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Supreme Court Upholds Large Punitive Damages

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Washington--The U.S. Supreme Court ruled 7 to 1 last week that punitive damages awarded by juries in civil cases do not violate the Constitution.

The imposition of punitive damages, assessed by juries to punish wrongdoers and deter misconduct, remains controversial, the Court said, but "we cannot say this is a violation of 14th Amendment due process."

Questions of steep punitive damages and resulting high insurance rates bedeviled school districts and municipalities, as well as insurers, throughout the 1980's, prompting calls for legal reforms.

Ruling in Pacific Mutual Life Insurance Company v. Haslip (Case No. 89-1279), the Justices declined to say that punitive damages are constitutionally protected in all cases.

Given the long history of damage awards, "we cannot say that the common-law method for assessing punitive damages is so inherently unfair as to deny due process and be 'per se' unconstitutional," the Court said.

"This, however, is not the end of the matter," the Court continued. "It would be just as inappropriate to say that, because punitive damages have been recognized for so long, their imposition is never unconstitutional."

Justice Sandra Day O'Connor was the sole dissenter; Justice David H. Souter took no part in the case.

August W. Steinhilber, general counsel for the National School Boards Association, found the ruling's implications mixed.

"First, I'm disappointed in the decision, but the Court opened the door for us" as well, he said. For one thing, he said, the Court indicated that eventually another case will arise in which "punitive damages will be in violation of due process." Also, he said, it suggested that remedial action could be taken through state legislatures.

The Court pointed out that the Alabama legislature has limited most punitive damages to $250,000.

Employees of an Alabama city filed suit when an agent who worked for Pacific Mutual "misappropriated" the city's premium payments. A state circuit-court jury held the firm liable and awarded both actual and punitive damages; one plaintiff received nearly $1 million, at least $840,000 of which was punitive. Alabama's supreme court upheld the award.

"This Court more than once has approved the common-law method for assessing punitive awards," the federal High Court said. But, it added, unlimited leeway in "punitive damages may invite extreme results that jar one's constitutional sensibilities."

Justice O'Connor asserted that often "juries are permitted to target unpopular defendants, penalize unorthodox or controversial views, and redistribute wealth."

She said that while she does not question the legitimacy of punitive damages, she sees a need for standards so that juries "exercise their power wisely, not capriciously or maliciously."

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