State Farm Mutual Automobile Insurance v. Campbell
The Supreme Court struck down a $145 million punitive damages award against State Farm, ruling it was grossly excessive under the Constitution's Due Process Clause given that the compensatory damages were only $1 million.
The Court held that Utah courts improperly punished State Farm for its nationwide business practices rather than its specific conduct toward the Campbells, and it signaled that punitive damages exceeding a single-digit ratio to compensatory damages will rarely survive constitutional scrutiny.
“few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process”
The Court's new guidance on how large punitive damages awards can be compared to actual harm.
How it got here: After a Utah jury awarded punitive damages later reduced by the trial court, the Utah Supreme Court reinstated the full $145 million award, and State Farm asked the U.S. Supreme Court to review it.
The Case in Depth
What happened
Curtis Campbell caused a car accident that killed one driver and permanently disabled another. His insurer, State Farm, refused to settle within policy limits and took the case to trial, leaving Campbell exposed to a judgment far exceeding his coverage. The Campbells then sued State Farm for bad faith, and a jury awarded them $2.6 million in compensatory and $145 million in punitive damages, later reduced by the trial court to $1 million and $25 million.
The question before the Court
Was a $145 million punitive damages award against an insurance company constitutionally excessive when the actual harm to the policyholders was $1 million?
Why it matters
Businesses facing punitive damages lawsuits now have a clearer constitutional benchmark limiting awards to roughly single-digit multiples of actual harm, making enormous punitive verdicts harder to sustain. Plaintiffs' lawyers must now tie evidence more tightly to the specific harm suffered rather than a defendant's broader misconduct nationwide.
What changes now
The case is sent back to the Utah courts to recalculate a constitutionally appropriate punitive damages award consistent with the Supreme Court's guidance, likely close to the amount of compensatory damages. This is a final merits decision resolving the constitutional question, though the exact dollar figure for punitive damages remains to be determined on remand.
What this does not decide
The Court did not hold that punitive damages are always capped at a single-digit ratio or that a 1-to-1 ratio is always the maximum; it left room for higher ratios in cases involving particularly egregious conduct causing small economic harm. It also did not decide the exact dollar amount State Farm must pay.
Concurrences and dissents
Dissent — Justice Scalia
Justice Scalia reiterated his long-held view from his BMW v. Gore dissent that the Due Process Clause provides no substantive limit on punitive damages at all. He argued the punitive damages case law is unworkable and not entitled to precedential weight, and would simply affirm the Utah Supreme Court's judgment.
Dissent — Justice Thomas
Justice Thomas briefly reaffirmed his position that the Constitution does not limit the size of punitive damages awards at all, citing his earlier concurrence in Cooper Industries, and would affirm the judgment below.
Dissent — Justice Ginsburg
“Today's decision exhibits no such respect and restraint.”Ginsburg's objection that the majority abandoned deference to state courts on punitive damages.
Justice Ginsburg argued the majority overstepped by second-guessing Utah's competent decisionmakers and ignored extensive trial-court findings that State Farm's nationwide scheme directly caused the Campbells' harm and affected many other Utah residents. She contended the Court's new single-digit-ratio guidance improperly converts flexible guideposts into rigid marching orders and disrespects states' traditional authority over punitive damages.
How the Court got there
The legal reasoning, step by step
- The Court applied the three guideposts from BMW of North America v. Gore for reviewing punitive damages: the reprehensibility of the defendant's conduct, the ratio between the harm and the punitive award, and comparable civil or criminal penalties.
- On reprehensibility, the Court found that Utah courts improperly used evidence of State Farm's nationwide business practices over 20 years, most unrelated to the type of claim at issue, to punish the company for conduct that had no connection to the specific harm suffered by the Campbells.
- The Court explained that a state cannot use punitive damages to punish conduct that was lawful where it occurred or that harmed people outside the state, since each state may only punish conduct within its own jurisdiction under basic principles of federalism.
- On the ratio guidepost, the Court declined to set a rigid mathematical cap but stated that few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process, especially where compensatory damages are already substantial and contain a punitive element.
- Comparing the $145 million award to the $10,000 civil fine available under Utah law for fraud, the Court found the third guidepost also weighed heavily against the award, since the punitive sum vastly exceeded any comparable civil penalty.
- Weighing all three guideposts together, the Court concluded that a punitive award at or near the amount of the compensatory damages would have been appropriate, making the 145-to-1 ratio irrational and arbitrary.
Doctrinal impact
Cases affected by this decision
Reaffirms BMW of North America, Inc. v. Gore (517 U. S. 559)
The Court applied and clarified the three-guidepost framework from Gore for reviewing punitive damages.
Reaffirms Cooper Industries, Inc. v. Leatherman Tool Group, Inc. (532 U. S. 424)
The Court relied on Cooper Industries' requirement that appellate courts review punitive damages de novo.