38 Pages Posted: 19 Dec 2008
Date Written: December, 18 2008
In BMW v Gore, the Supreme Court held that a state court's award of punitive damages was so excessive that it violated the Due Process Clause. In three other recent cases, the Court had rejected due process challenges to large awards of punitive damages. Although the Court did not articulate an economic rationale, these four cases are consistent with a theory under which federal courts should intervene only when there is a high risk that punitive damages will systematically appropriate wealth from the citizens of other states. Rather than apply due process analysis directly to punitive damages awards, the Court might more usefully revise the constitutional rules regulating the exercise of long-arm jurisdiction. With clear and realistic rules allowing firms to avoid states in which juries are not adequately restrained, the mechanisms of federalism would adequately control excessive punitive damages. Gore may be an effort to approximate this result by other means.
Keywords: Due Process Clause, punitive damages
Suggested Citation: Suggested Citation
Rubin, Paul H. and Calfee, John and Grady, Mark F., BMW v. Gore: Mitigating the Punitive Economics of Punitive Damages (December, 18 2008). Supreme Court Economic Review, Vol. 5, 1997; UCLA School of Law, Law-Econ Research Paper No. 08-22. Available at SSRN: https://ssrn.com/abstract=1317857