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

• Decision Date: 23 April 2004
• Docket Number: No. 981564.,981564.
• Citation: 2004 UT 34,98 P.3d 409
• Parties: Inez Preece CAMPBELL and Matthew C. Barneck, Special Administrator and Personal Representative of the Estate of Curtis B. Campbell, Plaintiffs, Appellees, and Cross-Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant, Appellant, and Cross-Appellee.
• Court: Utah Supreme Court

98 P.3d 409

2004 UT 34

Inez Preece CAMPBELL and Matthew C. Barneck, Special Administrator and Personal Representative of the Estate of Curtis B. Campbell, Plaintiffs, Appellees, and Cross-Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant, Appellant, and Cross-Appellee.

No. 981564.

Supreme Court of Utah.

April 23, 2004.

L. Rich Humpherys, Roger P. Christensen, Karra J. Porter, Salt Lake City, Laurence H. Tribe, Kenneth J. Chesebro, Cambridge, MA, W. Scott Barrett, Logan, for plaintiffs.

Glenn C. Hanni, Paul M. Belnap, Stuart H. Schultz, Michael D. Zimmerman, James D. Gardner, Amy F. Sorenson, Salt Lake City, Sheila L. Birnbaum, New York, NY, for defendant.

George C. Harris, San Francisco, CA, for amici National Association of Independent Insurers, National Association of Mutual Insurance Companies, United Services Automobile Association, Farmers Group of Insurance Companies, SAFECO Insurance Company of America.

NEHRING, Justice:

¶ 1 We take up this case after remand from the United States Supreme Court, which held that the imposition of a $145 million punitive damages award against State Farm Mutual Automobile Insurance Company in favor of State Farm's insured, Curtis B. Campbell, and his wife, Inez Preece Campbell, was excessive and violated the due process clause of the Fourteenth Amendment to the Constitution of the United States. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003) (Campbell II) (rev'g 2001 UT 89, 65 P.3d 1134 (Campbell I)). The Supreme Court directed us to recalculate the punitive damages award under principles articulated in its decision. We have performed this task and reduced the jury's award to $9,018,780.75 in punitive damages, a figure nine times the amount of compensatory and special damages awarded to the Campbells.

I. FACTS AND PROCEDURAL HISTORY¹

¶ 2 Mr. Campbell was responsible for an automobile accident that disabled Robert Slusher and killed Todd Ospital. At the time, Mr. Campbell was insured by State Farm up to $25,000. State Farm chose not to settle the case. At trial, Mr. Campbell was found 100 percent responsible and a judgment was entered against him for $135,000. State Farm refused to pay this amount, suggesting instead that the Campbells put their house up for sale to pay off the judgment. Although State Farm did eventually pay the judgment, the Campbells sued for bad faith. At trial, the Campbells were permitted to introduce evidence that State Farm had a comprehensive nationwide policy of handling certain claims in a like manner.

¶ 3 The jury awarded the Campbells $2,086.75 in special damages, $2.6 million in compensatory damages, and $145 million in punitive damages. The trial judge remitted this amount to $1 million in compensatory damages and $25 million in punitive damages. On appeal, we reinstated the original jury verdict of $145 million in punitive damages. State Farm then appealed our decision in Campbell I to the United States Supreme Court, which reversed and remanded the case to us, after determining that $145 million violated due process.

¶ 4 We first address the limitations imposed on and discretion extended to us by the Supreme Court's remand order. We then turn to our application of the Supreme Court's principles set forth in Campbell II.

II. DUTY ON REMAND

¶ 5 State Farm suggests that our duty in the face of a remand order demands unwavering fidelity to the letter and spirit of the mandate. Thurston v. Box Elder County, 892 P.2d 1034, 1038 (Utah 1995).² We agree. State Farm further argues that the letter and spirit of the mandate erect an impenetrable ceiling on the punitive damages award of $1,002,086.75, based on a 1-to-1 ratio of punitive damages to compensatory damages.

¶ 6 State Farm makes two arguments in aid of this contention. First, it invokes what it characterizes as the "mandate rule" which, it claims, elevates all of the statements in the Supreme Court's opinion to the status of a holding, thereby binding us to what would otherwise be properly deemed dicta. Second, having identified and broadly defined a "mandate rule," State Farm then turns to the text of Campbell II which states that "[a]n application of the [relevant] guideposts to the facts of this case ... likely would justify a punitive damages award at or near the amount of compensatory damages." Campbell II, 538 U.S. at 429, 123 S.Ct. 1513. State Farm claims that, when given the dignity required by the mandate rule, this language limits our punitive damages award to the amount of compensatory damages.

¶ 7 We are both sensitive to our responsibility as an inferior court to honor the Supreme Court's remand order with utmost fidelity and skeptical of claims that our duties can be reduced to an enumerated task list imposed by a "mandate rule." We do not, therefore, interpret the Supreme Court's mandate to be as restrictive as State Farm claims. Had the letter of the Supreme Court's mandate included an express punitive damages award, our responsibilities would be easily discharged. The Supreme Court declined, however, to fix a substitute award, choosing instead to entrust to our judgment the calculation of a punitive award which both achieves the legitimate objectives of punitive damages and meets the demands of due process. We take seriously the Supreme Court's direction that "[t]he proper calculation of punitive damages under the principles we have discussed should be resolved, in the first instance, by the Utah courts." Id.

¶ 8 By assigning to us the duty to resolve the issue of punitive damages by fixing an award, the Supreme Court signaled its intention to vest in us some discretion to exercise our independent judgment to reach a reasonable and proportionate award. To faithfully exercise our discretion, we must properly identify and apply the Supreme Court's principles announced in Campbell II. These principles restated and refined the analytical tools first announced in BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). In Gore, the Supreme Court issued an invitation to the Alabama Supreme Court to undertake on remand an "independent determination" of an appropriate punitive damages award consistent with the guideposts erected by the Supreme Court. Id. at 586, 116 S.Ct. 1589. We understand our duties to mirror those assigned to the Alabama Supreme Court, supplemented by the evolving principles of punitive damages jurisprudence announced in Campbell II.

¶ 9 It is within this delegated responsibility that the "spirit" of the Supreme Court's order of remand resides, presenting the greater challenge to us to honor that mandate. Accordingly, our view of the limits of our discretion to award punitive damages relies little on the "mandate rule" or any similar interpretive aid. Rather, the text of Campbell II provides us with clear direction.

¶ 10 The Supreme Court has long held the view that, except when they transgress due process guarantees, punitive damages awards are properly the province of the states. Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 433, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001) ("Despite the broad discretion that States possess with respect to the imposition of criminal penalties and punitive damages, the Due Process Clause of the Fourteenth Amendment to the Federal Constitution imposes substantive limits on that discretion."); Browning-Ferris Indus. of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 278, 109 S.Ct. 2909, 106 L.Ed.2d 219 (1989) ("[T]he propriety of an award of punitive damages for the conduct in question, and the factors the jury may consider in determining their amount, are questions of state law.").

¶ 11 Reinforcing our conclusion that we may properly exercise our judgment in fixing the punitive damages award are certain themes prominently featured in Campbell II and Gore. In both cases, the Supreme Court resisted the impulse to draw bright lines or create categorical classifications in fixing punitive damages awards, electing instead to adopt general standards and guideposts. Campbell II, 538 U.S. at 425, 123 S.Ct. 1513; Gore, 517 U.S. at 582-83, 116 S.Ct. 1589. The Supreme Court has also consistently recognized punitive damages as a means to "further a State's legitimate interests in punishing unlawful conduct and deterring its repetition." Gore, 517 U.S. at 568, 116 S.Ct. 1589. Taken together, these themes create a logical underpinning to an interpretation of the Supreme Court's remand order which sanctions and expects us to exercise a considerable measure of independent judgment in fixing the punitive damages award.

¶ 12 Even the Supreme Court's observation that this case "likely would justify a punitive damages award at or near the amount of compensatory damages" does not cause us to retreat from our view that we have been granted discretion to determine the amount of punitive damages. Campbell II, 538 U.S. at 429, 123 S.Ct. 1513. Contrary to State Farm's assertions, this language cannot reasonably be interpreted as a conclusive determination that the magnitude of State Farm's blameworthiness merits a punitive damages award no greater than the compensatory award. These are words of prediction, not direction, and are wholly compatible with a remand order which both instructs us to apply the Supreme Court's standards with fidelity and recognizes that Utah courts are best able to address our state's legitimate interests. Consistent with that view, the Supreme Court has clearly communicated its intention to cede to us the responsibility to assess the reprehensibility of State Farm's conduct, to identify Utah's legitimate interests, and to exercise reasoned judgment in fixing punitive damages.

III. ANALYSIS LIMITED TO ACTIVITY IN UTAH

¶ 13 While authorizing us to determine the amount of the punitive damages award, the Supreme Court leashed us more tightly to the established analytical guideposts of G...