WASHINGTON – A nonprofit, public-interest law firm and policy center has suggested the Supreme Court of Pennsylvania follow the example of the U.S. Supreme Court, and adopt a proportional cap on the subject of punitive damages.
In a June 10 amicus brief, the Washington Legal Foundation (WLF) argues the state Supreme Court should join other courts and adopt a 1:1 limit on the ratio of punitive damages to compensatory damages in all cases.
In the subject case at hand, The Bert Company v. Turk Et.Al, several employees from Northwest Insurance Services were hired by First National Insurance Agency. As a result, Northwest Insurance sued the departing employees and their new employer in the Warren County Court of Common Pleas, and received a $250,000 compensatory damages award.
Additionally, the jury also awarded Northwest $2.8 million in punitive damages – a punitive damages to compensatory damages ratio of over 11:1, plus $361,093.74 in attorney’s fees.
A divided panel from the Superior Court of Pennsylvania upheld the decision, which was appealed to the state Supreme Court.
“Almost 20 years ago, the U.S. Supreme Court said that the maximum permissible ratio of punitive damages to substantial compensatory damages may be 1:1. After that pronouncement, it capped punitive damages under maritime law to the amount of compensatory damages when the award is substantial. Many federal courts of appeals have interpreted this precedent as imposing a similar limit on punitive damages in all cases. This Court should follow these courts’ leads and limit punitive damages to the amount of substantial compensatory damages,” the WLF’s amicus brief stated, in part.
“The Superior Court’s analysis started off on the wrong track and only continued to veer further off course. If anything, the pre-revolutionary era precedent cited by the Superior Court supports a 1:1 limit on the ratio of punitive damages to substantial compensatory damages. The Superior Court then relied on U.S. Supreme Court precedent that is no longer good law. It failed to address more recent U.S. Supreme Court precedent. And when addressing State Farm v. Campbell, the Superior Court failed to analyze the most relevant part of the opinion. In short, the Superior Court’s opinion ignored relevant legal authorities and relied on inapposite authorities.”
According to the WLF, the 1:1 punitive damages cap is “the only way to ensure that companies have fair notice of their potential liability as required by the Fourteenth Amendment’s Due Process Clause” and it is why “many federal courts of appeals and state courts of last resort have taken the Supreme Court at its word and applied that cap in all cases.”
“The question presented here is what ratio between compensatory and punitive damages is so unreasonable that it violates the Fourteenth Amendment’s Due Process Clause. The Supreme Court’s punitive damages precedent answers this question. In State Farm, the Supreme Court explained that ‘when compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee.’ In other words, the maximum ratio of punitive damages to compensatory damages is 1:1 when compensatory damages are substantial,” per the brief.
“What juries – and courts – cannot do is use merely potential harm to increase the ratio of punitive damages to substantial compensatory damages to more than 1:1. That would cause the type of unpredictability that the Supreme Court rejected in State Farm v. Campbell and Exxon Shipping Co. v. Baker. But that is what the Superior Court did here. It affirmed a punitive to substantial compensatory damages ratio of over 11:1. This it could not do.”
Supreme Court of Pennsylvania cases 13 WAP 2022 & 14 WAP 2022
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com