Yesterday, the Wisconsin Supreme Court reduced an award of punitive damages against a title insurer from $1 million to $210,000 because the $1 million award violated due process.  Kimble v. Land Concepts, Inc., 2011AP1514 (Wis. Apr. 22, 2014).

The case arose out of a dispute over an easement in Door County.  After a number of settlements, the appeal involved only a cross-claim against the title insurer by a former owner of the real estate who was exercising, by assignment, the rights of the title policy holder.  A jury found the title insurer liable for $50,000 in compensatory damages (later reduced to $29,738.49) and $1 million in punitive damages.  Both the circuit court and the court of appeals upheld the punitive damages award.

The first surprising aspect of the supreme court’s decision is that the court decided the issue at all.  The insurer filed its post-verdict motion challenging the excessiveness of the punitive damages one day late, which barred it from pursuing the punitive damages issue as a matter of right on appeal.  Then, the court of appeals held that the insurer had not fully developed its argument on punitive damages because it failed to cite the portions of the record demonstrating that the award was excessive under the factors in the case law.

The insurer petitioned for review, and the supreme court granted the petition only as to the issue on punitive damages.  Though the insurer could not appeal the issue as a matter of right, the supreme court addressed the issue with its discretionary reversal power under Wis. Stat. § 751.06.

The court held that the $1 million punitive damages award was so excessive that it violated due process.  The majority opinion, authored by Justice Ziegler and joined by Justices Crooks, Roggensack, and Gableman, focused primarily on the disparity between the compensatory and punitive damages.  The court ultimately determined that $210,000, rather than $1 million, was the appropriate amount of punitive damages, and ordered that judgment be entered accordingly.  Though the court’s discomfort with the size of the jury’s verdict is plain, the decision articulates no clear constitutional rule regarding the ratio of compensatory damages to punitive damages (i.e., what role potential harm plays in that calculation) or how the ratio fits into the overall analysis.

The Chief Justice, joined by Justice Bradley, dissented.  The Chief Justice criticized the majority for departing from the court’s decision in Trinity Evangelical Lutheran Church v. Tower Ins. Co., 2003 WI 46, 261 Wis. 2d 333, 661 N.W.2d 789, which upheld a $3.5 million punitive damages award on similar facts–a 7:1 ratio of punitive damages to potential harm.

The long-term impact of the decision is unclear for another reason, too.  The Legislature recently amended Wis. Stat. § 895.043 to limit punitive damages in many cases to the greater of double compensatory damages or $200,000.  This statutory cap on damages will render a constitutional analysis unnecessary in many cases.  But, if the statute is ever repealed, it will be difficult for courts to reconcile Kimble with Trinity when reviewing whether jury verdicts violate due process.