In the case of BMW of North America, Inc. v. Ira Gore Jr., 1995, the U.S Supreme Court ruled that excessively high punitive damages awards can violate due process rights under the Fourteenth Amendment. The plaintiff, Dr. Ira Gore Jr., purchased a new BMW and later discovered it had been repainted to cover minor damage before sale without his knowledge or consent. He sued for fraud and won $4,000 in compensatory damages and $2 million in punitive damages from an Alabama jury which was later reduced to $500,000 on appeal by state courts. The Supreme Court overturned this decision stating that although states have broad discretion over imposing punitive fines as deterrence against unethical business practices; they must be reasonable and proportional to actual harm suffered by plaintiffs - not grossly excessive or arbitrary as seen in this case where ratio between potential harm ($10k) versus awarded punishment ($2m) was unconstitutionally disproportionate (500:1). This landmark ruling established guidelines for determining constitutionality of such penalties based on degree of reprehensibility involved; disparity between actual/potential harm suffered & penalty imposed; comparison with civil/criminal penalties authorized/awarded for comparable misconduct within jurisdiction.

In the dissenting opinion for BMW of North America, Inc. v. Ira Gore Jr., Justice Scalia, joined by Justice Thomas and Chief Justice Rehnquist, argued that the Constitution does not constrain the size of a punitive damages award a state court can impose so long as it doesn't cross into "gross excessiveness." They contended that there is no clear historical or constitutional basis to support such judicial interference in punitive damage awards determined by juries and affirmed by state courts. The dissenters also criticized the majority's introduction of three guideposts (reprehensibility of defendant’s conduct, ratio between harm suffered and award granted, comparison with civil penalties in similar cases) to assess reasonableness of an award as vague standards which would create confusion rather than clarity. In their view, this decision represented an unwarranted expansion of federal power over state court judgments.