BMW of North America, Inc. v. Gore

Supreme Court of the United States · 1996 · Torts

TortsConstitutional Lawpunitive damagesdue processguidepostsexcessivepunitive damagessubstantive due process

Facts

Dr. Gore bought a new BMW in Alabama for $40,750.88 and later discovered it had been repainted before sale. BMW had a nationwide policy of not disclosing presale damage repairs costing less than 3 percent of the car's suggested retail price; the repainting of Gore's car cost $601.37, about 1.5 percent, so BMW did not disclose it. Gore presented evidence that a repainted BMW was worth about 10 percent less than an unrepaired new car, and the jury found $4,000 in actual damages. The jury also awarded punitive damages based on BMW's nondisclosure policy, and the Alabama Supreme Court reduced that punitive award from $4 million to $2 million after rejecting reliance on out-of-state sales as a multiplier.

Issue

Whether a $2 million punitive damages award imposed by Alabama for BMW's failure to disclose minor presale repainting of a new car violated the Due Process Clause of the Fourteenth Amendment as grossly excessive. The case also raised whether Alabama could punish BMW based on conduct outside Alabama or to change BMW's lawful conduct in other States.

Rule

The Due Process Clause of the Fourteenth Amendment prohibits a State from imposing grossly excessive punitive damages. Constitutional excessiveness review is guided by three indicia: (1) the degree of reprehensibility of the defendant's conduct, (2) the disparity between the actual or potential harm suffered and the punitive damages award, and (3) the difference between the punitive award and the civil or criminal penalties authorized or imposed in comparable cases. A State may punish and deter conduct affecting its own consumers, but it may not impose punitive damages to punish lawful conduct in other jurisdictions or to force a defendant to change lawful out-of-state conduct.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lena Ortiz bought a new sailboat from Harbor Crest Marine in Mobile, Alabama. She proved $6,000 in compensatory damages after learning the distributor had a nationwide policy of not disclosing minor gel-coat repairs, and the jury imposed $3 million in punitive damages after counsel urged it to multiply Lena’s loss by hundreds of sales in Florida, Texas, and Georgia, many of which complied with those states’ laws.

Which is the strongest constitutional objection to the punitive award?

Explanation. The majority held that a State may punish and deter conduct affecting its own consumers and economy, but it may not impose punitive damages to punish lawful conduct in other jurisdictions or to change a defendant’s lawful out-of-state conduct. Evidence of out-of-state conduct may bear on reprehensibility, but it cannot be used as a multiplier to punish nationwide sales that were lawful where they occurred.