Punitive Damages

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CHRISTINA J. IMRE
Sedgwick, Detert, Moran & Arnold LLP
801 S. Figueroa Street, 18th Floor
Los Angeles, CA 90017-5556
Tel: 213.615.8049
Fax: 213.426.6921
Email: christina.imre@sdma.com
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JULY 2004
Punitive Damages in Year One
After ‘Campbell’:
Leveling the Playing Field
Year One After Campbell: Leveling The Playing Field 1 
 
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© Christina J. Imre Sedgwick, Detert, Moran & Arnold LLP July 2004 
 
 
TABLE OF CONTENTS Page 
 
I. THE U.S. SUPREME COURT’S RECENT “BIG THREE” 
 DECISIONS 2 
 A. First Try: BMW’s Substantive Standards 2 
 B. Second Try: Cooper’s Procedural Approach 3 
 C. Third Try: State Farm v. Campbell 5 
1. Overview 5 
2. The facts 5 
3. Procedural history 6 
4. Substantive guidelines 7 
 a. Heightened concerns 7 
b. Stronger language on the reprehensibility 
test 8 
 c. Stricter ratios 8 
 d. Punishment for out-of-state conduct 8 
 e. The “other acts” similiarity requirement 9 
 f. Comparable fines & penalties 10 
 g. Wealth evidence after Campbell 11 
 (1) Changing the role of wealth 11 
 (2) How should wealth be handled? 12 
 (3) Danger of excluding all wealth evidence 13 
 (4) Judge or jury determination? 14 
II. CAMPBELL TRENDS: HOW APPELLATE COURTS ARE 
 APPLYING THE DECISION 15 
 A. Overview 15 
 B. California 15 
 1. The California remands 15 
 2. Other California decisions 17 
 3. The Ninth Circuit 18 
III. POST-CAMPBELL PRACTICAL ISSUES AND PROBLEMS 19 
 A. Raising Constitutionality Objections 19 
 B. Evidence 20 
 C. Requests for Bifurcation 21 
 D. Arguments And Motions 22 
 E. Effect On Discovery 22 
 F. Jury Instructions 23 
 1. Current practice 23 
 2. Should the jury be instructed on these guideposts? 23 
 3. Existing pattern instructions 24 
 a. California approved instructions 24 
 b. Constitutional problems with CACI 26 
 4. Examples of possible instructions 28 
 
Year One After Campbell: Leveling The Playing Field 2 
 
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© Christina J. Imre Sedgwick, Detert, Moran & Arnold LLP July 2004 
I. THE U.S. SUPREME COURT’S RECENT “BIG THREE” DECISIONS. 
 
Legislative efforts at tort reform have done little to correct the problem of 
burgeoning punitive verdicts or their underlying causes. However, after some 
slow starts in the 1980’s, the U.S. Supreme Court has become surprisingly active 
in the field. In the last eight years, the court has issued three major decisions on 
excessive punitive damages, each time making its message blunter: it’s time to 
put the brakes on these runaway verdicts. As with every Supreme Court opinion, 
these cases answer many questions, but raise even more. 
 
A. First Try: BMW v. Gore’s Substantive Standards. 
 
The court fired its first major salvo against punitive damages in 1996. In 
BMW, it recognized that defendants have a constitutional right to be free of 
“grossly” excessive awards and a due process right to notice of the extent of the 
potential monetary punishment. The court remanded a $2 million punitive award 
(reduced from $4 million by the lower court), in the process creating three 
substantive “guideposts” for reviewing courts to use in evaluating when, and 
whether, a punitive verdict is grossly or constitutionally excessive. (BMW v. Gore 
(1996) 517 U.S. 559.) Those “guideposts” are: 
 
(1) degree of reprehensibility: how bad was defendant’s conduct? 
 
(2) ratio: what is the ratio of punitive damages to actual or potential 
harm? 
 
(3) comparable penalties: what comparable civil penalties are 
available for the conduct at issue in the case? 
 
Terming the “reprehensibility” guidepost the most important factor, BMW created 
what could be called a scale of relative reprehensibility, as a marker for lower 
courts to use in evaluating how much punishment is warranted. It noted, for 
example, that 
 
• conduct causing physical injury is generally more reprehensible than 
purely economic harm 
 
• economic harm is worse, relatively speaking, when inflicted on the 
financially vulnerable than on the wealthy 
 
• reckless disregard of another’s rights or safety is more serious than 
indifference 
 
• repeated conduct is more blameworthy than a single isolated act or 
incident, and 
 
Year One After Campbell: Leveling The Playing Field 3 
 
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• harm resulting from mere accident is less onerous than that arising 
from intentional malice, deceit or trickery. (BMW, supra, 517 U.S. at 
575-576.) 
 
In announcing these ‘relative reprehensibility’ factors, the court provided 
benchmarks, which, all other things being equal, should provide some guidance 
to evaluate the degree of reprehensibility. In other words, the court was striving 
for proportionality: how bad was the defendant’s conduct when viewed in relation 
to the general scheme of things? This ‘relative reprehensibility’ scale requires 
placing the conduct into perspective. Thus, for example (assuming all other 
factors balance out), a defendant who intentionally and deliberately causes 
serious physical harm, or does it repeatedly, is more worthy of blame and 
punishment than a defendant that causes accidental injury; a defendant who 
causes economic harm to a wealthy plaintiff is less deserving of punishment than 
one who injures the financially vulnerable, and so on, in many permutations. 
 
The conduct in BMW clearly fell on the low end of the scale. The actual 
harm inflicted was minimal, a few thousand dollars. Defendant BMW failed to 
advise the Alabama plaintiff (a doctor) that his new car, after sustaining minor 
damage en route to the dealership, had been repainted. In remanding to the 
lower court for a redetermination of the proper amount, the opinion relied heavily 
on the fact that BMW’s conduct was legal in many states. 
 
Admittedly, however, the guideposts were (perhaps unavoidably) vague, 
and thus subject to a great deal of interpretation. After the BMW decision issued 
in 1996 it was business as usual for large punitive damage awards. In fact, a 
well-known study of California punitive verdicts suggests that the size and 
number of verdicts actually increased between 1995 and 2000. (See, e.g., Kelso 
& Kelso, An Analysis Of Punitive Damages In California Courts, 1991-2000, 
Capital Center for Government Law & Policy, University of the Pacific, McGeorge 
School of Law.) 
 
B. Second Try: Cooper’s Procedural Approach. 
 
Changing Tactics. Evidently recognizing that the vague BMW guideposts 
were not equal to the task of policing and reducing large verdicts, in 2001, the 
court switched gears. Leaving BMW’s substantive standards untouched, this 
time the majority changed the procedural mechanism by which punitive awards 
are reviewed on appeal. (Cooper Industries, Inc. v. Leatherman Tool Group, Inc. 
(2001) 532 U.S. 424.) Cooper held that where the defendant claims the punitive 
award exceeds the bounds set by the Federal Constitution, appellate courts must 
review the amount independently, no longer constrained by the trial court’s 
determination that the amount passes constitutional muster. 
 
Why the change was so significant. Cooper was a radical procedural 
revolution, at least in theory. Before, when a defendant claimed on appeal that 
Year One AfterCampbell: Leveling The Playing Field 4 
 
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© Christina J. Imre Sedgwick, Detert, Moran & Arnold LLP July 2004 
the punitive verdict was constitutionally excessive, appellate courts reviewed the 
award under a standard known as “abuse of discretion.” If the trial judge had 
denied a post-trial motion brought on excessiveness grounds, the appellate court 
was required to give that ruling substantial deference. Only if the trial court had 
abused its discretion – i.e., acted beyond the bounds of reason – could the court 
of appeal conclude the amount was grossly excessive. In other words, in 
conducting the BMW excessiveness review, appellate courts were constrained 
by the trial court, in effect required to conduct their review with one hand tied 
behind their backs. Cooper changed that by giving appellate courts the freedom 
to independently decide the question of “gross excessiveness.” Under this less 
restrictive standard, courts of appeal are no longer hampered by the trial court’s 
decision or the deferential abuse of discretion rule. 
 
Rationale. In the course of revamping the standard of review, the 
Supreme Court explained that punitive damages are “quasi-criminal” and serve 
as private fines designed to punish the defendant and deter similar conduct in 
future. However, these quasi-criminal systems lacked the procedural safeguards 
afforded a criminal defendant. Cooper held the Federal Constitution requires 
independent review to ensure the defendant’s constitutional rights have not been 
violated. 
 
Goal: Uniformity & Proportionality. Cooper concluded that appellate 
courts are just as capable of applying the three guideposts as trial judges and, in 
some respects, are better suited to do so. Juries, given general guidelines for 
awarding punitive damages, typically make their decisions in a vacuum, with no 
basis for comparison. In contrast, the constitutional concept of “gross 
excessiveness” is “fluid,” comparable to a criminal determination of probable 
cause, and acquires “more meaningful content through case-by-case application” 
at the appellate level. (532 U.S. at 436.) Thus, courts of appeal, with their 
greater perspective and experience in evaluating punitive awards, are particularly 
well-equipped to decide if the punishment is “proportional” to the offense and 
comparable to penalties imposed against other defendants. (Id. at 440.) This 
independent review tends to “unify precedent and stabilize the law,” with the goal 
of helping to “assure uniform treatment of similarly situated persons.” (Id. at 436, 
citation omitted.) 
 
Not A “Fact” Finding. Notably, Cooper’s majority went to great lengths 
to justify its radical new rule of procedure. In granting appellate courts 
independent or de novo power to review verdicts, the Supreme Court faced a 
theoretical dilemma: typically, jury determinations of damages are semi-
sacrosanct, and reducing verdicts might be viewed as violating plaintiff’s Seventh 
Amendment right to a jury trial. The majority opinion offered the following 
answer: though a jury’s award of compensatory damages is essentially a factual 
determination (thereby requiring some deference on review to the trial judge, who 
heard the evidence), deciding the proper amount of punitive damages is a 
question of constitutional dimensions and “an expression of moral 
Year One After Campbell: Leveling The Playing Field 5 
 
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condemnation.” (Id. at 432.) Thus, the independent review standard did not run 
afoul of any jury trial rights. Unlike the actual measure of plaintiff’s compensatory 
damages, “which presents a question of historical predictive fact [citation], the 
level of punitive damages is not really a fact tried by the jury. [Citation.]” (Id. at 
437, emphasis added.) 
 
Disappointing Results. In other words, Cooper was an attempt at a 
practical solution. It gave appellate courts considerable leeway, intending that 
this power be used as a safety net, to help ensure that the penalties were not 
excessive, were relatively uniform, and fair. Though a theoretical bombshell, this 
procedural change probably did little to alter the outcome in individual cases. 
Granting broad new powers did not mean all lower courts would exercise them. 
For example, two California intermediate appellate courts, both ordered by the 
Supreme Court to reconsider large punitive damage awards in light of Cooper, 
simply issued new opinions concluding the amounts passed muster even under 
the new de novo standard. (See, e.g., Simon/Sao Paolo (Cal. 2001) 2001 
Cal.App. Unpub. Lexis 1860 [remanded by Supreme Court: 121 S.Ct. 2190]; 
Textron v. National Union (Cal. 2002) 2002 Cal.App. Unpub. Lexis 6131 
[remanded by Supreme Court: 121 S.Ct. 1678].) 
 
C. Third Try: State Farm v. Campbell. 
 
1. Overview. 
 
With the advent of the Campbell decision in April of 2003, the high court 
has gone even further, using sweeping language about restraining punitive 
awards, limiting a state’s power to punish a corporation for conduct outside that 
state, and even limiting what types of evidence may be used to prove when and 
how much punitive damages are constitutionally permissible. (State Farm Mut. 
Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408; 155 L.Ed.2d 585; 123 S.Ct. 
1513.) The opinion has far-ranging implications for virtually every aspect of trials 
and appeals involving a punitive damages claim. It should revolutionize how 
punitive cases are tried, from top to bottom, including the role of wealth evidence, 
discovery, pre-trial motions, permissible evidence, argument, verdict forms and 
jury instructions. 
 
2. The facts. 
 
Campbell was an insurance bad faith case brought in Utah state court for 
the insurer’s failure to settle a serious (death and permanent injury) auto accident 
lawsuit against its elderly, and clearly culpable, insured. In the underlying 
lawsuit, the jury awarded damages exceeding Campbell’s policy limit. The insurer 
refused to appeal the judgment; Campbell had to hire his own appellate attorney, 
and the insurer declined to post any bond to stay enforcement of the judgment 
while the appeal was pending. It paid only when the higher court affirmed the 
personal injury judgment against its insured. 
Year One After Campbell: Leveling The Playing Field 6 
 
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3. Procedural history. 
 
In the ensuing bad faith case against State Farm, the trial court admitted 
evidence not only of the company’s handling of the underlying third-party claim, 
but of a wide range of practices around the country spanning a 20-year period. 
This included a performance directive to employees to reduce claim payouts, 
evidence that managers in other states did not report punitive damage awards to 
home office, how State Farm handled auto repair claims in other states, and 
even the fact that employees had sued the company in various states for 
wrongful employment practices. The Utah jury set compensatory damages at 
$2.6 million and punitives of $145 million. The trial judge reduced 
compensatories to $1 million and punitives to $25 million. However, the Utah 
Supreme Court, largely relying on evidence of the company’s unrelated out-of-
state acts and wealth, reinstated the jury’s original punitive verdict. (65 P.3d 
1134.) The U.S. Supreme Court granted certiorari. Its opinion, which found the 
case “neither close nor difficult,” concluded $145 million was grossly excessive 
and arbitrary, and remanded thecase for a re-determination of the proper 
amount of punishment.1 
 
4. Substantive guidelines. 
 
a. Heightened concerns about the dangers of punitive 
damages. 
 
In comparison with BMW and Cooper, this time around, the court was 
especially blunt about the dangers of runaway punitive awards. Justice 
Kennedy, writing for the majority, began by noting that juries have wide latitude in 
determining the amount of punishment, and evidence of financial condition, 
required in most states, creates a danger that juries “will use their verdicts to 
express biases against big businesses.” He echoed Justice O’Connor’s dissent 
in a prior opinion, that: 
 
“[p]unitive damages are a powerful weapon. Imposed 
wisely and with restraint, they have the potential to 
advance legitimate state interests. Imposed 
indiscriminately, however, they have a devastating 
potential for harm. Regrettably, common-law 
procedures for awarding punitive damages fall into 
the latter category.” (Campbell, supra, 123 S.Ct. at 
1520.) 
 
The majority also voiced dismay over the “imprecise manner” in which punitive 
damages systems are administered, the “acute danger of arbitrary deprivation of 
 
1 After remand, the Utah Supreme Court issued a new opinion in April, 2004, 
setting the punitives at $9 million, or a ratio of 9:1. (2004 Utah Lexis 62.) 
Year One After Campbell: Leveling The Playing Field 7 
 
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© Christina J. Imre Sedgwick, Detert, Moran & Arnold LLP July 2004 
property,” and vague and inadequate instructions that do little to guide the jury in 
setting the appropriate amount. (Ibid.) “Vague jury instructions . . . do little to aid 
the decisionmaker in its task of assigning appropriate weight to evidence that is 
relevant and evidence that is tangential or only inflammatory.” The court finally 
observed that although punitive awards are designed to serve the same 
purposes as criminal penalties, “defendants subjected to punitive damages in 
civil cases have not been accorded the protections applicable in a criminal 
proceeding. This increases our concerns over the imprecise manner in which 
punitive damages systems are administered.” (Ibid.) 
 
b. Stronger language on applying the reprehensibility test. 
 
Campbell reiterated its statements about the first BMW guidepost, i.e., 
how courts should go about deciding the degree of reprehensibility of the 
defendant’s act. Reciting the five relative reprehensibility factors first raised in 
BMW, the majority provided more guidance on how to apply them and what they 
mean: 
“the existence of any one of these factors weighing in 
favor of plaintiff may not be sufficient” to sustain a 
punitive award, and the absence of all of them 
renders any award suspect.” (Campbell, supra, 123 
S.Ct. at 1521, emphasis added.) 
 
Since the plaintiff already has been made whole by the compensatory award, 
punitive damages should only be awarded if the defendant’s culpability is “so 
reprehensible as to warrant the imposition of further sanctions.” (Ibid., emphasis 
added.) Notably, though the court observed that the defendant’s conduct 
“merited no praise,” State Farm’s acts were not “so reprehensible” to warrant 
$145 million. The court concluded, “a more modest punishment for this 
reprehensible conduct could have satisfied the State’s legitimate objectives, and 
the Utah courts should have gone no further.” (Ibid.) 
 
c. Stricter, almost-quantifiable ratios. 
 
On these facts, Campbell continued, the conduct “likely would justify a 
punitive damage award at or near the amount of compensatory damages.” That 
would be approximately $1 million, the reduced compensatory award. In even 
plainer language, the court made its bluntest statements to date on the BMW 
ratio guidepost. Though declining to establish a bright line, Campbell said that 
few awards significantly exceeding a single-digit ratio between punitive and 
compensatory damages will satisfy due process. It reiterated that a 4:1 ratio 
(originally stated in Haslip) is close to the line of constitutional excessiveness, but 
added that when the compensatory damages are themselves substantial, 
 
“then a lesser ratio, perhaps only equal to the 
compensatory damages, can reach the outermost 
Year One After Campbell: Leveling The Playing Field 8 
 
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limit of the due process guarantee.” (Campbell, 
supra, 123 S.Ct. at 1524, emphasis added.) 
 
The court observed that State Farm ultimately paid the excess judgment, so the 
compensatory award represented $1 million for 1 ½ years of emotional distress. 
Thus, the clearly-substantial compensatory award consisted largely of ‘soft’ 
damages. Campbell believed that a punitive component already was built into 
the compensatory verdict and that this can play a role in the ratio determination: 
 
“The compensatory damages . . . likely were based 
on a component which was duplicated in the punitive 
award. Much of the distress was caused by the 
outrage and humiliation the Campbells suffered at the 
actions of their insurer; and it is a major role of 
punitive damages to condemn such conduct. 
Compensatory damages, however, already contain 
this punitive element.” (Id. at 1525.) 
 
. Since there is no “bright line,” what conclusions can we draw from the ratio 
discussion? It appears that ratios exceeding a single digit multiplier (more than 
9:1) may be appropriate only in two situations: (1) the compensatory damages 
themselves are low and probably contain no punitive component, or (2) the 
conduct is exceptionally egregious or reprehensible, repeated on a grand scale 
or difficult to detect. In most other cases, 4:1 is “close to the line.” However, if 
the compensatory damages are high and/or themselves reflect a punitive 
element, then 1:1 may approach the constitutional maximum. 
 
And even then, deciding on the constitutionally-permitted maximum does 
not necessarily mean that the maximum amount is appropriate or must be 
awarded. In BMW, the court suggested that the award should be the least sum 
needed to punish and deter. (See discussion in Continental Trend Resources, 
Inc. v. OXY USA, Inc. (10th Cir. 1996) 101 F.3d 634, 641 [“The Supreme Court’s 
opinion [in BMW] seems to ask for the least punishment that will change future 
behavior . . . . “].) The Tenth Circuit Court of Appeals interpreted BMW as 
requiring courts to lower punitive verdicts to the level necessary to deter 
defendants economically, and no more. 
 
 d. Punishment for conduct outside the state. 
 
 In an attempt to justify the $145 million award, the Campbells argued that 
the verdict was necessary to punish the defendant for its conduct towards other 
insureds in other states. As the opinion puts it, the plaintiffs’ evidence at trial 
represented an attempt to “rebuke” State Farm for its “nationwide activities.” 
However, Campbell narrowly circumscribed the use of evidence of out-of-state 
acts towards persons other than the plaintiff. 
 
Year One After Campbell: Leveling The Playing Field 9 
 
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The court first raised its concern over a state’s use of punitive damages to 
punish for nationwide conduct – the so-called “one-way class action” - in BMW. 
There, the act, repainting new cars with minor damage before sale, was lawful in 
many states. BMW observed that a jury may consider evidence of conduct 
affecting persons in other states in calculating thedegree of reprehensibility of 
the conduct aimed at the plaintiff. However, under principles of comity and 
sovereign immunity, juries may not punish conduct directed at non-plaintiffs in 
other states where the conduct was lawful in those other jurisdictions. BMW left 
open the question of whether one state may punish for out-of-state acts directed 
at non-residents if the conduct is unlawful in the other state. 
 
Campbell answered that question, all but slamming the door shut on 
evidence of conduct unlawful in the other state: “[n]or, as a general rule, does a 
State have a legitimate concern in imposing punitive damages to punish a 
defendant for unlawful acts committed outside of the State’s jurisdiction.” 
(Campbell, supra, 123 S.Ct. at 1522.) Any other rule would allow one state’s 
imposition of punitive damages to punish the defendant for conduct in the other 
state. That, Campbell plainly believed, is the function of the other state’s juries 
and regulators. 
 
Making it still harder for plaintiffs to secure extra-territorial punishment, 
even for conduct unlawful elsewhere, the court clarified that “[a]ny proper 
adjudication of conduct that occurred outside Utah to other persons would 
require their inclusion, and, as to those parties, the Utah courts, in the usual 
case, would need to apply the laws of their relevant jurisdiction.” (Id. at 1522, 
emphasis added.) This would basically require the joinder of parties-plaintiff from 
the other states, as well as instructions on what is and is not lawful in the other 
jurisdictions, and could radically expand the scope of trial. In all likelihood, the 
extra-territoriality holding, coupled with comments about what is and is not 
sufficiently similar conduct (see below), should spell the end of many “one-way” 
class actions, and to jury arguments to “send a nationwide message.” 
 
 e. The tighter “other acts” similarity requirement. 
 
 As an additional constraint, the court concluded that, in determining 
reprehensibility, the only germane evidence of the defendant’s other acts is 
conduct similar to that directed at the plaintiff. The other-conduct evidence must 
have “a nexus to the specific harm suffered by the plaintiff.” (123 S.Ct. at 1522.) 
Putting an end to general character assassination evidence, Campbell’s majority 
observed: 
 
“A defendant’s dissimilar acts, independent from the 
acts upon which liability is premised, may not serve 
as the basis for punitive damages. A defendant 
should be punished for the conduct that harmed the 
Year One After Campbell: Leveling The Playing Field 10 
 
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plaintiff, not for being an unsavory individual or 
business.” (123 S.Ct. at 1523, emphasis added.) 
 
What’s more, when the ‘relative reprehensibility’ issue is whether defendant was 
a recidivist, only evidence of acts similar to that which harmed this plaintiff may 
be considered. 
 
 The court did not provide an express calculus for determining what 
constitutes a sufficiently “similar” act, but it did give ample illustrations of what is 
not sufficiently similar. Campbell was a third party excess liability case. In a kind 
of evidentiary wildfire, the trial court appeared willing to admit evidence on 
everything State Farm ever did, anywhere, to anyone. The majority roundly 
rejected the notion that State Farm’s allegedly wrongful employment practices 
had any bearing on setting its punishment for its treatment of the Campbells, 
clearly-irrelevant evidence aimed at character assassination. 
 
More telling on the “similarity” issue is the court’s rejection of how State 
Farm handled other insurance claims, such first party earthquake claims, 
“improper” payment of replacement auto parts, and its employee performance 
directive to reduce claim payouts across the board. Each of these acts was 
related, however tangentially, to the handling of insurance claims, but that was 
not enough. The acts lacked a sufficient nexus to the specific harm to this 
plaintiff. Thus, the court’s definition of sufficient similarity appears to approach 
that of nearly identical. 
 
 While evidence other acts may be used to show that the conduct toward 
plaintiff was part of a wider plan, hence raising the degree of reprehensibility, the 
conduct must be highly similar. And even then, punitive damages for the 
repeated conduct cannot be too high a multiple of the compensatory award. The 
court clearly disapproved of the practice of multiple lawsuits by different plaintiffs, 
who often bootstrap themselves into higher punitive awards by sharing 
witnesses, evidence of other acts, and even the same experts. The court 
appears to be putting an end to the uncertified “one-way” class action. 
 
 f. Comparable fines and penalties. 
 
 Some lower courts, to justify high awards, have used criminal penalties as 
the basis for comparison, or the highest possible administrative fine, however 
remote its imposition might be. For example, one California appellate court, 
justifying a $290 million punitive damage verdict against Ford in a rollover-death 
case, noted that the comparable criminal sanction was manslaughter, and the 
huge amount of punitives was proper because corporations cannot be jailed. 
(Romo v. Ford Motor Co. (Romo I) (Cal. App. 2002) 99 Cal.App.4th 1115, opinion 
vacated and remanded for reconsideration in light of Campbell.) The Utah 
Supreme Court had relied on the severest potentially-available administrative 
penalty, loss of license to do business in the state for repeated claims 
Year One After Campbell: Leveling The Playing Field 11 
 
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mishandling, as well as the possibility that defendant’s corporate officers could 
be prosecuted criminally. 
 
Campbell added much-needed clarity to this often-overlooked BMW 
guidepost, cautioning against using criminal penalties to justify a high punitive 
verdict: 
 
“The existence of a criminal penalty does have 
bearing on the seriousness with which a State views 
the wrongful action. When used to determine the 
dollar amount of the award, however, the criminal 
penalty has less utility. Great care must be taken to 
avoid use of the civil process to assess criminal 
penalties that can be imposed only after heightened 
protections of a criminal trial have been observed, 
including, of course, its higher standards of proof. 
Punitive damages are not a substitute for the criminal 
process, and the remote possibility of a criminal 
sanction does not automatically sustain a punitive 
damages award.” (Campbell, supra, 123 S.Ct. at 
1526, emphasis added.) 
 
Where the Utah Supreme Court had justified the $145 million based on the 
potential loss of business license, disgorgement of profits, and perhaps even 
imprisonment, the U.S. Supreme Court dismissed these possibilities as 
“speculative.” Moreover, the Utah opinion’s reliance on the most severe 
sanctions available had been predicated on the “nationwide fraud scheme,” 
which turned on the now-discredited evidence of other acts. Notably, Campbell 
observed that the most relevant civil sanction under Utah law appeared to be 
$10,000 for a single act of fraud, a point defendants should keep in mind in 
preparing instructions and challenging awards post-trial. (Campbell, supra, 123 
S.Ct. at 1526.) 
 
 
 g. Wealth evidence after Campbell. 
 
(1) Changing the role of wealth evidence. 
 
 Many states have traditionally justified wealth evidence as necessary to 
achieve the “proper” amount of deterrence and punishment, on the theory that 
the state has aninterest in protecting its citizens from reprehensible acts, and an 
easily absorbed monetary punishment will not achieve those goals. However, as 
a practical matter, giving wealth evidence to the jury has functioned as an 
aggravating factor, tending to substantially increase the jury’s award. California, 
for example, requires plaintiffs to offer evidence of defendant’s wealth; the failure 
to meet this burden is grounds for overturning the award. (See, e.g., Cal. 
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approved jury instruction, BAJI 14.71 [wealth is one of three factors jury must 
consider]; Adams v. Murakami (Cal. 1991) 54 Cal. 3d 105 [plaintiff’s burden to 
offer evidence of financial condition].) 
 
Notably, BMW omitted defendant’s wealth from the three guideposts 
courts use to evaluate excessiveness, instead suggesting that wealth alone is not 
a proper criterion in assessing punishment: “[t]he fact that BMW is a large 
corporation rather than an impecunious individual does not diminish its 
entitlement to fair notice of the standards that the several States impose on the 
conduct of its business.” (517 U.S. at 585.) Cooper ignored the question of 
wealth, although the lower court had cited defendant’s financial condition as a 
factor justifying a $4.5 million punitive verdict. In Campbell itself, the Utah 
Supreme Court relied heavily on defendant’s financial condition, noting $145 
million was a small percentage of the company’s overall net worth. 
 
The Campbell court made no secret of its concerns about the abuse of 
wealth evidence in punitive damages trials nor its function as a factor that 
enhances the jury’s punitive award. Quoting a concurrence of Justice Breyer in a 
prior case, it noted: 
 
“‘[Wealth] provides an open-ended basis for inflating 
awards when the defendant is wealthy. . . . That does 
not make its use unlawful or inappropriate; it simply 
means that this factor cannot make up for the failure 
of other factors, such as ‘reprehensibility,’ to constrain 
significantly an award that purports to punish a 
defendant’s conduct.’ The principles set forth in 
[BMW v.] Gore must be implemented with care, to 
ensure both reasonableness and proportionality.” 
(Campbell, supra, 123 S.Ct. at 1525-1526, citation 
omitted, emphasis added.) 
 
Responding to the Utah Supreme Court’s use of wealth evidence, among other 
things, to support the high verdict, the Campbell majority stated that a 
defendant’s wealth “cannot justify an otherwise unconstitutional punitive 
damages award.” (Campbell, supra, 123 S.Ct. at 1525, emphasis added.) In 
other words, the amount of the verdict must be supportable under the three BMW 
factors. Using wealth to uphold the award would, in essence, trump the three 
constitutionality standards, i.e., depart from these “well-established constraints 
on punitive damages.” (Ibid.) 
 
(2) How should wealth evidence be handled after 
Campbell? 
 
 The question remains, however, precisely what role financial-condition 
evidence should play. Does the court’s strong indictment of the misuses of 
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wealth evidence mean it is no longer admissible at all, for any purpose? That 
seems doubtful. As noted above, wealth cannot be used to sustain an award 
that is otherwise constitutionally excessive under the three BMW factors. But the 
court went on to say “that does not make it uses unlawful or inappropriate.” 
(Campbell, supra, 123 S.Ct. at 1525.) Reading these two statements together, 
financial condition apparently continues to have some relevance, but, at 
minimum, serves a less important function than before. The most logical 
conclusion is that now wealth should function as a limiting factor, constraining the 
size of the award. Even California state law recognizes a punitive award can be 
excessive solely because it is too high a percentage of defendant’s net worth. 
(Adams v. Murakami (1991) 54 Cal.3d 105, 111.) Thus, arguably, juries should 
not use wealth as an enhancement, to inflate the punitive award against a rich 
defendant. As the court noted: financial condition encourages poorly instructed 
juries to “vent their bias” against business and thus is one of the causes of 
excessive awards. (Campbell, 123 S.Ct. at 1520.) 
 
Even now, courts and litigants are struggling with this issue. Should 
defendants move to exclude any and all evidence of their wealth? The Breyer 
comment (the fact that wealth provides an open-ended basis for inflating awards 
does not make its use unlawful or inappropriate) suggests otherwise, but the 
answer far from clear. 
 
(3) The danger of excluding all wealth evidence. 
 
Many defendants, relying on Campbell, are moving to exclude all evidence 
of their financial condition. Arguably, this over-reads Campbell, which expressly 
noted that the fact wealth is not a BMW factor does not make its use “unlawful or 
inappropriate.” Moreover, in many states, moving to exclude all wealth evidence 
could backfire. California is an example. In reviewing punitive damages awards 
on appeal, it invokes a judicially-imposed state (i.e., a non-constitutional) ceiling.2 
In its last major pronouncement on punitive damages, the California Supreme 
Court held that “the award can be so disproportionate” to defendant’s ability to 
pay that it is excessive for that reason alone. (Adams v. Murakami, supra, 54 
Cal.3d 105.) As a result, California uses a “10% rule:” punitive damages 
“exceeding 10% of a defendant’s net worth have generally been disfavored by 
the appellate courts” and “significantly lower percentages are indeed the norm.” 
(Goshgarian v. George (Cal. App. 1984) 161 Cal.App.3d 1214, 1228, emphasis 
omitted; Storage Services v. Oosterbaan (Cal. App. 1989) 213 Cal. App.3d 498, 
516.) Any award exceeding that amount is presumptively the product of jury 
 
2 Ironically, in California, wealth evidence must be given to the jury, where it clearly 
serves as an “aggravating” factor. However, post-trial, when courts review the jury’s 
punitive damages award for excessiveness under state law, wealth evidence may work 
to reduce or mitigate the verdict. Why introduce the jury to such a potentially-
inflammatory factor as wealth, only to use the same evidence on appeal to conclude the 
verdict resulted from passion or prejudice? 
 
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passion and prejudice. Thus, a defendant in California who, relying on Campbell, 
blocks all evidence of its financial condition has sacrificed its chance to obtain 
relief under the “10% (or less) rule” on appeal. 
 
(4) Jury or judge determination? 
 
 The question remains, however, what should the jury be told about 
defendant’s wealth, or has wealth dropped out of the jury’s consideration? The 
Supreme Court seems to be moving away from the notion that juries should be 
involved in deciding the amount of punitive damages. Cooper noted that the 
amount of punitive damages is not, or “not really” a fact question, but rather a 
non-factual, or perhaps quasi-factual, expression of moral condemnation. The 
high court is clearly concerned that wealth evidence is inflammatory, gives jurors 
an excuse to vent their spleen against big business, and plays a major role in the 
enormousawards we see reported regularly in the news. 
 
 While lower courts around the country are still struggling with the 
ramifications of the 14-month old Campbell decision, the solution, what to do with 
wealth, is far from clear. Here is one suggestion for states, such as California, 
that apply their own “passion and prejudice” review on appeal. As noted above, 
any punitive verdict over 10% of net worth or financial condition is presumptively 
excessive as the product of jury passion and prejudice. Appellate courts cannot 
apply that rule if there is no evidence in the appellate record of defendant’s 
worth. Thus, defendant might consider offering evidence of financial condition to 
the trial judge, either in chambers or post-trial. Warning: this is a novel, 
untested argument, contrary to existing case law that requires the jury to hear 
evidence of wealth.3 However, this approach would go a long way toward 
satisfying Campbell’s concerns about the misuse of wealth evidence, and at the 
same time preserve the defendant’s ability to avail itself of the 10% rule on 
appeal. 
 
 As the preceding discussion shows, all states that allow wealth evidence 
as part of the jury’s punitive damages calculation will have to rethink the role of 
wealth, at trial and on appeal. Assuming wealth evidence is still a jury issue, 
should juries now be instructed that it can be considered only in mitigation, or 
that the award cannot exceed a maximum set by the trial judge after hearing 
financial condition evidence? These and other solutions have been offered by 
legal commentators but are not without their flaws. In the mitigation-instruction 
proposal, the jury still hears about wealth, thus requiring jurors to ignore 
enormous numbers except for mitigation. And any pre-set maximum instructions 
 
3 Under current California law, the jury must be given financial condition evidence 
and the trial and appellate courts cannot consider evidence the jury did not hear. 
(Adams v. Murakami, supra, 54 Cal.3d at 111; Stevens v. Owens Corning, supra, 49 
Cal.App. 4th 1645.) Based on existing California authority, the trial court will probably 
feel constrained to deny the motion, but the issue would be preserved for adjudication in 
a higher court in light of Campbell’s changed circumstances. 
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suffer from problems of their own. An instruction saying “do not exceed $10 
million” or “do not exceed a ratio of 4:1” is an open invitation to award $10 million 
or the highest permitted ratio. 
 
 
II. CAMPBELL TRENDS: HOW APPELLATE COURTS ARE APPLYING 
THE DECISION. 
 
 A. Overview. 
 
 It has been fourteen months since the landmark decision came down. In 
that period, courts around the country have been faced with scores of cases in 
which defendants have relied on Campbell to significantly reduce the amount of 
the punitive damages award. For a detailed analysis of the results and 
approaches to the new Campbell rule, see Table, “Appellate Court Reactions To 
Campbell.” 
 
 Prior to Campbell, many appellate courts had simply affirmed the amount, 
citing e.g., deference to the jury’s “discretion” (discretion that has been 
constitutionally circumscribed by Cooper and Campbell) or casually referring to 
the “extreme reprehensibility of defendant’s conduct.” That is changing, although 
the decision is not being applied as rigorously as the language seemingly 
requires. 
 
 Thus far, the trend in California state courts has been to set the puntitives 
at approximately four to one, even in cases of economic harm and even where 
the compensatory damages are substantial. Some have exceeded 4:1 but 
remained within the “single digit ratio” parameter, and some decisions have 
continued to rely on wealth evidence as a justification for not reducing the award 
further. Many of these decisions do not seriously evaluate degree of 
reprehensibility. 
 
B. California. 
 
1. The California remands. 
 
After issuing its Cooper decision, the U.S. Supreme Court remanded 
cases to the lower appellate courts, instructing them to reconsider the amount in 
light of Cooper’s new de novo standard of review. Those courts issued new 
opinions reaffirming the punitive damage awards. (See Table, “Appellate Court 
Reactions To Campbell.”). California was among them. In many instances, the 
U.S. Supreme Court granted certiorari again, vacated the decisions and again 
remanded, ordering propriety of the award be reconsidered in light of Campbell’s 
principles and precepts. 
 
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This time, the California lower courts responded more favorably, reducing 
the awards, but many of them arguably read the permissible ratio language too 
broadly, using 4:1 as a benchmark, even in fact patterns where the defendant 
caused economic harm only and the compensatory damages were substantial. 
 
• Textron. A case the U.S. Supreme Court remanded twice, first in light 
of Cooper and then Campbell, to reconsider the amount. (See Table, 
“Appellate Court Reactions To Campbell;” Textron II (2004 118 
Cal.App.4th 1061.) On its third try, in mid-2004, the court of appeal 
reduced the punitives from approximately $1.7 million to $360,000, a 
ratio of about 4:1. Arguably, the number is still too high. Textron II 
found the compensatories neither exceptionally high nor low, the 
conduct neither very extreme nor trivial. That the maximum usually 
should not exceed 4:1 does not mean such a ratio is appropriate for 
“average” cases. The harm here was economic only and the plaintiff 
was not financially vulnerable. 
 
• Simon v. Sao Paolo. Another case the U.S. Supreme Court 
remanded twice. The Los Angeles Court of Appeal (Second District, 
Division Four) originally affirmed a $1.7 million punitive award on a 
$5,000 compensatory verdict, and reaffirmed that amount after remand 
for reconsideration in light of Cooper. (2001 Cal. App. Unpub. Lexis 
1860.) After a second “Campbell” remand, the same appellate court 
once again reaffirmed the punitive award. (Simon II (Cal. 2003), 
formerly published at 113 Cal.App.4th 1137.) The court rejected 
defendant’s argument that Campbell bars all wealth evidence, which it 
found “still useful” in determining the amount. It also considered the 
conduct, causing only economic harm, to be very egregious, noting 
that extremely reprehensible conduct warrants higher punitives where 
only a small economic harm results. The California Supreme Court 
granted review in March, 2004. The issue is proper calculation of the 
ratio after Campbell. (See fn. 10, post.) 
 
• Romo. In this defective product case, the jury returned a punitive 
damages verdict of $290 million against Ford for design of the vehicle 
roof, which partially collapsed during a rollover causing serious injuries 
and deaths. The trial judge granted a new trial for juror misconduct 
during deliberations. In an opinion giving short shrift to Ford’s 
constitutional challenges, the Fresno Court of Appeal reinstated the 
award and the California Supreme Court denied review. (Romo I, 
supra, 99 Cal.App.4th 1115.) However, after the U.S. Supreme Court 
remanded for reconsideration under Campbell, the same appellate 
court reduced the punitives to approximately $24 million. (Romo II 
(Cal. 2003) 113 Cal.App.4th 738.) The new opinion criticized the BAJI 
instruction’s emphasis on defendant’s wealth as one of the three 
factorsthe jury should consider in setting the amount, concluding this 
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improperly focused the jury more on defendant’s wealth, distracting 
attention from the real issue: what is the harm to this plaintiff.4 Since 
Ford settled the case soon after, no petition for review was filed with 
the state Supreme Court. 
 
2. Other California decisions. 
 
• Diamond Woodworks. One of the first California opinions to come 
down after Campbell was Diamond Woodworks v. Argonaut Ins. 
Co. (2003) 109 Cal.App.4th 1020. The court of appeal reduced the 
$ 5 million punitive damage award to $1 million, a 3.8 ratio of 
punitives to compensatory damages. This was the same appellate 
court (Fourth District, Division Three (Santa Ana) that a year before 
had reaffirmed the award after a “Cooper remand.” (See Textron I, 
supra.) The court expressed its conviction that awards exceeding 
four to one could not pass constitutional muster: “We have no 
doubt that any [ratio] exceeding four-to-one would not comport with 
due process under Campbell.” Though it represents a step in the 
right direction, Diamond Woodworks set the punitive award at the 
high end of the four to one scale, for economic harm inflicted on a 
single plaintiff, and, like Campbell, the compensatories themselves 
were substantial. The court of appeal thereby set a trend, which 
has been followed in several other California cases, that four to one 
is permissible, placing far less emphasis on the other factors, e.g., 
whether the act was intentional, repeated, caused physical injury or 
only economic harm, whether plaintiff was financially vulnerable, 
and the like. 
 
• Bardis. Defendants were accused of fraud against their partners, 
taking kickbacks, concealing commissions and serious breaches of 
fiduciary duties. The jury awarded $166,000 in compensatories 
and $7 million in punitives. The Sacramento Court of Appeal 
reduced punitives to $1.5 million, observing the reprehensibility was 
high, but not extremely so, the acts were intentional and repeated, 
but the harm was economic only. After concluding that the 42:1 
ratio was grossly excessive and only a single digit ratio was proper, 
the opinion found that a ratio of more than 4:1 was proper, in light 
of defendant’s high net worth. A 4:1 ratio would equal only 1% of 
defendant’s net worth, the equivalent of a “slap on the wrist.” The 
court thereby arguably ignored Campbell’s mandate that 
defendant’s wealth cannot be used to justify a punitive award that is 
otherwise constitutionally excessive under the three 
 
4 In contrast, an unpublished California opinion rejected defendant’s challenge to 
the instruction’s emphasis on wealth, stating “this is not a case [where] defendant’s 
wealth provides the sole justification for an otherwise unconstitutional punitive damages 
award.” (Alberts (Cal. 2004) 2004 Cal. App. Unpub. Lexis 5698.) 
Year One After Campbell: Leveling The Playing Field 18 
 
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Campbell/BMW factors. Notably, Bardis observed that this case 
was a “stronger candidate” for high punitives than Romo (which 
involved several deaths and serious injuries) because Romo 
involved a much higher compensatory award. (Bardis v. Oates 
(2004) 2004 Cal.App. Lexis 826.) 
 
• Henley. In this tobacco personal injury case, the jury returned a 
verdict of $1.5 million in compensatories and $50 million punitives. 
The trial judge reduced punitives to $25 million, and that reduction 
was originally affirmed on appeal. After the California Supreme 
Court ordered remand for reconsideration in light of Campbell, the 
appellate court (First District – San Francisco) conditionally reduced 
punitives to $9 million. The court concluded that given the highly 
reprehensible nature of the conduct over a lengthy period, a ratio of 
6:1 was appropriate. It also relied heavily on the defendant’s 
wealth, noting that an instruction on the limits of wealth evidence 
would not have produced a result more favorable than the appellate 
court’s reduction to 6:1. (Henley (Cal. 2004) formerly published at 
114 Cal.App.4th 1429.) The California Supreme Court has granted 
review, on a “grant and hold” basis, deferring briefing pending 
decision in the lead case, Simon II. (Case No. S123023, rev. 
granted 4/28/04.) 
 
• Taylor Woodrow. An insurance bad faith case where the jury 
assessed compensatories at $293,000 and punitives at $5 million. 
In an unpublished opinion issued soon after Campbell, the court of 
appeal reduced the punitives to $1 million, finding, that while the 
insurer was “distastefully opportunistic,” 17:1 was “way too much” 
to punish an insurer and the maximum penalty under the Insurance 
Code was only $55,000. (Taylor Woodrow (Cal. 2003) 2003 
Cal.App.Unpub. Lexis 5209.) Note: this is the same court of 
appeal (Santa Ana) that had resisted reducing punitives on remand 
from the U.S. Supreme Court in Textron. 
 
3. Ninth Circuit. 
 
• Ratio: One panel of the Ninth Circuit approved a 7:1 ratio in a 
discrimination case, citing large punitive awards in comparable 
cases and noting discrimination involves an affront to personal 
liberty. (Zhang (9th Cir. 2003) 339 F.3d 1020.) 
 
• Wealth. Reversing and remanding for redetermination of 
punitives, since the trial court erred evaluated the 
reprehensibility of multiple defendants “en grosse” instead of 
individually, this Ninth Circuit opinion noted that if the trial court 
decides to reduce punitives, it may do so only to the extent the 
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record substantiates defendant’s wealth and any indemnification 
of individual defendants by employer must be considered. It 
arguably uses wealth as an aggravating factor. (Bell (9th Cir. 
2003) 341 F.3d 858, see Table 1.) 
 
• Comparable penalties: Affirming a 4.4:1 ratio in a bad faith 
case, the court noted that the conduct could have justified 
revocation of the insurer’s license even though the Campbell 
decision expressly repudiated this justification. (Greenberg (9th 
Cir. 2004) 91 Fed. Appx. 539.) 
 
• The Exxon Valdez cases: After the Cooper decision required 
de novo review of awards, the Ninth Circuit remanded the $5 
billion punitive damage award (on compensatories of about 
$300 million), in cases brought by fisheries for economic losses, 
for redetermination by the trial judge. The Ninth Circuit’s 
opinion gave broad hints that $5 billion was far too high for 
Exxon’s conduct, failing to monitor the Valdez’ captain, a 
relapsed alcoholic. The opinion also noted that Exxon had 
already been penalized severely, having paid billions of dollars 
in fines and administrative penalties, billions more to clean up 
the oil spill, and lost its valuable tanker and cargo. (Sea Hawk 
Foods (9th Cir. 2003) 2003 U.S. App. Lexis 18219.) On remand, 
the trial judge set the award at $4 billion, and Exxon appealed 
again. Since Campbell came down before the appellate briefs 
were even filed, the Ninth Circuit again remanded to the trial 
judge, who this time set the punitive award at $4.5 billion, i.e., 
the amount went up. (In Re Exxon Valdez (D. Alaska 2004) 
296 F.Supp.2d 1071.) Exxon has appealed again. The Valdez 
case is one of the most flagrant examples of judicial nullification 
by thetrial judge to arise in the post-Campbell world. 
 
 
III. POST-CAMPBELL PRACTICAL PROBLEMS AND QUESTIONS 
 
 A. Raising Constitutionality Objections. 
 
 Given Campbell’s scathing indictment of the American systems for 
administering punitive damages, the defendant may want to consider raising 
constitutional objections and affirmative defenses early in the case. Objections 
may be particularly important in state systems which lack procedural safeguards 
– where, for example, the burden of proof for punitive damages is only 
preponderance of the evidence, the state allows purely vicarious or joint and 
several liability for punitives, or there are no recognized instructions to guide the 
jury on whether and how much to award. And raising the constitutionality issues 
should not be limited to affirmative defenses. When, for example, the plaintiff 
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proposes an instruction that entitlement to punitives and the amount calculus is 
determined by a preponderance of the evidence, defendants should object and 
offer their own instructions that, given the quasi-criminal nature of the 
proceeding, a higher burden of proof is constitutionally required on all elements 
of the punitive case. 
 
 B. Evidence. 
 
Evidence of other bad acts may be relevant to the reprehensibility 
analysis, but Campbell has severely restricted the type and scope of such acts. 
“In this case, because the Campbells have shown no conduct by State Farm 
similar to that which harmed them, the conduct that harmed them is the only 
conduct relevant to the reprehensibility analysis.” (Campbell, supra, at 1524.) 
As noted, Campbell’s facts are illustrative. This was a third party claim for the 
failure to settle within policy limits. The jury heard evidence of how State Farm 
had handled first party claims (e.g., made by the insured for property damage), 
evidence of an Illinois lawsuit against the company for its policy of paying for 
after-market parts, and the fact that employees had sued for wrongful 
employment practices. In other words, the trial court wrongly admitted evidence, 
on a nationwide basis, of all sorts of unrelated, allegedly wrongful acts. The 
Campbell majority held that none of these acts were sufficiently similar to the 
conduct in issue, even rejecting evidence of State Farm’s allegedly “nationwide” 
practice of reducing claim payouts without regard to the merits of the claim. 
Campbell held that other “bad acts” require a nexus, a showing of sufficient 
similarity to qualify as “reprehensible.” 
 
The majority thereby substantially restricted the meaning of the word 
“similar,” which no longer includes anything the defendant did, anywhere, at any 
time. It no longer involves “nationwide” policies. Now, “similar” is a very narrow 
concept. It probably means “‘pretty close to identical, in kind, location, and time.” 
(See Kolinski, Gore, Cooper Industries, and State Farm v. Campbell: Game, Set 
And Match For Exorbitant Punitive Damages Awards, The Florida Bar Journal, 
Nov. 2003.) 
 
In other words, to be “similar” under Campbell, the other “bad act” must 
not only be similar to the conduct that harmed this plaintiff, it seemingly requires 
proximity in time and place. Many states allow “pattern and practice” or “course 
of conduct” evidence in punitive damages cases. Campbell appears to define 
“similar” or “course of conduct” far more narrowly than any state. There is now a 
constitutional overlay to state law on admissibility of other acts. 
 
Certainly, “pattern and practice” evidence remains permissible under 
Campbell, and probably is even more important to plaintiffs than before. 
Evidence of truly similar “other acts” could be used to show defendant is a repeat 
offender, i.e., the conduct is not isolated and therefore more deserving of 
punishment under the relative reprehensibility scale. However, the trial court 
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should make a pretrial determination that the other acts are sufficiently similar 
under Campbell, and that they have a nexus to the specific harm to this plaintiff. 
Likewise, defendants could argue that the state’s legitimate interest in 
punishment decreases when the conduct occurred out of state, and thus even 
greater similarity is required to justify its introduction. Moreover, defendants 
might argue that a few pieces of “other act” evidence are not sufficient to 
establish pattern or practice, and thus anecdotal evidence of the handling (e.g.) 
of a few insurance claims is statistically insignificant given the volume of claims 
defendant processes.5 In contrast, evidence showing a standard practice that 
satisfies the nexus/similarity requirement would likely qualify. (See, e.g., Downey 
Savings & Loan Assn. v. Ohio Cas. Ins. Co. (Cal. App. 1987) 189 Cal.App.3d 
1072 [evidence showed defendant had a standard procedure because its claims 
manual instructed adjusters to misuse discovery to coerce claimants].) 
 
 C. Requests For Bifurcation 
 
 What It Is. In the typical bifurcated trial, the jury determines liability and 
compensatory damages, and often some punitive damage issues, before hearing 
evidence of wealth. For example, in California, the defendant has the option of 
requesting bifurcation of any trial in which punitives are being sought. (Cal. Civ. 
Code, § 3295(d).) The concept of bifurcation was designed to avoid tainting the 
jury with wealth evidence while the fact finder is deciding basic liability issues. In 
the typical bifurcation scenario contemplated by the California statute, the jury 
decides all liability issues (e.g., was a tort committed), the amount of 
compensatory damages, and whether the defendant acted with malice, fraud or 
oppression (California’s predicate requirement for punitive damages). If the jury 
concludes defendant acted out of malice, fraud or oppression, a second phase 
commences, in which the jury hears evidence relevant to the need to punish or 
deter, including wealth evidence. “Trifurcation” – where liability and 
compensatory damages are separated from virtually all punitive damages issues 
– is possible, but not mandatory. 
 
 Does Bifurcation Help, Or Hurt, Defendants? As a strategic matter, 
whether the defendant should request bifurcation is a question lawyers have 
debated for years. Traditionally, bifurcation serves to exclude wealth evidence 
while the jury is deciding liability issues. But if the defendant is a large 
corporation, juries know or assume the defendant is wealthy; the evidence only 
serves to quantify the number. Thus, with large corporate defendants, bifurcation 
may not serve, or fully serve, its intended purpose. In fact, many defense 
lawyers believe that bifurcating actually backfires, working to the plaintiff’s 
advantage by giving the jury two opportunities to punish. Typically, juries are not 
told there will be a second phase of trial. Anecdotal evidence suggests that if 
 
5 For example, a circuit court of appeals required statistical evidence and adequate 
samplings to determine business habit in the civil rights context. (See, e.g., United 
States v. Jacksonville Terminal Co. (5th Cir. 1971) 451 F.2d 418, 441; see also United 
States v. Gray (D. R.I. 1970) 315 F.Supp. 13, 20.) 
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jurors are irritated with the defendant, they tend to inflate compensatory awards 
by adding something extra for punishment, though technically this is not 
permissible. Campbell seemingly agreed when it noted that many “soft” 
compensatory damage awards, such as emotional distress, contain a punitive 
component. A second phase gives the jury the opportunity to take a second 
“swipe” at defendant. As the compensatory award artificially inflates, the more 
difficult the Campbell ratio argument may become for defendants. That appears 
to be part of plaintiffs’ post-Campbell trial strategy: introduce evidence on all 
potential compensatory damages, focus on potential harm, and thereby 
maximize the compensatory verdict as much as possible. 
 
 D. Argument And Motions. 
 
Campbell can be a useful tool to restrict the typical plaintiff arguments that 
jurors must “send a message to the company nationwide,” that punitive damages 
should be awarded to punish for other conduct or that this “renegade” company 
is a national menace. Likewise, if plaintiff’s reprehensibility evidence is marginal 
under Campbell, or involves out-of-state conduct, defense counsel should move 
in limine to prevent reference to “character assassination” in argument, and 
require plaintiff to make a sufficient showing of similarity and satisfy the extra-
territoriality requirements. If the “other acts” are allowed into evidence, 
defendants should propose limiting instructions on their use. (See discussion at 
p. 31.) 
 
E. Effect On Discovery. 
 
Many states permit discovery of how the defendant acted towards others, 
e.g., the handling of other claims in bad faith cases, on the theory this may show 
aggravated, repeated conduct or pattern and practice. (See, e.g., Colonial Life & 
Acc. Ins. Co. v. Superior Court (Cal.1982) 31 Cal.3d 785 [discovery of other 
claims files may be relevant to show a course of conduct by the insurer 
warranting punitive damages if the conduct is sufficiently similar; see also Cal. 
Ev. Code, § 1101(b)].) 
 
The redefinition of “similar acts” and extra-territoriality could well have a 
significant restrictive effect on discovery. In most states, the test for discovery 
relevance is broad: whether the request calculated to lead to the discovery of 
admissible evidence. Campbell has redefined what “admissible” evidence 
means. Thus, plaintiffs’ broad-based discovery of everything the defendant has 
done on a nationwide basis may no longer be appropriate. (See, e.g., Evans v. 
Allstate Ins. Co. 2003 WL 21382474 (N.D. Okla. 2003) [using Campbell to reject 
plaintiffs’ request for discovery of insurer’s senior officers to support a punitive 
claim predicated on allegedly pervasive practice of inadequate supervision over 
adjusters; court limited the geographical scope of request to the state of 
Oklahoma]; but see Sperros Drelles (3d Cir. 2003) 357 F.3d 344 [Campbell dealt 
Year One After Campbell: Leveling The Playing Field 23 
 
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with whether a punitive award may be based on nationwide conduct, not whether 
such evidence is relevant].) 
 
 F. Jury Instructions. 
 
1. Current Practice. 
 
In its opening indictment of the current systems for assessing punitive 
damages, the Campbell majority voiced serious concern over the “imprecise 
manner” in which these systems are administered, the “acute danger” of arbitrary 
deprivation of property, and, finally, the vague and inadequate instructions that 
do little to guide the jury. (Campbell, supra, 123 S.Ct. at 1520.) 
 
The court’s criticism is well-founded. In most states, instructions provide 
little guidance to the jury not only on when an award of punitive damages is 
appropriate, but on how much the award should be. Although many states have 
several approved pattern jury instructions on punitive damages, others, such as 
Kentucky, have paid far less attention to instructions. (See Sand Hill Energy v. 
Ford Motor Co. (Estate of Smith) (Ky. 2002) 83 S.W.2d 483.) In Sand Hill, 
defendant proposed pinpoint instructions on the criteria for any award and the 
amount, but was rebuffed by the Kentucky trial judge, who would only allow Ford 
to argue these points to the jury. The Kentucky Supreme Court was untroubled 
by the notion of “barebones” instructions or limiting defendant to argument about 
the appropriate punitive factors.6 (See Sand Hill, supra.) Clearly, after Campbell, 
that is no longer acceptable practice. 
 
And though many states require pattern jury instructions on punitive 
damages, local courts may have to rethink them. For example, on remand after 
Campbell, a California court of appeal criticized an approved jury instruction for 
placing too much emphasis on defendant’s wealth, thereby diverting the jury’s 
attention from the key issue, punishing for what the defendant did to this plaintiff. 
(Romo v. Ford Motor Co. (Romo II) (Cal. App. 2003) 113 Cal.App.4th 738.)7 
 
2. Should The Jury Be Instructed On These Guideposts? 
 
The Supreme Court’s complaint about vague and inadequate instructions 
appears to be an open invitation for defendants to get creative about how the jury 
 
6 Sand Hill (Smith) is one of several cases in which the U.S. Supreme Court 
granted certiorari, vacated the opinion and remanded to reconsider the punitives in light 
of Campbell. (123 S.Ct. 2072; 71 USLW 3721.) 
 
7 A year before, this same court had approved a $290 million punitive damage 
verdict for three deaths arising out of a single products liability rollover. (See Romo I, 
supra, 99 Cal.App.4th 1115.) After remand by the U.S. Supreme Court, the panel 
reduced the verdict to about $24 million. (See Romo II, supra, 113 Cal.App.4th 738.) 
 
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should be instructed on punitive damages. The court observed that lacking any 
real basis for comparison, and blinded by the corporate defendant’s wealth, juries 
use punitive damages to express their bias against big business. Many 
commentators have suggested that the jury now must be instructed on 
Campbell’s principles, including the three guideposts, relative reprehensibility 
scale and other considerations espoused in the decision. The argument is based 
on the compelling notion that relief from a grossly excessive award via appellate 
review is only a safety net; defendants are entitled to a fair trial when it comes to 
whether and how much punitives are permissible. Of course, we are writing on a 
clean slate here. Courts have yet to decide whether the jury should be told of 
these Supreme Court principles, or if instead these concepts are to be applied 
only by the trial and appellate courts when reviewing the jury’s verdict for 
constitutional excessiveness.8 Instructing the jury on the guideposts might 
provide some basis for stemming high awards. However, caution is needed 
here. Many states tend to disapprove of jury instructions taken from appellate 
case law, as too theoretical for juries. 
 
Campbell clearly contemplates at least some additional instructions. (See 
123 S.Ct. at 1522-1523, emphasis added [“A jury must be instructed, 
furthermore, that it may not use evidence of out-of-state conduct to punish 
defendant for action that was lawful in the jurisdiction where it occurred”].) 
 
3. Problems With Existing Pattern Jury Instructions. 
 a. California Approved Instructions. 
 
 Under existing California law, juries are required to consider (1)the 
reprehensibility of the defendant’s act, (2) the ratio of punitive to compensatory 
damages, and (3) the defendant’s wealth. (Neal v. Farmers Ins. Co. (1978) 21 
Cal.3d 910, 929, 930.) Plaintiff bears the burden of producing evidence of 
defendant’s financial condition, which the jury currently must consider in arriving 
at the punitive award. 
 
 The principal California Approved Civil Instruction, CACI 39499, tracks 
 
8 Cooper concluded that the amount of punitive damages is not really a fact tried 
by the jury and seemingly intended the BMW factors to be used by courts when 
reviewing the amount for excessiveness. The logical conclusion of Cooper would be to 
eliminate the jury entirely from the amount determination, relegating its role to deciding, 
as a factual matter, whether the defendant’s conduct was reprehensible enough to 
warrant any punishment. 
 
9 CACI contains a group of instructions designed for use depending on whether 
the trial is birfurcated at defendant’s request and whether the defendant is a corporate 
employer being held liable for an employee’s acts. (See CACI 3940-3949.) Since the 
salient points are largely the same, this discussion focuses on CACI 3949 and, to a 
lesser degree, the BAJI instructions, where they differ in material respects. 
Year One After Campbell: Leveling The Playing Field 25 
 
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© Christina J. Imre Sedgwick, Detert, Moran & Arnold LLP July 2004 
existing state law by providing: 
 
“You must now decide the amount, if any, that you 
should award [plaintiff] in punitive damages. The 
purposes of punitive damages are to punish the 
wrongdoer and to discourage him or her and others 
from similar conduct in the future. 
 
“There is no fixed standard for determining the 
amount of punitive damages and you are not required 
to award any punitive damages. In deciding the 
amount of punitive damages, you should consider all 
of the following separately for each defendant: 
 
“(a) How reprehensible was that defendant’s conduct? 
“(b) Is there a reasonable relationship between the 
amount of punitive damages and [plaintiff’s] harm? 
“(c) In view of that defendant’s financial condition, 
what amount is necessary to punish [it] and 
discourage future wrongful conduct? 
 
The California Supreme Court has yet to consider the effect of Campbell’s 
federal constitutional law pronouncements on the state’s punitive damage 
requirements and currently-approved instructions.10 However, that this landmark 
decision has significant implications on existing state law is beyond dispute. For 
example, a California Court of Appeal recently held that the trial court’s decision 
to give a pre-Campbell BAJI 14.71 meant the jury was “fundamentally 
misinstructed concerning the amount of punitive damages it could award. . . .” 
requiring an enormous remittitur of the jury’s punitive damage verdict. (Romo v. 
Ford Motor Co. (2003) 113 Cal.App.4th 738, 804-805, emphasis added, hereafter 
“Romo II”.) As discussed in detail below, the problem is that the state’s Neal 
factors (consider reprehensibility, ratio and wealth) may no longer pass muster 
after Campbell, not only for their omissions, but for affirmatively misleading the 
jury on certain key points. 
 
 
 
10 In late March of 2004, the state Supreme Court granted review on two post-
Campbell issues. Johnson v. Ford Motor Co., Case. No. S121723, and Simon v. San 
Paolo United States Holding Co., Inc. (See http://www.courtinfo.ca.gov/courts/supreme/ 
summaries/WS032204.PDF.) However, the issues to be decided do not directly address 
how the jury should be instructed. Johnson presents the question whether disgorgement 
of defendant’s profits from the wrongful act may constitute excessive punishment after 
Campbell. Simon concerns how to calculate the BMW ratio; specifically, in situations 
where some of plaintiffs’ claims for compensatory damages are time-barred, should the 
potential value of those claims be included in determining whether the ratio is 
constitutionally permissible? (See ibid.) 
Year One After Campbell: Leveling The Playing Field 26 
 
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© Christina J. Imre Sedgwick, Detert, Moran & Arnold LLP July 2004 
b. Constitutional problems with CACI. 
 
• Failing to tell the jury that punitive damages are not 
designed to compensate plaintiff. Punitive damages do not 
serve to compensate plaintiff in any way. On this, both state 
and federal courts agree. By definition, the plaintiff has already 
been made whole by the compensatory award. (Campbell, 
supra, 123 S.Ct. at 1521; see also Adams v. Murakami (1991) 
54 Cal.3d 105, 110). Indeed, Campbell found there is a 
presumption that the plaintiff has been fully compensated. 
(Campbell, supra, at 1523.) Arguably, in order to render a 
better-informed, fairer decision on the appropriate amount of 
punishment after Campbell, juries need the difference between 
the two types of damages spelled out, and must be told that 
duplication or overlap should be avoided. 
 
• Failing to tell the jury that punitive damages serve a purely 
public purpose, or how to balance the competing interests 
involved. California law recognizes that punitive damages 
serve, not the plaintiff’s individual interest, but the purely public 
goal of punishing sufficiently egregious conduct in order to deter 
its repetition in the future.11 Existing pattern instructions do not 
help the jury to make an informed and principled decision, and 
in fact require the jury to reach a number by focusing on 
defendant’s wealth in a vacuum. For a fuller perspective, jurors 
need to know that the public interest’s is not served by an award 
which cripples or destroys a defendant and they should not 
ignore the broader implications of the award, e.g., when a 
defendant business has minimal financial resources, and a 
punitive award, in the guise of punishment, could threaten the 
company’s continued viability, with the resulting loss of jobs, tax 
revenue and other adverse effects on the economy. The jury 
needs evidence and direction in setting the award, so as to 
balance the public’s interest in deterrence and punishment 
against these other, equally valid, public interests. 
 
• CACI does not address Campbell’s constitutional threshold 
reprehensibility requirement. Notably, Campbell states that 
punitive damages should be awarded only where the 
defendant’s conduct is “so reprehensible as to warrant the 
imposition of further sanctions to achieve punishment or 
 
11 For example, the public’s interest is not served by a quasi-criminal penalty that “cripples 
or destroys a defendant.” (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1283, 
citation omitted [“function of punitive damages is ‘ a purely public one. . .’”]; see also id., at 1283 
[public’s interest may be served by an award which punishes and deters, but not by one which 
cripples or destroys”]; see also Chavez v. Keat (1995) 34 Cal.App.4th 1406, 1410. 
Year One After Campbell: Leveling The Playing Field 27 
 
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© Christina J. Imre Sedgwick, Detert, Moran & Arnold LLP July 2004 
deterrence.” (Campbell, supra, 123 S.Ct. at 1521, emphasis 
added.) This appears to recognize there is a constitutional 
threshold, based on notice and fairness factors, regarding the 
type of conduct that may be punished, i.e., it must be “so 
reprehensible” that it warrants