Automobile Fraud: 8.9.3 Causation
As part of the proof of damages, the plaintiff must demonstrate a link between the misrepresentation made and the damages sustained.
As part of the proof of damages, the plaintiff must demonstrate a link between the misrepresentation made and the damages sustained.
Some courts do not find economic damages to be a precondition for punitive damages.400 But in many jurisdictions the plaintiff must first establish at least some actual damages in order to recover punitive damages in a fraud action.401 Some of these jurisdictions allow punitive damages if actual damages are shown even if for some reason they are not awarded402 or they are awarded only on a non-fraud count.
The relationship between the rescission remedy409 and punitive damages varies significantly by jurisdiction.
The exact standard for punitive damages varies by jurisdiction. The following standards have been applied in car fraud cases:
Principals are liable for punitive damages for the acts of their agents when:
A number of state statutes restrict the circumstances in which punitive damages can be awarded or cap the amount of the award. Even if such a statute has been enacted, however, carefully analyze it to see if it applies to a common law fraud claim. For example, some caps apply only to product liability cases, while others apply to all civil actions.
In a much criticized decision, Perez v. Z Frank Oldsmobile, Inc.,513 the Seventh Circuit has predicted that Illinois courts would interpret the Illinois odometer statute as establishing the maximum punitive damages award available on a common law fraud claim for an odometer rollback. The Seventh Circuit concluded that the treble damages recovery under the state odometer statute is not only a minimum but also a maximum recovery for odometer fraud.
The following is a sample of recent decisions dealing with punitive damages awards involving car dealers:
Starting in the 1990s, the United States Supreme Court began imposing substantive limits on punitive damages in a series of constitutional cases.522 These limits are in addition to the general standards of excessiveness applied by state and federal courts.523 Any automobile fraud case that seeks punitive damages should be framed and developed with these limits clearly in mind.
The first guidepost by which to evaluate a jury’s punitive damages verdict is the degree of reprehensibility of the defendant’s conduct.538 The Supreme Court stated in both in State Farm and Gore that reprehensibility is “the most important indicium of the reasonableness of a punitive damages award.”539 Five factors must be considered in evaluating an act’s reprehensibility:
The first factor identified by the Supreme Court in determining reprehensibility is whether the harm is physical as opposed to economic. In Gore, the Court emphasized that the harm caused by the failure to disclose that the vehicle the consumer bought had been repainted was purely economic, with no effect on safety, performance, or even appearance for at least the nine months it took the plaintiff to discover it.542
The second factor identified by the Supreme Court to determine reprehensibility is whether the defendant acted with indifference to, or in reckless disregard of, the health or safety of others. Courts have used this factor in determining reprehensibility in cases involving the sale of unsafe used cars550 and other products.551
The third factor in evaluating reprehensibility is whether the plaintiff was financially vulnerable. Because of their lower cost, used cars are often bought by those who can least afford to be defrauded.
The fourth factor in evaluating reprehensibility is whether the conduct involved repeated actions or was only an isolated incident.
Despite its recognition of the relevance and importance of repetition evidence to determine reprehensibility, State Farm places limits on the use of this evidence.
The fifth factor in evaluating reprehensibility is whether the harm resulted from intentional malice, trickery or deceit, or from mere accident. Reckless indifference may be sufficient.590 In nearly all automobile fraud cases the proof of the merits of the claim will show that the defendant’s acts involved intentional malice, trickery, deceit, or reckless indifference, thus satisfying this element.591
Often a case will involve several distinct claims.
The second guidepost identified by Gore and State Farm for determining the constitutionality of a punitive damages award is the ratio of punitive damages to compensatory damages. Gore did not suggest numerical standards for the ratio. In State Farm, while rejecting a “bright-line ratio,” the Court warned that “in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.”596
The Supreme Court’s 2008 decision in Exxon Shipping Co. v. Baker600 also addresses the ratio between punitive and compensatory damages, but it is based entirely on maritime law, not constitutional law. The Court, acting as a common law court deciding maritime law, refused to allow more than a one-to-one ratio for an unintentional multibillion dollar oil spill off the Alaskan coast for which the plaintiffs received $500 million in compensatory damages.
Although it focused on ratios, State Farm reiterated the Supreme Court’s earlier disavowal of “rigid benchmarks.”607 Many courts have taken the Court at its word.608 The Fifth Circuit has stressed that the ratio analysis only embodies a general evaluation of reasonableness.609 The Seventh Circuit commented that a rule limiting punitive damages to a 4-to-1 or single-digit ratio would be unreasonable because it would undermine the goal
One factor a number of courts have cited in approving higher ratios is the difficulty of quantifying certain types of injuries, such as fear, emotional distress, and violations of individual constitutional rights.624 While the Supreme Court has cautioned that a compensatory damages award that includes damages for emotional distress may already have a punitive component that the punitive damages award should not duplicate,625 the Court also approved a higher ratio when the harm is difficult t
The ratio is to be based on not only the actual damages the plaintiff has suffered, but also the potential damages the plaintiff could have suffered. Gore makes this clear, phrasing this guidepost as whether there is “a reasonable relationship between the punitive damages award and the harm likely to result from the defendant’s conduct as well as the harm that actually has occurred.”635 Likewise, a major factor the Court cited in TXO Production Corp. v.