Amicus Curiae Brief — Pacific Mutual Life Insurance v. Haslip

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Supreme Court, U.S, |

~~ FILED.

| wy } JUL 3 0]

No. 89-1279 | ee oe ee

IN THE me

Supreme Court of the United States

Octoser TERM, 1989

PACIFIC MUTUAL LIFE INSURANCE COMPANY,

Petitioner,

vs.

CLEOPATRA HASLIP, CYNTHIA CRAIG,

ALMA M. CALHOUN and EDDIE HALGROVE,

Respondents.

ON WRIT OF CERTIORARI

TO THE SUPREME COURT OF ALABAMA

BRIEF FOR

CALIFORNIA TRIAL LAWYERS ASSOCIATION

AS -AMICUS CURIAE SUPPORTING RESPONDENTS

ROLAND WRINKLE

Counsel of Record

HURLEY, GRASSINI & WRINKLE

A Law Corporation

11313 Weddington Street

North Hollywood, California 91601

(818) 763-4318

: Attorneys for Amicus Curiae

CALIFORNIA TRIAL LAWYERS ASSOCIATION

"Lawyers Brief Service / Legal Printers / (213) 383-4457 / (714) 720-1510

‘BEST AVAILABLE COPY! Siummnan

No. 89-1279

IN THE

Supreme Court of the United States

OCTOBER TERM. 1989

PACIFIC MUTUAL LIFE INSURANCE COMPANY,

Petitioner,

vS.

CLEOPATRA HASLIP, CYNTHIA CRAIG,

ALMA M. CALHOUN and EDDIE HALGROVE,

Respondents.

ON WRIT OF CERTIORARI

TO THE SUPREME COURT OF ALABAMA

BRIEF FOR

CALIFORNIA TRIAL LAWYERS ASSOCIATION

AS AMICUS CURIAE SUPPORTING RESPONDENTS

- ROLAND WRINKLE

Counsel of Record

HURLEY, GRASSINI & WRINKLE

A Law Corporation

11313 Weddington Street

North Hollywood, California 91601

(818). 763-4318

Attorneys for Amicus Curiae

CALIFORNIA TRIAL LAWYERS ASSOCIATION

TABLE OF CONTENTS

RECENT LEGISLATIVE CHANGES IN

THE STATES’ PUNITIVE DAMAGE

SYSTEMS ARE HAVING A DRAMATIC

EFFECT ON THE SIZE AND NUMBER OF

PUNITIVE AWARDS; THE STATES ARE

NOT ABUSING THE RIGHTS WHICH

THEY RETAINED WHEN THEY

ENTERED THE FEDERAL UNION ......... 2

SUBSTANTIVE AND PROCEDURAL

LIMITATIONS ON PUNITIVE DAMAGES

ARE NOT ONLY IN PLACE BUT ARE

EVOLVING AS THE PRODUCT OF

CURRENT LEGISLATIVE PROCESSES—

THE CALIFORNIA MODEL ............... 4

A. Statutory Limitations on Punitive

ee cnc ccc se eccececcces 5

1. Procedural Safeguards Applicable

To The Assessment Of Punitive

eis ccc ceccccecc cs 6

2. Limitations On Liability For

I on nncaccccceccss 7

Page Page

3. Limitations On Actions In Which (c) The Discretion of California

Punitive Damages Allowed ............ 8 Juries Is Further Checked By

Elected Judges Who, On Motions

B. Judicial Limitations On Punitive Damages ... 9 For New Trial, Sit As "Inde-

pendent Triers Of Fact," And

1. Constitutional Limitations—In Are Mandated To Reweigh The

California, Civil Penalties Are Evidence And To Review Jury-

Measured Against Due Process Decided, Punitive Awards ......... 13

Kequirements On A Case-By-Case

Basis And Those Penalties Which (d) The Discretion Of California

‘Demonstrably Overbalance And Juries Is Still Further Checked

Outweigh Reasonable Goals Of By Active And Aggressive

Punishment, Regulation And Appellate Review ............... 15

Deterrence” Are Invalidated ........... 8

(1) Reported Decisions, Each

2. Jury Discretion In California Is Employing A Proportional

Anything But "Standardless” ........... 10 Analysis. Produce Punitive

Judgments With An Average

(a) California Law Imposes Muitiple Percentage Of Net Worth

And Well-Defined Standards Of | BAS R aand - 5 aa ne 15

Proportionality, Which The

Trier Of Fact, Trial Court And (2) Amicus ACTR’s Graph Concern-

Reviewing Courts Are Obligated ing Recent Trends Is Illusory... 16

WOW 6 at Sree eds. 10

(3) Only 9% of the Punitive

(b) In California, Evil Motive Is Damage Dollars in California

The Central Element Of Malice Reported Cases Survive

And Is Not Established By Appellate Review ........... 17

Conduct Which Is Unreasonable,

Negligent, Grossly Negligent III PROPORTIONALITY BASED ON "ANAL-

GOR UND 6 65 aN Side cene sce 12 OGOUS CRIMINAL PENALTIES" IS NOT

PROPORTIONAL IF THE ANALYSIS

EXCLUDES THE PRINCIPAL MEANS OF

DETERRENCE—INCARCERATION ......... 19

Page

IV IF PETITIONER’S SUBSTANTIVE DUE

PROCESS ARGUMENT IS ACCEPTED,

THEN, IN LIGHT OF McGAUTHA, A SMALL

FRACTION OF A PERSON’S ASSETS WILL

BE AFFORDED GREATER PROTECTION

THAN THAT AFFORDED HIS | Se 21

V THE REASONS WHICH LED TO THE

McGAUTHA RULING APPLY HERE WITH

GREATER FORCE—ie., A MECHANISTIC

APPROACH TO SENTENCING, WHICH IS

INCAPABLE OF APPLYING REASONED

DISCRETION TO INDIVIDUAL CIRCUM-

STANCES, IS NO FRIEND OF DUE

WR Score ere 23

VI PETITIONER DANGEROUSLY BLENDS

THIS COURT'S FUNCTION WITH RESPECT

TO INTERPRETING FEDERAL STATUTES

WITH ITS ROLE IN DETERMINING THE

CONSTITUTIONALITY OF STATE

STATUTES

VII PETITIONER’S EXPANSIVE VIEW OF

SUBSTANTIVE DUE PROCESS MAKES

THE CONSTITUTIONALIZATION OF

STATE COMPENSATORY DAMAGE

SYSTEMS INESCAPABLE

CONCLUSION

TABLE OF AUTHORITIES

Cases

Aetna Life Ins. Co. v. Lavoie

475 U.S. 813 (1986) ....... 0. cece e eee 6

Andres v. United States

333 U.S. 740, 68 S.Ct. 880, 92 L.Ed. 1055 (1948)... 23

Bankers Life and Casualty Co. v. Crenshaw

486 U.S. 71, 108 S.Ct. 1645 (1988) .... 5,10,13,21

Beagle v. Vasold ; -

Do ce vcs k es kab ce oeel

Bell v. Sharp Cabrillo Hospital ,

212 Cal.App.3d 1034 (1989) ................. 13

Bertero v. National General Corp. -

ee i bes ah dhe ehd eee woo 6,2

Browning-Fernis Industries of Vermont v.

Kelco Disposal Inc. 1

492 US. , 109 S.Ct. 2909 (1989) .......... 2, 11

Burnett v. National Enquirer, Inc. -

BO Ce Oe CISEE) occ cc ccc ccceescece :

Central Alabama Elec. Corp. v. Tapley 0

ee ee PE COU ED ow cnc cv wu c wcee nee

Collins vy. Lucky Markets, Inc.

5 Cal.App.3d 705, 85 Cal.Rptr. 350 (1969) ....

Cruzan v. Director, Missouri Dept. of Health

__ US. __, No. 88-1503 (June 25, 1990) ......

Devlin v. Kearney Mesa AMC/Jeep/Renautt Inc.

155 Cal.App.3d 381, 202 Cal.Rptr. 204 (1984) ....

Duke Power Co. v. Carolina Env. Study Group

438 U.S. 59, 98 S.Ct. 2620,

57 L.Ed.2d 585 ETO ie aa ee Le

Dun & Bradstreet, Inc. y. Greenmoss Builders, Inc.

105 S.Ct. 2939, 472 U.S. 749.

86 L.Ed.2d 593 (1985) .....................

Egan v. Mutual of Omaha

Oe cy ck ee

Fein v. Permanente Medical Group

38 Cal.3d 137, 695 P.2d 665 SIR a ea

Ferraro v. Pacific Finance Corp.

8 Cal.App.3d 339, 87 Cal.Rptr. 226 (1970) ......

Gagnon v. Continental Casualty Co.

211 Cal.App.3d 1598, 260 Cal.Rptr. 305 (1989) . . .

Garcia v. United States

769 F.2d 697 (11th Cir. ae, HO PT TN See

Giaccio v. Pennsylvania

382 U.S. 399 (1966)

Page

4,22

vii

Page

Gregg v. Georgia

Se I aS ci era Rts ce ak a 28

Grimshaw v. Ford Motor Co.

119 Cal.App.3d 757, 174 Cal.Rptr. 348 (1981) .... 16

Hale v. Morgan

22 Cal.3d 388, 584 P.2d 512 (1978) ............ 9

Johnson v. St. Vincent Hospital Inc.

273 Ind. 374, 404 N.E 2d 585 (1980) ........... 28

Little v. Stuyvesant Life Ins. Co. ;

OF Ca Age Se i CISTI) . ww ccc cecccnccccese 1s

Lockett v. Ohio ee

SO cS eS oO ha a 27,28

McGautha v. California

91 S.Ct. 1459, 402 U.S. 183, oe hs

re Tt: | ee §,22,23,25

McMillan v. Pennsylvania :

eS oe cies gigs oe are 27

Merlo v. Standard Life & Acc. Ins. Co.

SP ND EMOTO so 5 5 ons Siew dewewccbnn 15

Moore v. East Cleveland

DI rea ar Cu gi Ghbr at tense ha 3

Neal v. Farmers Ins. Exchange

eee 11,12,14,17

viii

Page

Parratt v. Taylor

er PS ai es eee 22

People ex rel. Dept. of Transp. v.

Grocers Wholesale Co.

214 Cal App.3d 498 (1989) .............000.. 15

Santosky v. Kramer

I ae be is ora 22

Smith v. Wade

461 U.S. 30, 103 S.Ct. 1525,

ee rena 12,26

Solem v. Helm

ee Es wen bee 'odeu neue es «Ook 24

Stevens v. Armontrout

787 F.2d 1282 (8th Cir. 1986) ................ 27

Triangle Sheet Metal Works, Inc. v. Silver

154 Conn. 116, 222 A.2d 220 (1966) ........... 3

Walton v. Anzona

__ S.Ct. __, 58 U.S.L.W. 4992

EN ee ts Sy nse eeu a 8

Waters-Pierce Oil Co. v. Texas

oe PUI orn 6 ocr deccdsetereoes 4

Page

Rules

California Rules of Court, rule 977(a)(b)(1)-(2) ..-.-- 18

State Statutes

Alabama Code (Supp. 1988):

EE 6 9 6k ae 0b oO hse eg 6 46 64608 2

NN Pree ree reer eee Ce 3

Alabama Criminal Code:

0 PPP eee 20

RES TEP ree Tere ee eee 20

FPPC PeTUTeerrreT REET ere 20

Alaska Statutes, § 09.17.020 (Supp. 1988) .........- 2

California Civil Code:

SS eeeore reer rier se ee reer Tete 7

| et Pe De ee eee ee Oe ee 8

IPE ee nT Serer ae ere ee ee ee 2,8

$3294(a) ........ ee aauet ye sagas 6,7

fC | eee rer eer Tere eT ST Cor 7

DD acc saw ated esesssuseeineneses'< 7

Err rere tre TT retro rr ere 2

SS err Terr crete ee reese 6

5 PTT Tee Te eee rT Se re eet 6

+) EPP TTe ree ore eee TE eee ee 8

California Code of Civil Procedure:

DE Cus Leer eee ets eeenaede hagas )

DEE, 2c Seis ceeeeebae Ge andanad 6ees eee 14

Te TPCT eT Tee TLE 8

California Government Code:

Bi ae a er Pee ee ee ee &

_—

Colorado Revised Statutes (Supp. 1986):

$$ 13-21-102, 13-25-127 ..................

I ne ee aaa

Connecticut General Statutes,

§ 52-240(b) (Supp. 1989 ..................

Florida Statutes Annotated (West Supp. 1989),

§§ 768.72 through 768.74

Georgia Code Annotated,

$51-12-3.1-Goupp. 1909)... eee

Idaho Code, § 6-1604 (Supp. 1989)

Illinois Annotated Statutes,

Ch. 110, §§ 2-604.1, 2-1207

(Smith-Hurd Supp. 1989)

Indiana Code Annotated,

§ 34-4-34-2 (Burns 1986)

Iowa Code Annotated, § 668A.1 (West 1987)

Kansas Code of Civil Procedure Annotated,

§§ 60-3701 through 60-3703

6 eee ewe ien

Kentucky Revised Statutes,

§$§ 411.184, 411.186 (1988)

Minnesota Statutes Annotated,

$§ 549.191, 549.20 (West 1988)

Missouri Annotated Statutes: ~

§ 510.263 (Vernon Supp. 1990)

Montana Code Annotated, § 27-1-221 (1987)

Nevada Revised Statutes Annotated (Supp. 1989):

§ 42.005

§ 42.005.1

New Hampshire Revised Statutes Annotated,

I ON oa soak va wevauves

New Jersey Statutes Annotated,

$ 2A:58C-5 (West 1987)

§ 537.675 (Vernon Supp. 1988) . .s ' | , | |

North Dakota Century Code,

§ 32-03.2-11 (Supp. 1987) ..........----+--

Ohio Revised Code Annotated,

§ 2315.21 (Page Supp. 1988) ...........---.

Oklahoma Statutes Annotated,

Tit. 23, § 9 (West 1987) .........-0.020 00s

Oregon Revised Statutes (1987):

UE GkG esd encevarasccensessesenn'

POE: 6 ct cba weeeteraarseseesoseees

South Carolina Code Annotated,

§ 15-33-135 (Supp. 1988) .........-.----:-

South Dakota Revised Code, § 21-1-4.1 (1987) ....

Texas Codes Annotated (Vernon Supp. 1990):

Civil Practice & Remedies, § 41.001 .........

Civil Practice & Remedies, § 41.007 .........

Utah Code Annotated, § 78-18-1 (Supp. 1989) .....

Virginia Code Annotated, § 8.01-38.1 (Supp. 1989) ...

California Jury Instructions

Book of Approved Jury Instructions, Civil (BAJI)

eee wei ee hea he Cone eae e wees

es ee ee eee aaa eee

Rs i So lees Seer e re xe ee

i oe de ene wee ee ce oe eae

Pi Pe ie js cea heat eee ee ake ewe ees

Page

xii

Texts

4 Blackstone, Commentaries 371 ........

"The Federalist Papers" No. 45 (J. Madison)

Speiser, Recovery for Wrongful Death

oe FG. Lt & Pree rreerreee

Benjamin N. Cardozo, The Storrs Lectures,

Lecture III, from "The Nature of the

IS SL Fe ais a og

2 te & } eee eer errr Tere re

Conventions

Warsaw Convention, 49 Stat., Part I, 3000,

Treaty Series No. S76 .... 2.2.20.

BRIEF FOR

CALIFORNIA TRIAL LAWYERS ASSOCIATION

AS AMICUS CURIAE SUPPORTING RESPONDENTS

INTEREST OF AMICUS CURIAE

The California Trial Lawyers Association ("CTLA"), found-

ed in 1962, is a voluntary organization composed of approxi-

mately 5,000 trial lawyers who appear regularly in state and

federal courts. The predominant practice of most CTLA

members is the representation of injured tort victims and

victims of consumer fraud. As such, CTLA is concerned with

issues which implicate the rights of victims and consumers.’

CTLA believes Petitioner and its amicus, Association For

California Tort Reform (ACTR), has presented a distorted view

of what is really going on in the States with respect to punitive

damage judgments which defendants are actually ordered to pay.

As their "tort reform" movement marches from its substantial

successes in the state legislatures to this Court, the requested

radicalization of the federal relationship with respect to state

tort law will dramatically alter not only punitive damages, but

also compensatory damages and criminal sentencing—matters

traditionally reserved to the states. It is these issues which

CTLA wishes to discuss.

"A letter consenting to the filing of this amicus curiae brief by counsel

for respondents is being filed concurrently. Pursuant to an agreement between

counsel for petitioners and respondents, such consent from counsel for the

party in whose support the amicus curiae brief is being filed is deemed to be

consent from both counsel.

RECENT LEGISLATIVE CHANGES IN THE

STATES’ PUNITIVE DAMAGE SYSTEMS ARE

HAVING A DRAMATIC EFFECT ON THE SIZE

AND NUMBER OF PUNITIVE AWARDS; THE

STATES ARE NOT ABUSING THE RIGHTS

WHICH THEY RETAINED WHEN THEY

ENTERED THE FEDERAL UNION. .

As "tort reform" sweeps the nation, lobbyists for insurance

and business concerns, such as ACTR, are getting - ‘ch of

what they are asking for. As a result, punitive dam: . have

been sharply limited in recent years through new" » ,eform"

legislation. As of this date, the majority of states nave enacted

laws significantly restricting punitive damages.*

Lobbyists such as ACTR have been massively successful in

convincing state legislatures to select a variety of restrictive

°See Ala. Code § 6-11-20 er seq. (Supp. 1988); Alaska Stat. § 09.17.020

(Supp. 1988); Cal. Ann. Civ. Code §§ 3294, 3295 (West Supp. 1990); Colo.

Rev. Stat. §§ 13-21-102, 13-25-127 (Supp. 1986); Conn. Gen. Stat. § 52-240(b)

(Supp. 1989) (applicable to product liability cases); Fla. Stat. Ann. §§ 768.72

through 768.74 (West Supp. 1989); Ga. Code Ann. § 51-12-5.1 (Supp. 1989);

Idaho Code § 6-1604 (Supp. 1989); Ill. Ann. Stat. ch. 110 §§ 2604.1, 2-1207

(Smith-Hurd Supp. 1989); Ind. Code Ann. § 34-4-34-2 (Burns 1986); Iowa

Code Ann. § 668A.1 (Wesi 1987); Kan. Civ. Proc. Code Ann. §§ 60-3701

through 60-3703 (Vernon Supp. 1989); Ky. Rev. Stat. §§ 411.184, 411.186

(1988); Minn. Stat. Ann. §§ 549.191, 549.20 (West 1988); Mo. Ann. Stat.

§§ 510.263 (Vernon Supp.1990), 537.675 (Vernon Supp. 1988); Mont. Code

Ann. § 27-1-221 (1987); Nev. Rev. Stat. Ann. § 42.005 (Supp. 1989); N.H.

Rev. Stat. Ann. § 507:16 (Supp. 1988); NJ. Stat. Ann. § 2A:58C-5 (West

1987) (applicable to product liability cases); N.D. Cent. Code § 32-03.2-11

(Supp. 1987); Ohio Rev. Code Ann. § 2315.21 (Page Supp. 1988); Okla. Stat.

Ann. tit. 23, § 9 (West 1987); Or. Rev. Stat. §§ 30.925 (applicable to product

liability cases) 18.540, 41.315 (1987); S.C. Code Ann. § 15-33-135 (Supp.

1988); S.D. Rev. Code § 21-1-4.1 (1987); Tex. Civ. Prac. & Rem. Code Ann.

§§ 41.001 ef seg. (Vernon Supp. 1990); Utah Code Ann. § 78-18-1 (Supp.

1989); Va. Code Ann. 8.01-38.1 (Supp. 1989).

devices from their agenda. However, only nine states have

adopted the one device which is most important to Petitioner

and its amici—a cap on the dollar amount of punitive awards.*

Other states may well decide to follow the lead and place a

statutory outer limit on such awards. Such is the proper

business of legislatures. However, due to either impatience

with the deliberative processes of the state legislatures, or

frustrated by temporary defeats before some state legislatures,

the insurance and business community has now turned to this

Court to give it the device it most cherishes by finding within

the boundaries of the Fourteenth Amendment a cap on puni-

tive damages.*

Thus, in the very midst of the current debate going on

within the state legislatures, and in order to short-circuit that

process, the insurance and business lobby is (to borrow the

words of Justice White from Moore v. East Cleveland, 431 U.S.

494, 544) asking the Judiciary "to pre-empt{] for itself another

part of the governance of the country without express constitu-

tional authority."

What makes this short-circuiting and pre-empting of a

function ordinarily reserved to the states particularly sad and

tragic is the empirical fact that these newly-enacted punitive

damage reforms are having a dramatic effect in limiting such

awards.

3See Ala. Code § 6-11-21; Colo. Code § 13-21-102(1)(a); Fla. Code

§ 768.73(1)(a); Georgia Code § 51-12.5.1(g); Kansas Code § 60-3701(c):

Nevada Code § 42.005.1; Oklahoma Code Title 23, § 9; Texas Code § 41.007;

Virginia Code § 8.01-38.1. In addition, the Connecticut Supreme Court, in

Triangle Sheet Metal Works, Inc. v. Silver, 154 Conn. 116, 222 A.2d 220 (1966),

held that an award of punitive damages is limited to plaintiffs litigation

expenses less taxable costs.

“If this Court imposes such a restriction on the State legislatures, then

Michael Milken ought to think twice about a plea bargain which could result

in 600 million dollars in penalties.

California’s Tort Reform Act, which included extraordinary

changes as to punitive damages, went into effect on January

1, 1988. From 1987 to 1988, the number of punitive damage

verdicts in excess of $100,000 went from 62 to 29, i.e., a reduc-

tion of 53%! The difference in the total amount of punitive

awards from 1987 to 1989 represents a reduction of 60%! (See

Appendix A and page 4 of Brief of ACTR.)

Thus, while the state "laboratories" are not only in fact

experimenting with devices to limit and circumscribe punitive

awards based upon the economic and social theories adopted

by each state, and as these experiments are beginning to show

positive and dramatic results, Petitioner and its amici seek to

have this Court simply shut that process down and impose a

“constitutionally"-mandated cap on punitive awards. This, the

Framers did not envision.

SUBSTANTIVE AND PROCEDURAL LIMITA-

TIONS ON PUNITIVE DAMAGES ARE NOT ONLY

IN PLACE BUT ARE EVOLVING AS THE

PRODUCT OF CURRENT LEGISLATIVE

PROCESSES—THE CALIFORNIA MODEL.

If it is assumed that Due Process serves as a check on

punitive damage awards that are "so severe and oppressive as

to be wholly disproportionate to the offense or obviously

unreasonable" (Waters-Pierce Oil Co. v. Texas, 212 U.S. 86, 111

(1909)), and it is assumed that "Due Process requires more"

(Brief of Petitioner at 49), and it is assumed that this is one of

>This Court need not, and has no authority to, inject itself into every field

of human activity where irrationality and oppression may theoretically occur,

and if it tries to do so it will destroy itself." Cruzan v. Director, Missouri Dept.

of Health, ___ U.S. __, No. 88-1503 (June 25, 1990) (Scalia, J., concur-

ring.)

those "rare occasions"°—unlike capital sentencing, unlike defa-

mation awards and unlike compensatory tort awards in

general—where the Court chooses to dictate the use of specific

devices to the states with respect to their punitive damage

systems, what devices are mandated by the Fourteenth Amend-

ment?

Petitioner gives the Court no guidance whatsoever. It seeks

imposition of a "range of permitted punishment” but offers not

a clue as to the form or substance of whatever it sees lurking

within the Due Process Clause.

Respondents, on the other hand, have addressed themselves

to the “active re-examination underway in the States" as a

response to this Court’s invitation in Bankers Life and Casualty

Co. v. Crenshaw, 486 U.S. 71, 108 S.Ct. 1645 (1988) to "enact

legislation addressing punitive damage awards,” 108 S.Ct. at

1651. Respondents discuss the array of creative and innovative

devices and procedures being enacted by the state legislatures

to limit and channel punitive damage awards so as to meet the

social and economic policy goals which have been adopted

through the balancing process of each individual legislature

(Respondents’ Brief in Opposition at 19-21).

The recent restructuring of its punitive damage system by

an increasingly more conservative California Legislature and

Judiciary is illustrative of the appropriate exercise of the States’

power (in direct response to the electorate) "to choose among

competing social and economic theories in the ordering of life

within their respective jurisdictions” and (to paraphrase Justice

Brennan (from McGautha, supra)), to determine for themselves

the criteria under which malicious tortfeasors should be

assessed punitive damages.

McGautha v. California, 91 S.Ct. 1459, 402 U.S. 183, 28 L.Ed.2d 711

(1971).

A. Statutory Limitations on Punitive Damage

Awards.

Since originaliy enacting the basic punitive damage statute,

Civil Code section 3294,’ in 1872, the California Legislature

has frequently and regularly made various policy decisions,

selecting from a menu of competing economic and social

policies.

1. Procedural Safeguards Applicable To The

Assessment Of Punitive Damages.®

(a) Civil Code section 3295(d) [mandatory bifurcation of

trial; preclusion of evidence of defendant's profits or financial

conditions until finding of malice, fraud or oppression; right to

same jury].

(b) Civil Code section 3294(a) ["clear and convincing"

standard of proof required].

amount of punitive damages in claim].

(d) Civil Code section 3295(a) [protective order requiring

plaintiff to produce evidence of a prima facie case of malice,

fraud or oppression prior to introduction of evidence of defend-

ant’s profits or financial condition].

(e) Civil Code section 3294(a) [prohibition on pretrial

discovery of defendant's net wealth without a prima facie

showing of malice, fraud or oppression].

(f) Code of Civil Procedure section 425.13 [court order

"California is one of eight states whose punitive damage systems are

based on statute as opposed to the common law. Nonetheless, it is a codifica-

tion of the common law. Bertero v. National General Corp., 13 Cal.3d 43, 66,

n.13 (1974).

8 Most of these safeguards were instituted by the 1987 Tort Reform Act

which was passed subsequent to the “warning shot" fired in Aetna Life Ins.

Co. v. Lavoie, 475 U.S. 813 (1986).

required to plead punitive damages against health care provid-

er).

(g) Civil Code section 48a [hatred or ill will toward plaintiff

required for punitive damages against media}.

2. Limitations On Liability For Punitive Damages.

(a) Civil Code section 3294(b) (no vicarious liability for

punitive damages and no punitive damages based on respondeat

superior).”

(b) Civil Code section 3294(a) (punitive damages permis-

sible only upon clear and convincing showing of malice, '° fraud

Or Oppression).

which is intended by the defendant to cause injury to the

plaintiff or despicable conduct which is carried on by the

defendant with a wilful and conscious disregard of the rights

nb) An employer shall not be liable for damages pursuant to subdi-

vision (a), based upon acts of an employee Qf the employer, unless the

employer had advance knowledge of the unfitness of the employee and

empioyed him or her with a conscious disregard of the rights or safety of

others or authorized or ratified the wrongful conduct for which the damages

are awarded or was personally guilty of oppression, fraud, or malice. With

respect tO a corporate employer, the advance knowledge and conscious

disregard, authorization, ratification or act of oppression, fraud, or malice must

be on the part of an officer, director, or managing agent of the corporation.”

Section 3294(b).

The California Supreme Court has defined "managerial capacity,” and

juries are instructed, as follows: "An agent or employee acts in a managerial

capacity where the degree of discretion permitted the agent or employee in

making decisions is such that the agent’s or employee’s decisions will ultimately

determine the business policy of the principal or employer.” Book of

Approved Jury Instructions, Civil, Instruction No. 14.74; Egan v. Mutual of

Omaha, 24 Cal.3d 809, 822 (1979).

Was originally enacted, section 3294 permitted punitive damages pon

a showing of "malice, express or implied.” The statute was amended to delete

the words "express or implied.”

or safety of others. [The Book of Approved Jury Instructions,

Civil, provides that the jury is to be instructed as follows:

"Despicable conduct’ is conduct which is so vile, base, con-

temptible, miserable, wretched, or loathsome that it would be

looked down upon and despised by ordinary decent people.”

(Instruction No. 14.71.)] (2) ‘Oppression’ means despicable

conduct that subjects a person to cruel and unjust hardship in

conscious disregard of that person’s rights. (3) ‘Fraud’ means

an intentional misrepresentation, deceit, or concealment of a

material fact known to the defendant with the intention on the

part of the defendant of thereby depriving a person of property

or legal rights or otherwise causing injury.”)'

3. Limitations On Actions In Which Punitive Damages

Allowed.

(a) Civil Code section 3294 [not allowable in contract

actions].

(b) Civil Code section 956 [not allowed in wrongful death

action].

actual damages only].

(d) Government Code section 818 [no punitive damages

against governmental entity].

(e) Civil Code section 3340 [injury to animals].

"Compare Walton v. Arizona, S.Ct. , 58 U.S.L.W. 4992

(June 27, 1990) where the Court upheld, against a charge of unconstitutional

vagueness and as providing "sufficient guidance to the sentences,” Arizona’s

definitions of its “especially heinous, cruel or depraved” aggravating factor

which is a necessary predicate, under Arizona’s death penalty statute, to a

capital sentence. ("[A] crime is committed in an especially cruel manner when

the perpetrator inflicts mental anguish or physical abuse before the victim's

death.” "Depraved" was defined as when the perpetrator "relishes the murder,

evidencing debasement or perversion,” or “shows an indifference to the

suffering of the victim and evidences a sense of pleasure” in the killing.)

B. Judicial Limitations On Punitive Damages.

tics Are Measured Against Due Process Requirements On A

Case-By-Case Basis And Those Penalties Which "Demonstrably

Overbalance And Outweigh Reasonable Goals Of Punishment,

Regulation And Deterrence” Are Invalidated.

The California Supreme Court is not “' e least bit hesitant

to invalidate a civil penalty in any given case based on the Due

Process Clauses in the federal and state constitutions:

"The due process clauses, federal and state, are the

most basic substantive checks on government’s power to

act unfairly or oppressively. As such, they protect against

infringements by the state upon those ‘fundamental’ rights

‘implicit in the concept of ordered liberty.’ (Palko v.

Connecticut (1937) 302 U.S. 319, 325, 58 S.Ct. 149, 152,

82 L.Ed. 288.)

**~* *

"The due process shield, whiie protecting life and

liberty, of course, has sim‘lar application in the protection

of property. Courts have consistently assumed that

‘oppressive’ or ‘unreasonable’ statutory penalties may be

invalidated as violative of due process. (See, e.g., People

v. Western Air Lines, Inc. (1954) 42 Cal.2d 621, 642, 268

P.2d 723.) We therefore examine section 789.3 to deter-

mine whether, either as enacted or as specifically applied

(Boddie v. Connecticut (1971) 401 U.S. 371, 379-380, 91

S.Ct. 780, 28 L.Ed.2d 113), the penalties therein author-

ized are reasonable and proper or arbitrary and oppres-

sive.” Hale v. Morgan, 22 Cal.3d 388, 398-399, 584 P.2d

512 (1978).

In Hale, the court concluded that the imposition of a $17,300

penalty against an unsophisticated landlord under a statute

which assesses a penalty of $100 per day against a landlord who

wilfully deprives his tenant of utility services for purposes of

evicting the tenant was constitutionally excessive and vio!ative

of due process. As the California Supreme Court observed:

"Though the Legislature need not, of course, precisely

adjust its regulatory efforts to ensure exact justice in

every case, neither may it, in defiance of due process

requirements, compel the exaction of penalties which, in

a particular case, demonstrably overbalance and outweigh

reasonable goals of punishment, regulation and deter-

rence.” (Jd. at 402.)

** *

"Where, as here, a penal statute may be subject to

both constitutional and unconstitutional applications

courts evaluate the propriety of the sanction on a case-by-

case basis." (Id. at 404; emphasis added.)

** *

"We are of the view however, that under all of the

circumstances of this case the amount of the penalties is

constitutionally excessive.” (Jd. at 405; emphasis in orig-

inal.)

"Similarly, in Walsh v. Kirby (1974) 13 Cal.3d 75, 118

Cai.Rptr. 1, 529 P.2d 33, the California Supreme Court

held cumulative penalties violative of Due Process prin-

ciples.

2. Jury Discretion In California Is Anything

But "Standardless."

(a) California Law Imposes Multiple And Well-Defined

Standards Of Proportionality, Which The Tricr Of Fact, Trial

Court And Reviewing Courts Are Obligated To Apply.

During oral argument in Bankers Life, Justice Scalia asked

counsel for Plaintiff and Respondent whether a criminal statute

would be constitutional (presumably under the Due Process

clause) if the fine were jury-determined and limited only by:

(1) "It shall not shock the judicial conscience,” (2) "it shail not

deprive the defendant of a livelihood,” and (3) "it shall not be

disproportionate to the offense” (Transcript, Monday, Novem-

ber 30, 1987, at 40). That question would never have to be

asked under California law.

"In making the indicated assessment we are afforded

guidance by certain established principles, all of which are

grounded in the purpose and function of punitive damages.

One factor is the particular nature of the defendant’s acts

in light of the whole record; clearly, different acts may

be of varying degrees of reprehensibility,""*? znd the

more reprehensible the act, the greater the appropriate

punishment, assuming all other factors are equal. [Cita-

tions.} Another relevant yardstick is the amount of

compensatory damages awarded; in general, even an act

of considerable reprehensibility will not be seen to justify

a proportionately high amount of punitive damages if the

actual harm suffered thereby is stnall. [Citation.] Also

to be considered is the wealth of the particular defend-

ant;"'*) obviously, the function of deterrence . . . wi!l not

‘2Petitioner’s amicus, The Association For California Tort Reform,

argues that “Reprehensibility’ Provides No Meaningful Guidance To A Jury"

(Brief of ACTR at 10). Although the word has been found vague in other

circumstances (see Giaccio v. Pennsylvania, 382 U.S. 399, 404-405 (1966), it

must be viewed in context here. The jury does not determine the amount of

punitive damages unless it has already determined that the conduct of the

defendant was malicious, oppressive, or fraudulent. The term "reprehensible"

relates to that prior determination. The jury merely considers the proved

conduct as part of its analysis to determine the appropriate amount to punish

the defendant.

'SACTR, as amicus for Petitioner, argues that evidence of wealth

"becomes less and less meaningful as ‘wealth increases, to the point of

providing no guidance whatsoever when a multi-million or multi-billion dollar

corporation is involved.” (Brief of ACTR at 10-11.)

To the contrary, the cases discussed herein (see, e.g., Neal v. Farmers Ins.

Exchange, infra, 21 Cal.3d 910, 929), demonstrate that using wealth as a factor

produces reasonable awards when considered as a percentage of net worth

Or earnings. Petitioner and amicus’ real complaint is that the wealth factor

(continued...)

be served if the wealth of the defendant allows him to

absorb the award with little or no discomfort. [Citations.]

By the same token, of course, the function of punitive

damages is not served by an award which, in light of the

defendant’s wealth and the gravity of the particular act,

exceeds the level necessary to properly punish and deter."

Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d 910, 928,

148 Cal.Rptr. 389 (1978).

California juries are strictly instructed to follow each of these

"established principles" in formulating an award of punitive

damages. (See Book of Approved Jury Instructions, Civil, BAJI

Nos. 14.71 (1989 Revised), 14.72.1 (1989 Re-Revision), 14.73

(1989 New), and 14.73.1 (1989 New)."* The jury is also given

the statutory definitions of "malice," "fraud" and "oppression"

as well as the above-referenced definition of "despicable con-

duct." (/d.)

13(. continued)

means that deterrence considerations may result in larger awards against

wealthier defendants. This is as it should be. Indeed, in her dissent in

Browning-Ferris, Justice O’Connor quoted as follows from 4 Blackstone,

Commentaries, page 371: "[T]he quantum, in particular, of pecuniary fines

neither can, nor Ought to be, ascertained by any invariable law. The value of

money itself changes from a thousand causes; and at all events, what is ruin

to One man’s fortune, may be a matter of indifference to another's.” (109

S.Ct. at 2933.)

The "ratio-of-punitive-damages-to-actual-damages” factor is similar to the

“wealth” factor. It is capable of mathematical determination. The fact that

it may be subjugated to the other factors on occasion (Nea/ v. Farmer: Ins.

Exchange, infra, 21 Ca\.3d 910, 929), does not render it or the whole scneme

of guidelines vague.

4a punitive award rendered by a jury which has not been instructed

that the award must bear a reasonable relationship to the compensatory

damages is subject to reversal. Gagnon v. Continental Casualty Co., 211

Cai.App.3d 1598, 260 Cal.Rptr. 305 (1989).

(b) In California, Evil Motive Is The Central Element Of

Malice And Is Not Established By Conduct Which Is Unreason-

able, Negligent, Grossly Negligent Or Reckless.

In Smith v. Wade, 461 U.S. 30, 48, 103 S.Ct. 1625, 1636, 75

L.Ed.2d 632 (1983), this Court observed that most cases under

state common law permit punitive damages based on "reckless-

ness, . . . or even gross negligence.""? Not so in California.

"Animus malus or evil motive,... is the central

element of the malice which justifies an exemplary award.

[Citation.]" ...

"[S]ection 3294 views evil motive as the central essen-

tial factor in the malice which justifies an exemplary

award. That factor calls upon the jury to assess the

defendant’s actual state of mind; it is not satisfied by

characterizing his conduct as unreasonable, negligent,

grossly negligent or reckless.“® [Citation.]" G.D. Searle

& Co. v. Superior Court of Sacramento, 49 Cal.App.3d 22,

30-31, 122 Cal.Rptr. 218, 223-224 (1975).

"Malice as used in Civil Code section 3294 means

malice in fact, not malice in law. [Citation.] “There must

be an intent to vex, annoy or injure. Mere... negli-

gence, even gross negligence is not sufficient to justify an

award of punitive damages’ (quoting Ebaugh v. Rabkin

(1972) 22 Cal.App.3d 891, 894, 99 Cal.Rptr. 706, 709).”

Simmons v. So. Pac. Trans. Co., 62 Cal.App.3d 341, 368,

133 Cal.Rptr. 42, 58 (1976).

'SIndeed, the majority itself in Smith v. Wade rejected the position of

the dissent that punitive damages should only be available for a violation of

42 U.S.C. § 1983 upon a showing of "some degree of bad faith or improper

motive... .”

16a showing of constructive knowledge is insufficient. Bell v. Sharp

Cabrillo Hospital, 212 Cal.App.3d 1034 (1989).

By Elected Judges Who, On Motions For New Trial, Sit As

“Independent Triers Of Fact,” And Are Mandated To Reweigh

The Evidence And To Review Jury-Decided, Punitive Awards.

In Bankers Life, Justice O’Connor observed that, under

Mississippi law, "the determination of the amount of punitive

damages is a matter committed solely to the authority and

discretion of the jury" (108 S.Ci. at 1656, quoting the opinion

below). This is not the law in California.

"[Tjhe trial court, in ruling on the [new trial] motion,

sits not in an appellate capacity but as an independent

trier of fact." Neal v. Farmers Ins. Exch., 21 Cal.3d 910,

933, 148 Cal.Rptr. 389, 402 (1978).

"The trial judge not only has the discretion to grant

a new trial on the ground of excessive damages, but it is

his duty to do so, or to provide for a reduction of the

verdict, if under the evidence he believes it to be too

ee. ...

"As heretofore indicated the 1967 amendments to

Code of Civil Procedure, section 657 eliminated the

words ‘appearing to have been given under the influence

of passion or prejudice’ as part of the stated ground for

granting a new trial for excessive damages. . . .

"[I]t is the exclusive province of the trial court to

judge the credibility of the witnesses, to determine the

probative force of testimony and to weigh the evidence,

and it may draw reasonable inferences therefrom opposed

to those drawn by the trier of fact at the trial." (Quoting

Yarrow v. State of California, 53 Cal.2d 427, 434, 2 Cal.

Rptr. 137.) Collins v. Lucky Markets, Inc., 5 Cal.App.3d

705, 85 Cal.Rptr. 350, 458-459 (1969).

California Code of Civil Procedure section 662.5 provides

for the trial court to issue a remittitur "of so much [of the

verdict] as the court in its independent judgment determines from

the evidence to be fair and reasonable" (emphasis added). Also

see Neal v. Farmers Ins. Exch., supra.

"It has been repeatedly held that after a jury award of

exemplary damages, it becomes the province of the trial

court on motion for new trial to say whether the amount

is excessive." Ferraro v. Pacific Finance Corp., 8 Cal.

App.3d 339, 351, 87 Cal.Rptr. 226, 233 (1970).

Thus, judges who are elected by the citizenry of California

are mandated to sit as independent triers of fact and to exercise

broad powers to limit any award of punitive damages.

(d) The Discretion Of California Juries Is Still Further

Checked By Active And Aggressive Appcliate Revicw.

(1) Reported Decisions, Each Employing A Proportional

Analysis, Produce Punitive Judgments With An Average Per-

centage Of Net Worth Of 3.41.

The proportional analysis which Petitioner asks this Court

to constitutionally impose on the states with respect to punitive

damages (and, presumably, to have the federal courts review

on a case-by-case basis) is already in place and functioning well

in California. In Devlin v. Kearney Mesa AMC/Jeep/Renault

Inc., 155 Cal.App.3d 381, 202 Cal.Rptr. 204 (1984), the court

performed a summary review of reported decisions to propor-

tionally compare punitive damage awards, after appellate

review, as a function of the defendant’s net worth and net

income. The court attached the results of its survey as an

appendix to its decision. The study revealed that the average

"percentage of net worth” ratio was 3.41% and the average

"percentage of net income” ratio was 3.14%.

Based on this survey, the California Court of Appeal recent-

ly, in The People ex rel. Dept. of Transp. v. Grocers Wholesale

Co., 214 Cal.App.3d 498 (1989), reversed a punitive award of

$75,000 reasoning that punitive damage awards which are

"significantly lower" than 10% of the defendant's net worth are

indeed the norm.""”

(2) Amicus ACTR’s Graph Concerning Recent Trends

Is Illusory.

The brief of the Association For California Tort Reform,

as amicus for Petitioner, contains a chart purporting to sum-

marize punitive damage jury verdicts in California from 1976

to 1989, and a graph visually depicting the survey results. (Jd.

at 4-5.) Nothing could be more misleading.

First, one verdict rendered in each of the three years (i.e.,

1978, 1985 and 1988)—which years tower over the other years

in ACTR’s "graph" like giraffes among Pygmies—amounts to

91%, 34% and 52%, respectively, of that year’s total awards!"®

"’ See Burnett v. National Enquirer, Inc., 144 Cal.App.3d 991, 1011-1012

(1983) [award equalling 15% of net worth excessive]; Little v. Snayvesant Life

Ins. Co., 67 Cal.App.3d 451, 469-470 (1977) [award equalling 15% of net

wor... excessive}; and Merlo v. Standard Life & Acc. Ins. Co., 59 Cal.App.3d

5, 18 (1976) [award exceeding 30% of net worth excessive].

'8ihe punitive damage award in Grimshaw v. Ford Motor Co., which

constitutes 91% of the first (e., 1978) of the three tall towers which stand

Out in the graph in ACTR’s brief, never even saw the light of appellate review.

The trial judge remitted 97.2% of the award. As drastically remitted, this

amount was affirmed on appeal. Grimshaw v. Ford Motor Co., 119 Cal.

App.3d 757, 174 Cal.Rptr. 348 (1981). By factoring into the chart the actual

judgment in Grimshaw, instead of the historical curiosity of the verdict,

ACTR’s first towering bar on its graph shrinks to the width of the pencil line

used to draw it. Moreover, this aberrant verdict is hopefully a reflection that

the defendant’s conduct was aberrant. Evidence was introduccd at trial that

showed the automaker calculated it was cheaper to pay damages to the

families of those killed in fiery crashes than to install a $25 part.

The foundation of the second big year in the graph was Micro/Vest v.

Computerland. The punitive award there was a mere 30% of the compensa-

tory award of $416,000,000 in an on-going battle between a computer giant

and iis investors.

The third verdict, which represents over one-half of the third towering bar

(ce., 1988) on ACTR’s graph is the massive "Technical Equities” fraud case

in which $50,000,000 was fraudulently extracted from the public through the

(continued...)

Shorn of these three doppelgangers, the past five years in

California have demonstrated a decidedly and steady downward

trend in both the number and dollar amount of punitive damage

verdicts in California! The "punitive monster” which Petitioner

and amicus see "growing on the civil side” (Brief of ACTR at

3) is indeed a phantasm.

(3) Only 9% of the Punitive Damage Dollars in

California Reported Cases Survive Appellate Review.

As Petitioner and its amici exhort the lack of due process

in state punitive damage systems,'? the exclusive focus is upon

the verdict of the jury. Petitioner offers the Court, as an

appendix, a list of jury verdicts and refers the Court to their

amicus ACTR’s similar appendix to impress upon the Court

"the sheer magnitude of present punitive damages awards"

(Brief of Petitioner at 37.) What Petit.oner ignores is—at least

in California—only 9% of such awards in published decisions

18(_ coutinued)

Technical tquities corporate shell. That verdict has not resulted in any

judgment. The case is still before an intermediate state court of appeal.

'9ACTR, as amicus for Petitioner, has provided the Court with a chart

purporting to provide information concerning the results of new trial motions

as tO punitive awards (Appendix B). The accuracy of the chart is, again,

questionable. Unable to check every “source” for accuracy, the author of

CTLA’s Brief herein simply noticed that one of the cited cases, Kasparian v.

Fremont Indemnity (id. at B-28) was handled by him and, therefore, he was

personally aware of the results of the new trial motion. Although ACTR states

that the motion was “denied,” in fact the trial court remitted a substantial

portion of the punitive award. The case is currently on appeal. Since the

authors of ACTR’s brief clearly would not misrepresent this information, it

is Obvious that the "source" of their "study" was, at least in some respects,

inaccurate. In California, the trial judge does not directly order that a portion

of an award be remitted. Rather, he grants a new trial unless the plaintiff

agrees to such a remittitur. If the remittitur is accepted, then the motion for

new trial is "dcnied.” Neal v. Farmers Ins. Exch. , 21 Cal.3d 910, 148 Cal.Rptr.

389, 582 P.2d 980 (1978). This may be part of the problem with ACTR’s

Statistical “study.”

ever survive the appellate process, which is as much a part of

the punitive damage system as the jury verdict. Attached

hereto as Appendix A is a fairly exhaustive chart of available

opinions of the California Courts of Appeal and Supreme

Court, decided between 1922 and 1986, in which the excessive-

ness of a punitive award was examined.*° The amount of the

award, and how it was treated by the trial and reviewing courts,

is analyzed for each of 71 cases. Such empirical analysis defini-

tively dispels the wholly unsupported and pejorative notion that,

in California at least, the substantive and procedural due

process rights of punitive damage defendants are left

unchecked.

Out of all 71 cases, in 42 (or 60%), the courts have ordered

the punitive award to be either reduced or reversed. Out of

the 23 cases involving awards of $500,000 or more, 18 (or 78%)

have been reduced or reversed. Out of the 19 cases involving

awards of one million dollars or more, 16 (or 85%) have been

reversed or remanded. Out of the total dollar amount of all

71 punitive awards, 9/% have been judicially excised, leaving

only 9% to serve as the basis of a final judgment against the

defendant.

Even the statistics set forth in amicus ACTR’s brief (see

Appendix B, Figure 2, and pp. 6-7 of their Brief), the accuracy

of which)is questionable (see footnote 21 herein), indicate that

trial judges—before any appellate court scrutiny—grant new trials

or remit punitive awards 46% of the time and reduce such

awards by 45%.

Petitioner refers to appeliate review as involving "no more

than the ‘gentle test of excessiveness™ (Brief of Petitioner at

47). Yet, while its amicus, ACTR, uses a bar graph to demon-

201n California, unpublished appellate opinions are not available and only

published opinions may be used as precedent to guide the courts in conducting

any proportional analysis of punitive damage awards. California Rules of

Court, rule 977(a)(b)(1)-(2).

strate "trends" with respect to jury verdicts, when it discusses

trial court review of such verdicts, it switches to a pie chart so

that these "trends" will not be revealed. When it comes to

appellate review, ACTR simply ignores it.

A jury has no power to deprive any civil defendant of

anything. Only a final judgment—entered after a full opportu-

nity for review by the trial court and by the courts of

appeal—can command the payment of money from a civil

defendant. If the raw verdict statistics of ACTR’s bar graph

is reduced to the 9% of punitive awards which actually go to

final judgment, it would look like this:

CALIFORNIA JURY FINAL JUDGMENTS OVER $100,000

1976-1989

° ooo he

tote

1008 ive) aves 1907 1800

I, isve DA 1986 ives

CALIFORNIA PUNITIVE DAMAGE FINAL JUDGMENTS

FOR $100,000 OR MORE

Ill

PROPORTIONALITY BASED ON "ANALOGOUS

CRIMINAL PENALTIES” IS NOT PROPORTIONAL

IF THE ANALYSIS EXCLUDES THE PRINCIPAL

MEANS OF DETERRENCE—INCARCERATION.

Advancing its "disproportionate award/due process” theory,

Petitioner asks:

"Compare the recent punitive damages award in

Appendix A to the statutory c1iminal fines in Appendix

B. They are shockingly disproportionate” (Brief of Peti-

tioner at 34.)

Petitioner’s Appendix B lists the fines for Class A felonies

as $20,000, Class B felonies as $10,000, Class C felonies as

$5,000 (Ala. Crim. Code §§ 13A-5-11), Class A misdemeanors

as $2,000, Class B misdemeanors as $1,000, and Class C misde-

meanors as $500 (Ala. Crim. Code §§ 13A-5-12). Then, by

comparing these penalties to punitive damage awards, the

disproportion becomes "shocking."

However, Petitioner is comparing the height of a giraffe to

the length of an elephant’s trunk, while pretending the rest of

the elephant doesn’t exist. Petitioner completely ignores the

principal aspect of the penalty for felonies and misdemeanors,

i.e., incarceration. Class A felonies in Alabama carry a manda-

tory prison term of 10-99 years; Class B felonies, 2-20 years;

Class C felonies, 1-10 years (Ala. Crim. Code § 13A-5-6):

Class A misdemeanors, up to one year; Class B misdemeanors,

up to six months; and Class C misdemeanors, up to three

months (Ala. Crim. Code § 13A-5-7). Moreover, section

13A-5-2(e) ress ves to the court the right "to forfeit property,

dissolve a corporation, suspend or cancel a license... or

impose any other lawful civil penalty.”

Thus, a true proportionate analysis would compare the

$1,000,000 punitive damage award (whether it represents one

week or one month of net income to the defendant) with the

above stated "analogous" criminal penalties. These "analogous"

penalties range from 99 years in jail and a $25,000 fine to three

months in jail and a $500 fine. Apart from implications of

stigma, probation, loss of voting rights, and recidivist problems

associated with a criminal sentencing, a corporate defendant

earning $1,000,000 a week in net income would suffer a loss

of income of $120,000,000 for a Class C misdemeanor,

$240,000,000 for a Class B misdemeanor, and $480,000,000 for

a Class A misdemeanor.

As it compares the entirety of civil punitive damage awards

with only a minor aspect of criminal penalties (i.e., fines) while

ignoring the principle element (i.e., imprisonment), the "analo-

gous criminal penalties" argument is spurious.

IF PETITIONER’S SUBSTANTIVE DUE PROCESS

ARGUMENT IS ACCEPTED, THEN, IN LIGHT OF

McGAUTHA, ASMALL FRACTION OF A PERSON’S

ASSETS WILL BE AFFORDED GREATER PROTEC-

TION THAN THAT AFFORDED HIS LIFE.

The current debate was framed by Justice O’Connor in her

concurrence in Bankers Life, at 486 U.S. 87-88:

"... This grant of wholly standardless discretion to

determine the severity of punishment appears inconsistent

with due process.”

Justice Blackmun, in his majority opinion in Browning-Ferns,

stated the issue as follows:

"... whether due process acts as a check on undue

jury discretion to award punitive damages in the absence

of any express statutory limit.”

The subject of this debate is punitive damage awards

extracted from defendants, who maliciously or fraudulently

injure others, and which amount to a small percentage of their

net worth or net income.*'

When this Court examined the due process implications of

State systems for sentencing defendants to death in McGautha

v. California, 91 S.Ct. 1454, 402 U.S. 183, 28 L-Ed.2d 711

(1971), it held as follows:

"In light of history, experience, and the present limita-

tions of human knowledge, we find it quite impossible to

say that committing to the untrammeled discretion of the

Jury the power to pronounce life or death in capital cases

is offensive to anything in the Constitution.{] The States

are entitled to assume that jurors confronted with the

truly awesome responsibility of decreeing death for a

fellow human will act with due regard for the

consequences of their decision and will consider a variety

of factors, many of which will have been suggested by the

evidence or by the arguments of defense counsel.”

(Emphasis added.)

As Justice Douglas pointed out in his dissent in McGautha:

"Under Ohio law the determination of whether to grant or

withhold mercy is exclusively for the jury and cannot be

reviewed by either the trial court or an appellate court."

The question, then, becomes as obvious as it is simple: Even

if the amount of a punitive damage award were the product of

"standardless jury discretion,” why is the deprivation of a small

amouni of a person’s assets or income violative of due process

while the deprivation of his life is not?—particularly when the

*"The $1.6 million Punitive damage award upheid in Bankers Life was

less than one percent of the defendant’s net worth. The $3.5 million punitive

Gamage award the Supreme Court let stand in Allstate Ins. Co. v. Hawkins,

in the same term, was only 1/2Sth of 1% of the defendant's reported assets.

In Browning-Ferms, the punitive award amounted to .6% of the defendant's

net worth and 5% of its net annual income. The punitive award in Merro-

media v. April Enterprises, \ct stand last term, was one-half of 1% of the

defendant’s net worth and one week of net income.

former is the subject of trial court and appellate review and the

latter is not.”

THE REASONS WHICH LED TO THE McGAUTHA

RULING APPLY HERE WITH GREATER

FORCE-—ie., A MECHANISTIC APPROACH TO

SENTENCING, WHICH IS INCAPABLE OF APPLY-

ING REASONED DISCRETION TO INDIVIDUAL

CIRCUMSTANCES, IS NO FRIEND OF DUE

PROCESS.

Punitive damage juries are told to consider the nature and

purpose of punitive damages, ie., punishment, example and

deterrence, and to fashion an award by considering the repre-

hensibility of the conduct found to be malicious, fraudulent or

oppressive, the net worth of the defendant, and a reasonable

relationship to the compensatory damages.

In the Caiifornia case reviewed in McGautha, the jury was

instructed:

"Now, beyond prescribing the two alternative penal-

ties, the law itself provides no standard for the guidance

of the jury in the selection of the penalty, but, rather,

commits the whole matter of determining which of the

two penalties shall be fixed to the judgment, conscience,

and absolute discretion of the jury.”

22 More protective procedures are required if the action is criminal rather

than civil, or if the interest involved is life or liberty, rather than property. See

Parratt v. Taylor, 451 U.S. 527 (1981).

"This Court has mandated an intermediate standard of proof—‘clear and

convincing evidence’--when the individual interests at stake in a state proceed-

ing are both ‘particularly important’ and ‘more substantial than mere loss of

money.” Cruzan v. Director, Missouri Dept. of Heath, __ U.S. __, No.

88-1503 (June 25, 1990) (quoting Santosky v. Kramer, 495 U.S. 745, 756

(1982)).

In the Ohio case, the jury was simply given no instruction

at all in this regard. The instruction approved in Andres v.

United States, 333 U.S. 740, 68 S.Ct. 880, 92 L.Ed. 1055 (1948)

provided:

“This power {to recommend mercy] is conferred

solely upon you and in this connection the Court can not

extend or prescribe to you any definite rule defining the

exercise of this power, but commits the entire matter of

its exercise to your judgment.” Jd. at 743, n. 4, 68 S.Ct.

at 882."

In holding that this admittediy standardless jury discretion

to determine the severity of a criminal penalty was not violative

of due process, the majority reasoned as follows:

"Those who have come to grips with the hard task of

actually attempting to draft means of channeling capital

sentencing discretion have confirmed the lesson taught

by the history recounted above. To identify before the

fact those characteristics of criminal homicides and their

perpetrators which call for the death penalty, and to

express these characteristics in language which can be

fairly understood and applied by the sentencing authority,

appear to be tasks which are beyond present human

ability.”

"|However (quoting from the Royal Commission on

Capital Punishment)], it is within the realm of possibility

to point to the main circumstances of aggravation and of

mitigation that should be weighed and weighed against

each other when they are presented in a concrete case."

** £

"For a court to attempt to catalog the appropriate

factors in this elusive area could inhibit rather than

expand the scope of consideration, for no list of

circumstances would ever be really complete."

In light of the various devices suggested by Petitioner and

its amici for restraining punitive awards, the following observa-

tion from McGautha is particularly cogent:

"To say that the two-stage jury trial in the English-

Connecticut style is probably the fairest, as some com-

mentators and courts have suggested, and with which we

might well agree were the matter before us in a legislative

or rule-making context, is a far cry from a constitutional

determination that this method of handling the problem

is compelled by the Fourteenth Amendment."

PETITIONER DANGEROUSLY BLENDS THIS

COURT'S FUNCTION WITH RESPECT TO INTER-

PRETING FEDERAL STATUTES WITH ITS ROLE

IN DETERMINING THE CONSTITUTIONALITY OF

STATE STATUTES.

Petitioner's attempt to appeal to this Court as a Superiegis-

lature, dictating policy to the states, is no better illustrated than

in its blending of principles of statutory construction with those

of constitutional review. It argues as follows:

*31: is this very reasoning process which is attacked by Petitioner and

found to be violative of Due Process. At page 7 of Petitioner’s Brief, it

attempts to demonstrate the lack of Due Process in Alabama’s punitive

damage system by quoting from Central Alabama Elec. Corp. v. Tapley, 546

So.2d 371 (Ala. 1989): "We can envision no set of carved-in-granite standards

that would guide every jury in every conceivable case.” Far from being a

violation Of Due Process, such sentiments echo those of the majority in

McGautha. Indeed, seven years ago, Justice O'Connor joined the dissent of

Chief Justice Burger, in which it was argued that the application of a propor-

uionality analysis under the Eighth Amendment to all criminal sanctions would

lead to rulings that either would be essentially arbitrary or would call for

"Solomonic wisdom.” Solem v. Helm, 463 U.S. 277, 305, 314 (1983).

. "In Electrical Workers v. Foust, 442 U.S. 42 (1979),

this Court banned punitive damages in union represen-

tation Cases, noting, at page 50, that ‘the impact of these

en recoveries is unpredictable and potentially sub-

stantial.”

*_* *

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

247 (1981), this Court banned punitive damages in suits

against municipal corporations in 42 U.S.C. § 1983

actions.

. "In Smith v. Wade, 461 U.S. 30 (1983), cogent objec-

tions to punitive damages generally were set forth (Rehn-

quist, J., dissenting).

. "The concerns regarding punitive damages expressed

in the above cases are, it is submitted, Due Process con-

cerns, applicable here." (Brief of Petitioner, at 8-19.)

In Foust, the Court interpreted the Railway Labor Act as

not providing for punitive damages, while in Fact Concerts and

Smith v. Wade, the Court construed the Civil Rights Act of

1871 to allow for punitive damages generally, but not against

municipalities.

| In his dissent in Smith v. Wade, Justice Rehnquist clearly

identified the "concerns" at issue—and they were not "duc

process concerns":

"... @ forthright inquiry into the intent of the 42d

Congress and a balanced consideration of the public

policies ...." (461 U.S. at 56; 103 S.Ct. 15 1640.)

Nowhere in Justice Rehnquist’s dissenting opinion is there the

slightest hint that the Due Process Clause precludes the states

from conducting their own "balanced consideration of public

policies."

According to Petitioner's distorted view of Federalism, this

Court’s interpretation of the intent of Congress with respect

to a punitive damage remedy in the Railway Labor and Civil

Rights Acts becomes the measure of what the states are consti-

tutionally permitted to accomplish under the Due Process

Clause.

By equating this Court’s "statutory interpretation" function

with its “constitutional review" function, Petitioner wholly

deprives the States of their role in the federal system.

Justice Rehnquist's dissent in Smith v. Wade, while critical

of punitive damages as a matter of federal policy in section

1983 actions, was far from a harbinger of any constitutional

restrictions on the states’ right to maintain their own, long-

established punitive damage systems. Indeed, an acute sensitiv-

ity to federalism concerns fueled Justice Rehnquist's dissent:

"When federal courts enforce punitive damages

awards against local officials they intrude into sensitive

areas of sovereignty of coordinate branches of our

Nation, thus implicating the most basic values of our

system of federalism." (461 U.S. at 92; 103 S.Ct. 1654.)

Vil

PETITIONER’S EXPANSIVE VIEW OF

SUBSTANTIVE DUE PROCESS MAKES THE

CONSTITUTIONALIZATION OF STATE

COMPENSATORY DAMAGE SYSTEMS

INESCAPABLE.

Petitioner states its Due Process challenge to state punitive

damage awards as follows:

"Standardless Jury Discretion. Alabama law for

determining the amount of punitive damages, and the jury

instruction in this case authorized thereunder, are imper-

missibly vague and incomprehensible, and therefore void

under the Due Process Clause of the Fourteenth Amend-

ment, because they contain no standard for determining

the amount to be awarded.” (Brief of Petitioner at 9.)

If this theory is adopted, then not only state punitive damage

and criminal sentencing** systems must be constitutionalized

but state compensatory damage systems as well.

Compensatory awards for general damages in a personal

injury action are proportional only to "a detriment for which

monetary compensation cannot be ascertained with any demon-

strable accuracy” and for which "no method is available to the

jury by which it can objectively evaluate such damages.” Beagle

v. Vasold, 65 Cal.2d 166 (1966). On appeal, a "shock the

conscience" standard is employed. Bertero v. National General

Corp., 13 Cal.3d 43, 61, 118 Cal.Rptr. 184 (1974).

As compensatory awards are "open-ended" and subject to

substantially less proportionality and less standards than puni-

tive awards, are all of the States depriving tortfeasors of proce-

dural and substantive Due Process? A merely inadvertent

automobile driver or a faultless product manufacturer, who

renders another quadriplegic, and stands to lose 100% (not just

1/2 of 1%) of his assets, is surely entitled to at least as much

due process protection against "open-ended" and "standardless"

awards.

244 myriad of state laws typically set a very wide range of punishment

for a given offense and give judges almost unreviewable discretion in fixing

sentences—aws which have been held not to violate due process. See Garcia

v. United States, 769 F.2d 697, 699, n.1 (11th Cir. 1985). As this Court has

noted in dicta, “legislatures [are] free to decide how much discretion in

sentencing should be reposed in the judge or jury in noncapital cases." Lockett

v. Ohio, 438 U.S. 586, 603 (1978) (plurality opinion). See Stevens v. Armon-

trout, 787 F.2d 1282, 1284 (8th Cir. 1986) [upholding against due process

challenge a 200-year bench sentence under a statute that permitted sentence

between ten years and “any number of years"]. In McMillan v. Pennsylvania,

106 S.Ct. 2411, 2420 (1986), the Court rejected a due process challenge to

a Statute that prescribed a preponderance of the evidence standard for

determining facts relating to sentencing, noting that "[sJentencing courts have

traditionally heard evidence and found facts without any prescribed burden

of proof at all.” Even in capital sentencing, the constitutional limits are based

on the Eighth Amendment and not the Due Process Clause. See Gregg v.

Georgia, 428 U.S. 153 (1976), and Lockett, supra.

Petitioner and its amici seek to have this Court set an "outer

limit" on punitive damage awards. Just as nine state legislatures

have seen fit to do so, many states, as well as Congress, have

set “outer limits" on various categories of compensatcry

awards.*? If substantive due process principles mandate an

“outer limit” on punitive awards (regardless of the heinousness

of the defendant’s conduct, its assets, or the amount of com-

pensatory damages), then would these same principles serve to

afforded juries in assessing compensatory damages? Is there

a rational—let alone a constitutional—distinction?

CONCLUSION

"The powers delegated by the proposed Constitution to

the federal government are few and defined. Those

which are to remain in the State governments are

numerous and indefinite. . .. The power reserved to the

25 See, e.g., Duke Power Co. v. Carolina Env. Study Group, 438 U.S. 59,

98 S.Ct. 2620, 57 L.Ed.2d 595 (1978) [upholding statutory limit on liability

in the event of a nuclear accident); Johnson v. St. Vincent Hospital Inc., 273

Ind. 374, 404 N.E.2d 585 (1980); and Fein v. Permanente Medical Group, 38

Cal.3d 137, 695 P.2d 665 (1985) [upholding limitation on compensatory

damages in medical malpractice cases]; the Warsaw Convention, 49 Stat., Part

II, 3000, Treaty Series No. 876 [limiting personal injury and death damages

in international airplane crash litigation}; Speiser, Recovery for Wrongful Death

(2d ed. 1975), The Lawyers Coopeiative Publishing Co., Ch. 7, "Limitations

On Death Damages”; and various state "no-fault" automobile liability systems

(42 A.L.R.3d 229).

26"New York Times Co. v. Sullivan was the first major step in what

proved to be a seemingly irreversible process of constitutionalizing the entire

law of libel and slander.” Dun & Bradstreet, Inc. v. Greenmoss Builders Inc.,

105 S.Ct. 2939, 2949, 472 U.S. 749, 766, 86 L.Ed.2d 593 (1985) (Justice

White, concurring).

several States will extend to all the objects which, in the

ordinary course of affairs, concern the lives, liberties, and

properties of the people, and the internal order, improve-

ment, and prosperity of the State." "The Federalist

Papers” No. 45 (James Madison).

"None the less, within the confines of these open

spaces and those of precedent and tradition, choice

moves with a freedom which stamps its action as creative.

The law which is the resulting product is not found, but

made. The process, being legislative, demands the legis-

lator's wisdom.” Benjamin N. Cardozo, The Storrs

Lectures, delivered at Yale University, Lecture III, from

"The Nature of the Judicial Process," Yale University

Press, 1921, at 115.

Respectfully, the judgment of the State Supreme Court

should be affirmed.

Respectfully submitted,

HURLEY, GRASSINI & WRINKLE

A Law Corporation

By: ROLAND WRINKLE

Attorneys for Amicus Curiae

California Trnal Lawyers Association

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