Facts of the Case

After purchasing a new vehicle from an authorized Alabama BMW dealership, Ira Gore, Jr. discovered that his new vehicle had been repainted. He sued BMW's American distributor (BMW), alleging that it committed fraud by failing to inform him that his car had been repainted. The Alabama Circuit Court entered judgment, following a jury verdict, awarding Gore $4,000 in compensatory damages and $4 million in punitive damages. On appeal from the trial judge's denial of BMW's post-trial petition to set aside the punitive damages as 'grossly excessive,' the Alabama Supreme Court ruled that the punitive damages were not so excessive as to violate BMW's Fourteenth Amendment right to due process. Due to a jury calculation error, however, the Alabama Supreme Court reduced Gore's punitive damage award to $2 million. BMW appealed to the Supreme Court.

Question

Assuming that Gore's punitive damage award was grossly excessive, does the Fourteenth Amendment's due process clause protect BMW from paying the award?

Conclusion

Yes. In a 5-to-4 decision, the Court held that while a state may impose punitive damages to further its interest in deterring unlawful conduct, the Fourteenth Amendment's due process clause prohibits states from imposing grossly excessive punishments on tort-feasors. In the present case, the punitive damage's excessive nature is indicated by the 500 to 1 ratio between the jury's punitive and actual damage awards, the relatively insignificant amount of damage, and the lack of statutory fines that remotely parallel the present award's magnitude. BMW's due process rights were also violated because it could not have possibly anticipated, nor did it receive fair notice, that it might face such a severe punishment.