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Applying Constitutional Limits on Punitive Damages to Franchise Disputes

July 8, 2003

Reprinted with permission from the Franchise Law Journal (American Bar Association), Volume 22, Number 2, Spring 2003

The U.S. Supreme Court’s recent decision in State Farm Mutual Insurance Co. v. Campbell marks anew the constitutional limits on punitive damages. The six-Justice majority (Scalia, Thomas, and Ginsburg each dissented separately) reversed and remanded the Utah Supreme Court’s decision reinstating a $145 million punitive damage verdict,which the trial court had reduced to $25 million. State Farm was not a franchise case; it involved an insurer’s failure to settle a personal injury suit. But in several crucial respects, Justice Kennedy’s opinion clarifies punitive damage issues likely to arise in franchise disputes, and may make it significantly harder for plaintiff franchisees to win and hold large punitive damage awards.

Resources

Dunham.reprint 7-8-2003.pdf

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