538 U.S. 408 (2003)
State Farm v. Campbell is the Supreme Court's seminal modern statement on constitutional limits to punitive damages awards.
Does the Due Process Clause of the Fourteenth Amendment permit a state to impose a $145 million punitive damages award—145 times the $1 million compensatory damages—based substantially on evidence of an insurer's nationwide practices and conduct dissimilar to and occurring outside the state and the harm to the plaintiffs?
The Due Process Clause prohibits grossly excessive or arbitrary punitive damages. Courts review punitive awards using the Gore guideposts: (1) the degree of reprehensibility of the defendant's misconduct—the most important factor—assessed by whether the harm was physical or economic; whether the conduct showed indifference or reckless disregard for health or safety; whether the target was financially vulnerable; whether the conduct was repeated as opposed to an isolated incident; and whether it was the result of intentional malice, trickery, or deceit rather than mere accident; (2) the ratio between punitive and actual or potential harm suffered by the plaintiff, for which few awards exceeding a single-digit multiplier of compensatory damages will satisfy due process, and where a 1:1 ratio may be the constitutional maximum when compensatory damages are substantial; and (3) the disparity between the punitive award and the civil or criminal penalties authorized or imposed in comparable cases. A state may not use punitive damages to punish a defendant for conduct that is lawful where it occurred, for out-of-state conduct unconnected to the plaintiff's harm, for dissimilar acts, or for harm to nonparties.
No. The $145 million punitive damages award—145 times the $1 million compensatory award—was grossly excessive and violated the Due Process Clause. The Utah courts improperly relied on dissimilar and out-of-state conduct to justify the award and imposed a punitive sanction disproportionate to the harm. The judgment was reversed and remanded for further proceedings consistent with due process.
State Farm is the leading case on constitutional limits to punitive damages. It translates the Gore guideposts into practical constraints, most notably the general expectation of single-digit ratios and the caution that a 1:1 ratio may be the ceiling when compensatory damages are substantial. It also cabined the permissible use of evidence of a defendant's broader conduct, barring punishment for out-of-state lawful acts, dissimilar conduct, or injuries to nonparties. The decision is indispensable for exam analysis in torts and constitutional law and shapes trial strategy, jury instructions, remittitur practice, and appellate review of punitive awards.