Gore bought a new car from
BMW. A few months later, he learned that the car had been repainted.
BMW later admitted that when
cars got damaged during manufacture, they sometimes fixed the damage and
repainted the car.
BMW estimated that the
damage to the car had been about $600.
BMW did not disclose the
fact that the car had been damaged to the dealer or Gore.
Gore sued, claiming that BMW
had suppressed a material fact during the sale of the car.
He asked for $4M in
compensatory and punitive damages!
Gore figured that BMW had
sold 1000 repainted cars, and a damaged, repainted BMW was worth $4k
less than a fresh one.
The Trial Court awarded Gore
$4M in damages. BMW appealed.
The Alabama Supreme Court
affirmed, but lowered the award to $2M. BMW appealed.
The Alabama Supreme Court
found that BMW's conduct was "reprehensible" and that $4M was
not a substantial amount compared to the company's overall profits.
The US Supreme Court reversed
and found the damages to be excessive.
The US Supreme Court found that
the excessively high punitive damages in this case violated the Due
Process Clause of the 14th
Amendment.
The Court found that in
order to be a valid exercise of a State's police powers, damages must be reasonably necessary to
vindicate the StateŐs legitimate interest in punishment and deterrence.
The Court suggested a
three-part test in determining whether a damage award violated due
process:
The degree of
reprehensibility of the defendantŐs conduct.
The ratio or harm to the
compensatory damages awarded.
A comparison of the
punitive damages award to civil or criminal penalties that could be
imposed for comparable misconduct.
Since BMW is a multi-national
corporation, the costs of the judgment would have been borne by people not
likely to be Alabama residents, while the benefits would be given to
Alabama residents. Is it fair for Alabama to do that?
