Amicus Curiae Brief — Pacific Mutual Life Insurance v. Haslip

paennet e Record

The American University

et et pe College of Law

“Washington, DC 20016

(202) 885-2604

Linda Lipsen, Esq.

Consumérs Union of U.S.

2001 S Street, N.W.

Washington, DC 20009

(202) 462-6262

.

>

TABLE OF CONTENTS

Page

STATEMENT OF CONSENT AND INTEREST OF THE

PUEC EL CURIAR. ccocccevecescsccccccesceccece ]

SUMMARY OF ARGUMENT.......cccceceesescees 2

i ci |< - PorrrrrerrrreereererererELELETEEE Ti 3

I. THERE IS NO TORT CRISIS JUSTIFYING

EXTRAORDINARY INTERVENTION BY THE

UNITED STATES SUPREME COURT........ 3

Il. PUNITIVE DAMAGES ARE INTEGRAL TO OUR

COMMON LAW HERITAGE AND ARE HIGHLY

BENEFICIAL TO CONSUMER INTERESTS.

A. Punitive Damages Are Part of Our

Common Law Heritage.........6.. 11

B. Punitive Damages Further the

Rational State Interests of Up-

grading the Quality of Consumer

Goods and ServiceS.......+2++2+14

C. Consumer Advantages from Punitive

Damages Would Be Undercut by Man-

dating a Fixed Formula or Propor-

CRGMBLASH BMAGe. cccccvesscccesesse 20

D. Punitive Damages Exert Positive

Market Pressure to Upgrade the

Quality of Goods and Services..26

Rabe ALABAMA PUNITIVE DAMAGES LAW COM-

PORTS WITH ‘ONSTITUTIONAL REQUIRE-

MENTS OF PROCEDURAL AND SUBSTANTIVE

DUE PROCESS.

A. The History of Substantive Due

Process Mandates Restraint in

Assessing State Programs that

Affect Economic Interests...... 28

B. Substantive Due Process Is Not

Offended by Juries Making Proper-

ii

ty Affecting Decisions in Puni-

tive Damage CaSeS........eeeees 37

C. Properly Instructed Jurors in

Alabama Use Comprehensible Stan-

dards to Determine Punitive

Damage LevelS.....cccceseeeee ee 40

D. There Is Rational Review of Puni-

tive Damage Awards.........++++45

E. Tort Reform Legislation in 1987

Refined Punitive Damages Law and

Reflects the Social and Economic

Policy of the State............47

F. The Alabama System for Determin-

ing Punitive Damages Comports

with the Requirements of Proce-

dural Due Process.......e++++++48

G. Punitive Damages Are Not Criminal

Sanctions Entitled to Special

Procedural Protections.........57

IV. VICARIOUS LIABILITY ASSURES AC-

COUNTABILITY AND COMPORTS WITH DUE

i ESS

CONCLUSION... cccccsccccccccce coccccsce ec O4

iii

TABLE OF AUTHORITIES

CASES:

Aetna Life Ins. Co. v. Lavoie, 470 So. 2d

ee ww cece ecceee 41

Alabama Power Co. v. Hussey, 291 Ala. 586,

ee ee OM MS CL97S) de ccc ccccccccccs 43

American Society of Mechanical Engi-

neers v. Hydrolevel, 456 U.S.

PUM DeS Cee seccccecccccecs 59,60,62

Badgett v. McDonald, 304 So. 2d 228 (Ala.

Ee ec eecccccccccccceccs 40

Bankers Life & Casualty Co. v. Crenshaw,

ehh CRED ccccccecoccece passim

Bell v. Preferred Assurance Society of

Montgomery, 320 U.S. 238 (1943).....23

Bishop v. Wood, 426 U.S. 341 (1976)..... 48

Boddie v. Connecticut, 401 U.S. 371

rr |) ee by

Bowers v. Hardwick, 478 U.S. 186

DUPE E PER Reb ebGecocececécecece 30,31

Brandt v. Board of Co-Op Educ., 820 F.2d

ET MET Das cccccccccccececece 48

Brock v. Roadway Express, 481 U.S.

URE CEES Che Se eeeececccseccces 49

Brotherhood of Elec. Workers v. Foust, 442

POT MMU ME Sb seeceececccccccccecccs 37

Brown v. Board of Education, 347 U.S.

DPPPCSSGEEDSS66s oc ecccccccececes 6

iv

Browning-Ferris Indus. v. Kelco Disposal,

Inc., 109 S. Ct. 2909 (1989)....passim

Burroughs Co. v. Hall Affiliates, 423 So.

2d 1348 (Ala. 1982)..... PPrrrrirriyT fT 44

Campus Sweater & Sportswear Co. v. M.V.

Kahn Construction Co., 515 F. Supp. 64

(D.S.C. 1979), aff'd, 644 F.2d 877 (2d

Cir. 1LOBlL) ccc ccccceccccececes 13,14,19

Carey v. Population Services Int'l, 431

U.S. 678 C1977 )ece oeeeeeweeeaeeeeeeee 30

Cleveland Board of Educ. v. Loudermill,

470 U.S. 532 (1985).. eoeeeeeevee ee eeee -49

Commodore Corp. v. Bailey, 393 So. 2d

467 (MiSS. 1981). cecscccccccccscee 39

Courtesy Ford Sales, Inc. v. Clark, 425

So. 2d 1075 (Ala. 1983)... eeeeeees 44

Day v. Woodworth, 54 U.S. (13 How.) 363

(1851) eecoeoeoeaevnevee ee ees eeseeeweeeeeee eee © @ 7,9

Day-Brite Lighting, Inc. v. Missouri, 342

U.S. 421 (1952) cccccccccccccccccces 28

DeShaney v. Winnebago County DSS, 109

S. Ct. 998 (1989)... cence eeevees 31,32

Devlin v. Kearney Mesa AMC/Jeep Renault,

155 Cal. App. 3d 381, 202 Cal. Rptr.

204 (1984). cccccee WEETTETTT TTT oveekd

Doroszka v. Lavine, lll Conn. 575, 150 A.

692 (1930) -ccccccccsccccscesccsecsece 13

Dred Scott v. Sandford, 60 U.S. (19 How.)

SOS LASSI deccccccceseccessesesees 33,34

Vv

Dun & Bradstreet v. Greenmoss Builders,

EeGce SFE Gils FOO CAPSS L 66 ee eeeeese 1l

Duncan v. Louisiana, 391 U.S. 145

CLPOS dc coesees 06660 6.00646666 06060468 36

Evans v. Philadelphia Transportation Co.,

418 Pa. 567, 212 A.2d 440 (1965)....12

Ex parte Smith, 412 So. 2d 1222

CAPSS cccesvcceseseesereetecseess 40,44

Fleet & Semple v. Hollenkemp, 52 Ky. (13

B. Mon. 219) 175 (1852)... cecceeeees 9

Focht v. Rabada, 217 Pa. Super. 35, 268

A.2G 157 (1970) -ccccccscccses TeTTTT 12

Ford Motor Credit Co. v. Washington, 420

SO. 26 14 (ALS. LISZ) ecceccccscccsecs 43

Foster v. Floyd, 276 Ala. 428, 163 So. 2d

SES CLOSE ce ecccceceseasavesseses 20,23

Germanio v. Goodyear Tire & Rubber Co.,

732 F. Supp. 1297 (D.N.J. 1990).passim

Gertz v. Robert Welch, Inc., 418 U.S. 323

CIP FEd ccc eee vcs esssceeeeeseoeens passim

Giaccio v. Pennsylvania, 382 U.S. 399

CLPOO) cccccccececvecceessceves 11,35,50

Gleason v. Seaboard Airline Arco, 278 U.S.

FEE CEOSP Pc cee ceceesevessecsceuceeces 60

Green Oil Co. v. Hornsby, 539 So. 2d 218

{ALGe LEED) ccsccccceseceesccccsse 41,43

Griswold v. Connecticut, 381 U.S. 479

PESOS D Coe ecbeceecceeseseceeeeseeesen 30

vi

Gryc v. Dayton-Hudson, 297 N.W.2d 727

(Minn.), cert. denied, 449 U.S. 921

p) 3 ARS eee re ees

Gulf Atl. Life Ins. Co. v. Barnes, 405 So.

Bo Be ee) eae reer ere i

Hammond v. City of Gasden, 493 So. 2d 1374

Ses BOTs 6s 646666 6664% sbeeenes 43,53

Hicks v. Herring, 246 S.C. 429, 144 S.E.

2. Be | arr eee TeTTeTTTTTy

Huckle v. Money, 2 Wils. K.B. 205, 95 Eng.

ne Se Chee een accuse eeesaeenssacees 9

J. Truett Payne Co. v. Jackson, 281 Ala.

426, 203 So. 2d 443 (1967).......... 41

Jolley v. Puregro Co., 94 Idaho 702, 496

Fae OE CHUTES $ 60040 08640066800800e88

Kelly v. Robinson, 479 U.S. 36 (1986)...56

Lanese v. Carlson, 32 Conn. Supp. 163, 344

eee We COPTON 6 cvaceseeeseseesdeces 13

Lassiter v. Dept. of Social Services, 452

ems BOS CRUE) 6 006065 90866600600060088

Lincoln Union v. Northwestern Co., 335

OR FR) Dee

Linsley v. Bushnell, 15 Conn. 225

PONS 64606065 26008 64606064060 see eee

Lochner v. New York, 198 U.S. 45

PREné6 606066008 %0R6 se @ ee # @# © @& © © © © « &@ ~«C*@ 27

Louis Pizitz Dry Goods Co. v. Yeldell, 274

Wes AEE CHWET 6066866606 066 ee EKO COS 59

vil

Loving v. Virginia, 388 U.S. 1 (1967)...30

Man _v. Raymark Indus., 728 F. Supp. 1461

(ae. Se BUS 6 6a b%-ee%%-s ee eeus passim

Mathews v. Eldridge, 424 U.S. 319

SRUUW ECS W885 6 0640 4500.0800045080 NR

Merrells v. The Tariff Mfg. Co., 10 Conn.

a ) rea

Meyer v. Nebraska, 262 U.S. 390

(50 2) Rep rre seeewe ceesneces 30

Fer Pe 040460404660 b ee keke ened uacece 54

Milwaukee & St. Paul Ry. v. Arms, 91 U.S.

Cee i et ekb hed sink eaes 64066686065 9

Minnepolis & St. Louis Ry. v. Beckwith,

i129 U.S. 26 (1889)....... rrr rrr 10

Missouri Pacific Ry. Co. v. Humes, 115

Wes WES CRUNUT6645 40056206 bcedeeeecan 9

Mobile Dodge, Inc. v. Waters, 404 So. 2d

Oe COs BO 66eksdeedeceaceecas 41,44

Moore v. East Cleveland, 431 U.S. 494

FECT PS OOE FEEDERS GEESE bbe sO 004 Ce aweec 29

Nebbia v. New York, 291 U.S. 502

i 2) ) Pepe Ter ee eT eee Te eT eee 28

Newport v. Fact Concerts, 453 U.S. 247

6 8 Fp perpen occcedl

Oppenhuizen v. Wennersten, 2 Mich. App.

288, 139 N.W. 2d 765 (1965)......... 12

viii

Pan Am Petroleum v. Hardy, 370 S.W.2d 904

CTOR. CiGe ABD. LFSSpccccccesesecses i2

Paul v. Davis, 424 U.S. 693 (1976)...... 48

Phillips v. Commissioner, 283 U.S. 539

CAPsipcccccccseseceesescesecess *e © @ 48

Pierce v. Society of Sisters, 268 U.S. 510

a TAPS S Pec eeeccececserdecesececesesenesae

Puppe v. A.C.S., Inc., 733 F. Supp. 1355

(D.N.D. 1990)......-.. TEYTEEETY irik.

Racich v. Celotex Corp., 887 F.2d 393 (2d

ol TF EPSP doce cceceseeecesecccceceseeee

Ricketts v. Pennsylvania R.R. Co., 153

Fede FSF C48 ChE se LOPES) ccccccccesses 60

Ridout's-Brown Service, Inc. v. Holloway,

SP? BO. 26 129d (ALBe LHSL) ccccesecee 43

Roe v. Wade, 410 U.S. 113 (1973)........30

St. Louis, I.M. & S. Ry. v. Taylor, 210

ewe 281 CEFGS dp ccecccccccesesccsccsesee

St. Louis, Iron Mt. & So. Ry. v. Williams,

SSL UeBe BS (AFLP pc ccccccescscscscccecans

San Francisco Civil Serv. Assn. Vv.

Superior Court of Marin County, 16

Cal. 3d 46, 127 Cal. Rptr. 131, 544

P.26 [33 CASTE) ccoccccccescseseseccedld

Shelley v. Kraemer, 334 U.S. 1 (1948)...47

Silkwood v. Kerr-McGee Corp., 464 U.S. 238

PEPE d cc ccceseeccescesseceesésesecesee

Smith v. Wade, 461 U.S. 30 (1983)...passim

ix

Snowden v. Osborne, 269 So. 2d 858 (Miss.

gg ) PP errr e ann penn aaee 13

Standard Life v. Veal, 354 So. 2d 239

(Miss. 1977)

Standard Oil Co. v. Missouri, 224 U.S. 270

by 28) pp peeae cVeAVaeE Ret easee keen sc 21

Story Parchment v. Patterson Parchment

Paper, 282 U.S. 555 02 Farr

Taylor v. Louisiana, 419 U.S. 522

$i oc.) Peres bakan es eau eae eae 36

Treadwell Ford v. Leek, 272 Ala. 544, 133

wee Oe We Cee és dks ee cata twauae ce 64

Tull v. United States, 481 U.S. 12

Boy rrr nee 21

United Services Auto Assn. v. Wade, 544

So. 2d 906 (Ala. 0. Riper eee 44

United States v. Carolene Products Pe

304 U.S. 144 (1938)......... sescsapese

Walker v. Sheldon, 10 N.Y.2d 401, 179

ememe Se CRUE Dn 6s 6k's ko aC aS ck 53,35

Waste Disposal v. Stewart, 432 So. 2d 1255

CO ee os BPP re ee pee ee 44

West Coast Hotel v. Parrish, 300 U.S. 379

i oo ARP epee ee eee 28

Wilkes v. Wood, 98 Eng. Rep. 489 (K.B.

SUPE SER SERASGH sha cde eek ee ceae wn aw 9

Williamson v. Lee Opticai, 348 U.S. 483

FoPeP oc cecese

x

Wilmington Star Mining Co. v. Fulton, 205

Wee GO CAPO sec tvicovecenececessece 59

Witherspoon v. Illinois, 391 U.S. 510

LSPs cccescccces Cescoteseecveeceseors 54

STATUTES:

42 U.S.C. § 2011 et seq. (1976 ed. and

Supp. V).ccecce ecccecsescceccceesecceee IO

Ala. Code §§ 6-11-20 through 6-11-30

(Supp. 1988) ...ccece TUTTLE LET TTT.

Ala. Pattern Jury Instructions 11.93

CaP 7Ed ccesees ne ff ft © @ rrr cree Terres.

TREATISES:

B. Nicholas, Roman Law 210 (1962)

Prosser & Keaton on Torts 13 (5th ed.

| Per are aera aaa ar a ee 59

D. Pugsley, The Roman Law of Property and

Obligations 31 (1972)...... jeevevees 10

Rehnquist, The Supreme Court--How It Was,

How It Is (William Morrow & Co.

BOOT ecco eee ses eessrccecsesses 27,33

RESTATEMENTS:

Restatement (Second) of Torts § 908

CASTE) co cccccsccescsteceseeveseses 12,57

PERIODICALS:

Borowsky & Nicolaisen, Punitive Damages in

California: The Integrity of Jury

Verdicts, 17 U.S.F. L. Rev. 147

Pi 3) RAPT TEER rT Tree 20, 38

xi

Burrow & Collins, Insurance Crisis--Texas

Style: The Case for Insurance Reform,

18 St. Mary's L.J. 759 SEE y eeéeecanesa

Daniels, Punitive Damages: Storm on the

Horizon?, Preliminary Report of the

Punitive Damages Project Study, Am.

Bar Found. Fellows Seminar, ABA Mid-

year Meeting, Baltimore, Md. (February

8, 1986). eee e rece eeeeeeeeeeeees passim

Daniels & Martin, Myth and Reality in

Punitive Damages, ABF Working Paper

8911, Am. Bar Found. 63 (1990)..passim

Demarest & Jones, Exemplary Damages as an

Instrument of Social Policy: Is Tort

Reform in the Public Interest, 18 St.

Mary's L.J. 797 (1987)...........18,36

Hirsch, Strict Liabilities: A Response to

Gruenberg-Silberg Conflict Regarding

Insurance Litigation Awards, 7 S.W.U.

L. Rev. 310 (1975)... ..ccccces eeeede 16

Kindregan & Schwartz, The Assault on the

Captive Consumer: Emasculating the

Common Law of Torts in the Name of

Tort Reform, 18 St. Mary's L.J. 672

S£0GT Peesec TEVTy TST Ter Trrrecr rr rere 3

Landes & Posner, New Light on Punitive

Damages, 33 Reg., Oct. 1986..... 3,4,25

Levine, Demonstrating and Preserving the

Deterrent Effect of Punitive Damages

and Insurance Bad Faith Actions, 13

U.§.F. L. Rev. 613 (1979)........ 16,17

Morris, Punitive Damages in Tort Cases, 44

Harv. L. Rev. 1173 (1931)........... 19

xii

Petersen, Sarma & Shanley, "Punitive

Damages: Empirical Findings" (RAND,

Institute for Civil Justice 1987)....6

Peterson, Punitive Damages: Preliminary

Findings, The RAND Corporation, In-

Stitute for Civil Justice (1985).....5

Prentice, "Reforming Punitive Damages:

The Judicial Bargaining Concept," 7

Review of Litigation 113 (1988)......6

Comment, Punitive Damages: An Appeal for

Deterrence, 61 Nev. L. Rev. 651

CRE 4068 6666050046008 6008664 e0 06 000 Ne

Note, Punitive Damages and the Reasonable

Relation Rule: A Study in the Frus-

tration of Purpose, 9 Pac. L.J. 823

CBMUPRé6eeeeeeceeeeveceéeenes *eeee#e# ey

Owen, Punitive Damages and Product

Liability Litigation, 74 Mich. L. Rev.

BSUS COOTER C6 ecevecssoeviveces 10,13,19

Rehnquist, The Notion of a Living Consti-

tution, 54 Tex. L. Rev. 693 (1976)..34

Reisberg, In Defense of Punitive Damages,

55 N.Y.U. L. Rev. 303 (1980).........6

Note, The Vitality of the Doctrine of

Punitive Damages in Maine, 35 Me. L.

Mev e SEP. TEOSS ccs cecsoeseeséceeseschf

Wheeler, The Constitutional Case for

Reforming Punitive Damages Procedures,

69 Va. L. Rev. 269 (1983).......00.. 48

No. 89-1279

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1989

PACIFIC MUTUAL LIFE INSURANCE COMPANY,

Petitioner

Vv.

CLEOPATRA HASLIP, CYNTHIA CRAIG,

ALMA M. CALHOUN, AND EDDIE HARGROVE

Respondents

On Writ of Certiorari to the

Supreme Court of Alabama

BRIEF OF AMICUS CURIAE CONSUMERS UNION

OF U.S. IN SUPPORT OF RESPONDENTS

STATEMENT

INTEREST OF

ry r > *

» t ‘

?

. ai t ?

t . ] t

¥ ¥ , >

> A

| ’

. ‘

¥ c i 4

;

; ,

4 -

+

OF

THE

CONSENT

AMICUS

AND

CURIAE

2

SUMMARY OF ARGUMENT

There is insufficient data to con-

clude that a tort/punitive damage crisis

exists at a level appropriate to justify

unprecedented intrusion into state tort

law, stretching and perhaps exceeding the

limits of due process.

There are multiple and beneficial

state objectives critical to the interests

of consumers furthered by punitive damages

nationally and in Alabama. The procedures

for determining those damages require a

full trial and compulsory post-trial re-

view. Jury instructions in this case

reflected accurately Alabama law and arti-

culate the proper goals of punishment and

deterrence. As such, the Alabama system

for determining punitive damages conforms

with the requirements of procedural and

substantive due process.

se

ARGUMENT

THERE IS NO TORT CRISIS JUSTIFYING

EXTRAORDINARY INTERVENTION BY THE UNITED

STATES SUPREME COURT.

During the last ten years the tort

system--and Particularly the various

Systems for determining punitive damages--

has come under close Scrutiny. (See

Appendix A.) "Tort reforme-s" who conten

that the system has become unbalanced and

weighted unduly in favor oF

Spar with various plaintiff ana -

groups who defend the +=;

20 make it function more ef fe

role of this Court has peer

‘

Claring that the excessive fine

the Eighth Amendment is uUnavailat a

means of reviewing punitive damages. See

Browning-Ferris Indus. v. Kelco Dp sposal,

109 S. Ct. 2909, 2913-29 (1989); Crenshaw,

486 U.S. 71, 76-78 (1988).

In the present case, this Court has

4

agreed to consider whether the system for

determining punitive damages in the state

of Alabama comports with the constitu-

tional requirement of due process. It

appears a motivation to consider this

matter comes from the belief that punitive

damages nationally are "out of control,"

depriving parties of fundamental fair-

ness. Browning-Ferris, 109 S. Ct. at 2923

(Brennan, J., concurring), Bankers Life &

Casualty v. Crenshaw, 436 U.S. ac 87-88

(O'Connor, J., concurring).

Although there is a growing body of

literature in the field of punitive

damages, the assessment is not complete

nor is a clear conclusion emerging. A

recent comprehensive study funded by the

American Bar Foundation concludes that

there is no punitive damage crisis based

on a careful evaluation of 25,000 jury

verdicts and related statistics. Daniels

& Martin, Myth and Reality in Punitive

5

Damages, ABF Working Paper 8911, Am. Bar

Pound. 63 (1990) [Daniels & Martin 1990].

Although the amici in this case assert to

the contrary, there is no clear and un-

equivocal data suggesting a national

Crisis sufficient to compel intrusive

judicial intervention, stretching the

limits of the due process clause, to ad-

dress a problem that may well not exist.}

A 1986 study of over thirty jurisdic-

tions in ten states from 1981-1985 asserts

that punitive damages were not routinely

awarded. Daniels, Punitive Damages:

Storm on the Horizon?, Preliminary Report

of the Punitive Damages Project Study, Am.

"h diverse group of scholars have written

that whatever problems exist in the tort field,

punitive damages play no substantial role. Landes

& Posner, New Light on Punitive Damages, 33 Reg.

October 1986; Burrow & Collins, Insurance Crisis--

Texas Style: The Case for Insurance Reform, 18

St. Mary's L.J. 759, 763-65 (1987); Kindregan &

Schwartz, The Assault on the Captive Consumer:

Emasculating the Common Law of Torts in the Name

of Tort Keform, 18 St. Mary's L.J. 673, 695

(1987).

6

Bar Found. Fellows Seminar, ABA Midyear

Meeting, Baltimore, Md. (February 8, 1986)

[Daniels 1986].

The study found that punitive damage

awards in cases where plaintiff won a

money judgment ranged from 0.0 percent of

all reported verdicts in four sites to a

high of 21.6 percent in one site. For

two-thirds of the surveyed sites, the per-

centage of reported verdicts in which

plaintiff won money was less than ten per-

cent. In New York City, only 1.6 percent

of awards included punitives, 2.2 percent

in Cook County, Illinois (which includes

Chicago), and 8.6 percent in Los Angeles

County, California. Daniels 1986 at ll.

The Landes & Posner study, supra note l,

of federal courts from 1982 to November of

1984 found four punitive damage awards up-

held out of 172 cases, and of 359 product

liability, punitives were allowed in only

two percent. A RAND study of civil jury

7

trials in San Francisco, California, and

Cook County, Illinois, between 1960-1984

found only eight awards of punitive dam-

ages in product liability cases. Peter-

son, Punitive Damages: Preliminary Find-

ings, The RAND Corporation, Institute for

Civil Justice (1985).

Critics of punitive damage awards

distort statistical images through the use

of numerical averages. For example, in

the RAND Cook County Study, the average

award was $137,350, but 87.7 percent of

the cases had awards lower than the aver-

age, with a median of $8,800. Medians are

the appropriate measure since they reflect

the typical award or the dollar amount for

the case at the 50th percentile when

awards are listed from lowest to highest

in ascending order. Daniels & Martin 1990

at 42-43; Daniels 1986 at 13. The fact is

that "(t]he predicted unmanageability of

punitive damages ha: failed t appear.

8

Experience has shown that judicial over-

Sight of punitive damages awards. has

greatly reduced the risk of substantial

over-deterrence." Reisberg, In Defense of

Punitive Damages, 55 N.Y.U. L. Rev. 303,

345 (1980). There are two juried empiri-

cal and systematic studies of punitive

damages, and neither supports the proposi-

tion that there is a national crisis in

punitive damages. *

There are situations were judicial

action is justified based on stark princi-

ples of fairness, where empirical, socio-

logical, or economic data compels a re-

sponse, e.g., Brown v. Board of Education,

347 U.S. 483 (1953). Such data does not

“Daniels & Martin 1990 and Petersen, Sarma &

Shanley, Punitive Damages: Empirical Findings"

(RAND, Institute for Civil Justice, 1987). Pren-

tice, Reforming Punitive Damages: The Judicial

Bargaining Concept, 7 Review of Litigation 113,

123 (1988). ("The attack on punitive damages is

part of a wide-ranging, well organized attack on

tne current tort system. .. . There is substan-

tial evidence that the claims of runaway punitive

damages are greatly exaggerated.")

9

yet exist in the area of punitive damages.

Nevertheless, the claim is made that some-

how in the last few years juries receiving

the same information they have received

Since Day v. Woodworth, 54 U.S. (13 How.)

363 (1851), have engaged in irresponsible

behavior. Bluntly, "[t]here is no system-

atic empirical evidence that juries are

excessively plaintiff oriented." Daniels

& Martin 1990 at 9.

This Court must avoid scrupulously

the mischaracterizations that have been

put forward regarding the state of

punitive damages.

Horror stories and their implications

are presented as if they are represen-

tative of what is typical, describing

a system run amuck and in need of fun-

damental and immediate change. Such

vivid stories typically distort the

actuai facts of situations described.

- + The stories are meant to foster

tne acceptance of a particular charac-

terization of the civil justice system

and punitive damages. ... The view

is portrayal as one so obvious and

common-sensical that no reasonable

person could disagree.

Daniels & Martin 1990 at ra ae Press kits

10

and news releases have become the tools of

jurisprudential debate, rather than case

analysis and synthesis of jury verdict

statistics. Daniels & Martin 1990 at

24. However, an analysis of the hard data

put forward in support of tort reform and

modification of punitive damages provides

"little if any, reliable evidence on the

punitive damage system." Daniels & Martin

1990 at 29.

In general, then, it does not

appear from our data that punitive

damages are routinely awarded in the

sites studied, contrary to what would

be expected in light of the rhetoric

of crisis and reform. Nor were puni-

tive damages typically given in a-

mounts that would "“boggle the mind."

Punitive damages were awarded infre-

quently, and when they were awarded

the amount was typically modest.

Daniels & Martin 1990 at 44.

In the absence of unequivocal data

suggesting a crisis in the punitive damage

area, judicial intervention can be justi-

fied only if the Alabama method for deter-

mining punitive damages at the time this

ll

case was decided violates due process.

II

PUNITIVE DAMAGES ARE INTEGRAL TO OUR

COMMON LAW HERITAGE AND ARE HIGHLY BENE-

FICIAL TO CONSUMER INTERESTS.

A. Punitive Damages Are Part of Our

Common Law Heritage.

In Day, 54 U.S. at 371, this Court

found that punitive damages are proper, so

much so that argument as to their validity

was not tolerated. 2 In Missouri Pacific

Ry. v. Humes, 115 U.S. 512, 57° (1885),

this Court approved the use of punitive

damages to "blend together the interests

3Common law affirmation of punitive damages

can be traced back centuries through the Magna

Carta, see Browning-Ferris, 109 S. Ct. 2909, 2919-

20 (1989), but usually begins with a look at

Wilkes v. Wood, 98 Eng. Rep. 489 (K.B. 1763), and

Huckle _v. Money, 2 Wils. K.B. 205, 95 Eng. Rep.

768 (1763). The nineteenth century view of puni-

tive damages was that the doctrine was "too well

settled now to be shaken, that exemplary damages

may in certain cases be assessed." Milwaukee &

St. Paul Ry. v. Arms, 91 U.S. 489, 492 (1875);

Fleet & Semple v. Hollenkemp, 52 Ky. (13 B. Mon.

219) 175, 180 (1852); Merrells v. The Tariff Mfg.

Co., 10 Conn. 388 (1835); Linsley v. Bushnell, 15

Conn. 225 (1842),

12

of society and the aggrieved individual.”

Constitutionality of punitive damages was

considered in Minneapolis & St. Louis Ry.

v. Beckwith, 129 U.S. 26, 36 (1889), hold-

ing: "The imposition of punitive or exem-

plary damages .. . cannot be opposed as

in conflict with the prohibition against

the deprivation of property without due

process of law." Looking to the legal

systems in the United States, Great Brit-

ain, and even to Roman law, it is evident

that punitive damages are a fundamental

part of our jurisprudence. 4

More recently, this Court allowed the

use of punitive damages in the civil

rights and defamation areas even though

such damages might have a chilling effect

on speech or intimidating effect on cer-

Hy, Pugsley, The Roman Law of Property and

Obligations 31 (1972); B. Nicholas, Roman Law 210

(1962); Owen, Punitive Damages in Products Liabil-

ity Litigation, 74 Mich. L. Rev. 1258, 1262, n.17

(1976); The Vitality of the Doctrine of Punitive

Damages in Maine, 35 Me. L. Rev. 447, 451 (1983).

13

tain law enforcement functions. °® This

Court has not engaged in a due process

review of punitive damage award amounts. ®

The absence of systemic review may be

because "the availability of punitive

damages in civil cases was well known to

the framers of the Fourteenth Amendment,

as it had been for centuries." Germanio

v. Goodyear Tire & Rubber, 732 F. Supp.

1297, 1303 (D.N.J. 1990).

B. Punitive Damages Further the Rational

State Interests on —apara ing the Qual-

ity of Consumer G S and Services.

Punitive damages are vital to the

Smith v. Wade, 461 U.S. 30 (1983), permitted

punitive damages in 42 U.S.C. § 1983 (1982) ac-

tions and affirmed the validity of punitive dam-

ageS aS a deterrent to misconduct. 461 U.S. at

36-37 n.5; and Gertz v. Robert Welch, Inc., 418

U.S. 323 (1974), upheld the use of punitive dam-

ages despite the potential effect on speech. See

also Dun & Bradstreet v. Greenmoss Builders, Ine

472 U.S. 749 (1985).

Oput see St. Louis, Iron Mt. & So. Ry. v.

Williams, 251 U.S. 63, 66-67 (1919), requiring

courts to guard against grossly excessive ver-

dicts, and Giaccio y. Pennsylvania, 382 U.S. 399,

402-03 (1966), holding invalid a system that

provides jurors no guidance on awards.

14

protection of consumers. With the minimum

of transaction costs, they achieve the

dual goals of punishment of specific

actors and industrywide deterrence for

future misconduct and creation of incen-

tives to upgrade the quality of goods and

services.’ Individuals who suffer at the

hands of others whose behavior is suffi-

ciently bad to be characterized as inten-

tional or wanton misconduct are in no way

winners of some bizarre lottery. The

destruction of family life, the trauma of

TBeyond punishment and deterrence, punitive

damages provide resources to aggrieved plaintiffs

who have been thrust into an abnormal risk cate-

gory. See, e.g., Evans v. Philadelphia

Transportation Co., 418 Pa. 567, 212 A.2d 440

(1965); Focht v. Rabada, 217 Pa. Super. 35, 268

A.2d 157 (1970); Restatement (Second) of Torts

§ 908 (1979). A few states are straightforward in

discussing the functions of punitive damages

beyond punishment and deterrence: Hicks v. Herr-

ing, 246 S.C. 429, 144 S.E.2d 151, 155 (1965),

allows punitive damages to vindicate a private

right. Jolley v. Puregro Co., 94 Idaho 702, 496

P.2d 939, 947 (1972), permits punitive damages for

"rectification of wrongs"; Oppenhuizen v. Wen-

nersten, 2 Mich. App. 288, 139 N.W.2d 765 (1965),

permits punitive damages to address embarrassment.

15

Protracted litigation, the displacement of

emotional equilibrium, and various costs®

pertaining to pursuing legal claims can be

addressed by a punitive damage award.

Owen, Punitive Daiiages in Product Liabil-

ity Litigation, 74 Mich. L. Rev. 1257,

1296-98 (1976).

It is argued regularly that compensa-

tory damages cover the needs of injured

persons and deter future misconduct. Such

arguments are devoid of empirical sup-

port.? Punitive damages are often awarded

8, very few states permitted punitive damages

for the purpose of assisting with attorneys fees.

Lanese_v. Carlson, 32 Conn. Supp. 163, 344 A.2d

361, 364 (1975); Doroszka v. Lavine, 111 Conn.

575, 578, 150 A. 692 (1930). Other jurisdictions

allow punitive damages for "inconvenience, reason-

able attorneys fees, and other losses too remote

to be considered under actual damages." Pan Am

Petroleum v. Hardy, 370 S.W.2d 904, 908 (Tex. Civ.

App. 1963). Other states recognize that punitive

damage awards encourage private persons to bring

wrongdoers before the court, e.g., Snowden vy.

Osborne, 269 So. 2d 858 (Miss. 1972).

Swalker _v. Sheldon, 10 N.Y.2q 401, 406, 179

N.E.2d 497, 499 (1961); Campus Sweater & Sports-

wear Co. v. M.B. Kahn Construction Co., 515 F.

Supp. 64, 104-05 (D.S.C. 1979) ff'd 4

'ceae*a} — , 644 F.2d

16

after a multi-year pattern of misconduct,

interspersed with various compensatory

damage awards which did not deter the de-

fendant, prompting the Supreme Court of

Minnesota to conclude that punitive dam-

ages are particularly effective in pre-

venting repetitive forms of misconduct.

Gryc v. Dayton-Hudson, 297 N.W.2d 727

(Minn.), cert. denied, 449 U.S. 921

(1980).

In the state of New York, the deter-

rence function of punitive damages is well

recognized:

877 (2d Cir. 1981), holding that punitive damages

deter manufacturers from misconduct, encourage the

production of safer products, and "serve as a type

of private revenge which is carried out in the

courts rather than through duels or in back al-

leys." The court held further "there is no exact

monetary standard which can be used as a measure.

There is no formula for punitives as the

amount to be awarded is peculiarly within the

judgment and discretion of the jury, subject to

the supervisory powers of the trial judge over

jury verdicts. .. . The main things to be con-

sidered are the character of the tort committed,

the punishment which should be meted out there-

fore, and the ability of the wrongdoer to pay."

515 F. Supp. at 105-06.

17

A judgment simply for compensatory

damages would require the offender to

do no more than return the money which

he had taken from the plaintiff. In

the calculation of his expected pro-

fits, the wrongdoer is likely to allow

for a certain amount of money which

will have to be returned to those

victims who object too vigorously, and

he wihl be perfectly content to bear

the additional cost of litigation as

the price for continuing his illicit

business. It stands to reason that

the chances of deterring him are mate-

rially increased by subjecting him to

the payment of punitive damages.

Walker v. Sheldon, 10 N.Y.2d 401, 406, 179

N.E.2d 497, 499 (1961).

The need for punitive damages in the

insurance industry is undeniable.

If an insurance company could not be

subjected to punitive damages it could

intentionally and unreasonably refuse

payment of a legitimate claim with

veritable impugnity. To permit an

insurer to deny a legitimate claim,

and -thus force a claimant to litigate

with no fear that the claimant's maxi-

mum recovery could exceed the policy

limits plus interest, would enable the

insurer to pressure an insured to a

point of desperation enabling the in-

Surer to force an inadequate settie-

ment or avoid payment entirely.

Standard Life Ins. Co. v. Veal, 354 So. 2d

239, 248 (Miss. 1977). In insurance rela-

18

tionships the potential of punitive dam-

ages provides consumers with some force at

the bargaining table.

[T]he relationship of insurer’ and

insured is inherently unbalanced; the

adhesive nature of insurance contracts

places the insurer in a superior bar-

gaining position. The availability of

punitive damages is thus compatible

with the recognition of insurers’ un-

derlying public obligation and re-

flects an attempt to restore balance

in the contractual relationship.

Hirsch, Strict Liability: A Response to

the Gruenberg-Silberg Conflict Regarding

Insurance Litigation Awards, 7 S.W.U. L.

Rev. 310, 326 (1975).

Thesc benefits are of particular im-

port since state insurance regulation has

not provided a significant countervailing

force to insurance industry power. Insur-

ance regulation has been characterized by

“apathetic administrative agencies and

lethargic legislative bodies providing

little discipline to an industry that has

enormous power over the well-being of

American consumers." Levine, Demonstrat-

a |

19

ing and Preserving the Deterrent Effect of

Punitive Damages in Insurance Bad Faith

Actions, 43 U.8.F. Ls Rev. 613, 615

(1979). While it may take years to pro-

mulgate an insurance regulation, there is.

generally a stunning and prompt reaction

to a punitive damage award in the insur-

ance industry. Punitive damage awards

against insurance companies prompt action

and stern admonition to exercise greater

care in dealing with consumers, eliminate

fraudulent practices, develop training

Programs for employees, and engage in

Oversight of staff. Levine, supra, at

625-27.

An opinion from this Court that

dilutes the punitive damage system would

have a deleterious effect on the benefits

derived from punitive damage awards and

frustrate the ability of states to achieve

these rational objectives.

20

C. Consumer Advantages from Punitive Dam-

ages Would Be Undercut by Mandating a

Fixed Formu'a or Proportionality Rule.

A decision that compels the states to

establish fixed ratios for punitive dam-

ages would allow business interests to

calculate easily the proper sum to be set

aside to accommodate judgments. This

would have a disastrous effect on the de-

terrent value of punitive damages.

Conscious wrongdoers must know they

cannot estimate the cost of their mis-

deeds by coldly calculating the number

_ of dead or injured and their resulting

limited compensatory expenses. They

must know that their financial ex-

istence may be threatened by the evil

they contemplate.

Demarest & Jones, Exemplary Damages as an

Instrument of Social Policy: Is Tort Re-

form in the Public Interest, 18 St. Mary's

L.J. 797, 833 (1987). Generally, courts

favor an individualized punitive damage

system not bound by mathematical

equations.

The admonitory function of punitive

damages does not lend itself to for-

mulation. .. . The refusal to speci-

21

fy a ratio is due to the need to indi-

vidualize punitive damage verdicts.

One must look to behavior, not to

results, to determine the need to

admonish and .. . the amount which

must be awarded. .

Campus Sweater & Sportswear Co. v. M.B.

Kahn Construction Co., 515 F. Supp. 64,

106 (D.S.C. 1979), aff'd, 644 F.2d 877 (2d

Cie. 1981) .29 Some courts1 have

struggled to find a proper calculation

mechanism but have come up empty handed:

Frankly, we are unable to find that

formula. Instead of making a mathe-

matical breakthrough we discovered

what everyone probably already knows:

the formula does not exist. And, we

have concluded, that is properly so.

Accordingly, we examine the usual

factors recited by appellate courts

when reviewing punitive damage awards,

applying those factors in the custom-

0see Morris, Punitive Damages in Tort Cases,

44 Harv. L. Rev. 1173, 1180-81 n.9 (1931), reject-

ing proportional ratios as "arbitrary"; Owen,

Punitive Damages in Product Liability Litigation,

74 Mich. L. Rev. 1258, 1316 (1976), rejecting

ratios due to their failure to take into account

apprcpriate damage factors.

"ILinsley_v. Bushnell, 15 Conn. 225, 235

(1842), "there is no rule of damages fixed by law"

to accommodate punitive damages.

22

ary manner to reach what we believe is

a decision consistent with precedent.

Devlin v. Kearney Mesa AMC/Jeep Renault,

155 Cal. App. 3d 381, 202 Cal. Rptr. 204,

209 (4th Dist. 1984). Like California,

Alabama imposes no specific formula for

punitive damages. +}?

This Court has suggested that a

plaintiff's entitlement to the “recovery

of uncertain damages" is not flawed con-

stitutionally, though defendants are

entitled to certainty in ascertaining what

conduct is wrong./3 Story Parchment v.

Patterson Parchment Paper, 262 U.S. 555,

l2see Foster v. Floyd, 276 Ala. 428, 163 So.

2d 213 (1964); Note, Punitive Damages and the Rea-

sonable Relation Rule: A Study in Frustration of

Purpose, 9 Pac. L.J. 823, 852 (1979); Borowsky,

Punitive Damages in California: The Integrity of

Jury Verdicts, 17 U.S.F. L. Rev. 147, 164-65

(1983), condemning the reasonable relation rule as

a decisional pretext.

13, ratio rule “undermines the deterrent

effect of punitive damages by stressing the actual

resulting harm rather than the social undesira-

bility of the defendant's conduct." Comment,

Punitive Damages: An Appeal for Deterrence, 61

Neb. L. Rev. 651, 676 (1982).

23

562 (1930). Recently, this Court charac-

terized punitive damages as a "legal reme-

dy that is not a fixed fine." Tull v.

United States, 481 U.S. 412, 423 n.7

(1987). Tull follows well established

precedent that defendants have no parti-

cular entitlement to a fixed maximum in

cases where punishment is in the form of a

fine. Standard Oil Co. of Indiana v. Mis-

souri, 224 U.S. 270, 286 (1911).

The value of not being bound to a set

formula is apparent when a defendant

causes only minor compensatory losses but

acts with an intention, vengeance, or hos-

tility requiring substantial punishment.

In such cases, to use a multiple of com-

pensatory damages is arbitrary. The quest

for formulae and limits stems from the

perception that punitive damage awarus are

Wildly disportionate to compensatory dam-

ayes. On the average, in those few cases

where punitive damages are awarded, for

24

every dollar of compensatory damages,

about $1.50 is awarded for punitives, with

the ratio between punitive damages and

compensatory damages ranging from 0.67 to

approximately 3.6. Daniels & Martin 1990

at 56-60. Were a state or a court to

adopt a trebling mechanism, as suggested

by some of the amici, then the actual

dollars spent on puritive damages may

increase substantially.

A directive to impose Pixed multiples

or other means of ensuring certainty stems

also from the perception that jury in-

struction is “standardless." In the pres-

ent case the jury was told to consider

punishment, deterrence, and the propor-

tional relationship between the wrongful-

ness of the defendant's act and the award.

Reviewing a similar situation in North

Dakota, Judge Van Sickle held as follows:

This court is not convinced that a

jury's determination of punitive dam-

age awards is "“standardless." The

standard the jury applies in determin-

25

ing whether to grant an award is the

culpability of the defendant. To de-

termine the amount of the award, the

jury determines the amount needed to

deter such behavior in the future, the

amount it takes to make certain types

of conduct unprofitable.

Puppe v. A.C. & S., Incec., 733 F. Supp.

1355, 1362 (D.N.D. 1990).

As a matter of its substantive law,

Alabama has decided that "I[p]Junitive dam-

ages need bear no particular mathematical

relationship to actual damages." Foster

v. Floyd, 276 Ala. 428, , 163 So. 2d

213, 217 (1964), citing Bell v. Preferred

Life Assurance Society of Montgomery, 320

U.S. 238 (1943). Unless this Court wishes

to perform the role of the Alabama state

legislature, it must avoid tampering with

the decisions of that body.

In summary, there is ample data to

conclude: that there is no crippling tort

Crisis, that punitive damages provide a

Significant benefit in deterring unaccept-

able behavior, and that remedies such as

26

ratios would be destructive to the ra-

tional and reasonable objectives of states

such as Alabama. A judicial directive

limiting punitive damages would be an

unprecedented intrusion on the right of

the state to accomplish rational state

objectives.

D. Punitive Damages Exert Positive Market

Pressure to Upgrade the Quality of

Goods and Services.

Recently, it has been contended that

punitive damages have an adverse effect on

the competitive posture of the United

States. Browning-Ferris, 109 S. Ct. at

2924 (O'Connor, J., dissenting); Daniels &

Martin 1990 at 22. Quite simply, there is

no solid empirical basis to support the

proposition.

It seems incredulous to assert that a

system that condemns products or services

produced fraudulently, in a grossly negli-

gent manner, or in a way that comports

with intentional misconduct is destructive

27

of the competitive posture of the United

States. In Man v. Raymark Indus., 728 F.

Supp. 1461 (D. Haw. 1989), the court con-

Sidered whether punitive damages have a

detrimental effect and prevent manufac-

turers from developing new products due to

their fear of “uncertain liability."

This court respectfully suggests that

if that is indeed what is happening

[to proposed new products], then puni-

tive damages are accomplishing a

worthy goal. In this respect it is

important to remember that punitive

damages are awarded for some form of

Outrageous misconduct, never for

Simple negligence. A manufacturer who

vigilantly and honestly tests his

product can have no fear of punitive

damages.

728 F. Supp. at 146 n.7.

A companion attack is that punitive

damages divert substantial resources away

from research and development. This argu-

ment borders on the absurd for two rea-

sons. First, there is only a miniscule

level of direct or real dollar loss from

punitive damages. Landes & Posner, supra;

Daniels & Martin 1990 at 33-35. Second,

28

the vast majority of punitive damage

awards do not involve consumer goods such

as pharmaceutical products; rather, they

involve personal violence, false arrest,

malicious behavior, or intentional miscon-

duct. Daniels & Martin 1990 at 48, 50,

and 56. It seems most unlikely that U.S.

problems in international competitive

markets stem from punitive damage awards

that deter fraud or punish intentional

wrongdoers.

III

ALABAMA PUNITIVE DAMAGES LAW COMPORTS

WITH CONSTITUTIONAL REQUIREMENTS OF PRO-

CEDURAL AND SUBSTANTIVE DUE PROCESS.

A. The History of Substantive Due Process

Mandates Restraint in Assessing State

Programs that Affect Economic In-

terests.

Probing substantive due process

review is reserved for constitutional

assessments of fundamental entitlements.

A system that_ allows punitive damage

awards affecting property interests need

29

Satisfy only the rational basis test.

Where the substance of a law is chal-

lenged under the due process clause, the

Starting point for analysis should be

Lochner v. New York, 198 U.S. 45 (1905),

one of the "most ill-starred decisions

that [the Court] ever rendered."14 The

majority declared unconstitutional a New

York workplace safety law. The Court bal-

anced public safety and freedom of con-

tract and, coming to a result opposite

that of New York lawmakers, used substan-

tive due process to assert their will.?°®

For the next thirty years the Court used

M4Rehnquist, The Supreme Court--How It Was,

How It Is at 205.

"Justice Holmes dissented, admonishing that

"(a] Constitution is not intended to embody a par-

ticular economic theory, whether of paternalism

and the organic relation of the citizen to the

State or of laissez faire. It is made for people

of fundamentally differing views, and the accident

of our finding certain opinions . . . shocking,

Ought not to conclude our judgment upc: the ques-

tion whether statutes embodying them conflict with

the Constitution of the United States. 198 U.S.

at 75-76.

30

substantive due process "to strike down

state laws, regulatory of business and

industrial conditions, because they .. .

[were thought to] be unwise, improvident,

or out of harvony with a particular school

of thought." Williamson v. Lee Optical,

348 U.S. 483, 488 (1955).

Lochner “wisdom substitution" suk

sided with Nebbia v. New York, which held

that "a state is free to adopt whatever

economic policy may reasonably be deemed

to promote public welfare, and to enforce

that policy by legislation adapted to its

purpose." 291 U.S. 502, 537 (1934).2°

In Day-Brite Lighting, Inc. v. Mis-

souri, 342 U.S. 421, 423 (1952), the Court

refused to invalidate a rationally-based

ours jtates have power to legislate against .

injurious practices in their internal commer-

cial and business affairs, so long as their laws

do not run afoul of some specific federal con-

stitutional prohibition, or of some valid Federal

law." Lincoln Union v. Northwestern Co., 335 U.S.

527, 537 (1949). See West Coast Hotel v. Parrish,

300 U.S. 379 (1937).

31

state statute, declaring they "do not sit

as a superlegislature to weigh the wisdom

of legislation nor to decide whether the

policy which it expresses offends the

public welfare."

In Moore v. East Cleveland, 431 U.S.

494 (1977), this Court cautioned against

judicial redrafting of state law where the

outcome would rest on "the predilections

of those who happen at the time to be Mem-

bers of this Court" rather than on a firm

constitutional basis. 431 U.S. at 502.

These cases reflect self-imposed judicial

restraint, an accurate vision of the judi-

Cciary, and compel states to be accountable

for formulating credible economic policy.

Restricted review does not occur when

assessing “statutes directed at particular

religious, or national, or racial minori-

ties . . . which tend . . . seriously to

curtail the operation of those political

processes ordinarily to be relied upon to

32

protect minorities. .. ." United States

v. Carolene Products, 304 U.S. 144, 153

n.4 (1938). These cases employ a careful

review of state law on fundamental en-

titlements or privacy interests within the

penumbral privacy domain of the First

Amendment, none of which bear the slight-

est resemblance to the interests asserted

by petitioner in this case.?/

Petittoner's quest for "substantive

review" of punitive damages based on due

process seems particularly far afield when

consideration is given to those critical,

basic areas where the Court has refused to

apply substantive due process. In Bowers

'Tsee, e.g., Roe v. Wade, 410 U.S. 113 (1973)

(involving abortion); Boddie v. Connecticu', 40)

U.S. 371 (1971), and Loving v. Virginia, 388 U.S.

1 (1967) (involving freedom of choice in marital

decisions); Griswold v. Connecticut, 381 U.S. 479

(1965), involving marital privacy; Carey v. Popu-

lation Services Int'l, 431 U.S. 678 (1977) (pur-

chase of contraceptives); Pierce v. Society of

Sisters, 268 U.S. 510 (1925), and Meyer v. Neb-

raska, 262 U.S. 390 (1923) (involving child

rearing).

33

v. Hardwick, 478 U.S. 186 (1986), the

Court declined to extend the notion of

fundamental rights to homosexual relations

and refused to

take a more expansive view of [their]

authority to discover new fundamental

rights imbedded in the Due Process

Clause. ... (T]he Court is most

vulnerable and comes nearest to il-

legitimacy when it deals with judge-

made constitutional law having little

Or no cognizable roots in the language

Or design of the Constitution. {When

that occurs] .. . the Judiciary nec-

essarily takes to itself further

authority to govern the country with-

out express constitutional authority.

478 U.S. 186 at 194-95.

A complaint about a state system of

punitive damages that punishes and deters

future misconduct does not involve a fun-

damental right, involves no language or

concept having "cognizable roots" in the

Constitution, and would require a redefi-

nition of constitutional entitlements, a

Process hardly merited by the claims in

this case.

After Bowers, this Court rejected

34

substantive due process claims in DeShaney

v. Winnebago County DSS, 109 S. Ct. 998

(1989), involving the reaction of the

state to a child abuse complaint.

The people of Wisconsin may well pre-

fer a system of liability which would

place upon the State and its officials

the responsibility for failure to act.

7 at But they should not have it

thrust upon them by this court's ex-

pansion of the Due Process Clause of

the Fourteenth Amendment.

Id. at 1007. The people of Alabama may

well have preferred a different “system of

liability" for punitive damages prior to

1987, but like the people of Wisconsin,

“they should not have it thrust upon them

by this Court's expansion of Due Process."

Id.

Bowers and DeShaney demonstrate the

tremendous constraints in the area of due

process. The interests asserted in these

cases are critical, private, basic, and

broad reaching, yet the power of the

states to formulate and implement policy

outside of a direct constitutional claim

35

must prevail.

In the present case, petitioner's

quest to be free from pre-1987 Alabama

punitive damages involves neither a funda-

mental right, nor a recognized personal

autonomy interest. The state of Alabama

need show only that its system for award-

ing punitive damages is rational and fur-

thers a valid state objective.

The ultimate crisis caused by an

overexpansive view of substantive due pro-

cess is found in Dred Scott v. Sandford,

60 U.S. (19 How.) 393 (1857), where Chief

Justice Taney used due process for rede-

fining evolving economic interests that

pertained to slavery. The catastrophic

consequences of Dred Scott illuminate two

canons of constitutional interpretation.

Rehnquist, The Supreme Court at 144. The

first requires restraint in the use of the

Constitution to resolve a matter addressed

appropriately by other standards. Id.

36

Alabama has addressed the problem of puni-

tive damages through recent legislation,

as have numerous states. See Appendix

A. The second holds that a mere sense of

unfairness is not a basis to declare a2 law

unconstitutional. "{A] sense that a law

is unfair, however deeply felt, ought not

to be itself a ground for declaring an act

of Congress void." Id. at 145.

Surely the Constitution does not

put either the legislative branch or

the executive branch in the position

of a television quiz show contestant

so that when a given period of time

has elapsed and a problem remains

unsolved by them, the federal judi-

Ciary may press a buzzer and take its

turn at fashioning a solution.

Rehnquist, The Notion of a Living Consti-

tution, 54 Tex. L. Rev. 693, 700 (1976).

In light of the modern constitutional

history of substantive due process, it is

difficult to envision why this Court would

seek to second-guess evolved rational eco-

nomic policy. “If determinations limiting

the availability of punitive damages are

37

to be made, this determination must be

made by the state legislature." Puppe,

733 F. Supp. at 1362.

B. Substantive Due Process Is Not Of-

fended by Juries Making Property-

Affecting Decisions in Punitive Damage

Cases.

If a law is "so vague and standard-

less . . . [and] leaves the public uncer-

tain as to the conduct it prohibits or

leaves judges and jurors free to decide,

without any legally fixed standards what

is prohibited and what is not," then the

law is void for vagueness. Giaccio v.

Pennsylvania, 382 U.S. 399, 402-03 (1966).

Petitioners contend that the Alabama

system was standardless because it con-

tained no fixed levels, caps, or other

precise limitations. In Smith v. Wade,

461 U.S. 30, 56 (1983), this Court found

that "a jury may be permitted to assess

punitive damages in an action under 1983

when the defendant's conduct is shown to

be motivated by evil motive or intent, or

38

when it involves reckless or callous in-

difference to federally protected rights

of others." This Court required no more

in terms of precision, nor did it impose a

ceiling on punitive damages.

We trust juries to guard against the

misuse of power and to demonstrate con-

science, allowing them to assess community

standards and make highly complicated

decisions. Taylor v. Louisiana, 419 U.S.

522, 530 (1975); Duncan v. Louisiana, 391

U.S. 145, 155-56 (1968). Since this Court

is willing to allow juries to decide mat-

ters of life and death, they should be

trusted "to make a fair assessment of

punitive damages in a civil tort case."

Demarest & Jones, Exemplary Damages as an

Instrument of Social Policy: Is Tort Re-

form in the Public Interest, 18 St. Mary's

L.J. 797, 824 (1987).

The state of Alabama uses juries as a

means of effecting property interests. To

39

suggest that a jury is an irrational

choice or that jurors are inherently arbi-

trary or incapable of making intelligent

choices offends the American system of

18 Jurors take seriously

jurisprudence.

the responsibility of assessing culpabil-

ity and award amounts and, on a national

level, tend to deny punitive damages in

the vast majority of cases, making modest

awards in those few cases where punitive

damages are deserved. Daniels & Martin

1990 at 35-39, 56-60. From the earliest

British punitive damage cases forward,

there has been a “respect for the jury's

discretion and a hesitancy to interfere

with its judgment.” Borowsky & Nicolai-

18rhe issue of the competence of jurors to

make proper choices hardly seems proper for argu-

ment. See Newport v. kact Concerts, 453 U.S. 247,

270 (1981); Brotherhood of Elec. Workers v. Foust,

442 U.S. 42, 50-51 (1979); Gertz v. Robert Welch,

Inc., 418 U.S. 323, 349-50 (1974). See also Gulf

Atl. Life Ins. Co. v. Barnes, 405 So. 2d 916, 925

(Ala. 1981), and compare Commodore Corp. v.

Bailey, 393 So. 2d 467 (Miss. 1981).

40

—

sen, Punitive Damages in California: The

Integrity of Jury Verdicts, 17 U.S.F. L.

Rev. 147, 152 (1983) (footnotes omitted).

The underlying reason for empowering the

jury in this area is obvious:

[T)he jury is in the best possible

position to function as the communi-

ties' conscience. The jury's reaction

of shock and outrage presumably mirror

those of the community as a whole.

Thus when the jury decides to make a

punitive award, it is expressing soci-

ety's disapproval; and when it sets

the amount of the award, it measures

societies' outrage and determines the

degree of punishment that society

believes will deter the defendant and

others like him.

Borowsky & Nicolaisen at 152-53.

C. Properly Instructed Jurors in Alabama

Use Comprehensible Standards to Deter-

mine Punitive Damage Levels.

This Court's invitation to consider

punitive damage levels in due _ process

terms?? has given rise to a series of

"9see Browning-Ferris, 109 S. Ct. at 2923

(1989) (Brennan, J., concurring, joined by Mar-

shall, J.); id. at 2924 (O'Connor, J., concurring,

joined by Stevens, J.); Crenshaw, 486 U.S. at 87-

88 (1988) (O'Connor, J., concurring, joined by

Scalia, J.).

41

cases which assess the means by which

states instruct juries on damages. Typi-

cal of the post-Browning-Ferris cases is

Man v. Raymark Indus., 728 F. Supp. 1461

(D. Haw. 1989), where the court assessed

the Hawaii system of jury instructions for

punitive damages. The standards in Hawaii

are similar to those in Alabama. As to

standard of proof, Alabama required proof

by a preponderance of the evidence prior

to 1987, while Hawaii requires proof by

Clear and convincing evidence. Although

this difference is meaningful, it is

hardly the basis for finding one standard

constitutional and the other

unconstitutional.

Based on these standards, the court

found the Hawaii system comported with and

exceeded requirements established by this

Court in Smith vy. Wade, 461 U.S. 30

(1983), and in Gertz v. Robert Welch,

Inc., 418 U.S. 323, 349 (1974). "(T]he

42

Standard established by Hawaii law is

sufficient to apprise potential defendants

and juries of both the nature of the con-

duct which may expose one to punitive

damage liability as well as what level of

award is appropriate under the circum-

stances." 728 F. Supp. at 1465. In

virtually every case examining punitive

damages since Browning-Ferris, based on

the standards in the Hawaii case that re-

flect the law of the state of Alabama, the

result has been the same. See Appendix B

listing post-Browning-Ferris cases where a

due process claim was raised.

At the time the present case went to

trial, Alabama had evolved standards for

punitive damages that focused on punish-

ment and deterrence. Badgett v. McDonald,

304 So. 2d 228 (Ala. Civ. App. 1974); Ex

parte Smith, 412 So. 2d 1222 (1982). The

amount is left to the sound discretion of

the jurors who act “with regard to the

43

enormity of the wrong and the necessity of

preventing a similar wrong." J. Truett

Payne Co. v. Jackson, 281 Ala. 426, 429,

203 So. 2d 443, 446 (1967); Aetna Life

Ins. Co. v. Lavoie, 470 So. 2d 1060, 1076

(Ala. 1984). The amount “must not exceed

an amount that will accomplish society's

goals of punishment and _ deterrence."

Green Oil v. Hornsby, 539 So. 2d 218, 222

(Ala. 1989). The level of wrongdoing re-

quired prior to finding liability for

punitive damages was fraud that was gross,

oppressive, or aggravated. Mobile Dodge,

Inc. v. Waters, 404 So. 2d 26 (Ala. 1981).

These standards reflect an intense, inter-

nal debate within the Alabama court system

demonstrating careful and well evolved

measures. 20

20See Alabama Pattern Jury Instructions

§ 11.03 (1974):

The purpose of awarding punitive damages or

exemplary damages is to allow money recovery

to the plaintiff by way of punishment to the

(Cont'd)

a4

The trial judge in the present case

gave instructions “to punish the defendant

. « «+ Make an example. .. . take into

consideration the c.aracter and degree of

wrong [and prevent] similar wrongs." R.T.

at 897-98. The trial judge enunciated the

purpose of punitive damages and explained

the level of culpability needed, as ex-

pressed in the caselaw, to warrant a puni-

tive damage award. The standards are

clear, and the jury was properly instruc-

ted. To contend that this is a “standard-

less" process flawed by vagueness or that

the judge failed to communicate state law

is to deny fact.

D. There Is Rational Review of Punitive

Damage Awards.

Alabama review of punitive damages

defendant and for the purpose of protecting

the public by deterring the defendant and

others from doing such wrong in the future.

: You must take into consideration the

character and degree of wrong as shown by

evidence in the case, and the necessity of

preventing similar wrongs.

45

includes conventional remittitur, a peti-

tion process for a new trial, an appeal of

the denial of either, and de novo review

of the jury's verdict on appeal. 21 Bias,

passion, prejudice, corruption, improprie-

ties, or excessiveness are grounds for a

new trial court unless the plaintiff ac-

cepts a remittitur. 2

Post-verdict review by the trial

judge in the present case was guided by

Green Oil v. Hornsby, 539 So. 2d 218 (Ala.

1989), and Hammond v. City of Gasden, 493

So. 2d 1374 (Ala. 1986), requiring judges

2lala. Code § 12-22-71 (1975).

eeu When the record establishes that the award

is excessive or inadequate as a matter of law, or

where it is established as reflected in the record

the verdict is based upon bias - May a trial

court order a new trial ro remittitur." Hammond

v. City of Gasden, 493 So. 2d 1374, 1379 (Ala.

1986). Post-trial hearings include consideration

of “the culpability of the defendant's conduct,

Ridout's-Brown Service, Inc. v. Holloway, 397 So.

2d 125 (Ala. 1981); the desirability of discourag-

ing others from similar conduct, Ford Motor Credit

Co. v. Washington, 420 So. 2d 14 (Ala. 1982); the

impact upon the parties, Alabama Power Co. v. Hus-

sey, 291 Ala. 586, 285 So. 2d 92 (1973)."

46

to explain in written orders punitive dam-

age awards, taking into account the level

of the defendant's culpability, various

wealth-based factors, and the existence of

other sanctions imposed on the defendant.

These standards have led to reversal or

modification of a number of jury or lower

court decisions. 23

The system for awarding and reviewing

punitive damages in Alabama was designed

to catch and change jury decisions that

are arbitrary or irrational. Jury in-

structions reflect a rational, pro-consu-

mer state policy, and trial and appellate

23see, e.g., Burroughs Co. Vv. Hall

Affiliates, 423 So. 2d 1348 (Ala. 1982), reversal

on failure to find appropriate level of culpabil-

ity; Treadwell Ford v. Leek, 272 Ala. 544, 547,

133 So. 2d 24, 26 (1961), reversed for failure to

find intent; Mobile Dodge v. Waters, 404 So. 2d 26

(Ala. 1981), failure to find malice; United Ser-

vices Auto. Assn. v. Wade, 544 So. 2d 906 (Ala.

1989), amount reduced by $1 million after review.

See also Waste Disposal v. Stewart, 432 So. 2d

1255 (Ala. 1983), Courtesy Ford Sales, Inc. v.

Clark, 425 So. 2d 1075 (Ala. 1983), and Ex parte

Smith, 412 So. 2d 1222 (Ala. 1982), regarding the

need for precise findings of deceipt.

47

court review provide fundamental safe-

guards that comport with fundamental due

process.

E. Tort Reform Legislation in 1987

Refined Punitive Damages Law and

Reflects the Social and Economic

Policy of the State.

In 1987 Alabama adopted new guide-

lines for punitive damage cases. Ala.

Code § 6-11-20 through 6-11-30 (Supp.

1988). The law affects burden of proof,

presumptions of correctness of jury ver-

dicts, award levels, vicarious liability,

and appellate process. Id. Alabama has

formed its own safeguards without external

mandate for all punitive damage cases.

In Crenshaw, supra, this Court

expressed a clear desire for states to

evaluate their tort systems.

Our review . . . now would short-cir-

cuit a number of less intrusive, and

possibly more appropriate, _resolu-

tions: the . . . State Legislature

might choose to enact legislation ad-

dressing punitive damage awards .

[or] state courts may choose to re-

solve the issue by relying on the

State Constitution or on some other

48

adequate and independent non-federal

ground.

486 U.S. at 79-80. Since the law at the

time the present case was decided was fa-

Cially constitutional, and the law in

place today is explicitly responsive to

this Court's request in Crenshaw, an

intrusive decision elaborating on punitive

damages would smack of judicial oppor-

tunism.

F. The Alabama System for Determining

Punitive Damages C rts with the Re-

quirements of Procedural Due Process.

A true failure of appropriate process

is a most serious constitutional matter.

Were the petitioner denied notice of a

legal standard, sanctions or the process

whereby its property interests would be

affected, or were there a denial of an

Opportunity to be heard at the pretrial,

trial, post-trial, or appellate review

level, this Court would be obligated to

move aggressively. This case does not

involve a denial of an opportunity to be

49

heard or notice, but rather a disagreement

over the wisdom of substantive choices

made by Alabama. Such is hardly an appro-

priate matter for a due process review.

The action of a court or an official

of the judicial branch constitutes state

action for the purposes of the Fourteenth

Amendment when their acts affect a consti-

tutionally protected interest. Shelley v.

Kraemer, 334 U.S. 1, 14 (1948). A person

compelled to rely upon the authority of a

court to settle a civil dispute must be

given a meaningful opportunity to. be

heard. Boddie v. Connecticut, 401 U.S.

371, 377 (1971). Deciding what processes

are due requires a balancing of interests

articulated in Mathews v. Eldridge, 424

U.S. 319, 335 (1976). Mathews established

a three-part test for balancing various

interests when the state action affects

life, liberty, or property requiring an

assessment of the private interests and

50

government interests affected, as well as

the risk of error in the process.

The nature of the specific interest

effected is of consequence as it can dic-

tate the process required. Neither the

loss of life nor liberty is at issue in a

24 There is then

punitive damages case.

only a “simple property" interest involved

in this case. This Court has previously

held that a property interest may not en-

joy the same procedural protections as

life or liberty interests. See, e.g.,

Lassiter v. Dept. of Social Services, 452

U.S. 18, 41 n.8 (1981) (Blackmun, J., dis-

senting); and Phillips v. Commissioner,

att has been argued that punitive damages

deprive a party of liberty and property because

such an award can harm a person's reputation.

Wheeler, The Constitutional Case for Reforming

Punitive Damages Procedures, 69 Va. L. Rev. 269,

278-84 (1983). This argument is flatly at odds

with Paul v. Davis, 424 U.S. 693 (1976), and

Bishop v. Wood, 426 U.S. 341, 348 (1976), where

this Court held that there is no liberty interest

in reputation. But see Brandt v. Board of Co-Op

Education, 820 F.2d 41, 43 (2d Cir. 1987).

51

283 U.S. 539, 596-97 (1931).

In light of this background, it is

appropriate to ask whether the process

provided petitioner conformed with the

baseline constitutional requirements of

due process for protection of a property

interest. This analysis, as with any

procedural due process question, should be

centered on notice and an opportunity to

be heard. Cleveland Board of Education v.

Loudermill, 470 U.S. 532, 546 (1985);

Brock v. Roadway Express, 481 U.S. 252

(1987). Petitioner is entitled to notice

of the standards of culpability and evi-

dence proffered by his adversary, to an

opportunity to respond and present his own

evidence, and to a timely process. These

procedural entitlements were provided.

Petitioner claims, however, that it

was entitled to "“better" jury instruc-

tions, including limits on liability, to

more oral clarity from the judge who gave

52

the jury instructions, and to a “better”

set of laws regarding punitive damages.

These matters may be of great consequence,

but they are not part of a procedural due

process analysis. They are substantive

law issues vested to the best judgment of

the state of Alabama. In a due process

punitive damage case decided this spring,

a North Dakota court assessed accurately

the complainant's rights:

Procedural due process guarantees only

that there is fair decision-making

process before the government takes

some action directly impairing a per-

son's life, liberty, or property.

This procedural aspect of the due pro-

cess clause does not protect against

the use of arbitrary rules of law

which are the basis of those proceed-

ings.

Puppe, 733 F. Supp. at 1360 (footnotes

omitted). See also Section III.

Petitioner's contentions have merit

only if this Court accepts the proposition

that there are no jury instructions, no

guidance at all, in contravention of this

Court's ruling in Giaccio v. Pennsylvania,

$3

382 U.S. 399 (1966). As has been demon-

Strated, however, the jury in this case

was given instruction on culpability and

damage amounts that required the jury to

consider punishment, deterrence, and the

nature of the wrongdoing. (RT 896-898.)

Based on the rulings of this Court and

courts reviewing similar systems, this is

not a “standardless" process. ?°

As previously noted, the methodology

for determining process entitlements re-

quires an assessment of petitioner's pri-

vate interests, in this case money. Spe-

cifically, petitioner would like greater

certainty and predictability regarding the

potential of a large punitive damage

award. Such information would allow peti-

tioner to modify its rate base and ensure

smith v. Wade, 461 U.S. 30 (1983); Gertz v.

Robert Welch, Inc., 418 U.S. 323 (1974); Racich v.

Celotex Corp., 887 F.2d 393 (2d Cir. 1989); Ger-

manio v. Goodyear Tire & Rubber Co., 732 F. Supp.

1297 (D.N.J. 1990); Man v. Raymark Indus., 728 F.

Supp. 1461 (D. Haw. 1989).

54

against the "sting" of a punitive damage

award. As already demonstrated, a compo-

nent of uncertainty forwards the rational

state interest in the punishment function

of punitive damages. (See Section II,

Part C.)

Petitioner's interest in certainty

regarding disposition of his property runs

in tandem with petitioner's allegation

that the Alabama jury system presents a

dangerously high risk of erroneous deci-

sionmakiong, the second leg of the Mathews

test. Petitioner argues that the jury was

given unfettered discretion in this case

to make an award of punitive damages in

any amount it wished. The jury in this

case heard all of the evidence at trial,

including the petitioner's defenses. They

were instructed that they did not have to

award punitive damages, but if they chose

to, the amount should reflect what is

necessary to punish, deter, and make an

55

example of the petitioner anc take into

consideration the character and degree of

the wrong committed by the petitioner.

(RT 898 et seq.)

The foregoing process is constitu-

tionally sufficient, 7® particularly in

light of the fact that the trial judge

conducted a review of the award returned

by the jury in light of Hammond v. City of

Gasden, 493 So. 2d 1374 (Ala. 1986). To

say that there is a high risk of error

requires the belief that jurors make bad

decisions when properly instructed, hardly

a convincing position.

The final leg of a Mathews analysis

requires an assessment of the governmental

264 very similar complaint was raised in

Germanio, supra, regarding procedural due process

and punitive damages. That court found the "[dlJe-

fendants [are] afforded every opportunity consis-

tent with the requirements of due process in civil

cases, including the right to present mitigating

evidence on the punitive damage issue, should the

case reach that juncture." Germanio, 732 F. Supp.

at 1304.

56

interest in the challenged process. In

this case a procedural due process attack

has been levied against the use of a jury

and the content of Alabama law. The state

has a significant interest in maintaining

a punitive damage system that allows

juries to express the will of the state to

punish intentional wrongdoers and deter

future destructive behavior.?? |

These are powerful interests in com-

parison with the private interest of the

defendant. In light of these interests,

it is hard to conceive of a reasoned anal-

ysis that would compel this Court to re-

write the laws of Alabama based on a

failure of procedural due process. The

phrases used by the trial court judge

coula have been articulated more clearly.

eT Juries are often called upon to make

important decisions on matters affecting the well

being of the community. See Witherspoon v.

Illinois, 391 U.S. 510, 519 (1968), and Miller v.

California, 413 U.S. 15 (1973).

rs

. 57

Poor grammar, however, does not make a

judicial instruction unconstitutional.

Improving, refining, and analyzing judi-

cial instructions is a proper task for a

judicial conference. It is wholly inap-

propriate, however, to use the Constitu-

tion to fine-tune judicial instructions.

G. Punitive Damages Are Not Criminal

Sanctions Entitled to Special Pro-

cedural Protections.

The finding in Browning-Ferris Indus.

v. Kelco Disposal, Inc., supra, put to

rest the question of whether punitive dam-

ages were "criminal" in nature, obligating

courts to consider a more broad range of

procedural protections. Petitioners and

amici refuse to accept this fact and con-

tend that they are criminal, necessitating

a brief response.

Punitive damages serve multiple pur-

poses i .cluding punishment. The mere fact

that one of the purposes underlying puni-

tive damages is similar to one of the pur-

58

poses underlying criminal law does not

change the stark legal fact that punitive

damages are recognized to “have long been

a part of traditional state tort law."

Silkwood v. Kerr-McGee Corp., 464 U.S.

238, 255 (1984).

\

Implicitly, Silkwood allows for the

recognition of different protective re-

gimes within our legal system. Civil

fines address governmental needs, ensuring

the implementation of legislatively-

mandated behavioral norms, e.g., 42 U.S.C.

§ 2011 et seg. (1976 ed. and Supp. V), and

are subject to scrutiny by the’ federal

courts, while punitive damages are subject

to scrutiny pursuant to state tort law

principles. 464 U.S. at 257.

To characterize punitive damages as

civil fines and then move civil fines into

the domain of criminal fines requires a

large jurisprudential leap, ignoring whole

blocks of established precedent. Kelly v.

59

Robinson, 479 U.S. 36, 49 n.10 (1986).7°®

Punitive damages are not criminal

Sanctions. They derived from the system

of private wrongs, not public’ wrongs.

There is not a single instance in all of

American jurisprudence in which a court

has accepted the proposition that a state

common law tort remedy (not a legislative

sanction) could somehow be recharacterized

as a criminal sanction. 22

28san Francisco Civil Service Ass'n _v.

Superior Court of Marin County, 16 Cal. 3d 46, 49,

127 Cal. Rptr. 131, 134, 544 P.2d 1331, 1334

(1976), deals with the relationship between fines

and punitive damages, holding that fines "col-

lected civilly are not punitive damages. .. ,"

following § 908 of the Restatement (Second) of

Torts, comment a (1977).

°9Presented with the precise contention that

the "criminal" nature of punitive damages compels

a different process, the court ir Germanio, held:

We do not see any reason why this Court should

extend other protections normally enjoyed only

by criminal defendants to defendants in a tort

case faced with the claim for punitive dam-

ages. The framers of the Bill of Rights and

the Fourteenth Amendment could easily have

done so, and did not.

732 F. Supp. at 1304 (footnote omitted).

6U

IV

VICARIOUS LIABILITY ASSURES ACCOUNT-

ABILITY AND COMPORTS WITH DUE PROCESS.

The petitioner and various amici have

argued that it is unfair to compel Pacific

Mutual to pay punitive damages for the in-

tentional misconduct of an agent of Paci-

fic Mutual based on vicarious liability.

The agent was authorized to make represen-

tations on behalf of Pacific Mutual. His

misdeeds were outside the range of prac-

tices approved by Pacific Mutual. None-

theless, to employees like Cleopatra Has-

lip he gave reasonable assurance that he

was operating on behalf of Pacific Mutual.

Though it has been argued that Paci-

fic Mutual was on notice of the agent's

activity, that is not essential to finding

Pacific Mutual liable. "The majority of

courts . . . have held that the vicarious

liability of the master for acts within

the scope of the employment extend to

punitive . . . damages, .. . [particu-

61

larly] if damages will encourage employers

to exercise closer control over their

servants for the prevention of outrageous

torts. . . ." Prosser & Keaton on Torts

13 (5th ed. 1984).79

American Society of Mechanical Engi-

neers v. Hydrolevel, 456 U.S. 556 (1982),

held that nonprofit organizations can be

liable for the misdeeds of its agents when

the organization neither ratifies nor

authorizes the intentional misconduct,

where the agent's behavior is secret, and

the misconduct is solely for his benefit.

Hydrolevel reaffirms the principle of

corporate accountability. More than a

half-century ago, this Court held that

“few doctrines of law are more firmly

30punitive damages can be assessed against a

corporation for the misconduct of its agents with-

out violating due process. Louis Pizitz Dry Goods

Co. v. Yeldell, 274 U.S. 112 (1927); St. Louis 1.

M. & S. Ry. v. Taylor, 210 U.S. 281 (1908); Wilm-

ington Star Mining Co. v. Fulton, 205 U.S. 60

(1907).

62

established or more in harmony with ac~-

cepted notions of social policy than that

of the liability of the principal without

fault of his own." Gleason v. Seaboard

Airline Arco, 278 U.S. 349, 357 (1929).

The line between Gleason and Hydrolevel is

unbroken. The policy underlying this case

series is simple: the public, consumers,

must be able to rely upon the representa-

tions of agents who are cloaked with the

authority to act on behalf of corpora-

tions. When those representations prove

to be fraudulent they are, for better or

worse, the representations of the corpora-

tion.?2

Were this Court to find that it is

inappropriate to impose punitive damages

3\see Ricketts v. Pennsylvania Railroad Co.,

153 F.2d 757, 759 (2d Cir. 1946), where Judge

Learned Hand wrote “an agent does not cease to be

acting within the scope of his authority when he

is engaged in a fraud upon a third person. ;

[T]he third person has no means of knowing that

the agent is acting beyond his authority. ho

63

On Pacific Mutual for the misdeeds of its

agent, it would permit insurance companies

to look quietly the other way while their

agents engaged in fraudulent activity.

The deterrent or incentive value of puni-

tive damages would be lost. The maximum

exposure of a company is likely to be

nothing more than the obligations created

by nonfraudulent transactions.

If the punitive damage award is up-

held Pacific Mutual will be forced to pay

out a large sum of money it had hoped

greatly to use for other purposes. It

will communicate with its agents nation-

wide. It will upgrade its review of field

agents using the Pacific Mutual name. In

short, Pacific Mutual will take every pos-

Sible step to prevent this type of miscon-

duct in the future. Other insurance com-

panies will learn quickly of Pacific

Mutual's behavior; like trade associations

after Hydrolevel, they will take steps to

64

prevent misconduct by agents acting with

apparent authority.

CONCLUSION

It has been demonstrated that there

is no punitive damage crisis sufficient to

warrant judicial intervention, that puni-

tive damages provide multiple benefits and

further rational state objectives, and

that the Alabama system for determining

punitive damages comports with the re-

quirements of procedural and substantive

due process. Accordingly, the decision of

the Supreme Court of Alabama should be

affirmed.

65

Respectfully submitted,

4 Andrew F. eo

Professor of Law and

Deputy Dean

Counsel of Record

The American University

Washington College of Law

Washington, DC 20016

(202) 885-2604

Attorney for Amicus

Curiae

*

This is to extend deepest appreciation to

Robert Brener, Anne Guy, Nancy Juda, and Richard

Sauer for their fine work in preparing this brief.

——_— aT eo }

he

l.

i

APPENDIX A

Legislation proposed in Congress to

modify punitive damages inc'‘udes:

S. 1400, 10lst Cong., ist Sess.

(1989)

H.R. 2700, 101lst Cong., 1st Sess.

(1989)

H.R. 1115, 100th Cong., I1st Sess.

(1987)

S. 2760, 99th Cong., 2d Sess. (1986)

S. 1999, 99th Cong., lst Sess. (1985)

S. 100, 99th Cong., lst Sess. (1985)

S. 44, 98th Cong., lst Sess. (1983)

S. 2631, 97th Cong., 2d Sess. (1982).

The following are examples of state

"tort reform":

Ala. Code § 6-11-20 et _ seq.

1988)

(Supp.

Alaska Stat. § 09.17.0200 (Supp. 1988)

Gai. Gna... Ca¥.

(West Supp. 1990)

Code §§ 3294, 3295

Colo. Rev. Stat. §§ 13-21-102, 13-25-

127 (Supp. 1986)

Conn. Cen.

1989)

Stat. § 52-240(b) (Supp.

13.

14.

15.

16.

oe

18.

19.

20.

21.

ii

Fla. Stat. Ann. §§ 768.72 through

768.74 (West Supp. 1989)

Ga. Code _ Ann.

1989)

§ 51-12-5.1 (Supp.

Idaho Code § 6-1604 (Supp. 1989)

Ill. Ann. Stat. ch. 110 §§ 2-604.1,

2-1207 (Smith-Hurd Supp. 1989)

Ind. Code Ann. § 34-4-34-2 (Burns

1986).

Iowa Code Ann. § 668A.1 (West 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)

Mont. Code Ann. § 27-1-221 (1987)

Nev. Rev. Stat. Ann. § 42.005 (Supp.

1989)

N.H. Rev. Stat. Ann. § 507:16 (Supp.

1988)

N.J. Stat. Ann.

1987)

§ 2A:58C-5 (West

N.D. Cent. (Page Supp. 1988)

Ohio Rev. Code Ann. § 2315.21 (Page

Supp. 1988)

a i eee

22.

23.

24.

25.

26.

27.

28.

iii

Okla. Stat. Ann. tit. 23, § 9 (West

1987)

Or. Rev. Stat. §§ 30.925; 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 et seg. (Vernon Supp. 1990)

Utah Code Ann. § 78-18-1 (Supp. 1989)

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

iv

APPENDIX B

The following cases are typical of

due process cnallenges to punitive damage

systems after this Court's decision in

Browning-Ferris:

he

Racich v. Celotex Corp., 887 F.2d 393

(2d Cir. 1989) (refused to tamper

with punitive damage system based on

traditional due process’ require-

ments).

Simpson v. Pittsburgh Corning Corp.,

901 F.2d 277 (2d Cir. 1990) (more

precise and restrictive standards for

imposing punitive damages are fore-

closed by Racich).

Eichenseer v. Reserve Life Ins., 881

F.2d 1355 (5th Cir. 1989) (Mississip-

pi law of punitive damages does not

violate Fourteenth Amendment due pro-

cess standards).

Campbell v. A.C. & S., 704 F. Supp.

1020 (D. Mont. 1989) (punitive damage

law not unconstitutionally vague).

Germanio v. Goodyear Tire 6& Rubber

Co., 732 F. Supp. 1297 (D.N.J. 1990),

and Leonen v. Johns-Manville Corp.,

717 F. Supp. 272 (D.N.J. 198889)

(punitive damage awards in New Jersey

do not deny due process).

Horowitz v. Schneider Nat., 708 F.

Supp. 1573 (D. Wyo. 1989) (Wyoming

punitive damage law comports with due

process).

|

i

:

10.

Vv

Kociemba v. G.D. Searle & Co., 707 F.

Supp. 1517 (D. Minn. 1989) (Minnesota

punitive damage law is constitu-

tional).

Hospital Authority v. Jones, 259 Ga.

759, 386 S.E.2d 120 (1989) (Georgia

punitive damages system meets para-

meters of due process).

Lazarus Dept. Store v. Sutherlin, 544

N.E.20 513 (Ind. App. 1 Dist. 1989)

(Indiana punitive damage awards do

not violate due process).

Stoner v. Nash Finch, 446 N.W. 2d 747

(N.D. 1989) (North Dakota punitive

damages system not constitutionally

defective).