Arizona Court ofAppeals Division One Reduces Punitive Damages Award as Violative of Due Process.

Two bail-enforcement agents requested and received permission from Southwest Airlines to carry their weapons onto a flight.  However, during the flight the captain suspected the agents’ possession of weapons violated federal law, so Southwest contacted the authorities, and the agents were arrested when the plane landed.   Because Southwest gave the agents permission to carry their weapons onto the plane, the federal prosecutor informed Southwest that it would drop the criminal charges if Southwest cooperated and provided the prosecutor with the results of its own internal investigation of the matter.  That investigation showed that the agents did not mislead the airline in order to carry their weapons onto the plane.   Southwest, however, refused to cooperate unless the agents would release it from any potential civil liability.  The prosecutor eventually nevertheless dropped the charges without Southwest’s cooperation, and the agents sued Southwest for negligence and punitive damages.  The jury awarded the agents $500,000 each in compensatory damages and $4 million each in punitive damages.  Southwest appealed, alleging, among other issues, that the size of the punitive damages award was excessive and therefore violated due process.

The Court reversed the amount of the punitive damages award and remanded the issue to the trial court.  , The Court used the three factors set forth in BMW of North America, Inc. v. Gore,  517 U.S. 559, 575 (1996)to analyze whether the size of the punitive damages award violated due process: (1) the degree of reprehensibility of the defendant’s misconduct; (2) the ratio between compensatory and punitive damages; and (3) how the award compares with other penalties.  Noting that the degree of reprehensibility of defendant’s conduct is the most important factor, the Court held Southwest’s conduct fell in the low-to-middle range of reprehensibility, because Southwest acted in reckless disregard for the agents’ health by refusing to cooperate with the federal prosecutor without obtaining a release from civil liability, and that malice motivated Southwest’s failure to cooperate.  However, the Court held Southwest’s reprehensibility was mitigated because it had notified the federal authorities that it gave the agents permission to board the plane with weapons.  In light of the lower reprehensibility, the Court invoked State Farm Mut. Auto. Ins. Co. v. Campbell, 538U.S. 408, 416 (2003)’s statement that a ratio of 1:1 may be appropriate if, like here, the jury has already awarded substantial compensatory damages.

Finally, the Court noted that there were no similar civil penalties with which to compare the award of punitive damages, but that the most similar penalty was a criminal fine for obstruction of a criminal investigation, which carries a maximum fine of $1 million.  The Court noted this was far below the punitive damages award of $4 million to each agent.

Based on the above factors, the Court found the award was excessive and therefore violated due process.  Because the jury already awarded the agents the “substantial sum” of $500,000 in compensatory damages and the case involved less reprehensible conduct, the Court instructed the trial court to award an equal amount in punitive damages.

Presiding Judge Timmer authored the opinion, with Judges Norris and Brown concurring.