# Petitioners Brief — Pacific Mutual Life Insurance v. Haslip > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0717%3A07 ## Record - **Collection:** Supreme Court brief - **Document type:** Petitioners Brief - **Published:** January 1, 1991 - **Citation:** 499 U.S. 1 ## Text ———— No. 89-1279 IN THE Supreme Court of the Un tes OcToBER TERM, 1989 PACIFIC MUTUAL LIFE INSURANCE COMPANY, Petitioner, VS. CLEOPATRA HASLIP, CYNTHIA CRAIG, ALMA M. CALHOUN and EDDIE HARGROVE, Respondents. ON WRIT OF CERTIORARI TO THE SUPREME COURT OF ALABAMA BRIEF OF PETITIONER Of Counsel: BRUCE A. BECKMAN VICKI “V.W. LAI Counsel of Record ADAMS, DUQUE & HAZELTINE ADAMS, DUQUE & HAZELTINE 523 West Sixth Street 523 West Sixth Street Los Angeles, California 90014 Los Angeles, California 90014 (213) 620-1240 (213) 620-1240 OLLIE L. BLAN, Jr. J. MARK HART BERT S. NETTLES SPAIN, GILLON, GROOMS, SPAIN, GILLON, GROOMS, BLAN & NETTLES BLAN & NETTLES 2117 Second Avenue North 2117 Second Avenue North Birmingham, Alabama 35203 Birmingham, Alabama 35203 (205) 328-4100 (205) 328-4100 Attorneys for Petitioner Pacific Mutual Life Insurance Company PETITION FOR CERTIORARI FILED FEBRUARY 7, 1990 CERTIORARI GRANTED APRIL 2, 1990 Lawyers Brief Service / Legal Printers / (213) 383-4457 / (714) 720-1510 adie QUESTIONS PRESENTED The following questions are presented by the Petitioner: 1. Whether Alabama law, as applied below, violates Due Process by allowing the jury to award punitive damages as a matter of "moral discretion," without adequate standards as to the amount necessary to punish and deter and without a necessary relationship to the amount of actual harm caused. 2. Whether Alabama law violated Pacific Mutual’s right to Due Process under the Fourteenth Amendment by allowing punitive damages to be awarded against it under a respondeat superior theory. 3. Whether the amount of punitive damages in this case was excessive, in violation of Pacific Mutual’s Due Process right to be free of grossly excessive, disproportionate dam- ages awards. 4. Whether the suit below, although nominally civil, must be considered sufficiently criminal in nature as to the puni- tive damages awarded therein to entitle Pacific Mutual to certain protections under the Fifth and Fourteenth Amend- ments to the United States Constitution. 5. Whether Alabama law is discriminatory in violation of the Equal Protection Clause of the Fourteenth Amendment, by encouraging disproportionate punishment without rational basis. 6. Whether the constitutional defects in the award of puni- tive damages against Pacific Mutual were cured by judicial review and the potential for a remittitur. =» RULE 29.1 STATEMENT Pursuant to Rule 29.1 of the Rules of this Court, petitioner Pacific Mutual Life Insurance Company states that it is a California mutual insurance company. It has no parent company, non-wholly owned subsidiary or affiliate. — - lil - TABLE OF CONTENTS Page QUESTIONS PRESENTED .....°........... i RULE 29.1 STATEMENT. ............... ii TABLE OF AUTHORITIES............... ix OPINIONS BELOW................... l EE ES eee l CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED ............... 1 STATEMENT OF THE CASE ............. 2 EE 2 B. THEACTIONBELOW ........... 3 C. STATEMENTOFFACTS.......... 3 1. Respondents’ Prior Coverage... .. . 3 2. Mr. Ruffin’s Solicitation ........ 3 3. Pacific Mutual Did Not Issue Group ME ow tt tt ttt 4 4. The Separate Applications to Union Fidelity and Pacific Mutual. ..... . 4 5. Issuance of the Separate Health and EE 4 6. Pacific Mutual’s Agents’ Contract Forbade Mr. Ruffin’s Conduct ..... 5 -iv- Page 7. Cancellation of Union Fidelity’s Health Coverage ............ 5 8. Mrs. Haslip’s Hospitalization. .... . 6 “TP ws Gs oe ce oe ke 6 >: Ts: 4s owe eee 6 i: SERRA ere ek Sy ag ee oe 7 c. The Punitive Damage Jury fe a ee we ee oe oS 7 Wes Fes 64 24 3 eo 8 8 e. Pacific Mutual’s Appeal. .... . 8 f. The Alabama Supreme Court Ras en eo Sig we ee se 8 g. Pacific Mutual’s Petition for DS Fo Caw ew ee 9 SUMMARY OF ARGUMENT.............. 9 1. Standardless Jury Discretion. ........ 9 2. Respondeat Superior. ............ 10 3. Excessiveness ofthe Award ......... 10 4. Criminal Procedural Protections ....... 11 5. Judicial Review Did NotCure........ 11 ALABAMA LAW, AS HERE APPLIED, AND PUNITIVE DAMAGES DOCTRINE GENER- ALLY, VIOLATES DUE PROCESS BY ALLOWING THE JURY TO AWARD PUNI- TIVE DAMAGES AS A MATTER OF “MORAL DISCRETION,” WITHOUT ADE- QUATE STANDARDS AS TO THE AMOUNT NECESSARY TO PUNISH AND WITHOUT A NECESSARY RELATIONSHIP TO THE AMOUNT OF ACTUAL HARM igs Sehr” ihe a a Gana aaa A. Punitive Damages Are Punishment, Imposed Through State Action, And As Such Are Subject To Due Proc- a B. The Jury Instruction On Punitive Damages In This Case, Which Conformed To Alabama Law, Gave The Jury Unlimited Discretion To Set The Amount Of Punishment To Be Imposed. This Violated Pacific Mutual’s Right To Due Process Under The Fourteenth Amendment... . 1. Basic Due Process Required Adequate Standards To Limit Jury Discretion In Determining The Severity Of Punishment ... . Page II. IIT. - Vi - 2. The Jury Instruction In This Case, Which Froperly Stated Alabama Law, Was Hopelessly Vague And Incomprehensible As A Basis. For Determining a ee C. The Absence Of Prior Establishment Of The Punishment To Be Imposed On Pacific Mutual for Mr. Ruffin’s Conduct Violated Pacific Mutual's Right to Due Process. .......... ALABAMA LAW VIOLATED PACIFIC MUTUAL’S RIGHT TO DUE PROCESS UNDER THE FOURTEENTH AMEND- MENT, BY ALLOWING PUNITIVE DAM- AGES TO BE AWARDED AGAINST IT UNDER A RESPONDEAT SUPERIOR a, ee ee ee ee a ae ee A. The Punitive Damages Award Herein Violated Due Process By Imposing Punishment For Conduct Not Authorized Or Ratified, And Not Performed To Benefit The is e678 he es oe Ke 8 THE AMOUNT OF THE AWARD OF PUNI- TIVE DAMAGES IN THIS CASE WAS EXCESSIVE, IN VIOLATION OF PACIFIC MUTUAL’S DUE PROCESS RIGHT TO BE FREE OF GROSSLY EXCESSIVE, DIS- PROPORTIONATE DAMAGES AWARDS . . Page .32 IV. VI. CONCLUSION - Vii - THE SUIT BELOW, ALTHOUGH NOMI- NALLY CIVIL, MUST BE CONSIDERED CRIMINAL IN NATURE AS TO THE PUNI- TIVE DAMAGES AWARDED THEREIN, ENTITLING PACIFIC MUTUAL TO PRO- TECTION UNDER THE FIFTH AND FOUR- TEENTH AMENDMENTS TO THE UNITED STATES CONSTITUTION .......... A. Beyond A Reasonable Doubt Stand- DS Gus 6 + 6-04 ob 6 @ we Ww tt tt te te es C. UpperLimitOn Awards......... D. Separation In The Order Of Trial Of Liability Issues From Punitive Damages Issues ............. ALABAMA PUNITIVE DAMAGES LAW IS DISCRIMINATORY IN VIOLATION OF THE EQUAL PROTECTION CLAUSE, BY ENCOURAGING DISPROPORTIONATE PUNISHMENT, WITHOUT RATIONAL GP ee a ee ee THE CONSTITUTIONAL DEFECTS IN THE AWARD OF PUNITIVE DAMAGES AGAINST PACIFIC MUTUAL IN THIS CASE WERE NOT CURED BY JUDICIAL REVIEW AND THE POTENTIAL FOR A © 6 6.6 6 6 0 6 08 &.0 018 6 Page - Viii - Page APPENDIX A PARTIAL LIST OF ALABAMA JURY VER- DICTS AWARDING PUNITIVE DAMAGES OF$:00,000ORMORE ............ Al APPENDIX B VARIOUS ALABAMA STATUTORY OF- FENSES AND CORRESPONDING MAXI- otis. Leelee Peres Bl - ix - TABLE OF AUTHORITIES Page Cases A.B. Small Co. v. American Sugar Refining Co. ST. 13, 16, 37 Addington v. Texas 441 U.S. 418 (1979)... .....020-20,,20202.. 39 Aetna Life Ins. Co. v. Lavoie 470 So.2d 1060 (Ala. 1984). .....,.,...... 12 American Fed. of Labor v. Swing ee 13 Baggett v. Bullitt ER ie ee ene 44 Bankers Life and Casualty Ins. Co. v. Crenshaw Co eee 18 Bell v. Wolfish I Ea rt te i to A Bag 12 Bouie v. Columbia Pee NS «6 so ok Se SreeQ 23, 42, 45 Browning-Ferris Industries of Vermont v. Kelco Disposal, Inc. 492U.S.___, 109 S.Ct. 2909 (1989)... . . 9, 17, 33 Burgess v. Salmon neil CE og aN Crd sre Ne 23, 37 Caider v. Bull 3 U.S. (3 Dall.) 386 (1798) ....... 23, 24, 32, 45 Page Charter Hospital Of Mobile, Inc. v. Weinberg to be published at 558 So.2d 150, 1990 Ala. Lexis 17 (Jan. 12, 1990). . . . 17, 21, 44, 46 City of Newport v. Fact Concerts, Inc. a ae a ee eer 19 Civil Rights Cases og ee ee are ar 13 Coates v. City of Cincinnati ee 15, 20 Connally v. General Const. Co. og GT ee a ee ae 15 Coombes v. Getz a 23 Crowe v. State 485 So.2d 351 (Ala.Cr.App. 1984), rev'd. on other grounds 485 So.2d 373 (Ala. 1985), cert. denied, ee I 6 ek GC ee et eh eee A 20 Cummings v. Missouri 71 U.S. (4 Wall) 277 (1867)... ...... 23, 37, 40 Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc. ope FR OT ee ee 19, 20 Dobbert v. Florida _ i | |, See a eee 24 Dowling v. Garner 195 Ala. 493, 70 So. 150 (Ala. 1915) ........ 17 ° Ri - Page Electrical Workers v. Foust See ee ea eee 18 Ettor v. Tacoma 6 o''o ke ee ebb ee eee 23 Ex Parte Garland Pe Wes Oe We Ce ss 6s 6 es le ee 23 Fletcher v. Peck > as PD OP CUED 6 6 ec 0 eee 0 e's 23 Furman v. Georgia ED sab. V 6 2 6 bos 6 Sere See 44 Gertz v. Robert Welch, Inc. es I oad se ae Oe SS 14, 18, 35, 41 Giaccio v. Pennsylvania 0 ee eee 13, 14, 20, 37 Gore v. United States a Pn as 6 5 hb ce ee eS 6 8 ES 26 Grayned v. City of Rockford A ee a 15, 42, 45 Greenbelt Coop. Publishing Assn. v. Bresler ee eae ee 44 Gregg v. Georgia es IG es ks Sa a 48 16, 33 Hammond v. City of Gadsden 493 So.2d 1374 (Ala. 1986). .......... 41-47 - Xli- Page Hogan v. Alabama Power Co. oon Se.ae Se (Ale. 1977). www tt 17 How Ah Kow v. Nunan 12 Fed.Cas. 252 (Case 6, 546, 1877). ........ 40 Hughes v. Superior Court Of California I, ge eS Ce a a 25 In Re Paris Air Crash 622 F.2d 1315 (9th Cir. 1980), cert. denied, 449 U.S. 976 (1980) ......... 13, 37 In Re Winship ae ee a ee 38 Jacobs v. Board of School Commissioners 490 F.2d 601 (7th Cir. 1973)... .........0.., 13 Jenkins v. Werger 564 F.Supp. 806 (D. Wyo. 1983). .......2..., 20 Jordan v. De George ee Ne i ee oe ee ec ee bees 13 Kennedy v. Mendoza-Martinez 2 37 Kolender v. Lawson oe 20 Lanzetta v. New Jersey Ee 15 - xiii - Page Livingston v. State 419 So.2d 270 (Ala. Cr. App. 1982). ........ 26 Logan v. Zimmerman Brush Co. ee eee ee ee 31 Marks v. United States ee ee a ee ae 22, 23, 42 Mathews v. Eldridge oS ee ee 38-40, 46 Miller v. Florida eee 16, 22, 24, 26 Morissette v. United States ee ee ee eee 28 New York Central And Hudson River R.R. Co. v. United States PU IS 6 oe 6s ee et ee eee 28, 30 Old Dearborn Distributing Co. v. Seagrams-Distillers Corp. PU SEs 6 5 6 6s 2 0 eke ee BE 41 Papachristou v. City of Jacksonville Re eae ee ee ee ee 40 Plyler v. Doe ee ee ee 33, 40 Riss & Co. v. United States 262 F.2d 245 (8th Cir. 1958). .......... 28, 30 - XiV - Page Roberts v. United States Jaycees oo 42, 45 Robinson v. California iC Sse 6 sw sg ee a ee ee 8 31 Roginsky v. Richardson-Merrell, Inc. ee 35 Roller v. Holly es 6 6 ocs p 6 6.8 & 6 ee 0 6 8 17 Rookes v. Barnard (1964) ASL. 1029; | AB Bag. Regt. 367... 2. ww we 21 Rosenbloom v. Metromedia, Inc. ee 14, 18, 41 Rummel v. Estelle en ig g ln ee s 47 Shelley v. Kraemer I a a ee eet a eis iS 13 Smith v. Goguen CG ee ee eee 20 Smith v. Wade PE I ies Cd Ke k's oe oe oe 14, 19 Solem v. Helm Ne ea es ey 8 ie ee 33-35, 47 Standard Oil Of Texas v. United States of & ef. Lo Se 28, 30 - XV - Page Suits v. State 507 P.2d 1261 (Okla.Crim. 1973) .......... 24 Thompson v. City Of Louisville Ee 31 Toole v. Richardson-Merrell, Inc. 251 Cal.Age.26 669 (1967)... we ee ee 35 Travelers Indemnity Co. v. Armstrong 442 N.E.2d 349 (Ind. S.Ct. 1982) ...... 38-39 41 Trop v. Dulles CE. + 6. 6 « 6 6s » 6% 32, 33, 37 Tullidge v. Wade 8 SS 21 2-D’s Logging, Inc. v. Weyerhauser Co. ee 45 United States v. A & P Trucking Co. ee ae 28 United States v. Balint ae eas ec eee be 6 eo 28 United States v. Batchelder ee 16, 26 United States v. Cohen Grocery Co a 15, 45 United States v. Eaton oN 26 - XVi - Page United States ex. rel. Marcus v. Hess at7 US. Sey Gee cc ce hte Cee 32, 37 United States v. Halper 490 U.S. _, 109 S.Ct. 1892 (1989)... ..... 33, 37 United States v. Hudson and Goodwin 11 U.S. (7 Coamesh) 32 (IBID) 2 ww wc et 24, 26 United States Trust Co. v. New Jersey EF ST, eee 23 United States v. Ward O48 U.S. BER CREEP. we ee cetwre eee 33 Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc. ee 0 | 14 Walters v. St. Louis 347 US. pe CURD. weet kt eee 41 Weaver v. Graham 450 US. SECISR) ww eve siecon es eee 22, 23 Williams v. Illinois See U.S. dae CORT. cece ee eee 48 Wisconsin v. Constantineau OR |) er a 714 Yick Wo v. Hopkins 869 U.S. Se Che tte te eee 25, 40, 45 Oe ee tN TD el seri aie ee eie,.~ - XVii - Page United States Constitution ES a ee ee ee 2 Fifth Amendment.......... 1, 10, 13, 22, 36, 37, 40 EE LE eee 37 Ee ee ee 33, 40 Fourteenth Amendment. ...........+24-. passim Federal Statutes EE eee l Tee 19 State Statutes Ala. Code §§ 13A-4-3, 13A-5-12 and EE Oe 34 Calif. Ins. Code § 4010. ............. oa Colo. Rev. Stat. § 13-25-127(2) (Supp. 1986). ...... 38 Publications ALI Model Penal Code, Comment On § 207, Tentative Draft No. 4(1956). ............, 29 IV Blackstone, Commentaries (1st Ed. Reprint). ..... 20 Campbell, Law Of Sentencing, §§ 1,2(1978)....... 24 Canfield, Corperate Responsibility For Crime 14 Colum.L.Rev. 469 (1914)... .......... 29 - XVili - Clark, Handbook of Criminal Law (ist Ed. 1984). . . Francis, Criminal Responsibility Of Corporations, eee ee ee Jeffries, Legality And Vagueness, And The Construction Of Penal Statutes, ho SS re Mueller, Mens Rea And The Corporation, ee eee Note, Corporate Criminal Liability For Acts In Violation Of Company Policy, Ses Ge & 0 6 6 6-48 6 6 © 0 2 Perkins, Criminal Law (2d Ed. 1969). ........ Pound, Criminal Justice In America(1951)...... Rich, Law And The Administration Of Justice (1975) . . . 2 L. Schlueter and K. Redden, Punitive Damages (2d Ed. 1989) ............. Tomas, The Penal Equation (1978)} ......... Wharton, Criminal Law, §9(1978).......... Willis, Measure of Damages When Property Is Wrongfully Taken By An Individuai, 22 Harv.L.Rev. 419(1909) ........... 0 heats Gms xo PETITIONER’S BRIEF ON THE MERITS Pacific Mutual Life Insurance Company (“Pacific Mutual”) respectfully submits its brief on the merits as follows: OPINIONS BELOW The opinion of the Jefferson Circuit Court is unreported. (Pet. App. Al-A16.]! The opinion of the Supreme Court of Alabama [Pet. App. B1-B16] is reported as Pacific Mutual Life Ins. Co. v. Cleopatra Haslip, et al., No. 87-482 (Sept. 15, 1989) (to be reported at 553 So.2d 537 (1990)). JURISDICTION The jurisdiction of this Court is invoked under 28 U.S.C. Section 1257(a). The judgment of the Supreme Court of Alabama was entered on September 15, 1989. A timely petition for rehear- ing was denied on November 9, 1989. [Pet. App. Cl.] On December 22, 1989 Justice Kennedy issued an order granting Pacific Mutual’s application for stay, which was confirmed by the full Court on January 8, 1990. [Pet. App. E1.] CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED 1. The Fifth Amendment to the United States Constitution provides in relevant part: 1 Documents in the Appendix to the Petition will be cited “Pet. App.,” those in the Petitioner’s Reply to Respondents’ Brief in Opposition “Pet. Reply Cert.,” and those in the Joint Appendix “JA.” ~ = “No person shall ... be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty or property, without due process of law; nor shall private property be taken for public use, without just compensation.” 2. The Fourteenth Amendment, Section 1, of the United States Constitution provides in relevant part: “... No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” 3. Article I, § 10[1], of the United States Constitution provides in part: “No state shall... pass any ... ex post facto Law...” STATEMENT OF THE CASE A. THE PARTIES Petitioner Pacific Mutual is a mutual life insurance com- pany, owned by its policyholders [Calif. Ins. Code § 4010). Respondents Cleopatra Haslip, Cynthia Craig, Alma Calhoun and Eddie Hargrove (“respondents”) are employees of the City of Roosevelt (“the City”) in the State of Alabama. Respondents were participants in an insurance plan spon- sored by the City in which Pacific Mutual provided individ- ual life insurance coverage. a, B. THE ACTION BELOW Respondents’ action against Pacific Mutual involved a suit seeking punitive damages for the misconduct of one of Pacific Mutual’s nonexclusive soliciting agents, Lemmie L. Ruffin, Jr. (“Mr. Ruffin”), who at the time of the alleged acts was acting on behalf of another company, Union Fidelity Life Insurance Company (“Union Fidelity”) with respect to a health insurance policy issued by Union Fidelity, not Pacific Mutual. [RT 470-75.]” Pacific Mutual, in an amendment to answer, raised the federal constitutional challenges presented here. [JA 11-14, 25-27, 29-35.) The jury found Pacific Mutual to be vicariously liable for punitive damages for Mr. Ruffin’s acts. Pacific Mutual renewed its constitutional challenges by a motion for directed verdict [JA 37-44], and by a post-trial motion [CT 277-325]. Pacific Mutual appealed, again raising its federal constitu- tional challenges, which were rejected in the opinion of the Alabama Supreme Court affirming the trial court judgment. [Pet. App. B1l.] Pacific Mutual petitioned for rehearing, which was denied. [Pet. App. C1.] C. STATEMENT OF FACTS i. Respondents’ Prior Coverage Respondents are employees of the City of Roosevelt. The City allowed its employees to purchase a group health insur- ance policy through the municipality. [RT 91.] 2. Mr. Ruffin’s Solicitation Sometime in 1981, Mr. Ruffin, who was then a soliciting agent for both Pacific Mutual and Union Fidelity, forwarded a mail solicitation to the City [RT 431-32], and later met with the City’s mayor, city attorney and city clerk. [RT 92, 2 The Clerk's Transcript will hereinafter be designated as “CT.” The Reporter's Transcript of the proceeding will hereinafter be designated as “7. «lis 96, 132, 431-32.] Mr. Ruffin presented his Pacific Mutual business card and discussed the City’s interest in obtaining health and life insurance. [RT 92-93, 96, 98-99, 429, 435-36.] 3. Pacific Mutual Did Not Issue Group Health Policies While Pacific Mutual issued individual life policies to City employees, it did not underwrite group health insurance policies for municipalities. [RT 442-43.] Pacific Mutual did, however, allow its agents to broker business with other insurance companies. [RT 469-70.] Mr. Ruffin at that time was also a licensed agent of Union Fidelity. Union Fidelity, a separate and distinct company from Pacific Mutual, did issue group health insurance to municipalities. [RT 262-63.] 4. The Separate Applications to Union Fidelity and Pacific Mutual Mr. Ruffin submitted a proposal to the City indicating he would place life insurance with Pacific Mutual and health insurance with Union Fidelity. [RT 439, 442-43, 473, 475-76.] The City approved the proposals, and on August 19, 1981, Mr. Ruffin completed separate applications for the City and its employees for group health coverage with Union Fidelity and individual life policies with Pacific Mutual. [RT 219-21, 283, 312-16, 335.] Mr. Ruffin then submitted the City’s application for health insurance to Union Fidelity. The City’s application for life insurance was submitted to Pacific Mutual. Pacific Mutual and Union Fidelity are sepa- rate companies witheut any affiliation. [RT 262-63.] 5. Issuance of the Separate Health and Life Policies Union Fidelity approved the health application and issued group health coverage to the City effective September 1, 1981. [RT 255.] Union Fidelity later confirmed the health coverage by letter with the city clerk. [RT 138-39.] Pacific Mutual approved tne applications for individual life insur- ance and began issuing life insurance coverage to the City’s employees. The premium checks for both the life and health wis insurance policies were collected by Mr. Ruffin. [RT 115-16, 141-42.] 6. Pacific Mutual’s Agents’ Contract Forbade Mr. Ruffin’s Conduct An arrangement was made with Union Fidelity to have premium billings sent to Mr. Ruffin at his office in the Pacific Mutual branch office in Birmingham. [RT 271.] Under Mr. Ruffin’s sales agent’s contract with Pacific Mutual, Mr. Ruffin was specifically forbidden from collect- ing any premiums beyond the initial premium submitted with the application. [JA 122-25.] Nevertheless, Mr. Ruffin instructed the city clerk to make all premium checks payable to him and to remit the premiums directly to him. [RT 141.] Pacific Mutual’s agent in charge of the Birmingham office, Patrick Lupia, was also licensed with Union Fidelity and other companies. [RT 741.] Mr. Lupia was unaware Mr. Ruffin was collecting premium checks from the City or having the premium checks made payable to him indivi- dually. [JA 83-84.] It appears that Mr. Ruffin failed to remit premiums received by him from the City to Union Fidelity. Union Fidelity sent lapse notices to respondents in care of Mr. Ruffin and Mr. Lupia. Mr. Ruffin apparently did not forward them to respondents. [RT 143, 147, 161-62, 256, 270.) 7. Cancellation of Union Fidelity’s Health Coverage In the fall of 1981, the Union Fidelity health coverage for the City was cancelled. Shortly thereafter, Mr. Ruffin attempted to obtain replacement health insurance coverage for the City’s employees. [RT 454-56, 479.] He appears to have submitted applications therefor to Union Fidelity and to John Alden Insurance Company. [RT 455, 456, 479.] Mr. Ruffin’s deposition testimony, which was read at trial, was that he continued to collect the health portion of the premiums so that he would have the premium money to submit to the replacement carrier. [RT 455.] An application for health insurance was submitted by Mr. Ruffin to both wis John Alden and Union Fidelity. Mr. Ruffin received prelimi- nary approval and was assigned a case number. [RT 455, 456-58.] However, before a policy was ever issued, respon- dent Cleopatra Haslip was hospitalized. [/d.] 8. Mrs. Haslip’s Hospitalization Mrs. Haslip was hospitalized for a kidney infection on January 23, 1982 before a replacement policy was ever issued. [RT 455, 456-58.} Mrs. Haslip incurred $2,500 in hospital bills. Because the hospital could not confirm insur- ance coverage it required her to pay a cash sum toward her final bill upon her discharge. The hospital records for Mrs. Haslip’s hospitalization do not list Pacific Mutual or Union Fidelity as the insurer, but instead list another company, Commercial Insurance Company. A claim for the hospital- ization was never filed with Pacific Mutual. [RT 235.] Mr. Ruffin testified that Mrs. Haslip called him after her discharge, angered about having to write a check to the hospital and demanded her premium payment back. [RT 458-60, 480-82.] With the deletion of Mrs. Haslip, there were not enough participating employees for issuance of the replacement policy, so Union Fidelity issued a premium refund check to Mr. Ruffin, which he said he attempted to tender to the city clerk, who refused to take the check. [RT 460.] Mr. Ruffin then placed the funds into his wife’s check- ing account and did not return the funds to Union Fidelity or Pacific Mutual. [JA 71-72.] 9. The Litigation a. The Pleadings Respondents commenced this action on May 25, 1982 in the Jefferson Circuit Court alleging that Mr. Ruffin collected premiums but failed to remit them to the insurers so that respondents’ coverage lapsed without their knowledge. The complaint claimed damages against Pacific Mutval and Mr. Ruffin for fraud, breach of contract and bad faith. [JA 3-10.] Union Fidelity was not named as a defendant. Respondents yr amended the complaint several times. [JA 11-17, CT 66-68.] Pacific Mutual, in an amended answer, raised federal con- stitutional challenges to an award of punitive damages. [JA 29-35.] b. The Trial The case was submitted to the jury on respondents’ fraud claims on both the health and life insurance policies against Pacific Mutual. c. The Punitive Damage Jury Instructions Following the trial court’s charge on the issue of liability, the jury was instructed that once it determined there was liability for fraud, it could award punitive damages in its discretion. The court charged as follows: “Now, if you find that fraud was perpetrated then in addition to compensatory damages you may «nm your discretion, when I use the word discretion, I say you don’t have to even find fraud, you wouldn’t have to, but you may, the law says you may award an amount of money known as punitive damages. “This amount of money is awarded to the plaintiff but is not to compensate the plaintiff for any injury. It is to punish the defendant. Punitive means to punish or it is also called exemplary damages, which means to make an example. So, if you feel or not feel, but if you aie reasonably satisfied from the evidence that the plaintiff, whatever plaintiff you are talking about, has had a fraud perpetrated upon them and as a direct result they were injured and in addition to compensatory damages you may in your discretion award punitive damages. “Should you award punitive damages, in fixing the amount, you must take into considera- tion the character and degree of the wrong as _ es shown by the evidence and the necessity of preventing similar wrongs.” [JA 103-106.) d. The Verdict On August 7, 1987 the jury rendered a verdict in favor of each of the respondents and determined that Pacific Mutual was liable for Mr. Ruffin’s acts on an apparent authority respondeat superior basis, as follows: Cleopatra Haslip — $1,040,000;° Cynthia Craig — $12,400; Alma Calhoun — $15,290; - Eddie Hargrove — $10,288. (CT 342-43.] Pacific Mutual timely moved for new trial, or in the al- ternative, judgment notwithstanding the verdict, again raising its constitutional issues, which was denied on December 11, 1987. [Pet. App. Al.] e. Pacific Mutual’s Appeal Pacific Mutual raised a number of state law grounds of error, and raised each of the constitutional arguments regard- ing the award of punitive damages set forth in the Questions Presented section, above. f. The Alabama Supreme Court Decision The Alabama Supreme Count, in a 5 to 2 decision affirmed the judgment below on September 15, 1989. [Pet. App. B1-B16.] 3 Mrs. Haslip’s claim was,as to the Union Fidelity health insurance policy. Pacific Mutual was therefore fined on a respondeat superior basis with respect to insurance it did not issue. in final argument, Mrs. Hasiip claimed actual damages of $3,923.84, aggregated into a request for compensatory damages of $200,000, and punitive damages of $3,000,000 [R.T. pp. 810, 812, 814]. In their reply to Pacific Mutual's Petition For Rehearing before the Alabama Supreme Court, plaintiffs categorized the general verdict as contaiaing a punitive damages award of $1,040,000. [Pet. Reply Cert. App. Cl.] . ¥ Justice Maddox and Justice Steagall of the Alabama Supreme Court voted to vacate the punitive damages award, finding that the punitive damages award in this case violated the Due Process Clause of the Fourteenth Amendment. They also concluded that Alabama’s judicial review processes did not cure the violation. [Pet. App. B14-B16.] g. Pacific Mutual’s Petition for Rehearing Pacific Mutual filed a timely petition for rehearing regard- ing the constitutional validity of punitive damages, citing the concurrences in Browning-Ferris Industries of Vermont v. Kelco Disposal, Inc., 492 U.S. ___, 109 S.Ct. 2909 (1989). The Alabama Supreme Court denied that petition by an order dated November 9, 1989. [Pet. App. C1.] SUMMARY OF ARGUMENT 1. Standardless Jury Discretion. Alabama law for determining the amount of punitive damages, and the jury instruction in this case authorized thereunder, are imper- missibly vague and incomprehensible, and therefore void under the Due Process Clause of the Fourteenth Amendment, because they contain no standard for determining the amount to be awarded. Punitive damages are punishment, and therefore the stand- ard of scrutiny for vagueness should be similar to that in criminal cases. The Due Process rules regarding void-for- vagueness apply in civil actions and apply as to the deter- mination of the severity of punishment. The jury instruction in this case told the jury that if it chose to punish by an awaid of punitive damages, in deter- mining the amount it should consider the “character and degree of the wrong” and the “necessity of preventing similar wrongs.” The instruction is contentless and hopelessly vague as to (i) under what circumstances punishment is deserved, (ii) the relative degree of punishment to be imposed, and 7 * (iii) the range within which punishment might properly be imposed. Prior decisions of this Court have incorporated into the Fifth and Fourteenth Amendments the concerns of the Ex Post Facto Ciauses as to fair notice of penalty and prohibi- tion of retroactive changes in punishment adverse to the defendant. The punitive damages award here violated this fundamental principle of legality, that punishable conduct be defined and the penalty be set prior to commission of forbid- den conduct. The vagueness of Alabama law was such that no standard at all was supplied to the jury, which was left free to punish selectively and arbitrarily and to give free reign to bias, prejudice and wealth redistribution inclinations, in violation of both Due Process and Equal Protection guarantees of the Fourteenth Amendment. 2. Respondeat Superior. Due Process requires that cor- porations not be punished on a respondeat superior basis where, as here, the acts of the agent were not performed in the business of the corporation, with intent tu benefit the corporation. Here, the fraudulent intent of Mr. Ruffin cannot be im- puted to Pacific Mutual consistently with Due Process be- cause, at the time Mr. Ruffin diverted the premiums on the Union Fidelity policy, he was acting for himself, with respect to the policy of another company. An agent stealing from the principal cannot be deemed to have been acting with intent to benefit the principal, nor can such theft be a valid basis for punishment under Due Process. 3. Excessiveness of the Award. Civil penalty awards are excessive in violation of Due Process if grossly dispropor- tionate to the harm caused. Here, the award was in excess of $1,000,000, where actual damages from nonpayment of medical bills under the Union Fidelity policy, for which no claim was ever made, was $3,923.94. Under any test of excessiveness, the award imposed on Pacific Mutual on an _ apparent authority basis for acts of Mr. Ruffin of pocketing premiums, was excessive. If Pacific Mutual was involved in the conduct at all, the premiums were stolen from it. Any award in such circumstances is excessive. 4. Criminal Procedural Protections. Punitive damages are punishment, and in this case, severe punishment. Under the tests to determine the requirements or procedural Due Process, additional trial procedural protections are required to establish the appropriate level of confidence in the result, in view of the risk to defendants in these cases. Such protec- tions, as relevant to this case, are a beyond a reasonable doubt standard of proof, unanimous jury, an upper limit on awards, and bifurcation of the trial to try underlying liability before trial of punitive damages issues. Failure to accord these protections, other than unanimous jury, to Pacific Mutual at the trial herein, violated Pacific Mutual’s right to Due Process and requires vacation of the award. 5. Judicial Review Did Not Cure. The reviewing courts in Alabama had no better standards by which to review the jury award than the jury had in rendering it. The various factors cited by the Alabama Supreme Court to be considered in reviewing punitive damages awards amount to no more than a test of excessiveness. Further, the trial court did not hold a hearing to consider such factors, and the reasons cited by that Court as upholding the award are unrelated to such factors. Judicial review merely transferred standardless discretion to the reviewing courts, to make a judgment upon bases which would have been equally invalid had the court initially set the punishment. It is submitted that the punitive damages award imposed upon Pacific Mutual should be vacated. o is I. ALABAMA LAW, AS HERE APPLIED, AND PUNITIVE DAMAGES DOCTRINE GENER- ALLY, VIOLATES DUE PROCESS BY AL- LOWING THE JURY TO AWARD PUNI- TIVE DAMAGES AS A MATTER OF “MORAL DISCRETION,” WITHOUT ADE- QUATE STANDARDS AS TO THE AMOUNT NECESSARY TO PUNISH AND WITHOUT A NECESSARY RELATIONSHIP TO THE AMOUNT OF ACTUAL HARM CAUSED Alabama law and the jury instruction below which that law authorized are impermissibly vague and indefinite re- garding the severity of punishment to be imposed in a puni- tive damages award, in violation of the Due Process Clause of the Fourteenth Amendment. The Dve Process clause of the Fourteenth Amendment provides, “... [NJor shall any state deprive any person of life, liberty, or property, without due process of law. . .” A. Punitive Damages Are Punishment, Im- posed Through State Action, And As Such Are Subject To Due Process Requirements. Punitive damages under Alabama law,* and under the laws of nearly all other states,» are imposed expressly for the purpose of retribution and deterrence. These are punishment purposes [Bell v. Wolfish, 441 U.S. 520 (1979)]. State action is present in this case, because actions by State courts and judicial officers, in their official capacities, including enforcement in litigation among private parties, of private agreements, state law, and common law policy, is 4 Aetna Life Ins. Co. v. Lavoie, 470 $0.24 1060 (Ala. 1984), 5 2 L. Schlueter and K. Redden, Punitive Damages (2d Ed. 1989), pp. 168-270. a. state action within the Fourteenth Amendment [Civil Rights Cases, 109 U.S. 3, 11, 17 (1883); American Fed. of Labor v. Swing, 312 U.S. 321 (1941); Shelley v. Kraemer, 334 U.S. 1 (1948)]. State action is further present because the imposition of punitive damages is not a private right, but is a public inter- est in retribution and deterrence; and plaintiffs in such ac- tions act as private attorneys general in seeking to effect that interest [Jn Re Paris Air Crash, 622 F.2d 1315, 1319-1320 (9th Cir. 1980), cert. denied 449 U.S. 976 (1980)]. The fact that the punishment® is imposed in a civil action among private litigants does not insulate the matter from Due Process scrutiny [A.B. Small Co. v. American Sugar Refining Co., 267 U.S. 233, 239 (1925); Jordan v. De George, 341 U.S. 223, 231 (1951); Giaccio v. Pennsylvania, 382 U.S. 399, 401-403 (1966); Jacobs v. Board of School Commis- sioners, 490 F.2d 601, 605 (7th Cir. 1973)]. In A.B. Small Co. v. American Sugar Refining Co., above, an action to recover for the breach of two contracts for the sale of sugar to a dealer, defenses were asserted that the contracts were unlawful *s violating the Lever Act, which made unlawful any “unjust or unreasonable ... charge in... dealing with any necessaries,” or “to exact any excessive price for necessaries,” These defenses were successfully demurred to as violating the Due Process Clause of the Fifth Amendment. In upholding this ruling that the Lever Act violated the plaintiff's Due Process rights in the context of a civil suit, this Court stated, at page 239: “The defendant attempts to distinguish those cases because they were criminal prosecutions. But that is not an adequate distinction. The ground or principle of the decisions was not such © «Pynishment” will be used in this brief to refer to the punitive damages goals of retribution and deterrence. -14- as to be ap;licable only to criminal prosecutions. It was not the criminal penalty that was held invalid, but the exaction of obedience to a rule or standard which was so vague and indefinite as really to be no rule or standard at all. Any other means of exaction, such as declaring the trans- action unlawful or stripping a participant of his rights under it, was equally within the principle of those cases.” The fact that states have chosen to enforce punishment through civil actions by private attorneys general does not affect Constitutional requirements. In Giaccio v. Pennsyl- vania, 382 U.S. 399, 402 (1966), this Court held that the placement of a civil label on a statute did not affect the application of Due Process principles. While economic regulations may be subjected to a less strict vagueness test [Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 498 (1982)], it is submitted that where, as in punitive damages cases, punishment is to be imposed for proscribed conduct, a level of scrutiny should be given similar to that applied to criminal sanctions. As noted in prior decisions of this Court, punitive damages awards are “quasi-criminal,”’ “serve the same function as criminal penalties”® and are private fines imposed to punish and deter conduct.? Close scrutiny is additionally appropriate because of the stigma and loss of reputation which attaches to a punitive damages award. [See Wisconsin v. Constan- tineau, 400 U.S. 433 (1971)]. 7 Smith v. Wade, 461 U.S. 30, 59 (1983), Rehnquist, J., dissenting. 8 Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 82-84 (1971), Marshall, J., dissenting. 9 Gertz v. Robert Welch, Inc., 418 U.S. 323, 350 (1974). = + B. The Jury Instruction On Punitive Dam- ages In This Case, Which Conformed To Alabama Law, Gave The Jury Unlimited Discretion To Set The Amount Of Pun- ishment To Be Imposed. This Violated Pacific Mutual’s Right To Due Process Under The Fourteenth Amendment. Alabama punitive damages law, and the jury instructions it authorized in this case provided no meaningful standards whatsoever for determining the amount of punishment to be imposed. As a result, both the law and jury instruction, which accurately stated it, are impermissibly vague and indefinite. The resulting award against Pacific Mutual is therefore invalid. 1. Basic Due Process Required Ade- quate Standards To Limit Jury Dis- cretion In Determining The Severity Of Punishment. Laws forbidding or requiring conduct must give the per- son of ordinary intelligence a reasonable opportunity to know what is prohibited, so he or she may act accordingly. Vague laws may trap the innocent by not giving fair warning. [Grayned v. City of Rockford, 408 U.S. 104, 108-109 (1972); Coates v. City of Cincinnati, 402 U.S. 611, 614 (1971); Lanzetta v. New Jersey, 306 U.S. 451, 453 (1939); Connally v. General Const. Co., 269 U.S. 385, 393, 395 (1926); United States v. Cohen Grocery Co., 255 U.S. 81 (1921)]. In Grayned v. City of Rockford, above, this Court stated, at 408 U.S., pages 108-109: “A vague law impermissibly delegates basic policy matters to policemen, judges, and juries for resolution on an ad hoc and subjective basis, with the attendant dangers of arbitrary and discriminatory application.” = @ These principles apply as weil to the prescription of the range of punishment as to the definition of forbidden or required conduct. [United States v. Batchelder, 442 U.S. 114, 123 (1979); Gregg v. Georgia, 428 U.S. 153, 189 (1976); Miller v. Florida, 482 U.S. 423, 429, 435-436 (1987)]. Where, as here, the range of permissible punish- ment was not stated in a law to be enforced, this basic policy decision was left to the jury and reviewing judges “on an ad hoc and subjective basis, with the attendant dangers of arbi- trary and discriminatory application.” The same Due Process concerns apply in the case of civil suits involving the consequences of forbidden conduct [A.B. Small Co. v. American Sugar Ref. Co., 267 U.S. 233, 239 (1925))]. 2. The Jury Instruction In This Case, Which Properly Stated Alabama Law, Was Hopelessly Vague And Incomprehensible As A Basis For Determining Puniskment. In this case the trial court charged the jury: “... [I)f you find fraud, you may in your discretion award what is known as punitive damages. “ “This amount of money is awarded to the plaintiff but is not to compensate the plaintiff for any injury. It is to punish the defendant... “Should you award punitive damages, in fixing the amount, you must take into considera- tion the character and the degree of the wrong as shown by the evidence and the necessity of preventing similar wrongs.” [RT 895, 898]. This jury instruction is incomprehensibly vague and indefinite, and told the jury it could do as it pleased. The two criteria stated are contentless and meaningless as stand- . FP ards for a decision on whether to punish or how much to punish. “The character and degree of the wrong” is hope- lessly vague as a basis for determining what conduct de- serves punishment under what circumstances. Similarly, “the necessity of preventing similar wrongs” set forth no mean- ingful basis upon which the jury could decide whether Pacific Mutual deserved punishment, and if so, how much punishment was necessary or appropriate. The jury was left to make these decisions based only upon their biases or visceral reactions arising from their individual temperaments, backgrounds and societal concerns, and were therefore free to punish selectively and give reign to bias, prejudice and wealth distribution tendencies. Due Process must rest on a firmer foundation. [See Roller v. Holly, 176 U.S. 398, 409 (1900)). As stated by Justice Brennan (concurring) regarding a very similar instruction, in Browning-Ferris Industries of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. ____, 109 S.Ct. 2909 at page 2923: “Guidance like this is scarcely better than no guidance at all ... The point is ... that the instruction reveals a deeper flaw: the fact that punitive damages are imposed by juries guided by little more than an admonition to do what they think is best.” In this case, which again is typical, the jury was, as noted by Justice Brennan in Browning-Ferris [109 S.Ct. 2909 at page 2923], “left largely to [itself] in making this important, and potentially devastating, decision.” 10 Alabama case law recognizes that no legal measure limits this jury discretion [Dowling v. Garner, 195 Ala. 493, 70 So. 150 (Ala. 1915); Hogan v. Alabama Power Co., 351 So,2d 1378, 1382 (Ala. 1977); Charter Hospital Of Mobile, Inc. v. Weinberg, to be published at 558 So.24¢ 150, 1990 Ala. Lexis 17 (Jan. 12, 1990), Houston, J., concurring). ith. This Court has noted the arbitrary and unpredictable results of this unguided discretion in prior decisions. In Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974), this Court invalidated punitive damages under state law standards in defamation cases, and stated, at page 350: “In most jurisdictions jury discretion over the amounts awarded is limited only by the gentle rule that they not be excessive. Consequently, juries assess punitive damages in wholly unpre- dictable amounts bearing no necessary relation to the actual harm caused. And they remain free to use their discretion selectively to punish expressions of unpopular views... .” In Rosenbloom v. Metromedia, Inc., 403 U.S. 29 (1971), Justice Marshall, dissenting, analyzed punitive damages, in a libel case, in terms directly applicable to the Due Process concerns raised here by Pacific Mutual, stating at pages 82-84: “... This discretion allows juries to penalize heavily the unorthodox and the unpopular and exact little from others.... These awards are not to compensate victims; they are only windfalls.... {iNJor is there even any way to determine that the jury has considered the cul- pability of the conduct involved in the particular case. Thus the essence of the discretion is unpre- dictability and uncertainty.” In Electrical Workers v. Foust, «42 U.S. 42 (1979), this Court banned punitive damages in union representation cases, noting, at page 50, that “the impact of these windfall recoveries is unpredictable and potentially substantial.” In Bankers Life and Casualty Ins. Co. v. Crenshaw, 486 U.S. 71 (1988), Justice O’Connor, concurring, noted with respect to the similar law and procedures in Mississippi, at pages 87-88: -19- “ ... This grant of wholly standardless discre- tion to determine the severity of punishment appears inconsistent with due process.” In City of Newport v. Fact Concerts, Inc., 453 U.S. 247 (1981), this Court banned punitive damages in suits against municipal corporations in 42 U.S.C. § 1983 actions. In Smith v. Wade, 461 U.S. 30 (1983), cogent objections to punitive damages generally were set forth (Rehnquist, J., dissenting). The concerns regarding punitive damages expressed in the above cases are, it is submitted, Due Process concerns, appli- cable here. Because punitive damages awards in large measure de- pend upon the degree to which the plaintiff's counsel has succeeded in arousing the anger of the jury toward the defen- dant, the awards, under present procedures, depend upon the idiosyncratic reactions of each jury. This fact, and its conse- quences, were commented upon in Deviin v. Kearny Mesa AMC/Jeep/Renault, Inc., 155 Cal.App.3d 381 (1984), as foilows, at page 388: “The process through which a fact finder finds punitive damages is somewhat contradictory. On the one hand, the court or jury must be suffi- cicatly disturbed to conclude the defendant must be punished. On the other hand, although out- raged, the fact finder cannot be vindictive. The channeling of just the correct quantum of bile to reach the correct level of punitive damages is, to put it mildly, an unscientific process compli- cated by personality differences. Conduct which one person may view as outrageous another may accept without feeling, depending on such di- verse characteristics as an individual's back- ground, temperament and societal concerns. The process is further complicated by the lack of objective criteria from either the Legislature or - 20- z the courts as to ‘how much’ is necessary to punish and deter.” (Emphasis added.) This is exactly the arbitrary and discriminatory enforce- ment condemned by Due Process. Because the decision of whether or not to award punitive damare*s is committed to the moral discretion of each jury, imposition of such punishment is necessarily arbitrary and unpredictable. Devlin recognized that what may outrage one jury, and lead it to award substantial punitive damages, may leave another jury unmoved. The constitutional invalidity of this type of situation was described by this Court in Coates v. City of Cincinnati, 402 U.S. 611, 614 (1971) in which this Court stated that many types of behavior can be restricted or even prohibited but not constitutionally, “through the enact- ment and enforcement of an ordinance whose violation may entirely depend upon whether or not a [law enforcement officer] is annoyed.” [See also Jenkins v. Werger, 564 F.Supp. 806, 808 (D. Wyo. 1983))]. Neither mey juries be allowed to pursue their personal predilections.'' [Kolender v. Lawson, 461 U.S. 352, 358 (1983); Smith v. Goguen, 415 U.S. 566, 575 (1974)]. Juries at common law had no right to determine punish- ment in a criminal case [see IV Blackstone, Commentaries, pp. 354-355, 366-369, 371 (1st Ed. Reprint); Crowe v. State, uM It is recognized that jury sentencing in criminal matters is permitted in some states, and that this court, in Giaccio v. Pennsylvania, 382 U.S. 399 (1966), expressly stated, in footnote 8 at page 405, that it intended in that decision “to cast no doubt whatsoever on the constitutionality of the settled practice of many States to leave to juries finding defendants guilty of a crime the power to fix punishment within legally prescribed limits.” It is submitted that it is the lack of such “legally prescribed limits” which Singularize the punitive damages award procedures in this case and rend . them Constitutionally invalid. a‘ — ~ 485 So.2d 351, 363-364 (Ala.Cr.App. 1984), rev'd. on other grounds 485 So.2d 373 (Ala. 1985), cert. denied, 477 U.S. 909 (1986)].!2 The effect of the arbitrary power given to juries in award- ing punitive damages under Alabama law has led an addi- tional justice of that court to rethink his position since the opinions below in this case, in which he voted with the majority. In Charter Hospital of Mobile, Inc. v. Weinberg, 558 So.2d 150, 1990 Ala. Lexis 17 (Jan. 12, 1990), released for publication April 16, 1990, Justice Houston, concurring in the result, which vacated the punitive damages award on state law grounds, appears to have been concerned because of widely differing verdicts in two cases in which he viewed the conduct as being the same. Justice Houston stated, at 1990 Ala. Lexis 17, pages 20-23: “.. I recently noted that, for the same con- duct, one insurance company and its special agent were punished by a punitive damages award of $21,130.86 ... and another insurance company and its special agent were punished by a punitive damages award of $2,490,000 .... The instructions given to the juries in those two cases were substantially the same.... [T]he standard by which the jury is to gauge the amount of punitive damages, if any, that it is to award is incomprehensibly vague and unintelligible. ... Under such a ‘standard,’ one 12 The common law right of juries to determine the amount of punitive damuges appears in large part to be a result of the perceived inadequacy of the compensatory damages then available to compensate for all detriment, such as emotional distress. See Tullidge v. Wade, 95 Eng. Rep. 909 (1769). The vastly expanded scope of civil damages available today invalidates such a consideration. England, in Rookes v. Barnard (1964) A.C. 1129, 1221; 1 All Eng. Rept. 367, 411, re-examined punitive damages, and severely limited their availability. - 22. jury can award $21,130.86 and another $2,490,000 for the same ‘wrong.’ This does not comply with the requirement of procedural due process under the Alabama Constitution.” Punishment was imposed upon Pacific Mutual by a jury acting under instructions so vague as to provide no standards at all for determining the relative culpability of Mr. Ruffin’s conduct and the amount appropriate to punish Pacific Mutual therefore vicariously. This absence of standards for deter- mining punishment violated Pacific Mutual’s right to Due Process under the Fourteenth Amendment. C. The Absence Of Prior Establishmert Of The Punishment To Be Imposed On Pacific Mutual for Mr. Ruffin’s Conduct Violated Pacific Mutual’s Right to Due Process. The Due Process Clause of the Fourteenth Amendment requifes that permitted punishment be established before commission of the punishable acts. Although prohibition of changes in permitted punishment adverse to the defendant has been the province of the Ex Post Facto Clauses,!* prior decisions of this Court have found the concerns of the Ex Post Facto Clauses to be so basic to the concepts of funda- mental fairness embodied in the Due Process Clause that "hose requirements are to be applied through the Due Process Clauses of the Fifth and Fourteenth Amendments. In Marks v. United States, 430 U.S. 188 (1977), this Court held that a substantive change in obscenity standards made by this Court could not be applied to a defendant retroac- tively, under the Due Process Clause of the Fifth Amend- merit, stating at pages 191-192 that while the Ex Post Facto Clause applied only to the powers of legislatures, the concept 13 See Weaver v. Graham, 450 U.S. 24, 30-31 (1981); Miller v. Florida, 482 U.S. 423, 429, 435-436 (1987). Ot i. eas ae ee eye we -%. of fair warning embodied in it was fundamental to our con- cept of constitutional liberty. In Bouie v. Columbia, 378 U.S. 347 (1964), this Court applied the same reasoning to invalidate a S.ate law convic- tion under an expanded interpretation of punishable conduct by the California Supreme Court, as violating the Due Proc- ess Clause of the Fourteenth Amendment. !4 The Ex Post Facto Clauses have been stated to apply only to the imposition of punishment [United States Trust Co. v. New Jersey, 431 U.S. 1, 17 n. 13 (1977); Calder v. Bull, 3 U.S. (3 Dall.) 386, 390-391 (1798)]. It is submitted that the punishment imposed by punitive damages is sufficient to require the application through the Due Process Clause of the Ex Post Facto Clause principles stated in the Marks and Bouie cases, above, and Weaver v. Graham, 450 U.S. 24, 30-32 (1981) and Calder v. Bull, above. Additionally, the Ex Post Fac'» Clauses have not been limited in application to criminal prosecutions. In Fletcher v. Peck, 10 U.S. (6 Cranch) 87, 138-139 (1810) the Ex Post Facto Clause was applied in a case involving vested property rights; and Cummings v. Missouri, 71 U.S. (4 Wall) 277, 327-328 (1867) and Ex Parte Garland, 71 U.S. (4 Wall) 333, 377-378-(1867), involved, in effect, license revocation pro- ceedings for failure to take an oath following the Civil War, which was held to be punishment. In Burgess ». Salmon, 97 U.S. 381, 385 (1878), a civil suit to collect a duty imposed by law after the sale of the item was completed, this Court stated that “ex post facto effect cannot be evaded by giving civil form to that which is essentially criminal.” 14 See also Ettor v. Tacoma, 228 U.S. 148, 155-156 (1913), Fourteenth Amendment Due Process violated by State statute repealing a vested right to compensation; Coombes v. Getz, 285 U.S. 434 (1932), Fourteenth Amendment Due Process violated by change in a State constitution repealing liability of defendants during the course of litigation. Sh. The concerns of the Ex Post Facto Clauses apply directly to punitive damages awards. No fair warning is given of the amount of punishment. All determinations of punishment by punitive damages awards are after the fact and adverse to the defendant, except in those cases in which legislatures have previously acted to limit punitive damages awards [see e.g. Pet. Reply Cert. App. F]. Unless limits are set on punitive damages awards prior to commission of the punishable acts, arbitrary, selective punishment, at the whim of the particular jury or court, becomes the rule, giving free reign to bias and prejudice.!° This is contrary to all of the fundamental principles of fairness and notice embodied in the Due Process and Ex Post Facto Clauses. !® 15 Judges may impose punishment only to the extent the law has autho- rized prior to commission of the acts for which punishment is to be imposed [Calder v. Bull, 3 U.S. (3 Dall.) 386, 390 (1798); United States v. Hudson and Goodwin, 11 U.S. (7 Cranch) 32, 34 (1812); Dobbert v. Florida, 432 U.S. 282, 292 (1977); Miller v. Florida, 482 U.S. 423, 429, 435-436 (1987)). Prior to the adoption of penal codes by the states, crimes were those defined by the received common law of England. [Pound, Criminal Justice In America, pages 106-121 (1951); Rich, Law And The Administration Of Justice, pages 58-59 (1975); Wharton, Criminal Law, §9 (1978); Campbell, Law Of Sentencing, §§ 1, 2 (1978)]. The punishment for those crimes was fixed and established by the coc on law, and judges were required to sentence in accord therewith although greater discretion was allowed for misdemeanors [Tomas, The Penal Equation, p. 3 (1978)). Also, by the Eighteenth Century, England had adopted a penal code [Campbell, Law Of Sentencing, § 2 (1978)}. In states permitting jury sentencing, juries must also sentence within prescribed limits [See Suits v. State, 507 P.2d 1261 (Okla.Crim. 1973)). 16 Fair notice is one of the bases of the Ex Post Facto Clauses. See Miller v. Florida, 482 U.S. 423 (1987), wherein this Court explained the reasons for inclusion of the Ex Post Facto Clauses in the Constitution as follows, at pages 425-430: “... [T]he reason the Ex Post Facto Clauses were included in the Constitution was to assure that federal and state legislatures were restrained from enacting arbitrary or vindictive legis- (continued) ee - 25. It is a fundamental tenet of this society that such arbitrary power is not given to any branch of government, or its in- strumentalities. In Yick Wo v. Hopkins, 118 U.S. 356 (1886), an ordinance regulating laundries was challenged as violating the Equal Protection rights of Yick Wo, because, among other reasons, the ordinance was administered in a way to apply only to Chinese laundries. This Court held the or- dinance to violate the Equal Protection Clause, stating, at pages 369-70: “When we consider the nature and the theory of our institutions of government, the principles upon which they are supposed to rest, and re- view the history of their development, we are constrained to conclude that they do not mean to leave room for the play and action of purely personal and arbitrary power....” (Emphasis added.) It is submitted that application of these principles to the award of punitive damages in this case requires that the award be vacated, with an opinion that no such awards can be made in the absence of prior governmental action estab- lishing the range of permitted punishment for defined, for- bidden conduct. While it is recognized that the United States Constitution does not mandate separation of powers in state governments [see e.g. Hughes v. Superior Court Of California, 339 U.S. 460, 467 (1950)], and therefore, state courts could theoreti- cally announce such rules prospectively where state (ftn. continued) lation. ... [and] that legislative enactments ‘give fair warning of their effect and permit individuals to .ely on their meaning until explicitly changed.’ ... Thus, almost from the outset, we have recognized that central to the ex post facto prohibition is a concern for ‘the lack of fair notice and governmental restraint when the legislature increases punishment beyond what was prescribed when the crime was consummated.’ Weaver, 450 U.S., at 30, 67 L.Ed 2d 17, 101 S.Ct. 960.” - 26 - constitutions permit,!” it is submitted that the prescription of punishment and the definition of punishable conduct are appropriately legislative functions. !® At the federal level the determination of the punishment to be imposed for proscribed acts is an exclusive legislative function [United States v. Hudson And Goodwin, 11 U.S. (7 Cranch) 32, 34 (1812); United States v. Eaton, 144 U.S. 677, 687-688 (1892); Gore v. United States, 357 U.S. 386, 393 (1958); see also Livingston v. State, 419 So.2d 270 (Ala. Cr. App. 1982, applying Alabama law)]. In Gore v. United States, above, this Court stated, at page 393: “In effect, we are asked to enter the domain of penology, and more particularly that tantalizing aspect of it, the proper apportionment of punish- ment. Whatever views may be entertained re- garding severity of punishment, whether one believes in its efficacy or its futility ... these are peculiarly questions of legislative policy.” The legislature’s duty is satisfied by establishing a range of permissible punishment for the particular offense [United States v. Batchelder, 442 U.S. 114, 126 (1979)], prior to the commission of the punishable act by the defendant [Miller v. Florida, 482 U.S. 423, 435-436 (1987). The absence of legislative or court action in Alabama to perform the balancing and weighing of competing choices to set the range of permitted punishment by way of punitive damages prior to the acts involved, placed purely arbitrary power in the jury and the reviewing courts, to set punishment after the fact. 17 Clark, Handbook of Criminal Law, (1st Ed. 1984) p. 3. 18 See discussion in Jeffries, Legality And Vagueness, And The Construc- tion Of Penal Statutes, 71 Va.L.Rev. 189, 190-195 (1985). . Fr This, it is submitted, violates the fundamental fairness requirement of the Due Process Clause of the Fourteenth Amendment. The punitive damages award below should therefore be vacated. Il. ALABAMA LAW VIOLATED PACIFIC MUTUAL’S RIGHT TO DUE PROCESS UNDER THE FOURTEENTH AMENDMENT, BY ALLOWING PUNITIVE DAMAGES TO BE AWARDED AGAINST IT UNDER A RESPONDEAT SUPERIOR THEORY A punishment sanction was imposed upon Pacific Mutual for acts of Mr. Ruffin, in pocketing premiums on Union Fidelity medical insurance policies. The jury may have found that Mr. Lupia had knowledge that billings and notices were being sent to Mr. Ruffin care of Mr. Lupia at the Pacific Mutual Agency office. Both were licensed with Union Fidelity. No evidence showed that Mr. Lupia was aware that Mr. Ruffin was collecting premiums contrary to his contract. No evidence showed that Pacific Mutual’s home office received any notice of any alleged similar prior activity by Mr. Ruffin before the actions in this case, or that Pacific Mutual had any notice of the actions complained of in this suit prior to the filing of the complaint. No evidence showed any authorization for or ratification of this conduct. In fact, Pacific Mutual’s contract with Mr. Ruffin forbade him from collecting any premiums other than the initial premium to be submitted with an application. Pacific Mutual was therefore punished for unauthorized, unratified actions of one, or possibly two of its agents for acts they performed while acting on behalf of another com- pany, Union Fidelity. The collecting of premiums was - 28 . forbidden, and stealing them cannot under any circumstances be deemed to be within any authority of an agent. When punitive damages were imposed on Pacific Mutual on a respondeat superior basis, the focus for determination of the amount of the damages shifted from Mr. Ruffin to Pacific Mutual. It is self-evident that the jury would not have imposed a fine of over one million dollars on Mr. Ruffin. This factor contributed greatly to the fundamental unfairness, excessiveness and disproportionality of the fine imposed in this case, even though no wealth evidence was admitted. A. The Punitive Damages Award Herein Violated Due Process By Imposing Pun- ishment For Conduct Not Authorized Or Ratified, And Not Performed To Benefit The Principal. In the law which has developed regarding the liability of corporations for criminal acts of agents, the following rules appear: 1. Legislatures have the authority to impose absolute liability on corporations for acts of agents, in public welfare crimes, unrelated to knowledge or any other mental element, where the forbidden act or omission is so injurious to the public interest that no mental element is required [United States v. Balint, 258 U.S. 250 (1922); Morissette v. United States, 342 U.S. 246 (1952)]. 2. Legislatures may, consistently with Due Process, impute the mental element of the agent to the corporation for purposes of criminal liability under regulatory statutes, where the agent is acting to benefit the corporation and further its business [New York Central And Hudson River R.R. Co. v. United States, 212 U.S. 481 (1909); See United States v. A & P Trucking Co., 358 U.S. 121 (1958); Standard Oil Of Texas v. United States, 307 F.2d 120 (Sth Cir. 1962); Riss & Co. v. United States, 262 F.2d 245 (8th Cir. 1958)]. ~- eee Ne ee ee wr ee —— = - 29. No such legislative programs are involved in this case. Virtually all of the cases upholding corporate criminal liability involve statutes regulating business activity. In ALI Model Penal Code, Comment On § 207, Tentative Draft No. 4 (1956), it is stated, at page 149: “... [T)he great mass of legislation calling for corporate criminal liability suggests a wide- spread belief on the part of legislators that such liability is necessary to effectuate regulatory policy.” Outside of the regulatory area, where fines are imposed to achieve compliance under circumstances where it is in the corporation’s financial interest to evade the statutory require- ments, there would appear little justification for allowing punishment of corporations for the punishable mental state of agents performing unauthorized, unratified acts within the scope of actual or apparent authority.!? That punishment falls ultimately upon innocent share- holders, or here, upon Pacific Mutual’s other policyholders, who own the company. However, assuming the viability of such awards, it is submitted that the punitive damages award here violated Due Process by imputing acts of Mr. Ruffin to Pacific Mutual which were not performed to benefit, or with any intent of benefiting, Pacific Mutual, and therefore are beyond the point of fundamental fairness. As noted above, virtually all of the cases holding corpora- tions to criminal liability for acts of agents outside of the absolute liability, public welfare offense area, have been 19 Canfield, Corporate Responsibility For Crime, 14 Colum.L.Rev. 469 (1914); Francis, Criminal Responsibility Of Corporations, 18 Il1.L.Rev. 305 (1924); Mueller, Mens Rea And The Corporation, 19 U.Pitts.L.Rev. 21 (1957); Note, Corporate Criminal Liability For Acts In Violation Of Company Policy, 50 Geo. LJ. 547 (1962); Perkins, Criminal Law, (2d Ed. 1969). . = regulatory statutes, where the legislatures have expressed the intent that the mental element of the agents be imputed to the corporation. Courts, in enforcing this legislative intent, have drawn the line for the imposition of such liability at the point where the agent cannot be said to be acting to benefit, or for the purpose of benefiting, the corporation. [See e.g. New York Central And Hudson River R.R. Co. v. United States, 212 U.S. 481, 495 (1909); Standard Oil Of Texas v. United States, 307 F.2d 120, 128 (Sth Cir. 1962); Riss & Co. v. United States, 262 F.2d 245 (8th Cir. 1958). It is submitted that the line so established is also the line beyond which Due Process does not allow the actions or intent of the agent to be imputed to the corporation for pur- poses of imposing punishment. In New York Central And Hudson River R.R. Co. v. United States, above, which established the basic principles of corporate criminal liability, this Court emphasized that liability, civil and criminal, is imposed on corporations “because the act is done for the benefit of the principal, while the agent is acting within the scope of his employment in the business of the principal.” [212 U.S. at 493.] Where these factors are absent, such liability is not im- posed. In Standard Oil Of Texas v. United States, 307 F.2d 120 (Sth Cir. 1962), employees of Standard Oil violated the Connally “Hot Oil” Act by diverting oil from Standard’s wells and falsely recording it as having been produced by eligible wells of a third party. Standard Oil was convicted of “knowingly” falsely recording the production. The Circuit Court, in reversing the conviction, stated at page 128: “ . Thus the taking in or paying out of money by a bank telJez, while certainly one of his regular functions, would hardly cast the corporation for criminal liability if in such ‘handling’ the faithless employee was pocketing the funds as an embezzler or handing them over to a confederate under some ruse.” x. This example is exactly the basis upon which Pacific Mutual was punished. The Court characterized such liability as follows, at page 129: “ .. [T]o say that acts done by servants ac- tuated by such evil and specifically unlawful motives were the acts of the very corporations thus sought to be cheated or implicated in prac- tices known to be in serious violation of law and, moreover, to impute not only accountability but ‘knowledge’ of such acts to the corporations, would be to disregard every accepted notion of respondeat superior.” The Court then stated, as the governing rule, at page 129: “[T]he corporation does not acquire that knowl- edge or possess the requisite ‘state of mind essential for responsibi'‘ty,’ through the activi- ties of unfaithful servants whose conduct was undertaken to advance the interests of parties other than their corporate employer.” It is submitted that the rule stated above is required by Due Process. A defendant cannot be punished for an act or omission so far removed from culpability that punishment cannot be justified [Logan v. Zimmerman Brush Co., 455 U.S. 422, 429 (1982); Robinson v. California, 370 U.S. 660, 667 (1962); Thompson v. City Of Louisville, 362 U.S. 199 (1960)]. Mr. Ruffin’s actions were taken to benefit himself, while dealing with the medical insurance policy issued by another company. The trial court described a fraud justifying the punitive damages award as, “... Ruffin knowingly and intentionally committed fraud by collecting insurance pre- miums on canceled policies and keeping the premiums for himself.” ([Pet. Reply Cert. App. Al2.] In his deposition testimony, Mr. Ruffin stated that he was collecting the premiums after cancellation of the Union Fidelity policy for submission with applications to other companies. Therefore, . oe he cannot have been acting for, or with intent to benefit, Pacific Mutual. Punishment of Pacific Mutual for Mr. Ruffin’s apparent theft of the premiums from Pacific Mutual, assuining arguendo, that Pacific Mutual could under any circumstances be considered the principal as to such act, violated the con- cept of fundamental fairness embodied in Due Process. III. THE AMOUNT OF THE AWARD OF PUNI- TIVE DAMAGES IN THIS CASE WAS EXCESSIVE, IN VIOLATION OF PACIFIC MUTUAL’S DUE PROCESS RIGHT TO BE FREE OF GROSSLY EXCESSIVE, DIS- PROPORTIONATE DAMAGES AWARDS If this Court accepts the analysis set forth in above, re- garding the standardless jury discretion to punish in this case, the question of the excessiveness of this award, or future punitive damages awards, would not be involved. The issue would, rather, be the validity, if challenged, of state legislative acts providing for punitive damages. Here, the actual economic damage sought by all Respon- dents was $3,923.94 [Pet. Reply Cert. App. A21-22]. Mrs. Haslip sought a combination of economic and emotional distress damages of $200,000 [/d., A22-23], and punitive damages of $3,000,000 [/d., A23]. The punitive damages award as to Mrs. Haslip alone, assuming the jury awarded the full $200,000 in non-punitive damages, would be $800,000. Respondents’ counsel presented the case to the Alabama Supreme Court as involving a punitive damages award of $1,040,000 [/d., C1]. A number of decisions of this Court have addressed the issue of whether or not a particular penalty constituted punishment, and the Constitutional implications of such a finding [Calder v. Bull, 3 U.S. (3 Dall.) 286 (1798); United States ex. rel. Marcus v. Hess, 317 U.S. 537 (1943); Trop v. e Dulles, 356 U.S. 86 (1958); United States v. Ward, 448 U.S. 242 (1980) and United States v. Halper, 490 U.S. ___, 109 S Ct. 1892, (1989)]. The punishment purpose of the punitive damages award here is express. The jury was instructed that punitive dam- ages were not to be awarded for compensation for injury, but for punishment. In Browning-Ferris Industries of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. ___, 109 S.Ct. 2909 (1989), Justice Brennan, in his concurrence, suggested that Due Process forbids excessive damages in civil cases, stating, at page 2923: “Several of our decisions indicate that even where a statute sets a range of possible civil damages that may be awarded to a private litigant, the Due Process Clause fortids damages awards that are ‘grossly excessive,’ Waters- Pierce Oil Co. v. Texas, 212 U.S. 86, 111 (1909), or ‘so severe and oppressive as to be wholly disproportionate to the offense and obvi- ously unreasonable,’ St. Louis, 1.M. & S.R. Co. v. Williams, 251 U.S. 63, 66-67 (1919); see also Southwestern Telegraph & Telephone Co. v. Danaher, 238 U.S. 482, 491 (1915); Missouri Pacific Railway Co. v. -« mes, 115 U.S. 512, §22-23 (1885).” The concern for proportionality of punishment thus ex- pressed is a common theme under the Constitution [See Trop v. Dulles, 356 U.S. 86 (1958); Gregg v. Georgia, 428 U.S. 153 (1976); Plyler v. Doe, 457 U.S. 202 (1982), and Solem v. Helm, 463 U.S. 277 (1983)]. Due Process, Equal Protection and the Eighth Amendment all share this concern. The general rule regarding whether a punishmeni sanction is excessive appears to be that the punishment must not be grossly out of proportion to the severity of the offense [/d.]. 28. While the three part text for excessiveness and dispropor- tionality set forth in Solem v. Helm, above, was applied in an Eighth Amendment excessiveness context, it is submitted that the same analysis is appropriate for consideration of excessiveness under a Due Process analysis. In Solem, that test was stated as follows, at pages 290-292: “First, we look to the gravity of the offense and the harshness of the penalty... . “Second, it may be helpful to compare the sentences imposed on other criminals in the Same jurisdiction. If more serious crimes are subject to the same penalty, or to less serious penalties, that is some indication that the punish- ment at issue may be excessive... . “Third, courts may find i. useful to compare the sentences imposed for commission of the same crime in other jurisdictions.” Applying the Solem test here, one can scarcely imagine a criminal statute being upheld which imposed a million dollar fine for vicarious liability of a principal not shown to have had a mens rea. The disproportion between the fine assessed in this case against an innocent corporation for the unauthorized, un- ratified fraud of a sales agent, and the fines established by the Alabama legislature for serious offenses against the public is so great that such fines are excessive in violation of constitutional protections. [Compare the recent punitive damages awards in Appendix A to the Statutory criminal fines in Appendix B. They are shockingly disproportionate. } See Ala. Code §§ 13A-4-3, 13A-5-12 and 13A-9-41 (1975). Comparison of the award in this case with punitive damages established by the Alabama Legislature where it has ad- dressed the issue of the appropriate amount of civil punish- ment with respect to specific conduct shows a similar dis- proportionality [see Pet. Reply Cert. App. F]. - 35 - Similarly, no criminal fine in virtually any state remotely approaches the amount of the fine imposed upon Pacific Mutual here. ‘This penalty award should therefore fail the second Solem test. With respect to the third Solem test, it is virtually impos- sible to make any comparison of the fire imposed in this case with fines imposed by other jurisdictions for the same offense. In the majority of jurisdictions, punitive damages are not allowed against a principal upon a respondeat supe- rior basis, where no ratification or authorization is proven and the agent is not in a managerial capacity [Pet. Reply App. D]. Further, the arbitrary and unpredictable nature of punitive damages in general makes comparisons an exercise in futility, other than to show the arbitrary nature of the doctrine. For example, in a products liability case, Toole v. Richardson-Merrell, Inc., 251 Cal.App.2d 689 (1967), puni- tive damages for falsifying drug test dates, resulting in blind- ness, remitted to $250,000 were upheld, while in Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832 (2d Cir. 1967), a case involving injury from the same drug, against the same manufacturer, the court set aside the punitive damages award entirely. Under any test of excessiveness, however, it is submitted that the punishment imposed upon Pacific Mutual on an apparent authority basis was excessive. The award in this case exemplifies the concern expressed in Gertz v. Robert "’sIch, Inc., 418 U.S. 323, 350 (197%) regarding punitive damage awards in wholly unpredictabie amounts bearing no necessary relation to actual harm caused. Even an $800,000 punishment sanction under the facts of this case must be deemed to be grossly disproportionate to any fault on the part of Pacific Mutual, and therefore, to violate the Due Process Clause of the Fourteenth Amendment. . = IV. THE SUIT BELOW, ALTHOUGH NOMI- NALLY CIVIL, MUST BE CONSIDERED CRIMINAL IN NATURE AS TO THE PUNI- TIVE DAMAGES AWARDED THEREIN, ENTITLING PACIFIC MUTUAL TO PRO- TECTION UNDER THE FIFTH AND FOUR- TEENTH AMENDMENTS TO THE UNITED STATES CONSTITUTION As noted above, the punitive damages award here was imposed as punishment, and served the same function as a criminal fine. In an early analysis of punitive damages awards, Professor Willis wrote: “...+ No hypothesis, however ingenious, can cloud the mind to the fact that exemplary dam- ages put a man in jeopardy once, and if he is also punished criminally for the same offense, he is ‘twice put in jeopardy.” Again, when assessed exemplary damages, the accused is really punished for a criminal offense without the safeguards of a criminal trial... . The proce- dure and principles of criminal law are dis- regarded, the rules of damages are forgotten, and the machinery of justice is used for the avowed purpose of giving the plaintiff that to which he has no shadow of right.... The doctrine is altogether inconsistent with sound legal princi- ples and it is unfortunate that it ever found lodgment in the law, and we look with admira- tion upon any court brave enough to disown and abandon it.” 20 a“ Willis, Measure of Damages When Property Is Wrongfully Taken By An Individual, 22 Harv.L.Rev. 419, 421-422 (1909). - 37. Professor Willis’ comments sum up Pacific Mutual’s experience in this case. The rights of Pacific Mutual under the Fourteenth Amend- ment to certain trial procedural protections incorporated from the Fifth Amendment were violated by the trial procedures below. Where punishment is imposed in actions initiated by the government, certain Fifth and Sixth Amendment protections have been required [United States v. Halper, 490 U.S. ___, 109 S.Ct. 1892 (1989); Kennedy v. Mendoza-Martinez, 372 U.S. 144 (1963); Trop v. Dulles, 356 U.S. 86 (1958). See also United States ex rel Marcus v. Hess, 317 U.S. 537 (1943)]. Here, the enforcement of the State’s interest in punish- ment and deterrence was given over to private attorneys general [Jn Re Paris Air Crash, 622 F.2d 1315 (9th Cir. 1980), cert. denied, 449 U.S. 976 (1980)]. The fact that the punishment is imposed in a private action should not affect the rights of the defendant made subject to possible severe punishment [See A.B. Small Co. v. American Sugar Refining Co., 267 U.S. 233, 239 (1925); Giaccio v. Pennsylvania, 382 U.S. 399, 401-403 (1966); Burgess v. Salmon, 97 U.S. 381, 385 (1878); Cummings v. Missouri, 71 U.S. (4 Wall.) 277, 326-27 (1867)]. To the defendant facing possible stigma and severe financial penalties, the difference between an action sec king a civil penalty and one seeking a criminal penalty is small. Further, the sheer magnitude of present punitive damages awards [see e.g. Appendix A, setting forth the astonishing number and size of recent Alabama punitive damages awards, and the similar appendix to the amicus curiae brief for the Association for California Tort Reform] requires that rigorous procedural fairness be imposed in these trials. It is submitted that, as relevant in this case, the procedural protections required are (i) a beyond a reasonable doubt burden of proof, (ii) unanimous jury, (iii) an upper limit on - 38 - the punishment, and (iv) trial of issues of underlying liability prior to trial of issues relating to liability for and amount of punitive damages. Under the test of procedural Due Process set forth in Mastews v. Eldridge, 424 U.S. 319 (1976), it is submitted that -ach of the above is required. In Mathews, this Court set for. the analysis for determining the requirements of proce- dural Due Process in particular cases, stating, at page 335: “.. .{[}dentification of the specific dictates of due process generally requires consideration of three distinct factors: first, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, ard the probable value, if any, of additional or substi- tute procedural safeguards; and finally, the Government’s interest, including the function involved and the fiscal and administrative bur- dens that the additional or substitute procedural requirement would entail.” Testing the trial procedures in this case by the three Mathews factors shows that each of the following additional protections were required. A. Beyond A Reasonable Doubt Standard Of Proof. The trial court rejected Pacific Mutual’s requested jury instruction for a beyond a reasonable doubt burden of proof. Given the close analogy of punitive damages to criminal fines, it is submitted that this enhanced burden of proof is required by Due Process. [See Jn Re Winship, 397 U.S. 358, 364 (1970)]. Colorado has imposed a beyond a reasonable burden of proof by statute [Colo. Rev. Stat. § 13-25-127(2) (Supp. 1986)]. Other states have by statute or court decision required a clear and convincing evidence test. In Travelers Indemnity - 39 - Co. v. Armstrong, 442 N.E.2d 349 (Ind. S.Ct. 1982), the Court adopted that standard of proof, stating, at page 363: “A rule that would permit an award of punitive damages upon inferences permissibly drawn from evidence of no greater persuasive value than that required to uphold a finding of the breach of contract — which may be nothing more than a refusal to pay the amount demanded and subsequently found to be owing — injects such risks into refusing and defending against questionable claims as to render them, in es- sence, nondisputable. The public interest cannot be served by any policy that deters resort to the courts for the determination of bona fide com- mercial disputes... .” (Emphasis added.) It is submitted that the reasoning of the Indiana Court is sound, but that a clear and convincing standard of proof, while an improvement, is not sufficient in these cases. The risks of erroneous fact finding and jury bias are too high in cases where civil fines can be awarded which far exceed any conceivable criminal fine. Such risk requires the enhanced standard of proof to provide the necessary confidence in the correctness of the fact finding involved. [See Addington v. Texas, 441 U.S. 418, 423 (1979)]. B. Unanimous Jury. Alabama required a unanimous jury in this case. C. Upper Limit On Awards. The necessity of such a limit has been discussed above. Under the test in Mathews v. Eldridge, above, it is submitted that such a limit is procedurally required. Limits fixed to match conduct would alleviate much of the problemi associ- ated with these awards. The fact that Alabama and other states have limited punitive damages in many areas demon- strates that no governmental interest would be adversely affected. ow ~ * D. Separation In The Order Of Trial Of Liability Issues From Punitive Damages Issues. Again under the test in Mathews v. Eldridge, above, it is submitted that bifurcation is required of the order of trial, to try the issues of underlying liability before issues related to punitive damages and the amount of such an award. If such bifurcation is not allowed, the defendant is put at risk of erroneous findings of fact on liability issues. Here, the jury below could not help but be influenced in determin- ing whether or not Pacific Mutual should be held for Mr. Ruffin’s fraud by evidence and argument relating to plain- tiffs’ request for emotional distress and punitive damages. This unnecessary risk can easily be avoided by controlling the order of proof and submitting the question of underlying liability to the jury prior to continuing the trial, if necessary, as to punitive damages issues. Vv. ALABAMA PUNITIVE DAMAGES LAW {S DISCRIMINATORY IN VIOLATION OF THE EQUAL PROTECTION CLAUSE, BY ENCOURAGING DISPROPORTIONATE PUNISHMENT, WITHOUT RATIONAL BASIS. The Fifth, Eigintth and Fourteenth Amendments, and the Ex Post Facto Clauses, all embody a concern for even-handed application of the law to all. [Plyler v. Doe, 457 U.S. 202 (1982); Yick Wo v. Hopkins, 118 U.S. 356 (1886); Papach- ristou v. City of Jacksonville, 405 U.S. 156 (1972); How Ah Kow v. Nunan, 12 Fed.Cas. 252 (Case 6, 546, 1877); Cum- mings v. Missouri, 71 U.S. (4 Wall.) 277, 325 (1867).] The Equal Protection cases generally deal with clas- sifications which discriminate against groups, protecting against religious, racial, ethnic and gender bias, among others. Classifications which are arbitrary or capricious are YY invalid. [Walters v. St. Louis, 347 U.S. 231 (1954); Old Dearborn Distributing Co. v. Seagrams-Distillers Corp., 299 U.S. 183 (1936).] Under Alabama law, and punitive damages law generally, each jury or court is allowed to classify and discriminate in deciding who among those “guilty” of substantially the same conduct should be punished, and how severely to punish those chosen for punishment. The effects of this unpredictable discretion is to allow juries to punish the unpopular and indulge bias and prejudice [Gertz v. Robert Welch, Inc., 418 U.S. 323, 250 (1974); Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 82-84 (1971) (Marshall, J., dissenting)] and to inhibit access to the courts for the resolution of disputes [Travelers Indemnity Co. v. Armstrong, 442 N.E.2d 349, 363 (Ind. S.Ct. 1982)]. An example of this differential punishment in Alabama is discussed above, in Section I.B, wherein Justice Houston noted the great disparity in awards for substantially the same conduct made by two different juries which were identically instructed. It is submitted that the award of punitive dam- ages here, and the Alabama law under which it was made, violated both the Due Process and Equal Protection rights of Pacific Mutual. The award should be vacated. VI. THE CONSTITUTIONAL DEFECTS IN THE AWARD OF PUNITIVE DAMAGES AGAINST PACIFIC MUTUAL IN THIS CASE WERE NOT CURED BY JUDICIAL REVIEW AND THE POTENTIAL FOR A REMITTITUR The Alabama Supreme Court stated at page 11 of its opinion [Pet. App. B13] that review of the punitive damages award by the trial court under the procedures established in Hammond v. City of Gadsden, 493 So.2d 1374 (Ala. 1986) ~ further established that the Due Process Clause had not been violated. In fact no such review occurred. In Hammond, the Alabama Supreme Court established seven factors to be considered by the trial court in reviewing a challenged award of punitive damages. They are: (i) whether there is a reasonable relationship between the punitive damages and the harm done by the defendant; (ii) the reprehensibility of defendant’s conduct; (iii) the profit to defendant from such conduct; (iv) the wealth of the defendant; (v) the costs of litigation; (vi) whether criminal sanctions have been imposed; and (vii) whether other civil awards have been made against defendant for the same conduct. These factors are largely unreviewable, and merely trans- fer discretion to the reviewing court. For example, the “reasonable relationship” test has proved to be meaningless because virtually any ratio of punitive to actual damages can be and has been held to be “reasonable.” These factors amount to no more than the “gentle test of excessiveness,” particularly given the extraordinary deference given to the jury decisions in these cases. At most, use of the language of these criteria merely disguise the true bases of the court’s decisions, which are subjective value judgments. Where, as here, there were no meaningful standards to guide the jury, trial court and appellate review is meaning- less. Courts, no more than juries, can be given unbridled discretion to determine the amount of punishment after the defendant has acted. [Grayned v. City of Rockford, 408 U.S. 104, 108-109 (1972); Marks v. United States, 430 U.S. 188, 191-192 (1977); Bouie v. Columbia, 378 U.S. 347 (1964); the vice of vague standards is that no meaningful review can be made [Roberts v. United States Jaycees, 468 U.S. 609, 629 (1984)]. ~-@- The trial court review in this case illustrates this fact. That court did not conduct a Hammond hearing, and the reasons stated by the trial court for upholding the award were not Hammond factors. The trial court’s reasons were stated as follows [Pet. App. A15]: “Although the award is for a great amount of money, it is the considered opinion of this Court that it is not excessive as a matter of law, though this Court would in all likelihood have rendered a lessor amount; nor is the verdict based upon bias, passion, corruption, or other improper motive. The jury seems to fashioned [sic] their awards in proportion to the damage done each plaintiff; awarding the most damaged plaintiff, Cleopatra Haslip, the larger award and the least damaged plaintiff, Eddie Hargrove, the least award. “The jury was composed of male and female, white and black and in the opinion of the Court, acted conscientiously throughout the trial.” These stated reasons demonstrate only the subjective reaction of the trial judge, tempered by deference to the jury verdict. The resulting judgment was affirmed by the Alabama Supreme Court, upon a presumption of the correct- ness of the verdict. Even if a review utilizing Hammond criteria had been given, it would not have cured the defects. Justice Maddox, in his dissent below [Pet. App. B16] stated his view of these criteria as follows: “While I applaud the procedure this Court has adopted to review and revise the jury’s decision based upon its ‘standardless discretion,’ I cannot believe that procedure is sufficient to accord to litigants all the due process protection the Consti- tution envisions.” [Footnote omitted.] “AVAILABLE COPY - 44 - It is submitted that judicial review does not and cannot cure the constitutional defects in the punitive damages award in this case. A procedure for review of a decision made under an unconstitutional law does not and cannot cure the unconstitutionality of the law. [Baggett v. Bullitt, 377 U.S. 360, 373 (1964); See Furman v. Georgia, 408 U.S. 238 (1972); cf. Greenbelt Coop. Publishing Assn. v. Bresler, 398 U.S. 6, 7-11 (1970).]} In Baggett v. Bullitt, 377 U.S. 360 (1964), this Court stated, at p. 373: “Well-intentioned prosecutors and judicial safeguards do not neutralize the vice of a vague law.” These defects are worsened because, in Alabama, as in most states, extraordinary deference is given to the jury’s decision as to punitive damages, and a jury’s punitive dam- age award will only be disturbed if it is, in the judgment of the reviewing court, so excessive as to show that it must have been the product of bias, passion, prejudice, corruption or other improper motive. [Hammond v. City of Gadsden, 493 So.2d 1374, 1379 (Ala. 1986)]. This deference is enhanced in Alabama because of that state’s interpretation of the provi- sion in the Alabama Constitution, confirming a right to jury trial.?! “tk Ge —— oe such a broad field for t it cannot cure underlying defects, and as noted above, merely transfers standardless discretion to the reviewing courts. 21 See the concurring opinion of Houston, J.. i ’ ' ; , J., in Charter Hospital ae Inc. v. Weinberg, 1990 Ala. Lexis 17, to be published at 558 ra - ¢ an. 12, 1990), in which the effect of this provision on judicial review of jury verdicts appears to contribute to his view that review under Hammond procedures cannot cure the constituti ul punitive damages law. nstitutional defects in Alabama + In 2-D’s Logging, Inc. v. Weyerhauser Co., 632 P.2d 1319 (Or. 1981), the appellate court made note of this problem, stating at page 1326: “(Punitive damages doctrines have] resulted in a perplexing and contorted mode of judicial review ... which, in reality, is an imprecise pattern of subjective judicial reactions mixed with some episodes of deference to jury ver- dicts.... At least in cases where there is no specific statutory authorization for their award, the imposition of punitive damages involves a policy or value judgment.” Decisions by reviewing courts in these cases are equally 1s invalid as the original jury awards, because they are made 6.’ a Stan ardless basis. the Hammond factors are equally deficient in content as standards for juries in setting awards as for reviewing courts in overseeing such awards, because (i) these “standards” are insufficient as guides to determine the amount of punishment (only two of the factors are directed to that issue), and (ii) no range of permissible punishment would have been set in advance of Pacific Mutual’s conduct, to give fair warning of the consequences of committing whatever wrongful acts were involved. [Grayned v. City of Rockford, 408 U.S. 104, 108-109 (1972); United States v. Cohen Grocery Co., 255 U.S. 81 (1921); Calder v. Bull, 3 U.S. (3 Dall.) 386, 390 (1798); Bouie v. Columbia, 378 U.S. 347 (1964)]. Decisions by either a jury or a court would still be made upon the basis of the subjective reactions of the jurors or judges, with no effective or reviewable limit on their discretion as to the amount of the award. Such decisions are necessarily ar- - bitrary, and therefore invalid. [Grayned v. City of Rockford, 408 U.S. 104, 108-109 (1972); Roberts v. United States Jaycees, 468 U.S. 609, 629 (1984); Yick Wo v. Hopkins, 118 J.S. 356, 369-370 (1886)]. Review of such awards would still necessarily be by the “gentle test of excessiveness.” , * Discretion unguided by any objective, meaningful standards would still reside in the jury, and be transferred to reviewing courts upon motion or appeal. Justice Houston has now joined Justices Maddox and Steagall in concluding that Alabama review procedures do not cure the Due Process defects at the jury levei. In Charter Hospital of Mobile v. Weinberg, 1990 Alabama Lexis !7 (Jan. 12, 1990), Justice Houston“ stated that he had believed that post trial court review would pass constitutional muster, but that because of the deference to jury verdicts required by the Alabama Constitution he had to conclude such review did not cure the defects. Justice Houston stated, at 1990 Ala. Lexis 17, pages 22-23: “Setting standards for post-trial review of a jury’s verdict ... does not comply with this constitutional provision, since the standard by whicl the jury is to gauge the amount of puni- tive damages, if any, that it is to award is incom- prehensibly vague and unintelligible.” It is submitted that under the three-part test of procedurai Due Process set forth in Mathews v. Eldridge, 424 U.S. 319 (1976), the provision for remittitur by reviewing trial and appellate courts does not satisfy the requirements of Due Process for adequate limits on jury discretion. The concern expressed by this Court, that there is a lack of objective standards limiting the jury’s imposition of punishment, and juries are left free to render awards without any necessary relationship to actual harm, cannot be met by the generalized, subjective and highly judgmental factors suggested by the Alabama Supreme Court. 22 Justice Hovston recommended in his concurrence that juries be instructed with factors essentially the same as the Hammond factors. This would not cure the Constitutional defects for the reasons stated in the text. + -P CONCLUSION Punitive damages law, as applied in this case, and as presently applied generally, is overwhelmingly lacking in fundamental fairness. The law gives no fair notice of the consequences of prohibited conduct because of the vague and contentless criteria upon which the award was founded. The jury was sent to deliberate with no meaningful standards to guide it as to the amount of punitive damages awardable. This unbridled discretion leads to arbitrary, discriminatory and unpredictable awards The jury was told only to consider the “character and degree of the wrong,” and the “necessity of preventing simi- lar wrongs.” As recognized by Justice Houston, these criteria are hopelessly vague and incomprehensible as stand- ards for a jury to use in assessing punitive damages. These instructions left the jury free (i) to give reign to biases and prejudices and to punish selectively; (ii) to allow others “guilty” of equally “reprehensible” conduct to go unpunished; (iii) to punish unpopular and target defendants; and (iv) to render awards with no necessary relationship to actual harm caused. if the award had been made initially by the trial court utilizing the same criteria contained in the pattern jury in- struction, the award would be equally invalid. Therefore, trial court review did not, and could not cure the defects at the jury level. Similarly, appellate review based upon these criteria, or the Hammond criteria, amounted to no more than the “gentle test of excessiveness.” A determination of exces- Siveness in these circumstances means only that the visceral reactions of the reviewing justices were that the award either was or was not too large [See Rummel v. Estelle, 445 U.S. 263, 275 (1980); Solem v. Helm, 463 U.S. 277, 308 (1983), Burger, C.J., dissenting]. - 48 - Withcut objective limits on the amount of punitive dam- ages which may be awarded for specified conduct, no fair warning of the consequences of any particular conduct is given, and the result is punishment on an ad hoc, after-the- fact basis. Such punishment violates the concerns for funda- mental fairness and fair warning embodied in the Due Proc- ess Clause of the Fourteenth Amendment. If the Alabama legislature had enacted a statute making conduct of the class of Pacific Mutual’s involvement with Mr. Ruffin subject to civil penalty of $1,000,000, a‘ter Mr. Ruffin’s fraud, both Due Process and Ex Post Facto Clauses concerns would invalidate application thereof to Pacific Mutual. But that is what was allowed through the jury and reviewing court procedures in Alabama in this case. This lack of fundamental fairness was exacerbated by the trial procedure employed, which aliowed (i) trial of the punitive damages claim concurrently with the agency issues, thereby tainting the fact finding as to agency; and (ii) the award of punitive damages to be made upon a preponderance of the evidence basis, so that a fine in excess of $1,000,000 could be imposed on the slightest tipping of the balance in favor of Respondents. Although Alabama did not allow wealth evidence, the amount of the award was clearly based upon the jury’s perception of Pacific Mutual’s ability to pay, which has no relationship to deterrence or fault, and is a punishment of status [See Williams v. Illinois, 399 U.S. 235 (1970)]. Given Pacific Mutual’s tenuous connection to the punish- able conduct of Mr. Ruffin for which it was punished on a respondeat superior basis, Due Process was also violated by such an award. Even applying the rules for imposing criminal liability on corporations for violations of statutory offenses, Pacific Mutual would not validly be subject to punishment. Such liability depends upon the agent acting to benefit, or with intent to benefit, the corporatiom No such intent could conceivably be found in Mr. Ruffin’s pocketing - 49 - of the premiums on the Union Fidelity policy. Punishing Pacific Mutual under these circumstances was akin to punish- ing a bank because a teller embezzled funds. No statute existed in Alabama making Pacific Mutual’s conduct punishable, and setting the range of permitted punishment. No received common law supplied these defi- ciencies. The jury was allowed, in fact instructed, to view the evidence through the prism of its biases, and to impose or withhold punishment in any amount as it chose, limited only by its perception of Pacific Mutual’s assets. Due Process requires more. It is subrnitted that the award of punitive damages should be vacated. : Dated: June 1, 1990 Respectfully submitted, Of Counsel: BRUCE A. BECKMAN VICKI W.W. LAI Counsel of Record ADAMS, DUQUE ADAMS, DUQUE & HAZELTINE & HAZELTINE 523 West Sixth Street Los Angeles, California 90014 (213) 620-1240 OLLIE L. BLAN, JR. J. MARK HART BERT S. NETTLES SPAIN, GILLON, GROOMS, SPAIN, GILLON, GROOMS, BLAN & NETTLES BLAN & NETTLES 2117 Second Avenue North Birmingham, Alabama 35203 (205) 328-4100 Attorneys for Petitioner Pacific Mutual Life Insurance Company APPENDIX A alee -A l- PARTIAL LIST OF ALABAMA JURY VERDICTS AWARDING PUNITIVE DAMAGES OF $500,000 OR MORE FROM JANUARY 1, 1990 TO APRIL 30, 1990 (* indicates wrongful death case) 1990 Wilburn v. Luxaire, et al. $50,000,000* Mobile County Circuit Court CV-88-147 et seq. (April, 1990) $50,000,000 punitive damages, plus previous settlement of $11,500,000 for wrongful death of five-member family resulting from alleged negli- gence involving heating unit. Sue Chumney as Administrator 3,000,000* of the Estateof Christopher E. Long, deceased v. Flowers Hospital Houston County Circuit Court CV-87-587 (1990) Wrongful death of child. Settled post-trial. Tate v. P.P.G. Industries 2,500,000* U.S. District Court for the Southern District of Alabama (February 19, 1990) Punitive damages for wantonness in wrongful death case. Carter v. Old American 1,400,000 Insurance Company Lauderdale County Circuit Court (April, 1990) $1,400,000 punitive damages for bad faith nonpayment of health insurance claim. See 544 So.2d 917 (Ala. 1989) wherein summary judgment for the insurer was reversed. -A 2- Burden v. Empire Fire & Marine $ 1,400,000 Ins. Co. Lauderdale County Circuit Court CV-88-244 (March 2, 1990) Alleged bad faith for failing to settle uninsured motorist claim. $400,000 awarded for compensatory damages and $1,000,000 for punitive damages. Post-trial motions pending. American Employers Insurance 1,150,000 Company v. Southern Seeding Services, Inc., et al. U. S. District Court for the Northern District of Alabama CV 87-G-0294S Verdict awarding $400,000 in compen- satory damages and $750,000 in punitive damages on February 22, 1990. Appeal filed 3/27/90. Braden v. Dorsey Motor Sales, Inc. 1,000,000 Autauga County Circuit Court (April 3, 1990) $1,000,000 punitive damages, $15,600 compensatory damages for alleged fraudulent mis- representation by car dealer that a used car was “new.” William Thornton v. Yamaha 750,000* Motor Co., Ltd., et al. Montgomery County Circuit Court CV-88-1639-TH (April 18, 1990) Wrongful death. No appeal pending. -A 3- PARTIAL LIST OF ALABAMA JURY VERDICTS AWARDING PUNITIVE DAMAGES OF $500,000 OR MORE FROM JANUARY 1, 1989 TO DECEMBER 31, 1989 (* indicates wrongful death case) 1989 Braswell v. Conagra $13,150,000 U.S. District Court for Middle District of Alabama (Southern Division) 88-00741-T-S (November, 1989) Breach of contract and fraud. $4,050,000 in compensatory damages and $9,100,000 in punitive damages. Appeal pending. Sigafoose, v. Babson Brothers Co. 10,000,000 Baldwin County Circuit Court CV-86-573 (1989) $10 million punitive damages for fraud involving $21,000 compensa- tory claim. Settled post-trial. Robbins v. State Farm Mut. 5,000,000 Auto. Ins. Co. 541 So.2d 477 (Ala. 1989) Macon County $5 million punitive damages for bad faith and fraud involving $700 disability claim. Remitted to $500,000. Affirmed by Alabama Supreme Court. Thornton v. Knollwood Park Hospital 5 ,000,000* Mobile County Circuit Court CV-85-1275 (1989) Wrongful death. Settled on Appeal. -A 4- Turner v. Alabama Power Company $ 4,000,000* Montgomery County Circuit Court CV-88-1700-PH (August 30, 1989) Wrongful death suit. Appeal pending. United Serv. Auto Ass'n. v. Wade 3,500,000 544 So.2d 906 (Ala. 1989) Walker County $3.5 million nonjury punitive damages verdict for bad faith remitted to $2.5 million. Compensatory damages of $166,795 plus $21,962 on contract count. Appeal pending. Ford v. Colonial Mortgage Co. 3,000,000 Russell County Circuit Court CV-89-010 (November 1989) Punitive damages for fraudulent breach of residential home loan commitment. Appeal pending. Lindblom v. Intercontinental 3,000,000 Life Ins. Co. Jefferson County Circuit Court CV-86-7156 (1989) Bad faith & fraud involving $10,000 death benefit. Appeal pending. Olympia Spa v. Johnson 3,000,000* 547 So.2d 80 (Ala. 1989) Mobile County Wrongful death. Affirmed by Alabama Supreme Court. 10. 11. 12. 13. 14. -A 5- Land & Associates, Inc. v. Simmons $ 2,500,000 (Ms.87-1313, December 22, 1989] ____ $o.2d___—s (1989) Mobile County Fraud involving $10,000 in life insurance proceeds. Affirmed by Alabama Supreme Court. Majid Jahandarfard, et al. v. Lomax * 500,000* Killough, et al. Madison County Circuit Court CV88-1269P (November 8, 1989) Wrongful Death. Appeal pending. Pettus, Estate of v. Vari-Care 2,500,000* Mobile County Circuit Court CV-86-196 (June 20, 1989) Wrongful death. Appeal pending. Blackburn, et al. v. Altus Bank 2,038,753 Mobile County Circuit Court CV-88-2263 (November 30, 1989) Alleged fraud. Two plaintiffs. $1,538,753 for one plaintiff, $500,000 for other plaintiff. Appeal pending. White, et al. v. Georgia Casualty 2,000,000 Insurance Co. Barbour County Circuit Court, Clayton Division CV-84-037 (June 28, 1989) Bad faith action. Appeal pending. 15. 16. 17. 18. 19. -A 6- Stoval, Estate of v. Montgomery Health Care, et al. Montgomery County Circuit Court CV87-173-TH (1989) Wrongful death. HealthAmerica, et al. v. Menton 551 So.2d 235 (Ala. 1989) Mobile County Fraud involving $2,400 claim for medical benefits. Affirmed by Alabama Supreme Court; Cert. denied by Supreme Court of United States. 1,800,000 Phillips v. United American Ins. Co. Etowah County Circuit Court CV-87-132JSS (June 2, 1989) Bad faith and fraud involving $264 unpaid balance on medical claim. Settled post-trial. 1,800,000 Turner v. Deutz-Allis Credit Corporation Barbour County, Clayton Division CV-85-043 (October 9, 1989) No post-trial relief. Appeal pending. 1,609,500 Beyer v. Beech Aircraft Corp. Jefferson County Circuit Court CV-81-2120 (1989) Wrongful death. 1,500,000* $ 2,000.000* 20. 21. 22. 23. -A 7- Terry v. John Carner and Leisure American, Inc. Jefferson County Circuit Court CV 85-6777 (November 1, 1989) Fraud claim involving $5,500 actual damages. Settled prior to appeal. Porter v, Hook 554 So.2d 382 (Ala. 1989) Jackson County Action for breach of written contracts. Breach of unwritten joint venture agreement and fraud against cable television owner. Remitted to $300,000 by trial court. Full verdict reinstated by Supreme Court of Alabama. Central Alabama Electric Coop. v. Tapley 546 So.2d 371 (Ala. 1989) Tallapoosa County Wrongful death. Affirmed by Alabama Supreme Court. Pacific Mutuai Life Ins. Co. v. Haslip [Ms.87-842, Sept. 13, 1989] 553 So.2d 537 (Ala. 1989) Fraud. Affirmed by Alabama Supreme Court. Cert. granted by Supreme Court of United States. $ 1,500,000 1,300,000 1,000,000* 1,000,000 24. 25. 26. 27. -A 8- Carlis v. Ft. Deposit Motor Co., etal. $ 1,000,000 Macon County Circuit Court CV-87-30 (April 19, 1989) Fraud involving sale of credit life insurance; approximately $1,000 compensatory damages. $1,000,000 remitted to $250,000. Appeal pending. Shelby County v. Bailey 1,000,000* 545 So.2d 743 (Ala. 1989) Jefferson County Wrongful death - $500,000 each for two deaths. Affirmed by Alabama Supreme Court. United American Ins. Co. v. Brumley 1,000,000 $42 So.2d 1231 (Ala. 1989) Marion County Bad faith involving compensatory damages of $5,000. Affirmed by Alabama Supreme Court. Rehearing denied. Kumar v. Lewis 875,000* Tuscaloosa County Circuit Court CV-86-97 (January 27, 1989) Medical malpractice involving death of a child. Affirmed by Alabama Supreme Court on 4/06/90. 28. 29. 30. 31. -A 9- Battles’ Entertainment, Inc. v. First Federal Savings & Loan Association of Russell County, et al. Lee County Circuit Court CV-88-083 (April 20, 1989) Fraud in connection with a sale of real estate. Settled post-trial. Robert McDonald v. Continental Casualty Company (CNA) Houston County Circuit Court (March 9, 1989) Alleged tort of outrage due to late payment of workmen’s com- pensation benefits. Motions for J.N.O.V. and/or remittitur denied by trial court. Appeal pending. Thomas v. Principal Mut. Ins. Co. Mobile County Circuit Court CV-85-1275 (1989) Bad faith failure to pay $1,000 death benefit. Set aside by trial court on defendant’s motion for J.N.O.V. - Appeal pending. Harris v. M & § Toyota, Inc. Jefferson County Circuit Court CV-86-1344 (August 22, 1989) Alleged fraud involving sale of used car. Verdict set aside cn J.N.O.V. Appeal pending. $ $ 800,000 750,000 750,000 500,000 -A 10- 32. Mallory v. Hobbs Trailers 33. 34. 554 So.2d 966 (Ala. September 29, 1989) Jefferson County Wrongful death. Trial court granted defendant’s motion for J.N.O.V. Original verdict reinstated by Supreme Court of Alabama. Rehearing denied. Vintage Enterprises v. Jaye 547 So.2d 1169 (Ala. 1989) Tallapoosa County $500,000 punitive damages and $20,000 compensatory, relating to sale, order, delivery of mobile home, fraud, wantonness, negligence, warranty and Magnuson- Moss theories. Affirmed by Alabama Supreme Court. Watson, Watson & Rutland v. Rosser Fabrap Int'l U. S. District Court for Middle District of Alabama 88-H-1292-N (M.D. Ala. 1989) Intentional interference with business relationship. Post-trial motion pending. 500,000* 500,000 500,000 -A 11- PARTIAL LIST OF ALABAMA JURY VERDICTS AWARDING PUNITIVE DAMAGES OF $500,000 OR MORE FROM JANUARY 1, 1988 TO DECEMBER 31, 1988 (* indicates wrongful death case) 1988 Turner v. Southern Life & $ 5,000,000 Health Ins. Co. Macon County Circuit Court CV-87-91 (1988) Punitive damages for bad faith and fraud involving $1,000 death benefit. Remitted to $500,000. Appeal pending. Industrial Chemical & 2,500,000* Fiberglass v. Chandler 1,250,000 547 So.2d 812 (Ala. 1988) Jefferson County $3,750,000 punitive damages - $2.5 million for wrongful death and $1.25 million for breach of warranty. Affirmed by Alabama Supreme Court. Industrial Chemical & 2,500,000* Fiberglass v. Ensley 1,250,000 547 So.2d 812 (Ala. 1988) Jefferson County $3.75 million - $2.5 million for wrongful death and $1.25 million for breach of warranty. Affirmed by Alabama Supreme Court. -A 12- Heathcoat v. Mitchell Potts, et al. $ 3,000,000* U. S. District Court for the Northern District of Alabama Case No. 85-7805, 85-7288 (1988) Wrongful death. Clardy v. Sanders 2,750,000* 551 So.2d 1057 (Ala. 1989) Montgomery County (January 15, 1988) Wrongful death. Affirmed by Alabama Supreme Court. Proctor & Gamble Co. 2,750,000* v. Staples 551 So.2d 949 (Ala. 1989) Colbert County (March 2, 1988) Wrongful death. Reversed on appeal. Settled thereafter. E & § Facilities, Inc., et al. v. 1,750,000 Precision Chipper Corporation, et al. Jefferson County Circuit Court CV-84-6422 (April 4, 1988) Alleged fraud in the procurement of products liability insurance. Verdict for $875,000 each against insurance agency and insurance broker/wholesaler. Affirmed by Alabama Supreme Court on 4/12/90. Walls v. Colonial Mortgage Co. 1,700,000 Russell County Circuit Court CV87-194 (1988) Fraud involving breach of residential home loan commitment; compensatory damages of $2,500 or less. Settled pending appeal. 10. 11, 12. 13. -A 13- Trawick v. Michaels of $ Oregon Co. U.S. District Court for Middle District of Alabama 88-C-413N (December 21, 1988) Products liability involving rifle swivel. Appeal pending on certified question to Alabama Supreme Court. 1,000,000 Williams v. Rust International Jefferson County Circuit Court CV-82-174 (1988) Wrongful death. 1,000,000* Achord v. Momar, Incorporated United States District Court for the Middle District of Alabama, Northern Division No.87-D-0824-N (September 6, 1988) Products liability suit. Verdict includes $500,000 punitive damages. No appeal. 863,625 Carner, et al. v. Commercial Union Insurance Company, et al. Jefferson County Circuit Court CV-82-3504 (1988) Breach of contract and bad faith. 811,804 Ramsey Health Care, Inc. v. Follmer 24 ABR 1321 Jefferson County Circuit Court CV-87-7215 Alleged fraud. Affirmed by Alabama Supreme Court. 800,000 14. 15. 16. 17. 18. -A 14- Alabama Power Co. v. Courtney 539 So.2d 170 (Ala. 1988) Chilton County Wrongful death. Affirmed by Alabama Supreme Court. Consolidated Freightways v. Pacheco-Rivera 524 So.2d 346 (Ala. 1988) Jefferson County Wrongful death. Alabama Farm Bureau v. Hixon 533 So.2d 518 (Ala. 1988) Montgomery County Wrongful death. Reversed on appeal. Alabama Power Co. v. Capps 519 So.2d 1328 (Ala. 1988) Butler County Wrongful death. Affirmed by Alabama Supreme Court. L. W. Johnson & Assoc. v. Rivers Constr. Co. 532 So.2d 618 (Ala. 1988) Marion County Fraud action by construction county against developer involving $165,000 compensatory damages. Affirmed by Alabama Supreme Court. 750,000* 525,000* 500,000* 500,000* 500,000 -A 15- PARTIAL LIST OF ALABAMA JURY VERDICTS AWARDING PUNITIVE DAMAGES OF $500,000 OR MORE FROM JANUARY 1, 1987 70 DECEMBER 31, 1987 (* indicates wrongful death case) 1987 Dale, Estate of v. Griffin, Dept. of Mental Health Montgomery County Circuit Court CV85-138-K (1987) Wrongful death. $11,701,372* Estate of Jackson v. 5,100,000 Phillips Petrelesm Co. 2,550,000 676 F.Supp. 1142 (S.D. Ala. 1987) Reduced punitive damages from $5,041,694.04 to $300,000 in one case, and from $2,519,439.85 to $150,000 in another. Claim for conversion, intentional interference with contractual relations and wrongful exercise of lien rights. New trial granted on refusal to remit punitive damages. Super Valu Stores, Inc. v. Peterson 5,000,000 506 So.2d 317 (Ala. 1987) Etowah County Breach of contract and fraud in employment relationship. Affirmed by Alabama Supreme Court. -A 16- Aetna Life Ins. Co. v. Lavoie 505 So.2d 1050 (Ala. 1987) Mobile County $3 million punitive damages for bad faith refusal to pay $1,650 medical claim. Initially affirmed by Alabama Supreme Court, then vacated on appeal to U.S. Supreme Court and thereafter remitted to $500,000 by Alabama Supreme Court and affirmed. State Farm Mutual Automobile Insurance Company v. Hollis, Adm. ABR 87-808 Coffee County Circuit Court CV-853 (1987) Bad faith claim alleging negligent or wanton failure to settle lawsuit and wanton failure to file supersedeas bond. Reversed and remanded for new trial. Talmage v. Humana Hospital Florence, et al. Lauderdale County Circuit Court CV-85-135 (September 10, 1987) Wrongful death. Settled post-trial. Curry, Estate of v. Alabama Gas, et al. Montgomery County Circuit Court CV86-323-G (1987) Wrongful death. $ 3,500,000 1,500,000 1,500,000* 1,250,000* 10. 11. -A 17- North Carolina Mut. Life. Ins. Co. v. Holley 533 So.2d 497 (Ala. 1987) Tallapoosa County Bad faith. Remitted to $500,000 by Alabama Supreme Court. Best Plant Food Products, Inc. v. Cagle 510 So.2d 229 (Ala. 1987) Jackson County Breach of warranty/fraud/deceit Affirmed by Alabama Supre: vurt. Hixon v. Village West Traile Park Montgomery County Circuit Court CV-84-1447-PR (February 4, 1987) Wrongful death. Reversed and rendered on appeal. Harmon v. Motors Ins. Corp. 493 So.2d 1370 after remand 525 So.2d 411 (1987) Calhoun County $500,000 punitive damages for fraud remitted to $40,000. Affirmed conditionally. $ 1,000,000 972,000 750,000* 500,000 -A 18- PARTIAL LIST OF ALABAMA JURY VERDICTS AWARDING PUNITIVE DAMAGES OF $500,000 OR MORE « FROM JANUARY 1, 1986 TO DECEMBER 31, 1986 (* indicates wrongful death case) 1986 Davison v. Mobile Infirmary $ 8,000,000 518 So.2d 675 (Ala. 1986) Mobile County $8 million punitive damages for medical malpractice remitted to $1,350,000. Beck, Murray, Tull v. Piper 5,175,000* Aircraft, et al. Jefferson County Circuit Court CV-83-6266 (1: °6) Wrongful death. Black Belt Wood Yard v. Sessions 3,500,000* 514 So.2d 1249 (Ala. 1986) Jefferson County Wrongfui death. Affirmed by Alabama Supreme Court. Patricia L. Crandall, et al. 3,035,000* v. Rudolph V. Williams 514 So.2d 1267 (Ala. 1987) Madison County Circuit Court CV-85-461, CV-85-379 consolidated (January 13, 1986) One death - $500,000; one personal injury - $2,500,000 (compensatory and punicive - general verdict); two personal injuries - $2,500 each (compensatory and punitive - general verdict); one subrogation - $30,000. Affirmed. -A 19- Treadwell Ford, Inc. v. Campbell $ 485 So.2d 312 (Ala. 1986) Mobile County Three plaintiffs - $1,000,000 wrongful death; $60,000 negligence; and $350,000 which included compen- satory damages and punitive damages for fraud involving a defect in the acceler- ator of a pickup truck. Affirmed by Alabama Supreme Court. Appeal dismissed by 486 U.S. 1028, 108 S.Ct. 2007, 100 L.Ed.2d 596 (U.S.Ala., May 31, 1988). Alabama Power Co. v. Cantrell 507 So.2d 1295 (Ala. 1986) St. Clair County Wrongful death. Affirmed by Alabama Supreme Court. Appeal dismissed by 486 U.S. 1028, 108 S.Ct. 2008, 100 L.Ed.2d 596 (U.S.Ala., May 31, 1988). AmSouth Bank v. Speigner 505 So.2d 1030 (Ala. 1986) Elmore County Wrongful completion, cashing of $25,000 check. Settled on appeal. 1,000,000* 350,000 1,000,000* 1,000,000 —_ -A 20- Rollison Logging Company of Alabama, Inc. v. John Ellis, et al. Cherokee County Circuit Court CV-84-03 (May 12, 1986) Alleged fraud involving proposed purchase of logging equipment. Compensatory damages in the amount of $78,416 and punitive damages in the amount of $921.584. Remitted to $200,000. $ 1,000,000 -A 21- PA tTIAL LIST OF ALASAMA JURY VERDICTS AWARDING PUNITIVE DAMAGES OF $500,000 OR MORE FROM JANUARY 1, 1985 TO DECEMBER 31, 1985 (* indicates wrongful death cases) 1985 Holt v. State Farm Mutual $25,000,000 Auto Ins. Co. Clay County Circuit Court CV-82-060 (1985) Fraud involving UM stacking; $10,000 contract claim. Settled post-trial. McMillian v. Massey Ferguson, 10,500,000 Inc., et al. Mobile County Circuit Court CV-82-686 (1985) $10.5 million general verdict which included $584,000 actual damages for partial leg amputation caused by alleged wantonness in design & manufacture of grain auger. Settled pending appeal. General Motors Corp. v. Edwards 4,000,000* 482 So.2d 1176 (Ala. 1985) Jefferson County Two plaintiffs at $2 million each. Remitted by trial court to $1.4 million each. Affirmed by Alabama Supreme Court. Overruled by Schwartz v. Volvo North American Corp., 554 So.2d 927, 58 U.S.L.W. 2132 (Ala. July 28, 1989) -A 22- May v. Lloyd Noland Foundation Jefferson County Circuit Court CV-79-583 (1985) Wrongful death. Settled Post-trial. $ 4,000,000* Wright v. Superior Gas 3,600,000 Macon County Circuit Court CV-84-47 (1985) Wrongful death. Settled post-trial. American Pioneer Life Ins. Co. 3,000,000 v. Sandlin 470 So.2d 657 (Ala. 1985) Marion County $3 million punitive damages for fraud involving $100,000 compensatory damages. Affirmed by Alabama Supreme Court. Pasquale Food Co. v. Shakey’s Inc. 3,000,000 Jefferson County Circuit Court CV-82-2606 (1985) Punitive damages for intentional interference with business relation- ship and improper acquisition of trade secrets. Hudson v. K&S Industries, Inc. Montgomery County Circuit Court CV-84-593 (1985) Wrongful death. 2,000,000* 10. -A 23- Nationwide Mut. Ins. Co. v. Clay 469 So.2d 533 (Ala. 1985) Mobile County Bad faith involving $40,000 disabil- ity claim. Affirmed by Alabama Supreme Court. Kathy Dunaway, as Mother and Custodial Parent of Daniel Allen Dunaway, a Minor, v. Alabama Power Company Montgomery County Circuit Court CV-84-650-PR (December 13, 1985) Wrongful death. Appealed. JNOV for Defendant on 4/02/87. (Reversed) $ 1,250,000 500,000* - APPENDIX B Ee Ure sh hc -B 1- oos $ duly WINWIXe, S1UO]IJ D SSPID [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0717%3A07. Public record. Not legal advice.