WASHINGTON -- In a decision that could curb multimillion-dollar jury verdicts, the Supreme Court yesterday nullified a $2 million punitive-damages award against a car company for not telling a customer that a new car had been partly repainted.
The 5-4 ruling, in favor of BMW of North America, marked the first time the court has struck down a high-dollar verdict for corporate misconduct in the past decade as the justices have been closely policing damage awards for defective products or services.
The ruling is likely to have an effect beyond faulty products and services. It also is likely to limit jury awards for medical or legal malpractice, libel in news coverage and other forms of injury caused by professionals.
The outcome, thus, was a significant victory for the corporate and professional communities. It also appears to provide even more second-guessing of megabuck verdicts than Congress has been willing to provide by new legislation.
For the first time, the majority laid down a four-step constitutional formula that courts must use to judge whether a jury has gone too far to punish a company for selling a defective product or service or otherwise causing harm.
At issue in the case was a verdict that awarded "punitive damages" -- an extra amount tacked on top of the money awarded for actual out-of-pocket losses. Punitive damages are used to make an example of a wrongdoer, to reform its conduct and to deter others from similar misconduct.
Those damages most often are imposed by juries in state courts. They have become fairly common in cases involving auto and other transport ac-cidents, injuries or deaths from harmful products such as faulty drugs or machines, harms that result from mistakes or inattention in medicine or surgery or legal practice, and injury to reputation from newspaper or broadcast libel.
Normally, the extra damages to be allowed in such cases are questions under state law. Yesterday, the court added a layer of federal constitutional law to the test for judging the validity of punitive verdicts.
The court's main opinion went further than the justices had previously gone to set limits, despite the complaint of dissenting Justice Antonin Scalia that the new guidelines "provide no real guidance at all" because the court spoke in mere "platitudes."
The majority, though insisting it was not laying down any "mathematical formula" or "categorical approach," spelled out these "guideposts" on whether a punitive verdict is "unreasonable" and thus violates the Constitution:
