Last month the Ninth Circuit issued this rather surprising published opinion, holding that a district court went too far when it reduced a punitive damages award to four times the compensatory damages award. The Ninth Circuit decided that the maximum constitutionally permissible ratio was actually eight to one.
The case involved the well publicized Volkswagen emissions scandal. Plaintiffs bought Volkswagens and Audis and later discovered that the vehicles had been modified so that they would pass emissions testing even though the vehicles actually produced emissions in excess of regulatory standards. It was undisputed that the plaintiffs suffered no physical harm from the increased emissions. But they sought recovery for having been duped into buying a vehicle they thought was eco-friendly but wasn’t.
The district court viewed Volkswagen’s harm as worthy of punitive damages, but found it to be relatively low on the reprehensibility scale. The Ninth Circuit disagreed, finding that Volkswagen’s conduct was “highly reprehensible,” warranting a ratio closer to the high-end of the single digit ratio scale. That conclusion is surprising, because courts ordinarily place economic torts at the low end of the spectrum. Putting this conduct at the high end of the scale does not leave much room between this economic tort and the classic punitive damages case involving someone who acts with malice or puts someone else’s life at risk. Publication of this opinion will make it easy for plaintiffs in the Ninth Circuit to argue that just about every punitive damages case warrants a ratio of eight to one.