BMW of North America, Inc. v. Gore

Facts

In January 1990, Dr. Ira Gore, Jr. bought a black BMW sports sedan for $40,750.88 from an authorized BMW dealer in Birmingham, Alabama. After driving the car for approximately nine months, he took it to an independent detailer, who found evidence that it had been repainted. Gore sued BMW of North America (BMW), the American distributor, and alleged that failing to disclose the repainting was suppression of a material fact. At trial BMW admitted that in 1983 it had adopted a nationwide policy. If repairing damage to a car cost more than 3 percent of its suggested retail price, the car was sold as used. If the repair cost did not exceed 3 percent, the car was sold as new, and the dealer was not told about the repairs. The $601.37 repainting of Gore's car was about 1.5 percent of the price, so BMW disclosed nothing. A former BMW dealer testified that a repainted car was worth about 10 percent less than an undamaged one, and Gore claimed actual damages of $4,000. To support punitive damages, Gore showed that since 1983 BMW had sold 983 refinished cars as new, including 14 in Alabama. In a post-trial motion, BMW showed that its policy was consistent with the laws of roughly 25 States, and that none required disclosure of repairs costing 3 percent or less.

Issues

1. May a State use punitive damages to punish a defendant for conduct that was lawful where it occurred and had no impact on the State, or to change the defendant's lawful conduct in other States?
2. Is a $2 million punitive damages award, for a nondisclosure policy that caused $4,000 of actual harm to the plaintiff, grossly excessive in violation of the Due Process Clause of the Fourteenth Amendment?

Holding

A $2 million punitive award, 500 times Gore's actual harm of $4,000 and substantially greater than the statutory fines available in Alabama and elsewhere for similar conduct, imposed for a nondisclosure policy that was not sufficiently reprehensible to warrant it, was grossly excessive and exceeded the constitutional limit.