Blurring the Distinction Between Contract and Tort: the Resurrection ...

Blurring the Distinction Between Contract and Tort: the Resurrection ...

evaluating defendants' motive for the breach, are some of the reasons the supreme court

abolished the "Seaman's" tort, which had permitted tort liability for "bad faith" denial of the

existence of a contract. Freeman & Mills v Belcher Oil Co. (1995) 11 C4th 85, 102, 44 CR2d

420, overruling Seaman's Direct Buying Serv., Inc. v Standard Oil Co. (1984) 36 C3d 752, 206

CR 354. "To include bad faith denials of liability within Seaman's scope could potentially

convert every contract breach into a tort." Freeman & Mills, 11 C4th at 103. As the court

explained in an earlier decision, presaging the demise of Seaman's, there are "important

differences between contract and tort theories of recovery," and "the law generally does not

distinguish between good and bad motives for breaching a contract." Applied Equip. Corp. v

Litton Saudi Arabia Ltd. (1994) 7 C4th 503, 515, 28 CR2d 475.

The Punitive Damages Excessiveness Claim

Standard of Review on Appeal

In 2001, the U.S. Supreme Court held that, in deciding if the defendant's due process right to be

free from grossly excessive punitive awards has been violated, appellate courts must review the

issue de novo. Cooper Indus., Inc. v Leatherman's Tool Group, Inc. (2001) 532 US 424, 435, 149

L Ed 2d 674, 686, 121 S Ct 1678. In other words, the constitutional excessiveness analysis is

subject to an independent, not a deferential, standard of review. Cooper Indus., Inc. v

Leatherman's Tool Group, Inc., supra (emphasis added, quotation omitted). Yet the [PAGE

19]COH opinion admittedly viewed the entire record "most favorably to the judgment." City of

Hope Nat'l Med. Ctr. v Genentech, Inc., (review granted Feb. 2, 2005, S129463; superseded

opinion at 123 CA4th 306, 354, 20 CR3d 324) (emphasis added). Such deference to the

judgment arguably does not satisfy Cooper's mandate for independent, de novo review of the

federal excessiveness claim.

The Appellate Court's Application of Campbell

The BMW/Campbell Degree of Reprehensibility Factors

The three guideposts for evaluating a federal excessiveness claim are (1) the degree of

reprehensibility of the defendant's act; (2) the ratio of punitive to compensatory damages; and (3)

comparable fines or penalties for similar conduct. BMW v Gore (1996) 517 US 559, 575, 134 L

Ed 2d 809, 826, 116 S Ct 1589.

Terming "degree of reprehensibility" the most important guidepost, BMW created what could be

called a "scale of relative reprehensibility" as a benchmark for comparison, to decide how bad

this defendant's act was in relation to acts of other defendants. BMW v Gore, supra. Conduct

causing physical injury is generally considered more reprehensible than purely economic harm;

economic harm is worse, relatively speaking, when inflicted on the financially vulnerable than

on the wealthy; reckless disregard is more serious than indifference; repeated conduct is more

blameworthy than a single isolated act; and harm resulting from mere accident is less onerous

than intentional malice or deceit. BMW v Gore, supra.

In its most recent pronouncement on punitive damages, State Farm Mut. Auto. Ins. Co. v

Campbell (2003) 538 US 408, 419, 155 L Ed 2d 585, 602, 123 S Ct 151, the court evaluated the

degree of reprehensibility factors using a weighing or balancing test; observing "the existence of

any one of these factors weighing in favor of plaintiff may not be sufficient to sustain a punitive

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