State Farm Mutual Automobile Insurance Co. v. Campbell
Citation and Court
538 U.S. 408 (2003), Supreme Court of United States
Facts
State Farm refused to settle a claim against its insured, Campbell, for the policy limits, leading to a jury verdict of 2.6 million in compensatory damages and $145 million in punitive damages; the Utah Supreme Court reinstated the full punitive award after the trial court reduced it, resulting in a ratio of approximately 145:1.
Issue
Whether the $145 million punitive damages award, reflecting a 145:1 ratio to compensatory damages, violated the Due Process Clause.
Holding
The Supreme Court held the punitive damages award was unconstitutionally excessive, reaffirming the BMW guideposts and holding that, in practice, few awards exceeding a single-digit ratio to compensatory damages will satisfy due process.
Rule / Doctrine
Applying the BMW v. Gore three guideposts, courts must carefully scrutinize large punitive damage awards. While no bright-line ratio exists, punitive damages that exceed a single-digit multiple of compensatory damages are presumptively invalid. Courts may not use punitive damages to punish conduct that occurred in other states or that was not directed at the plaintiff.
Significance
State Farm v. Campbell is the companion to BMW of North America, Inc. v. Gore and is the Court’s clearest statement that single-digit ratios of punitive to compensatory damages are presumptively the constitutional maximum. Together these cases form the core due process framework for punitive damages review.