Damages

When reviewing a trial court's award of damages, an appellate court generally examines all of the evidence from the trial to determine whether the evidence supports the award. When reviewing awards for compensatory damages, an appellate court determines from the lower court's record whether the trial judge abused his or her discretion in allowing a jury's damage award to stand or in making his or her own damage award, called a bench award. A bench award by a judge is typically subject to closer scrutiny than an award by a jury.

An appellate court may determine that a damage award is excessive or inadequate. If the court of appeals determines that the damages are excessive or inadequate, and can determine the proper amount with reasonable certainty, the court may adjust the award so that it corresponds with the evidence. One common method for altering an award is through the use of remittitur, whereby the judge directs the plaintiff either to accept a lower award or face a new trial. On the other hand, if the appellate court cannot determine the proper amount of the award based upon the evidence, the court may order a new trial. A court of appeals will also review a trial court's decision whether to admit or to exclude evidence that supports the damage award, such as the decision whether to admit or exclude testimony regarding SCIENTIFIC EVIDENCE. Appellate courts typically review the trial court's decision with respect to admission or exclusion of evidence under the ABUSE OF DISCRETION standard.

Courts review awards of punitive damages differently than other types of damage awards. Several federal courts of appeals are engaged in an ongoing struggle over what standard of review should be applied to punitive damages at the appellate court level. In Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 121 S. Ct. 1678, 149 L. Ed. 2d 674 (2001), the U.S. Supreme Court ruled that appellate courts must conduct de novo review rather than apply an abuse of discretion standards. This ruling means that federal appellate courts have great freedom to review and reduce punitive damages based on previous U.S. Supreme Court standards. The decision is one more example of the Court expressing its desire to control excessive punitive damage awards.

Cooper Industries, Inc. involved a suit for TRADEMARK infringement, where Cooper Industries was accused of using photographs of a knife manufactured by Leatherman Tool Group. A jury awarded Leatherman $50,000 in general damages and $4.5 million in punitive damages. On appeal, the U.S. Court of Appeals for the Ninth Circuit upheld the trial court, basing its analysis on the abuse of discretion standard. This standard is very deferential to the trial court's actions, allowing the appeals courts to overturn a decision only if the trial judge clearly abused his or her authority. By comparison, de novo review empowers the appeals court to review all of the evidence on punitive damages without regard to the trial court's decision.

The U.S. Supreme Court agreed to hear Cooper's appeal to resolve the division among the federal circuits over the appropriate standard of review for punitive damages. The Court, in an 8–1 decision, determined that the federal courts should apply de novo review. Justice JOHN PAUL STEVENS, writing for the majority, concluded that the nature of punitive damages demanded that appeals courts conduct a fresh inquiry. He noted the similarities of punitive damages to criminal fines and cited various criminal cases that addressed the proportionality of sentences that relied on de novo review. Moreover, Stevens rejected the idea that when a jury awards punitive damages, it makes a finding of fact that could not be disturbed by an appeals court unless it was clearly erroneous.