The Supreme Court 4/7/03 struck down a $145 million punitive damages award in a case where full compensatory damages were $1 million. The Court stated that substantive due process requirements ordinarily prohibit a punitive award where the ratio between punitive damages and compensatory damages exceeds single digits. When the compensatory award is substantial, as in the case before the Court, the Constitution often will limit a punitive award to the amount of the compensatory award. The Court also concluded that the $145 million award improperly punished the defendant for an alleged nationwide scheme of misconduct. The Court reasoned that states generally lack authority to punish extraterritorial conduct, regardless of whether that conduct was unlawful where it occurred. A punitive damages award also may not be used to punish and deter conduct that bears no relation to the plaintiffs’ harm. This case is important to any business that is or may become subject to liability for punitive damages.
The NAM filed an amicus brief on 8/19/02 arguing that the application of Utah's punitive damages law to conduct in other states that is not directly related to injury in Utah violates the Full Faith and Credit Clause of the Constitution.