In the case of TXO Production Corp. v. Alliance Resources Corp., et al., 1992, the U.S Supreme Court ruled on a dispute involving punitive damages awarded in a contract violation lawsuit. TXO Production Corporation was accused by Alliance Resources Corporation of slandering its title to certain oil and gas rights with malicious intent to reduce their value and force a sale at an artificially low price. A West Virginia jury found in favor of Alliance and awarded $19,000 in compensatory damages for lost profits but also granted $10 million as punitive damages due to TXO's egregious conduct. The Supreme Court upheld this decision despite arguments from TXO that such high punitive damage awards violated constitutional protections against excessive fines or cruel punishment under the Eighth Amendment, or denied fair process under Fourteenth Amendment’s Due Process Clause. The court concluded that while there is no set mathematical ratio between actual harm inflicted on plaintiff and level of punitive damages which may be constitutionally imposed, grossly excessive punishments could violate due process clause; however, it did not find this award grossly excessive given evidence presented about defendant's wealth (TXO being multi-billion dollar company) & reprehensible conduct.

In the dissenting opinion for TXO Production Corp. v. Alliance Resources Corp., Justice O'Connor, joined by Chief Justice Rehnquist and Justices Scalia and Thomas, argued that the punitive damages awarded were excessive in relation to the actual harm inflicted on Alliance Resources Corporation. The majority upheld a $10 million punitive damage award against TXO Production Corp., despite compensatory damages being only $19,000 - a ratio of more than 500:1. The dissenting justices believed this violated due process rights as it was grossly disproportionate to any potential or actual harm caused by TXO's actions. They suggested that such an award could have chilling effects on economic activity and discourage companies from pursuing legitimate business strategies out of fear of potentially ruinous punishments.