# Amicus Curiae Brief — Pacific Mutual Life Insurance v. Haslip > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0717%3A29 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 1991 - **Citation:** 499 U.S. 1 ## Text FILED No. 89-1279 1990 cuer, Iu the Supreme Court of the United States — OCTOBER TERM, 1989 PACIFIC MUTUAL LIFE INSURANCE COMPANY, PETITIONER V. CLEOPATRA HASLIP, ET AL., RESPONDENTS On Writ of Certiorari to the Supreme Court of Alabama BRIEF FOR THE BUSINESS ROUNDTABLE AND THE PRODUCT LIABILITY ADVISORY COUNCIL, INC., AS AMICI CURIAE SUPPORTING PETITIONER ANDREW L. FREY Counsel of Record KENNETH S. GELLER MARK I. LEvy ANDREW J. PINCUS 4 Mayer, Brown & Platt _ 2000 Pennsylvania Ave., N.W. Washington, D.C. 20006 (202) 778-0602 Counsel For Amici Curiae WILSON - Eres PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001 QUESTION PRESENTED This brief will address the following question: Whether the punitive damages award in this case violates the Due Process Clause because the amount of the penalty imposed is not rationally related to the pur- poses of fairly punishing the misconduct that occurred or appropriately deterring such misconduct. (i) TABLE OF CONTENTS QUESTION PRESENTED .0000.o222........cceccccccecceseeeeeeeeeees INTEREST OF THE AMICI CURIAE ............... iiaiicieee SUMMARY OF ARGUMENT 00 LE THE PUNITIVE DAMAGES AWARD IN THIS CASE VIOLATES DUE PROCESS BECAUSE IT IS NOT RATIONALLY RELATED TO THE PUR- POSES OF PUNISHMENT OR DETERRENCE... I. THE DUE PROCESS CLAUSE PROHIBITS II. DISPROPORTIONATE AND IRRATIONAL AWARDS OF PUNITIVE DAMAGES ............ A. A Punitive Damages Award That Is Arbi- trary And Irrational In Amount Deprives The Defendant Of Property Without Due B. A Punitive Damages Award Is Arbitrary And Irrational If It Is Disproportionate To The Objectives Of Imposing Punishment........ AN AWARD OF PUNITIVE DAMAGES IS DISPROPORTIONATE AND IRRATIONAL IF IT SUBSTANTIALLY EXCEEDS ANALO- GOUS STATUTORY PENALTIES AND BEARS NO REASONABLE RELATIONSHIP TO THE NATURE OR GRAVITY OF THE DEFENDANT'S CONDUCT ooo eeeeeeecenenene A. Punitive Damages Are Disproportionate If They Substantially Exceed The Statutory Penalties Prescribed By The Legislature........ B. Punitive Damages Are Disproportionate If They Do Not Bear A Reasonable Relation- ship To The Misconduct For Which Punish- ment Is Being Imposed ..........0..0.00000.00--eeeee ee (iii) 10 18 iv TABLE OF CONTENTS—Continued 1. Character of the defendant’s conduct 2. Injury caused by the misconduct .......... 5. Actual or potential gain to the defendant.. Ill. THE PUNITIVE DAMAGES AWARD IN THIS CASE IS PLAINLY EXCESSIVE ......... A. The Award Is Grossly Disproportionate To Statutory Penalties In Alabama And Other Jurisdictions PPPOE RESET SHOES SSS ESET OS SEES SEOSESESESSSSSSSSCCS B. The $1,000,000 Penalty Bears No Reasonable Relationship To The Gravity Of The Con- duct Being Punished .......... C. Alabama’s Post-Verdict Review Procedures Do Not Eliminate The Unconstitutionality Of The Punitive Award In This Case CONCLUSION PO OOS OS OS OO OOO SOS SSSSSSSSSSSSSSSSO 0855S S0S COSC COSOSSOSSEESOSOSOOSSSSS 21 23 28 29 Vv TABLE OF AUTHORITIES Cases: Page AMPAT /Midwest, Inc. Vv. Illinois Tool Works Inc., 896 F.2d 1035 (7th Cir. 1990) -...........................--- 11 Bell v. Wolfish, 441 U.S. 520 (1979) ....................-...- 8 Berkey Photo, Inc. v. Eastman Kodak Co., 608 F.2d 268 (2d Cir. 1979), cert. denied, 444 U.S. . _ sles Ses 20 Browning-Ferris Industries of Vermont, Inc. V. Kelco Disposal, Inc., 109 S. Ct. 2909 (1989) ........ passim Chicago & N.W. Ry. v. Nye Schneider Fowler Co., I I cae iemetliesmenseententibneniensinnen 8,9 City of Newport v. Fact Concerts, Inc., 453 U.S. A iinet it inainennaiitinesibins 15 City of Revere v. Massachusetts General Hospital, PE ren 7 Daniels v. Williams, 474 U.S. 327 (1986) -................ 5 Enmund V. Florida, 458 U.S. 782 (1982) ................. 9 Gore V. United States, 357 U.S. 386 (1958) ............. 11 Hawkins v. Allstate Insurance Co., 733 P.2d 1073 (Ariz.), cert. denied, 484 U.S. 874 (1987)........ 20 Hustler Magazine, Inc. Vv. Falwell, 485 U.S. 46 I cli acct tas tatrentssinnededilipdepebansiiabadtiinnsinibietan 5 International Brotherhood of Electrical Workers v. Foust, 442 U.S. 42 (1979) ........2-.222.222-----2---2----- 6 Lassiter V. Department of Social Services, 452 U.S. TT scsi coethisstiihiandenininiaanieilianiininsinasidiissieaniedteniabipen 5 Life & Casualty Ins. Co. v. McCray, 291 U.S. 566 ins liechiclithneiiiinnaad inline tibiae daailttcmaneaitaneiiin 17 Logan Vv. Zimmerman Brush Co., 455 U.S. 422 iain iil inet cad Dnnainditesiaene 5 Memphis Community School Dist. v. Stachura, 477 NI MI cain cilettheabiipaiansinalpaiatbaniincen 18 Missouri Pac. Ry. Vv. Humes, 115 U.S. 512 (1985) .... 6 Missouri Pac. Ry. v. Tucker, 230 U.S. 340 (1918)... 7 New York Times Co. v. Sullivan, 376 U.S. 254 ID - dis setssicnttcanitncsiicinsiisnseeientinesiedsinibtabaltidessiabiabesettionen 5 North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 BN I MI inc rcnsenianissiabciietiadaiisiaeiieibidinenen 5 Robinson V. California, 370 U.S. 660 (1962) -......... 20 Rowlett v. Anheuser-Busch, Inc., 832 F.2d 194 ela 15-16, 17 vi TABLE OF AUTHORITIES—Continued Page Seaboard Air Line Ry. v. Seegers, 207 U.S. 78 RSE RR wees one DSCNS CSI 19 Smith v. Wade, 461 U.S. 30 (1983) 6,18 Solem v. Helm, 468 U.S. 277 (1988) .................. passim Southwestern Tel. & Tel. Co. v. Danaher, 238 U.S. a a aaa 7 Stack v. Boyle, 342 U.S. 1 (1951) ) St. Louis, 1.M. & S. Ry. v. Williams, 251 U.S. 68 SE Sich cele Sika ee renee eer 6, 8, 19 United States v. Busher, 817 F.2d 1409 (9th Cir. 1987 eee : iatemaiietineee tiles nce A RN 17, 19-20 United States v. Salerno, 481 U.S. 739 (1987) _...... 9 United States v. United Mine Workers, 330 U.S. ARERR NOISE UOTE, scat 2 ie 3 OES A 9 United States v. United States Steel Corp., 251 U.S. se ale ee See 20 Waters-Pierce Oil Co. v. Texas, 212 U.S. 86 RIT Ee nT ie staat ine ea adel 6, 7,8 Weems v. United States, 217 U.S. 349 (1910) _...... 11, 13 Constitution and Statutes: United States Constitution I A ee 7,8 A A RRC ER TS. SE a ee passion TET RTT aE SS TS 15 Ala. Code: EE eT ee a eae 22 Se eee 22 EE NT Ree A IN, CNL! 22 re me aa) 22 EERE ee Seo Senn 21 § 1BA-B-12 (&) (1) one ceccceeeeeeeeeceeeee 21 EEE STE Sa ENR, a Ue 22 eee ae ee aE ee 22 EE Se ee ee ee ee 22 EET eee eae ee 22 — SEEINP Ir a See See 22 EE See One ae eS 21 vii TABLE OF AUTHORITIES—Continued RDG nnn.cceccccccc2oce--cosnccsccccncccessescnssenecesnonseres I ances cece concnsvescnenscseecscecorenesenccconcsonesonsose Miscellaneous : ABA Special Comm. on Punitive Damages, PUNI- TIVE DAMAGES: A CONSTRUCTIVE EXAMINATION I: siveiatnsantensnitanciinsptensiitanmcctintiinttianpeensespazineaies American Coilege of Trial Lawyers, REPORT ON PUNITIVE DAMAGES (1989) ...........--.-...---------0-0-----+ J. Bentham, AN INTRODUCTION TO THE PRINCIPLES OF MORALS AND LEGISLATION (1892 ed.) .............. Cooter, Punitive Damages for Deterrence: Whe 19 19 14, 20 and How Much?, 40 ALA. L. REv. 1143 (1989) .... 20, 24 Dobbs, Ending Punishment in “Punitive” Dam- ages: Deterrence-Measured Remedies, 40 ALA. a cae ccatitncleeianeninen Elliott, Why Punitive Damages Don’t Deter Corpo- rate Misconduct Effectively, 40 ALA. L. REv. 1053 CEN eecctecestnsecintenstcqnetammnassnmnmmnmansanunrencsmanameees Ellis, Fairness and Efficiency in the Law of Punt- tive Damages, 56 S. CAL. L. REV. 1 (1982) ......... Ellis, Punitive Dam- es in Iowa Law: A Critical Assessment, 66 IOWA L. REV. 1003 (1981) -......... 1 & 2 J. Ghiardi & J. Kircher, PUNITIVE DAMAGES LAW AND PRACTICE (1985) .......... a i H.L.A. Hart, PUNISHMENT AND RESPONSIBILITY I i canciscstnictssdetsecinniimanevnimnninpitinasittemcuansces P. Huber, LIABILITY: THE LEGAL REVOLUTION AND ITs CONSEQUENCES (1988) ..................-.--------000----- Huber, No-Fault Punishment, 40 ALA. L. REV. 1037 (a viii TABLE OF AUTHORITIES—Continued Page C. McCormick, HANDBOOK ON THE LAW OF DAM- TET A ATR I ae aS 18 1 M. Minzer, et al., DAMAGES IN TorRT ACTIONS RTI ‘Suiinianherneniadesitinttatenesenendaetstiditiiaias: yliki Nite 18 Morris, Punitive Damages in Tort Cases, 44 HARV. L. REV. 1173 (1981) 000 18 Owen, Punitive Damages in Products Liability Liti- gation, 74 MICH. L. REV. 1258 (1976) 20 K. Redden, PUNITIVE DAMAGES (1980 & 1987 CAL FINDINGS (1987) 000 4 K. Redden, PUNITIVE DAMAGES (1980 & 1987 SRR SEE s PEA Que oS ee oe 17 RESTATEMENT (SECOND) OF TorTS (1979)... 6, 16, 17 Wheeler, A Proposal for Further Common Law Development of the Use of Punitive Damages in Modern Product Liability Litigation, 40 ALA. es Ce UP GED Gectecensttedn ee ee 20 Iu the Supreme Court of the Mnited States OCTOBER TERM, 1989 No. 89-1279 PACIFIC MUTUAL LIFE INSURANCE COMPANY, PETITIONER V. CLEOPATRA HASLIP, ET AL., RESPONDENTS On Writ of Certiorari to the Supreme Court of Alabama BRIEF FOR THE BUSINESS ROUNDTABLE AND THE PRODUCT LIABILITY ADVISORY COUNCIL, INC., AS AMICI CURIAE SUPPORTING PETITIONER INTEREST OF THE AMICI CURIAE The Business Roundtable is an association of the chief executive officers of approximately 200 of the largest companies in the Nation. The Roundtable examines public issues that affect the economy and develops posi- tions that seek to reflect sound economic and social policies. The Product Liability Advisory Council, Inc., is an association of major industrial companies formed for the purpose of filing amicus curiae briefs in cases involving significant issues affecting the law of product liability. Amici have an interest in the resolution of th‘s case because their members frequently are defendants in actions in which punitive damages are sought. Amici’s members thus face on a daily basis the threat of irra- 9 tional and excessive punitive damages awards that is an omnipresent feature of the current punitive damages systen.,.' SUMMARY OF ARGUMENT . It 1S well settled that the Due Process Clause prohibits civil monetary penalties that are arbitrary and irrational. The decisions of this Court establish that a civil penalty violates due process if it is disproportionate to the ob- Jectives sought to be achieved by the imposition of such punishment. That analysis is fully applicable to punitive damages awards: an award that is not rationally related to the retributive and deterrent purposes of punitive damages is unconstitutionally excessive, Under the proportionality analysis of Solem v. Helm 163. U.S. 277 (1983), an award of punitive damages is arbitrary and irrational if it (a) is disproportionate to criminal and civil penalties established by the legislature for similar conduct or (b) bears no reasonable relation- ship to the nature and gravity of the defendant’s conduct The legislative process is well suited for determining the level of punishment that is appropriate in light of the type of misconduct involved and the penalties provided for other categories of wrongdoing: accordingly, the leg- islature’s judgment provides a significant objective bench- mark for judging the excessiveness of the punishment meted out by a jury in the context of a punitive damages award. In addition, punitive damages must be rationally related to the nature of the defendant’s wrong, including in particular the degree of the defendant's culpability and ‘to the extent not already accounted for in the compen- satory damages award) the amount of the gain to the defendant or loss to the plaintiff that resulted from the misdeeds. 1 Letters from the parties consenting to the fling of this brief have been filed with the Clerk of this Court. 3 Applying this standard here, it is clear that the $1,000,000 punitive damages award is excessive and ir- rational. The award is grossly disproportionate to legis- latively prescribed penalties in Alabama and elsewhere for even the most severe wrongdoing. Such penalties sel- dom exceed the range of $10,000 to $100,000—a level of punishment some 10 to 100 times lower than the punitive damages award selected by the jury. Likewise, the award bears no conceivable relationship to the misconduct being punished. If Lemmie Ruffin, the miscreant insurance agent, is viewed as the object of the punishment, his actions, while intentional and serious, caused only a small gain to himself and slight harm to Mrs. Haslip ‘her actual damages were $4,000 and her total compensatory damages were $40,000) in relation to the enormous punitive award. If, on the other hand, Pa- cific Mutual is being punished for corporate wrongdoing, a large award is equally unjustified. Ruffin did not en- gage in his misconduct pursuant to any company policy (indeed, he violated company policy!, nor did he act with the knowledge or approval of corporate management; his actions were not in any way in furtherance of the com- pany’s interest, since his defaleation benefited only him- self and occurred at the expense of the company. Thus, while we doubt that Pacific Mutual is properly subject to punishment at all in these circumstances, it certainly cannot be held liable for anything approaching $1,000,000 in punitive damages. 4 ARGUMENT THE PUNITIVE DAMAGES AWARD IN THIS CASE VIOLATES DUE PROCESS BECAUSE IT IS NOT RATIONALLY RELATED TO THE PURPOSES OF PUNISHMENT OR DETERRENCE There can be no doubt that “{a] wards of punitive dam- ages are skyrocketing.” Browning-Ferris Industries of Vermont, Inc. v. Kelco Disposal, Inc., 109 8S. Ct. 2909, 2924 (1989) (O’Connor, J.. concurring and dissenting). In the past, punitive damages were awarded in only a small fraction of cases where the challenged conduct was egregiously offensive; today, as this case illustrates, the distinction between the culpability sufficient to support liability for compensatory damages and the culpability warranting punitive damages has all but collapsed. In the past, punitive damages were awarded in modest amounts; today, as this case illustrates, many awards are breathtakingly large. In the past, punitive damages awards generally bore a discernible relationship to the offensiveness of the defendant’s behavior and roughly ac- corded with fines applicable to analogous criminal con- duct; today, as this case illustrates, punitive damages often simply reflect sympathy for the plaintiff or the size of the defendant's pocketbook. See, e.g., P. Huber, Lia- BILITY: The LEGAL REVOLUTION AND ITs CONSEQUENCES 127 (1988); M. Peterson, et al.. PUNITIVE DAMAGES: EMPIRICAL FINDINGS 65 (1987). Petitioner Pacific Mutual Life Insurance Company has presented a number of substantial] constitutional chal- lenges to the million dollar punitive damages award in this case. We fully agree with Pacific Mutual that due process forbids the imposition of any punishment on ac- count of its actions ‘see pages 23-25, infra) and that the jury’s verdict was the product of a gravely flawed set of procedures. However, assuming arguendo that some pun- ishment of Pacific Mutual could be sustained following the trial that was held and on the facts shown, we none- 5 theless believe that the amount of punitive damages awarded by the jury deprives Pacific Mutual of its prop- erty without due process because the punishment is wholly disproportionate to the company’s wrongful con- duct and does not rationally advance the purposes of exacting punitive damages. OCESS CLAUSE PROHIBITS DIs- . palette AND IRRATIONAL AWARDS OF PUNITIVE DAMAGES A. A Punitive Damages Award That Is Arbitrary And Irrational In Amount Deprives The Defendant Of Property Without Due Process. The Due Process Clause of the Fourteenth Amendment “ ‘protect{s| * “ * against arbitrary action|s| of govern- ment’ * * * regardless of the fairness of the procedures used to implement them.” Daniels v. Williams, 474 U.S. 327, 381 (1986) (eitation omitted). See also, e.q¢., Las- siter V. Department of Social Services, 452 U.S. 18, 24 (1981) ‘(due process “expresses the requirement of ‘fun- damenta! fairness’’’). And, as the Court has repeatedly held, the protections of the Due Process Clause extend to “civil * * * defendants |seeking| to protect their prop- erty.” Logan v. Zimmerman Brush Co., 455 U.S. 422, 429 (1982). It follows that a disproportionate award of punitive damages-—one that bears no rational relation- ship to the purposes for which the damages have been exacted-—violates due process of law. There can be no doubt that the imposition of punitive damages constitutes a government-compelled deprivation of property... Accordingly, the Due Process Clause re- 2A punitive damages award plainly is state action subject to the Due Process Clause. It is embodied in the judgment of a stat court-- which itself constitutes state action. and state law obligates the defendant to pay the judgment. See Hustler Magazine, Ine. ¥. Falwell, 485 U.S. 16 (1988); New York Times Co v. Sullivan, 376 U.S. 254, 265 (1964). See also North Georgia Finishing, Ine. V. Di-Chem, Inc., 419 U.S. 601 (1975). 6 quires that the deprivation not be arbitrary or irr tional. As this Court recently noted, punitive damages are in- tended to “advance the interests of punishment and de- terrence.” Browning-Ferris, 109 S. Ct. at 2920. See also Smith v. Wade, 461 U.S. 30, 49, 54 (1983): International Brotherhood of Electrical Workers v. Foust, 442 US. 42, 48 (1979) (citation and internal quotation marks omitted) (“Punitive damages are not compensation for injury. Instead, they are private fines levied by civil juries to punish reprehensible conduct and to deter its future occurrence’); RESTATEMENT (SECOND) OF TORTS * 908 comment a (1979). Therefore, an award of puni- tive damages satisfies due process only if it reasonably serves to punish and deter. Any part of a punitive dam- ages judgment that is larger than necessary to accomp- lish those purposes has no legitimate justification and amounts to nothing less than an arbitrary, irrational, and fundamentally unfair transfer of the defendant's prop- erty to the plaintiff. In light of these principles, it is not surprising tha‘ this Court has long recognized that the Due Process Clause prohibits excessive civi! monetary penalties in liti- gation between private parties. In Waters-Pierce Oil Co. Vv. Texas, 212 U.S. 86, 111 (1909), in considering a due process chalienge to a state civil penalty, the Court stated unequivocally that the Constitution would be violated by “fines * * * [that] are so grossly excessive as to amount to a deprivation of property without due process of law.” Similarly, in St. Louis, 1L.M. & S. Ry. v. Williams, 251 U.S. 63 (1919), the Court recognized that the Due Proc- ess Clause “places a limitation upon the power of the States to prescribe [civil] penalties” that are “wholly disproportioned to the offense and obviously unreason- able.” 251 U.S. at 66-67; see also Missouri Pac. Ry. v. Humes, 115 U.S. 512, 523 (1885) (reviewing constitu- tionality of statutory double-damages penalty under the Due Process Clause}. The Court has applied these principles to invalidate dis- proportionate civil penalties. For example, in Missouri ‘ Pac. Ry. Vv. Tucker, 230 U.S. 340 (1913), the Court struck down a penalty of $500 for a $3.02 overcharge, holding that the penalty was “grossly out of proportion to the possible actual damages” and therefore in viola- tion of due process. 230 U.S. at 351 (citing Waters- Pierce: : see also Southwestern Tel. & Tel. Co. Vv. Dana- her, 238 U.S. 482, 490-491 (1915) ‘invalidating penalty on due process grounds}. The Court recently acknow!- edged these precedents in the decision in Browning- Ferris. 109 S. Ct. at 2921; see also id. at 2923 ( Bren- nan, J., concurring) .' Although the Court has not heretofore had occasion to apply the Due Process Clause to a punitive damages award, we can imagine no reasoned justification for limiting the protection against excessive civil penalties to penalties imposed pursuant to statute. The harm to a defendant from an irrational government-imposed civil penalty is no less simply because the penalty is imposed pursuant to a common law rule. To the contrary, the danger of arbitrary government action, and therefore the need for constitutional proteciion, is far greater when a jury is permitted to exercise essentially unbridled dis- cretion in fixing the amount of the penalty. See Brown- ing-Ferris, 109 S. Ct. at 2925 (Brennan, J., concurring) ; see also pages 11-12, infra. The conclusion that the Due Process Clause provides protections in this context analogous to those afforded by the Fxcessive Fines Clause with respect to criminal fines is consistent with this Court's decisions in other areas in which the Eighth Amendment does not apply due to technical limitations on its scope. In City of Re- vere V. Massachusetis General Hospital, 465 U.S. 239 (1983), for example, the Court held that, even though the Eighth Amendment was inapplicable, the Due Proc- ess Clause required that medical care be provided to a 3 Significantly, even the plaintiff in Browning-Fercis did not dis- pute that the Due Process Clause imposes a substantive limit on punitive damages awards. 88-556 Resp. Br. 7 29. 8 person injured while being arrested. “In fact,” the Court stated, “the due process rights of a person in [that] situ- ation are at least as great as the Eighth Amendment pro- tections available to a convicted prisoner.” 463 U.S. at 244; see also Bell v. Wolfish, 441 U.S. 520, 535-536 & n.16 (1979) (Due Process Clause protects pretrial de- tainees, who are not entitled to Eighth Amendment pro- tection because they have not been convicted). The same approach is proper in the present context. The Court's conclusion in Browning-Ferris that techni- cal limitations on the Excessive Fines Clause place puni- tive damages awards to private parties beyond thai Clause’s reach does not justify exempting such awards from all constitutional scrutiny. Indeed, it would be as- tounding if the Due Process Clause offered no protection against irrational government action that deprived a de- fendant of an exorbitant sum of money simply because the deprivation occurred in the context of private civil litigation and was labeled “punitive damages.” B. A Punitive Damages Award Is Arbitrary And Irra- tional If It Is Disproportionate To The Objectives Of Imposing Punishment. As in other areas of substantive due process, the gov- erning constitutional standard is one of rationality. This Court's decisions establish that punishment violates the Due Process Clause if it is “wholly disproportioned to the offense and obviously unreasonable.” St. Louis, 1.M. & S. Ry., 251 U.S. at 67. See also Chicago & N.W. Ry. vy. Nye Sehocice Fowler Co., 260 U.S. 35, 44 (1922) ito be valid, “penalties * * * must be moderate and reason- ably sufficient to accomplish their legitimate object”; those that ave “plainly arbitrary and oppressive” viola.c the Due Pivcess Clause); Waters-Pierce, 212 U.S. at 111 (“grossly excessive” civil penalties violate due process). Of cous. ‘he question whether a penalty is “unreason- able” or ‘“‘disproportion|ate| to the offense” cannot be an- swered in a vacuum or by a wholly subjective and stand- ardless inquiry of the kind all too many courts currently 9 engage in when reviewing punitive damages awards. This Court has firmly rejected such an ad hoe approach, instead assessing the constitutionality of civil penalties by evaluating whether they are no more than is ‘“reason- ably sufficient to accomplish their legitimate object.” Nye Schneider Fowler Co., 260 U.S. at 44. That is the same approach the Court has utilized in other contexts in which it must evaluate the proportionality and reason- ableness of government action. For example, in determining whether a criminal sen- tence is disproportionate to a particular offense and thus violates the Cruel and Unusual Punishments Clause, the Court inquires whether the sentence is justified by refer- ence to the purposes of criminal penalties—deterrence and punishment. Enmund v. Florida, 458 U.S, 752, 500- 801 (1982). That analogy is particularly probative in view of the fact that punitive damages have the same deterrent and pena! purposes as criminal sanctions. Similarly, bail is excessive within the meaning of the Eighth Amendment if it is “set at a figure higher than an umount reasonably calculated to fulfill thje] purpose” of bail—ensuring the presence of the defendant. Stack v. Boyle, 342 U.S. 1, 5 (1951). See also United States Vv. Salerno, 481 U.S. 729, 754 (1987) ‘emphasis added) (‘when the government has admitted that its only in- terest is in preventing flight, bail must be set by a court at a sum designed to ensure that goal, and no more”) ; United States v. United Mine Workers, 330 U.S. 258, 304 (1947) (a court should calculate the appropriate fine for civil contempt by looking to the purposes ‘or which the fine is imposed}. Here too, courts should judge the rationality of the government action by reference to its purposes. So long as an award of punitive damages is “no more’ than is “reasonably calculated” to serve the purposes of deter- rence and punishment, it will pass muster under the Due Process Clause. If, on the other hand, the award ex- ceeds any amount reasonably justified in light of these 10 purposes, it is a disproportionate and irrational sanction that violates the Constitution.’ As we now discuss, this Court's decision in Solem Vv. Helm, 463 U.S. 277 (1983), provides the appropriate judicial standard for this inquiry. Il. AN AWARD OF PUNITIVE DAMAGES IS DISPRO- PORTIONATE AND IRRATIONAL IF IT SUBSTAN- TIALLY EXCEEDS ANALOGOUS STATUTORY PENALTIES AND BEARS NO REASONABLE RE- LATIONSHIP TO THE NATURE OR GRAVITY OF THE DEFENDANT'S CONDUCT The basic framework for analyzing the proportionality of civil penalties was established in So/em v. Helm, which involved the closely related question of how to determine whether criminal penalties are disproportionate to the defendant’s wrongdoing. First, the Court compared “the gravity of the offense and the harshness of the penalty” (463 U.S. at 290-291). Next, it assessed the reasonable- ness of that reiationship by measuring it against the sentences that could be imposed for other offenses in the same jurisdiction and the sentences authorized for the same offense in other jurisdictions. /d. at 291-292, 298- 300. These factors—modified so as to shift the focus to 4Some have suggested that the haphazard and unpredictable character of today’s punitive damages awards is a virtue because it prevents companies from treating misconduct simply as a cal- culable cost of doing business. See Brief of Consumers Union of the United States, «ft al., as Amici Curiae in Browning-Ferris, at 42- 51. Such irrationality is not only unacceptable as an instrument of government but ineffectual to control misconduct. A predictable, properly proportioned punishment is the most effective possible deterrent, because the actor would know in advance that it would lose, not gain, by engaging in the conduct in question. See Elliott Why Punitive Damages Don’t Deter Corporate Misconduct Eifec- tively, 40 ALA. L. REV. 1053 (1989). Moreover, the argument that a system of punishment must be irrational and unpredictable in orde: to be effective would apply equally to criminal sanctions, but this Court made clear in Solem v. Helm, 4623 U.S. 277 (1983), that crim- inal penalties must be proportional to the offense and rational in light of the purposes for which the sanction is imposed. 11 punitive damages rather than criminal sentences--should also guide the present inquiry. Browning-Ferris, 109 S Ct. at 2933-2934 (O’Connor, J., concurring and dissenting ).° In applying the Solem factors, however, it is impor- tant to appreciate the critical distinction between a crim- inal sentence imposed by a court pursuant to statutory standards and a punitive damages verdict announced by a jury in the exercise of virtually untrammeled discre- tion. A jury s unguided award of punitive damages is not entitled to judicial deference comparable to that which is appropriate for punishments that fall within a legislatively prescribed range. A legislature’s decision to authorize the imposition of a particular sanction for a particular type of miscon- duct reflects a finding—either explicit or implicit—that there is a reasonable relationship between the sanction and the misconduct. In view of the legislature's superior ability to gather relevant facts, ascertain and express the values of the community, and establish a proportional system of sanctions by considering each offense as part of the broader universe of wrongful conduct and fixing the proper relationship between various categories of of- fenses, the legislature’s determinations of reasonableness plainly should be accorded “substantial deference.” Solem, 463 U.S. at 290; see also Gore v. United States, 35% US. 223, 392 (1958) | the proper apportionment of punishment is “peculiarly [al question|| of legislative policy”) ; Weems v. United States, 217 U.S. 349, 378 (1910). 5 The evaluation of the rationality of a punitive damages award should reflect as well the common-sense principle that “[t]he yreater the sanction, the more confidence there should be that it is justified.” AMPAT/Midwest, Inc. v. Illinois Tool Works Inc., 896 F.2d 1035, 1044 (7th Cir. 1990). A court should look more closely at a punishment of, for example, $500,000 than at one of $5,000. Large awards, such as those of $1 million or more, should receive especially close scrutiny. 12 “Substantial deference’ is appropriate, though, only when the legislature has in fact authorized the sanction uncer review. As Justice Brennan observed in Brown- ing-Ferris, “scrutiny of awards made without the bene- fit of a legislature’s deliberation and guidance |{should] be less indulgent than * * * consideration of those that fall within statutory limits.” 109 S. Ct. at 2923 ‘con- curring opinion!; see also id. at 2934 (O’Connor, J., concurring and dissenting) (substantial deference should be accorded to legislative judgments |. A jury hearing a single case differs from a legislature in at least one especially relevant respect. The jury con- siders its case in isolation and in retrospect. Unlike a legislature, the jury lacks the information and expertise needed to place the particular defendant's actions in the context of the entire range of behavior that society deems wrongful and has no knowledge of the scale of punish- ments to which other wrongdoers are subjected. An unguided jury is therefore much less likely than a legis- lature to be able to devise a punishment that is appro- priately proportioned to the relative wrongfulness of the defendant’s conduct. According!y, in applying the Solem standard to an award of punitive damages, courts should give little deference to the jury’s determination of the proper punishment but rather should closely scrutinize the reasonableness of such an award in determining whether it passes muster under the Due Process Clause. Browning-Ferris, 109 S. Ct. at 2923 ‘Brennan, J., con- curring!) (it is appropriate to “look longer and harder at an awerd of punitive damages based on such skeletal guidance than * * * at one situated within a range of penalties as to which responsible officials had deliberated und then agreed”’). With this preface, we now briefly sketch the factors that should be considered in determining whether a puni- tive damages award is so disproportionate to the de- fendant’s misconduct as to violate due process. 13 A. Punitive Damages Are Disproportionate If They Substantially Exceed The Statutory Penalties Pre- scribed By The Legislature. As in most states today, a jury’s award of punitive damages in Alabama is not consirained by any legisla- tively determined ceiling. In this circumstance, the ex- cessiveness inquiry should first compare the penalty selected by the jury with the sanctions set forth in rele- vant criminai and civil penalty statutes in order to de- termine whether the award is in line with punishments fixed by the legislature for similar conduct. See Solem, 463 U.S. at 291-292: see also Weems, 217 U.S. at 380-381. For the reasons just discussed, the legislature’s judgment in setting criminal fines and civil penalties—which, like punitive damages, are designed to further the goals of punishment and deterrence—furnishes a powerful objec- tive standard for a court assessing the reasonableness of a punitive damages award. If the jury’s punishment significantly exceeds the penalty range established by the legislature in analogous areas, that is a telling sign that the award is dispropor- tionate. Indeed, in some cases that comparison may be sufficient in itself to demonstrate the existence of a con- stitutional violation. For example, if a corporation found guilty of fraudulent trade practices could be fined a max- imum of $50,000, it would be difficult to justify uphold- ing a jury verdict of $5,000,000 to punish and deter the identical conduct. Where such a comparison does not ® Another telltale indication of excessiveness would arise if the verdict under examination were ubstantially out of line with other awards of punitive damages. Browning-Ferris, 109 8. Ct. at 2934 (O’Connor, J., concurring and dissenting) ; Solem, 463 U.S. at 291- 292, 298-300. The converse, however, is certainly not true, for the existence of other large punitive verdicts likely reflects nothing more than the predictable results of having punitive damages set by juries exercising unguided and unconstrained discretion. In par- ticular, justifying an award in terms of its relation to only a few of the highest previous awards will lead to an inexorable upward spiral, as more and more large awards are justified by reference 14 conclusively establish the excessiveness of a sanction, a court should turn to an examination of the proportional- ity of the penalty to the gravity of the particular con- duct being punished. B. Punitive Damages Are Disproportionate If They Do Not Bear A Reasonable Relationship To The Mis- conduct For Which Punishment Is Being Imposed. Another important factor under Solem is “the gravity of the offense” for which punishment is being imposed. 463 U.S. at 290-291. From the standpoint of both just retribution and deterrence, a greater wrong should be punished more severely than a lesser wrong. H.L.A. Hart, PUNISHMENT AND RESPONSIBILITY 9, 25 (1963) ; J. Bentham, AN INTRODUCTION TO THE PRINCIPLES OF MorALS AND LEGISLATION 179-182 (1892 ed.)}. This is no less true for punitive civil damages than for criminal fines. Solem set forth a number of criteria by which the na- ture of an offense may be measured. See 463 U.S. at 292-294. This Court’s due precess decisions also provide guidance. See pages 8-9, supra. In addition, the common law standards developed in the context of excessiveness challenges to punitive damages awards look to several considerations that may be relevant in determining the evavily of particular conduct. Drawing upon these sources, a punitive damages award can be-said to be cisproportionate to the conduct for which punishment is being imposed when it lacks any reasonable relation to che character of the defendant’s misdeeds, to the injury caused by the defendant’s actions, or to the actual or potentia! gain to the defendant. hiv i» not to say that each of these considerations will be applicable or of equal weight in every instance; their significance will depend upon the particulars of the given case. Where, however, a punitive damages to prior large awards, and in turn validate still higher awards in the future 15 award appears disproportionate in relation to any of these benchmarks, that is a strong signal that the award does not rationally advance the objectives of imposing punishment and thus is constitutionally infirm. Furthermore, where the defendant is a corporation. labor union, religious body or other organization whose members or owners consist principally or entirely of persons wholly innocent of the alleged wrongdoing, the courts should be especially sensitive to the potential un- fairness of imposing an excessively large punishment upon blameless individuals. Here, for instance, Pacific Mutual is owned by its policyholders, who, of course, had no part in the wrongdoing but will be forced to bear the full brunt of any punishment.’ 1. Character of the defendant’s conduct In analyzing the character of the defendant’s conduct. a reviewing court should first and foremost consider the relative seriousness of the wrongdoing for which the punishment is being imposed. See Rowlett v. Anheuser- Busch, Inc., 832 F.2d 194, 207 ‘ist Cir. 1987) (quoting ‘In holding that municipalities are not subject to punitive dam- ages in actions ander 42 U.S.C. $ 1983, this Court observed that “[rjegarding retribution, * * * an award of punitive damages against a municipality ‘punishes’ only the taxpayers, who took no part in the commission of the tort. * * * Neither reason nor justice suggests that such retribution should be visited upon the shoulders of blameless or unknowing taxpayers.” City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 267 (1981). “Under ordinary principles of retribution,” the Court continued, speaking to a point quite material to this case, it is the wrongdoer himself who is made to suffer for his un- lawful conduct. If a government official acts knowingly and maliciously to deprive others of their civil rights, he may be- come the appropriate object of the community’s vindictive sentiments. A municipality, however, can have no malice in- dependent of the malice of its officials. Damages awarded for punitive purposes, therefore, are not sensibly assessed against the governmental entity itself. 453 U.S. at 267 (citations omitted; emphasis in original). 16H PESTATEMENT (SECOND) OF ToRTS § 908(2)) (the award “must bear some relation to the ‘character of the defendant's act’). There are several commonly accepted yardsticks against which the nature of the defendant's wrongful conduct may be measured. For example, as the Court observed in Solem, “nonviolent crimes are less serious than crimes marked by violence or the threat of violence” (463 U.S. at 292-293). In judging the gravity of the misconduct, the degree of he defendant's culpability is also of central importance. sce Solem, 463 U.S. at 293-294. A defendant would be highly culpable where, for instance, it violated a fiduci- ary duty to the plaintiff or otherwise abused a position of trust. Similarly, if a defendant acted with what is commonly called “actual malice’—i.e., with the specilic intent or purpose io injure the plaintiff or others—it would have behaved in a highly culpable manner that would support a relatively higher level of punishment. if. on the other hand, a defendant lacked any intent to cause harm but acted in a manner that was later found to have been “reckless” or in “disregard” of the plain- tiff’s rights, only a lower level of punishment could be justified (assuming that punitive damages would be ap- propriate at all). While a state may have the constitu- ‘ional authority to subject reckless or even “grossly” negligent conduct to punishment in the form of punitive damages, principles of fundamental fairness require that the anount of punishment in such a case be commen- surate with the lesser degree of culpability.” * Punitive damayes are not available unless a defendant is shown to have acted wrongfully. See yvencrally RESTATEMENT (SECOND oF TorTS § 908(1); 1 J. Ghiardi & J. Kircher, PUNITIVE DAMAGES LAW AND PRACTICE $5.01 (1985). Thus, proof of the requisite wrongdoing simply establishes that the conduct merits punishment and does not speak to the appropriate size of the punishment, The record would have to show something more, such as a specific intent to enuse injury or an extraordinary level of wantonness, In corde: to justify an especially large verdict 17 In addition, where the defendant is a corporation or other erganization, its level or extent of culpability de- pends upon the nature of the organization’s complicity in the wrongful conduct. If the conduct was undertaken pursuant to corporate policy or was approved by high- ranking officers, a relatively greater sanction would be permissible, both because the corporation could in such a case fairly be said to be more “culpable” and because higher-level corporate actors have the capacity to commit greater wrongs in the name of the corporation. If, on the other hand, the misconduct was the isolated act of one or two low-level employees, the organization’s culpa- bility would be less, and only a relatively smaller sanc- tion would be reasonable. 2. Injury caused by the misconduct Another red flag irdicating excessiveness is the pres- ence of a gross disproportion between the punitive dam- ages award and the injury inflicted by the defendant’s conduct. Solem, 463 U.S. at 292-293. See also Life & Casualty Ins. Co. v. McCray, 291 U.S. 566, 573 (1934) ‘sustaining penalty for wrongfully withholding payment because the penalty amount bore a “reasonable propor- tion to the possible actual damages”); United States v. Busher, 817 F.2d 1409, 1415 (9th Cir. 1987). Other things being equal, “jt|he absolute magnitude cf the iharm involved] may be relevant” (Solem, 463 U.S. at 9931." It by no means follows, however, that proportionality in this factor establishes that a punishment is not exces- * The extent of the injury inflicted generally is reflected by the amount of compensatory damages. For that reason, common law excessiveness standards identify the amount of compensatory dam- ages as a relevant factor in assessing the propriety of a punitive damages award. See, ¢.¢.. Rowlett v. Anheuser-Busch, Ince.. ®32 F.2d at 207 (quoting RESTATEMENT (SECOND) OF TORTS § 908(2) “the award * * * must bear some relation to * * * ‘the nature and extent of the harm to the plaintiff that the defendant caused’ ” see generally K. Redden, PUNITIVE DAMAGES $3.5 A) (1980, & 1987 Supp 18 sive, especially when the harm to the plaintiff was unin- tended by the defendant. The primary reason why harm is deemed relevant to the level of punishment of crimes is that society wishes to ensure greater deterrence of more socially injurious acts than of less dangerous ones. But in the context of civil tort actions, that objective is already attained by the fact that the defendant’s duty to make compensation will itself vary directly with the ex- tent of the harm caused by his wrongful acts. Thus, in many circumstances, compensaiory damages awards themselves can fully satisfy the goals of punish- ment and deterrence. See Memphis Community School Dist. v. Stachura, 477 U.S. 299, 312-313 (1986); Smith vy. Wade, 461 U.S. at 94 (O’Connor, J., dissenting! ; El- lis, Punitive Damages in Iowa Law: A Critical Assess- ment, 66 Iowa L. REV. 1003, 1660 (1981); Morris, Puni- tive Damages in Tort Cases, 44 Harv. L. Rev. 1173, 1182 (1931). Particularly where the compensatory award is sizeable, this element is likely to obviate the need for punitive damages altogether or at least to reduce the amount of such damages that are reasonably necessary to punish and deter." 19 This is especially true where recovery for intangible harm such as mental anguish or pain and suffering is a substantial com. ponent of the compensatory award. Such damages often are so large—and so far in excess of the defendant’s gain--that they fully ‘atisfy the purposes of punishment. It is well recognized that dam- ages for pain and suffering —which “frequently constitute| | the largest portion of awards"—-are inherently “indeterminate” and thus are “left (o the discretion of the trier of fact’: because the measurement of such damages is “essentially subjective” and “elu- sive,’ awards for pain and suffering are “open-ended to the point of inviting abuse” and are determined in the “virtually untrammeled discretion” of the jury. 1 M. Minzer, ef al., DAMAGES IN TORT ACTIONS 4-6, 4-10, 4-198, 4-205, 4-209 (1989). See also, e.g. © McCormick. HANDBOOK ON THE LAW OF DAMAGES 318-319 (1955 (damages for pain and suffering represent “an arbitrary allowance” Coy which the jury givens ‘ne standard te go by: the principal restraint on such awards is simply the “common sense of the jury”) 19 Accordingly, the size of the compensatory damages award, while not irrelevant, is but one factor for a court to consider in determining whether the amount of puni- tive damages is so large as to offend the Due Process Clause. Although some commentators have proposed that punitive damages be considered presumptively excessive if greater than a prescribed multiple (typically three) of the amount of compensatory damages,'' a punitive damages award should neither be conclusively unconsti- tutional simply because it is more than three times the compensatory award"? nor conclusively constitutional be- cause it is less than a trebled compensatory award. In the absence of legislative: reform, arbitrariness and irra- tionality can be rooted out of the present punitive dam- ages system only if this Court establishes a due process standard that esenews fixed formulas and instead re- quires a case-specific analysis of the rationality of the jury’s verdict. 3. Actual or potential gain to the defendant Much like the harm to the plaintiff, the punishment inflicted by a punitive damages verdict may be so far out of line with the amount that the defendant gained or reasonably could have expected to gain from its mis- conduct as to suggest irrationality. See Busher, 817 F.2d 11 See, e.g., American College of Trial Lawyers, REPORT ON PUNI- TIVE DAMAGES 15 (1989); ABA Special Comm, on Punitive Dam- ages, PUNITIVE DAMAGES: A CONSTRUCTIVE EXAMINATION 6-10 to 6-12 (1986). 12 Where the injury caused is slight or only nominal, basing the penalty on the amount of compensatory damages may be inadequate to provide appropriate punishment and deterrence. This Court recognized as much in St. Louis, 1.M. & S. Ry. v. Williams, supra. There the penalty imposed pursuant to statute ($75 for a $.66 over- charge) was held not to be excessive because no individual pas- senger would have an incentive to sue for such nominal actual damages (this was before the advent of class actions) and because the railroad could wrongfully obtain substantial profit from “the numberless onnortunities for committing the offense” (251 US. at 67). See also Seahoard Air Line Ru. Vv. Seegers, 207 US. 7, 78 WHT 20 at 1415: Hawkins v. Allstate Insurance Co., 732 P.2d 1073, 1080-1081 (‘Ariz.), cert. denied, 484 U.S. 874 (1987): Dobbs, Ending Punishment in “Punitive” Dam- ages: Deterrence-Measured Remedies, 40 ALA. L. REV. 831, 874-875 (1989): Owen, Punitive Damages in Prod- ucts Liability Litigation, 74 MicH. L. Rev. 1258, 1319 (1976). In such an instance, it would be exceedingly dif- ficult to justify the amount of punitive damages as necessary or appropriate to achieve adequate punishment. Bentham, at 179-181; Cooter, Punitive Damages for De- terrence: When and How Much?, 40 ALA. L. Rev. 1143, 1179 & n.69 (1989)."* Ill. THE PUNITIVE DAMAGES AWARD IN THIS CASE IS PLAINLY EXCESSIVE Application of the Solem framework to this case makes it evident that the punitive verdict is grossly excessive 13 Evidence of Pacific Mutual’s “wealth” was not submitted to the jury or relied upon by the Alabama courts to justify its punish- ment and therefore does not appear to be an element of this case. In general, the role of wealth in the excessiveness inquiry must be ‘imited if punitive damages awards are to be kept within reasonable bounds. Punitive damages are awarded to deter and punish par- ticular misecnduct, and the Constitution therefore dictates that the defendant’s conduct be central to the selection of punishment. To allow conduct-based limitations to be overridden by consideration of the defendant’s finances would be irrational. The penalty would not “fit the crime,” but instead would punish a large entity simply for its status, even though such status in itself is not wrongful. United States v. United States Steel Corp., 251 U.S. 417, 451 (1920); Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 265, 273-274 (2d Cir. 1979), cert. denied, 444 U.S. 1093 (1980); ef. Robinson v. California, 370 U.S. 660 (1962). For these reasons, and because in the case of organizations charged with economic wrongdoing size has little rational nexus to effective deterrence, the great weight of scholarly commentary opposes giving size or wealth a major role in determining the size of punishment. See. +.4., Cooter, 40 ALA. L. REv. at 1176-1177; Wheeler, A Proposal foi Further Common Law Development of the Use of Punitive Damages in Modern Product Liability Litigation, 40 ALA. L. Rev. 919, 950-952 (1989): Ellis, Fairness and Efficiency in the Law of Punitive Dam- aaes, 56S. CAL. L. REV. 1, 61-63 (1982). 21 and cannot be justified as a rational means of deterring or punishing the wrongful conduct found to have oc- curred. To begin with, the jury’s determination of the size of the punishment is not entitled to any appreciable defer- ence. The amount of the verdict was not chosen by the jury from a legislatively established spectrum of permis- sible penalties for the kind of wrong Pacific Mutual was found to have committed. Rather, the jury was told no more than that “in fixing the amount [of punitive dam- ages|, you must take into consideration the character and degree of the wrong as shown by the evidence and the necessity of preventing similar wrongs.” RT 897-898. Because the punitive damages award thus represents the view of only a single jury, with no experience of any kind in selecting punishments, and exercising unlimited and basically unguided discretion regarding the appropri- ate sanction, deferential review is not appropriate. See pages 11-12, supra, A. The Award Is Grossly Disproportionate To Statu- tory Penalties In Alabama And Other Jurisdictions. As noted above, the first step in assessing the ration- ality of a punitive damages award is to compare the amount of the award with criminal fines and civil pen- alties. Those legislatively established sanctions are fixed with reference to the same goals of deterrence and pun- ishment that underlie punitive damages and _ therefore provide an objective standard for the proportionality review. We have canvassed all the criminal fines and civil penalties prescribed by the Alabama legislature. None comes close to the penalty imposed by the jury in this case. Of greatest significance, the statutory penalties most directly applicable to Ruffin’s conduct—embezzle- ment, theft, larceny, and willful violations of the State insurance code—are limited to $10,000. See Ala. Code S$ 18A-5-11, 138A-5-12(ai 11), 27-1-12, 27-12-17, 27-12-23. 22 The amounts of Alabama’s other monetary punishments range from $10 for relatively minor conduct '* to $50,000 for more serious wrongs.’* The $1 million penalty in this ease is far outside that range. It is especially noteworthy that, in fixing this range of penalties, the Alabama legislature has distinguished for purposes of punishment between individuals and organi- zations such as corporations, which cannot be imprisoned but can only be fined. Thus, in a variety of circumstances —including insurance offenses—Alabama’s penal code provides more severe fines for corporations, typically pre- scribing a multiple of the maximum fine for individuals."” But even after taking these differences into account, the fine levels are far below the punishment imposed by the jury here. The verdict is equally excessive when viewed against the statutory penalties for similar misconduct in other jurisdictions. For example, the highest penalties auth- orized by other states for willful violations of insurance regulations, embezzlement, larceny, and theft generally 14 E.g., Ala. Code § 6-6-9 ($10; failure of summoned witness to attend an arbitration without a sufficient excuse); Ala. Code § 13A- 12-3 ($10-$50; selling cigarettes to minors); Ala. Code § 14-6-21 ($10-$100; person having custody of a jail allowing the jail to be- come “foul or unclean”); Ala. Code § 22-9-78 ($5-$25; midwife’s failure to report a death); Ala. Code § 34-23-52 ($10; late pay- ment of pharmacists’ license fee). 15 E.g., Ala. Code § 8-19-11 (up to $25,000; violation of a deceptive trade practice order) ; Ala. Code § 22-22A-5 ($100-$25,000 ; violation of environmental regulations) ; Ala. Code § 22-30-19 ($50,000; vio- lation of hazardous waste regulations ) ; see also Ala. Code § 5-5A-10 ($1,000-$10,000 per day; engaging in banking without a permit) ; Ala. Code § 5-20-7 (up to $10,000 per day; failure of credit card company to comply with cease and desist order). 16 Ala. Code § 27-29-10 (insurer subject to a fine of up to $10,000 for violation; individual subject to a fine of up to $1,000 for same conduct); Ala. Code § 34-7-25 (corporation subject to a $500 fine for practicing cosmetology without a license; individual subject to a $100 fine). 25 range from $10,000 to $100,000, with some states pro- viding an alternative fine of two or three times the de- fendant’s gain.'’ The verdict is thus grossly in excess of the punishment level that legislatures have deemed ap- propriate for misconduct of the type present in this case. Accordingly, this factor alone establishes the impropriety of the jury’s award.'* At a minimum, the disparity suggests that the punitive damages award is presumptively excessive. That conclu- sion is confirmed by an examination of the relationship between that penalty and the wrongful conduct. B. The $1,0€0,000 Penalty Bears No Reasonable Rela- tionship To The Gravity Of The Conduct Being Punished. As a preliminary matter, any assessment of the ration- ality of the punishment in this case requires a careful and precise identification of the conduct being punished and of the rationale for imposing punishment on Pacific Mutual. A proper analysis of that question reveals that there is no acceptable basis for punishing Pacific Mutual: even if there were, any imaginable rationale for doing so cannot support the massive punishment imposed. 1. The Alabama courts did not identify the basis on which the jury was permitted to punish Pacific Mutual. 17QOnly Arizona authorizes higher sanctions—fines of up to $150,000 for individuals (see Ariz. Rev. Stat. § 13-801) and $1 mil- lion for corporations (see Ariz. Rev. Stat. § 13-803). However, these maxima, which are fixed by general sentencing provisions applicable to a wide variety of offenses, reflect the legislature’s judgment regarding the appropriate sanction for the most severe felonies. They therefore provide no basis for upholding the punish- ment in this case, which surely did not involve misconduct at the upper limits of wrongfulness. 18 No different conclusion is supported by examination of other punitive damages awards in Alabama, which, as petitioner has demonstrated (see Pet. Reply Br. App. E1-E10), range over a large seale. For the reasons we already have discussed (see note 6, supra), such awards do not establish a rational yardstick against which to measure the punishment in this case. 24 In fact. the Alabama Supreme Court, having once con- cluded that the sale of health insurance policies to plain- tiffs was done within the scope of Lemmie Ruffin’s ap- parent authority (see Pet. App. B7-B10), never separate- ly addressed whether this asserted basis for civil compen- satory liability sufficed for the quite distinet task of de- termining susceptibility to punishment. In fact, the two questions are worlds apart. When the faithless Ruffin, acting as an intermediary between Pacific Mutual and Union Fidelity on the one hand and plaintiffs on the other, purloined the insurance premiums, someone would have to bear the resulting loss. The principles invoked by the court below may serve to explain why, as between two innocent parties, that loss should be borne by Pacific Mutual as Ruffin’s employer. But it is surely a far dif- ferent question whether an innocent party may properly be punished. ‘ine Alabama Supreme Court simply as- sumed an affirmative answer to that question by conflat- ing the conceptually distinct punitive and compensatory inquiries and conducting only the latter. See 1 & 2 J. Ghiardi & J. Kircher, PUNITIVE DAMAGES LAW AND PRAC- TICE $$ 2.04, 24.07 (1985); Cooter, 40 ALA. L. Rev. at 1181-1182: see also Huber, No-Fault Punishment, 40 ALA. L. REV. 1037, 1044 (1989) (“a sweeping new no- tion of vicarious punishment [has developed, for a]s rec- ently as 1967, the general rule was that an employer would not face punitive damages for the unsanctioned misconduct of an employee’’). The analysis of the issue of punishability has been fur- ther confused by the failure to distinguish between the acts that were taken by Ruffin in furtherance of his agency relationship with Union Fidelity and Pacific Mu- tual (the sale of insurance policies and receipt of the premiums) and the wrongful acts for which punishment could constitutionally be imposed (the theft of the prem- ium payments). The sale of the policies was within the scope of Ruffin’s employment, but not punishavle because not wrongful. The theft of the premiums, on the other hand, while certainly wrongful and punishable, cannot 25 rationally be said to have been in the course of or within the scope of Ruffin’s employment with Union Fidelity and Pacific Mutual; rather, his self-ernrichment by diverting to personal use funds paid to his employer was surely a frolic and detour of his own."’ Properly understood, therefore, Pacific Mutual has been punished for being the victim of wrongful acts. (It was a victim because Ruffin’s theft exposed it to liability under the policies while depriving it of the premium pay- ments that would cover the insurance risk.) We cannot believe that the Constitution permits the punishment of defendants because of crimes directed at least in part against them, and from which they derive no benefit. 2. Assuming for present purposes that we are wrong about the constitutional limits on the State’s power to inflict punishment in a case such as this, it remains nec- essary in considering the rationality of the punishment to identify the actor and the conduct that properly are the focus of the proportionality analysis. Pacific Mutual’s punishment could not have been and was not imposed here on the basis of any direct role by the company in the wrongdoing, because the company had none: Ruffin did not act pursuant to some company-wide policy, or with the consent of management, or even in furtherance of any interest of the company.”’ 19 This case is thus different, for purposes of vicarious liability, from one in which an insurance ager.t commits fraud in the course of selling a policy. In the latter situation, even though the fraud may not have been authorized and may have violated his employer's policies, there is at least a sense in which the agent can be said to be acting as the corporation in committing the wrongful acts. For reasons that space does not permit us to explore here, we do not believe that punishment of the corporation is constitutionally permissible solely on the basis of vicarious liability even in such circumstances. But that is a question the Court need not address in this case, because Ruffin’s wrongful acts cannot in any sense rationally be said to have been the imputable acts of his employer. 20 Respondents argued in their brief in opposition (at 4) that “Pacific Mutual’s corporate responsibility was premised on corporat: malfeasance” (emphasis in original), because the Birmingham office 26 This leads to two possible ways of looking at the case. Under one view, the company’s vicarious liability for punishment forces it to stand in Ruffin’s shoes and ac- cept any punishment that could rationally have been im- posed on Ruffin for his individual wrongdoing. Under another, Pacific Mutual is being punished for “corporate wrongdoing” occurring at the sales agent level. From either perspective, however, the punishment of approxi- mately $1,000,000 cannot be justified in the circumstances of this case.*' Viewing Ruffin as the subject of punishment, we readily acknowledge that the misconduct (embezzlement of the in- surance premiums), though not violent, is of some grav- ity. But the loss inflicted on respondent Haslip—$4,000 in out-of-pocket expenses and some amount, perhaps ap- proaching $40,000, for nonmonetary injuries **—is slight manager allegedly had notice of Ruffin’s wrongful conduct. But if the office manager countenanced Ruffin’s fraud, he was certainly not acting on behalf of or in the interests of the company. See Pet. Reply Br. 3-4. And, to the extent Pacific Mutual had notice of Ruffin’s acts (but see id. at 1-4), that evidence is not relevant. The jury was not asked to punish Pacific Mutual for failing to supervise Ruffin (an act that would, at most, amount to ordinary negligence and therefore provide no basis for imposition of punitive damages). Rather, the punishment plainly was inflicted for Ruffin’s diversion of the premium payments. 21 The judgment in this case does not specify the portion of re- spondents’ recovery that constitutes punishment rather than com- pensation. See Pet. App. B3. Nevertheless, as petitioner has dis- cussed (Pet. Reply Br. 5-6 & n.3), the record makes clear that the great bulk of the $1,040,000 awarded to respondent Haslip must have been intended as punitive damages. Indeed, respondents them- selves repeatedly characterized the punitive award in the court below as greater than $1,000,000 Ala. Sup. Ct. Br. 58, 62. Because the Alabama courts did not clarify the precise amount of the punish- ment and upheld a punitive damages award that may be (and in fact appears to be) some $1,000,000, analysis of the constitutional issues in this Court should proceed on the premise that such dam ages constitute the overw heiming share of the jury's verdict 22 If, as respondents have stated (see note 21, svpra), appres mately $1 million of the award is punitive, the remainder of the award—$40,000—must be compensatory. 27 in relation to the size of the punitive award and cannot rationally explain it. So too for Ruffin’s gain, which was but a tiny fraction of the punishment exacted. . No different conclusion can be reached when consider- ing the purposes of punishment. From the standpoint of Just retribution, the penalty is wildly disproportionate. The same is true for the goal of rational deterrence. A fine of $1,000,000 far exceeds any amount that could possibly be necessary and appropriate to deter Ruffin and others like him from similar wrongdoing in the future. Indeed, because the penalty is to be exacted from Pacific Mutual, with which Ruffin could have no hope of a con- tinuing relationship, the size of the penalty is bound to he entirely immaterial to Ruffin and therefore entirely in- capable of achieving deterrence. In sum, if Pacifie Mu- tual is being made to stand in the shoes of Lemmie Ruf- fin for purposes of punishment, the verdict is egregiously excessive. Precisely the same conclusion follows if the punishment is viewed as being inflicted for corporate wrongdoing. In contrast to Ruffin himself, the character of the company’s conduct involves no conscious or deliberate wrongdoing of any kind. And the punitive award remains just as disproportionate to respondents’ loss when viewed from (his perspective. Moreover, the element of gain to the “offender” vanishes entirely. Even if the company could have avoided any liability to respondents, the diversion of the insurance premiums from Union Fidelity and Pacific Mutual to Ruffin would have gained it not one cent; as matters eventuated, Pacific Mutual was ‘quite apart from punishment) left with the responsibility of providing health insurance but without the benefit of the corresponding premium income. Nor, for a variety of reasons, does a deterrence ra- tionale better support a large award against Pacific Mu- tual than it would against Ruffin himself. First, although the company itself is a large entity, the responsibility 28 for any misconduct is limited to the lowest level of the company. It would plainly be irrational to treat fraud or theft by R=ffin as equivalent to similar conduct under- taken or authorized at higher levels of the company: tuffin simply lacked the capacity to engage in corporate wrongdoing of the same scope as those with greater authority. By the same token, the company is bound to be less resistant to disciplining an employee such as tuffin than a high-ranking officer and therefore will be deterred by a far lower penalty from countenancing mis- conduct by one at Ruffin’s level in the corporate hierarchy. l’urthermore, because the scheme for which Pacific Mu- tuai is being held responsible was bound to be discovered when one of the respondents incurred medical expenses and could result only in losses to the company, a purely nominal fine will satisfy fully any need to deter future “misconduct” of this sort. Because anything beyond a relatively modest monetary sanction far exceeds what is justifiable to punish and deter the type of conduct in question here, the award against Pacific Mutual is constitutionally excessive and must be set aside. C. Alabama’s Post-Verdict Review Procedures Do Not Eliminate The Unconstitutionality Of The Punitive Award In This Case. Respondents contend ‘Br. in Opp. 14-16) that the state-law review of the size of the punitive damages award conducted by the courts below assured satisfac- tion of any proportionality inquiry mandated by the Due Process Clause. That is simply incorrect. The Alabama courts did not even purport to conduct the kind of pro- portionality review required by the Due Process Clause. The trial court made only the conclusory finding that the award was “not excessive as a matter of law.” even “-Of course, even if they had, an erroneous conclusion that th: sanction was not arbitrary would net insulate the award from review by this Court 29 though it was “for a great amount of monev" and the court “would in all likelihood have rendered wu lessje amount.” Pet. App. Al5. And the Alabama Supreme Court observed merely that “jury verdicts are presume?) correct, and that presumption is strengthened when 1 presiding judge refuses to grant a new trial.” /v/. at B13. Such perfunctory review in the course of uphold- ing the punishment under state law does not preciuce scrutiny of the jury’s exorbitant award under the fede ral Constitution. CONCLUSION The judgment of the Alabama Supreme Court should be reversed. Respectfully submitted. ANDREW L. FREY Counsel of Record KENNETH S. GELLER MARK I. LEvy ANDREW J. PINCUS Mayer, Brown & Platt 200 Pennsylvania Ave... NAW. Washington, D.C. 20006 (202) 778-0602 Counsel For Amici Curiae JUNE 1990 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0717%3A29. Public record. Not legal advice.