274. The insured, who asserted that Farmers’ failure to settle was an act of bad faith, assigned his bad faith claim to Goddard who prosecuted the action and obtained an $863,274 compensatory damages award at trial along with an award of $20,718,576 in punitive damages. The Court of Appeals reduced the punitive damages award finding that the punitive damages award was grossly excessive and therefore unconstitutional under the Due Process Clause. As Mike outlines below, the Oregon Supreme Court affirmed the Court of Appeals finding that a ratio of 4:1 was constitutionally acceptable.
In making its decision, the court reviewed the “guideposts” recited by the US Supreme Court in BMW of North America, Inc. v. Gore, 517 US 559, 568 (1996) and State Farm Mut. Ins. Co. v. Campbell, 538 US 408 (2003), in analyzing punitive damages awards for excessiveness. Of particular note is the court’s determination that the 4:1 ratio was appropriate in this case as opposed to the recent $79.5 million punitive damages award it upheld several weeks ago which is summarized in our prior post concerning the Williams v. Phillip Morris case. The court specifically stated that an award that exceeds the single-digit ratio may be acceptable in a “few narrow circumstances” including when “extraordinarily reprehensible” conduct is involved such as the conduct in Williams. The court referenced the fact that only economic harm was present in this case and Farmers’ conduct was not comparable to the conduct of Phillip Morris’ “50-year campaign to delude a large part of the population of Oregon about the potentially devastating physical effects of smoking its products.” The court ultimately determined that the 4:1 ratio was constitutionally permissible and directed remand for a new trial unless the plaintiff agreed to remittitur of punitive damages to four times the compensatory damages award. This is not likely to be the court’s last take on what is a constitutionally permissible punitive damages award.
