Divided COAKY Panel Reduces Punitive Damage Award in Economic Damages Case to 1:1 Ratio to Compensatory Damages

In a recent 2-1 decision, the Kentucky Court of Appeals reduced a massive punitive damages award (four times the substantial compensatory damages awarded) in a purely economic damages case to a ratio of one to one.

In Grant Thornton LLP v. Yung (2016 WL 4934672 (Ky.  App.) (rendered 9/16/16), a divided panel of the Court held that the award of damages by the trial court, which sat without a jury in a case involving claims of fraud and gross negligence against a major accounting firm in giving tax advice, was excessive, and held that a ratio of one to one was appropriate in light of the following factors:

  • The harm caused by the defendant’s conduct was purely economic;
  • The plaintiffs were sophisticated business entities that were not financially vulnerable; and
  • The underlying award of compensatory damages was substantial.

In light of those circumstances, the Court found that the reprehensibility of the defendant’s conduct was limited, and held that the four to one ratio exceeded the bounds of constitutional due process under Kentucky and federal precedent.

The decision is not final as the case is currently pending on a motion for discretionary review (not yet ruled on) to the Kentucky Supreme Court.