Did the Supreme Court Finally Rein in Punitive Damages?

The threat of a punitive damages award sends shivers down the spines of many corporate officers and directors. The concern that a runaway jury will disproportionately “punish” a corporation or individual for allegedly reckless or intentional conduct leads many to settle lawsuits for grossly inflated sums, even when strong defenses to liability are present. Almost everyone is familiar with the excessive punitive damages jury verdict levied against McDonald's for serving too-hot coffee that burned a customer, as well as many other tales of rogue juries awarding apparently outrageous punitive damages. High-profile jury verdicts, and the resulting fear instilled in many national and multinational corporations, have had a tremendous impact on the insurance industry, which is often required to indemnify settlements inflated by claims of punitive damages. Without a reasonable limit on punitive damages, corporations and individuals feel compelled to settle cases that would otherwise go to trial, typically at a premium that does not bear a rational relationship to the damage caused by the alleged wrongful conduct. Despite heavy lobbying by the insurance and business sectors and others, there is only piecemeal state legislation and no federal legislation to protect corporate America from punitive damages awards that shock the conscience.