The Tenth Circuit’s April 1, 2016 ruling in Lompe v. Sunridge Partners, LLC indicates that punitive damage awards in personal injury suits must receive close scrutiny to ensure compliance with constitutional Due Process requirements. The court reduced a jury’s punitive damages award of $22.5 million to less than $2 million, finding the award originally determined by the jury and entered after review by the trial court to be “grossly excessive and arbitrary” in violation of the Due Process Clause of the Fourteenth Amendment. The Tenth Circuit’s analysis focused on two points in reaching the conclusion that the punitive damages award violated Due Process guarantees.
First, deferring to the jury’s findings is not sufficient to ensure that an award meets constitutional requirements. Instead, federal courts must conduct an “exacting” de novo review to ensure the award comports with Due Process. The Tenth Circuit found that the district court in Lompe failed to fulfill this obligation. On post-trial review, the district court had simply accepted the jury’s determination, stating that a reduction of the award would amount to second-guessing the jury’s findings. In the Tenth Circuit view, however, the jury’s verdict setting the amount of punitive damages “is neither a factual finding nor entitled to deference.” Rather than accepting the jury’s assessment, the district court must undertake its own analysis in order to decide the ultimate Due Process question: whether the jury’s particular punitive damages award is greater than reasonably necessary to punish and deter.
Second, the Tenth Circuit’s ruling indicates that in a personal injury situation in which the jury awards “substantial” compensatory damages, in this case $1.45 million for economic losses and $1.55 million in additional damages for suffering and emotional distress, the amount of punitive damages may not exceed the sum awarded for compensatory damages in the absence of circumstances recognized as justifying more extensive punishment. The Tenth Circuit identified the reprehensibility of the defendant’s actions as bearing particular significance in the constitutional analysis. Especially egregious conduct, such as a demonstrated intent to injure the plaintiff or deceit of financially vulnerable individuals, could form the basis for a ratio higher than 1:1. Conduct that is grossly negligent or even recklessly indifferent to the safety of others, however, does not warrant punitive damages at a higher proportion. A punitive damages award exceeding the amount of compensatory damages will be constitutionally suspect unless the defendant acted in a particularly egregious manner.
Punitive damages awards must receive constitutional scrutiny in addition to the jury’s assessment entered after hearing the evidence presented at trial. The Tenth Circuit’s dramatic reduction of the punitive damages award in Lompe demonstrates that judgments entered without such scrutiny are vulnerable to appellate challenge.