This post was written by Kevin G. Lohman.

On May 26, 2009, the U.S. Supreme Court denied a petition for writ of certiorari to review a decision from the Supreme Court of Tennessee that upheld an award of punitive damages for over $13 million dollars, which amounted to a 5.35-to-1 ratio of punitive damages to actual damages. See DaimlerChrysler Corp. v. Flax, NO. 08-1010, 2009 WL 357533, (2009). deserves recognition for flagging this decision.

The case arose out of a motor vehicle accident in June 2001, which resulted in the death of an eight-month-old baby. Plaintiffs, the parents of decedent, filed suit alleging wrongful death and negligent infliction of emotional distress (NIED) against the other driver involved in the accident and against DaimlerChrysler Corp., who was the manufacture of plaintiffs’ 1998 Dodge Caravan. The jury assigned fault evenly against the defendant driver (for speeding) and DaimlerChrysler Corp. (for defective design of the car seats), and awarded plaintiffs $5 million dollars in compensatory damages for their wrongful death claim, and $2.5 million damages for their NIED claim. During the second phase of the trial, evidence was presented that DaimlerChrysler Corp. was aware of the defective design of their car seats, they failed to warn customers, they hid evidence of the of the defective design, and they continued to market the Caravan as a vehicle that put safety first. The jury awarded punitive damages against DaimlerChrysler Corp. in the amount of $65.5 million for the wrongful death claim, and $32.5 million for the NIED claim. The trial judge remitted the punitive damages down to $13,367,345.00 for the wrongful death claim and $6,632,655.00 for NIED.

On appeal, the Tennessee Court of Appeals reversed, holding that there was insufficient evidence to award any damages pertaining to the NIED claim. Further, the court held that there was not clear and convincing evidence that DaimlerChrysler Corp. acted recklessly or intentionally in order to warrant punitive damages, and struck the entire punitive damage award.

On further appeal, the Supreme Court of Tennessee affirmed the court of appeal’s holding pertaining to the NIED. However, they reversed the portion of decision pertaining to punitive damages. Holding that there was in fact sufficient evidence to support a finding of punitive damages, the court reviewed whether the size of the punitive damages award is excessive in violation of the due process standards set out by the United States Supreme Court in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996) and State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003). Specifically, the court relied on the first two guideposts set out in Gore and Campbell (the reprehensibility of the defendant’s conduct; and the ratio between the punitive damage award and the compensatory damages).

With regard to the first guidepost, the court noted that the evidence in this case “clearly demonstrates that [DaimlerChrysler Corp.’s] conduct was reprehensible.” As to the second guidepost, the court noted that the punitive-to-compensatory ratio was 5.35-to-1 and acknowledged the language of the Supreme Court decisions in Gore (suggesting that a ratio of greater than 4-to-1 approaches the outer limits of constitutionality) and Campbell (suggesting that a ratio of 1-to-1 may be all that is permissible in cases where compensatory damages are “substantial”). However, the court also noted that in Campbell the Supreme Court declined to adopt a fixed mathematical formula to determine the appropriateness of punitive damages and stated that “the precise award in any case, of course, must be based upon the facts and circumstances of defendant’s conduct and the harm to the plaintiff.” The Tennessee court held that “In light of the first two guideposts, we believe that a ratio of 1 to 5.35 would be warranted in this case,” noting that the evidence pertaining to the defendant’s conduct demonstrated their conduct was reprehensible and the harm to the plaintiffs in this case was tragic (the death of an eight-month-old baby).

Interestingly, the Tennessee court chose not to acknowledge the Supreme Court’s most recent punitive damage decision from Exxon Shipping Co. v. Baker, ___ U.S. ___, ___, 128 S. Ct. 2605 (2008), which was decided one month prior and established a 1-to-1 ratio between punitive and compensatory damages under federal maritime law and contained implications for applying the 1-to-1 ratio to limit punitive damages in state court actions. (The Exxon decision is discussed in this prior post). Despite the fact that Supreme Court of Tennessee did not acknowledge Exxon, the United States Supreme Court denied DaimlerChrysler’s petition for writ of certiorari.