BMW of North America, Inc. v. Gore

517 U.S. 559, 116 S. Ct. 1589, 134 L. Ed. 2d 809, 1996 U.S. LEXIS 3390

• Court: Supreme Court of the United States
• Decided: May 28, 1996
• Docket: 94-896
• Status: Published

Opinions

Justice Stevens

delivered the opinion of the Court.

The Due Process Clause of the Fourteenth Amendment prohibits a State from imposing a “ 'grossly excessive’ ” punishment on a tortfeasor. TXO Production Corp. v. Alliance Resources Corp., 509 U. S. 443, 454 (1993) (and cases cited). The wrongdoing involved in this case was the decision by a national distributor of automobiles not to advise its dealers, and hence their customers, of predelivery damage to new cars when the cost of repair amounted to less than 3 percent of the car’s suggested retail price. The question presented is whether a $2 million punitive damages award to the purchaser of one of these cars exceeds the constitutional limit.

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In January 1990, Dr. Ira Gore, Jr. (respondent), purchased 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, and without noticing any flaws in its appearance, Dr. Gore took the car to “Slick Finish,” an independent detailer, to make it look “ ‘snazzier than it normally would appear.’ ” 646 So. 2d 619, 621 (Ala. 1994). Mr. Slick, the proprietor, detected evidence that the car had been repainted.¹ Convinced that he had been cheated, Dr. Gore brought suit against petitioner BMW of North America (BMW), the American distributor of BMW automobiles.² Dr. Gore alleged, inter alia, that the failure to disclose that the car had been repainted constituted suppression of a material fact.³ The complaint prayed for $500,000 in compensatory and punitive damages, and costs.

At trial, BMW acknowledged that it had adopted a nationwide policy in 1983 concerning cars that were damaged in the course of manufacture or transportation. If the cost of repairing the damage exceeded 3 percent of the car’s suggested retail price, the car was placed in company service for a period of time and then sold as used. If the repair cost did not exceed 3 percent of the suggested retail price, however, the car was sold as new without advising the dealer that any repairs had been made. Because the $601.37 cost of repainting Dr. Gore’s car was only about 1.5 percent of its suggested retail price, BMW did not disclose the damage or repair to the Birmingham dealer.

Dr. Gore asserted that his repainted car was worth less than a car that had not been refinished. To prove his actual damages of $4,000, he relied on the testimony of a former BMW dealer, who estimated that the value of a repainted BMW was approximately 10 percent less than the value of a new car that had not been damaged and repaired.⁴ To support his claim for punitive damages, Dr. Gore introduced evidence that since 1983 BMW had sold 983 refinished cars as new, including 14 in Alabama, without disclosing that the cars had been repainted before sale at a cost of more than $300 per vehicle.⁵ Using the actual damage estimate of $4,000 per vehicle, Dr. Gore argued that a punitive award of $4 million would provide an appropriate penalty for selling approximately 1,000 cars for more than they were worth.

In defense of its disclosure policy, BMW argued that it was under no obligation to disclose repairs of minor damage to new cars and that Dr. Gore’s car was as good as a car with the original factory finish. It disputed Dr. Gore’s assertion that the value of the car was impaired by the repainting and argued that this good-faith belief made a punitive award inappropriate. BMW also maintained that transactions in jurisdictions other than Alabama had no relevance to Dr. Gore’s claim.

The jury returned a verdict finding BMW liable for compensatory damages of $4,000. In addition, the jury assessed $4 million in punitive damages, based on a determination that the nondisclosure policy constituted “gross, oppressive or malicious” fraud.⁶ See Ala. Code §§6-11-20, 6-11-21 (1993).

BMW filed a post-trial motion to set aside the punitive damages award. The company introduced evidence to establish that its nondisclosure policy was consistent with the laws of roughly 25 States defining the disclosure obligations of automobile manufacturers, distributors, and dealers. The most stringent of these statutes required disclosure of repairs costing more than 3 percent of the suggested retail price; none mandated disclosure of less costly repairs.⁷ Relying on these statutes, BMW contended that its conduct was lawful in these States and therefore could not provide the basis for an award of punitive damages.

BMW also drew the court’s attention to the fact that its nondisclosure policy had never been adjudged unlawful before this action was filed. Just months before Dr. Gore’s case went to trial, the jury in a similar lawsuit filed by another Alabama BMW purchaser found that BMW’s failure to disclose paint repair constituted fraud. Yates v. BMW of North America, Inc., 642 So. 2d 937 (Ala. 1993).⁸ Before the judgment in this case, BMW changed its policy by taking steps to avoid the sale of any refinished vehicles in Alabama and two other States. When the $4 million verdict was returned in this case, BMW promptly instituted a nationwide policy of full disclosure of all repairs, no matter how minor.

In response to BMW’s arguments, Dr. Gore asserted that the policy change demonstrated the efficacy of the punitive damages award. He noted that while no jury had held the policy unlawful, BMW had received a number of customer complaints relating to undisclosed repairs and had settled some lawsuits.⁹ Finally, he maintained that the disclosure statutes of other States were irrelevant because BMW had failed to offer any evidence that the disclosure statutes supplanted, rather than supplemented, existing causes of action for common-law fraud.

The trial judge denied BMW’s post-trial motion, holding, inter alia, that the award was not excessive. On appeal, the Alabama Supreme Court also rejected BMW’s claim that the award exceeded the constitutionally permissible amount. 646 So. 2d 619 (1994). The court’s excessiveness inquiry applied the factors articulated in Green Oil Co. v. Hornsby, 539 So. 2d 218, 223-224 (Ala. 1989), and approved in Pacific Mut. Life Ins. Co. v. Haslip, 499 U. S. 1, 21-22 (1991). 646 So. 2d, at 624-625. Based on its analysis, the court concluded that BMW’s conduct was “reprehensible”; the nondisclosure was profitable for the company; the judgment “would not have a substantial impact upon [BMW’s] financial position”; the litigation had been expensive; no criminal sanctions had been imposed on BMW for the same conduct; the award of no punitive damages in Yates reflected “the inherent uncertainty of the trial process”; and the punitive award bore a “reasonable relationship” to “the harm that was likely to occur from [BMW’s] conduct as well as . . . the harm that actually occurred.” 646 So. 2d, at 625-627.

The Alabama Supreme Court did, however, rule in BMW’s favor on one critical point: The court found that the jury improperly computed the amount of punitive damages by multiplying Dr. Gore’s compensatory damages by the number of similar sales in other jurisdictions. Id., at 627. Having found the verdict tainted, the court held that “a constitutionally reasonable punitive damages award in this case is $2,000,000,” id., at 629, and therefore ordered a remittitur in that amount.¹⁰ The court’s discussion of the amount of its remitted award expressly disclaimed any reliance on “acts that occurred in other jurisdictions”; instead, the court explained that it had used a “comparative analysis” that considered Alabama cases, “along with cases from other jurisdictions, involving the sale of an automobile where the seller misrepresented the condition of the vehicle and the jury awarded punitive damages to the purchaser.”¹¹ Id., at 628.

Because we believed that a review of this case would help to illuminate “the character of the standard that will identify unconstitutionally excessive awards” of punitive damages, see Honda Motor Co. v. Oberg, 512 U. S. 415, 420 (1994), we granted certiorari, 513 U. S. 1125 (1995).

II

Punitive damages may properly be imposed to further a State’s legitimate interests in punishing unlawful conduct and deterring its repetition. Gertz v. Robert Welch, Inc., 418 U. S. 323, 350 (1974); Newport v. Fact Concerts, Inc., 453 U. S. 247, 266-267 (1981); Haslip, 499 U. S., at 22. In our federal system, States necessarily have considerable flexibility in determining the level of punitive damages that they will allow in different classes of cases and in any particular case. Most States that authorize exemplary damages afford the jury similar latitude, requiring only that the damages awarded be reasonably necessary to vindicate the State’s legitimate interests in punishment and deterrence. See TXO, 509 U. S., at 456; Haslip, 499 U. S., at 21, 22. Only when an award can fairly be categorized as “grossly excessive” in relation to these interests does it enter the zone of arbitrariness that violates the Due Process Clause of the Fourteenth Amendment. Cf. TXO, 509 U. S., at 456. For that reason, the federal excessiveness inquiry appropriately begins with an identification of the state interests that a punitive award is designed to serve. We therefore focus our attention first on the scope of Alabama’s legitimate interests in punishing BMW and deterring it from future misconduct.

No one doubts that a State may protect its citizens by prohibiting deceptive trade practices and by requiring automobile distributors to disclose presale repairs that affect the value of a new car. But the States need not, and in fact do not, provide such protection in a uniform manner. Some States rely on the judicial process to formulate and enforce an appropriate disclosure requirement by applying principles of contract and tort law.¹² Other States have enacted various forms of legislation that define the disclosure obligations of automobile manufacturers, distributors, and dealers.¹³ The result is a patchwork of rules representing the diverse policy judgments of lawmakers in 50 States.

That diversity demonstrates that reasonable people may disagree about the value of a full disclosure requirement. Some legislatures may conclude that affirmative disclosure requirements are unnecessary because the self-interest of those involved in the automobile trade in developing and maintaining the goodwill of their customers will motivate them to make voluntary disclosures or to refrain from selling cars that do not comply with self-imposed standards. Those legislatures that do adopt affirmative disclosure obligations may take into account the cost of government regulation, choosing to draw a line exempting minor repairs from such a requirement. In formulating a disclosure standard, States may also consider other goals, such as providing a “safe harbor” for automobile manufacturers, distributors, and dealers against lawsuits over minor repairs.¹⁴

We may assume, arguendo, that it would be wise for every State to adopt Dr. Gore’s preferred rule, requiring full disclosure of every presale repair to a car, no matter how trivial and regardless of its actual impact on the value of the car. But while we do not doubt that Congress has ample authority to enact such a policy for the entire Nation,¹⁵ it is clear that no single State could do so, or even impose its own policy choice on neighboring States. See Bonaparte v. Tax Court, 104 U. S. 592, 594 (1881) (“No State can legislate except with reference to its own jurisdiction.... Each State is independent of all the others in this particular”).¹⁶ Similarly, one State’s power to impose burdens on the interstate market for automobiles is not only subordinate to the federal power over interstate commerce, Gibbons v. Ogden, 9 Wheat. 1, 194-196 (1824), but is also constrained by the need to respect the interests of other States, see, e. g., Healy v. Beer Institute, 491 U. S. 324, 335-336 (1989) (the Constitution has a “special concern both with the maintenance of a national economic union unfettered by state-imposed limitations on interstate commerce and with the autonomy of the individual States within their respective spheres” (footnote omitted)); Edgar v. MITE Corp., 457 U. S. 624, 643 (1982).

We think it follows from these principles of state sovereignty and comity that a State may not impose economic sanctions on violators of its laws with the intent of changing the tortfeasors’ lawful conduct in other States.¹⁷ Before this Court Dr. Gore argued that the large punitive damages award was necessary to induce BMW to change the nationwide policy that it adopted in 1983.¹⁸ But by attempting to alter BMW’s nationwide policy, Alabama would be infringing on the policy choices of other States. To avoid such encroachment, the economic penalties that a State such as Alabama inflicts on those who transgress its laws, whether the penalties take the form of legislatively authorized fines or judicially imposed punitive damages, must be supported by the State’s interest in protecting its own consumers and its own economy. Alabama may insist that BMW adhere to a particular disclosure policy in that State. Alabama does not have the power, however, to punish BMW for conduct that was lawful where it occurred and that had no impact on Alabama or its residents.¹⁹ Nor may Alabama impose sanctions on BMW in order to deter conduct that is lawful in other jurisdictions.

In this case, we accept the Alabama Supreme Court’s interpretation of the jury verdict as reflecting a computation of the amount of punitive damages “based in large part on conduct that happened in other jurisdictions.” 646 So. 2d, at 627. As the Alabama Supreme Court noted, neither the jury nor the trial court was presented with evidence that any of BMW’s out-of-state conduct was unlawful. “The only testimony touching the issue showed that approximately 60% of the vehicles that were refinished were sold in states where failure to disclose the repair was not an unfair trade practice.” Id., at 627, n. 6.²⁰ The Alabama Supreme Court therefore properly eschewed reliance on BMW’s out-of-state conduct, id., at 628, and based its remitted award solely on conduct that occurred within Alabama.²¹ The award must be analyzed in the light of the same conduct, with consideration given only to the interests of Alabama consumers, rather than those of the entire Nation. When the scope of the interest in punishment and deterrence that an Alabama court may appropriately consider is properly limited, it is apparent—for reasons that we shall now address—that this award is grossly excessive.

Ill

Elementary notions of fairness enshrined in our constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose.²² Three guideposts, each of which indicates that BMW did not receive adequate notice of the magnitude of the sanction that Alabama might impose for adhering to the nondisclosure policy adopted in 1983, lead us to the conclusion that the $2 million award against BMW is grossly excessive: the degree of reprehensibility of the nondisclosure; the disparity between the harm or potential harm suffered by Dr. Gore and his punitive damages award; and the difference between this remedy and the civil penalties authorized or imposed in comparable cases. We discuss these considerations in turn.

Degree of Reprehensibility

Perhaps the most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant’s conduct.²³ As the Court stated nearly 150 years ago, exemplary damages imposed on a defendant should reflect “the enormity of his offense.” Day v. Woodworth, 13 How. 363, 371 (1852). See also St. Louis, I. M. & S. R. Co. v. Williams, 251 U. S. 63, 66-67 (1919) (punitive award may not be “wholly disproportioned to the offense”); Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U. S. 257, 301 (1989) (O’Connor, J., concurring in part and dissenting in part) (reviewing court “should examine the gravity of the defendant’s conduct and the harshness of the award of punitive damages”).²⁴ This principle reflects the accepted view that some wrongs are more blameworthy than others. Thus, we have said that “nonviolent crimes are less serious than crimes marked by violence or the threat of violence.” Solem v. Helm, 463 U. S. 277, 292-293 (1983). Similarly, “trickery and deceit,” TXO, 509 U. S., at 462, are more reprehensible than negligence. In TXO, both the West Virginia Supreme Court and the Justices of this Court placed special emphasis on the principle that punitive damages may not be “grossly out of proportion to the severity of the offense.”²⁵ Id., at 453, 462. Indeed, for Justice Kennedy, the defendant’s intentional malice was the decisive element in a “close and difficult” case. Id., at 468.²⁶

In this case, none of the aggravating factors associated with particularly reprehensible conduct is present. The harm BMW inflicted on Dr. Gore was purely economic in nature. The presale refinishing of the car had no effect on its performance or safety features, or even its appearance for at least nine months after his purchase. BMW’s conduct evinced no indifference to or reckless disregard for the health and safety of others. To be sure, infliction of economic injury, especially when done intentionally through affirmative acts of misconduct, id., at 453, or when the target is financially vulnerable, can warrant a substantial penalty. But this observation does not convert all acts that cause economic harm into torts that are sufficiently reprehensible to justify a significant sanction in addition to compensatory damages.

Dr. Gore contends that BMW’s conduct was particularly reprehensible because nondisclosure of the repairs to his car formed part of a nationwide pattern of tortious conduct. Certainly, evidence that a defendant has repeatedly engaged in prohibited conduct while knowing or suspecting that it was unlawful would provide relevant support for an argument that strong medicine is required to cure the defendant’s disrespect for the law. See id., at 462, n. 28. Our holdings that a recidivist may be punished more severely than a first offender recognize that repeated misconduct is more reprehensible than an individual instance of malfeasance. See Gryger v. Burke, 334 U. S. 728, 732 (1948).

In support of his thesis, Dr. Gore advances two arguments. First, he asserts that the state disclosure statutes supplement, rather than supplant, existing remedies for breach of contract and common-law fraud. Thus, according to Dr. Gore, the statutes may not properly be viewed as immunizing from liability the nondisclosure of repairs costing less than the applicable statutory threshold. Brief for Respondent 18-19. Second, Dr. Gore maintains that BMW should have anticipated that its failure to disclose similar repair work could expose it to liability for fraud. Id., at 4-5.

We recognize, of course, that only state courts may authoritatively construe state statutes. As far as we are aware, at the time this action was commenced no state court had explicitly addressed whether its State’s disclosure statute provides a safe harbor for nondisclosure of presumptively minor repairs or should be construed instead as supplementing common-law duties.²⁷ A review of the text of the statutes, however, persuades us that in the absence of a state-court determination to the contrary, a corporate executive could reasonably interpret the disclosure requirements as establishing safe harbors. In California, for example, the disclosure statute defines “material” damage to a motor vehicle as damage requiring repairs costing in excess of 3 percent of the suggested retail price or $500, whichever is greater. Cal. Veh. Code Ann. § 9990 (West Supp. 1996). The Illinois statute states that in cases in which disclosure is not required, “nondisclosure does not constitute a misrepresentation or omission of fact.” Ill. Comp. Stat., ch. 815, §710/5 (1994).²⁸ Perhaps the statutes may also be interpreted in another way. We simply emphasize that the record contains no evidence that BMW’s decision to follow a disclosure policy that coincided with the strictest extant state statute was sufficiently reprehensible to justify a $2 million award of punitive damages.

Dr. Gore’s second argument for treating BMW as a recidivist is that the company should have anticipated that its actions would be considered fraudulent in some, if not all, jurisdictions. This contention overlooks the fact that actionable fraud requires a material misrepresentation or omission.²⁹ This qualifier invites line-drawing of just the sort engaged in by States with disclosure statutes and by BMW. We do not think it can be disputed that there may exist minor imperfections in the finish of a new car that can be repaired (or indeed, left unrepaired) without materially affecting the car’s value.³⁰ There is no evidence that BMW acted in bad faith when it sought to establish the appropriate line between presumptively minor damage and damage requiring disclosure to purchasers. For this purpose, BMW could reasonably rely on state disclosure statutes for guidance. In this regard, it is also significant that there is no evidence that BMW persisted in a course of conduct after it had been adjudged unlawful on even one occasion, let alone repeated occasions.³¹

Finally, the record in this case discloses no deliberate false statements, acts of affirmative misconduct, or concealment of evidence of improper motive, such as were present in Haslip and TXO. Haslip, 499 U. S., at 5; TXO, 509 U. S., at 453. We accept, of course, the jury’s finding that BMW suppressed a material fact which Alabama law obligated it to communicate to prospective purchasers of repainted cars in that State. But the omission of a material fact may be less reprehensible than a deliberate false statement, particularly when there is a good-faith basis for believing that no duty to disclose exists.

That conduct is sufficiently reprehensible to give rise to tort liability, and even a modest award of exemplary damages does not establish the high degree of culpability that warrants a substantial punitive damages award. Because this case exhibits none of the circumstances ordinarily associated with egregiously improper conduct, we are persuaded that BMW’s conduct was not sufficiently reprehensible to warrant imposition of a $2 million exemplary damages award.

Ratio

The second and perhaps most commonly cited indicium of an unreasonable or excessive punitive damages award is its ratio to the actual harm inflicted on the plaintiff. See TXO, 509 U. S., at 459; Haslip, 499 U. S., at 23. The principle that exemplary damages must bear a “reasonable relationship” to compensatory damages has a long pedigree.³² Scholars have identified a number of early English statutes authorizing the award of multiple damages for particular wrongs. Some 65 different enactments during the period between 1275 and 1753 provided for double, treble, or quadruple damages.³³ Our decisions in both Haslip and TXO endorsed the proposition that a comparison between the compensatory award and the punitive award is significant.

In Haslip we concluded that even though a punitive damages award of “more than 4 times the amount of compensatory damages” might be “close to the line,” it did not “cross the line into the area of constitutional impropriety.” 499 U. S., at 23-24. TXO, following dicta in Haslip, refined this analysis by confirming that the proper inquiry is “ '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.’” TXO, 509 U. S., at 460 (emphasis in original), quoting Haslip, 499 U. S., at 21. Thus, in upholding the $10 million award in TXO, we relied on the difference between that figure and the harm to the victim that would have ensued if the tortious plan had succeeded. That difference suggested that the relevant ratio was not more than 10 to l.³⁴

The $2 million in punitive damages awarded to Dr. Gore by the Alabama Supreme Court is 500 times the amount of his actual harm as determined by the jury.³⁵ Moreover, there is no suggestion that Dr. Gore or any other BMW purchaser was threatened with any additional potential harm by BMW’s nondisclosure policy. The disparity in this case is thus dramatically greater than those considered in Haslip and TXO.36

Of course, we have consistently rejected the notion that the constitutional line is marked by a simple mathematical formula, even one that compares actual and potential damages to the punitive award. TXO, 509 U. S., at 458.³⁷ Indeed, low awards of compensatory damages may properly support a higher ratio than high compensatory awards, if, for example, a particularly egregious act has resulted in only a small amount of economic damages. A higher ratio may also be justified in cases in which the injury is hard to detect or the monetary value of noneconomic harm might have been difficult to determine. It is appropriate, therefore, to reiterate our rejection of a categorical approach. Once again, “we return to what we said ... in Haslip: We need not, and indeed we cannot, draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case. We can say, however, that [a] general concer[n] of reasonableness . . . properly enters] into the constitutional calculus.’” Id., at 458 (quoting Haslip, 499 U. S., at 18). In most cases, the ratio will be within a constitutionally acceptable range, and remittitur will not be justified on this basis. When the ratio is a breathtaking 500 to 1, however, the award must surely “raise a suspicious judicial eyebrow.” TXO, 509 U. S., at 481 (O’Connor, J., dissenting).

Sanctions for Comparable Misconduct

Comparing the punitive damages award and the civil or criminal penalties that could be imposed for comparable misconduct provides a third indicium of excessiveness. As Justice O’Connor has correctly observed, a reviewing court engaged in determining whether an award of punitive damages is excessive should “accord ‘substantial deference’ to legislative judgments concerning appropriate sanctions for the conduct at issue.” Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U. S., at 301 (opinion concurring in part and dissenting in part). In Haslip, 499 U. S., at 23, the Court noted that although the exemplary award was “much in excess of the fine that could be imposed,” imprisonment was also authorized in the criminal context.³⁸ In this case the $2 million economic sanction imposed on BMW is substantially greater than the statutory fines available in Alabama and elsewhere for similar malfeasance.

The maximum civil penalty authorized by the Alabama Legislature for a violation of its Deceptive Trade Practices Act is $2,000;³⁹ other States authorize more severe sanctions, with the maxima ranging from $5,000 to $10,000.⁴⁰ Significantly, some statutes draw a distinction between first offenders and recidivists; thus, in New York the penalty is $50 for a first offense and $250 for subsequent offenses. None of these statutes would provide an out-of-state distributor with fair notice that the first violation — or, indeed the first 14 violations — of its provisions might subject an offender to a multimillion dollar penalty. Moreover, at the time BMW’s policy was first challenged, there does not appear to have been any judicial decision in Alabama or elsewhere indicating that application of that policy might give rise to such severe punishment.

The sanction imposed in this case cannot be justified on the ground that it was necessary to deter future misconduct without considering whether less drastic remedies could be expected to achieve that goal. The fact that a multimillion dollar penalty prompted a change in policy sheds no light on the question whether a lesser deterrent would have adequately protected the interests of Alabama consumers. In the absence of a history of noncompliance with known statutory requirements, there is no basis for assuming that a more modest sanction would not have been sufficient to motivate full compliance with the disclosure requirement imposed by the Alabama Supreme Court in this case.

IV

We assume, as the juries in this case and in the Yates case found, that the undisclosed damage to the new BMW’s affected their actual value. Notwithstanding the evidence adduced by BMW in an effort to prove that the repainted cars conformed to the same quality standards as its other cars, we also assume that it knew, or should have known, that as time passed the repainted cars would lose their attractive appearance more rapidly than other BMW’s. Moreover, we of course accept the Alabama courts’ view that the state interest in protecting its citizens from deceptive trade practices justifies a sanction in addition to the recovery of compensatory damages. We cannot, however, accept the conclusion of the Alabama Supreme Court that BMW’s conduct was sufficiently egregious to justify a punitive sanction that is tantamount to a severe criminal penalty.

The fact that BMW is a large corporation rather than an impecunious individual does not diminish its entitlement to fair notice of the demands that the several States impose on the conduct of its business. Indeed, its status as an active participant in the national economy implicates the federal interest in preventing individual States from imposing undue burdens on interstate commerce. While each State has ample power to protect its own consumers, none may use the punitive damages deterrent as a means of imposing its regulatory policies on the entire Nation.

As in Haslip, we are not prepared to draw a bright line marking the limits of a constitutionally acceptable punitive damages award. Unlike that case, however, we are fully convinced that the grossly excessive award imposed in this case transcends the constitutional limit.⁴¹ Whether the appropriate remedy requires a new trial or merely an independent determination by the Alabama Supreme Court of the award necessary to vindicate the economic interests of Alabama consumers is a matter that should be addressed by the state court in the first instance.

The judgment is reversed, and the case is remanded for further proceedings not inconsistent with this opinion.

It is so ordered.

1 The top, hood, trunk, and quarter panels of Dr. Gore’s car were repainted at BMW’s vehicle preparation center in Brunswick, Georgia. The parties presumed that the damage was caused by exposure to acid rain during transit between the manufacturing plant in Germany and the preparation center.

2 Dr. Gore also named the German manufacturer and the Birmingham dealership as defendants.

3 Alabama codified its common-law cause of action for fraud in a 1907 statute that is still in effect. Hackmeyer v. Hackmeyer, 268 Ala. 329, 333, 106 So. 2d 245, 249 (1958). The statute provides: “Suppression of a material fact which the party is under an obligation to communicate constitutes fraud. The obligation to communicate may arise from the confidential relations of the parties or from the particular circumstances of the case.” Ala. Code §6-5-102 (1993); see Ala. Code §4299 (1907).

4 The dealer who testified to the reduction in value is the former owner of the Birmingham dealership sued in this action. He sold the dealership approximately one year before the trial.

5 Dr. Gore did not explain the significance of the $300 cutoff.

6 The jury also found the Birmingham dealership liable for Dr. Gore’s compensatory damages and the German manufacturer liable for both the compensatory and punitive damages. The dealership did not appeal the judgment against it. The Alabama Supreme Court held that the trial court did not have jurisdiction over the German manufacturer and therefore reversed the judgment against that defendant.

7 BMW acknowledged that a Georgia statute enacted after Dr. Gore purchased his car would require disclosure of similar repairs to a car before it was sold in Georgia. Ga. Code Ann. §§ 40 — 1—5(b)—(e) (1994).

8 While awarding a comparable amount of compensatory damages, the Yates jury awarded no punitive damages at all. In Yates, the plaintiff also relied on the 1983 nondisclosure policy, but instead of offering evidence of 983 repairs costing more than $300 each, he introduced a bulk exhibit containing 5,856 repair bills to show that petitioner had sold over 5,800 new BMW vehicles without disclosing that they had been repaired.

9 Prior to the lawsuits filed by Dr. Yates and Dr. Gore, BMW and various BMW dealers had been sued 14 times concerning presale paint or damage repair. According to the testimony of BMW’s in-house counsel at the postjudgment hearing on damages, only one of the suits concerned a car repainted by BMW.

10 The Alabama Supreme Court did not indicate whether the $2 million figure represented the court’s independent assessment of the appropriate level of punitive damages, or its determination of the maximum amount that the jury could have awarded consistent with the Due Process Clause.

11 Other than Yates v. BMW of North America, Inc., 642 So. 2d 937 (1993), in which no punitive damages were awarded, the Alabama Supreme Court cited no such cases. In another portion of its opinion, 646 So. 2d, at 629, the court did cite five Alabama eases, none of which involved either a dispute arising out of the purchase of an automobile or an award of punitive damages. G. M. Mosley Contractors, Inc. v. Phillips, 487 So. 2d 876, 879 (1986); Hollis v. Wyrosdick, 508 So. 2d 704 (1987); Campbell v. Burns, 512 So. 2d 1341, 1343 (1987); Ashbee v. Brock, 510 So. 2d 214 (1987); and Jawad v. Granade, 497 So. 2d 471 (1986). All of these cases support the proposition that appellate courts in Alabama presume that jury verdicts are correct. In light of the Alabama Supreme Court’s conclusion that (1) the jury had computed its award by multiplying $4,000 by the number of refinished vehicles sold in the United States and (2) that the award should have been based on Alabama conduct, respect for the error-free portion of the jury verdict would seem to produce an award of $56,000 ($4,000 multiplied by 14, the number of repainted vehicles sold in Alabama).

12 See, e. g., Rivers v. BMW of North America, Inc., 214 Ga. App. 880, 449 S. E. 2d 337 (1994) (nondisclosure of presale paint repairs that occurred before state disclosure statute enacted); Wedmore v. Jordan Motors, Inc., 589 N. E. 2d 1180 (Ind. App. 1992) (same).

13 Four States require disclosure of vehicle repairs costing more than 3 percent of suggested retail price. Ariz. Rev. Stat. Ann. §28-1304.03 (1989); N. C. Gen. Stat. §20-305.1(d)(5a) (1995); S. C. Code §56-32-20 (Supp. 1995); Va. Code Ann. §46.2-1571(D) (Supp. 1995). An additional three States mandate disclosure when the cost of repairs exceeds 3 percent or $500, whichever is greater. Ala. Code § 8-19-5(22)(c) (1993); Cal. Veh. Code Ann. §§9990-9991 (West Supp. 1996); Okla. Stat., Tit. 47, §1112.1 (1991). Indiana imposes a 4 percent disclosure threshold. Ind. Code §§9-23-4-4, 9-23-4-5 (1993). Minnesota requires disclosure of repairs costing more than 4 percent of suggested retail price or $500, whichever is greater. Minn. Stat. §325F.664 (1994). New York requires disclosure when the cost of repairs exceeds 5 percent of suggested retail price. N. Y. Gen. Bus. Law §§ 396-p(5)(a), (d) (McKinney Supp. 1996). Vermont imposes a 5 percent disclosure threshold for the first $10,000 in repair costs and 2 percent thereafter. Vt. Stat. Ann., Tit. 9, § 4087(d) (1993). Eleven States mandate disclosure only of damage costing more than 6 percent of retail value to repair. Ark. Code Ann. §23-112-705 (1992); Idaho Code §49-1624 (1994); Ill. Comp. Stat., eh. 815, §710/5 (1994); Ky. Rev. Stat. Ann. §190.0491(5) (Baldwin 1988); La. Rev. Stat. Ann. §32:1260 (West Supp. 1995); Miss. Motor Vehicle Comm’n, Regulation No. 1 (1992); N. H. Rev. Stat. Ann. §357-C:5(III)(d) (1995); Ohio Rev. Code Ann. §4517.61 (1994); R. I. Gen. Laws §§ 31-5.1-18(d), (f) (1995); Wis. Stat. §218.01(2d)(a) (1994); Wyo. Stat. §31-16-115 (1994). Two States require disclosure of repairs costing $3,000 or more. See Iowa Code Ann. §321.69 (Supp. 1996); N. D. Admin. Code §37-09-01-01 (1992). Georgia mandates disclosure of paint damage that costs more than $500 to repair. Ga. Code Ann. §§ 40-1-5(b)-(e) (1994) (enacted after respondent purchased his car). Florida requires dealers to disclose paint repair costing more than $100 of which they have actual knowledge. Fla. Stat. § 320.27(9)(n) (1992). Oregon requires manufacturers to disclose all “postmanufaeturing” damage and repairs. It is unclear whether this mandate would apply to repairs such as those at issue here. Ore. Rev. Stat. § 650.155 (1991).

Many, but not all, of the statutes exclude from the computation of repair cost the value of certain components — typically items such as glass, tires, wheels and bumpers — when they are replaced with identical manufacturer’s original equipment. E. g., Cal. Veh. Code Ann. §§ 9990-9991 (West Supp. 1996); Ga. Code Ann. §§40-l-5(b)-(e) (1994); Ill. Comp. Stat., ch. 815, §710/5 (1994); Ky. Rev. Stat. Ann. § 190.0491(5) (Baldwin 1988); Okla. Stat., Tit. 47, § 1112.1 (1991); Va. Code Ann. § 46.2-157KD) (Supp. 1995); Vt. Stat. Ann., Tit. 9, § 4087(d) (1993).

14 Also, a state legislature might plausibly conclude that the administrative costs associated with full disclosure would have the effect of raising car prices to the State’s residents.

15 Federal disclosure requirements are, of course, a familiar part of our law. See, e. g., the Federal Food, Drug, and Cosmetic Act, as added by the Nutrition Labeling and Education Act of 1990, 104 Stat. 2353, 21 U. S. C. § 343; the Truth In Lending Act, 82 Stat. 148, as amended, 15 U. S. C. § 1604; the Securities Exchange Act of 1934, 48 Stat. 892, 894, as amended, 15 U. S. C. §§781-78m; Federal Cigarette Labeling and Advertising Act, 79 Stat. 283, as amended, 15 U. S. C. § 1333; Alcoholic Beverage Labeling Act of 1988, 102 Stat. 4519, 27 U. S. C. §215.

16 See also Bigelow v. Virginia, 421 U. S. 809, 824 (1975) (“A State does not acquire power or supervision over the internal affairs of another State merely because the welfare and health of its own citizens may be affected when they travel to that State”); New York Life Ins. Co. v. Head, 234 U. S. 149, 161 (1914) (“[I]t would be impossible to permit the statutes of Missouri to operate beyond the jurisdiction of that State ... without throwing down the constitutional barriers by which all the States are restricted within the orbits of their lawful authority and upon the preservation of which the Government under the Constitution depends. This is so obviously the necessary result of the Constitution that it has rarely been called in question and hence authorities directly dealing with it do not abound”); Huntington v. Attrill, 146 U. S. 657, 669 (1892) (“Laws have no force of themselves beyond the jurisdiction of the State which enacts them, and can have extra-territorial effect only by the comity of other States”).

17 State power may be exercised as much by a jury’s application of a state rule of law in a civil lawsuit as by a statute. See New York Times Co. v. Sullivan, 376 U. S. 254, 265 (1964) (“The test is not the form in which state power has been applied but, whatever the form, whether such power has in fact been exercised”); San Diego Building Trades Council v. Garmon, 359 U. S. 236, 247 (1959) (“[Regulation can be as effectively exerted through an award of damages as through some form of preventive relief”).

18 Brief for Respondent 11-12, 23, 27-28; Tr. of Oral Arg. 50-54. Dr. Gore’s interest in altering the nationwide policy stems from his concern that BMW would not (or could not) discontinue the policy in Alabama alone. Brief for Respondent 11. “If Alabama were limited to imposing punitive damages based only on BMW’s gain from fraudulent sales in Alabama, the resulting award would have no prospect of protecting Alabama consumers from fraud, as it would provide no incentive for BMW to alter the unitary, national policy of nondisclosure which yielded BMW millions of dollars in profits.” Id., at 23. The record discloses no basis for Dr. Gore’s contention that BMW could not comply with Alabama’s law without changing its nationwide policy.

19 See Bordenkircher v. Hayes, 434 U. S. 357, 363 (1978) (“To punish a person because he has done what the law plainly allows him to do is a due process violation of the most basic sort”). Our cases concerning recidivist statutes are not to the contrary. Habitual offender statutes permit the sentencing court to enhance a defendant’s punishment for a crime in light of prior convictions, including convictions in foreign jurisdictions. See e.g., Ala. Code §13A-5-9 (1994); Cal. Penal Code Ann. §§ 667.5(f), 668 (West Supp. 1996); Ill. Comp. Stat., ch. 720, §5/33B-l (1994); N. Y. Penal Law §§70.04, 70.06, 70.08, 70.10 (McKinney 1987 and Supp. 1996); Tex. Penal Code Ann. § 12.42 (1994 and Supp. 1995-1996). A sentencing judge may even consider past criminal behavior which did not result in a conviction and lawful conduct that bears on the defendant’s character and prospects for rehabilitation. Williams v. New York, 337 U. S. 241 (1949). But we have never held that a sentencing court could properly punüh lawful conduct. This distinction is precisely the one we draw here. See n. 21, infra.

20 Given that the verdict was based in part on out-of-state conduct that was lawful where it occurred, we need not consider whether one State may properly attempt to change a tortfeasor’s unlawful conduct in another State.

21 Of course, the fact that the Alabama Supreme Court correctly concluded that it was error for the jury to use the number of sales in other States as a multiplier in computing the amount of its punitive sanction does not mean that evidence describing out-of-state transactions is irrelevant in a case of this kind. To the contrary, as we stated in TXO Production Corp. v. Alliance Resources Corp., 509 U. S. 443, 462, n. 28 (1993), such evidence may be relevant to the determination of the degree of reprehensibility of the defendant’s conduct.

22 See Miller v. Florida, 482 U. S. 423 (1987) (Ex Post Facto Clause violated by retroactive imposition of revised sentencing guidelines that provided longer sentence for defendant’s crime); Bouie v. City of Columbia, 378 U. S. 347 (1964) (retroactive application of new construction of statute violated due process); id., at 350-355 (citing cases); Lankford v. Idaho, 500 U. S. 110 (1991) (due process violated because defendant and his counsel did not have adequate notice that judge might impose death sentence). The strict constitutional safeguards afforded to criminal defendants are not applicable to civil cases, but the basic protection against “judgments without notice” afforded by the Due Process Clause, Shaffer v. Heitner, 433 U. S. 186, 217 (1977) (Stevens, J., concurring in judgment), is implicated by civil penalties.

23 “The fiagrancy of the misconduct is thought to be the primary consideration in determining the amount of punitive damages.” Owen, A Punitive Damages Overview: Functions, Problems and Reform, 39 Vill. L. Rev. 363, 387 (1994).

24 The principle that punishment should fit the crime “is deeply rooted and frequently repeated in common-law jurisprudence.” Solem v. Helm, 463 U. S. 277, 284 (1983). See Burkett v. Lanata, 15 La. Ann. 337, 339 (1860) (punitive damages should be “commensurate to the nature of the offence”); Blanchard v. Morris, 15 Ill. 35, 36 (1853) (“[W]e cannot say [the exemplary damages] are excessive under the circumstances; for the proofs show that threats, violence, and imprisonment, were accompanied by mental fear, torture, and agony of mind”); Louisville & Northern R. Co. v. Brown, 127 Ky. 732, 749, 106 S. W. 795, 799 (1908) (“We are not aware of any ease in which the court has sustained a verdict as large as this one unless the injuries were permanent”).

25 Pacific Mut. Life Ins. Co. v. Haslip, 499 U. S. 1, 22 (1991).

26 The dissenters also recognized that “TXO’s conduct was clearly wrongful, calculated, and improper ....” TXO, 509 U. S., at 482 (opinion of O’Connor, J.).

27 In Jeter v. M & M Dodge, Inc., 634 So. 2d 1383 (La. App. 1994), a Louisiana Court of Appeals suggested that the Louisiana disclosure statute functions as a safe harbor. Finding that the cost of repairing presale damage to the plaintiff’s car exceeded the statutory disclosure threshold, the court held that the disclosure statute did not provide a defense to the action. Id., at 1384.

During the pendency of this litigation, Alabama enacted a disclosure statute which defines “material” damage to a new car as damage requiring repairs costing in excess of 3 percent of suggested retail price or $500, whichever is greater. Ala. Code § 8-19-5(22) (1993). After its decision in this ease, the Alabama Supreme Court stated in dicta that the remedies available under this section of its Deceptive Trade Practices Act did not displace or alter pre-existing remedies available under either the common law or other statutes. Hines v. Riverside Chevrolet-Olds, Inc., 655 So. 2d 909, 917, n. 2 (1994). It refused, however, to “recognize, or impose on automobile manufacturers, a general duty to disclose every repair of damage, however slight, incurred during the manufacturing process.” Id., at 921. Instead, it held that whether a defendant has a duty to disclose is a question of fact “for the jury to determine.” Id., at 918. In reaching that conclusion it overruled two earlier decisions that seemed to indicate that as a matter of law there was no disclosure obligation in eases comparable to this‘one. Id., at 920 (overruling Century 21-Reeves Realty, Inc. v. McConnell Cadillac, Inc., 626 So. 2d 1273 (1993), and Cobb v. Southeast Toyota Distributors, Inc., 569 So. 2d 395 (1990)).

28 See also Ariz. Rev. Stat. Ann. §28-1304.03 (1989) (“[I]f disclosure is not required under this section, a purchaser may not revoke or rescind a sales contract due solely to the fact that the new motor vehicle was damaged and repaired prior to completion of the sale”); Ind. Code § 9-23-4-5 (1993) (providing that “[Repaired damage to a customer-ordered new motor vehicle not exceeding four percent (4%) of the manufacturer’s suggested retail price does not need to be disclosed at the time of sale”); N. C. Gen. Stat. §20-305.1(e) (1993) (requiring disclosure of repairs costing more than 5 percent of suggested retail price and prohibiting revocation or rescission of sales contract on the basis of less costly repairs); Okla. Stat., Tit. 47, §1112.1 (1991) (defining “material” damage to a car as damage requiring repairs costing in excess of 3 percent of suggested retail price or $500, whichever is greater).

29 Restatement (Second) of Torts §538 (1977); W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts § 108 (5th ed. 1984).

30 The Alabama Supreme Court has held that a car may be considered “new” as a matter of law even if its finish contains minor cosmetic flaws. Wilburn v. Larry Savage Chevrolet, Inc., 477 So. 2d 384 (1985). We note also that at trial respondent only introduced evidence of undisclosed paint damage to new cars repaired at a cost of $300 or more. This decision suggests that respondent believed that the jury might consider some repairs too de minimis to warrant disclosure.

31 Before the verdict in this case, BMW had changed its policy with respect to Alabama and two other States. Five days after the jury award, BMW altered its nationwide policy to one of full disclosure.

32 See, e. g., Grant v. McDonogh, 7 La. Ann. 447, 448 (1852) (“[Exemplary damages allowed should bear some proportion to the real damage sustained”); Saunders v. Mullen, 66 Iowa 728, 729, 24 N. W. 529 (1885) (“When the actual damages are so small, the amount allowed as exemplary damages should not be so large”); Flannery v. Baltimore & Ohio R. Co., 15 D. C. 111, 125 (1885) (when punitive damages award “is out of all proportion to the injuries received, we feel it our duty to interfere”); Houston & Texas Central R. Co. v. Nichols, 9 Am. & Eng. R. R. Cas. 361, 365 (Tex. 1882) (“Exemplary damages, when allowed, should bear proportion to the actual damages sustained”); McCarthy v. Niskern, 22 Minn. 90, 91-92 (1875) (punitive damages “enormously in excess of what may justly be regarded as compensation” for the injury must be set aside “to prevent injustice”).

33 Owen, supra n. 23, at 368, and n. 23. One English statute, for example, provides that officers arresting persons out of their jurisdiction shall pay double damages. 3 Edw., L, ch. 35. Another directs that in an action for forcible entry or detainer, the plaintiff shall recover treble damages. 8 Hen. VI, ch. 9, §6.

Present-day federal law allows or mandates imposition of multiple damages for a wide assortment of offenses, including violations of the antitrust laws, see §4 of the Clayton Act, 38 Stat. 731, as amended, 15 U. S. C. § 15, and the Racketeer Influenced and Corrupt Organizations Act, see 18 U. S. C. § 1964, and certain breaches of the trademark laws, see § 35 of the Trademark Act of 1946, 60 Stat. 439, as amended, 15 U. S. C. § 1117, and the patent laws, see 66 Stat. 813, 35 U. S. C. §284.

34 "While petitioner stresses the shocking disparity between the punitive award and the compensatory award, that shock dissipates when one considers the potential loss to respondents, in terms of reduced or eliminated royalties payments, had petitioner succeeded in its illicit scheme. Thus, even if the actual value of the ‘potential harm’ to respondents is not between $5 million and $8.3 million, but is closer to $4 million, or $2 million, or even $1 million, the disparity between the punitive award and the potential harm does not, in our view, ‘jar one’s constitutional sensibilities.’” TXO, 509 U. S., at 462, quoting Haslip, 499 U. S., at 18.

35 Even assuming each repainted BMW suffers a diminution in value of approximately $4,000, the award is 35 times greater than the total damages of all 14 Alabama consumers who purchased repainted BMW’s.

36 The ratio here is also dramatically greater than any award that would be permissible under the statutes and proposed statutes summarized in the appendix to Justice Ginsburg’s dissenting opinion. Post, at 615-616.

37 Conceivably the Alabama Supreme Court’s selection of a 500-to-l ratio was an application of Justice Scalia’s identification of one possible reading of the plurality opinion in TXO: Any future due process challenge to a punitive damages award could be disposed of with the simple observation that “this is no worse than TXO.” 509 U. S., at 472 (Scalia, J., concurring in judgment). As we explain in the text, this award is significantly worse than the award in TXO.

38 Although the Court did not address the size of the punitive damages award in Silkwood v. Kerr-McGee Corp., 464 U. S. 238 (1984), the dissenters commented on its excessive character, noting that the “$10 million [punitive damages award] that the jury imposed is 100 times greater than the maximum fine that may be imposed ... for a single violation of federal standards” and “more than 10 times greater than the largest single fine that the Commission has ever imposed.” Id., at 263 (Blackmun, J., dissenting). In New York Times Co. v. Sullivan, 376 U. S. 254 (1964), the Court observed that the punitive award for libel was “one thousand times greater than the maximum fine provided by the Alabama criminal statute,” and concluded that the “fear of damage awards under a rule such as that invoked by the Alabama courts here may be markedly more inhibiting than the fear of prosecution under a criminal statute.” Id., at 277.

39 Ala. Code §8-19-ll(b) (1993).

40 See, e. g., Ark. Code Ann. § 23-112-309(b) (1992) (up to $5,000 for violation of state Motor Vehicle Commission Act that would allow suspension of dealer’s license; up to $10,000 for violation of Act that would allow revocation of dealer’s license); Fla. Stat. § 320.27(12) (1992) (up to $1,000); Ga. Code Ann. §§ 40 — 1—5(g), 10-l-397(a) (1994 and Supp. 1996) (up to $2,000 administratively; up to $5,000 in superior court); Ind. Code §9-23-6-4 (1993) ($50 to $1,000); N. H. Rev. Stat. Ann. §§ 357-C:15, 651:2 (1995 and Supp. 1995) (corporate fine of up to $20,000); N. Y. Gen. Bus. Law § 396-p(6) (McKinney Supp. 1995) ($50 for first offense; $250 for subsequent offenses).

41 Justice Ginsburg expresses concern that we are “the only federal court policing” this limit. Post, at 613. The small number of punitive damages questions that we have reviewed in recent years, together with the fact that this is the first case in decades in which we have found that a punitive damages award exceeds the constitutional limit, indicates that this concern is at best premature. In any event, this consideration surely does not justify an abdication of our responsibility to enforce constitutional protections in an extraordinary case such as this one.