Reply Brief — Goodyear Tire & Rubber Co. v. Hodder

No. 88-626

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

THE GOODYEAR TIRE & RUBBER COMPANY,

Petitioner,

DALE L. HODDER,

Respondent.

REPLY MEMORANDUM

*Theodore B. Olson

Larry L. Simms

Of Counsel: GIBSON, DUNN & CRUTCHER

1050 Connecticut Avenue, N.W.

Robert B. Bell Washington, D.C. 20036-5303

Theodore J. Boutrous, Jr. (202) 955-8500

GIBSON, DUNN & CRUTCHER

1050 Connecticut Avenue, N.W. Attorneys for Petitioner

Washington, D.C. 20036-5303 *Cownsel of Record

(202) 955-8500

PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203

TABLE OF CONTENTS

. Presentation of Question 1—The Due Process

Clause Challenge to the Imposition of Pu-

nitive Damages for Having Failed in the Past

to Have Complied with a Subsequently For-

mulated Legal Standard ......... eee

. Presentation of Question 2—Goodyear’s Due

Process Clause Challenge to the Limitless

and Standardless Imposition of Punitive

I Fi acicsecantinajapideennabherstecieretasciaivicinanees

. The Presentation of Question 3—The Exces-

sive Fines Clause Challenge to the $4,000,000

Punitive DAMAGE AWOPG nci.cccccsecscsssccsssccesss

. No Prudential Considerations Counsel

Against Review of Minnesota’s Punitive

Damage System in this Case ............c eee

. The Questions Presented are Substantial and

Worthy of this Court’s Plenary Consideration

SUE NOE RMN Seas arcu ct.cec tic asee cuentas nav aainancaetih

Page

~]

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li

TABLE OF AUTHORITIES

CASES: Page

Aetna Life Insurance Co. v. Lavoie, 475 U.S. 813

(19GB) ...0ninnsa20sasssaukencentiapeenaianlaeeeaeeaeeeines 4

Balder v. Haley, 390 N.W. 2d 855 (Minn. App.

1986), rev'd, 399 N.W. 2d 77 (Minn. 1987) .... 9

Clay v. Clay, 397 N.W. 2d 571 (Minn. App.

1987) ...i+2+s00cdassecsccekahedssadiltlaasamaneaenneaoneenete 6

Comstock v. General Motors Corp., 358 Mich. 163,

99 N.W. 24 627 (1900) s.ciccaea eee 8.9

Frey v. Montgomery Ward & Co., 258 N.W. 2d 782

(Marin. 1977) scxscnsassouecacensacianen uae 8

Gryc v. Dayton-Hudson Corp., 297 N.W. 2d 921

(1960): s......0s001se.caaekesnsnseaseil ps usniinnenn ene nana ange 8

Hauenstein v. Loctite Corp., 347 N.W. 2d 272 (Minn.

1084) .......0:00<0ssexsesssaaseeeleeeelaianinantania nen 8

Solem v. Helm, 463 U.S. 277 (1988) .................0000 10

Willmar Poultry Co. v. Carus Chemical Co., 378

N.W. 2d 830 (Minn. 1960) i.cnnneeeene 8

FEDERAL CONSTITUTION:

Eighth Amendment, .....4<dicsessssiesasswestacaneeaeneie 6,7

Fourteenth Amendment (Due Process Clause) ...... passim

MINNESOTA STATUTES AND RULEs:

Minn. Stat. § 549.20 (067 ....0..05ce eee 6

Minn. R. App. P. 106 cscccusuunoeeeeeeeeee 3

MISCELLANEOUS:

4 W. Blackstone, Commentaries on the Laws of Eng-

land (1768) .....00::0s:ssecdscencahsesguenaneeaeaaen anaes 9-10

H. Packer, The Limits of the Criminal Sanction

(1968) .......:0000:.0se0sesaunueessnienes ines nine Pe)

REPLY MEMORANDUM

Respondent challenges the adequacy of petitioner’s pres-

entation of its federal questions to the Minnesota courts

through a series of factual assertions that are either ir-

relevant to that issue or are refuted by the record in this

case. Respondent also contends that he should prevail on

the merits of these questions. Goodyear will address each

of these arguments in turn.

1. Presentation of Question 1—The Due Process Clause

Challenge to the Imposition of Punitive Damages for

Having Failed in the Past to Have Complied with a

Subsequently Formulated Legal Standard

Respondent argues at great length, Opp., at 4-13, that

Goodyear was aware that he was seeking to establish li-

ability on the theory that Goodyear had failed to meet a

continuing duty to warn persons in respondent’s position

of hazards associated with misuse of KWX rims. Goodyear,

however, has never contended that it was unaware of

respondent’s propcsed new legal theory. Indeed, as

respondent observes, Opp. at 6, Goodyear filed pretrial

motions 1n limine to exclude evidence related to this the-

ory of liability and the trial court denied those motions at

that stage of the proceedings.

Its motions in limine having been denied, Goodyear un-

derstandably introduced evidence at trial of the substantial

efforts it had made voluntarily—not under legal compul-

sion and not in recognition of any legal duty—to inform

users of the KWX rim regarding the dangers of its misuse.

Goodyear, however, never acceded! to the proposition that

‘ Respondent, Opp., at 11-12, asserts that Goodyear ‘‘acknowledg{ed]”’

a post-sale duty to warn by offering to stipulate, eighteen months prior

to trial and in return for an agreement by respondent to limit discovery,

that it had become aware in the mid-1970s of certain consequences

~ associated with the misuse of multi-piece tire rims. The limited purpose

of that proffered stipulation was to strike a bargain with respondent

regarding evidence and discovery. What respondent fails to point out

Minnesota law imposed a continuing post-sale duty to warn

and, as this case went to the jury, the trial court concurred

in Goodyear’s position. Respondent, for the second time

in this Court,? fails to acknowledge this crucial fact, which

is demonstrated by a colloquy reproduced in App. E to

the Petition, 39a-40a, but which merits reiteration here:

(MR. RISJORD, counsel for respondent Hodder:]}

You could punish them sure, and you punish for

past acts. Punitive damages is based on the past

acts, the failure up to the time Dale Hodder got

hurt to tell anybody, why didn’t—

MR. HENDRICKS [counsel for Goodyear]: Ob-

jection, Your Honor. That’s improper argument

on punitive damages.

[13,956] MR. RISJORD: No. it’s a continuing fail-

ure to warn.

THE COURT: Sustained.

MR. RISJORD: Well, they are liable for a con-

tinuing failure to warn up to the time —

MR. HENDRICKS: Same objection, Your Honor.

MR. RISJORD:—Dale Hodder was injured.

MR. HENDRICKS: Outside the scope of the in-

structions and improper.

MR. RISJORD: No, it isn’t; no it isn’t.

THE COURT: Sustained.

to the Court is that he refused to accept that proposed stipulation,

which therefore never existed and has no relevance to this case in the

Minnesota courts or this Court.

? Respondent presented a virtually identical argument in his Oppo-

sition to Goodyear’s Application to Continue Stay without mentioning

that the trial court had ruled that this case would not be presented to

the jury on a continuing-duty-to-warn theory.

The record in this case is therefore quite specific. The

trial court precluded, and therefore the jury could not have

imposed, punitive damages on Goodyear for violating a

continuing, post-sale duty to warn. Respondent did not

challenge the trial court’s order on this point by filing a

cross appeal, known in Minnesota as a ‘“‘notice of review,”

as he was required to do under Minn. R. App. P. 106.°

Thus, this case did not go to the jury or on direct appeal

to the Supreme Court of Minnesota on a continuing, post-

sale duty to warn theory. Goodyear therefore had no oc-

casion and no obligation, as a matter of state law, to object

to an award of punitive damages on the basis of such a

theory. It was only when the Supreme Court of Minnesota

resurrected that theory* and, in doing so, approved that

theory for the first time in its jurisprudence, and then

imposed a $4,000,000 penalty on Goodyear for not adher-

ing to that duty eight years earlier, that Goodyear had

the occasion and obligation to object. And Goodyear did

so in the first pleading filed thereafter—its Petition for

Rehearing.®

* Under Minn. R. App. P. 106, an appellee is required to file a ‘‘notice

of review’’ within fifteen days of the filing of the appellant’s notice of

appeal if it wishes to preserve for appellate review issues decided ad-

versely to it by the trial court.

‘In its decision, the Supreme Court of Minnesota acknowledged that

the instruction given to the jury on duty to warn ‘‘seems to be drafted

with time-of-sale warnings primarily in mind’’ but went on to state

that that instruction ‘“‘does not purport to preclude a post-sale duty to

warn nor to declare what the law might be on the subject.”’ Pet., App.,

12a. Having thus concluded that that instruction did not inform the

jury regarding the correct law to apply, that court went on to declare

for the first time in its jurisprudence that ‘‘a continuing post-sale duty

to warn existed” and, remarkably, that this duty ‘‘was adequately sub-

mitted.”” Jd. The most clairvoyant litigant could not be charged with

anticipating such a feat of judicial legerdemain.

‘Respondent, Opp., at 7-8, cites a number of Minnesota and non-

Minnesota cases for the proposition that Goodyear, by the time of trial,

should have known “‘the direction the appellate courts would take” with

2. Presentation of Question 2—Goodyear’s Due Process

Clause Challenge to the Limitless and Standardless Im-

position of Punitive Damages

Without any specific focus on Goodyear’s presentation

to the Minnesota courts of its federal constitutional ob-

jections to the imposition of unlimited punitive damage

awards under vague, subjective and elastic standards,

respondent asserts broadly, Opp., at 13-16, that questions

presented for the first time on rehearing will not be heard

by the court below and that Goodyear failed to alert the

Attorney General of Minnesota to this challenge, Opp., at

17-22. These assertions are meritless for several reasons.

First, as Goodyear documents in its Petition, at 11-12

n.3, it challenged the “free rein” given to this jury, op-

erating under vague and general standards, on due process

grounds in the trial court and on direct appeal quoting,

inter alia, this Court’s decision in Aetna Life Insurance

Co. v. Lavoie, 475 U.S. 813, 828-29 (1986). Indeed, in his

brief on direct appeal respondent, without suggesting that

this argument had not been raised properly in the trial

court, joined issue and took the position that Aetna was

“not even remotely on point.’’ App., infra, 2a. Aetna is,

however, precisely on point, which may explain why

respondent’s Opposition does not even acknowledge Good-

year’s reliance on Aetna on direct appeal—a reliance which

undermines completely the premise of his argument that

this issue was raised for the first time on rehearing.

Second, the punitive damage award at issue in this case

is the $4,000,000 award imposed de novo by the Supreme

respect to a potential continuing duty to warn. Given the posture of

this case as it went to the jury and on direct appeal, those cases are

irrelevant to the question when Goodyear should have presented its Due

Process Clause challenge to the imposition of punitive damages under

a newly recognized standard of conduct. To the extent relevant, those

eases are discussed infra in connection with the merits of this Due

Process Clause issue.

Court of Minnesota after it determined that the jury’s

award had to be set aside because based upon an incorrect

legal theory, i.e., an alleged duty to recall. Goodyear was

not required to challenge, nor could it have challenged,

the constitutionality of this punitive damage award until

its petition for rehearing was filed. But in that petition,

at its first opportunity, it did so.* Respondent’s only ap-

parent response to this obvious defect in his argument is

the assertion, Opp., at 2, 25, that the court below “‘re-

mitted” the award to $4,000,000. As Goodyear, however,

demonstrates in its Petition, at 10-11, the Supreme Court

of Minnesota, in fact, imposed this $4,000,000 punishment

de novo on a legal theory with respect to which the jury

had not been instructed and that had never previously been

recognized by that court. This was in no sense a “remit-

titur,” nor did the court below regard it as such (the word

“remittitur’’ does not appear in the opinion of the court

below). However labelled, the substance of the action taken

by the Supreme Court of Minnesota in imposing this

$4,000,000 award stands independently of the jury’s award.

It is the action of the Supreme Court of Minnesota that

is now at issue in this Court.

Third, Goodyear did not notify the Attorney General of

Minnesota of this challenge because this chailenge is not

an attack on any particular Minnesota statute. Rather, it

was and is an attack on the absence of any Minnesota

statutes or court decisions placing maximum limits on pu-

nitive damage awards and adequately constraining the dis-

cretion of juries and, as in this case, appellate courts, in

* This fact also disposes of respondent’s contention, Opp., at 21, that

the court below was deprived of the opportunity to review the consti-

tutionality of the punitive damage award as a matter of state consti-

tutional law. In its Petition for Rehearing, Pet., App., 46a, 48a, 52a,

58a, 60a, Goodyear expressly and repeatedly interposed the pertinent

provisions of the Minnesota Constitution against this punitive damage

award.

7)

their exercise of their power to impose punitive damages.’

Until Minnesota enacts such a statute, defendants in Good-

year’s position have no statute to attack.*

3. The Presentation of Question 3—The Excessive Fines

Clause Challenge to the $4,000,000 Punitive Damage

Award

As discussed above, the punitive damage award at issue

is that imposed de novo by the Supreme Court of Min-

nesota. Without contesting this fact, respondent, Opp., at

27, asserts that Goodyear “‘cannot rely upon the decision

in this case ....” in this regard because Goodyear could

have raised an Eighth Amendment challenge to the jury’s

award. But the jury’s award was set aside because it was

predicated on a legal theory that had not been submitted

to it—failure to recall. Goodyear prevailed on this point

on appeal, Pet., App. A, 18a-20a. Had the court below

stopped at that point and ordered a retrial limited to pu-

nitive damages, there would have been no punitive damage

award subject to objection by petitioner. The court below

went on to act as both jury and reviewing court in im-

posing a new $4,000,000 award on a new legal theory,

‘The assumption underlying respondent's entire argument regarding

notification of the Minnesota Attorney General is that Goodyear chal-

lenged Minn. Stat. § 549.20 (1987) on its face, because the law is clear

that the Minnesota Attorney General need not be notified of cases in

which the application of a statute to a particular case is challenged as

unconstitutional. See Clay v. Clay, 397 N.W. 2d 571 (Minn. App. 1987).

Nowhere does respondent suggest to this Court the basis for this critical

assumption, which is unsupportable.

‘ Respondent, Opp., at 16, maintains that a litigant seeking to attack

the constitutionality of a statute in Minnesota must do so pre-trial

because such attacks are viewed as “‘atfirmative defenses’ that are

“waived.” However, neither the Minnesota rule cited by respondent

nor the Minnesota cases relied upon by him involve or make any ref-

erence to constitutional challenges to statutes or otherwise purport to

deal with the timeliness of a constitutional challenge to the de novo

imposition of a punitive damage award by the Supreme Court of Min-

nesota.

mooting completely the question of the constitutionality of

the jury’s $12,500,000 award under the Eighth (or Four-

teenth) Amendment. Goodyear’s constitutional objections

to the new punitive damage award were immediate and,

therefore, timely.

4. No Prudential Considerations Counsel Against Review

of Minnesota’s Punitive Damage System in this Case

Respondent argues that the $4,000,000 award in this

case “‘evidences”’ the close control that the Supreme Court

of Minnesota exercises over the imposition and size of

punitive damage awards. Opp., at 28. As Goodyear argues,

however, the $4,000,000 figure arrived at by that court

was completely arbitrary, unsubstantiated, essentially

unexplained, and, indeed, could have been virtualiy any

amount. Pet., at 10-11. If, as respondent correctly asserts,

the court below is satisfied that it has these issues well

in hand, there is no reason to believe that the passage of

time will alleviate the need for this Court to review the

constitutionality of Minnesota’s punitive damage system.

Likewise, respondent asserts that the fundamental is-

sues raised in this case regarding Minnesota's punitive

damage system ‘“‘have been carefully reviewed and regu-

lated by ... the Minnesota legislature ....’’ Opp., at 26.

Respondent apparently takes the position that Minnesota's

legislature has done all that needs to be done, but in any

event does not suggest that that body is prepared to go

beyond the cosmetic actions, Pet., at 24, it has recently

taken. In respondent’s own view, Minnesota’s legislature,

like its courts, is satisfied with the punitive damage sys-

tem. That being the case, there would be no purpose served

by any delay in this Court’s review of that system and

the arbitrary results it produces.

5. The Questions Presented are Substantial and Worthy of

this Court’s Plenary Consideration in this Case

On the merits, respondent does not appear to disagree

that the questions presented by Goodyear are, at least in

the abstract, substantial and important. Rather, he argues

that he would prevail because this case “represents the

most reasoned approach and result’’ of punitive damage

cases presently or recently on this Court’s docket. Opp.,

at 26. Respondent proves perhaps more than he intends,

because if his contentions are correct, then the Court will

have the opportunity in this case to approve the Minnesota

system as a model for other less enlightened States to

follow.

As for Question 1, respondent does not contest that

Goodyear should prevail if in fact liability for punitive dam-

ages was imposed for violation in 1981 of a legal duty

newly announced in 1988. Instead, respondent suggests

that a series of five Minnesota cases’ decided since 1977

‘foretold’ that the Supreme Court of Minnesota would

some day recognize a continuing, post-sale duty to warn

as was recognized by that court for the first time in 1988

in this case. Tellingly, not a single one of these cases was

relied upon by the Supreme Court of Minnesota in recog-

nizing a continuing, post-sale duty to warn in this case.

None of those cases is primarily concerned with a post-

sale duty to warn. Indeed, the only case even cited by the

Supreme Court of Minnesota in considering this new duty—

which, in that court’s own words, it had not ‘‘had occasion

to deal with ... before,’ was the decision of the Supreme

Court of Michigan in Comstock v. General Motors Corp.,

‘Frey v. Montgomery Ward & Co., 258 N.W. 2d 782, 786 (Minn.

1977); Grye v. Dayton-Hudson Corp., 297 N.W. 2d 921 (1980); Hauwen-

stein v. Loctite Corp., 347 N.W. 2d 272, 275 (Minn. 1984); Willmar

Poultry Co. v. Carus Chemical Co., 378 N.W. 2d 830 (Minn. 1985);

Balder v. Haley, 390 N.W. 2d 855 (Minn. App. 1986), rev'd, 399 N.W.

2d 77 (Minn 1987). Of these five cases, which are otherwise distin-

guishable from the case at bar on multiple grounds, only one—Gruc v.

Dayton-Hudson Corp.—involved a claim for punitive damages. Gryc,

contrary to respondent’s suggestion, involved a case in which the prod-

uct—flannel cloth used for children’s pajamas—was known by the man-

ifacturer prior to its sale to be unreasonably dangerous. 297 N.W. 2d,

at 730.

358 Mich. 163, 99 N.W. 2d 627 (1959). Comstock itself was

only cited as analogous, see Pet., App., 12a, presumably

because, unlike the case at bar, it involved a defective

product—this case does not involve a defective product—

where the defect became known to the manufacturer

“shortly after the product ha[d] been put on the market.”’

99 N.W. 2d, at 634.

In addition, respondent fails to acknowledge that neither

Comstock nor four of the five cases upon which he relies

even involved the imposition of punitive damages. See note

9, supra. Goodyear does not contend in this Court that

Minnesota is not free to push its common law in new

directions and, in doing so, to require manufacturers to

compensate persons who have been injured, even by non-

defective products such as the KWX rim, based upon newly

articulated standards of conduct. Indeed, Mr. Hodder has

‘ been completely compensated for his injuries by the Min-

nesota courts and Goodyear has not brought any federal

objections to the compensatory award to this Court. Good-

year’s argument is that a penalty or fine in the form of

punitive damages may not be imposed on manufacturers

for the violation of such newly announced, retroactively

applied standards of conduct because there is no state

interest in doing so that is even arguably sufficient to

overcome the fundamental unfairness inherent in doing so.

With respect to Question 2, respondent makes the cu-

rious argument that legislatures should not place what he

terms an “‘arbitrary ceiling’ on punitive damage awards

because doing so would allow defendants to ‘“‘budget”’ their

exposure to such awards into the cost of doing business.

Opp., at 25. But the limitless and intentionally capricious

system advocated by respondent is contrary to all accepted

rationales for punishment and deterrence that form the

basis of our legal system. See, e.g., H. Packer, The Limits

of the Criminal Sanction 45-48 (1968). As stated by Sol-

icitor General Blackstone, ‘‘punishments of unreasonable

severity, especially when indiscriminately inflicted, have

sesielieneineaieinnstaamaeilll

10

less effect in preventing crimes, and amending the man-

ners of a people, than such as are more merciful in gen-

eral, yet properly intermixed with due distinctions of

severity.”’ 4 W. Blackstone, Commentaries on the Laws of

England 16-17 (1768).

With regard to Question 3, respondent asserts that the

Court need not be concerned that the $4,000,000 award

“far exceeds the maximum punishment established by the

Minnesota legislature for similar conduct’’ because that

legislature has otherwise stated some factors to be con-

sidered in the imposition of punitive damages. Opp., at 28.

Respondent apparently takes the position that the Min-

nesota legislature need not be concerned at all with the

Eighth Amendment’s requirement, confirmed in Solem v.

Helm, 463 U.S. 277, 292 (1983), that a punishment au-

thorized by a State be reasonably proportioned to other

punishments imposed by that State for similar conduct. If,

as Goodyear asserted below and asserts in this Court, the

Eighth Amendment applies to punitive damage awards,

respondent’s position could not be sustained absent a se-

rious retrenchment by this Court from its decision in So-

lem. That, by itself, would present a substantial question

worthy of this Court’s review.

November 17, 1988 Respectfully submitted,

*THEODORE B. OLSON

LARRY L. SIMMS

Of Counsel: Gipson, DUNN & CRUTCHER

1050 Connecticut Avenue, N.W.

RoBertT B. BELL Washington, D.C. 20036-5303

THEODORE J. BouTrous, JR. (202) 955-8500

Gipson, DUNN & CRUTCHER Attorneys for Petitioner

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036-5303 *Counsel of Record

(202) 955-8500

la

NOS. C3-87-419 and C2-87-511

STATE OF MINNESOTA

IN SUPREME COURT

DALE L. HODDER,

Respondent (C3-87-419)

Appellant (C2-87-511)

vs.

THE GOODYEAR TIRE & RUBBER COMPANY

and MOTOR WHEEL CORPORATION,

Appellants (C3-87-419)

Respondents (C2-87-511)

Vs.

REMER OIL COMPANY,

Respondent.

DALE L. HODDER’S BRIEF AND APPENDIX

JOHN C. RISJORD & BARNA, GUZY, MERRILL, HYNES

ASSOCIATES, P.C. & GLANCOLA, LTD.

Attorneys for Dale L. Hodder Attorneys for Dale L. Hodder

John C. Risjord Paul E. Godlawaki

Randy W. James Attorney Registration No. 35567

Suite 410, Park Plaza 3959 Central Avenue, N.E.

801 West 47th Street Minneapolis, MN 55421

Kansas City, MO 64112 (612) 788-1644

(816) 531-5356

2a

ses ¢ 8

D. The Trial Court Correctly Applied The Standard Pu-

nitive Damage Instruction To Failure To Warn In A

Product Liability Case And Did Not Thereby Deny

Goodyear’s Right To Due Process Of Law.

Punitive damages for willful disregard in product liability

cases is well recognized in Minnesota. Gryc, supra. Here,

Goodyear’s constitutional argument is also based upon the

false promise that the Court submitted punitive damages

solely on a newly defined cause of action—failure to recall.

To the contrary, the Court submitted punitive damages pur-

suant to §549.20 and the standard JIG 3rd Ed. 195 instruc-

tion. Goodyear’s conduct in failing to warn and taking no

remedial action in the face of safety engineering recommen-

dations to recall is well defined and an obvious breach of

its duty to warn and instruct. Goodyear cannot argue that

it had no notice of a duty to recall the KWX rim because

it was given such notice by its own field engineering staff

and safety vice-president. RA.24, 47, 50. Goodyear cites no

case for the proposition that punitive damages in the posture

of this case violate its right to due process. Aetna Life In-

surance Co. v. Lavoie, 106 Sup. Ct. 1580, 1589 (1986), is

not even remotely in point. The United States Supreme Court

held that Defendant’s due process rights were violated be-

cause the Alabama Supreme Court Justice who wrote the

opinion affirming punitive damages had a similar bad faith

insurance claim pending that therefore a stake in the out-

come. The Court specifically declined to comment on the

appropriateness of punitive damages for insurance company

bad faith in Alabama.

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