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Rose v. Brown & Williamson Tobacco Corp.9/29/2005
evidence in making their determinations as to what is appropriate to punish the conduct and deter its repetition. That the Supreme Court did not include a defendant's financial status among the Gore guideposts does not mean that the Constitution prohibits financial status from consideration. The guideposts laid out in Gore are not rules of evidence. They only apply when, after a punitive damages award has been made, a question arises of whether that award is so overly excessive that it offends due process of law. While the Supreme Court in Gore and State Farm frowned on the use of a corporate defendant's wealth as justification for a punitive damages award, it did so only because wealth was used to justify otherwise unconstitutionally excessive awards. It did not hold that it was constitutionally impermissible to use wealth as a factor in determining the amount of the award. Since the Constitution does not prohibit a jury from considering a defendant's wealth when fixing a punitive damages award, the court held that this portion of defendants' motion was without merit.
Defendants' argument that evidence of their financial condition was irrelevant to the question of punitive damages was likewise without merit. Defendants argued that, while the wealth of an individual may be relevant to the question of deterrence, a corporation's "wealth" is different than that of an individual's and, as such, it is an inappropriate factor to consider in determining punitive damages awards.
Punitive damages serve "as a punishment to the defendant for a wrong in a particular case, and for the protection of the public against similar acts, to deter the defendant from a repetition of the wrongful act, and to serve as a warning to others." (Le Mistral, Inc. v. Columbia Broadcasting System, 61 AD2d 491, 494 [1st Dept 1978]). A defendant's wealth is relevant to the amount of the punitive damages award, to ensure that the award carries the proper punishment and deterrent effect. (Rupert v. Sellers, 48 AD2d 265, 269-270 [4th Dept 1975]; see also McIntyre v. Manhattan Ford, Lincoln-Mercury, Inc., 256 AD2d 265, 271 [1st Dept 1998]). Defendants concede that an individual's wealth may be relevant to a punitive damages award, as the marginal utility of money decreases as wealth increases and a wealthier defendant will feel less of pinch from a given award than a poorer defendant. However, defendants argue that the same is not true for corporations. Defendants cite the case of Zazu Designs v. L'Oreal, S.A., (979 F2d 499, 508 [7th Cir 1992]) to support this argument. In that case, the Court of Appeals for the Seventh Circuit opined that corporate wealth is not an appropriate consideration for punitive damage awards because corporate defendants differ from individuals in three important respects. First, they are abstractions and are owned and controlled by individual investors. While a corporation itself may have great wealth, it is the individual investors who will bear the brunt of a punitive damages award and they may not be of great wealth. (Id. at 508.) Secondly, a corporation's net worth is a measure of its profits that have not been distributed to shareholders but instead have been reinvested in the corporation's ventures and operations. Basing a corporation's punitive damage award on its wealth will mean that corporations that have reinvested their profits will be more severely punished than corporations that distribute their profits. (Id .) Finally, in a products liability setting, larger corporations already have greater potential liability than smaller firms. Larger firms produce more of a given product than a smaller firm. Accordingly, when a large firm sells a defectively designed product, its potential liability for comp
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