Iowa's Punitive Damages

Will Iowa's adoption of changes to the Iowa Civil Jury Instructions on punitive damages mean large punitive damage awards are more likely to withstand judicial scrutiny?

In December, 2004, the Iowa State Bar Association incorporated the United States Supreme Court's holding in State Farm Mut'l Auto. Ins. Co. v. Campbell, 538 US 408 (2003), in the State''s pattern Jury Instructions.

In 1996, the United States Supreme Court held, in BMW of North America, Inc. v. Gore, 517 US 559, 562 (1996), "[t]he Due Process Clause of the Fourteenth Amendment prohibits a State from imposing a ''grossly excessive'' punishment on a tortfeasor." The Court provided three guideposts for a reviewing court in determining if a punitive damages award is grossly and unconstitutionally excessive:

1. the degree of reprehensibility of the defendant's conduct;
2. the disparity between actual or potential harm and the punitive damages awarded; and
3. the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.

Gore, 517 US at 575.

Drawing on the Gore decision, the Supreme Court held a jury award of $145 million in punitive damages, in a case involving damages of $1 million, was "grossly excessive" and violated the Fourteenth Amendment. State Farm Mut'l Auto. Ins. Co. v. Campbell, 538 US 408, 416-17 (2003). The Court provided the following guidelines, in addition to the 3 Gore guideposts:

1. The nature of defendant''s conduct that harmed the plaintiff.
2. The amount of punitive damages which will punish and discourage like conduct by the defendant. You may consider the defendant''s financial condition or ability to pay. You may not, however, award punitive damages solely because of the defendant''s wealth or ability to pay.
3. The plaintiff''s actual damages. The amount awarded for punitive damages must be reasonably related to the amount of actual damages you award to the plaintiff.

4. The existence and frequency of prior similar conduct. If applicable add: You may not, however, award punitive damages to punish the defendant for out-of-state conduct that was lawful where it occurred, or any conduct by the defendant that is not similar to the conduct which caused the harm to the plaintiff in this case.

In December, 2004, the Iowa State Bar amended Iowa Civil Jury Instruction No. 210.1, which now provides:

Punitive damages may be awarded if the plaintiff has proven by a preponderance of clear, convincing and satisfactory evidence the defendant's conduct constituted a willful and wanton disregard for the rights or safety of another and caused actual damage to the plaintiff.

Punitive damages are not intended to compensate for injury but are allowed to punish and discourage the defendant and others from like conduct in the future. You may award punitive damages only if the defendant's conduct warrants a penalty in addition to the amount you award to compensate for plaintiff''s actual injuries.

There is no exact rule to determine the amount of punitive damages, if any, you should award. You may consider the following factors:

1. The nature of defendant's conduct that harmed the plaintiff.
2. The amount of punitive damages which will punish and discourage like conduct by the defendant. You may consider the defendant's financial condition or ability to pay. You may not, however, award punitive damages solely because of the defendant''s wealth or ability to pay.
3. The plaintiff's actual damages. The amount awarded for punitive damages must be reasonably related to the amount of actual damages you award to the plaintiff.
4. The existence and frequency of prior similar conduct. If applicable add: You may not, however, award punitive damages to punish the defendant for out-of-state conduct that was lawful where it occurred, or any conduct by the defendant that is not similar to the conduct which caused the harm to the plaintiff in this case.

Under Chapter 668A of the Iowa Code, the jury must determine whether "by a preponderance of clear, convincing and satisfactory evidence, the conduct of the defendant from which the claim arose constituted a willful and wanton disregard for the rights or safety of another." If the answer is in the affirmative, punitive damages may be awarded, without any statutory cap, so long as the award is within the constitutional purview of the United States Supreme Court Gore and Campbell decisions.

The net effect of Jury Instruction No. 210.1 is the jury, not the judge, must consider and weigh the Campbell factors. And this is so important because, although an Iowa trial court may consider motions for new trial based on grounds the damage award is excessive and influenced by passion or prejudice, "findings of fact are binding upon the court if supported by substantial evidence." Iowa Rule of App. Proc. 6.14(6)(a) (the proposition is "so well established that authorities need not be cited in support.").

Therefore, as a practical matter, unless the jury's punitive damage's award is a result of passion or prejudice, or outside the 10:1 ratio of punitive to compensatory damages mentioned in Campbell, the likelihood the punitive damages award will stand in Iowa is greater.