Punitive Damages -- 2016

Lompe v. Sunridge Partners, LLC   (10th Circuit)

Considerations of wealth of defendant when assessing punitive damages

The Supreme Court has ruled that the Constitution imposes restraints on the size of punitive damage awards to prevent multiple punishment for the same conduct, to keep awards rationally related to the actual damage caused by wrongful conduct, and to otherwise ensure that the punishment fits the offense. Part of this case is about whether a court reviewing a punitive damages award can consider the wealth of the defendant to make an otherwise unconstitutional award constitutional. It also involves the size of the award given.

The suit is against an apartment owner and manager for injuries resulting from carbon monoxide poisoning from a faulty furnace. Actual damages were $3 million, and punitive damages were assessed at $22.5 million, well above the maximum under Supreme Court precedent.

The Tenth Circuit decided 4/6/16 to allow the jury to consider the company's net worth. The NAM filed an amicus brief 4/17/15 arguing that (1) courts should not use evidence of wealth to increase the constitutional limit of a jury's punitive damages award, (2) evidence of wealth does not provide a consistent or meaningful measure for evaluating the constitutionality of a punitive damages award, and (3) if wealth is relevant, it is a mitigating factor or limited to cases where the defendant's wealth stems from the conduct that harmed the plaintiff.

The case illustrates the danger of using evidence of wealth to punish a defendant. Such evidence is easily manipulated and often distorts a defendant's financial position or ability to pay an award at the time of trial. It also is more likely to impact shareholders, customers and employees that it is to harm those responsible for the harm caused to the plaintiff.

The appeals court did, however, reduce the size of the punitive damages award to $1.95 million, using the factors outlined by the Supreme Court (degree of reprehensibility, ratio to compensatory damages, and penalties in comparable cases). Net worth was not part of that analysis.

Related Documents:
NAM amicus brief  (April 17, 2015)


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