An angry Alabama doctor sued BMW after concluding he did not get his money's worth when buying a $41,000 sedan. He won $2 million, enraged an array of American businesses and set the stage for a Supreme Court showdown worth billions.
The court must decide whether the punitive-damages award won by Ira Gore Jr., a Birmingham cancer specialist with a weakness for snazzy cars, violated BMW's due-process rights.Punitive damages - paid above and beyond any actual harm - are aimed at punishing or deterring misconduct. Debates over the merits of such awards have tied state legislatures, Congress and even the Supreme Court in knots for years.
Manufacturers see the court's eventual decision in the Alabama case, expected by July, as their next best chance to rein in awards they believe have grown too large and unfair. A decision in their favor would save them billions.
But consumer advocates say large, punitive awards keep dangerous products off the market and protect the public from corporate greed.
Some states impose caps on punitive-damages awards. Some states do not allow such awards at all.
The nation's highest court has ruled that such awards must have limits. But in 1993, the justices upheld a $10 million award that rang in at 526 times larger than the $19,000 in actual harm caused by the misconduct.
Last year, the justices took a first step to limit punitive-damages awards when they struck down a unique Oregon law that prevented judges from reducing awards they considered excessive.
The ruling gave BMW and its allies hope for a bigger victory in the Alabama case.
Gore's 1990 car, a 535i model, had been partly repainted to touch up some damage sustained during shipping. Gore learned about the touch-up nine months after buying his car.
An Alabama jury awarded Gore $4,000 as compensation and added $4 million in punitive damages. There had been testimony about 1,000 other BMWs sold, mostly outside the state, with similar undisclosed damage.
The Alabama Supreme Court reduced Gore's award to $2 million.
BMW's ensuing appeal was supported by, among others, the National Association of Manufacturers, the U.S. Chamber of Commerce and the American Council of Life Insurance.
One brief supporting BMW's arguments was filed on behalf of numerous news organizations whose lawyers contend that punitive damages in libel cases are becoming larger and more frequent. The brief says such awards can violate free-speech rights.