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Williams v. First Advantage Lns Screening Solutions Inc.

United States Court of Appeals, Eleventh Circuit

January 9, 2020

RICHARD ALEXANDER WILLIAMS, Plaintiff-Appellee,
v.
FIRST ADVANTAGE LNS SCREENING SOLUTIONS INC, f.k.a. LexisNexis Screening Solutions Inc., et al. Defendants, FIRST ADVANTAGE BACKGROUND SERVICES CORPORATION, a Florida Corporation, Defendant-Appellant.

          Appeal from the United States District Court No. 1:13-cv-00222-MW-GRJ for the Northern District of Florida

          Before MARTIN, JULIE CARNES, and O'SCANNLAIN, [*] Circuit Judges.

          JULIE CARNES, CIRCUIT JUDGE

         In this Fair Credit Reporting Act ("FCRA") case, First Advantage Background Services Corporation ("Defendant") appeals the denial of its motion for judgment as a matter of law, or, in the alternative, motion for a new trial or remittitur. On appeal, Defendant asserts that the jury's $250, 000 compensatory damages award should be vacated because Richard Alexander Williams ("Plaintiff") failed to show evidence of reputational harm. Defendant also contends that it was entitled to judgment as a matter of law on Plaintiff's claim that it willfully violated the FCRA. Finally, Defendant argues that the excessiveness of the jury's $3.3 million punitive damages award rendered it unconstitutional under the Due Process Clause. After careful review, and with the benefit of oral argument, we affirm the district court's denial of Defendant's motion for judgment as a matter of law to the extent it challenged the reputational harm claim and the willfulness claim. We, however, vacate the jury's punitive damages award and remand the case to the district court to enter a judgment awarding Plaintiff $1 million in punitive damages.

         BACKGROUND

         I. Defendant's Procedures

         Defendant is a consumer reporting agency that prepares criminal background reports on individuals. In 2012 Defendant prepared around 9 to 10 million background reports nationally, and in 2013 it prepared 10 to 12 million background reports nationally.[1] Defendant charged $11 to $12 for each report. As to how Defendant prepares these reports, Defendant maintains a national criminal file database that contains criminal records from around the country. When a customer orders a criminal background check, the consumer's information is passed through an automated search of this database.

         Defendant's standard operating procedures for people with non-common names require a match of at least two identifiers-such as name, date of birth, social security number, or driver's license number-before attributing to the subject of a background investigation the criminal record of a person with the same, or similar, name. Attribution requires only a "reasonable match," rather than an exact match. Defendant looks for middle names or initials, but a match can be made without one. For example, consider the following two individuals, both of whom are Florida residents born on the same day with an uncommon name:

         Daniel Atreus Kowalski and Dan Kowalski. Daniel and Dan have a match of two identifiers-identical dates of birth and "reasonably matching" names. If Dan had a grand theft auto conviction, while Daniel had no criminal record, a background report compiled by Defendant on Daniel could nonetheless indicate that he had a grand theft auto conviction. The fact that Daniel has a reported middle name would not prevent Dan's criminal record from being included in a background report on Daniel. On the other hand, if Dan had a conflicting middle name or middle initial (e.g., "C." or "Christopher"), Dan's conviction would not be included in Defendant's background report on Daniel.

         Defendant purports to follow a different procedure when a customer requests a background report on an individual with a common name, such as Joe Smith. In such a case, Defendant's policy provides that a member of the records adjudication team must attempt to locate a third identifier to ensure a reasonably accurate match. An adjudicator could potentially use Experian to obtain an address history that might provide more information except for the fact that Defendant's agreement with Experian limits the number of employees who can conduct an Experian search; so Experian is not always utilized. If the adjudicator cannot locate a third identifier, he or she must so note this fact and obtain a supervisor's permission before releasing the criminal background report. Thus, notwithstanding Defendant's awareness that a third identifier should be obtained, its actual practice permits matching a subject who has a common name with a criminal record based on only two identifier matches.

         Defendant has a dispute system that allows consumers to contest items listed in their background reports. Between 2010 and 2013, Defendant prepared 3, 554, 163 reports containing public record information. During that time, Defendant made 13, 392 corrections as a result of customers successfully disputing Defendant's inclusion of public records belonging to another individual in their background reports, yielding a "not-me" or "not mine" error rate of 0.38 percent nationally.[2] During the relevant time period, Defendant's "not-me" or "not mine" error rate for Florida reports ranged from 0.28 percent (2013) to 0.64 percent (2012).

         Pertinent here is the fact that Defendant's system offers no means to ensure that an investigative subject who has been mispaired with a particular criminal conviction or arrest of a person with a similar name will not be mismatched in future background checks with other convictions/arrests of this same person. To return to our Dan/Daniel example above, assume that Dan was convicted in 2006 of grand theft auto, but a 2008 background report on Daniel erroneously attributed Dan's grand theft auto conviction to Daniel. Seeing the error, Daniel immediately disputed the inclusion of the conviction in his background report, resulting in a revised report. After being released from prison, Dan returns to his life of crime and is convicted of carjacking in 2013. Although Defendant's system can prevent a future misattribution of the disputed 2006 conviction, it provides no means to prevent other convictions or arrests of Dan, such as the 2013 carjacking conviction, from being attributed to Daniel in a subsequent background report.

         II. Events Leading to the Present Suit

         Plaintiff Richard Williams has lived with his mother in Chiefland, Florida, for his entire life. In February 2012, Plaintiff applied for a customer accounts representative position at Rent-A-Center East, Inc.'s ("Rent-A-Center") Chiefland store. As part of the hiring process, Rent-A-Center asked Defendant to prepare a criminal background report on Plaintiff.

         In preparing the Rent-A-Center background report, Defendant's employees examined public records from the Palm Beach County and Levy County courts. According to the Rent-A-Center report, Defendant used Plaintiff's first, middle, and last name, social security number, date of birth, and address to prepare the report. The report also indicated that Defendant had obtained driver record information from Florida's motor vehicle records, and it listed Plaintiff's driver's license number and information.

         On February 28, 2012, Defendant sent an electronic copy of the report to Rent-A-Center and mailed a copy to Plaintiff. The report stated that the Palm Beach Circuit and County courts had two case numbers associated with a "Ricky Williams." Both cases involved 2009 charges for sale of cocaine. The listed disposition of the cases was "bench warrant." Both cases stated that the "SSN on File" was the same as the first five digits of Plaintiff's social security number, though the report indicated that the match between Plaintiff and Ricky Williams was based on their names and dates of birth. Given the criteria provided by Rent-A-Center, Plaintiff's "overall case score" was "ineligible." Although Richard Williams is a common name, Defendant did not follow its common-name procedure, which called for the use of three, not just two, identifiers.

         On March 1, 2012, Plaintiff filed a dispute with Defendant and provided a copy of his driver's license, which listed his height as five feet, ten inches. After Plaintiff initiated the dispute, Defendant's employees ordered copies of the physical records relating to Ricky Williams' charges and saw that Ricky Williams' bench warrant listed his height as six feet, two inches. Upon seeing the discrepancy in height, Defendant removed the sale-of-cocaine charges from Plaintiff's report. On March 12, 2012, Defendant sent Rent-A-Center a revised background report clearing Plaintiff, but Rent-A-Center did not re-extend its job offer to Plaintiff.

         Plaintiff subsequently applied for a variety of other jobs. In November 2012, he was hired by the Levy County Sheriff's Office to be a 911 dispatcher. Rather than hiring an outside company, the Sheriff's Office conducted its own background check on Plaintiff and apparently found no disqualifying information. Unfortunately, though, Plaintiff could not meet performance expectations while in training, and he quit after about a month in lieu of being terminated.

         In March 2013, Plaintiff was hired by Kangaroo, a gas station. Like the Sheriff's Office, Kangaroo ran its own background check. Plaintiff ultimately left the Kangaroo job because he was not working enough hours, and all of the money he made was used to pay for his own gas. A few days after quitting his job at Kangaroo, Plaintiff received a call from Winn-Dixie Stores, Inc. ("Winn-Dixie"), offering him an interview. Plaintiff subsequently received a job offer for a position at Winn-Dixie's Gainesville store, but the offer was contingent on Plaintiff passing a background check. On April 23, 2013, Winn-Dixie asked Defendant to conduct a background check on Plaintiff. Two days later, Defendant sent Winn-Dixie an electronic copy of the background report. The report stated that a search for "Richard A. Williams" revealed two results from Broward County, Florida's records: Ricky Williams' 2004 conviction for "burglary assault" and Ricky Williams' 2004 conviction for aggravated battery on a pregnant woman. The match was again based on the similarity between Plaintiff's and Ricky Williams' names and on their identical dates of birth, as well as the fact that Plaintiff lived in Florida, where the crimes had occurred.[3] The report listed Plaintiff's "overall case score" as "ineligible."

         Of course, like its first background report concerning Plaintiff issued just a year before, this second report was also inaccurate in attributing Ricky Williams' run-ins with the law to Plaintiff. This is not surprising as the employees who created this Winn-Dixie report lacked access to information regarding Plaintiff's prior dispute, the contents of the Rent-A-Center report, or Plaintiff's driver's license, even though Defendant had all of the above information. Further, as with the Rent-A-Center report, Defendant did not follow its common-name procedure- that is, obtain a third identifier-in preparing the Winn-Dixie report. Beyond systemic failures, a note in Defendant's system indicated that one of its employees had actually examined the Broward County Department of Corrections' website while preparing the Winn-Dixie report. That website not only indicated that Ricky Williams was six feet, two inches tall but also revealed that he was currently incarcerated in the Broward County Jail: a fact that might reasonably have prompted a question whether a Ricky Williams who was presently in jail 300 miles away was the same person as Richard A. Williams-the subject of the background report-who was seeking employment.

         On May 2, 2013, Plaintiff contacted Defendant to again begin a dispute process. In resolving the dispute, Defendant obtained physical copies of Ricky Williams' court records, which happened to contain his social security number, and realized that the social security number found in the records did not match Plaintiff's. Defendant could have obtained physical copies of these records before the report was issued, but had failed to do so. On May 28, 2013, Defendant issued a revised background report that omitted the burglary and aggravated battery convictions, but by this time Winn-Dixie had already hired someone else to fill the position. Nonetheless, Plaintiff was hired by Winn-Dixie approximately six months later, in November 2013.

         III. Procedural History

         In November 2013, Plaintiff filed suit against Defendant, alleging violations of the FCRA.[4] In Count I of his second amended complaint, Plaintiff asserted that Defendant negligently or willfully violated 15 U.S.C. § 1681e(b), [5] which requires consumer reporting agencies to "follow reasonable procedures to assure maximum possible accuracy" when preparing a consumer report. 15 U.S.C. § 1681e(b). Plaintiff alleged that he suffered damages resulting from loss of employment, reputational harm, and pain and suffering. He requested compensatory and punitive damages based on Defendant's violation of § 1681e(b). Plaintiff proceeded to trial.

         In addition to explaining the economic impact caused by the loss of these two job opportunities, Plaintiff testified at trial as to the emotional impact that being falsely tagged as a criminal had caused him. He testified that the demeanor of a Rent-A-Center employee with whom he interacted "changed" once the background report was issued. The employee told Plaintiff that Defendant's "system is accurate and they can find anything and everything about you down to your juvenile records." When Plaintiff received the Winn-Dixie report and saw the error, he felt "horrible" and "really, highly upset." He began taking an over-the-counter medication because he was experiencing headaches and insomnia. Plaintiff's mother testified that Plaintiff was "bothered" and did not "eat[ ] like he should have" after Rent-A-Center and Winn-Dixie declined to hire him. She confirmed that not getting the jobs caused Plaintiff to experience insomnia.

         Matthew O'Connor, Defendant's Vice President of Operations, conceded that Defendant had within its records the following information before it issued to Winn-Dixie its second report concerning Plaintiff: (1) an individual named Ricky Williams, who had been arrested for sale of cocaine, was a different person than Plaintiff; (2) Ricky Williams was four inches taller than Plaintiff; and (3) Plaintiff lived in Chiefland, not Palm Beach, which was 300 miles away and where Ricky Williams had committed several crimes. He agreed that had Defendant made available the information from Plaintiff's dispute regarding the Rent-A-Center report to the person preparing the Winn-Dixie report, this person would "know with . . . certainty or virtual certainty" that Ricky Williams and Plaintiff were not the same person. Notably, O'Connor admitted that notwithstanding Defendant's ostensible protocol requiring a third identifier for a subject with a common name, in practice the finding of a third identifier is "kind of aspirational."

         Plaintiff called Evan Hendricks as an expert witness. Hendricks testified that "other consumer reporting agencies" have procedures that allow them to use information obtained in a prior successful dispute when preparing a subsequent consumer report. He explained:

Equifax has a procedure called cross-blocking which means they know that the problem is the identifiers are dragging in the wrong information about consumer B and consumer A. So they cross-block or flag those identifiers to make sure that anything-any information that's with that other wrongful identifier, that's not the subject of our consumer today, is blocked from him or his information from coming in.
And then in Experian they call that the do not combine, where they have the same procedure in place where they make sure they mark or block or flag these identifiers from causing this wrongful mix. These have been standard operating procedures for more than a decade with those two consumer reporting agencies that I have direct knowledge of.

         Based on everything Hendricks had observed and reviewed, Defendant had no similar procedure, though he acknowledged that he did not know of any other background screening company that used the same procedures as Equifax or Experian. Hendricks opined that, by choosing to use only two identifiers when preparing a report on an individual with a common name, Defendant was "basically inviting inaccuracy." Hendricks admitted, however, that "there is no hard and fast rule" as to how many identifiers must match in order to pair a consumer with a criminal record.

         After Plaintiff rested, Defendant moved for judgment as a matter of law on Count I and on Plaintiff's claim for compensatory damages resulting from the alleged harm to his reputation. The district court denied Defendant's motion to the extent it sought judgment as a matter of law on Plaintiff's claim that Defendant negligently violated § 1681e(b), but took the motion under advisement to the extent Defendant sought judgment as a matter of law on Plaintiff's claim that Defendant willfully violated that section. The district court denied judgment as a matter of law regarding the claim for compensatory damages resulting from the alleged harm to Plaintiff's reputation.

         During Defendant's case-in-chief, it called Oscar Marquis as an expert witness. Marquis explained that public records used in preparing criminal background reports typically contain only the individual's name and date of birth, and not a social security number. By contrast, credit agencies such as Experian and Equifax have access to credit account information, including the individual's name, address, social security number, date of birth, and account number. Marquis was not aware of any criminal background screening company that requires a match of more than two identifiers to pair a consumer with a criminal record.

         During closing arguments, Plaintiff contended that he suffered lost wages of $78, 272. The district court instructed the jury that, in considering damages, it should take into account any lost wages, emotional harm, or damage to Plaintiff's reputation. The jury found that Defendant willfully failed to follow reasonable procedures to ensure maximum accuracy, as required by § 1681e(b). It awarded Plaintiff $250, 000 in compensatory damages and $3.3 million in punitive damages. The district court entered judgment in favor of Plaintiff.

         Defendant subsequently filed a motion for judgment as a matter of law, or, in the alternative, a motion for a new trial and/or remittitur. The district court denied Defendant's motion. This appeal followed.

         DISCUSSION

         I. Standard of Review

         We review the denial of a renewed motion for judgment as a matter of law de novo, viewing the evidence and drawing all reasonable inferences in the light most favorable to the nonmoving party. Proctor v. Fluor Enters., Inc., 494 F.3d 1337, 1347 n.5 (11th Cir. 2007). "Judgment as a matter of law is appropriate when a plaintiff presents no legally sufficient evidentiary basis for a reasonable jury to find for him on a material element of his cause of action." Id. (quotation marks omitted). If there is a substantial conflict in the evidence, such that reasonable and fair-minded persons exercising impartial judgment might reach different conclusions, the district court must deny the motion. Id.

         We review the constitutionality of a punitive damage award de novo, but we defer to the district court's factual findings unless they are clearly erroneous. Action Marine, Inc. v. Cont'l Carbon Inc., 481 F.3d 1302, 1309 (11th Cir. 2007). "A finding is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed." Robinson v. Tyson Foods, Inc., 595 F.3d 1269, 1275 (11th Cir. 2010) (quotation marks omitted).

         II. Reputational Harm

         Plaintiff asked for compensatory damages based on the emotional distress, lost wages, and reputational harm caused by Defendant's conduct. The jury returned a general verdict awarding $250, 000 in compensatory damages; that is, it did not apportion its calculation based on the three types of harm alleged by Plaintiff. On appeal, Defendant argues that Plaintiff failed to present evidence sufficient to prove damage to his reputation.

         Although Plaintiff's evidence of reputational harm was not earth-shattering, we conclude that a reasonable jury could find that he suffered harm to his reputation. At trial, Plaintiff testified that a Rent-A-Center employee's "demeanor changed" after issuance of the background report showing that he had been charged with selling cocaine. The employee insisted to Plaintiff that Defendant's "system is accurate and they can find anything and everything about you down to your juvenile records." Moreover, Rent-A-Center declined to re-extend a job offer to Plaintiff even after the correction of his report. We conclude that this is sufficient for a jury to conclude that Plaintiff suffered some reputational harm.[6]We therefore affirm the district court's denial of Defendant's motion for judgment as a matter of law with respect to reputational harm.

         III. Willfulness

         Section 1681e(b) provides that "[w]henever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates." 15 U.S.C. § 1681e(b). The FCRA does not make consumer reporting agencies strictly liable for all inaccuracies, but instead creates a private right of action for negligent or willful violations of the FCRA. Cahlin v. Gen. Motors Acceptance Corp., 936 F.2d 1151, 1156 (11th Cir. 1991); see 15 U.S.C. §§ 1681n(a), 1681o(a). In this case, the jury found that Defendant had willfully violated the statute. This willfulness finding is significant because willfulness is a prerequisite to consideration of punitive damages, and here the jury also awarded substantial punitive damages.

         To establish a willful failure to comply with § 1681e(b), a plaintiff must show that the consumer reporting agency either knowingly or recklessly violated the statute. Pedro v. Equifax, Inc., 868 F.3d 1275, 1280 (11th Cir. 2017). "Recklessness" generally requires "action entailing an unjustifiably high risk of harm that is either known or so obvious that it should be known." Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 68 (2007) (quotation marks omitted). Thus, a consumer reporting agency acts in reckless disregard of FCRA requirements if its "action is not only a violation under a reasonable reading of the statute's terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless." Id. at 69.

         We conclude that a reasonable jury could conclude that Defendant acted willfully. Defendant itself had recognized the need to require more than two identifiers when dealing with a subject who has a common name. For that reason, and to ensure "maximum possible accuracy," its protocol required three identifiers, absent supervisor approval when that was not possible. Yet, the evidence suggested that this protocol may have been honored more in the breach than in actual practice. Specifically, Defendant's Vice President of Operations agreed that obtaining a third identifier for an individual with a common name was "kind of aspirational": an admission supporting an inference that, in its actual practices, Defendant consciously disregarded a known risk of violating the FCRA. Certainly, as pertinent to Plaintiff's claim, Defendant failed to follow its own procedure twice: first, when preparing a background report on Plaintiff for Rent-A-Center and, just a year later, when it was asked to prepare a second report concerning Plaintiff for Winn-Dixie. Cf. Hinkle v. Midland Credit Mgmt., Inc., 827 F.3d 1295, 1307 (11th Cir. 2016) (concluding that a reasonable jury could find the defendant "either knowingly or recklessly reported debts as 'verified, '" in violation of 15 U.S.C. § 1681s-2(b), in part because the evidence suggested that the defendant knew it might need certain documentation to verify disputed debts, but failed to obtain such documentation).

         Likewise, willfulness by Defendant was shown as to the additional error infecting the second report generated for Plaintiff. This is so because Defendant failed to promulgate an adequate procedure to flag the existence of an inaccurate first report for purposes of future reports concerning that same subject. While Defendant apparently had the technological capability to bar future attribution to Plaintiff of the two criminal charges wrongly attributed to him in the first Rent-A-Center report-the two 2009 charges against Ricky Williams for cocaine dealing- and it did not include those charges in the second report, it failed to develop a means to prevent additional criminal arrests or convictions belonging to Ricky Williams from being attributed to Plaintiff. And of course, that is exactly what happened here. In preparing the second Winn-Dixie report, employees found an additional 2004 burglary-assault conviction and a 2004 aggravated battery conviction for the same Ricky Williams who was misidentified as Plaintiff in the first report. Yet, because Defendant had established no procedure to block attribution to Plaintiff of other criminal charges concerning Ricky Williams or, at the least, to caution the preparer of subsequent reports that Plaintiff had been the victim of a previous mismatch between himself and a criminal with the same birthdate and a similar name, these 2004 convictions were wrongly included in the subsequent background report drafted for Winn-Dixie.

         In short, sufficient evidence supported the jury's willfulness finding, and the district court properly denied the motion for judgment as a matter of law.

         IV. Punitive Damages

         As noted, the jury awarded Plaintiff compensatory damages in the amount of $250, 000. Having found that Defendant acted willfully, the jury was then empowered to consider whether punitive damages should be awarded. Concluding that punishment was warranted, the jury awarded Plaintiff punitive damages in the amount of 3.3 million dollars. Defendant contends that no punitive damages were appropriate, but that even if some punishment was supportable, 3.3 million dollars is an amount so excessive that it violates the Due Process Clause of the Constitution, and these damages should therefore be reduced. We conclude that punitive damages were properly awarded, but also conclude that, pursuant to the standards set out by the Supreme Court, a 3.3 million dollar award was unconstitutionally excessive.

         A. Constitutional Principles

         While compensatory and punitive damages are typically awarded at the same proceeding by the same decisionmaker, they serve different purposes. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416 (2003). Compensatory damages are intended to remedy a concrete loss suffered by the plaintiff due to the defendant's wrongful conduct and to make that plaintiff whole. Punitive damages, on the other hand, "are aimed at deterrence and retribution": to deter the defendant and others from this type of conduct and to punish the defendant for his particular wrongful conduct. Id. The discretion to impose punitive damages is not unbridled, however. Rather, "there are procedural and substantive constitutional limitations on these awards." Id. And in the last three decades, the Supreme Court has developed standards to be used in assessing whether a particular punitive damages award has exceeded constitutional limitations.

         In Pacific Mutual Life Insurance Company v. Haslip, 499 U.S. 1 (1991), the Supreme Court considered whether a punitive damages award that was just slightly more than four times the amount of compensatory damages and "much in excess of the fine that could be imposed for insurance fraud" under state law[7] violated the Due Process Clause of the Fourteenth Amendment. Id. at 23. While the Supreme Court concluded that "the monetary comparisons . . . may be close to the line," it determined that the award did not "cross the line into the area of constitutional impropriety." Id. at 23-24.

         Two years later, in a fractured opinion, the Supreme Court addressed again a constitutional challenge to punitive damages. In TXO Production Corp. v. Alliance Resources Corporation, 509 U.S. 443 (1993), the plaintiff filed a common-law action for slander of title and received $19, 000 in actual damages and $10 million in punitive damages. Id. at 446. Over a due process challenge, a plurality of the Supreme Court affirmed the punitive damages award, which was 526 times greater than the compensatory damages. See id. at 446, 453, 466; id. at 469 (Kennedy, J., concurring in part and concurring in the judgment). Three of the justices found it "appropriate to consider the magnitude of the potential harm that the defendant's conduct would have caused to its intended victim if the wrongful plan had succeeded, as well as the possible harm to other victims that might have resulted if similar future behavior were not deterred." Id. at 460 (emphasis in original). Moreover, "the dramatic disparity between the actual damages and the punitive award" was not controlling in this particular case given that the jury could have reasonably determined that the defendant corporation "set out on a malicious and fraudulent course" to reduce royalty payments that were owed to the plaintiffs. Id. at 462. Given the "amount of money potentially at stake, the bad faith of petitioner, the fact that the scheme employed in this case was part of a larger pattern of fraud, trickery and deceit, and petitioner's wealth," this plurality determined that the award was not so "grossly excessive" as to violate due process. Id. Justice Kennedy concurred, noting his own concerns that the jury award may have been based on "the jury's raw, redistributionist impulses stemming from antipathy to a wealthy, out-of-state, corporate defendant," but nonetheless agreed that affirmance could be justified based on the jury's likely finding that the corporate defendant had acted with malice. Id. at 468-69 ("This was not a case of negligence, strict liability, or respondeat superior," but instead the defendant acted "through a pattern and practice of fraud, trickery and deceit . . . . to defraud and coerce those in positions of unequal bargaining power." (quotation marks omitted)).[8]

         In 1996, the Supreme Court overturned a punitive damages award on due process grounds in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996). In Gore, the plaintiff had purchased a BMW from a BMW dealership for approximately $41, 000. Id. at 563. Unbeknownst to the plaintiff, the car had been repainted before it was purchased, which allegedly lowered its value by about 10 percent. See id. at 563-64. The plaintiff sued the defendant-the American distributor of BMWs-and received $4, 000 in compensatory damages and $4 million in punitive damages, which the Alabama Supreme Court remitted to $2 million.[9] Id. at 565, 567.

         In assessing whether this $2 million punitive damages award violated the Constitution, the Supreme Court concluded that only awards that are "grossly excessive" in relation to the relevant state interest violate the Due Process Clause of the Fourteenth Amendment. Id. at 568. The Court noted that "[e]lementary notions of fairness" require that a defendant receive fair notice of the severity of the punishment a state may impose for misconduct. Id. at 574. It set forth three "guideposts" relevant to the inquiry of whether a defendant had the requisite notice: (1) the degree of reprehensibility of the defendant's conduct; (2) "the disparity between the harm or potential harm suffered by [the plaintiff] and his punitive damages award"; and (3) the difference between the punitive damages award and any civil penalties authorized or imposed in comparable cases. Id. at 574-75.

         In discussing the second guidepost, the Supreme Court considered the "long pedigree" of the principle that punitive damages should have a reasonable relationship to compensatory damages, and stated that approximately 65 enactments in English law between 1275 and 1753 provided for double, treble, or quadruple damages. Id. at 580-81. Reciting its earlier observations, it noted its conclusion in Haslip that a ratio of more than 4:1 between punitive and compensatory damages might be "close to the line" of constitutional impropriety. Id. at 581. As to its 1993 TXO decision, the Court indicated that "the relevant ratio" in TXO was no more than 10:1 because the TXO Court had relied on the difference between the punitive damages and the harm to the plaintiff that would have resulted had the defendant's tortious plan succeeded. Id. The Gore Court did not draw a bright line demarcating the limits of a constitutionally acceptable punitive damages award, but it characterized the 500:1 ratio at issue as ...


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