(The Return of) Ignatz, by Sam Heldman

Wednesday, December 11, 2002

Supreme Court

The final case for this week is a punitive damages case, State Farm v. Campbell. The Utah Supreme Court affirmed a $25 million jury award against State Farm. To make a long story short, State Farm unreasonably and in bad faith refused to settle a car-wreck case against its insured, Campbell; so the case against Cambell went to trial and he lost. (The law in most states, if not all, is that a liability insurance company must act in good faith, in settling claims against the insured – rather than taking an unreasonably hard line against settlement and therefore risking the entry of a judgment against the insured in excess of what is covered by the policy.). The Utah courts concluded that State Farm had a widespread and very very bad policy of encouraging its claims people not to pay claims, in ways that ended up screwing insureds. This is bad. Hence the $25 million. [UPDATE: a knowledgeable source correctly points out that I am wrong. The trial court had reduced the jury's $145 million to $25 million. The Utah S.Ct. not only rejected State Farm's appeal, but also reversed the remittitur -- which is to say, the pop was back to $145, not $25, million. Oops.]

State Farm is making various attacks on the constitutionality of this big punitive damage pop. State Farm says that the punitive award is too big in comparison to the amount of compensatory damages; that it unlawfully punishes State Farm in one state for conduct done in other states; that the state courts placed too much emphasis on State Farm's wealth in order to justify this big pop; and that it's based on business practices that are unrelated to the conduct that gave rise to this case. See State Farm's brief (pdf) here if you're interested. Professor Tribe, who had great success in beating back a similar set of challenges in another case (TXO) several years ago, has (along with others) written a good brief in response (pdf) here.

Can Professor Tribe pull it off again? His win in TXO was considered masterful and rather surprising. A win here, again, would go against the conventional wisdom, I think. But I'm predicting it. Here are the reasons, in a nutshell. First and most importantly, the Court is (I bet) going to say in the California 3-strikes cases that there's no judicial authority to do a very searching "proportionality" review that compares a criminal punishment, on the one hand, with the value of the thing stolen, on the other. (Remember the guy serving 50 years for stealing some video tapes). And, if they're going to do that, then it's quite hard – both as a matter of creating a coherent legal doctrine, and as a matter of public palatability – for a majority to say, within a few months of that, that Corporations unlike People do have a right to that sort of searching proportionality review. This leaves, then, only the other, less interesting, pieces of the patchwork that State Farm is trying to piece together; and Prof. Tribe has done a good job of explaining that the case doesn't really present Grand Constitutional Issues in that regard but is simply a plain old matter of state-law rules of evidence and such, and is really sort of a unique case that doesn't call for the announcement of any grand principles. So, with the understanding as always that I could be wrong (and in fact was as wrong as wrong could be on one of the cases issued yesterday – the Court unanimously said exactly the opposite of what I had predicted it would say), I'm saying AFFIRM.

posted by sam 7:25 AM 0 comments


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