Petition for Writ of Certiorari — Fortis Insurance Co. v. Mitchell

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09 ~85 TAR :

No. 09- 4°" 15 2010

In the Supreme Court of

FORTIS INSURANCE COMPANY,

Petitioner,

JEROME MITCHELL, JR.,

Respondent.

On Petition for a Writ of Certiorari to

the Supreme Court of South Carolina

PETITION FOR A WRIT OF CERTIORARI

FRANK G. BURT EVAN M. TAGER

RICHARD J. OVELMEN Counsel of Record

STEPHAN I. VOUDRIS Mayer Brown LLP

Jorden Burt LLP 1999 K St., N.W.

777 Brickell Avenue Washington, D.C. 20006

Suite 500 (202) 263-3240

Miami, FL 33131-2803 etager@mayerbrown.com

(305) 371-2600 CHRISTOPHER J. HOUPT

Mayer Brown LLP

1675 Broadway

New York, NY 10019

(212) 506-2380

Counsel for Petitioner

ee ee

QUESTIONS PRESENTED

The jury in this insurance bad-faith case

awarded respondent $150,000 in compensatory dam-

ages and $15 million in punitive damages. The

South Carolina Supreme Court reduced the latter

figure to $10 million, reasoning that such an amount

was a constitutionally permissible single-digit mul-

tiple of the $1,081,189.40 in “potential harm” that

respondent could have suffered. Although respon-

dent had introduced evidence that, over a lifetime, a

person with HIV could incur $1,081,189.40 in medi-

cal expenses in order to prove that petitioner had a

“motive” to rescind his policy, respondent had never

contended that this figure (which did not account for

deductibles, co-pays, premiums, and _ exclusions)

represented his potential harm, and in fact had nev-

er asked the jury to base punitive damages on poten-

tial harm at all (instead urging a wealth-based

measure). Moreover, the trial court did not instruct

the jury that it could consider potential harm, in-

stead instructing that the punitive damages were re-

quired to bear a relationship to “the harm caused.”

The questions presented are:

1. Whether the South Carolina Supreme Court

deprived petitioner of procedural due process by jus-

tifying the punitive damages on the basis of a ground

that was not advanced by respondent at trial and

that was foreclosed by the jury instructions.

2. Whether the $10 million punitive award—

which is 67 times the compensatory damages, over

nine times the measure of potential harm adopted by

the court below, and $9,970,000 more than the max-

imum possible fine for the conduct at issue—is un-

constitutionally excessive.

RULE 29.6 STATEMENT

Fortis Insurance Company, n/k/a Time Insurance

Company, Inc., is a wholly-owned subsidiary of Inter-

financial, Inc., which itself is a wholly-owned subsid-

iary of Assurant, Inc., a publicly-traded entity. No

publicly-traded corporation owns 10% or more of the

stock of Assurant, Inc.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ............................. Wdatan A i

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JURISDICTION .................. OTe WE ORR ne Ns sar l

CONSTITUTIONAL PROVISION INVOLVED ........ ]

Se EE dsacisticcitissinccsiaciiaanaial ced ae ]

A. The Facts Giving Rise To Mitchell’s

BAIIIIED.... ssc cctasconcsencoeusevacioneaueamananaaatedantteanineal 2

a I BO viv idiiccrecsnastiintienmisseniansaitae 5

REASONS FOR GRANTING THE PETITION ....... 10

I. The South Carolina Supreme Court’s

Employment Of A Post Hoc Rationale For

The Punitive Award Warrants Review And

I ii scccanscinkseoinbienenbiinisddinistmacenisacaassciatnnens 11

II. The South Carolina Supreme Court’s

Application Of The BMW Guideposts

Warrants Review And Reversal. ......................... 18

Fi, Fe wikckcivinathatnativtcniescishthedaicdeacds 20

| SER SSN CSAS RON TOON E NN KML RA Rm eM 26

C. Legislatively established penalties for

OUI GU ivdicicccieceesveencescsicsennecestosass 28

CTF Pe MRP UUIIT <ini'cancinsciisecstbiskasdehassiinidaanoenanusneneesouel 31

APPENDIX

APPENDIX A: Opinion of the Supreme Court

of South Carolina (September 14, 2009)............ la

APPENDIX B: Order of the Court of Common

Pleas, Florence County, South Carolina,

deciding post-trial motions (July 19, 2006)...... 29a

TABLE OF CONTENTS—continued

Page

APPENDIX C: Order of the Supreme Court of

South Carolina, denying petition for

rehearing (December 17, 2009) .......... 7Tla

TABLE OF AUTHORITIES

Page(s)

CASES

Action Marine, Inc. v. ContT Carbon Inc.,

481 F.3d 1302 (1ith Cir. 2007)............0........ ye |

Adidas Am., Inc. v. Payless Shoesource, Inc.,

2008 WL 4279812 (D. Or. Sept. 12, 2008).......... 26

Advocat, Inc. v. Sauer,

111 S.W.3d 346 (Ark. 2003) .............ccccccccseees 21, 37

Aken v. Plains Elec. Generation &

Transmission Co-op.,

BD Fe ee Cae BID dccintasicscsccccocsicceseses: REA: 29

Asa-Brandt, Inc. v. ADM Investor Servs., oy

$44 F.3d 736 (Gth Cir. 2O0B).........cccccccccccccccccsceees 23

Bach v. First Union Nat Bank,

486 F.3d 150 (6th Cir. 2007).................. 22, 24, 26

Bains LLC v. ARCO Prods. Co..,

405 F.3d 764 (9th Cir. 2005).........0.0--0.00-0--- 22, 23

Bennett v. Reynolds,

242 S.W.3d 866 (Tex. Ct. App. 2007).................. 14

BMW of N. Am., Inc. v. Gore,

Se eS ac ccknccpiccncesdaconasundusnuna passim

BMW of N. Am., Inc. v. Gore,

FOR CeO, BE BT GD, TOD) onc ccreseccscoseccsscesccesssess 29

Bocci v. Key Pharms., Inc.,

76 P.3d 668 (Or. Ct. App. 2003)..........ccccccccccsccses 27

Boerner v. Brown & Williamson Tobacco Co.,

394 F.3d 594 (8th Cir. 2005)............ccscesccesees 25, 26

Bogle v. McClure,

332 F.3d 1847 (Lith Cir. 2003)..........ccc.ccceeee 21, 37

Bridgeport Music, Inc. v. Justin Combs Publ’g,

507 F.3d 470 (6th Cir. 2007)....................0000 26, 30

TABLE OF AUTHORITIES—continued

Page(s)

Bright v. Addison,

171 S.W.3d 588 (Tex. Ct. App. 2005).................. 22

Burns v. United States, 501 U.S. 129 (1991)........... 15

Cambio Health Solutions, LLC v. Reardon,

234 F. App’x 331 (6th Cir. 2007).........ccccccc000000 27

Campbell v. State Farm Mut. Auto. Ins. Co.,

98 P.3d 409 (Utah 2004) ....0000. 0... 22, 27, 29

Casciola v. F.S. Air Serv., Inc.,

120 P.3d 1059 (Alaska 2005) ............ ieee ae 21

Casumpang v. Intl Longshore & Warehouse

Union, 411 F. Supp. 2d 1201 (D. Hawa

DOOB) ....e.c.csccesececeseesecseceeeees aan 26, 27

Century Sur. Co. v. Polisso,

43 Cal. Rptr. 3d 468 (Ct. App. 2006)............ 21, 27

CGB Occupational Therapy, Inc. v. RHA

Health Servs., Inc., 499 F.3d 184 (3d Cir.

(OG NEAT ERAS SS 24

Chasan v. Farmers Group, Inc.,

2009 WL 3335341 (Ariz. Ct. App. Sept. 24,

ec sipsusmnnboustnnins 30

Chicago Title Ins. Corp. v. Magnuson,

487 F.3d 985 (6th Cir. 2007) .......c.cccccececececeeeeeeees 24

Coastal Oil & Gas Corp v. Garza Energy

Trust, 268 S.W.3d 1 (Tex. 2008) .............cccsecccsees 22

Cock-N-Bull Steak House, Inc. v. Generali

Ins. Co., 466 S.E.2d 727 (S.C. 1996)................... 25

Cooper Indus., Inc. v. Leatherman Tool

Group, Inc., 532 U.S. 424 (2001) .................. 26, 31

TABLE OF AUTHORITIES — continued

Page(s)

Craig v. Holsey, 590 S.E.2d (Ga. Ct. App.

SUITE si iiasahisstunssndbassaudatsciaigaatenatabenenaaudiegenatbabenbiinanitay 21

Craig Outdoor Adver., Inc. vy. Viacom

Outdoor, Inc., 528 F.3d 1001 (8th Cir. 2008)..... 27

Cummings Inc. v. BP Prods. N. Am., Inc.,

648 F. Supp. 2d 969 (M.D. Tenn. 2009) ............. 26

Czarnik v. Illumina, Inc., 2004 WL 2757571

PR, Ce, SEs SERIE, Os SEIIPUED acnconcccedcseustcctesesscosencs 27

Dardinger v. Anthem Blue Cross & Blue

Shield, 781 N.E.2d 121 (Ohio 2002)................... 23

Diesel Mach., Inc. v. B.R. Lee Indus., Inc..,

418 F.3d 820 (8th Cir. 2005)....................0......02.. 21

Exxon Shipping Co. v. Baker,

BE Be Cris Se Ce cece ce nccscccesenssconcccenssesnes passim

Farm Bureau Life Ins. Co. v. Am. Nat Ins.

Co., 2009 WL 361267 (D. Utah Feb. 11,

SAI aA Set A AE 26

Fastenal Co. v. Crawford,

609 F. Supp. 2d 650 (E.D. Ky. 2009) ............ 21, 24

Flax v. DaimlerChrysler Corp.,

272 S.W.3d 521 (Tenn. 2008)........................ 28, 29

Goddard v. Farmers Ins. Co.,

179 P.3d 645 (Or. 2008) (en banc)...................... 13

Greenberg v. Paul Revere Life Ins. Co.,

91 F. App’x 539 (9th Cir. 2004) ....................:ee0e 27

Haggar Clothing Co. v. Hernandez,

164 S.W.3d 407 (Tex. Ct. App. 2003).................. 22

Hayes Sight & Sound, Inc. v. ONEOK, Inc.,

196 P.3d 428 CRKam. 2006).......cccccccccccccsessecccsescoees 21

Vill

TABLE OF AUTHORITIES—continued

Page(s)

Hudgins v. Sw. Airlines Co.,

212 P.3d 810 (Ariz. Ct. App. 2009) ven ne

Hussein v. Universal Dev. Mgmt., Inc.,

2006 U.S. Dist. LEXIS 49 (W.D. Pa. Jan. 3,

a Oo uondannant 21

In re Exxon Valdez, 490 F.3d 1066 (9th Cir

a ee cauasanaenoueses 30

In re New Orleans Train Car Leakage Fire

Litig., 795 So. 2d 364 (La. Ct. App. 2001)........ .14

In re Ruffalo, 390 U.S. 544 (1968) .......................008 17

James v. Horace Mann Ins. Co.,

638 S.E.2d 667 (S.C. 2006) .................0.-cec0eeees 9, 31

JCB, Inc. v. Union Planters Bank, NA,

Ee We cee ee Ce Gs I coccccnevcccccecscccccvcsescees 22

Jet Source Charter, Inc. v. Doherty,

55 Cal. Rptr. 3d 176 (Ct. App. 2007) .................. 27

Johansen v. Combustion Engg, Inc.,

170 F.3d 1320 (11th Cir. 1999)...................ccceeees 29

Joint Anti-Fascist Refugee Comm. v. McGrath,

oe cunabaneadesnsennentes 15

Jurinko v. Med. Protective Co.,

305 F. App’x 13 (3d Cir. 2008)...................... 26, 30

Kemp v. AT&T Co.,

393 F.3d 1354 (11th Cir. 2004)..................... 20, 29

Kent v. United of Omaha Life Ins. Co..,

430 F. Supp. 2d 946 (D.S.D. 2006) ..................... 26

Lankford v. Idaho, 500 U.S. 110 (1991) ...... 15, 16, 17

TABLE OF AUTHORITIES—continued

Page(s)

Leeper-Johnson v. Prudential Ins. Co, of Am.,

2009 WL 1318692 (Cal. Ct. App. May 13,

SPINE cccncsccssécnsctccicscschcoccsvsecsienseeeeeeennae 27

Life Ins. Co. v. Johnson, 701 So. 2d 524 (Ala.

EDGED ccocccccccccccseccesesstecseveessesusassieaaaee 25

Lopez v. Aramark Uniform & Career Apparel,

Inc., 426 F. Supp. 2d 914 (N.D. lowa 2006) ....... 21

Lopez v. Bimbo Bakeries USA, Inc., 2009 WL

1090375 (Cal. Ct. App. Apr. 23, 2009)...........000.. 27

Major v. W. Home Ins. Co.,

87 Cal. Rptr. 3d 556 (Ct. App. 2009).................. 30

Martinez v. Thompson,

2008 WL 5157395 (N.D.N.Y. Dec. 8, 2008)........ 26

Maskaniz v. Hayes,

832 N.Y.S.2d 566 (App. Div. 2007)..................04. 27

McDonald’s Corp. v. Ogborn, 2009 WL

3877533 (Ky. Ct. App. Nov. 20, 2009).......... 23, 27

Mendez-Matos v. Municipality of Guaynabo,

557 F.3d 36 (1st Cir. 2009) ..............sceeceeeeeee: 22, 26

Mission Res., Inc. v. Garza Energy Trust,

166 S.W.3d 301 (Tex. Ct. App. 2005).................. 22

Morgan v. New York Life Ins. Co.,

559 F.3d 425 (6th Cir. 2009)..............cccccccccerseeees 26

Myers v. Central Fla. Invs., Inc.,

2010 WL 20987 (11th Cir. Jan. 6, 2010) ............ 27

NLRB. v. Air Assocs., Inc.,

bie A Ff. Es et | Peel ee. 15

Noyes v. Kelly Servs., Inc.,

2009 WL 3358564 (9th Cir. Oct. 20, 2009)......... 26

TABLE OF AUTHORITIES—continued

Page(s)

Pac. Mut. Life Ins. Co. v. Haslip,

ee cesuuiensnnucen .19

Park v. Mobil Oil Guam, Inc.,

2004 WL 2595897 (Guam Nov. 16, 2004)........... 24

Paul v. Asbury Auto. Group, LLC,

2009 WL 188592 (D. Or. Jan. 23, 2009)........... . 26

Philip Morris USA v. Williams,

Se tI PI GENIN P nccconconccccsecsscocesncccssees 15, 18, 20

Planned Parenthood of Columbia/ Willamette

Inc. v. Am. Coal. of Life Activists,

422 F.3d 949 (9th Cir. 2005).....................000ec0ee 25

Rhone-Poulenc Agro, S.A. v. DeKalb Genetics

Corp., 345 F.3d 1366 (Fed. Cir. 2003) .......... 21, 27

Roby v. McKesson Corp.,

219 P.3d 749 (Cal. 2009)..................000005- 23, 27, 30

Roth v. Farner-Bocken Co.,

Se EE GLUE, SIEIIID cccccosccoccscccecscenecsesence 27

Sanchez v. Brokop,

398 F. Supp. 2d 1177 (D.N.M. 2005).................. 21

Saunders v. Branch Banking & Trust Co.,

626 F.3d 142 (4th Cir. 2008)..........c.ccccccoscccscoceees 22

Sec. Title Agency, Inc. v. Pope,

200 P.3d 977 (Ariz. Ct. App. 2008)......... 13, 23, 27

Seltzer v. Morton, 154 P.3d 561 (Mont. 2007) ......... 27

Shiv-Ram, Inc. v. McCaleb,

ee Se BP CARE, BUI cccccceccvcccscccccccccenccoccsess 21

Simon v. San Paolo U.S. Holding Co.,

Oe BE Se Is MUI vccccccescncéecescececccoseceses 23, 24

TABLE OF AUTHORITIES—-continued

Page(s)

Slip-N-Slide Records, Inc. v. TVT Records,

LLC, 2007 WL 3232274 (S.D. Fla. Oct. 31

ean Ree ee eee ne ape Nene 26

State Farm Mutual Auto. Ins. Co. v. Campbell,

Re i Cy CI occ ncn cncncccstecbasounacnonoelocenes passim

Stevens v. Vons Cos., 2009 WL 117902 (Cal.

Ct. App. Jan. 20, 2009) .. Sauicseutans sneuand ae

Stogsdill v. Healthmark eae L.L.C..,

377 F.3d 827 (8th Cir. 2004)... sccssetvarecseeseeee 27

Superior Fed. Bank. v. Jones & ube

Constr. Co., 219 S.W.3d 643 (Ark. Ct. App

SS AE Ee 28 ENE SAT ee eS 21

Thomas v. iStar Fin., Inc.,

508 F. Supp. 2d 252 (S.D.N.Y. 2007).................. 26

Trinity Evangelical Lutheran Church & Sch.-

Freistadt v. Tower Ins. Co.,

661 N.W.2d 789 (Wis. 2003) ............... See ee 24

Tronzo v. Biomet, Inc.,

236 F.3d 1342 (Fed. Cir. 2001) ...................0..6008- 13

TXO Prod. Corp. v. Alliance Res. Corp.,

509 U.S. 443 (1993) .............ccccccccccccsesceees 12, 13, 14

Union Pac. R.R. v. Barber,

149 S.W.3d 325 (Ark. 2004) ..............cccccceeeeee 21,27

United Int'l Holdings, Inc. v. Wharf (Holdings)

Lid., 210 F.3d 1207 (10th Cir. 2000)................. 29

Vasquez-Lopez v. Beneficial Or., Inc.,

152 P.3d 940 (Or. Ct. App. 2007).................. 21, 22

Walker v. Farmers Ins. Exch.,

63 Cal. Rptr. 3d 507 (Ct. App. 2007)............ 24, 27

xii

TABLE OF AUTHORITIES—continued

Page(s)

Wallace v. DTG Operations, Inc.,

563 F.3d 357 (8th Cir. 2009)... 27

Watson v. E.S. Sutton, Inc.,

2005 WL 2170659 (S.D.N.Y. Sept. 6, 2005) ....... 27

‘ieber v. FedEx Ground Package Sys., Inc.,

220 P.3d 68 (Or. Ct. App. 2009)... 27

Williams v. ConAgra Poultry Co.,

378 F.3d 790 (8th Cir. 2004).......... 26

Willow Inn, Inc. v. Pub. Serv. Mut. Ins. Co.,

399 F.3d 224 (3d Cir. 2005) .. scesuee 24, 28, 29

Winkler v. Petersilie,

124 F. App’x 925 (6th Cir. 2005).......... wa

Wrysinski v. Agilent Techs., Inc., 2006 WL

2742475 (Cal. Ct. App. Sept. 27, 2006) . 21

Zakre v. Norddeutsche Landesbank

Gironzentrale, 541 F. Supp. 2d 555

I a ndunciemioeanenias 26

Zhang v. Am. Gem Seafoods, Inc.,

339 F.3d 1020 (9th Cir. 2003).............. sioakesianinien 27

CONSTITUTION, STATUTES, AND

REGULATIONS

So: SEL, SINE. DEIW << s cncssnonnnsneneonononcssobsreees passim

IR os caiecanleleeaeel ee l

S.C. Code § 30-2-20 ......... Ra Sonne ee eee 4

a a ae he he BUI chose scccnescccncccesoneseicasoscecces 4

Oe Ge aie ee IG dncscecsinesccccconctsnereicicostnsees 4

ts RED HII, Se CII BO ovedccccastnsesccecscocesecosesteneossoes 30

PETITION FOR A WRIT OF CERTIORARI

Fortis Insurance Company respectfully petitions

for a writ of certiorari to review the judgment of the

South Carolina Supreme Court in this case.

OPINIONS BELOW

The decision of the South Carolina Supreme

Court (App., infra, 1a-28a) has not yet been released

for publication. The trial court’s order denying the

post-trial motions (id. at 29a-70a) is unpublished.

JURISDICTION

The South Carolina Supreme Court filed its deci-

sion on September 14, 2009 (App., infra, 1a), and de-

nied rehearing on December 17, 2009. Id. at 71a-

72a. The jurisdiction of this Court is invoked under

28 U.S.C. § 1257(a).

CONSTITUTIONAL PROVISION INVOLVED

The Fourteenth Amendment to the United States

Constitution provides in relevant part that “[n]o

State shall ... deprive any person of life, liberty, or

property, without due process of law.”

STATEMENT

This case arises out of Fortis’s erroneous tempo-

rary rescission of an individual health insurance pol-

icy after receiving a medical record whose date indi-

cated (inaccurately, as it turned out) that the in-

sured, Jerome Mitchell, Jr., had been diagnosed with

HIV only two days before he applied for the policy. It

was not until after Mitchell filed suit that Fortis

learned that the date of the medical record was in er-

ror. Fortis then retroactively reinstated the policy

and offered to pay all claims that arose during the

time that the policy had been rescinded, but Mitchell

continued with his lawsuit. The jury ultimately

awarded him $150,000 in compensatory damages

and $15 million in punitive damages. The trial court

upheld the judgment in full. The South Carolina

Supreme Court reduced the punitive damages to $10

million. It reasoned that an exaction of that amount

was a constitutionally permissible multiple of the

“potential harm” to Mitchell, which it valued at

$1,081,189.40—even though Mitchell did not contend

at trial that this figure constituted “potential harm,”

did not ask the jury to base the amount of punitive

damages on any measure of potential harm (instead

arguing for a percentage of Fortis’s capital surplus),

and acquiesced in a jury instruction that specified

that the punitive damages must “bear a relationship”

to “the harm caused.”

The South Carolina Supreme Court’s reliance on

a consideration that was not urged by the plaintiff

and that was not the basis for the jury’s verdict adds

to confusion in the courts over the procedural safe-

guards that must be afforded defendants in punitive

damages cases. And its application of this Court’s

three excessiveness guideposts deepens several addi-

tional splits. Both the procedural and the substan-

tive aspects of that court’s decision warrant review.

A. The Facts Giving Rise To Mitchell’s

Lawsuit

On May 15, 2001, Mitchell applied for a health

insurance policy from Fortis, because he was plan-

ning to attend college and his mother’s policy no

longer covered him. R675, 1891-1896.! The policy

1 Citations to “R__” refer to the Record on Appeal in the South

Carolina Supreme Court.

covered up to 50% of out-of-pocket costs incurred by

Mitchell, subject to a $1,000 annual deductible, a

separate $500 annual prescription-drug deductible,

and various co-payments. R1862, 1872.

Mitchell stated on his application that he had not

been “diagnosed as having or been treated for any

immune deficiency disorder by a member of the med-

ical profession.” R1893. Fortis approved the applica-

tion and issued the policy.

In May 2002, after attempting to donate blood,

Mitchell learned that he had tested positive for HIV.

R681-682. Mitchell realized that he could not afford

the deductibles and co-payments required under the

insurance policy he had selected, and his physician

advised him to seek free medication from a federally-

funded clinic (the “Free Clinic”). R635-636, 686.

Mitchell began going to that clinic in July, 2002, and

he received free and uninterrupted treatment

throughout the period relevant to this lawsuit.

R635-636, 700.

In mid-2002, however, Mitchell did submit a

small insurance claim relating to his HIV treatment.

R1010. In accordance with its standard procedure

for addressing claims for long-term disease, Fortis

investigated whether Mitchell’s illness was an undis-

closed pre-existing condition. R1012. The medical

records sent to Fortis by Mitchell’s physician in-

cluded a handwritten document, dated May 14, 2001,

that stated:

Chief Complaint: Gave blood in March —

Got letter yesterday stating blood tested +

HIV.

R2396. According to that document, Mitchell had

first learned that he was HIV-positive on May 13,

2001—two days before he signed his insurance

enrollment form. R1917-1923, 2396-2398.

Based on that record, Fortis concluded that Mit-

chell had made a material misrepresentation on his

application and rescinded the policy. R1925. Fortis

notified Mitchell of the rescission by letter dated

September 5, 2002, and invited him to submit “any

additional information you may have which would ef-

fect [sic] our decision to rescind your policy.” Ibid.

Although the medical record that Fortis had received

from Mitchell’s doctor was misdated, Mitchell never

told Fortis that.?

Not until eight months later, on June 4, 2003,

did Mitchell’s litigation counsel contact Fortis, alleg-

ing bad-faith rescission and breach of contract

(R2406-2407) and demanding either $450,000 (plus

reinstatement of insurance coverage), or $6 million

(without reinstatement). R248, 264-262, 2422-2423.

Mitchell’s attorneys specified that his demand should

not be considered an “appeal” of the rescission, and

they also revoked Mitchell’s authorization for Fortis

to receive his medical records from third parties.

2 The South Carolina Supreme Court stated that Fortis

“spurned” the offer of a Free Clinic caseworker to provide doc-

uments confirming that Mitchell did not test positive for HIV

until after he purchased his policy. App., infra, 5a. The

“spurn[ing]” in fact consisted of nothing more than accurately

informing the caseworker that federal and state law prohibited

Fortis from discussing Mitchell’s insurance or medical informa-

tion with third parties without his express written authoriza-

tion. R644, 708; see 45 C.F.R. §§ 160.101-160.312, 164.102-

164.534; S.C. Code § 30-2-20; S.C. Code Regs. 69-58, Art. V

§ 17(A) (2001). Neither Mitchell nor the caseworker followed up

with the necessary authorization, much less proof of the scri-

vener's error.

R2408, 2412-2414. Finally, although the letter en-

closed a copy of the report for a May 14, 2002 blood

test (ibid.), it said nothing to suggest that that was

the first test showing that Mitchell had HIV or to

cast doubt on the document bearing the 2001 date.

Despite the insistence by Mitchell’s attorneys

that he was not appealing the rescission, Fortis’s

Rescission Committee considered his case again on

June 18, 2003. R1950-1960. Still lacking any evi-

dence refuting the conclusion of misrepresentation or

casting doubt on the record containing the 2001 date,

however, Fortis concluded that it could not reinstate

the policy. Jbid. It notified Mitchell’s lawyers of that

decision in writing and invited them to contact it if

they had any further questions or concerns. R2020-

2030.

Instead, Mitchell filed suit on July 21, 2003. On

March 8, 2004, Fortis finally received a corrected

medical record in discovery reflecting that the date

on the handwritten note was off by a year. R1971-

2013. As a result of that new information, Fortis re-

troactively reinstated Mitchell’s health insurance

and invited him to submit any claims that accrued

while the insurance was temporarily rescinded.

R2415-2416. Despite the reinstatement of his insur-

ance, Mitchell continued to receive treatment at the

Free Clinic. R635, 660, 686. Mitchell also obtained

Blue Cross/Blue Shield health insurance through his

employer. R699.

B. Proceedings Below

Mitchell’s theory at trial was that Fortis engaged

in bad faith by not confirming the accuracy of the

medical record on which it based its rescission deci-

sion. Mitchell sought compensatory and punitive

damages. In attempting to satisfy South Carolina’s

standard for punitive damages, Mitchell argued that

Fortis had a financial motive for rescinding his poli-

cy, namely the money it would save by not having to

pay his HIV-related claims.

To support this theory, Mitchell presented testi-

mony from a nurse describing the cost of a generic

plan of care for any HIV patient. R771-772. Sub-

stantial components of that plan of care addressed

health problems that Mitchell himself had never ex-

hibited. R782-783. The nurse’s estimate did not ac-

count for premiums, co-payments, and deductibles;

moreover, some of the largest line items in that esti-

mate were for services that the policy did not even

cover, such as psychological treatment. R958 (indi-

cating that “psychological group counseling is the

[second] most expensive” component); R1878-1879

(exclusion of mental illness from coverage).

These costs were extrapolated to age 77, the av-

erage life expectancy of a male of Mitchell’s age.

R766. Finally, an economist calculated the present

value of the total at $1,081,189.40. R1533.

At trial, Mitchell used this figure for one purpose

and one purpose only: to establish bad faith by show-

ing that Fortis had a financial incentive to rescind

the policy. He argued during summations that when

deciding whether Fortis acted willfully in

reckless disregard, one of the things that you

can also consider, besides all those reasons,

is whether Fortis had a financial incentive

to act the way they did.

. If Fortis’s health care management

team had done numbers, the minimum care

costs they were looking at would have been

in this range. That’s their financial incen-

tive.

... [Adding in other costs, g]ives you a total

of one million eighty-one thousand and one

hundred and eighty-nine dollars and forty

($1,081,189.40) cents, the treatment and

costs that were facing Fortis Insurance Com-

pany at the time that they decided to rescind

Jerome’s policy.

R1532-1533 (emphasis added). Consistent with that

argument, the trial court instructed the jury that it

could consider any financial incentive “in determin-

ing whether an insurance company acted in bad faith

and with willful or reckless disregard for the Plain-

tiffs rights.” R1601.

Mitchell took a totally different tack in arguing

about the amount of punitive damages, urging the

jury to award a percentage of either Fortis’s invest-

ment income or its capital surplus. R1536-1537.

Mitchell never suggested to the jury that it

should consider “potential harm” in setting the

amount of punitive damages, much less that the

$1,081,189.40 figure was an accurate measure of po-

tential harm. Nor did he ask the trial court to in-

struct the jury that it could consider potential harm.

Instead, he acquiesced in an instruction that focused

the jury squarely on the actual harm caused by the

conduct. That instruction told the jury that, in set-

ting punitive damages,

You must first consider the relationship

between any punitive damage and the harm

caused. Any penalty imposed should take

into account the reprehensibility of the con-

duct, the harm caused, the Defendant’s

awareness of the conduct’s wrongfulness, the

duration of the conduct, and any conceal-

ment; thus, any penalty imposed should bear

a relationship to the nature and extent of the

conduct and the harm caused, including the

compensatory damage award made by you.

R1606-1607 (emphasis added).

The jury awarded $150,000 in compensatory

damages and $15 million in punitive damages on the

bad-faith claim, as well as $36,600 for breach of con-

tract. R1632-1633. Because the contract and tort

claims were alternative theories of liability, Mitchell

elected the tort damages, and the trial court entered

judgment for $150,000 in compensatory damages and

$15 million in punitive damages. See App., infra, 2a.

Fortis filed post-trial motions, arguing, among

other things, that the punitive award was unconsti-

tutionally excessive. The trial court upheld the

judgment in its entirety, concluding, inter alia, that

the punitive damages were not disproportionate to

the $6 million lifetime maximum payout under the

policy, which it regarded to be a reasonable measure

of the “potential harm” from the rescission. App., in-

fra, 48a-49a. On appeal, the South Carolina Su-

preme Court reduced the punitive award to $10 mil-

lion on the ground that it was unconstitutionally ex-

cessive under the three guideposts identified in

BMW of North America, Inc. v. Gore, 517 U.S. 559

(1996), and refined in State Farm Mutual Automobile

Insurance Co. v. Campbell, 538 U.S. 408 (2003). See

App., infra, 24a.

Analyzing the five reprehensibility factors identi-

fied in State Farm, the court first determined that

“Fortis’s conduct was highly reprehensible and that

the imposition of punitive damages was appropriate.”

App., infra, 20a.

Turning to the ratio guidepost, the court held

that the punitive damages should not be compared to

the $150,000 award of actual damages, but instead

“to the potential harm suffered by the plaintiff.”

App., infra, 20a. It nevertheless rejected “the circuit

court’s assertion that Mitchell suffered $6 million in

potential harm” as “unsupported by the evidence and

too speculative.” Jd. at 2la. Instead, the court de-

cided that the $1,081,189.40 present value of the

nurse-expert’s hypothetical treatment plan—which

had never before been offered for this purpose—

“bears a closer relation to Mitchell’s potential risk

than the $6 million lifetime payout.” Jbid. The court

then held that the 13.9:1 ratio of the punitive dam-

ages to this newly identified measure of potential

harm was grossly excessive. Ibid.

The court next considered the third guidepost,

but did not address the legislatively established civil

penalties for insurance bad faith, which it had held

in an earlier case to be too small to compare with any

“meaningful punitive damage award.” See James v.

Horace Mann Ins. Co., 638 S.E.2d 667, 672 (S.C.

2006). Instead, it reviewed the punitive-to-

compensatory ratios in other cases without regard to

the nature of the conduct in those cases or the abso-

lute amount of punitive damages at issue. Noting

that “South Carolina courts have most often upheld

verdicts on the low end of the single-digit spectrum,

but have frequently deviated from the norm in cases

involving particularly egregious conduct,” the court

concluded that “the conduct in this case was repre-

hensible enough to merit an award towards the outer

limits of the single-digit ratio.” App., infra, 23a-24a.

It accordingly reduced the punitive award to $10 mil-

lion, 9.2 times the measure of potential harm it had

latched onto.

REASONS FOR GRANTING THE PETITION

The question whether and how the due process

clause constrains common-law punitive damages

awards is both a recurring and an important one.

This Court’s recent decisions in this area have

helped bring greater procedural fairness and have

reduced the frequency of arbitrary, outlier exactions.

Nevertheless, there remains a good deal of confusion

in the lower courts regarding the proper application

of those precedents and, as a result, many outsized

exactions continue to escape the net. The present

case exemplifies this confusion in several different

respects, making it an excellent vehicle for providing

the guidance that the lower courts continue to need.

First, in justifying the enormous and dispropor-

tionate exaction in this case, the South Carolina Su-

preme Court relied on a post hoc “potential harm”

theory that Fortis had no realistic opportunity to re-

fute at trial and that demonstrably was not the basis

for the verdict. The court thereby deprived Fortis of

a core element of procedural due process and placed

itself in conflict with decisions of other courts that

have refused to countenance after-the-fact justifica-

tions for punitive damages judgments. Second, the

decision below deepens divisions among the lower

courts regarding the proper application of each of the

three BMW guideposts by (i) confining the reprehen-

sibility inquiry to a rote, checklist-like approach to

the five reprehensibility factors identified in State

Farm and failing to compare the conduct in this case

to other conduct for which comparable amounts of

punitive damages have been permitted; (ii) ignoring

this Court’s admonition that, when the compensatory

damages are “substantial,” a 1:1 ratio may mark “the

outermost limit of the due process guarantee” (State

‘arm, 538 U.S. at 410, 425); and (ii) refusing to

compare the punitive damages to the legislatively es-

tablished fine for comparable conduct on the ground

that the fine is “too low.” In short, this case presents

the Court with an opportunity to clarify multiple as-

pects of its punitive-damages jurisprudence in a sin-

gle stroke.

I. The South Carolina Supreme Court’s Em-

ployment Of A Post Hoc Rationale For The

Punitive Award Warrants Review And Re-

versal.

This Court has indicated that perhaps the “most

commonly cited indicium of an unreasonable or ex-

cessive punitive damages award is its ratio to the

actual harm inflicted on the plaintiff." BMW, 517

U.S. at 580 (emphasis added); see also State Farm,

538 U.S. at 426 (“courts must ensure that the meas-

ure of punishment is both reasonable and proportio-

nate to the amount of harm to the plaintiff and to

the general damages recovered’) (emphasis add-

ed); Exxon Shipping Co. v. Baker, 128 S. Ct. 2605,

2629 (2008) (“the ratio between compensatory and

punitive damages is ... a central feature in our due

process analysis”). Indeed, in setting the common-

law limit on punitive damages in maritime cases, the

Court placed near-exclusive emphasis on the ratio of

punitive to compensatory damages. See Exxon Ship-

ping, supra. In addition to being a practice of long

standing, comparing punitive damages to compensa-

tory damages has the virtue of simplicity because

both figures are almost always readily discernible

from the verdict form.

Nevertheless, in 7XO Production Corp. v. AIl-

liance Resources Corp., 509 U.S. 443 (1993), a three-

Justice plurality opined that in some cases “[i]t is

appropriate to consider the magnitude of the poten-

tial harm that the defendant’s conduct would have

caused to its intended victim if the wrongful plan

had succeeded.” Jd. at 460. The plurality proceeded

to conclude that the $10 million punitive award in

that case was not sufficiently disproportionate to the

potential harm (which the plurality indicated could

have ranged from $1 million to $8.3 million) to be in-

dicative of unconstitutionality. Jd. at 462.

Significantly, four of the remaining six Justices

rejected the plurality’s reliance on potential harm in

that case because that theory had not been argued at

trial. In a dissenting opinion joined by two other

Members of the Court, Justice O’Connor explained

that she had no quarrel with the plurality that, “in

the abstract, punitive damages may be predicated on

the potential but unrealized harm to the victim,” but

observed that in the case before the Court “[t]he

record demonstrates that the potential harm theory

is little more than an after-the-fact rationalization

invented by counsel to defend this startling award on

appeal.” Jd. at 484-485 (O’Connor, J., dissenting).

Specifically, the potential harm figures were based

on post hoc extrapolations from evidence offered for

other purposes; the jury was never instructed that it

could consider potential harm; and respondent never

suggested to the jury that it set punitive damages

based on potential harm, focusing instead “on TXO’s

vast wealth.” Jd. at 485-487 (O’Connor, J., dissent-

ing). In his concurring opinion, Justice Kennedy

agreed that “the record in this case does not contain

evidence, argument, or instructions regarding the

potential harm from TXO’s conduct” and that the po-

tential harm theory therefore did not “provide[] a

constitutionally adequate foundation for concluding

that the punitive damages verdict against TXO was

rational.” Jd. at 468 (Kennedy, J., concurring).*

Since TXO, the lower courts have been deeply

confused about when potential harm may be used to

justify an otherwise disproportionate punitive award.

Agreeing with Justices O’Connor and Kennedy, some

courts have refused to consider potential harm in the

analysis because that rationale was not placed before

the jury.‘ By contrast, like the 7XO plurality, other

courts have invoked potential harm even when the

plaintiff did not invoke that rationale at trial and the

jury was not instructed to consider it.5

3 Justices Scalia and Thomas had no reason to involve them-

selves in this dispute because they concurred in the judgment

on the ground that the Due Process Clause places no limits on

the amount of punitive damages. 7TXO, 509 U.S. at 470-472

(Scalia, J., dissenting).

4 See, e.g., Sec. Title Agency, Inc. v. Pope, 200 P.3d 977, 1000

(Ariz. Ct. App. 2008) (rejecting plaintiffs contention that five-

year lost-profits projection introduced to support claim for com-

pensatory damages and evidently rejected by the jury could be

used, after-the-fact, as a measure of the potential harm from

the misconduct); Goddard v. Farmers Ins. Co., 179 P.3d 645,

666 (Or. 2008) (en banc) (refusing to credit argument in insur-

ance bad-faith case that potential harm to the insured included

an amount that could have been, but was not awarded, against

the insured in the underlying personal injury case because “the

actual and potential harm suffered by a plaintiff is a fact to be

decided by the jury” in the case in which punitive damages are

awarded).

5 See, e.g., Tronzo v. Biomet, Inc., 236 F.3d 1342, 1350 (Fed. Cir.

2001) (noting that “competent evidence of damages may have

existed, but was never introduced” and reinstating punitive

award that was 38,000 times the compensatory damages based

This case is an ideal vehicle for resolving the con-

fusion in the lower courts because there can be no se-

rious question that the South Carolina Supreme

Court’s reliance on the ratio between the punitive

damages and the $1,081,189.40 figure was a post hoc

rationale of which Fortis lacked any meaningful no-

tice. Specifically, (i) Mitchell at no point so much as

hinted that the $1,081,189.40 figure was relevant to

anything other than Fortis’s motive; (ii) Mitchell did

not seek an instruction informing the jury that it

could consider potential harm (however measured) in

setting the amount of punitive damages; (iii) the trial

court never instructed the jury that it could consider

potential harm in setting the punitive damages and

instead told the jury that the punitive damages had

to “bear a relationship to ... the harm caused, includ-

ing the compensatory damage award made by you”

(R1606- 1607); (iv) Mitchell urged the jury to base the

punitive damages on a percentage of Fortis’s wealth;

and (v) the verdict was 5% of Fortis’s surplus—one of

the very measures suggested by Mitchell—rounded

on “a strong suggestion in the record that the potential compen-

satory damages may have been much higher than what was ac-

tually awarded”); Jn re New Orleans Train Car Leakage Fire Li-

tig., 795 So. 2d 364, 384 (La. Ct. App. 2001) (construing TXO to

permit post hoc reliance on potential harm “despite the fact that

there was no jury determination of the amount of such potential

harm”); Bennett v. Reynolds, 242 S.W.3d 866, 905 & n.46 (Tex.

Ct. App. 2007, pet. granted) (acknowledging that jury never

found potential harm, but nonetheless justifying punitive

awards that were 188 and 47 times the compensatory damages

on the ground that plaintiff could have suffered emotional dis-

treas and reputational harm, which the court valued at

$500,000 based on one defendant's testimony that he would ac-

cept $500,000 for his emotional! distress).

to the nearest million dollars.* Accordingly, this case

well frames the question whether upholding a puni-

tive award in reliance on a theory of “potential harm”

that was not presented to the jury and was not the

basis for its verdict violates procedural due process.

There also should be little doubt that the answer

to that question is “yes.” The avoidance of surprise

has long been recognized as an important component

of due process. See, e.g., Burns v. United States, 501

U.S. 129, 138 (1991) (noting “serious question

whether notice in this setting [upward departures

from Sentencing Guidelines] is mandated by the Due

Process Clause”). Mere notice of the proceedings is

insufficient. “In a variety of contexts, [this Court’s]

cases have repeatedly emphasized the importance of

giving the parties sufficient notice to enable them

to identify the issues on which a decision may

turn.” Lankford v. Idaho, 500 U.S. 110, 126 n.22

(1991) (emphasis added); see also Joint Anti-Fascist

Refugee Comm. v. McGrath, 341 U.S. 123, 171-172

(1951) (Frankfurter, J., concurring) (“No better in-

strument has been devised for arriving at truth than

to give a person in jeopardy of serious loss notice of

the case against him and opportunity to meet it.”);

NLRB. v. Air Assocs., Inc., 121 F.2d 586, 591 (2d Cir.

1941) (“the test of a fair hearing is whether the is-

sues were clearly defined, so that respondent could

address itself to the charges made against it”). In-

deed, the right to present “every available defense”

(Philip Morris USA v. Williams, 549 U.S. 346, 353

(2007) (internal quotation marks omitted)) is mea-

6 It also was precisely 100 times the tort damages—again, a

measure wholly unrelated to the $1,081,189.40 figure.

ningless without fair notice of the theory on which an

award of punitive damages is to be justified.

The present case is remarkably similar to Lank-

ford, in which this Court held that a trial court vi-

olated a defendant’s right to due process by imposing

the death sentence without giving the defendant any

inkling that such a sentence was under considera-

tion.? In Lankford, the defendant was convicted of

first-degree murder. After the guilt phase, the trial

court instructed the prosecution to notify the court

and the defendant whether it intended to seek the

death penalty and, if so, to identify the aggravating

circumstances on which it intended to rely. The

prosecution responded that it did not intend to seek

the death penalty. Thereafter, the penalty hearing

took place without any mention of the death penalty

by either the prosecution or the court. The court

nevertheless sentenced the defendant to death.

This Court reversed, explaining that “[nJotice of

issues to be resolved by the adversary process is a

fundamental characteristic of fair procedure.” Lank-

ford, 500 U.S. at 126. The Court rejected the State’s

argument that “the terms of the statute, plus the ad-

vice received at [the defendant's] arraignment, pro-

vided such notice” (id. at 119), noting that, in view of

the prosecution’s statement that it was not seeking

the death penalty, “it was surely reasonable for the

defense to assume that there was no reason to

present argument or evidence directed at the ques-

tion whether the death penalty was either appropri-

7 Although Lankford was a criminal case, this Court relied on it

in BMW, noting that “the basic protection against ‘judgments

without notice’ afforded by the Due Process Clause is implicated

by civil penalties.” 517 U.S. at 574 n.22 (citation omitted).

ate or permissible.” Jd. at 120. Accordingly, the de-

fendant’s “lack of adequate notice that the judge was

contemplating the imposition of the death penalty

created an impermissible risk that the adversary

process may have malfunctioned.” Jd. at 127.

In the present case, the trial court’s instructions,

which focused exclusively on actual injury, combined

with Mitchell’s exclusive reliance on wealth-based

measures of punishment in his closing arguments,

were the functional equivalent of the prosecution’s

statement in Lankford that it did not intend to seek

the death penalty. Just as the defendant in Lank-

ford had “no reason to present argument or evidence

directed at the question whether the death penalty

was either appropriate or permissible” (id. at 120;

see also id. at 122), so too Fortis had “no reason” to

devote scarce tria! time (and juror patience) to show

why the $1,081,189.40 figure was a wholly invalid

measure of potential harm.® Accordingly, just as in

Lankford, “lack of notice” that the South Carolina

Supreme Court would invoke the $1,081,189.40 fig-

ure post hoc to justify the punitive award “created an

impermissible risk that the adversary process may

have malfunctioned.” Id. at 127; see also In re Ruffa-

lo, 390 U.S. 544, 551-552 (1968) (“[Proceedings] be-

come a trap when, after they are underway, the

charges are amended on the basis of testimony of the

accused. ... This absence of fair notice as to the

reach of the grievance procedure and the precise na-

8 Among other things, the nurse’s estimate (i) was based on the

unrealistic assumption that Mitcheli would live to age 77, (ii)

included expensive services (like psychological counseling) that

were not covered by Mitchell’s policy (see p. 6, supra), and (iii)

failed to back out the deductibles, co-pays, and premiums that

Mitchell is obligated to pay.

ture of the charges deprived petitioner of procedural

due process.”).

The efforts this Court has made to ensure that

punitive damages are adequately constrained will be

thwarted if resistant reviewing courts are afforded

carte blanche to uphold large exactions on the basis

of factors never considered, much less relied on, by

the jury—especially such malleable ones as “poten-

tial harm.” To prevent this practice from adding “a

near standardless dimension to the punitive damag-

es equation” (Philip Morris, 549 U.S. at 347), the

Court should grant certiorari and roundly condemn

the use of post hoc rationalizations to justify large

punitive damages awards.

II. The South Carolina Supreme Court’s Appli-

cation Of The BMW Guideposts Warrants

Review And Reversal.

Quite apart from the South Carolina Supreme

Court’s troubling treatment of potential harm, that

court’s application of the three BMW guideposts is il-

lustrative of the conceptual confusion that continues

to plague the lower courts, making this case an ideal

vehicle for this Court to provide the clarification and

guidance that the lower courts sorely need.

Over the past two decades, this Court repeatedly

has expressed concern about awards of punitive

damages that, “today, may be many times the size of

such awards in the 18th and 19th centuries.” Philip

Morris, 549 U.S. at 355. To assist courts in deter-

mining when a punitive award is unconstitutionally

excessive, the Court has identified three guideposts:

(i) the degree of reprehensibility of the misconduct;

(ii) the ratio between the punitive and compensatory

damages (or, in appropriate circumstances, potential

harm); and (iii) the difference between the punitive

damages and the legislatively-established penalties

for comparable misconduct. BMW, 517 U.S. at 574-

585.

Regrettably, lower courts often apply the BMW

guideposts mechanically without considering this

Court’s broader concerns about the “extraordinary”

size of punitive awards “by historical standards”

(BMW, 517 U.S. at 594 (Breyer, J., concurring)) and

their “stark unpredictability” (Exxon Shipping, 128

S. Ct. at 2625). Moreover, courts routinely misapply

the guideposts, weakening their “constraining power

to protect against serious and capricious deprivations

[of property].” BMW, 517 U.S. at 590 (Breyer, J.,

concurring).

This case is emblematic. The South Carolina

Supreme Court applied the three guideposts in robot-

ic fashion, demonstrating no sensitivity to their in-

tended purpose, much less the ultimate inquiry of

whether a $10 million exaction is “greater than rea-

sonably necessary to punish and deter” the conduct

at issue. Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S.

1, 22 (1991). Along the way, it made fundamental

errors with regard to each guidepost. For example,

with respect to the reprehensibility guidepost, it

treated the five factors identified in State Farm as

exclusive, binary considerations and, after conclud-

ing (erroneously) that most were present, labeled the

conduct “highly reprehensible,” and moved on to the

next guidepost. Critically absent was any acknowl-

edgment that all punishable conduct is reprehensi-

ble to some degree or any effort to place Fortis’s con-

duct on a spectrum of reprehensibility by comparing

it to other kinds of conduct that have warranted pe-

nalties in the $10 million range. With regard to the

ratio guidepost, the South Carolina Supreme Court

misread this Court’s cases by ignoring the Court’s

admonition that a 1:1 ratio of punitive damages to

actual or potential harm may be the constitutional

maximum when compensatory damages are “sub-

stantial,” and instead assuming that any ratio below

10:1 will generally satisfy this guidepost. Finally,

the South Carolina Supreme Court effectively nulli-

fied the third guidepost by refusing to compare the

punitive damages to the legislatively established fine

for insurance bad faith and instead simply canvass-

ing the ratios of punitive to compensatory damages

in prior South Carolina cases.

Each of the South Carolina Supreme Court’s con-

ceptual errors is illustrative of a more pervasive con-

fusion. Indeed, the lower courts are deeply divided

as to all three points, reflecting the “arbitrariness”

(Philip Morris, 549 U.S. at 355), “stark unpredicta-

bility” (Exxon Shipping, 128 S. Ct. at 2625), and “un-

fairness” (id. at 2627) about which this Court has ex-

pressed concern. This Court’s review is urgently

needed to bring the necessary fairness and predicta-

bility to the process.

A. Reprehensibility

The purpose of the reprehensibility guidepost is

to ensure that the amount of punitive damages is not

out of proportion to “the enormity of [the] offense”

(BMW, 517 U.S. at 575)—or, as Justice Breyer has

put it, to determine whether the conduct was “espe-

cially or unusually reprehensible enough to warrant”

the amount of punishment imposed (id. at 590 (Brey-

er, J., concurring)). To assist courts in making this

determination, this Court has identified five, non-

exclusive factors: (i) whether the harm was physical

or merely economic; (ii) whether the conduct involved

a reckless disregard for health or safety; (ii) whether

the target of the conduct was economically vulnera-

ble; (iv) whether the defendant’s conduct was part of

a broader pattern or instead was an isolated inci-

dent; and (v) whether the conduct entailed “inten-

tional malice, trickery, or deceit, or mere accident.”

State Farm, 538 U.S. at 419. That effort at providing

guidance has, however, caused many courts to lose

sight of the forest for the trees. Rather, than using

these factors as a means of locating the conduct on a

spectrum of reprehensibility and assessing whether

the conduct was bad enough to justify the amount of

punishment imposed, courts have treated them as a

checklist and assumed that the more boxes that can

be checked, the higher the permissible ratio of puni-

tive to compensatory damages.?

® See, e.g., Diesel Mach., Inc. v. B.R. Lee Indus., Inc., 418 F.3d

820, 839-840 (8th Cir. 2005); Winkler v. Petersilie, 124 F. App’x

925, 937 (6th Cir. 2005); Rhone-Poulenc Agro, S.A. v. DeKalb

Genetics Corp., 345 F.3d 1366, 1370-1371 (Fed. Cir. 2003); Bogle

v. McClure, 332 F.3d 1347, 1361 (11th Cir. 2003); Fastenal Co.

v. Crawford, 609 F. Supp. 2d 650, 669 (E.D. Ky. 2009); Lopez v.

Aramark Uniform & Career Apparel, Inc., 426 F. Supp. 2d 914,

969-970 (N.D. Iowa 2006); Hussein v. Universal Dev. Mgmt.,

Inc., 2006 U.S. Dist. LEXIS 49, at *29-*31 (W.D. Pa. Jan. 3,

2006); Sanchez v. Brokop, 398 F. Supp. 2d 1177, 1194 (D.N.M.

2005); Shiv-Ram, Inc. v. McCaleb, 892 So. 2d 299, 316 (Ala.

2003); Casciola v. F.S. Air Serv., Inc., 120 P.3d 1059, 1068

(Alaska 2005); Union Pac. R.R. v. Barber, 149 S.W.3d 325, 348

(Ark. 2004); Advocat, Inc. v. Sauer, 111 S.W.3d 346, 360-361

(Ark. 2003); Superior Fed. Bank. v. Jones & Mackey Constr. Co.,

219 S.W.3d 643, 651 (Ark. Ct. App. 2005); Wrysinski v. Agilent

Techs., Inc., 2006 WL 2742475, at *25 (Cal. Ct. App. Sept. 27,

2006); Century Sur. Co. v. Polisso, 43 Cal. Rptr. 3d 468, 498-499

(Ct. App. 2006); Craig v. Holsey, 590 S.E.2d at 742, 747-748

(Ga. Ct. App. 2003); Hayes Sight & Sound, Inc. v. ONEOK, Inc.,

136 P.3d 428, 446-447 (Kan. 2006); Vasquez-Lopez v. Beneficial

Relatedly, in their rigid adherence to the five fac-

tors, many courts have either expressly or implicitly

rejected the notion that a meaningful assessment of

reprehensibility entails comparing the conduct at is-

sue to that in other cases in which significant

amounts of punitive damages have been imposed.!°

By contrast, a number of courts have rejected this

blinkered approach, recognizing that the goal of

avoiding arbitrariness requires ensuring that con-

duct of similar reprehensibility draws similar pu-

nishment, while conduct of differing reprehensibility

is punished differently. !!

Or., Inc., 152 P.3d 940, 959 (Or. Ct. App. 2007); Bright v. Addi-

son, 171 S.W.3d 588, 603-604 (Tex. Ct. App. 2005); Mission

Res., Inc. v. Garza Energy Trust, 166 S.W.3d 301, 318 (Tex. Ct.

App. 2005), rev’d on other grounds sub nom. Coastal Oil & Gas

Corp v. Garza Energy Trust, 268 S.W.3d 1 (Tex. 2008); Haggar

Clothing Co. v. Hernandez, 164 S.W.3d 407, 418-419 (Tex. Ct.

App. 2003), rev’d per curium on other grounds, 164 S.W.3d 386

(Tex. 2005); Campbell v. State Farm Mut. Auto. Ins. Co., 98

P.3d 409, 414-417 (Utah 2004).

10 See, e.g., Action Marine, Inc. v. Contl Carbon Inc., 481 F.3d

1302, 1320 (11th Cir. 2007); Bach v. First Union Nat7 Bank,

486 F.3d 150, 156 (6th Cir. 2007).

11 See, e.g., Mendez-Matos v. Municipality of Guaynabo, 557

F.3d 36, 54, 55-56 (1st Cir. 2009) (‘Although the Mayor’s con-

duct was reprehensible, it was not ‘particularly egregious’ in

comparison to defendants’ conduct in other cases supporting

substantial punitive awards.”); JCB, Inc. v. Union Planters

Bank, NA, 539 F.3d 862, 875 (8th Cir. 2008) (“the reprehensibil-

ity of its conduct was comparable to the conduct which sup-

ported punitive damages in prior business cases”); Saunders v.

Branch Banking & Trust Co., 526 F.3d 142, 154 (4th Cir. 2008)

(“Examining [other] punitive damages awards for violations of

FCRA, we cannot conclude that an award of $80,000 is grossly

excessive or arbitrary.”); Bains LLC v. ARCO Prods. Co., 405

F.3d 764, 775 (9th Cir. 2005) (misconduct in connection with

the performance of “a socially valuable task” is less reprehensi-

The decision below is illustrative of this concep-

tual confusion. The South Carolina Supreme Court

marched through the five State Farm factors, con-

cluded that four were present (and that the absence

of the fifth didn’t matter), and then jumped to the

conclusion that “Fortis’s conduct was highly repre-

hensible.” App., infra, 20a.!2 Even if, in hindsight,

ble than conduct serving no legitimate purpose, such as “inten-

tional, repeated ethnic harassment”); Asa-Brandt, Inc. v. ADM

Investor Servs., Inc., 344 F.3d 738, 747 (8th Cir. 2003) (affirm-

ing $1.25 million punitive award for breach of fiduciary duty

because the misconduct, “according to the hierarchy of repre-

hensiveness, was clearly more reprehensible than the conduct

in [BMW], and is at a similar level to the conduct in State

Farm”); Roby v. McKesson Corp., 219 P.3d 749, 797 (Cal. 2009)

(“McKesson’s conduct, although wrongful, does not rise to the

kind of oppressive, fraudulent, or malicious conduct that has in

the past justified large punitive damages awards.”); Simon v.

San Paolo U.S. Holding Co., 113 P.3d 63, 76 (Cal. 2005) (reduc-

ing punitive award from $1.7 million to $50,000 in part because

the fraud at issue was “of relatively low culpability” compared

to “the universe of cases warranting punitive damages under

California law”); McDonald’s Corp. v. Ogborn, 2009 WL

3877533, at *21 (Ky. Ct. App. Nov. 20, 2009) (“The $1,000,000

punitive damages award is extraordinary when compared to

other stand-alone ITED cases.”); Dardinger v. Anthem Blue

Cross & Blue Shield, 781 N.E.2d 121, 140, 143 (Ohio 2002)

(comparing reprehensibility and dollar awards from other cas-

es).

12 In holding that the repeated misconduct factor was present

merely because Fortis initially upheld its rescission decision

during an internal review, the South Carolina Supreme Court

contributed to a deep split over the meaning of this factor. See

Sec. Title Agency, 200 P.3d at 1000 n.23 (“We also note that ju-

risdictions differ as to whether ‘repeated actions’ for this pur-

pose may consist solely of acts against the plaintiff or whether

the plaintiff must show that the defendant has committed out-

rageous acts against another.”). Like the South Carolina Su-

preme Court, some lower courts have declared this factor to be

present after atomizing the conduct that injured the plaintiff.

Fortis’s reliance on the misdated medical record, like

the conduct of State Farm toward the Campbells,

“merits no praise” (State Farm, 538 U.S. at 419), the

South Carolina Supreme Court never asked the key

question whether that conduct warrants a $10 mil-

lion penalty and seemed entirely untroubled by the

See, e.g., CGB Occupational Therapy, Inc. v. RHA Health

Serus., Inc., 499 F.3d 184, 191 (3d Cir. 2007) (“while the ‘re-

peated conduct’ subfactor will necessarily have ‘less force’

where the defendant's misconduct did not extend beyond his

dealings with the plaintiff, it may still be ‘relevant’ in measur-

ing the reprehensibility of the defendant’s conduct”) (quoting

Willow Inn, Inc. v. Pub. Serv. Mut. Ins. Co., 399 F.3d 224, 232-

233) (3d Cir. 2005); Trinity Evangelical Lutheran Church &

Sch.-Freistadt v. Tower Ins. Co., 661 N.W.2d 789, 801 (Wis.

2003) (“Gallagher, as the representative of Tower, made a se-

ries of decisions that illustrate bad faith on behalf of Tower.”).

By contrast, numerous other courts have held that “[t]he re-

peated conduct factor ‘require[s] that the similar reprehensible

conduct be committed against various different parties rather

than repeated reprehensible acts within the single transaction

with the plaintiff.” Chicago Title Ins. Corp. v. Magnuson, 487

F.3d 985, 1000 (6th Cir. 2007) (quoting Bach v. First Union

Nat Bank, 149 F. App’x 354, 365 (6th Cir. 2005)). See Fastenal

Co. v. Crawford, 609 F. Supp. 2d 650, 670 (E.D. Ky. 2009) (“this

behavior by the ... Defendants does not constitute similar re-

prehensible conduct committed against different parties and

thus this factor does not weigh in favor of a punitive damage

award”); Walker v. Farmers Ins. Exch., 63 Cal. Rptr. 3d 507,

513 (Ct. App. 2007) (finding that insurer’s “persistent denial of

a defense” failed to satisfy the “repeated actions” prong because

“[t}here was one denial of the tender of a defense” and “persis-

tent’ is not the same as a repetition of the decision in other in-

stances”); Simon, 113 P.3d at 76 (factor requires that defendant

“had acted similarly toward other potential buyers”); Park v.

Mobil Oil Guam, Inc., 2004 WL 2595897, at *13 (Guam Nov. 16,

2004) (this factor was not implicated even though defendant’s

wrongful acts “spanned several years” and injured plaintiff on

separate occasions because those acts comprised a single course

of conduct).

fact that the highest amount of punitive damages ev-

er before sustained in an insurance bad-faith case in

South Carolina was only $1.5 million (Cock-N-Bull

Steak House, Inc. v. Generali Ins. Co., 466 S.E.2d

727, 729 (S.C. 1996)), and that a $10 million exaction

dwarfs the punishments authorized in other cases in

which the conduct was materially more reprehensi-

ble.!3 That cavalier approach to the reprehensibility

guidepost cannot be reconciled with this Court’s con-

cerns about “the implication of unfairness that an ec-

centrically high punitive verdict carries in a system

whose commonly held notion of law rests on a sense

of fairness in dealing with one another” (Exxon Ship-

ping, 128 S. Ct. at 2627) and, more particularly,

about “the uniform general treatment of similarly si-

13 See, e.g., Planned Parenthood of Columbia/ Willamette Inc. v.

Am. Coal. of Life Activists, 422 F.3d 949, 958 (9th Cir. 2005)

(reducing punitive awards totaling $109 million to just over

$4.7 million in case in which anti-abortion activists put up

“WANTED” posters threatening doctors who provided abor-

tions, creating a threat so serious that that the FBI “warned

[the] physicians to purchase bullet proof vests”); Boerner v.

Brown & Williamson Tobacco Co., 394 F.3d 594, 602-603 (8th

Cir. 2005) (reducing $15 million punitive award to $5 million

where defendant “actively misled consumers about the health

risks associated with smoking” leading the decedent's “painful,

lingering death following extensive surgery”); Kemp v. AT&T

Co., 393 F.3d 1354, 1363, 1365 (11th Cir. 2004) (reducing $1

million punitive award to $250,000 where defendant was found

to have participated in a “large-scale corporate” effort “to ex-

ploit customers who were un-sophisticated and economically

vulnerable” by misleadingly presenting gambling debts as “legi-

timate” long-distance phone charges); Life Ins. Co. v. Johnson,

701 So. 2d 524, 526-529 (Ala. 1997) (reducing punitive damages

from $15 million to $3 million where defendant engaged in pat-

tern of selling worthless Medicare supplement policies to “elder-

ly, uneducated, single black women”).

tuated persons that is the essence of law itself”

(Cooper Indus., Inc. v. Leatherman Tool Group, Inc.,

532 U.S. 424, 436 (2001) (internal quotation marks

omitted)).

B. Ratio

In State Farm, this Court explained that “[w]hen

compensatory damages are substantial, then a lesser

ratio, perhaps only equal to compensatory dam-

ages, can reach the outermost limit of the due

process guarantee.” 538 U.S. at 425 (emphasis add-

ed); see also Exxon Shipping, 128 S. Ct. at 2626,

2634. Heeding this guidance, many courts have re-

duced punitive awards to amounts at or near com-

pensatory damages when the latter were “substan-

tial.”"14 However, many other courts flatly ignore

\4 See, e.g., Noyes v. Kelly Servs., Inc., 2009 WL 3358564, at *1

(9th Cir. Oct. 20, 2009); Morgan v. New York Life Ins. Co., 559

F.3d 425, 442-443 (6th Cir. 2009); Mendez-Matos, 557 F.3d at

55; Jurinko v. Med. Protective Co., 305 F. App’x 13, 27-28 (3d

Cir. 2008); Bridgeport Music, Inc. v. Justin Combs Publ’g, 507

F.3d 470, 490 (6th Cir. 2007); Bach, 486 F.3d at 156; Boerner,

394 F.3d at 603; Williams v. ConAgra Poultry Co., 378 F.3d 790,

798 (8th Cir. 2004); Cummings Inc. v. BP Prods. N. Am., Inc.,

648 F. Supp. 2d 969, 987 (M.D. Tenn. 2009); Farm Bureau Life

Ins. Co. v. Am. Natl Ins. Co., 2009 WL, 361267, at *9-*11 (D.

Utah Feb. 11, 2009); Paul v. Asbury Auto. Group, LLC, 2009

WL 188592, at *11 (D. Or. Jan. 23, 2009); Martinez v. Thomp-

son, 2008 WL 5157395, at *10 (N.D.N.Y. Dec. 8, 2008); Adidas

Am., Inc. v. Payless Shoesource, Inc., 2008 WL 4279812,

at *15-*16 (D. Or. Sept. 12, 2008); Zakre v. Norddeutsche Lan-

desbank Gironzentrale, 541 F. Supp. 2d 555, 563-567 (S.D.N_Y.

2008); Thomas v. iStar Fin., Inc., 508 F. Supp. 2d 252, 263

(S.D.N.Y. 2007); Slip-N-Slide Records, Inc. v. TVT Records,

LLC, 2007 WL 3232274, at *30 (S.D. Fla. Oct. 31, 2007); Kent v.

United of Omaha Life Ins. Co., 430 F. Supp. 2d 946, 957-960

(D.S.D. 2006), aff'd in part, rev'd in part on other grounds, 484

F.3d 988 (8th Cir. 2007); Casumpang v. Int? Longshore &

State Farm’s warning that a 1:1 ratio will often be

the constitutional maximum and instead assume

that any single-digit ratio is presumptively valid.'5

The current case deepens this conflict. The court

below effectively ignored the guidance provided by

Warehouse Union, 411 F. Supp. 2d 1201, 1219-21 (D. Hawaii

2005); Watson v. E.S. Sutton, Inc., 2005 WIL. 2170659, at *19

(S.D.N.Y. Sept. 6, 2005), aff'd, 225 F. App’x 3 (2d Cir. 2006);

Hudgins v. Sw. Airlines Co., 212 P.3d 810, 829-830 (Ariz. Ct.

App. 2009); Sec. Title Agency, 200 P.3d at 1001; Roby, 219 P.3d

at 798-799; Walker, 63 Cal. Rptr. 3d at 512-514; Stevens v. Vons

Cos., 2009 WL 117902, at *14 (Cal. Ct. App. Jan. 20, 2009), cert.

denied, 130 S. Ct. 204 (2009); Jet Source Charter, Inc. v. Doher-

ty, 56 Cal. Rptr. 3d 176, 181-184 (Ct. App. 2007); Czarnik v. /I-

lumina, Inc., 2004 WL 2757571, at *11 (Cal. Ct. App. Dec. 3,

2004); Maskantz v. Hayes, 832 N.Y.S.2d 566, 570 (App. Div.

2007); Roth v. Farner-Bocken Co., 667 N.W.2d 651, 671 (S.D.

2003).

15 See, e.g., Myers v. Central Fla. Invs., Inc., 2010 WL 20987, at

*17 (11th Cir. Jan. 6, 2010); Wallace v. DTG Operations, Inc.,

563 F.3d 357, 363 (8th Cir. 2009); Craig Outdoor Adver., Inc. v.

Viacom Outdoor, Inc., 528 F.3d 1001, 1020-1021 & n.9 (8th Cir.

2008), cert. denied, 129 S. Ct. 1000 (2009); Action Marine, 481

F.3d at 1321; Cambio Health Solutions, LLC v. Reardon, 234 F.

App’x 331, 339 (6th Cir. 2007); Stogsdill v. Healthmark Part-

ners, L.L.C., 377 F.3d 827, 833 (8th Cir. 2004); Greenberg v.

Paul Revere Life Ins. Co., 91 F. App’x 539, 542 (9th Cir. 2004);

Rhone-Poulenc Agro, 345 F.3d at 1372; Zhang v. Am. Gem Sea-

foods, Inc., 339 F.3d 1020, 1044 (9th Cir. 2003); Bogle, 332 F.3d

at 1362; Union Pac. R.R., 149 S.W.3d at 348; Advocat Inc., 111

S.W.3d at 361; Leeper-Johnson v. Prudential Ins. Co, of Am..,

2009 WL 1318692, at *22-*23 (Cal. Ct. App. May 13, 2009); Lo-

pez v. Bimbo Bakeries USA, Inc., 2009 WL 1090375, at *17 (Cal.

Ct. App. Apr. 23, 2009); Century Sur. Co., 43 Cal. Rptr. 3d at

500; McDonald’s, 2009 WL, 3877533, at *20-*21; Seltzer v. Mor-

ton, 154 P.3d 561, 611 (Mont. 2007); Wieber v. FedEx Ground

Package Sys., Inc., 220 P.3d 68, 86 (Or. Ct. App. 2009); Bocci v.

Key Pharms., Inc., 76 P.3d 669, 675 (Or. Ct. App. 2003), mod-

ified, 79 P.3d 908 (Or. Ct. App. 2003); Campbell, 98 P.3d at 418.

this Court in State Farm (and reinforced in Exxon

Shipping), concluding that the full range of single-

digit ratios is available in virtually all cases, not-

withstanding its determination that the compensato-

ry damages were “fairly substantial.” App., infra,

22a. This case is thus a good one in which to lay

down further guidance on this important safeguard

against arbitrary punishments.

C. Legislatively established penalties for

comparable conduct

The third BMW guidepost requires reviewing

courts to “[clompare[] the punitive damages award

and the civil or criminal penalties that could be im-

posed for comparable misconduct.” BMW, 517 U.S.

at 583. The lower courts are all over the map in ap-

plying this guidepost. See Willow Inn, Inc. v. Pub.

Serv. Mut. Ins. Co., 399 F.3d 224, 237 (3d Cir. 2005)

(“the Supreme Court has not declared how courts are

to measure civil penalties against punitive damages,

and many courts have noted the difficulty in doing

80”).16

Most importantly for present purposes, there is a

clear split as to whether the third guidepost is rele-

vant when the legislatively established fines for the

pertinent conduct are low. Notwithstanding this

Court’s invocation of low fines when applying the

‘6 See also Flax v. DaimlerChrysler Corp., 272 S.W.3d 521, 540

(Tenn. 2008) (“We are unfortunately left with little guidance as

to how to resolve this discrepancy because both Gore and [State

Farm] are cases in which all of the guideposts suggest the same

result. Other courts have experienced similar frustrations

when attempting to apply the third guidepost, and some have

chosen to ignore the third guidepost altogether.”), cert. denied,

129 S. Ct. 2433 (2009).

third guidepost in BMW and State Farm (see BMW,

517 U.S. at 584 ($2,000); State Farm, 538 U.S. at 428

($10,000)), a surprising number of courts have re-

fused to treat the existence of a low fine as an indica-

tion that a high punitive award is excessive.!7 These

17 See, e.g., United Intl Holdings, Inc. v. Wharf (Holdings) Ltd.,

210 F.3d 1207, 1232-1233 (10th Cir. 2000) (affirming $58.5 mil-

lion punitive award that exceeded maximum possible civil pe-

nalty by $56 million and explaining that +tatutory maximum

punitive damages ratio of 1:1 gave defendant adequate notice of

extent to which it could be punished), aff'd, 532 U.S. 588 (2001);

Johansen v. Combustion Eng’g, Inc., 170 F.3d 1320, 1339 (11th

Cir. 1999) (affirming $4.35 million award because potential for

$10,000 fine “provided fair notice to CE that it might be subject

to a substantial penalty”); Willow Inn, 399 F.3d at 237-238 (dis-

regarding disparity between $135,000 punitive award and max-

imum comparable penalty of $10,000 because the court was “re-

luctant to overturn the punitive damages award on this basis

{of the third guidepost]”); Kemp, 393 F.3d at 1364 (the third

guidepost “is accorded less weight in the reasonableness analy-

sis than the first two guideposts”); BMW of N. Am., Inc. v. Gore,

701 So. 2d 507, 514 (Ala. 1997) (per curiam) (“Because the legis-

lature has set the statutory penalty for deceitful conduct at

such a low level, there is little basis for comparing it with any

meaningful punitive damages award”); Aken v. Plains Elec.

Generation & Transmission Co-op., 49 P.3d 662, 672 (N.M.

2002) (“As the Supreme Court of Alabama noted in BMW on

remand, when statutory penalties for the conduct in question

are low or do not exist, ‘a consideration of the statutory penalty

does little to aid in a meaningful review of the excessiveness of

the punitive damages award.”) (quoting BMW, 701 So. 2d at

514); Flax, 272 S.W.3d at 540 (approving $13.3 million award

because “we do not believe that a punitive damage award [equal

to maximum civil penalty] of $125,000 would adequately punish

DCC or deter future instances of similar conduct”); Campbell,

98 P.3d at 419 (holding on remand that a wide disparity be-

tween $9,018,780.75 punitive award and $10,000 maximum leg-

islative penalty for comparable conduct was irrelevant because

“the quest to reliably position any misconduct within the ranks

of criminal or civil wrongdoing based on penalties affixed by a

courts are in square conflict with several others that

have faithfully applied the third guidepost and con-

cluded that the modest size of legislatively estab-

lished penalties dictates a finding of excessiveness. '8

The decision below adds to this split. Section 38-

2-10 of the South Carolina Code sets maximum pe-

nalties for bad-faith insurance conduct of either

$15,000 or, if the conduct was willful, $30,000. But

because it had already held in an earlier case that,

when penalties for comparable conduct “are set at

legislature can be quixotic”); see also Jn re Exxon Valdez, 490

F.3d 1066, 1094 (9th Cir. 2007) (“In several recent decisions we

have not discussed the factor at all. This may be because legis-

lative judgments, unlike jury verdicts, do not represent an indi-

vidualized assessment of reprehensibility.”) (citations omitted),

vacated on other grounds, 128 S. Ct. 2605 (2008).

18 See, e.g., Jurinko, 305 F. App’x at 29-30 (“[T]he large punitive

damages award appears excessive in light of the comparatively

modest monetary sanctions imposed for such conduct. Section

1171 is unlikely to provide an insurer with fair notice of a $6.25

million award. Although the outrageous conduct that occurred

here is unlikely to be deterred by the statutory penalties in

§ 1171, the third guidepost suggests the award was excessive.”);

Bridgeport Music, 507 F.3d at 490 (third guidepost indicated

excessiveness because punitive award was much larger than

“the maximum allowable” amount of statutory damages under

the Copyright Act, which “would be the largest award that a

victim of copyright infringement could receive irrespective of

the reprehensibility of an infringer’s conduct”); Chasan v. Far-

mers Group, Inc., 2009 WL 3335341, at *10 (Ariz. Ct. App. Sept.

24, 2009) (comparing $370,000 punitive award in insurance

bad-faith action to range of fines permissible for unfair insur-

ance claims practices ($5,000 to $50,000), and reducing punitive

award to $40,000); Roby, 219 P.3d at 798 ($150,000 civil penalty

“[o]bviously ... weighs in favor of a lower constitutional! limit in

this case”); Major v. W. Home Ins. Co., 87 Cal. Rptr. 3d 556, 580

(Ct. App. 2009) (concluding that $10,000 civil penalty “supports

a relatively low punitive damages award’).

such a low level, there is little basis for comparing it

with any meaningful punitive damage award”

(James, 638 S.E.2d at 672 (internal quotation marks

omitted)), the South Carolina Supreme Court disre-

garded those penalties entirely. Instead, it looked to

the ratios of punitive to compensatory damages in

prior South Carolina cases, thereby effectively dupli-

cating the second-guidepost analysis, and rendering

the third guidepost a nullity. App., injfra, 22a-24a.

In short, in no small part because courts have

misunderstood and misapplied the three BMW gui-

deposts, “the uniform general treatment of similarly

situated persons that is the essence of law itself’

(Cooper Indus., 532 U.S. at 436 (internal quotation

marks omitted)) remains to be achieved. Because

this case is an excellent vehicle for providing the

lower courts with the guidance they need, and be-

cause there can be little doubt that the court below

made critical errors with respect to each of the gui-

deposts, the Court should grant certiorari and re-

verse the judgment below.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted.

FRANK G. BURT EVAN M. TAGER

RICHARD J. OVELMEN Counsel of Record

STEPHAN I. VOUDRIS Mayer Brown LLP

Jorden Burt LLP 1999 K Street, N.W.

777 Brickell Avenue Washington, D.C. 20006

Suite 500 (202) 263-3240

Miami, FL 33131-2803 etager@mayerbrown.com

(305) 371-2600

CHRISTOPHER J. HOUPT

Mayer Brown LLP

1675 Broadway

New York, NY 10019

(212) 506-2380

Counsel for Petitioner

JANUARY 2010

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