High court fails to clarify punitive damages law Man awarded $4 million after BMW repainted new car to hide $601 damage

October 12, 1995|By LYLE DENNISTON | LYLE DENNISTON,SUN NATIONAL STAFF

WASHINGTON -- A case that advocates of lawsuit reform are trumpeting as a clear-cut symbol of abuse -- a $2 million verdict for a doctor whose new BMW car had sustained $601 worth of damage -- turned out to be anything but simple before the Supreme Court yesterday.

With Congress locked in an impasse over proposals to impose curbs on civil lawsuits and multimillion-dollar verdicts, the court held a hearing on an appeal by BMW of North America Inc.

But at the end of questioning about the constitutional implications of an Alabama jury's award, the justices seemed no closer than they have been in the past six years to clearing up the law of "punitive damages"

The BMW case is the fifth since 1989 to test the court's position on punitive damages -- the added financial damages that juries tack on to punish a wrongdoer and deter others, in amounts that often run hundreds of times higher than the out-of-pocket value of the damage done.

Punitive damages are a key target of the "tort reform" movement, and Congress may set ceilings on such verdicts -- if the House and Senate can work out their differences on two bills passed last spring.

Sessions to work out a compromise are not yet scheduled.

So far, the Supreme Court has been unwilling to create a formula determine when punitive damages are unconstitutionally excessive. That is one of the issues in the BMW case.

That case dates to 1990, when Dr. Ira Gore Jr., a Birmingham doctor, took his new BMW 535i to an auto-body shop to have some detail work done, to dress it up.

The shop discovered that the car had been partly repainted.

That discovery was made after he had owned the car for nine months. Before it was delivered to him new, BMW had done a touch-up of several parts of the body that had been damaged by acid rain during transit from the factory.

It cost BMW $601 to do the refinishing, and Dr. Gore did not know it had been done.

BMW has a policy of not disclosing refinishing when it is that low in cost.

When Dr. Gore found out, he sued, and a jury awarded him $4,000 for actual lost value of the car, and then tacked on $4 million in punitive damages -- to punish BMW for having done the same thing to hundreds of cars through out the country.

The Alabama Supreme Court cut the $4 million punitive award to $2 million.

Still arguing that the punitive part of the verdict was excessive, BMW took the case on to the nation's highest court. Besides challenging the $2 million figure, BMW contends that it was unconstitutional for an Alabama jury to calculate a punishment for conduct that occurred largely outside the state.

BMW's lawyer, Washington attorney Andrew L. Frey, said the company feared that juries in many tort cases would interpret evidence about out-of-state conduct as "an invitation to punish for national conduct."

He said the Alabama case was an attempt "to take away the profits BMW made in New Jersey, California" and many other states.

At most, he said, the punitive part of the award should have been limited to $56,000, based on the number of refinished cars sold in Alabama.

While most of yesterday's hearing focused on the out-of-state reach of the verdict, Justice Ruth Bader Ginsburg insisted that ,, the issue was no longer a live question in the case.

Dr. Gore's lawyer, Georgetown University law professor Michael Gottesman, disputed the claim that only 14 refinished BMWs had been sold new in Alabama. "There is reason to believe hundreds of these cars were sold in Alabama," he argued.

He said the verdict in Dr. Gore's case "was large enough to deter" BMW and others from doing the same thing again.

The opposing lawyers were interrupted so frequently with questions that neither was able to explain the points they had planned to bring up.

After meandering over the technicalities of Alabama law, the long-arm reach of the Alabama jury, and the Constitution, and with almost no attention to whether the $2 million award was excessive, the court left the bench.

A decision is unlikely for several months.

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