In the case of City of Newport et al. v. Fact Concerts, Inc., et al., 1980, the U.S Supreme Court ruled that municipalities are not liable for punitive damages under Section 1983 in federal court lawsuits. The dispute arose when FACT Concerts sued Newport and its officials after they cancelled a jazz festival due to concerns about potential violence and drug use. FACT claimed this violated their First Amendment rights and sought compensatory as well as punitive damages. While the jury awarded both types of damages, on appeal it was decided that while cities could be held responsible for compensatory damages (actual harm caused), they were immune from punitive ones (meant to punish). This decision was based on considerations such as municipal immunity traditions dating back to common law principles, public policy reasons like deterring future misconduct by individual officers rather than punishing taxpayers collectively, and legislative intent behind Section 1983 which did not explicitly provide for municipal liability in terms of punitive damages.

In the dissenting opinion for CITY OF NEWPORT et al. v. FACT CONCERTS, INC., et al., 1980, Justice Blackmun argued that municipalities should not be granted absolute immunity from punitive damages under Section 1983 of the Civil Rights Act. He contended that this broad interpretation was inconsistent with both historical and modern principles of municipal liability and contradicted Congress's intent when it enacted Section 1983 to deter violations of constitutional rights by state actors. Furthermore, he believed there were sufficient safeguards in place to prevent frivolous lawsuits or excessive awards against cities without granting them complete immunity from punitive damages. Therefore, he disagreed with the majority's decision which effectively shielded municipalities from being held fully accountable for their actions.