Constitutional – Punitive Damages Award – ‘As Is’ Sale – Duty to Disclose – Right to Due Process

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We adopted the court of appeals’ determination that the punitive damages award represents the highest award due process allows considering the particular facts of this case.

We affirmed the court of appeals.

The issue before us was the court of appeals’ affirmance of the trial court’s reduction of the punitive damages award. Respondent, a South Carolina car dealership, learned it had sold a car that consisted of two cars welded together, known as a “clipped car.” As a result, it re-purchased the car from the buyer. Subsequently, to avoid returning the car to the hands of a consumer, Respondent sold the car “as is” through a North Carolina auction open only to licensed car dealers. Only four months prior, the auction’s terms and conditions of sale changed to require the disclosure of a car’s damage, even when it is sold “as is.” Respondent was unaware of that new disclosure obligation as it did not receive written notice of the rule change, despite the auction’s policy mandating such notice. Accordingly, Respondent did not affirmatively disclose the car’s clipped condition. Instead, Respondent relied on the “as is” nature of the auction sale.

At auction, Petitioner O&W Cars, a North Carolina used car dealership, purchased the car for $5,200. Petitioner did not discover the clipped nature of the car in its inspection. Petitioner sold the car for $6,800. The purchaser subsequently discovered the car’s true, clipped condition and returned it to Petitioner. Petitioner then sued Respondent for actual and punitive damages, asserting fraud and unfair trade practices claims. The jury returned a verdict of $6,645 in actual damages and $2,381,888 in punitive damages, equaling a 358:1 ratio of punitive to actual damages.

The trial court found the punitive damages award constitutionally excessive in violation of Respondent’s right to due process and reduced the award to $46,515, representing a 7:1 ratio. The trial court found Respondent had a good-faith basis for believing no duty to disclose existed. The trial court also found no evidence Respondent ever made a false representation. The trial court also found that this was an “isolated incident.” Finally, the trial court found “there was little, if any, chance of harmful consequences to the [Petitioner].” The reduced punitive damages award was, according to the trial court, the “upper limit of the range of punitive damages awards consistent with due process” given the facts presented.

The court of appeals affirmed the reduced punitive damages award. We affirmed and adopted the court of appeals’ analysis and determination that the punitive damages award represents the highest award due process allows considering the particular facts of this case. We remanded to the trial court for consideration of additional matters unrelated to the punitive damages award.

Affirmed.

O’Shields v. Columbia Automotive LLC (Lawyers’ Weekly No. 010-011-24, 3 pp.) (John W. Kittredge, J.) Appealed from Richland County Circuit Court (R. Ferrell Cothran Jr., J.) C. Steven Moskos, of C. Steven Moskos, PA, of North Charleston; and Brooks Roberts Fudenberg, of the Law Office of Brooks R. Fudenberg, LLC, of Charleston, both for petitioner; James Y. Becker, of Columbia; Sarah Patrick Spruill, of Greenville; and Harry Clayton Walker Jr., of Charleston, all of Haynsworth Sinkler Boyd, PA, for respondent. South Carolina Supreme Court