Plaintiffs-insureds brought suit against their auto insurance carriers alleging bad-faith failure to settle a claim against them within policy limits. The jury found in favor of plaintiffs, awarding $2.6 million in compensatory damages. Based largely on evidence that State Farm’s conduct was part of a longstanding pattern and practice of dishonest and fraudulent acts against policyholders, the jury awarded $145 million in punitive damages.

The trial court reduced the punitive award to $25 million, but the Utah Supreme Court, in an extensive opinion evaluating the evidence, reinstated the jury’s verdict. The U.S. Supreme Court granted review of whether the punitive damage award violated the standards of BMW v. Gore by a constitutionally excessive ratio to compensatory damages and by punishing out-of-state conduct.

AAJ in its amicus brief urges the Court to overrule BMW v. Gore, to the extent that it imposes a substantive due process limit on punitive awards that satisfy procedural due process. AAJ argues that this use of substantive due process has no support in the Court’s precedent, that it does not protect against excessive awards, and that it intrudes upon matters of state law and policy best left to state courts. The Court heard oral argument on December 11, 2002.