Article by Daniel Twilla, Esq., Daniel Inadomi, Esq., and Adam Murdock, Esq.
The Supreme Court of Pennsylvania recently approved the “per-defendant approach” for calculating the ratio of punitive damages to compensatory damages“ as consistent with federal constitutional principles that require consideration of a defendant’s due process rights.” Additionally, the Pennsylvania Supreme Court concluded that it is “appropriate to consider the potential harm that was likely to occur from the concerted conduct of the defendants in determining whether the measure of punishment was both reasonable and proportionate.” The Bert Company d/b/a Northwest Insurance Services v. Matthew Turk, et al., 2023 WL 4607874 (Pa. July 19, 2023).
In Turk, the Pennsylvania Supreme Court noted that in multiple defendant cases, the ratio of punitive to compensatory damages has been calculated by other courts in one of two ways, i.e., on a per-defendant or a per-judgment basis. The per-defendant approach divides the punitive damages assessed against a defendant by the compensatory damages assessed against that defendant, and the per-judgment approach divides the total of punitive damages assessed against the defendants by the total of compensatory damages assessed against the defendants.
In Turk, four different defendants were found jointly and severally liable for $250,000 in compensatory damages. The jury awarded punitive damages against each of the defendants in varying amounts between $300,000 and $1,500,000, for a total of $2.8 million. The defendants appealed, arguing that the $2.8 million total was excessive because it was 11.2 times the amount of the $250,000 judgment. The defendants also argued that the Superior Court had improperly considered the “potential harm” that the plaintiff could have sustained as a result of the defendant’s actions, even if that harm never occurred.
The Supreme Court concluded that the punitive damage award was not excessive when considered on a per-defendant basis, as each defendant was assessed punitive damages in an amount less than 10:1. The Supreme Court reasoned “the per-defendant ratio assesses the individualized impact intended by the punitive damages awards, whereas the per-judgment approach distorts the analysis by obscuring the due process rights of the individual defendants. A composite analysis undoes the jury’s determination of an individual’s reprehensibility and need for deterrence as reflected in the punitive verdict.” Further, “punitive damages awards must be tailored to each defendant. Unlike responsibility for causing the harm, which as to jointly and severally liable defendants is indivisible for purposes of liability, reprehensibility is a determination that must be individualized to each defendant. In this case, the jury deliberated and assessed the reprehensibility of the conduct of each of the defendants and determined the punitive damages verdict necessary to punish and deter each of the defendants.”
The Supreme Court found that the Superior Court did not err by considering the “potential harm” that the plaintiff could have sustained when considering the reasonableness of the punitive damages award. The Supreme Court stated that while it was “not convinced that the appropriate treatment of the amount of potential harm is to mechanically add it to the amount of compensatory damages and then recompute the ratio,” the harm that “was likely to occur from a defendants’ conduct is important and may be outcome determinative in judicial scrutiny of the award….”
The Supreme Court stated that the ratio of punitive to compensatory damages is a “guidepost” regarding the reasonableness of a punitive damages award. However, it concluded that the constitutional line of excessiveness cannot be marked by a mathematical formula in every case.