State Farm v. Campbell
State Farm Mutual Automobile Insurance Co. v. Curtis Campbell (usually shorted to the title shown) is a 2003 United States Supreme Court case which essentially set the top limits for punitive damages in a civil trial.
Background
In 1981, Curtis Campbell (a Utah resident and an insured of State Farm, one of the country's largest automobile insurance companies) caused a wreck which killed one person (Ospital) and permanently injured another (Slusher). Two witnesses to the wreck, and a later investigation, confirmed Campbell was solely at fault.
Notwithstanding that Slusher and Ospital's estate were willing to settle for $25,000 each (the policy limit), State Farm decided to contest liability, and repeatedly assured Campbell that his assets were safe, he had no liability for the accident and did not need to procure separate counsel.
Unsurprisingly, a jury found Campbell at fault and awarded $185,849 to Slusher and Ospital's estate, whereupon State Farm refused to pay the judgment, nor would it pay a bond to appeal the verdict, leaving Campbell to hire separate counsel to appeal the verdict and potentially be liable for the entire amount.
While the case was on appeal, in 1984 Campbell reached a settlement with Slusher and Ospital's estate, in which they would not seek satisfaction of the judgment against Campbell, while Campbell agreed to file a bad faith action against State Farm (if he was unsuccessful in getting the verdict overturned on appeal) and give Slusher and Ospital's estate (who's attorneys would represent Campbell and make all decisions involving the case) 90 percent of anything Campbell collected. The original case would become final in 1989 when the Utah Supreme Court upheld the trial court's verdict against Campbell. Then and only then did State Farm decide to pay the entire amount of the judgment; nevertheless, Campbell filed the bad faith suit.
The trial court in the bad faith suit initially ruled for the insurer, as it had (albeit late) paid the total amount owed, but the verdict was overruled on appeal, whereupon another court ruled for Campbell and awarded, among other things, $143 million in punitive damages.
SCOTUS verdict
Justice Kennedy wrote for the majority, joined by Chief Justice Rehnquist and Justices Stevens, O'Connor, Souter and Breyer, stating that punitive damage awards would be limited by due process to no more than ten times the amount of compensatory damages, with four times being "close to the limit of constitutional impropriety". Using a prior case (BMW of North America v. Gore) the Court gave lower courts three matters to consider: 1) the degree of reprehensibility of the defendant's misconduct, 2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award, and 3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.
Interestingly, the three dissenting Justices represented both the conservative (Scalia and Thomas) and the liberal (Ginsburg) wings. Justices Scalia and Thomas, each writing separately, both stated that the United States Constitution did not provide due process against "excessive" punitive damage awards, while Justice Ginsburg argued that the Court had no authority to rewrite state law concerning the allowable amount of punitive damage awards.
