Amicus Curiae Brief — Pacific Mutual Life Insurance v. Haslip

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1}; Supreme Court, U.S,

“* LINED

MAY Sh WO

SPANIO!, JR

ve RK

No. 89-1279

MCAT RY

Supreme Court of the United States

OCTOBER TERM, 1989

PACIFIC MUTUAL LIFE INSURANCE COMPANY,

Petitioner,

Vv.

CLEOPATRA HASLIP, et al.,

Respondents.

On Writ of Certiorari to the Supreme Court of Alabama

BRIEF OF THE NATIONAL ASSOCIATION

OF MUTUAL INSURANCE COMPANIES

AS AMICUS CURIAE IN SUPPORT OF PETITIONER

FORREST S. LATTA

(Counsel of Record)

BARKER & JANECKY, P.C.

Post Office Box 2987

Mobile, Alabama 36652

(205) 432-8786

GEOFFREY C. HAZARD, JR.

YALE LAW SCHOOL

401A Yale Station

New Haven, Connecticut 06520

(203) 432-4971

Attorneys for Amicus Curiae

National Association of

June 1, 1990 Mutual Insurance Companies

WILSON - Eres PRINTING Co., INC. - 789-0096 - WASHINGTON. D.c. 20001

QUESTION PRESENTED

Amicus Curiae will address the following question:

Whether Due Process requires, as a predicate to award-

ing substantial punitive damages against a principal,

an intelligible legal standard for attributing an agent’s

misconduct to the principal.

(i)

TABLE OF CONTENTS

TABLE OF AUTHORITIES... ievtbbichnassbuns |

INTEREST OF THE AMICUS CURIAE ..............

SUMMARY OF ARGUMENT .........

ARGUMENT .

I. IMPOSITION OF SUBSTANTIAL PUNITIVE

DAMAGES BY ATTRIBUTION—FOR EXAM-

PLE ATTRIBUTION TO A CORPORATION

OF AN EMPLOYEE’S CONDUCT—IS A RE-

CENT PHENOMENON .......... eee .

Il. ATTRIBUTION OF SUBSTANTIAL PUNI-

TIVE DAMAGES ON THE BASIS OF UNIN-

TELLIGIBLE STANDARDS EXPOSES COR-

PORATIONS TO FUNDAMENTAL UNFAIR-

(iii)

Page

TABLE OF AUTHORITIES

CASES Page

American Pioneer Life Ins. Co. v. Sandlin, 470

Se Ge Cis Picci en 7, 8,9

American Society of Mechanical Engineers v. Hy-

drolevel Corp., 456 U.S. 556 (1982) 6

The Amiable Nancy, 16 U.S. (3 Wheat.) 546

TEIIITIED ssntessbiecintanhiovommecessititers tithe marie A IVa teas 6

Avondale Mills v. Bryant, 10 Ala.App. 507, 63 So.

NE III ‘So sicsiceisutsivaciddsnnsscegnasidienasiitlabiucetnicis ac ian cea Ea 6

Bankers Life Ins. Co. v. Scurlock Oil Co., 447 F.2d

gf RE ATE et let ee 6

Case v. Hulsebush, 122 Ala. 212, 26 So. 155

EN spuioshatabiid laeadeiaaiadanddbialenedeises Gieinidadiaiahitete cass, 6

City of Newport v. Fact Concerts, Inc., 453 U.S.

SRST ESR Ps Ee 11

Continental Electric Co. v. American Employers

Insurance Co., 518 So.2d 83 (Ala. 19£7) ............. 9

Giac ‘9 v. Pennsylvania, 382 U.S. 399 (1966)... 10

HealtnAmerica et al. v. Menton, 551 So.2d 235

I III cid crinsscscacirestenenccnteieanchealaLelalen aii eta 7

Lake Shore & S.M. Ry. Co. v. Prentice, 147 U.S.

BEE MIIIIIITIED \shcnhcsuccnsissinasesi sinicvnsdiaaabiaeeeieneiinaieadieneetadtiinaa 5,8

Land & Assoc., Inc. v. Simmons, [1989 WL 162213]

So.2d EG SIIIINED <ciceiuntanesedsiohiadenahineetans 7

Logan v. Zimmerman Brush Co., 455 U.S. 422

RU las iia iata aia 8

Louis Pizitz Dry Goods Co. v. . Yeldell, 274 U. S. 112

SESE iste eh eR etnias 6, 10

McManus v. Crickett, 1 East. 105, 102 Eng. Rep. 43

(1800) ...... Selah aia i ac aaa 3

National Sec. Fire & Cas. Co. v. Bowen, 447 So.2d

~ 183 (Ala. 1983) .......... PRL aasp ee Te 5 HOS ePID 7,8

Parris v. St. Johnsbury Trucking Co., 395 F.2d 543

(2nd Cir. 1968) ......... sie aim ae ea ane 6

Richmond & D.R.R. v. Freeman, 97 Ala. 289, 11 So.

I I i eeeiatiaeieaes 10

Roginsky v. Richardson-Merrill, 378 F.2d 832 (2nd

RSI GES rae ates era iC ne re RO 6

State v. Spurlock, 393 So.2d 1052 (Ala. Crim. App.

ID cendiapinsadbiateceascieanceichamtoeet adhe tnt i ng ere tas 7

TABLE OF AUTHORITIES—Continued

Williams v. City of New York, 508 F.2d 356 (2nd

EIEN Caen nc tt Ric ead Lesa Nee an aOR

Union Ins. Co. v. Hoge, 62 U.S. 35 (1859) -..............

TREATISES

Couch on Insurance 2d (Rev. ed. 1984) -.................

Ghiardi & Kircher, Punitive Damages Law and

I i a nile

Harper, James & Gray, The Law of Torts (2nd ed.

Keeton, Dobbs, Keeton & Owen, Prosser & Keeton

on The Law of Torts (5th ed. 1984) —................

Perkins, Criminal Law (2nd ed. 1969) ....................

Prosser, Handbook of the Law of Torts (4th ed.

LAW REVIEWS

Comment, Corporate Vicarious Liability for Puni-

tive Damages, 1985 B.Y.U.L. Rev 317, 318

a a ace lala inembsiaimnlonmnettche

Elliott, Why Punitive Damages Don’t Deter Cor-

porate Misconduct Effectively, 40 Ala. L. Rev.

IE TTI saci aeccecueapienniesieenaphenebteneeeinneababeunedinns

Ellis, Punitive Damages, Due Process, and the

Jury, 40 Ala. L. Rev. 975 (1989) ........................-

Ellis, Fairness and Efficiency in the Law of Puni-

tive Damages, 56 So. Cal. L. Rev. 1 (1982)........

Holmes, Agency, 4 Harv. L. Rev. 345 (1891)........

Laski, The Basis of Vicarious Liability, 26 Yale

L.J. 105 (1916) . eh

Nettles & Latta, Alabama’ 8 Wrongful Death ‘Stat-

ute: A Problematic Existence, 40 Ala. L. Rev.

475 (1989) . Pa

Note, Dev elopments 1 in the Law —Corporate Crime:

Regulating Corporate Behavior Through Crimi-

nal Sanction, 92 Harv. L. Rev. 1227 (1979)........

Owen, Punitive Damages in Products Liability

Litigation, 74 Mich. L. Rev. 1257 (1976) ....... ieee

Page

“1 Ww

4,5

IN THE

TABLE OF A j >; 1

UTHORITIES—Continued <a Siren Coot of the United States

Parlee, Vicarious Liability for Punitive Damages: Seer Mae en

Suggested Changes in the Law Through Policy

Analysis, 68 Marq. L. Rev. 27 (1984). 4 :

Priest, Punitive Damages and Enterprise Liability, -

56 So. Cal. L. Rev. 123 (1982) 4 ; piiibeadad

Sykes, The Boundaries of Vicarious Liability: An

Eccnomic Analysis of the Scope of Employment

Rule and Related Legal Doctrines, 101 Harv. L. PACIFIC MUTUAL LIFE INSURANCE COMPANY,

en 0 Oa 4 Petitioner,

Wigmore, Responsibility for Tortious Acts: Its "

History, 7 Harv. L. Rev. 383 (1894)... 3 CLEOPATRA HASLIP, et al.

OTHER AUTHORITIES: aoe meets

42 U.S.C. § 1983 ......... Pe RSID OA ern ee RS POD 11

Model Penal Code § 2.07(1) (1985) 5 On Writ of Certiorari to the Supreme Court of Alabama

Restatement (Second) of Agency § 217 C (1958)... 5

Restatement (Second) of Torts § 909 (1977) ........ 5

BRIEF OF THE NATIONAL ASSOCIATION

OF MUTUAL INSURANCE COMPANIES

AS AMICUS CURIAE IN SUPPORT OF PETITIONER

INTEREST OF THE AMICUS CURIAE'

The National Association of Mutual Insurance Com-

panies (“NAMIC”) consists of more than 1,200 com-

panies that underwrite insurance of all types in every

jurisdiction in the United States. Founded in 1895,

NAMIC assists its members in providing a financiaily

stable, competitive private insurance market for the con-

suming public.

Insurance is marketed through widely various and

often remote business relationships. NAMIC members are

increasingly confronted with substantial punitive dam-

1 The parties’ letters of consent to this brief have been lodged

with the clerk.

ages claims based solely upon theories of vicarious attri-

bution, similar to the claim in this case. Amicus believes

there are valid constitutional objections where the nexus

between the active tortfeasor and a principal defendant is

too remote to justify imposition of substantial punitive

damages by attribution.

Amicus therefore asks that the Court in this case be

mindful of the serious problems resulting in unjustified

attribution of substantial punitive damages, and articu-

late a standard in this respect that is compatible with

notions of fundamental fairness embodied in the Due

Process Clause of the Fourteenth Amendment.

SUMMARY OF ARGUMENT

The unfairness of unconstrained jury discretion to

award punitive damages in a civil lawsuit is compounded

where such damages are imposed against a principal for

the wrongdoing of an agent in the absence of any intel-

ligible legal standards for attribution. The rule of attri-

bution applied in this case originated histcrically as an

extension of the respondeat superior doctrine from a

basis for compensatory damages to a predicate for puni-

tive damages. Unfortunately, no satisfactory rationale

for attribution of punitive damages has been articulated

in scholarly discussion or judicial decision, including the

Alabama decisions on the subject. Few courts have paused

to consider the fundamental differences between com-

pensatory and punitive damages. Until recently, the rule

of attribution resulted in few punitive damages awards

of any significance. The substantial increase in large

punitive damages awards during the last ten years,

however, warrants careful examination of this problem

and the articulation of intelligible standards for attribu-

tion that comport with Due Process.

ARGUMENT

Amicus adopts petitioner’s argument that Due Process

prohibits the imposition of substantial punitive damages

in the absence of standards or limits governing the dis-

cretion of the decisionmaker, judge or jury. This unfair-

ness is compounded where such damages are imposed

against a principal in the absence of any intelligible stand-

ards for attribution of an agent’s misconduct.

I. IMPOSITION OF SUBSTANTIAL PUNITIVE

DAMAGES BY ATTRIBUTION—FOR EXAMPLE

ATTRIBUTION TO A CORPORATION OF AN

EMPLOYEE’S CONDUCT—IS A RECENT PHE-

NOMENON.

While legal historians differ on the origins of vicarious

liability in Anglo-American law, see Harper, James &

Gray, The Law of Torts, § 26.2 (2nd ed. 1986); Laski,

The Basis of Vicarious Liability, 26 Yale L.J. 105 (1916) ;

Wigmore, Responsibility for Tortious Acts: Its History,

7 Harv. L. Rev. 383 (1894); Holmes, Agency, 4 Harv. L.

Rev. 345 (1891), it is generally accepted that until the

Sixteenth Century a master was not liable for a servant’s

tort unless the master authorized the wrongful act. Pros-

ser, Handbook of the Law of Torts, § 2 (4th ed. 1971).

By 1800, Lord Kenyon held that while a servant’s neg-

ligence within the course of employment could be attrib-

uted to the master for compensatory liability, the master

could not be liable for punitive damages (trespass) where

the servant wilfully disobeyed the master’s orders. Mc-

Manus v. Crickett, 1 East. 105, 102 Eng. Rep. 43 (1800).

Modern-day vicarious liability is rooted in the policy of

compensating victims for torts committed by servants in

the course of their masters’ employment. Although its

legal rationale is still arguable, see Ellis, Fairness and

Efficiency in the Law of Punitive Damages, 56 So.Cal.L.

Rev. 1 (1982), vicarious liability for compensatory dam-

ages is now uniformly accepted. Keeton, Dobbs, Keeton

& Owen, Prosser & Keeton on The Law of Torts, pp. 499-

508 (5th ed. 1984). See also, Sykes, The Boundaries of

Vicarious Liability: An Economic Analysis of the Scope

of Employment Rule and Related Legal Doctrines, 101

Harv. L.Rev. 563 (1988).

During the late Nineteenth Century, many American

jurisdictions extended the rule of attribution to impose

punitive damages upon principals for tortious misconduct

of agents or employees. Few courts paused to consider

the distinction between compensatory and punitive dam-

ages, or the policy considerations that could justify puni-

tive damages. No fully satisfactory rationale for vicari-

ous attribution of punitive damages has been articulated

in judicial or scholarly discussion. See, e.g., Ellis, Punitive

Damages, Due Process, and the Jury, 40 Ala.L.Rev. 975,

980 (1989) ; Elliott, Why Punitive Damages Don’t Deter

Corporate Misconduct Effectively, 40 Ala.L.Rev. 1053,

1068 (1989); Parlee, Vicarious Liability for Punitive

Damages: Suggested Changes in the Law Through Policy

Analysis, 68 Marq. L. Rev. 27, 28 (1984); Priest, Puni-

tive Damages and Enterprise Liability, 56 So.Cal. L.Rev.

123, 123-24 (1982): Owen, Punitive Damages in Prod-

ucts Liability Litigation, 74 Mich.L.Rev. 1257, 1299-1301

(1976) ; Comment, Corporate Vicarious Liability for Pu-

nitive Damages, 1985 B.Y.U.L.Rev. 317, 318 (1985). Cf.

Note, Developments in the Law—Corporate Crime: Regu-

lating Coiporate Behavior Through Criminal Sanction,

92 Harv.L.Rev. 1227, 1247-51 ( 1979).

The want of a satisfactory rationale may explain

the sharp division among American jurisdictions over the

proper standard for attribution. Some states have simply

extended the respondeat superior rule to encompass puni-

tive damages for tortious acts committed by employees in

the course of their employment, rfaking no distinction

between compensatory and punitive damages in attribut-

ing liability to the principal. The degree of a principal’s

involvement is immaterial, Other jurisdictions, now con-

stituting a majority,’ follow the “complicity” rule formu-

lated by the American Law Institute. See Restatement

(Second) of Torts § 909 (1977). Under that rule, attri-

bution of punitive damages is limited to torts committed,

authorized or ratified by a “managerial agent,” or torts

committed by an unfit employee who was recklessly em-

ployed or retained. Accord Restatement (Second) of

Agency § 217 C (1958); Model Penal Code § 2.07(1)

(1985).

In the federal sphere, this Court adopted the com-

plicity rule in Lake Shore & S.M. Ry. Co. v. Prentice, 147

U.S. 101 (1893), wherein it stated:

Exemplary or punitive dameges, being awarded, not

by way of compensation to the sufferer, but by way

of punishment of the offender, and as a warning to

others, can only be awarded against one who has

participated in the offense. A principal, therefore,

though of course liable to make compensation for in-

juries done by his agent within the scope of his em-

ployment, cannot be held liable for exemplary or

punitive damages, merely by reason of wantor op-

pressive or malicious intent on the part of the agent.

This is clearly shown by the judgment of this court

* See Comment, Corporate Vicarious Liability for Punitive Dam-

ages, 1985 B.Y.U.L.Rev. 317, 318 ( 1985) (showing the number of

states adhering to each rule). Accord, Ghiardi & Kircher, Puni-

tive Damages Law and Practice § 24.01 at 2 (1985).

* Section 909. Punitive Damages Against a Principal

Punitive damages may properly be awarded against a master or

other principal because of an act by an agent if, but only if,

(a) the principal or a managerial agent authorized the

doing and the manner of the act, or

(b) the agent was unfit and the principal or a managerial

agent was reckless in employing or retaining him, or

(ec) the agent was employed in a managerial capacity and

was acting in the scope of employment, or

(d) the principal or a managerial agent of the principal

ratified or approved the act.

in the case of The Amiable Nancy, 16 U.S. (3

Wheat.) 546 (1818).

147 U.S. at 107. The Court in Lake Shore further noted

that a corporation may be punished for the acts of an

agent only where “criminal intent, necessary to warrant

the imposition of such damages, is brought home to the

corporation.” Jd. at 111.

The Court later explained its Lake Shore holding as

merely adopting the rule of attribution “which it thought

most appropriate” and not necessarily establishing a Due

Process limitation. Louis Pizitz Dry Goods Co. v. Yeldell,

274 U.S. 112, 115 (1927). The Court has questioned Lake

Shore in a footnote in American Society of Mechanical

Engineers v. Hydrolevel Corp., 456 U.S. 556, 575 n.14

(1982), but did not overrule it. In Hydrolevel the Court

upheld a statutory antitrust award of treble damages

attributed to a principal under a theory of “apparent

authority.” The Court recognized the treble damages as

having a remedial component designed to counterbalance

the “difficulty of maintaining a private suit,” and not

serving a solely punitive purpose. Jd. at 575. The deci-

sion in Hydrolevel therefore is consistent with the com-

plicity rule adopted in Lake Shore.*

In Alabama, the rule of respondeat superior was ju-

dicially enlarged near the turn of this century to allow

the recovery of punitive as well as compensatory dam-

ages. See Case v. Hulsebush, 122 Ala. 212, 26 So. 155

(1899); Avondale Mills v. Bryant, 10 Ala.App. 507, 63

So. 932 (1913). As in other states, the Alabama Supreme

Court appears never to have analyzed the differences

between compensatory and punitive damages in connec-

*The complicity rule likewise has been embraced by several

federal courts of appeals. See Williams v. City of New York, 508

F.2d 356 (2nd Cir. 1974); Bankers Life Ins. Co. v. Scurlock Oil

Co., 447 F.2d 997 (5th Cir. 1971); Parris v. St. Johnsbury Truck-

ing Co., 395 F.2d 543 (2nd Cir. 1968); Roginsky v. Richardson-

Merrill, 378 F.2d 832 (2nd Cir. 1967).

tion with a rule of attribution, nor has it defined any

standard of attribution except for the vague requirement

that the agent’s tort be committed “within the scope of

his employment.” 63 So. at 934. The most recent state-

ment is found in HealthAmerica et al. v. Menton, 551

So.2d 235 (Ala. 1988), where the court in affirming $1.8

million in punitive damages stated simply, “A corpora-

tion is responsible for the acts of its agent.” Id. at 245-

46. As will be shown below, the operative rule of attri-

bution in Alabama civil cases has become “let the jury

decide,” without sufficient instruction for the factfinder

in legal standards for determining whether the prin-

cipal should be punished.*

Until a decade ago, Alabama’s rule of attribution re-

sulted in a few punitive damages awards of any signifi-

cance. Since then, several substantial punitive damages

awards have been imposed sodiiet insurance companies

based solely on grounds of respondeat superior. See, e.g.

Land & Assoc., Inc. v. Simmons, [1989 WL 162213]

So.2d (Ala. 1989) ($2.5 million) ; HealthAmerica,

et al. v. Menton, 551 So.2d 235 (Ala. 1989) ($1.8 mil-

lion); American Pioneer Life Ins. Co. v. Sandlin, 470

So.2d 657 (Ala. 1985) ($3 million) ; National Sec. Fire

& Cas. Co. v. Bowen, 447 So.2d 133 (Ala. 1983) ($1.5

million). The recent proliferating phenomenon of sub-

stantial punitive damages awards, based upon an in-

definite rule of attribution, compels careful examination

of this question and the articulation of a rule of attribu-

tion that comports with Due Process.

° Alabama applies a much stricter standard of attribution under

its criminal law, requiring “either (1) authorization, procurement

incitation or moral encouragement, or (2) the knowledge plus

acquiescence of the principal in the acts of his agent” before

vicarious criminal liability may be imposed. See State v. Spurlock

393 So.2d 1052,-1059 (Ala.Crim.App. 1981), citing Perkins Crim-

inal Law pp. 812-13 (2nd ed. 1969).

Il. ATTRIBUTION OF SUBSTANTIAL PUNITIVE

DAMAGES ON THE BASIS OF UNINTELLIGIBLE

STANDARDS EXPOSES CORPORATIONS TO FUN-

DAMENTAL UNFAIRNESS.

Due Process prohibits punishment of persons not ade-

quately shown to be guilty. See Lake Shore & M.S. Ry.

Co. v. Prentice, 147 U.S. 101, 115 (1983). This protec-

tion extends to civil defendants hoping to protect their

property. Logan v. Zimmerman Brush Co., 455 U.S. 422,

429 (1982). Punitive damages implicates the defendant’s

right to fair punishment rather than plaintiff’s interest in

fair compensation. The unfairness of punishing a prin-

cipal for its agent’s misconduct is made more acute where,

as in this case, the wrong is committed solely for the

agent’s illicit benefit. A meaningful nexus must be re-

quired between the defendant principal and the actual

tortfeasor before the latter’s misconduct may serve as

the predicate for punishment, even under a liberal rule

of respondeat superior. The focus must be upon the

level of corporate involvement, not solely upon the act of

the “agent”.

The Alabama Supreme Court has failed to come to

grips with this problem. Instead of articulating intel-

ligible standards, it has broadly declared the issue of at-

tribution a “question .. . for the jury.” See American

Pioneer Life Ins. Co. v. Sandlin, 470 So.2d 657, 665 (Ala.

1985). As a result, several multi-million dollar punitive

damages verdicts have been imposed by juries against

insurance companies for the tortious misconduct of per-

sons who had only remote or indirect relationships with

the defendant insurer.

For example, in National Security Fire & Cas. Co. ».

Bowen, 447 So.2d 133 (Ala. 1983), the insurance com-

®Such a nexus is explicit in the “complicity” rule, which re-

quires that the punishable act be committed or authorized by a

managerial agent.

pany had an agency relationship with an insurance

brokerage, which independently hired two private inves-

tigators to determine the cause of a fire loss. There was

no evidence of any relationship or communication be-

tween the insurance company and the investigators. After

a serious of outrageous actions by the investigators, the

insured sued the insurance company on theories of fraud,

malicious prosecution and the tort of outrage. A jury

imposed punitive damages in the amount of $1.5 million.

On appeal, the Alabama Supreme Court held that the

existence of an agent relationship is simply “a question

of fact to be determined by the jury” and “it is quite

obvious that the jury believed that a principle-agent re-

lationship existed in this case.” 447 So.2d at 138. There

was no discussion of intelligible standards or whether the

insurance company was guilty of any complicity in the

tortious conduct.

Similarly, in American Pioneer Life Ins. Co. v. Sand-

lin, 470 So.2d 657 (Ala. 1985), a total stranger to de-

fendant American Pioneer fraudulently induced the

plaintiff to purchase an annuity from the company.

The “agent” actually was a registered agent of an en-

tirely different insurer at the time of the fraud, and it

was undisputed that he did not become licensed by Amer-

ican Pioneer until several months later. 470 So.2d at

665. The jury returned a general verdict against Amer-

ican Pioneer in the sum of $3 million in punitive dam-

ages. On appeal, the Alabama Supreme Court noted that

the trial court instructed the jury that it could have

found the agent was merely a “broker,” rather than an

agent. The court then dispensed with the agency ques-

tion by stating that “there was disputed evidence in

the case, so the question was for the jury.” Jd.

Again, in Continental Electric Co. v. American Em-

ployers’ Insurance Co., 518 So.2d 83 (Ala. 1987), the

Alabama Supreme Court reversed a summary judgment

which the trial court had granted in favor of the in-

surer on the absence of a sufficient agency relationship.

The active tortfeasor was an employee of an insurance

agent, hence one step removed from a direct agency

relationship. The court held there was sufficient evidence

(under a “scintilla” standard) that he was a “subagent”

to warrant submission to the jury of the issue cf punitive

damages against the insurer. The operative rule of at-

tribution was, again, ‘let the jury decide.’ Jd. at 89

(“summary judgment on this claim was improper”).

In opposition to granting the writ on this issue, re-

spondents have cited Louis Pizite Dry Goods Co. v. Yel-

dell, 274 U.S. 112 (1927), where the Court held that Ala-

bama’s imposition of liability through punitive damages

against an employer in a statutory wrongful death case

did not violate Due Process under the Fourteenth Amend-

ment. The Pizitz case, however, involved a direct master-

servant relationship rather than a questionable agency

relationship. More important, the Alabama wrongful

death statute, although cast as a punitive remedy, is in

substance a compensatcry one. See Richmond & D.R.R.

v. Freeman, 97 Ala. 289, 11 So. 800, 801 (1892) ; Nettles

& Latta, Alabama’s Wrongful Death Statute: A Prob-

lematic Existence, 40 Ala. L. Rev. 475, 485-90 (1989).

Where the statutory punitive damages effectuates a com-

pensatory purpose, as in Pizitz and Hydrolevel, different

considerations are involved in attribution than when

punitive damages are imposed solely as punishment.

Furthermore, Hydrolevel involved an express statutory

limit of three-foid the compensatory damages.’ In con-

trast, the Alabama law applicable in this case had

neither an articulated substantive standard of attribution

such as in the Restatement of Torts, nor a proportionate

* Plaintiff in Pizitz was represented by then-attorney Hugo L.

Black who, perhaps not so coincidentally, later authored Giaccio v.

Pennsylvania, 382 U.S. 399 (1966), holding that federal due process

prohibits standardless jury discretion in the imposition of damages.

limitation on punitive damages such 2s the three-fold

standard under the antitrust liability in Hydrolevel.

Under any rule of attribution, further unfairness re-

sults where the amount of punishment for an agent’s

misconduct is determined by reference (express or im-

plied) to the innocent principal’s size and wealth. More-

over, the financial burden of the punishment ultimately

falls primarily upon blameless shareholders, customers,

or the public at large. See Ellis, Fairness and E fficiency

in the Law of Punitive Damages, 56 So. Cal. L. Rev. 1, 66

(1982). In the case of mutual insurance companies, it

falls directly on the policyholders.* Compare City of

Newport v. Fact Concerts, Inc., 453 U.S. 247 (1981),

where the Court prohibited attribution of punitive dam-

ages against municipalities in claims under 42 U.S.C.

§ 1983 because of the financial burden placed upon tax-

payers.

* Mutual insurance companies, by definition, are owned by their

policyholders. See Union Ins. Co. v. Hoge, 62 U.S. 35, 64-65 (1859);

Couch on Insurance 2d (Rev.ed) § 19:14 (1984).

CONCLUSION

There appears to have been no intelligible standard of

attribution applied in the present case, judging from the

report of the opinion below. This Couit should require,

as a matter of Due Process, the articulation of an in-

telligible legal standard for attribution of an agent’s

misconduct as a predicate to awarding substantial puni-

tive damages against a principal.

Respectfully submitted,

FORREST S. LATTA

(Counsel of Record) )

BARKER & JANECKY, P.C. |

Post Office Box 2987 |