Earlier this week, a federal jury in San Diego imposed a punitive damages award of $185 million against AutoZone in a case alleging pregnancy discrimination and retaliatory discharge.  The punitive damages are a whopping 212 times the $872,000 in compensatory damages that the jury awarded for lost wages and emotional distress.

Set of auto partsNeedless to say, it is exceptionally unlikely that anything close to $185 million will survive post-verdict and appellate review.  I have not yet had the chance to review anything other than media accounts about the case, but based on them a few things about the verdict jump out at me as being relevant to readers of this blog—all of which my colleagues and I have covered in previous posts.

First, as we noted in our post about Allen v. Takeda, the proper remedy for a punitive award that is this preposterously excessive is a new trial, not merely a reduction to what the courts may deem to be the constitutional maximum.  The reason is that the jury either was animated by passion or prejudice or that it ignored its instructions (or both).

For example, because the plaintiff’s claims arose under California law, the jury almost surely was instructed that its punitive award needed to be reasonably related to the compensatory damages—a standard instruction in California.  No one seriously can think that when the compensatory damages are as substantial as they were here, a punitive award of 212 times that amount is “reasonably related,” so if the jury was instructed on this requirement, it perforce violated its instructions.

When a jury deviates from its instructions or acts under the influence of passion or prejudice, its verdict is not merely excessive—it is defective.  It is impossible to know whether a jury not acting under the influence of passion or prejudice and conscientiously following its instructions would have imposed the maximum amount of punitive damages that the Constitution allows.  It follows that the proper remedy is a new trial, not a judge-imposed punishment at the constitutional limit.

Second, the plaintiff asked the jury to impose $160 million in punitive damages, representing eight weeks of AutoZone’s net income.  The jury’s resulting punitive award—which exceeds the amount requested by the plaintiff by $25 million—is a compelling illustration of why this kind of request is so grossly prejudicial to defendants.  As Lauren Goldman explained in a prior post, whatever amount the plaintiff’s lawyer requests can become an “anchor” for the jury’s deliberations, making it exceptionally difficult for the defendant to persuade the jury that the appropriate range of punishment is orders of magnitude lower.  That is why we routinely file motions in limine seeking to prohibit the plaintiff from suggesting a specific amount of punitive damages or, at minimum, to preclude the plaintiff from requesting an amount that, if actually imposed, would be presumptively excessive.

Third, and relatedly, the “anchor” problem is especially severe when, as here, the anchor is based on some measure of the defendant’s finances.  As Andy Frey explained in his recent post on this topic, in cases against large corporate defendants the defendant’s finances are the legal equivalent of an 800-pound gorilla.  They inevitably skew the punishment spectrum upward, and yet there is no economically valid  basis for considering financial condition in cases involving torts committed by corporate actors (as opposed to individuals).

Use of such a measuring stick also results, as here, in abandoning meaningful consideration of the guideposts the Supreme Court has identified, since the company’s earnings have nothing to do with the reprehensibility of its conduct, the magnitude of the harm that conduct inflicted, or the statutory and administrative penalties for similar conduct (for example, the $300,000 maximum liability for punitive and non-economic damages under Title VII).  Most courts continue to see nothing wrong with allowing juries to impose punitive damages against corporations based in part on the defendant’s net worth, but this case stands as a powerful illustration of the problems inherent in that approach.