BMW of North America Inc. v. Gore
Punitive damages are an old tradition in the common law system used by both the United Kingdom and the United States today. However, at times, courts have ruled punitive damages to be excessive relative to the severity of the tort committed. In the case of BMW of North America Inc. v. Gore, a punitive damage award of 1000 times the amount of the original claim attracted the attention of the United States Supreme Court.
The Initial Civil Case
A shipment of cars intended to be shipped to the United States was covered in acid rain, which led to over 1000 brand new BMWs having paint that looked bad before they were to be shipped to dealers. Not wanting to lose money on the cars, BMW followed a policy that any cars that could be restored to their original condition for less than three percent of the purchase price would be restored and sold as new to the consumer. They had the cars repainted, and to customers, the cars looked the same as they would have if they had not been hit by the acid rain in the first place.
The facts relevant to BMW of North America Inc. v. Gore started when Ira Gore purchased one of these repainted BMWs, and then took his car to be detailed. He found out from the detailer that the car had been repainted at some point before his purchase. Gore sued BMW, because it was his view that he had paid for a new car, and that a repainted car was worth substantially less to him than a car with its original paint job intact.
BMW agreed that it had repainted the car in keeping with its policy. At trial, a BMW dealer testified to the court that a car which had been repainted was roughly 10 percent lower than it would have been with original paint. Gore showed that BMW had in no way notified its customers that their vehicles had been damaged and subsequently repaired.
Punitive damages may be awarded when the court believes that simply awarding actual damages to a plaintiff would not be enough to discourage the same type of conduct from the defendant in the future. Ira Gore argued that because BMW had sold roughly 1000 cars at roughly a $4000 markup from what they should have been if the damage had been disclosed, the only way to ensure that they would not do the same thing in the future was to award punitive damages in the amount of $4 million.
The jury in the trial court agreed with Gore, giving him his own damages as well as the multimillion dollar punitive damage judgment he had asked for. An appeals court reduced this amount to $2 million, but BMW of North America Inc. v. Gore would be decided in the end at the Supreme Court level.
Supreme Court Decision
The Supreme Court reversed the punitive damages assessed by the jury and remanded the case to the trial level. The Court judged that BMW had not done anything that was especially worth a multimillion dollar punishment: they had not put anybody in danger or potential danger. The court said that even if the car manufacturer had been punished with a criminal fine for each car that it had repainted, it would have resulted in a similar total—making the civil penalties truly excessive, since they amounted to the same as if the government had fined them in a criminal case.