Opposition Brief — Great Republic Insurance v. Cheval ex rel. Miller

| FILED

| JUN 2. 1889

No. 88-1784 JOSEPH F. SPANIOL, JR.

Sit RK

—

In The

Supreme Court of the United States

October Term, 1988

sa

=

GREAT REPUBLIC INSURANCE COMPANY and GREAT

REPUBLIC LIFE INSURANCE COMPANY,

Petitioners,

VS.

La VERNE CHEVAL, By And Through Her

Conservator, MARTIN MILLER,

Respondent.

a

e

OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI TO THE COURT OF APPEAL

OF CALIFORNIA, FIRST APPELLATE DISTRICT

A.

vy

GRIFFINGER, LEVINSON, FREED & HEINEMANN

ARNOLD R. LEVINSON

(Counsel of Record)

One Market Plaza

Steuart Street Tower, 24th Floor

San Francisco, CA 94105-1415

(415) 243-0300

FIEDLER GARDNER & DERHAM

Rosert DERHAM

Ghirardelli Square

Cocoa Building, Suite 450

900 North Point

San Francisco, CA 94109

(415) 922-9404

Attorneys for Respondent

La Verne Cheval, by and through her

conservator, Martin Miller.

COCKLE LAW BRIEF PRINTING CO,, (800) 225-6964

OR CALL COLLECT (402) 342-2831

TABLE OF CONTENTS

Page

pe EF Be See ta | er ii

BRIEF IN OPPOSITION TO WRIT OF CERTIORARI... 1

PEPE EES GW BNC GA vice cccncccenverseces: 1

REASONS FOR DENYING THE WRIT............. 3

I. THE EIGHTH AMENDMENT ISSUE PRESENTED

BY THE PETITION WAS NOT PRESSED AND PAS-

ee SO TE Sa re ecaed cau ean tana weben te

A. Petitioners Did Not Raise The Eighth Amend-

ment Issue In The Court Of Appeal.........

B. The Court Of Appeal Did Not Rule On The

Eighth Amendment Question................

Il. THIS CASE IS NOT SIMILAR TO BROWNING-

EE PE eo os hs no wk nt sen eweneeeeices

A Re rrr ere rire Perr tere eer

ii

TABLE OF AUTHORITIES

CASES

Bankers Life and Casualty Co. v. Crenshaw, 486

U.S. __, 108 S.Ct. 1645, 100 L.Ed.2d 62 (1988) ...4, 5

Bowe v. Stott, 233 U.S. G56 (iP iay soviet coe avcee- sees 4

Browning-Ferris Industries v. Kelco Disposal, Inc.,

_.. U.S. __, 109 S.Ct. 527, 102 LEd.2d@ 529

(TORO) 2. cove cccven cues byes penne eee eee: 6, 7

Cardinale v. Lousiana, 394 U.S. 437 (1969)............ 3

Herndon v. Georgia, 295 U.S. 441 (1935) ............. 4

Illinois v. Gates, 462 US. 213 (ISRGh 6536s oa ese 4

McGoldrick v. Compagnie Generale Transatlanti-

que, 309 US. S350 ClO) ion 6 suite eee 3

Neal v. Farmers Insurance Exchange, 21 Cal.3d

910, 582 P.2d 980, 148 Cal.Rptr. 389 (1978)......... 8

Oxley Stave Co. v. Butler County, 166 U.S. 648

CRGBT) ones ev cccdbvduu punk de on eee eeea ee Cedar eaees 4

Street v. New York, 394 U.S. 576 (1969) .............. 6

Toole v. Richardson-Merrell Inc., 251 Cal.App.2d

OND IGG) «oe in dsca st ase raeben er eanee eeee 6

Webd v. Webb, 451 US. 693 (IDG1) i usc cee ies ress 6

STATUTES

CALIFORNIA CIVIL CODE

ee rrr srr mr ere 4; 5

OR BE iin sad ave soo ca aera eee peo

CALIFORNIA STATUTES

1987 Chapter 1498

oe RPE Ere er err es Serr ors & 5

Be cae Vein Secale nee 5

BRIEF IN OPPOSITION TO WRIT OF CERTIORARI

STATEMENT OF THE CASE

The relevant facts are set forth in the opinion of the

California Court of Appeal.’ These facts show that peti-

tioners are in the business of selling nursing home insur-

ance. Petitioners sold a “SKILLED NURSING HOME

INSURANCE” policy to respondent La Verne Cheval.

The policy promises to pay the policyholder $40 for each

day the policyholder is “necessarily and continuously”

confined to a skilled nursing home, on the advice of a

physician.

In January, 1985, Mrs. Cheval’s doctor placed her ina

skilled nursing home, following a fall that broke her hip.

The broken hip was another step in the gradual deteriora-

tion of Mrs. Cheval’s health that began when she suffered

a stroke in 1983. In addition to the broken hip, she suf-

fered from heart disease and advanced diabetes. The

diabetes had left her legally blind. She was also deaf,

incontinent of bowel and bladder, and unable to walk.

She required constant observation by skilled nurses

because she was a “brittle” diabetic, i.e., one who is

subject to rapid changes in her blood sugar levels. A

brittle diabetic in Mrs. Cheval’s frail condition requires

close observation because an undetected change in her

blood sugar could be fatal. On top of all this, Mrs. Cheval

received potentially toxic heart medication when her api-

cal pulse (the heart beat as measured by a stethoscope)

dropped below a certain rate. As Mrs. Cheval’s doctor

1 That opinion is included in the Appendix to the Petition

for Writ of Certiorari, at A-4 to A-18.

told petitioners on one occasion, the need for skilled

nursing care would be obvious to petitioners if they ever

saw Mrs. Cheval. They never did.

Incredibly, in August 1985 petitioners decided that

Mrs. Cheval no longer required “skilled nursing care”.

Petitioners made this decision knowing full well that Mrs.

Cheval was receiving the same nursing services that peti-

tioners had up until that time considered skilled nursing

care. This and other evidence showed that petitioners

employed an ever-changing definition of skilled nursing

care that became increasingly more restrictive as Mrs.

Cheval’s health deteriorated. As a result, treatment con-

sidered to be skilled nursing care in 1983 was no longer

covered by the same policy in 1985.

At trial, California nursing home experts — including

Mrs. Cheval’s physician, the nursing director of the

skilled nursing facility, and a representative of Medi-Cal,

the state sponsored health insurance program — emphat-

ically agreed that under California law Mrs. Cheval could

not be admitted to any nursing home that provided any-

thing less than skilled and continuous nursing care. Peti-

tioners never presented any contrary evidence.

After a week long trial, the jury awarded Mrs. Cheval

$32,200 in contract damages. The parties stipulated that

the reasonable attorney’s fees owed to her as a result of

the bad faith denial of her insurance claim amounted to

$8,050. The jury also awarded $500,000 in punitive dam-

ages, to punish petitioner for its fraudulent marketing of

an insurance policy that promised far more than peti-

tioners intended to deliver, and also to deter petitioners

from handling in a similar manner any future claims from

the thousands of other people in California who had

stored this insurance policy in a desk drawer or safety

deposit box, intending to use it as a safety net when

calamity struck.

REASONS FOR DENYING THE WRIT

I.

THE EIGHTH AMENDMENT ISSUE PRESENTED

BY THE PETITION WAS NOT PRESSED AND

PASSED UPON BELOW.

This Court has repeatedly held that it is without

authority to review the decision of a state court unless it

affirmatively appears that a Federal question was actually

raised and actually decided. Cardinale v. Lousiana, 394 US.

437, 439 (1969). The reasons for this long-recognized rule

are set forth in McGoldrick v. Compagnie Generale Trans-

atlantique, 309 U.S. 430, 434-35 (1940):

“In cases coming here from state courts in which a

state statute is assailed as unconstitutional, there are

reasons of peculiar force which should lead us to

refrain from deciding questions not presented or

decided in the highest court of the state whose judi-

cial action we are called upon to review. Apart from

the reluctance with which every court should pro-

ceed to set aside legislation as unconstitutional on

grounds not properly presented, due regard for the

appropriate relationship of this Court to state courts

requires us to decline to consider and decide ques-

tions affecting the validity of state statutes not urged

or considered there. It is for these reasons that this

Court, where the constitutionality of a statute has

been upheld in the state court, consistently refuses to

consider any grounds of attack not raised or decided

in that court.”

Whether the failure to raise properly a federal ques-

tion in state court is a jurisdictional defect or a prudential

limitation on the exercise of jurisdiction appears to be an

open question. Illinois v. Gates, 462 U.S. 213, 219-20 (1983);

Bankers Life and Casualty Co. v. Crenshaw, 486 U.S. __, 108

S.Ct. 1645, 1651, 100 L.Ed.2d 62 (1988). In any event, the

Eighth Amendment question cannot be considered by

this Court because that question was neither raised in nor

decided by the California Court of Appeal.

A. Petitioners Did Not Raise The Eighth Amend-

ment Issue In The Court Of Appeal.

It is well-recognized that a bare reference to the

“Constitution of the United States” is insufficient to raise

a Federal question. See, e.g., Herndon v. Georgia, 295 U.S.

441, 442-43 (1935); Oxley Stave Co. v. Butler County, 166

U.S. 648 (1897); Bowe v. Stott, 233 U.S. 658, 664-65 (1914).

Here, petitioners merely asked the Court of Appeal

to defer its decision until this Court had issued its deci-

sion in Bankers Life. Petitioners’ entire argument in the

Court of Appeal on the constitutionality of punitive dam-

ages is set forth at page A-23 of the Appendix attached to

the Petition. Petitioners did not challenge the California

punitive damage statute on the basis of either the Four-

teenth Amendment or the Eighth Amendment.? Instead,

2 California Civil Code sections 3294 and 3295 instruct

when and how punitive damages may be awarded. The statute

(Continued on following page)

petitioners elected to let their constitutional challenge

rise or fall with Bankers Life.

This Court issued its decision in Bankers Life on May

16, 1988, weeks before respondent filed her opposition to

petitioners’ opening brief in the Court of Appeal, and

months before the Court of Appeal filed its decision on

January 5, 1989. Petitioners’ constitutional challenge to

the punitive damages expired when this Court elected

not to review the constitutionality of punitive damages in

Bankers Life. At no time after Bankers Life was decided did

petitioners recast or renew their constitutional argument.

In fact, their 44 page reply brief in the Court of Appeal

contains no mention of any constitutional issues. Sim-

ilarly, petitioners never raised any constitutional issues

during oral argument. It appears, therefore, that peti-

tioners had no constitutional claim whatsoever before the

Court of Appeal when the court issued its decision in

January, 1985.

(Continued from previous page)

was amended after the jury verdict in this case. See, Cal. Stats.

1987, ch. 1498, §§ 5 and 6. The amended statutes provide that

punitive damages may be awarded only upon “clear and con-

vincing evidence” that a defendant has acted with malice,

fraud or oppression, as those terms are defined by the statute.

Cal. Civ. Code § 3294, subd. (a). In addition, evidence of a

defendant’s financial condition may not be introduced at trial

until the jury has found the defendant guilty of malice, fraud

or oppression. Cal. Civ. Code § 3295, subd. (d). The amend-

ments address several of the issues raised by petitioners, ren-

dering this case of interest only to the parties involved. This is

another reason to deny the petition.

B. The Court Of Appeal Did Not Rule On The

Eighth Amendment Question.

This Court has frequently stated that “when the high-

est state court has failed to pass upon a federal question,

it will be assumed that the omission was due to want of

proper presentation in the state courts, unless the

aggrieved party can affirmatively show the contrary.”

Street v. New York, 394 U.S. 576, 582 (1969); Webb v. Webb,

451 U.S. 493, 495 (1981). Petitioners assert that the Court

of Appeal resolved the Eighth Amendment issue in the

court’s one sentence statement that “[d]efendant’s attack

on the constitutionality of punitive damages, raised for

the first time on appeal, is without merit.” Petition, at 4.

However, the case cited by the Court of Appeal, Toole v.

Richardson-Merrell Inc., 251 Cal.App.2d 689, at pages

716-17, (1967) makes no reference to the Eighth

Amendment.

It is apparent that the Eighth Amendment issue peti-

tioners now raise is a mere afterthought. It was never

raised at trial, never mentioned on appeal. The parties

never debated the merits of this argument. More impor-

tantly, there is no record that the California Court of

Appeal decided this Federal question. It would be error

to presume that it did. i

II.

THIS CASE IS NOT SIMILAR TO BROWNING-

FERRIS INDUSTRIES.

Petitioners assert the instant case is similar to Brown-

ing-Ferris Industries v. Kelco Disposal, Inc., cert granted, ___

U.S. __, 109 S.Ct. 527, 102 L.Ed.2d 529 (1988). Petitioners

have asked this Court to hold the petition until a decision

is reached in Browning-Ferris. Petition, at 28.

There are several differences between this case and

Browning-Ferris. First, the damages are of a very different

order of magnitude. Browning-Ferris involves actual dam-

ages of approximately $50,000 and punitive damages of

$6 million. Here, the actual damages are $40,250 and the

punitive damages are $500,000. Because the question of

excessiveness is one of degree, the amount of the dam-

ages is necessarily relevant in determining whether con-

stitutional boundaries (if any exist) have been exceeded.

The damages in the instant case are not disproportionate

to the actual harm suffered, and are not otherwise

excessive.

. Second, the conduct to be punished and deterred is

qualitatively different. Petitioners and respondent in this

case are not two competitors locked in a commercial

dispute, as is the case in Browning-Ferris. Rather, respon-

dent was a frail, elderly woman trying to collect insur-

ance benefits she needed in order to pay for her nursing

home care. It is utterly reprehensible for an insurance

company, faced with such a claim, to invent a series of

false excuses for not paying the claim, leaving the insured

without the benefits she relied on to pay her medical

bills. Both the trial court judge and the California Court

of Appeal examined petitioners’ conduct and found the

damages awarded by the jury to be appropriate.

Third, the California punitive damage statute pro-

vides a completely different standard for awarding puni-

tive damages than Vermont, the state where Browning

Ferris Industries arose. California jury instructions provide

guidelines to assist the jurors in determining whether

punitive damages should be awarded, and if so, in what

amount. See, Book of Approved Jury Instructions (BAJI) No.

14.71 (7th ed. 1988 pocket pt.). Moreover, California has a

well-developed body of case law that guides the trial

court in ruling on a motion to remit the punitive dam-

ages. See, e.g., Neal v. Farmers Ins. Exch., 21 Cal.3d 910,

927, 582 P.2d 980, 148 Cal.Rptr. 389 (1978).

The damages awarded in this case do not give cause

for review by this Court, even if the Eighth Amendment

issue had been properly preserved in the state court.

a

vv

CONCLUSION

For the reasons stated above, respondent requests

that the petition be denied.

Respectfully submitted,

GRIFFINGER, LEVINSON, FreED & HEINEMANN

ARNOLD R. LEVINSON

(Counsel of Record)

One Market Plaza

Steuart Street Tower, 24th Floor

San Francisco, CA 94105-1415

(415) 243-0300

FIEDLER GARDNER & DERHAM

Ropert DERHAM

Ghirardelli Square

Cocoa Building, Suite 450

900 North Point

San Francisco, CA 94109

(415) 922-9404

Attorneys for Respondent

La Verne Cheval, by and through her

conservator, Martin Miller.

REP

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syn 10 1989

No. 88-1784

ic aed a} r SPAN LOL, JR.

phe

———

In The

Supreme Court of the United States

October Term, 1988

,

GREAT REPUBLIC INSURANCE COMPANY and

GREAT REPUBLIC LIFE INSURANCE COMPANY,

Petitioners,

VS.

LaVERNE CHEVAL, By And Through Her Conservator,

MARTIN MILLER,

Respondent.

,’

=

REPLY TO OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI TO THE COURT OF APPEAL

OF CALIFORNIA, FIRST APPELLATE DISTRICT

,%

4

LYNBERG & WATKINS

MakrtTIN D. KapLan

888 South Figueroa Street, 16th Floor

Los Angeles, California 90017-2516

Horvitz & Levy

Davip M. AxELRAD

(Counsel of Record)

GEORGE P. SCHIAVELLI

S. THomas Topp

Grecory R. ELLs

15760 Ventura Boulevard, 18th Floor

Encino, California 91436

(818) 995-0800

Attorneys for Petitioners

Great Republic Insurance Company and

Great Republic Life Insurance Company

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

TABLE OF AUTHORITIES

INTRODUCTION

I.

IT.

TABLE OF CONTENTS

ee ee ee ee ee oe ee ne ee ee ee ee ee a a ee ee ee

PETITIONERS PROPERLY RAISED THE CON-

STITUFIONAL CHALLENGE TO PUNITIVE

Et ESR ey a Oe ES Pee eee ae eras

RESPONDENT MISCHARACTERIZED THE

CURRENT STATE OF CALIFORNIA’S PUNI-

TIVE DAMAGE LAW

il

TABLE OF AUTHORITIES

Page

CAsEs

Auto Equity Sales, Inc. v. Superior Court, 57 Cal.

2d 450, 369 P.2d 937, 20 Cal. Rptr. 321 (1962)...... 4

Bankers Life & Casualty Co. v. Crenshaw, 108 S.

C2. 1645 (1966) .... 6005 1c aeee eeeee y

Barr v. Columbia, 376 U.S. 166 (196@). csc 05 cs 2

Downey Sav. & Loan Ass’n v. Ohio Casualty Ins.

Co., 189 Cal. App. 3d 1072, 234 Cal. Rptr. 835

(1987), cert. denied, 108 S. Ct. 2023 (1988) ......... 4

Flores v. Natividad Medical Center, 192 Cal. App.

a0 1106, 238 Cal. Rpty. 26 (IGG hc ccc ccs cv sases ses 3

Hale v. Morgan, 22 Cal. 3d 388, 584 P.2d 512, 149

Cal. Rots. 375 (1976)......0c05 045 3

Hathorn v. Lovorn, 457 U.S. 255 (1962)... .....4«:;. Zz, 3

Llinois v. Gates, 462 U.S: 213 (legen cee 2

Jolly v. Eli Lilly & Co., 44 Cal. 3d 1103, 751 P.2d

923, 245 Cal. Rpty. 656 (ISG). csciewcos eee 3

Moradi-Shalal v. Fireman’s Fund Ins. Companies,

46 Cal. 3d 287, 758 P.2d 58, 250 Cal. Rptr. 116

(1968S) . 4. cnc ecoseeuee eee es Seu nee 1, 4

Toole v. Richardson-Merrell Inc., 251 Cal. App. 2d

669, 60 Cal. Epte. 398 (1907) «5 eee eee 4

Tyre v. Aetna Life Ins. Co., 54 Cal. 2d 399, 353 P.2d

725, 6 Cal. Rpts. 139 (1000)... 55.5435 3

TABLE OF AUTHORITIES —- Continued

Page

FEDERAL CONSTITUTIONAL PROVISIONS, STATUTES, AND RULES

er dre vneWir keen vevecceveeswias passim

STATE STATUTES

California Civil Code section 3294................. 1, 6

California Rules of Court, Rule 29(b)(1).............. 2

OTHER AUTHORITIES

Book of Approved Jury Instructions (BAJI) No.

oO BEE ro i i ee eee ee 5, 6

R. Stern, E. Gressman & S. Shapiro, Supreme

Court Practice § 3.21, at 149-50 (6th ed. 1986)...... 2

INTRODUCTION

Respondent’s opposition contains erroneous state-

ments of fact and law. Contrary to respondent’s conten-

tions, Great Republic raised the constitutional challenge

to punitive damages in the courts below, and the 1988

revision to California Civil Code section 3294 and Califor-

nia’s standard jury instructions does not remedy the

serious constitutional infirmities of California’s punitive

damage scheme.

4

PETITIONERS PROPERLY RAISED

THE CONSTITUTIONAL CHALLENGE

TO PUNITIVE DAMAGES.

Respondent contends Great Republic did not prop-

erly raise below its constitutional challenge to Califor-

nia’s punitive damage scheme. Opposition to Petition for

Writ of Certiorari (hereinafter “Opposition”) at 4-5. This

is incorrect.

In Great Republic’s Petition for Writ of Certiorari

(hereinafter “Petition”), we observed the California

Supreme Court has rejected constitutional attacks on

punitive damages based upon due process arguments,

thus making it futile for Great Republic to raise such

issues in the trial court_or court of appeal. See Petition at

1-2 n.1. The due process issues were therefore preserved

by raising them in the petition for review to the Califor-

nia Supreme Court.!

1 Under Moradi-Shalal v. Fireman’s Fund Ins. Companies, 46

Cal. 3d 287, 292 n.1, 758 P.2d 58, 60 n.1, 250 Cal. Rptr. 116, 118

n.1 (1988), the California Supreme Court would have deemed it

(Continued on following page)

The California Supreme Court cases we cited, see id.,

did not expressly address the Eighth Amendment issue.

Nonetheless, Great Republic preserved the Eighth

Amendment issue below.

This Court will consider federal claims either raised

or considered and resolved by the appropriate state court

below. See, e.g., Illinois v. Gates, 462 U.S. 213, 218 n.1

(1983); see generally R. Stern, E. Gressman & S. Shapiro,

Supreme Court Practice § 3.21, at 149-50 (6th ed. 1986). The

Eighth Amendment attack on punitive damages was

explicitly raised in the California Supreme Court in Great

Republic’s petition for review. Petition app. at A-26. This

Court has held that raising a federal question initially in

the state’s highest court is sufficient to preserve the ques-

tion if state law does not consistently bar such procedure.

See Hathorn v. Lovorn, 457 U.S. 255, 262-65 (1982) (cited in

Bankers Life & Casualty Co. v. Crenshaw, 108 S. Ct. 1645,

1650 (1988)); Barr v. Columbia, 378 U.S. 146, 149 (1964).

California law does not consistently bar this pro-

cedure. Rule 29(b)(1) of the California Rules of Court

provides that “on petition for review the [California]

Supreme Court normally will not consider: (1) any issue

that could have been but was not timely raised in the

briefs filed in the Court of Appeal” (emphasis added).

This rule cannot be characterized as a consistent bar to

(Continued from previous page)

futile to raise these issues in the court of appeal because the

supreme court's decisions finding no due process violation are

controlling.

raising an issue for the first time in the California

Supreme Court. See, e.g., Jolly v. Eli Lilly & Co., 44 Cal. 3d

1103, 1118, 751 P.2d 923, 932, 245 Cal. Rptr. 658, 667 (1988)

(“Defendants respond that the issue is not properly

before us, as it was not raised below (Cal. Rules of Covrt,

rule 29), a contention we reject in light of the issue’s great

public importance”); Tyre v. Aetna Life Ins. Co., 54 Cal. 2d

399, 405, 353 P.2d 725, 729, 6 Cal. Rptr. 13, 17 (1960)

(“Defendant has been permitted to raise this issue for the

first time in this court because the facts are not disputed

and the issue merely raises a new question of law”). In

fact, it is the general rule in California that appellate

courts have discretion to consider a constitutional issue,

presented on undisputed facts, raised for the first time on

appeal. See, e.g., Hale v. Morgan, 22 Cal. 3d 388, 394, 584

P.2d 512, 516, 149 Cal. Rptr. 375, 379 (1978); Flores v.

Natividad Medical Center, 192 Cal. App. 3d 1106,

1117-1118, 238 Cal. Rptr. 24, 30-31 (1987). Because the

California Supreme Court had discretionary authority to

hear the Eighth Amendment issue raised in Great Repub-

lic’s petition for review, it cannot be said that the denial

of the petition was a “silent application of a procedural

bar.” Hathorn, 457 U.S. at 263.

Evening assuming arguendo it was not sufficient to

raise the Eighth Amendment issue for the first time in the

California Supreme Court, the issue was raised in the

California Court of Appeal as well. Great Republic

requested that the court of appeal align its ruling with the

upcoming decision in Bankers Life & Casualty Co. v.

Crenshaw, 108 S. Ct. 1645. Petition app. at A-23. Appel-

lants in Bankers Life raised both Eighth Amendment and

due process issues. See Bankers Life, 108 S. Ct. at 1649-50.

Hence an Eighth Amendment ruling in that case would

have bound the court of appeal in this case. The issue was

clearly before the court of appeal.

The court of appeal in fact ruled on Great Republic’s

constitutional attack on punitive damages, citing Toole v.

Richardson-Merrell Inc., 251 Cal. App. 2d 689, 716-17, 60

Cal. Rptr. 398, 417-18 (1967), which held that constitu-

tional guarantees applicable to criminal proceedings are

not required in civil actions. Apparently, the court of

appeal in this case interpreted Toole as rebutting Great

Republic’s Eighth Amendment as well as its due process

attack on the punitive damage award.

Great Republic did not raise the Eighth Amendment

issue in the trial court, but it was not necessary to do so

in order to preserve the issue for review by the court of

appeal. As discussed above, the court of appeal reached

the issue on the merits even though it had not been raised

in the trial court. Moreover, on February 26, 1987, the

court of appeal, in Downey Sav. & Loan Ass’n v. Ohio

Casualty Ins. Co., 189 Cal. App. 3d 1072, 234 Cal. Rptr. 835

(1987), cert. denied, 108 S. Ct. 2023 (1988), expressly

rejected an Eighth Amendment attack on California’s

punitive damage statute. Id. at 1100-01 (“Eighth Amend-

ment applies only to criminal actions, not to purely civil

penalties, as involved here”). The present case went to

trial after Downey Sav. & Loan Ass‘n, on July 27, 1987,

Petition app. at A-1, and the trial court was therefore

bound by the Downey Sav. & Loan Ass‘n decision. See Auto

Equity Sales, Inc. v. Superior Court, 57 Cal. 2d 450, 455, 369

P.2d 937, 939-40, 20 Cal. Rptr. 321, 323-24 (1962). Hence it

was pointless for Great Republic to raise the Eighth

Amendment issue in the trial court. See Moradi-Shalal v.

Fireman's Fund Ins. Cos., 46 Cal. 3d at 292 n.1, 758 P.2d at

60 n.1, 250 Cal. Rptr. at 118 n.1.

In sum, Great Republic did everything necessary to

preserve the Eighth Amendment issue for review in this

Court.

II.

RESPONDENT MISCHARACTERIZED THE CURRENT

STATE OF CALIFORNIA’S PUNITIVE DAMAGE LAW.

Respondent implies that the 1988 revision to Califor-

nia standard jury instruction, Book of Approved Jury

Instructions (BAJI) No. 14.71 (7th ed. 1988 supp.)

remedied the constitutional infirmities articulated by

Great Republic in its petition. Opposition at 7-8. Not so.

As was stated in the petition for certiorari, revised

BAJI No. 14.71 retains the constitutional inadequacies of

its 1986 predecessor. Petition at 14-18. For the Court’s

convenience we have attached at App., A-1 the text of

both BAJI No. 14.71 (7th Ed. 1986), which was given to

the jury in this case, and BAJI No. 14.71 (7th ed. 1988

supp.). A comparison of the two instructions makes clear

the inaccuracy of respondent’s implication that the

revised instruction has corrected the constitutional fail-

ings of its predecessor.?

2 Although the 1988 revision to BAJI 14.71 does change the

burden of proof to “clear and convincing evidence,” it does not

address the other constitutional deficiencies in California’s

punitive damage law: the lack of a “beyond a reasonable

doubt” proof standard, the lack of a legislatively-prescribed

statutory maximum, and the lack of any meaningful standards

governing a jury’s determination of the amount of a punitive

award. It likewise does not remedy the Eighth Amendment

problem.

Respondent also suggests amended Civil Code sec-

tion 3294, effective January 1, 1988, remedies all the con-

stitutional problems. This again is incorrect, for the same

reasons stated above with regard to the revision of BAJI

No. 14.71. It was the amendment to section 3294 that

resulted in the revision of BAJI No. 14.71. (For the Court’s

convenience we have attached the text of the revised

section 3294 at App., A-5.)3

Respondent is wrong that this case is “of interest

only to the parties involved.” Opposition at 5 n.2. It is of

great interest to all California defendants with punitive

damage claims pending, and, for that matter, all such

defendants across the nation. We urge that a writ of

certiorari be granted.

Respectfuly submitted,

LynserG & WarkINs

Martin D. Kaplan

888 South Figueroa Street, 16th Floor

Los Angeles, California 90017-2516

Horvitz & Levy

Davip M. AxELRAD

(Counsel of Record)

GeEorGE P. SCHIAVELLI

S. THomas Topp

Grecory R. ELLis

15760 Ventura Boulevard, 18th Floor

Encino, California 91436

(818) 995-0800

Attorneys for Petitioners

Great Republic Insurance Company and

Great Republic Life Insurance Company

3 The text of former section 3294 was attached to the

petition at App., A-27.

APPENDIX

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A-1

BAJI 14.71 (1986)

PUNITIVE DAMAGES - RECOVERY OF

AND MEASURE

If you find that plaintiff suffered damage as a [proxi-

mate] [legal] result of the conduct of the defendant on

which you base a finding of liability, you may then con-

sider whether you should award punitive damages

against defendant [___ only], for the sake of example and

by way of punishment. You may in your discretion award

such damages, if, but only if, you find by a prepon-

derance of the evidence that said defendant was guilty of

[oppression] [fraud] [or] [malice] in the conduct on which

you base your finding of liability.

[“Malice” means conduct which is [intended by the

defendant to cause injury to the plaintiff] [or] [carried on

by the defendant with a conscious disregard for the]

[rights] [or] [safety] of others.] [A person acts with con-

scious disregard of the rights or safety of others when

[he] [she] is aware of the probable dangerous conse-

quences of [his] [her] conduct and willfully and deliber-

ately fails to avoid those consequences. ]

[“Oppression” means subjecting a person to cruel

and unjust hardship in conscious disregard of that per-

son’s rights.]

[“Fraud” means an intentional misrepresentation,

deceit, or concealment of a material fact known to the

defendant with the intention on the part of the defendant

of thereby depriving a person of property or legal rights

or otherwise causing injury.]

The law provides no fixed standards as to the

amount of such punitive damages, but leaves the amount

A-2

to the jury’s sound discretion, exercised without passion

or prejudice.

In arriving at any award of punitive damages, you

are to consider the following:

(1) The reprehensibility of the conduct of the

defendant,

(2) The amount of punitive damages which will

have a deterrent effect on the defendant in the light of

defendant’s financial condition,

(3) That the punitive damages must bear a reason-

able relation to the actual damages.

If you find that plaintiff is entitled to an award of

punitive damages against defendant, you shall state the

amount of punitive damages separately in your verdict.

BAJI 14.71 (1988 Revision)

PUNITIVE DAMAGES —- RECOVERY OF

AND MEASURE - TRIAL NOT BIFURCATED

If you find that plaintiff suffered damage as a [proxi-

mate] [legal] result of the conduct of the defendant on

which you base a finding of liability, you may then con-

sider whether you should award punitive damages

against defendant [___ only], for the sake of example and

by way of punishment. You may in your discretion award

such damages, if, but only if, you find by clear and

convincing evidence that said defendant was guilty of

A-3

[oppression] [fraud] [or] [malice] in the conduct on which

you base your finding of liability.

[“Malice” means conduct which is [intended by the

defendant to cause injury to the plaintiff] [or] [despicable

conduct which is carried on by the defendant with a

willful and conscious disregard for the [rights] [or]

[safety] of others.] [A person acts with conscious disre-

gard of the rights or safety of others when [he] [she] is

aware of the probable dangerous consequences of [his]

[her] conduct and willfully and deliberately fails to avoid

those consequences. ]

[“Oppression” means despicable conduct that sub-

jects a person to cruel and unjust hardship in conscious

disregard of that person’s rights.]

[(“Despicable conduct” is conduct which is so [vile,]

[base,] [contemptible,] [miserable,] [wretched,] [or]

[loathsome] that it would be looked down upon and

despised by ordinary decent people.]

[“Fraud” means an intentional misrepresentation,

deceit, or concealment of a material fact known to the

defendant with the intention on the part of the defendant

of thereby depriving a person of property or legal rights

or otherwise causing injury.]

The law provides no fixed standards as to the

amount of such punitive damages, but leaves the amount

to the jury’s sound discretion, exercised without passion

or prejudice.

In arriving at any award of punitive damages, you

are to consider the following:

A-4

(1) The reprehensibility of the conduct of the

defendant.

(2) The amount of punitive damages which will

have a deterrent effect on the defendant in the light of

defendant’s financial condition,

[((3) The amount of actual damages.]

If you find that plaintiff is entitled to an award of

punitive damages against defendant, you shall state the

amount of punitive damages separately in your verdict.

A-5

§ 3294. Exemplary damages; when allowable; definitions

(a) In an action for the breach of an obligation not

arising from contract, where it is proven by clear and

convincing evidence that the defendant has been guilty of

oppression, fraud, or malice, the plaintiff, in addition to

the actual damages, may recover damages for the sake of

example and by way of punishing the defendant.

(b) An employer shall not be liable for damages

pursuant to subdivision (a), based upon acts of an

employee of the employer, unless the employer had

advance knowledge of the unfitness of the employee and

employed him or her with a conscious disregard of the

rights or safety of others or authorized or ratified the

wrongful conduct for which the damages are awarded or

was personally guilty of oppression, fraud, or malice.

With respect to a corporate employer, the advance knowl-

edge and conscious disregard, authorization, ratification

or act of oppression, fraud, or malice must be on the part

of an officer, director, or managing agent of the

corporation.

(c) As used in this section, the following definitions

shall apply:

(1) “Malice” means conduct which is intended by

the defendant to cause injury to the plaintiff or despicable

conduct which is carried on by the defendant with a

willful and conscious disregard of the rights or safety of

others.

(2) “Oppression” means despicable conduct that

subjects a person to cruel and unjust hardship in con-

scious disregard of that person’s rights.

A-6

(3) “Fraud” means an intentional misrepresentation,

deceit, or concealment of a material fact known to the

defendant with the intention on the part of the defendant

of thereby depriving a person of property or legal rights

or otherwise causing injury.

(d) Damages may be recovered pursuant to this sec-

tion in an action pursuant to Section 377 of the Code of

Civil Procedure or Section 573 of the Probate Code based

upon a death which resulted from a homicide for which

the defendant has been convicted of a felony, whether or

not the decedent died instantly or survived the fatal

injury for some period of time. The procedures for joinder

and consolidation contained in Section 377 of the Code of

Civil Procedure shall apply to prevent multiple recoveries

of punitive or exemplary damages based upon the same

wrongful act.

(e) The amendments to this section made by Chapter

1498 of the Statutes of 1987 apply to all actions in which

the initial trial has not commenced prior to January 1,

1988.