Amicus Curiae Brief — Cooper Industries, Inc. v. Leatherman Tool Group, Inc.

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No. 99-2035 CLERK

IN THE

Supreme Court of the United States

COOPER INDUSTRIES, INC..,

Petitioner,

Vv.

LEATHERMAN TOOL GROUP, INC.,

Respondent.

On Writ Of Certiorari

To The United States Court of Appeals

For The Ninth Circuit

BRIEF OF THE CALIFORNIA EMPLOYMENT

LAW COUNCIL, THE EMPLOYERS GROUP, AND

THE BOEING COMPANY AS AMICI CURIAE IN

SUPPORT OF PETITIONER

Of Counsel: WILLIAM J. KILBERG

BRYAN BAUMEISTER Counsel of Record

THE BOEING COMPANY THOMAS G. HUNGAR

2201 Seal Beach Blvd. GIBSON, DUNN & CRUTCHER LLP

Seal Beach, CA 90740 1050 Connecticut Avenue, N.W.

(562) 797-1016 Washington, D.C. 20036

(202) 955-8500

Counsel for Amici Curiae

—————_————_——eeeeeeeee ee

BH

QUESTION PRESENTED

What is the standard of review of a trial court’s ruling

on a challenge to the constitutionality of a punitive

damage award?

ii

TABLE OF CONTENTS

Page

QUES TIOIN PRRESIIOIN 2 EBD ccccscccsesssnsssseseninnsiaiiiuanaana i

TABLE OF AU TIRURRE BRR <cosesesvssssonsdsveienaniiananial iv

IN TEREST OF AACE CURRIES ccccsssssccsescceessnsinnnnne l

S TA TIME I .....:ccccorsecsnecsesepesseniuselinnnesinennnninninnnnnnnnnnE 2

SUMMARY OF ARGUMENT ..............cc:cccesssecessreeeeeees 3

ARRISUIEIEN TF .000ccsceccesesesneesseessesssnssniansnnninnnnnsnnnnnnnnnEEE 4

I. The Protection Against Excessive Punitive

Damages Is Firmly Rooted In The Constitu-

RROD ..200s0cccsccecesesessenenenesenenennsnnnelinninnninnnnnnnnnnnnnnnnnnnEEEE 4

II. Independent Appellate Review Of Excessive

Punitive Damages Is Necessary To Protect

The Rights Guaranteed Under The Due

PYOCSSS. CIBUBS......:cccsccecscecessonesestionsnineneinnnnnnnnnnnnnnnn 5

A. The Danger Of Excessive Awards Is Sig-

RRETECONEE ......0000esececsenssoesessnensennniininnnnnnnnnnnnn 6

B. The Absence Of Effective Appellate Re-

view Endangers Due Process .............:::csseeeeees 8

C. The Assessment Of Excessive Punitive

Damage Awards Is A Question Of Law

That Should Be Subject To Independent

RRO VES WY ......00ccccesseesesonsesessssenssienesnninnnnnnnnannnnnn 9

D. Even If The Excessivenss Inquiry Were

Not A Question Of Law, Independent

Review Would Still Be Required.................... 17

II]. The Factors Considered By Courts In Evalu-

ating Constitutionally Excessive Awards

Confirm The Need For Independent Review.......... 19

IV. The Court’s Due Process Jurisprudence Re-

veals No Special Deference To Trial Courts’

Excessiveness Determinations .................c0sssessseees 22

CONCLUSION

hhh ELE

iV

TABLE OF AUTHORITIES

Page(s)

CASES

Agosto v. INS, 436 U.S. 748 (1978)..........:cccccceeececeeeeees 17

Bose Corp. v. Consumers Union, 466 U.S.

GP Gee interne Deccinasiieiiiinaices 6,18

BMW of N. Am. v. Gore, 517 U.S. 559

EE sscccnsccenemionteniimmiaieainain 2,4,5,10,15,19,20,21,22

Browning-Ferris Industries v. Kelco

Disposal, Inc., 492 U.S. 257 (1989).........cccccceceees 7,16

California Retail Liquor Dealers Ass'n v.

Midcal Aluminum, Inc., 445 U.S. 97

Fel ictinciaesenmansinientiirensesmniahinnmieninnnmmpainticnnnesiiinnens 10

Cedar Rapids Gas Light Co. v. Cedar

LE | eee 19

Condon Auto Sales & Serv., Inc. v. Crick,

604 N.W.2d 587 (lowa 1999) ooo... eeceeeeeeeees 15,16

Conner v. Schrader-Bridgeport

International, Inc., 227 F.3d 179 (4th

uae COME wiccrnicsincinshnietciiasineinstaeciciniigaiaitaiabinitioaiiitiaisiaiaaiiaii 15

Day v. Woodworth, 13 How. 363 (1852)...............c00+0 20

Exxon Co., U.S.A. v. Sofec, Inc., 517 U.S.

I cnccennenniicinninsiiiaiinenainantinesdiiadainiaininnnicntins 10

FDIC v. Hamilton, 122 F.3d 854 (10th Cir.

FETE wcanenecersteinennisinanininineeieiaatiniateininitienniidbidnint 15

Gasperini v. Center for Humanities, Inc.,

ee a ee Ce cacirnepnnenictiniiiniciinntiniaiiaznien 15,16

Graver Tank & Mfg. Co. v. Linde Air

Products Co., 336 U.S. 271 (1949) .......ccccceceeseeees 10

High v. Rhay, 519 F.2d 109 (9th Cir. 1975) ................. 17

— -_-

Vv

Honda Motor Co. v. Oberg, 512 U.S. 415

See ennerecennintennemetniiaiitahenintinntiinenemeeees 2,4,5,8,9

Johansen v. Combustion Engineering, Inc.,

170 F.3d 1320 (11th Cir. 1999)... cece 14,15

Lee v. Edwards, 101 F.3d 805 (2d Cir. 1996) .............. 15

Lloyd A. Fry Roofing Co. v. Wood, 344 U.S.

AREER SE EER meee eee 10

MacCrone v. Edwards Ctr., Inc., 980 P.2d

Pe Ge GI Cp cticteiccniecitcinintsenoniomncnmeninniin 15

Miller v. Fenton, 474 U.S. 104 (1985) ................0000 9.10

Morse v. Southern Union Co., 174 F.3d 917

Sy TT eteiccdnnsetiiniieinainanaininsetiieneniiememiaund 15

New York Times Co. v. Sullivan, 376 U.S.

ST cictiniierrnntaiatiansiiatiacenicinteeapiaimeiel 6,17,18

Ornelas v. United States, 517 U.S. 690

EE enecioeeitieaeiennrecetannaainaiapaiiinsinaidiaitaslitaaniane teatime 12,13

Owens-Corning Fiberglass Corp. v.

Golightly, 976 S.W.2d 409 (Ky. 1998) 0.0.0.0... 16

Pacific Mutual Ins. Co. v. Haslip, 499 U.S. 1

ITED Uaicicnindsiinietulehiitieaaetaiehanasihihaciamatainieiindiaitinainiaiaiias 6,9,23

Pavon v. Swift Transportation Co., 192 F.3d

Ree names Or 15

Pullman-Standard v. Swint, 456 U.S. 273

eisai echinacea esata 9,19

Routh Wreckage Serv., Inc. v. Washington,

SED FS. WBE DED CAGE. 1996) nccccccccccesccceccecccccssccccsees 15

Salve Regina College v. Russell, 499 U.S.

Se cccisineiliiiteiciininciapsdisiaiipeniiiaiimainiininnsiibees 11,12

Seaboard Air Line R. Co. v. Seegers, 207

EE coer 4

Southwestern Tel. & Tel. Co. v. Danaher,

es Mc eciscnnseittinitaieidalcneniniatteaetatiannaes 4,5

vi

Strickland v. Washington, 466 U.S. 668

STITT sceiesuecenieecheinethaiiichieiagsiaaetittaiateiadetienaattahdlaiahlui 19

Thompson v. Keohane, 516 U.S. 99 (1995)............. 13,14

Turner v. Arkansas, 407 U.S. 366 (1972)..............000000 17

TXO Prod. Corp. v. Alliance Resources

Corp., 509 U.S. 443 (1993).........0.. 2,4,5,11,20,22,23

United Phosphorus, Ltd. v. Midland

Fumigant, Inc., 205 F.3d 1219 (10th Cir.

EATS SEES SSC Ee ce Tere 15

United States v. Big D. Enters., Inc., 184

fk een 15

United States v. John J. Felin & Co., 334

BT TTT cssesieriaciaineitcineneniimmaeaiemunneieinn 17,19

Verdine v. McDonnell Douglas, No.

B126205 (Cal. Ct. App. July 26, 2000) .........0......2.. 2

STATUTES AND RULE

Be is St TE ncrerasetersenencseennmnimncinindaneninianetenes 13

I ia lanier ikem tena 16

OTHER AUTHORITIES

James C. Goodale, Why Did the Enquirer

Pay $ 10 Million?, N.Y. L.J., Aug. 7,

iri hinsncnienuadiumeteteneneninmnneinetneemmenanetiieinnecnte 7

John Calvin Jeffries, Jr., A Comment on the

Constitutionality of Punitive Damages,

Be Ue ee EG CI ED crcctetesnniseenitcicnrnnmmennnes 7

MOoRE’S FEDERAL PRACTICE (3d ed. 2000) ............... 19

Russel Myles & Kelly Reese, Arbitration:

Avoiding The Runaway Jury, 23 AM. J.

TI 7

—_—_—— —— it. te

Vii

Victor E. Schwartz et al., Reining In Punitive

Damages “Run Wild”: Proposals For

Reform By Courts And Legislatures, 65

ee

=_— — ee —_

INTERES? OF AMICI CURIAE

The California Employment Law Council (“CELC”),

The Employers Group (“TEG”), and The Boeing

Company (“Boeing”) respectfully submit this brief

amici curiae in support of petitioners to assist the Court

in analyzing the important constitutional issues raised in

this case.! The purpose of this brief is to demonstrate

that in order to preserve and enforce the constitutional

prohibition against excessive punitive damage awards,

independent appellate review of punitive damages

verdicts is constitutionally required.

CELC is a voluntary, nonprofit organization that

promotes the common interests of employers and the

general public in fostering the development of

reasonable, equitable and progressive rules of

employment law. CELC’s membership includes more

than 60 private sector employers in the State of

California, which collectively employ well in excess of a

half-million Californians. This case is of great interest

and importance to CELC’s members. CELC is familiar

with the questions involved in this case, and believes

that the standard of review of constitutional challenges

to punitive damages awards is an issue that significantly

affects the rights of its members.

The Employers Group is one of the nation’s oldest

and largest human resources management associations,

representing nearly 5,000 companies of all sizes and

every industry, which employ approximately 2.5 million

| Pursuant to this Court’s Rule 37.6, amici state that no counsel

for any party authored this brief in whole or in part, and no

person or entity other than amici, their members, or their counsel

made a monetary contribution to the preparation or submission of

the brief Counsel of record for both petitioners and respondents

have consented to the filing of this amici brief in letters that have

been lodged with the clerk.

o)

—

employees. The Employers Group’s extensive

experience with the legal issues faced by business

enterprises of all shapes and sizes provides it with a

unique perspective that will hopefully assist the Court in

considering the important issues presented in this case.

Boeing is frequently sued in federal and state courts

by plaintiffs seeking punitive damages. The randomness

of the jury system sometimes results in the return of a

verdict awarding punitive damages. Accordingly,

Boeing has an interest in the proper resolution of the

question presented in this case. For example, Boeing

intends to file a petition for a writ of certiorari with this

Court seeking review of the decision of the California

Court of Appeal in Verdine v. McDonnell Douglas, No.

B126205, slip op. (Cal. Ct. App. July 26, 2000). In that

case, the court of appeal refused to conduct an

independent review of the constitutional validity of a $9

million punitive damage award in a single-plaintiff

employment case, and instead sustained the award under

a deferential standard of review.

Meaningful appellate review is a cornerstone of this

Court’s jurisprudence and provides an_ essential

protection against unreasonable jury awards. Amici are

concerned that any standard less rigorous than inde-

pendent review would denigrate the important concerns

identified by this Court in BMW of North America v.

Gore, 517 U.S. 559 (1996); Honda Motor Co. v. Oberg,

512 U.S. 415 (1994); and TXO Production Corp. v. Alli-

ance Resources Corp., 509 U.S. 443 (1993), and provide

inadequate protection for defendants subjected to uncon-

stitutionally excessive punitive damages awards.

Accordingly, amici are well situated to assist the Court

in resolving the important issues presented in this case.

STATEMENT

Respondent Leatherman Tool Group, Inc., brought

this action against petitioner Cooper Industries, Inc., in

the United States District Court for the District of

3

Oregon, asserting claims for violation of the Lanham

Act and common law claims for unfair competition,

false advertising, and “passing off.” Pet. App. 32a.

Respondent alleged that petitioner had improperly used

respondent’s tool in some promotional materials

purporting to feature petitioner’s product. The case

proceeded to a jury trial and the jury awarded

respondent $50,000 in compensatory damages and $4.5

million in punitive damages, solely with respect to the

common law claims. Petitioner filed a post-trial motion

in the district court arguing that the punitive damage

award, amounting to ninety times the compensatory

damage award, was unconstitutionally excessive under

the Due Process Clause. Pet. App. 24a. After the

district court refused to reduce this verdict, the Ninth

Circuit engaged in a deferential review for abuse of

discretion and found that, in light of the evidence at trial,

the district court did not abuse its discretion in finding

the award permissible. Pet. App. 3a-4a. This Court then

granted certiorari to decide whether appellate courts are

required to independently review alleged constitutional

violations of due process stemming from the assessment

of punitive damages.

SUMMARY OF ARGUMENT

In numerous contexts, this Court has repeatedly

ensured that constitutional protections are fully observed

by requiring appellate courts to rely on their own

independent review of constitutional matters of law.

This Court has also extended independent review to

certain “constitutional facts” in an effort to guarantee

that important constitutional protections are not

undermined by inadequate provisions for searching

judicial review. The same principles require application

of independent appellate review in the area of excessive

punitive damage awards.

Punitive damages may properly be imposed by States

and the federal government to further governmental

4

interests in punishing unlawful conduct and deterring its

repetition. This Court has made clear, however, that this

power is limited, because if punitive awards are “grossly

excessive,” they enter a “zone of arbitrariness that

violates the Due Process Clause of the Fourteenth

Amendment.” BMW of N. Am. v. Gore, 517 U.S. 559,

568 (1996). Despite this Court’s announcement of the

federal constitutional limits on punitive damage awards,

the incidence of constitutionally unreasonable punitive

damages is on the rise. Unless the Court ensures

meaningful appellate review of jury awards, the

constitutional protections recognized in BMW will be

undermined. Meaningful review requires independent

appellate review, regardless of whether the

excessiveness inquiry is viewed as a question of law (as

it should be), as a question of constitutional fact, or as a

mixed question of law and fact. Independent appellate

review would enhance, and is fully consistent with, the

analysis laid out by this Court in prior cases.

ARGUMENT

I. The Protection Against Excessive Punitive

Damages Is Firmly Rooted In The Constitution

This Court has repeatedly held “that the Due Process

Clause of the Fourteenth Amendment imposes substan-

tive limits ‘beyond which penalties may not go.’” TXO

Prod. Corp. v. Alliance Resources Corp., 509 U.S. 443,

454 (1993) (plurality opinion) (quoting Seaboard Air

Line R. Co. v. Seegers, 207 U.S. 73, 78 (1907)); see

Honda Motor Co. v. Oberg, 512 U.S. 415, 420 (1994)

(“the Constitution imposes a substantive limit on the

size of punitive damage awards”). The constitutional

prohibition against excessive punitive awards and sanc-

tions has long been recognized in this Court’s Due Proc-

ess Clause jurisprudence. See Southwestern Tel. & Tel.

Co. v. Danaher, 238 U.S. 482, 491 (1915) (setting aside

a penalty imposed on a telephone company because it

was so “plainly arbitrary and oppressive” as to violate

5

the Due Process Clause). Justice Kennedy’s concur-

rence in 7XO aptly describes the important and weighty

interests involved in the imposition and review of puni-

tive damage awards:

[The Constitution’s] fundamental guarantee is that

the individual citizen may rest secure against

arbitrary or irrational deprivations of property.

When a punitive damages award reflects bias,

passion, or prejudice on the part of the jury, rather

than a rational concern for deterrence and

retribution, the Constitution has been violated, no

matter what the absolute or relative size of the

award.

509 U.S. at 467.

Accordingly, the Court’s jurisprudence in this area

has recognized that the Constitution provides an upper

limit on punitive damages so a defendant has “fair notice

not only of the conduct that will subject him to punish-

ment but also of the severity of the penalty that a State

may impose.” BMW of N. Am. v. Gore, 517 U.S. 559,

574 (1996); see Honda Motor Co., 512 U.S. at 420.

This protection against excessive punitive awards is a

fundamental and important part of our constitutional

panoply of rights.

II. Independent Appellate Review Of Excessive

Punitive Damages Is Necessary To Protect The

— Guaranteed Under The Due Process

ause

In order to preserve the constitutional protections un-

derlying this Court’s due process jurisprudence in the

area of punitive damage awards, meaningful judicial re-

view of punitive damage awards is required at both the

trial and appellate level. Meaningful appellate review

aids the development of the law, but more fundamen-

tally it acts as an essential layer of support for those val-

ues we hold dear. Because constitutional rights are our

6

most cherished rights, courts have always had an un-

flagging obligation to make certain they are not in-

fringed upon. The importance of rigorous appellate re-

view in the constitutional context is illustrated by this

Court’s discussion in Bose Corp v. Consumer Union,

466 U.S. 485 (1984):

The requirement of independent appellate review

reiterated in New York Times Co. v. Sullivan, [376

U.S. 254 (1984)] is a rule of federal constitutional

law. It emerged from the exigency of deciding

concrete cases; it is law in its purest form under

our common-law heritage. It reflects a deeply held

conviction that judges—and particularly Members

of this Court—must exercise such review in order

to preserve the precious liberties established and

ordained by the Constitution .... Judges as

expositors of the Constitution, must independently

decide whether the evidence in the record is

sufficient to cross the constitutional threshold... .

Id. at 510-511.

While Bose arose in the First Amendment context, the

Bose Court’s analysis applies with equal force in cases

involving enforcement of the Due Process Clause’s pro-

hibition against grossly unreasonable punitive damage

awards. The need for searching review is most acute

when constitutional interests are at stake.

A. The Danger Of Excessive Awards Is

Significant

Many members of the Court have expressed concern

about the due process implications of runaway jury ver-

dicts, especially the potential that juries will be left with

no meaningful standards to constrain excessive punitive

damage awards. In Pacific Mutual Ins. Co. v. Haslip,

499 U.S. 1, 9 (1991), for example, the Court stated that

it and many “individual Justices thereof on a number of

occasions in recent years ha[d] expressed doubts about

7

the constitutionality of certain punitive damages

awards.” In the earlier case of Browning-Ferris Indus-

tries v. Kelco Disposal, Inc., 492 U.S. 257 (1989), Jus-

tice Brennan remarked that “[wJithout statutory (or at

least common-law) standards for the determination of

how large an award of punitive damages is appropriate

in a given case, juries are left largely to themselves in

making this important, and potentially devastating deci-

sion.” Jd. at 281 (Brennan, J., concurring). Also in

Browning-Ferris, Justice O’Connor cogertly observed

that “[a]wards of punitive damages are skyrocketing

. | adhere to my comments .. . regarding the vague-

ness and procedural due process problems presented by

juries given unbridled discretion to impose punitive

damages.” Jd. at 282-83 (O’Connor, J., concurring in

part and dissenting in part).

The Court is not alone in its recognition of the in-

creasing frequency of punitive damage awards. Numer-

ous commentators have also addressed this issue. See,

e.g., Russel Myles & Kelly Reese, Arbitration: Avoiding

The Runaway Jury, 23 AM. J. TRIAL ADvoc. 129

(Summer 1999); Victor E. Schwartz et al., Reining In

Punitive Damages “Run Wild”: Proposals For Reform

By Courts And Legislatures, 65 BROOK. L. REV. 1003

(1999); John Calvin Jeffries, Jr., A Comment On The

Constitutionality Of Punitive Damages, 72 VA L. REV.

139 (1986) (“As everyone who reads the newspapers

must know, the American civil liability system is ap-

proaching a crisis. One prominent aspect of this crisis is

the problem of punitive damages. In my view, punitive

damages are out of control.”); James C. Goodale, Why

Did the Enquirer Pay $ 10 Million?, N.Y. L.J., Aug. 7,

1998, at 3 (discussing how fear of an outrageous verdict

may have caused huge settlement). These realities only

enhance the need to provide adequate procedural protec-

tions to prevent encroachment on the fundamental liber-

ties guaranteed under the Due Process Clause.

8

B. The Absence Of Effective Appellate Review

Endangers Due Process

The decisions of this Court indicate that the absence

of effective judicial review of punitive damage awards

can threaten the integrity of a jury award so fundamen-

tally as to amount to a violation of due process. In

Honda Motor Co., the Court considered the constitu-

tional validity under the Fourteenth Amendment of a

state constitutional provision that barred judicial review

of the amount of punitive damages awarded by a jury

unless there was “no evidence to support the verdict.’”

512 U.S. at 418 (citation omitted). The jury in that case

had awarded $5 million in punitive damages, and the

lower state courts refused to reduce the award despite

Honda’s argument that it violated the Due Process

Clause. See id. The Oregon Supreme Court affirmed,

holding that there was no constitutional requirement that

state courts always review punitive damage awards for

excessiveness. See id. at 419.

On review, this Court began by recognizing the fed-

eral constitutional right to be free from excessive puni-

tive damages, and then turned to the question whether

judicial review is required as a matter of due process.

The Court found that “[{jJudicial review of the size of

punitive damage awards has been a safeguard against

excessive verdicts for as long as punitive damages have

been awarded,” id. at 421, and that the need for such

review had only increased as “the rise of large, interstate

and multinational corporations has aggravated the

problem of arbitrary awards and potentially biased

juries.” Jd. at 431. The Court then concluded that the

Oregon procedure could not pass constitutional muster.

See id. at 430-32. The Court explained that judicial re-

view of punitive damages was “one of the few proce-

dural safeguards which the common law provided

against” the “acute danger of arbitrary deprivation of

property.” Jd. at 432. Accordingly, the “denial of judi-

9

cial review of the size of punitive damage awards vio-

lates the Due Process Clause.” /d.

The Honda decision built on the Court’s earlier rec-

ognition in Haslip that a post-verdict judicial review of

punitive damage awards is a crucial component of a

permissible scheme for the imposition of punitive dam-

ages. In Haslip, the Court recognized “that unlimited

jury discretion—or unlimited judicial discretion for that

matter—in the fixing of punitive damages may invite

extreme results that jar one’s constitutional sensibili-

ties.” 499 U.S. at 18. The Court permitted the award to

stand in Haslip only because it found that “[t]he Ala-

bama Supreme Court’s postverdict review ensure[d] that

punitive damages awards [we]re not grossly out of pro-

portion to the severity of the offense and ha[d] some un-

derstandable relationship to compensatory damages.”

Id. at 22.

Accordingly, meaningful appellate review is not only

advisable, but constitutionally necessary to ensure due

process. It is only with judicial review that the rights

— in the Constitution can be effectively pre-

served.

C. The Assessment Of Excessive Punitive

Damage Awards Is A Question Of Law That

Should Be Subject To Independent Review

_ To obtain this meaningful review with regard to puni-

tive damage awards, independent judicial consideration

of their amount and validity should be required. The

resolution of punitive award cases turns on questions of

law that traditionally have been subject to independent

review.

“[T]}he Court has yet to arrive at ‘a rule or principle

that will unerringly distinguish a factual finding from a

legal conclusion."” Miller v. Fenton, 474 U.S. 104, 113

(1985) (quoting Pullman-Standard v. Swint, 456 U.S.

273, 288 (1982)). “Perhaps much of the difficulty in

10

this area stems from the truth that the decision to label

an issue a ‘question of law,’ a ‘question of fact,’ or a

‘mixed question of law and fact’ is sometimes as much a

matter of allocation as it is of analysis.” Miller v. Fen-

ton, 474 U.S. at 113-14 (citation omitted). The Court

has frequently made the classification based on its as-

sessment of whether one judicial actor is better suited to

the task than another. See id. at 114. For example, the

Court has sometimes treated questions as presenting is-

sues of fact when witness credibility is important, or has

classified questions as issues of law when the role of a

federal appellate court as the expositor of law was

threatened, as with the issue of “actual malice” in the

First Amendment context. See id.

Other questions may lack a specific classification, but

the Court’s approach indicates the nature of the inquiry.

In BMW, for example, although the Court never stated

whether it considered the excessiveness issue to present

an issue of law or fact, the circumstances make clear that

the Court was treating the case as presenting a question

of law. BMW arose out of the review of an Alabama

state court proceeding. See 517 U.S. at 563. This Court

has repeatedly reaffirmed its unwillingness to review

fact finding by state courts. See California Retail Liq-

uor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S.

97, 111-12 (1980) (“we customarily accept the factual

findings of state courts in the absence of ‘exceptional

circumstances’”) (citing Lloyd A. Fry Roofing Co. v.

Wood, 344 U.S. 157, 160 (1952)); see also Exxon Co.,

U.S.A. v. Sofec, Inc., 517 U.S. 830, 841 (1996) (“A

court of law, such as this Court is, rather than a court for

correction of errors in fact finding, cannot undertake to

review concurrent findings of fact . . . in the absence of a

very obvious and exceptional showing of error.””’) (quot-

ing Graver Tank & Mfg. Co. v. Linde Air Products Co.,

336 US. 271, 275 (1949)). Consequently, the BMW

Court must have been engaging in review as a matter of

law.

1]

Similarly, in T7XO, the Court’s extensive discussion

about the parties’ interest in differing bright-line tests

for excessiveness reveals that the Court considered the

excessiveness question as a matter of law. See 509 U.S.

at 453-62. Thus, the Court’s jurisprudence demonstrates

that the constitutional excessiveness inquiry is a ques-

tion of law that should be subjected to independent judi-

cial review.

The Court’s discussion in Salve Regina College v.

Russell, 499 U.S. 225 (1991), is particularly instructive

regarding the need for independent judicial review of

these sorts of questions of law. In Salve Regina, the

Court addressed the question whether the courts of ap-

peals were required to independently review district

courts’ determinations of state law. See id. at 227.

Finding a split among the circuits regarding the appro-

priate deference owed to a district court’s interpretation

of state law, the Court decided that independent de novo

review was appropriate. See id. at 231.

The Court began by noting the following general

principle: “The obligation of responsible appellate ju-

risdiction implies the requisite authority to review inde-

pendently a lower court's determinations.” Id. (empha-

sis added). The Court then catalogued some of the diffi-

culties caused by affording trial courts more deference

than is appropriate. The Court noted that trial judges of-

ten preside over fast-paced trials and out of necessity

devote much of their time to reviewing evidence and

hearing witnesses. See id. at 231. As the Court ex-

plained, “trial judges often must resolve complicated le-

gal questions without benefit of extended reflection [or]

extensive information.” /d. at 232 (internal quotation

omitted; alteration in original). By contrast, courts of

appeals are “structurally suited to the collaborative ju-

ridical process that promotes decisional accuracy.” /d.

The Salve Regina Court also described the benefits of

independent appellate review, many of which apply with

12

equal force to the question of constitutionally excessive

punitive damage awards:

Independent appellate review necessarily entails a

careful consideration of the district court’s legal

analysis, and an efficient and sensitive appellate

court at least will naturally consider this analysis in

undertaking its review....Amy expertise

possessed by the district court will inform the

structure and content of its conclusions of law and

thereby become evident to the reviewing court .

... [AJn appropriately respectful application of de

novo review should encourage a district court to

explicate with care the basis for its legal

conclusions.

Id. at 232-33. Lastly, the court rejected the notion that

deference was owed to the trial court because it might be

more familiar with state law. See id. at 238-39.

This case reveals two fundamental principles essential

to the Court’s resolution of the standard of review in

punitive damage cases: (1) independent appellate review

contributes significantly to meaningful review, and

(2) independent appellate review is warranted when the

issue before the court requires reflective, analytical, and

objective analysis more properly suited to the skills and

functional duties of appellate courts.

This Court has long applied independent appellate re-

view of analogous constitutional questions that, like ju-

dicial review of excessive punitive awards, involve ap-

plication of a legal standard to the totality of the circum-

stances presented. For example, the Court has held that

independent appellate review is required with respect to

determinations of probable cause and reasonable suspi-

cion under the Fourth Amendment. Like the assessment

of constitutional reasonableness for punitive awards, this

area of the law is not easily subject to bright-line rules

because it “is not possible” to “[a]rticulat[e] precisely’

what these standards mean. Ornelas v. United States,

—_—_—— oa

13

517 U.S. 690, 695 (1996). Instead, the decisionmaking

process involves application of “fluid concepts that take

their substantive content from the particular contexts in

which the standards are being assessed.” Jd. at 696.

Given these aspects of the legal standards, the Orne-

las Court concluded that independent appellate review

of probable cause and reasonable suspicion was neces-

sary. Jd. at 697 (“We think independent appellate re-

view of these ultimate determinations of reasonable sus-

picion and probable cause is consistent with the position

we have taken in past cases. We have never, when re-

viewing a probable-cause or reasonable-suspicion de-

termination ourselves, expressly deferred to the trial

court’s determination.”). The Court explained that the

relevant legal rules for probable cause and reasonable

suspicion “acquire content only through application.”

Id. Crucial to the development of such rules was inde-

pendent appellate review: “Independent review is there-

fore necessary if appellate courts are to maintain control

of, and to clarify, the legal principles.” Jd.

Similarly, in Thompson v. Keohane, 516 U.S. 99

(1995), the Court considered the question whether “in

custody” determinations in the habeas corpus context

were questions of law subject to de novo review or ques-

tions of fact entitled to a presumption of correctness un-

der 28 U.S.C. § 2254(d). See id. at 106-07. The Court

ultimately concluded that the “in custody” determination

should be reviewed de novo as a question of law. See

id. at 112. The Court reasoned that two discrete inquir-

ies were essential to the “in custody” decision: “first,

what were the circumstances surrounding the interroga-

tion; and second, given those circumstances, would a

reasonable person have felt he or she was not at li

to terminate the interrogation and leave.” Jd. The court

concluded that “[o]nce the scene is set and the players’

lines and actions are reconstructed, the court must apply

an objective test to resolve the ultimate inquiry.” /d. (in-

14

ternal quotation omitted). Accordingly, the Court held

that independent appellate review was required. See id.

Essentially the same considerations compel the

conclusion that independent appellate review is required

in the punitive damages context. As is true of the “in

custody” or “voluntariness” inquiry, an appellate court

reviewing an excessiveness claim in a punitive damages

case is presented with a trial court record that sets the

scene and reconstructs “the players’ lines and actions,”

and the only role of the appellate court is to consider and

apply the legal factors identified by the Court in BMW,

Honda Motor Co., TXO, and Haslip, to decide whether

the award is constitutionally excessive. Thus, the appel-

late court “must apply an objective test to resolve the ul-

timate inquiry,” Thompson v. Keohane, 516 U.S. at 112,

and de novo review is therefore appropriate.

The Eleventh Circuit in Johansen v. Combustion

Engineering, Inc., 170 F.3d 1320 (11th Cir. 1999),

offered a congent and persuasive analysis of this issue

in the punitive damages context. The question

presented in that case was whether a judicial reduc-

tion of a punitive damages award as excessive consti-

tuted a violation of the Seventh Amendment. In

resolving that question, the court examined the role of

a court in reviewing the amount of a punitive damage

award and concluded that this role entailed the

resolution of a question of law, not one of fact.2 See

id. at 1330-31. The court explained: “No one would

dispute that the court, not the jury, has the

responsibility for determining the constitutional limit.

Courts decide questions of law, not juries.” Jd. at

1331. Having determined that the excessiveness

inquiry presented a legal question, the Eleventh

2 The court of appeals did review certain underlying facts

involved in the BMW analysis for clear error. See Johansen, 170

F.3d at 1334.

15

Circuit then concluded that independent review was

required:

A constitutional reduction ... is a determination

that the law does not permit the award. Unlike a

remittitur, which is discretionary with the court

and which we review for an abuse of discretion . . .

a court has a mandatory duty to correct an uncon-

titutionally excessive verdict so that it conforms to

the requirements of the due process clause.

Id. (citing Gasperini v. Center for Humanities, Inc., 518

U.S. 415, 435 (1996); BMW, 517 U.S. at 585).

As noted in the petition, several other courts of

appeals have reached the same conclusion. See e.g.,

Conner v. Schrader-Bridgeport International, Inc., 227

F.3d 179, 202 (4th Cir. 2000) (“Whether the jury’s

award was excessive is a question of law, which we

review de novo.”); United Phosphorus, Ltd. v. Midland

Fumigant, Inc., 205 F.3d 1219 (10th Cir. 2000)

(applying de novo standard of review for punitive

damages assessed against company president) (citing

FDIC v. Hamilton, 122 F.3d 854, 857 (10th Cir. 1997));

United States v. Big D. Enters., Inc., 184 F.3d 924, 932-

33 (8th Cir. 1999) (“Appellants characterize the award

as ‘grossly excessive’ and claim that it violates their due

process rights . . . . We review the district court’s

conclusions de novo.”’).3

3 Other courts of appeals have reached the opposite conclusion.

See e.g., Pavon v. Swift Transportation Co., 192 F.3d 902, 909

(9th Cir. 1999); Morse v. Southern Union Co., 174 F.3d 917, 926

(8th Cir. 1999); Lee v. Edwards, 101 F.3d 805, 808-09 (2d Cir.

1996). State courts are similarly split. Compare MacCrone v.

Edwards Ctr., Inc., 980 P.2d 1156, 1165 (Or. Ct. App. 1999) (en

banc) (construing BMW to require an independent appellate

review); Routh Wreckage Serv., Inc. v. Washington, 980 S.W.2d

240, 244-45 (Ark. 1998) (applying de novo review) with Condon

Auto Sales & Serv. Inc. v. Crick, 604 N.W.2d 587, 595 (lowa

[Footnote continued on next page]

16

Most of the lower court decisions reaching a contrary

conclusion rely to some degree on Browning-Ferris v.

Kelco Disposal, Inc., 492 U.S. 257 (1989), or Gasperini

v. Center for Humanities, Inc., 518 U.S. 415 (1996).

Browning-Ferris does not compel this conclusion,

however, because in that case the Court held that the due

process challenge to the allegedly excessive punitive

damage award was not properly before the Court. See

Browning-Ferris Indus., 492 U.S. at 277. In that case,

the petitioner’s central contention (which the Court

rejected) was that the Eighth Amendment’s Excessive

Fines Clause applied to constrain awards of punitive

damages in private civil suits. See id. at 275. The

Court’s discussion of a deferential standard of review

was clearly addressed only to the defendant’s motion for

a new trial or remitittur under FED. R. CIV. P. 59, not to

a due process excessiveness challenge. See id. at 279.

Accordingly, Browning-Ferris does not resolve the

question of the appropriate standard of review for claims

of unconstitutionally excessive punitive damages awards

in violation of the Due Process Clause.

Gasperini is equally inapposite, because it addressed

only compensatory damages and did not involve any

constitutional challenge to the size of a damages award.

See Gasperini, 518 U.S. 415 (assessing the validity of

New York statute authorizing appellate review of

compensatory damages that deviate materially from

reasonable compensation and applying an abuse of

discretion standard for use by federal appellate courts).

Thus, the clear weight of the relevant caselaw supports

the application of an independent review standard for

these questions of law.

[Footnote continued from previous page]

1999) (using abuse of discretion standard); Owens-Corning

Fiberglass Corp. v. Golightly, 976 S.W.2d 409, 413-15 (Ky.

1998) (clear error).

ee ee

ee eae -_

17

D. Even If The Excessivenss Inquiry Were Not A

Question Of Law, Independent Review Would

Still Be Required

Even if the Court were to conclude that the assess-

ment of excessive awards is an essentially factual in-

quiry, independent judicial review would still be neces-

Sary as a prophylactic measure to guard against the dan-

ger of unconstitutional deprivations. See Agosto v. INS,

436 U.S. 748, 753 (1978) (de novo judicial determina-

tion required for claims of American citizenship in de-

portation proceedings); Turner v. Arkansas, 407 U.S.

366, 368 (1972) (“Collateral estoppel is part of the Fifth

Amendment’s double jeopardy guarantee, and it is a

‘matter of constitutional fact (this Court) must decide

through an examination of the entire record.””) (citation

omitted); United States v. John J. Felin & Co., 334 US.

624, 639-40 (1948) (plurality opinion) (“when this Court

reviews State court judgments involving constitutional

issues it ‘must review independently both the legal

issues and those factual matters with which they are

commingled.’”) (citation omitted); High v. Rhay, 519

F.2d 109, 114 (9th Cir. 1975) (“Constitutional facts must

be reviewed de novo on appeal .. ..”). Adoption of de

novo review in this area would be consistent with the

approach long followed by this Court in the First

Amendment context.

In New York Times Co. v. Sullivan, 376 U.S. 254

(1964), this Court adopted the “actual malice” standard

for public-figure defamation cases, and made clear that

independent appellate review of the record is required in

defamation cases “to assure . . . [that] a forbidden intru-

sion on the field of free expression” has not occurred.

ld. at 285. The Court’s rationale for requiring independ-

ent appellate review in such cases was not limited to the

issue of “actual malice” or the area of First Amendment

law. Instead, the Court expressed a considerably

broader rationale, describing the independent review re-

quirement as one arising from the Court’s duty “in

18

proper cases ... to make certain that [constitutional ]

principles have been constitutionally applied.” /d. The

case before it was “such a case” in the Court’s view,

“since the question is one of alleged trespass across ‘the

line between speech unconditionally guaranteed and

speech which may legitimately be regulated.’” Jd. (cita-

tion omitted).

The Court recently reaffirmed the independent review

requirement for constitutional facts in Bose Corp. v.

Consumers Union, 466 U.S. 485 (1984). The Court

stated: “The simple fact is that First Amendment

questions of ‘constitutional fact’ compel this Court’s de

novo review.” Id. at 508 n.27. The Bose Court charac-

terized the independent review requirement as applying

“in cases raising First Amendment issues,” noting that in

such cases the Court has “repeatedly held that an appel-

late court has an obligation to ‘make an independent ex-

amination of the whole record’ in order to make sure

that ‘the judgment does not constitute a forbidden intru-

sion on the field of free expression.” /d. at 499 (citation

omitted). The rationale for the independent review re-

quirement rests upon the fundamental obligation of

courts to guard zealously the boundary between consti-

tutionally protected and unprotected speech. See id. at

505.

If the Court decides that the review of punitive

damage awards essentially involves a factual determi-

nation, the Court should apply an independent review

requirement, because, as in the First Amendment con-

text, searching scrutiny by appellate courts is essential in

order to draw the line between constitutional and

unconstitutional action. The drawing of this line should

be the product of independent appellate review, which

creates precedent and uniformity, rather than the result

of inevitably conflicting and inconsistent trial court

determinations that lack precedential effect and are

reviewed only under a deferential standard.

19

The use of independent appellate review would also

be warranted if the Court found the excessiveness

determination to involve a mixed question of law and

fact. Mixed questions of law and fact exist in situations

where the law is clear, the facts undisputed, and a

court's task is to assess whether the facts satisfy the

legal standard. See Pullman-Standard, 456 U.S. at 289

n.19. In general, this Court’s precedents support the

conclusion that mixed questions of law and fact are

reviewed de novo. See MOORE’S FEDERAL PRACTICE

§ 206.04, (3d ed. 2000) (citing Strickland v. Washington,

466 U.S. 668, 698 (1984)); see also United States v.

John J. Felin & Co., 334 U.S. at 639-40 (plurality

opinion) (“Where the conclusion is a ‘composite of fact

and law,’ this Court may certainly hold that as a matter

of law the findings are erroneous.”) (quoting Cedar

Rapids Gas Light Co. v. City of Cedar Rapids, 223 U.S.

655, 668 (1912)). Additionally, all of the concerns

identified above as warranting independent review of

constitutional facts would apply with even greater force

to mixed questions of law and fact. Accordingly, this

Court should require appellate courts to conduct an

independent review regardless of whether the

assessment of constitutionally excessive punitive

damage awards is a question of law, a question of

constitutional fact, or a mixed question of law and fact.

Ill. The Factors Considered By Courts In

Evaluating Constitutionally Excessive Awards

Confirm The Need For Independent Review

This Court’s decisions regarding punitive damage

awards have created a legal framework to be applied by

courts in evaluating whether a punitive award is “grossly

excessive.” BMW, 517 U.S. at 568. The nature of this

inquiry further militates in favor of independent review.

Under BMW, courts must look to three “guideposts” in

deciding whether a punitive damage award is unconsti-

tutionally excessive. Jd. at 574. These guideposts are:

(1) the “degree of reprehensibility” of the wrongdoing:

20

(2) “the disparity between the harm or potential harm

suffered” by the plaintiff and the award; and (3) “the dif-

ference between this remedy and the civil penalties au-

thorized or imposed in comparable cases.” Jd. at 575.

Despite the presence of these guideposts, however, the

Court has repeatedly resisted invitations to fashion

bright line rules, preferring instead to focus on general

“reasonableness” concerns when evaluating whether a

certain award is “grossly excessive.” TXO, 509 U.S. at

458. A review of these necessarily flexible factors leads

to the inescapable conclusion that appellate courts are

best suited to the task of independently evaluating them.

The most important of these guideposts is the first

factor. See BMW, 517 U.S. at 575. “As the Court stated

nearly 150 years ago, exemplary damages imposed on a

defendant should reflect ‘the enormity of his offense.”’

Id. (quoting Day v. Woodworth, 13 How. 363, 371

(1852)). Several underlying concerns should be re-

viewed by a court: (1) whether the harm was primarily

or entirely economic in nature; (2) whether the defen-

dant’s conduct displayed a recklessness or indifference

to others’ health and safety; and (3) whether an injury, if

~ economic in nature, was the result of intentional acts of

misconduct or acts targeted to financially vulnerable in-

dividuals. See id. at 575-76. These are not factors that

are unique to the perspective of trial courts. Rather, ap-

pellate courts routinely assess, by comparison to other

cases and fundamental tenets, the reprehensibility of de-

fendants’ conduct. In fact, this Court and other appellate

courts around the country have engaged in this type of

analysis with regard to punitive damages on numerous

occasions without difficulty or objection. The Court has

merely evaluated the factors and in the process demon-

strated appellate courts’ ability, and indeed superior

ability, to conduct such analysis.

The nature of the second “guidepost”—the ratio of

the harm suffered to the punitive damage award im-

posed—also supports independent appellate review.

21

This analysis is often conducted by comparing the com-

pensatory damage award with the punitive damage

award. See id. at 580-83. However, the test is not “a

simple mathematical formula, even one that compares

actual and potential damages to the punitive award,” be-

cause “low awards of compensatory damages may prop-

erly support a higher ratio than high compensatory

awards, if, for example, a particularly egregious act has

resulted in only a small amount of economic damages.”

Id. at 582. Although this analysis depends on the factual

circumstances of a defendant’s misconduct, it also relies

significantly on an objective analysis of general reason-

ableness. See id. at 583. This objective analysis is best

suited to the capabilities of appellate courts, with their

consideration of many varied factual situations and their

ability to better promote uniformity and consistency

through the development of binding precedent.

The third guidepost, comparison to legislative evalua-

tions of the reprehensibility of the conduct, is also not

uniquely within the ability of trial courts. The briefing,

argument, and multiple judge format of appellate court

decision making enhances the likelihood that an appel-

late court will correctly determine the amount and type

of penalties imposed by legislatures for similar conduct.

Accordingly, the nature of the inquiry required to as-

sess possible due process violations counsels in favor of

independent review. Appellate courts are at least as able

as trial courts to review these types of considerations,

and with regard to some factors, appellate courts are

likely to have a distinct advantage. Moreover, the use of

independent appellate review would complement the

case-by-case approach the Court has adopted in this area

and further the objects of due process. The case-by-case

analysis properly relies on the expertise of courts in

evaluating awards. However, the expertise of courts

will not be fully brought to bear on this problem unless

appellate courts are required to make their own inde-

pendent reviews of punitive awards. Allowing appellate

22

courts to defer to the varied predilections of trial judges

across the country may be expedient, but it threatens the

effectiveness and uniformity of the excessiveness stan-

dard adopted by this Court to implement the Due Proc-

ess Clause.

IV. The Court’s Due Process Jurisprudence Reveals

No Special Deference To Trial Courts’ Exces-

siveness Determinations

It is also noteworthy that the Court’s decisions ad-

dressing punitive damage awards have not indicated in

any way that appellate courts should accord trial courts

deference in reviewing a punitive damage award. See

BMW, 517 U.S. 559 (containing little or no discussion =

the trial court’s ruling on the due process issue an

giving no deference to that decision), TXO, 509 U.S.

443 (showing no indication of special deference to the

trial court’s resolution of the due process issue).

In 7XO, for example, this Court’s review of a $10

million dollar punitive damages award upheld by the

West Virginia state courts included scant discussion of

the trial court’s ruling.4 Instead, this Court actively re-

viewed the trial record, the conduct of the defendant,

and the applicable law. See TXO, 509 U.S. at 454-62.

This approach parallels the independent-review standard

advocated by petitioner in this case. In the penultimate

portion of the opinion addressing the validity of the pu-

nitive award, the 7XO Court made no reference to the

trial court. Rather, the Court stated that “[o]n the record,

4 The Court’s only significant discussion of the tnal court's

review was in response to the petitioner's contention that the

court had failed to properly articulate its reasons for denying the

motion alleging a constitutional violation. Read in context, it Is

quite apparent that this discussion arose as a result of petitioner's

argument and not any underlying deference on the part of the

Court.

23

the jury may reasonably have determined that [ peti-

tioner] set out on a malicious and fraudulent course to

win back, either in whole or in part, the lucrative stream

of royalties that it had ceded to Alliance.” Jd. at 462.

The Court then concluded that it was “not persuaded that

the award was so ‘grossly excessive’ as be beyond the

power of the State to allow.” /d. This analysis strongly

Suggests that the Court was directly reviewing the jury’s

action, not assessing whether the trial court abused its

discretion.

In Pacific Mutual Life Insurance Co. v. Haslip, 499

U.S. 1 (1991), the Court discussed the function of judi-

cial review of punitive awards without making any dis-

tinction between trial and appellate judges, stating that

after the verdict, “(t]he jury’s determination is then re-

viewed by trial and appellate courts to ensure that it is

reasonable.” /d. at 15-16. Moreover, the Court's dis-

cussion recognized the value of rigorous appellate re-

view. See id. at 21 (“appellate review makes certain that

the punitive damages are reasonable in their amount and

rational in light of their purpose”). Again, the Court's

analysis eschewed any deference to the trial court’s as-

sessment. Instead, the Court’s decision to uphold the

award was due to its own thorough review as well as

that of the Alabama Supreme Court and the trial court.

See id. at 23-24. In short, this Court's precedents pro-

vide further support for the principle of independent ap-

pellate review in this context.

CONCLUSION

The Court should take this opportunity to make clear

that nothing short of independent appellate review will

sufficiently guarantee defendants’ constitutional rights

to be free of excessive awards of punitive damages. In

order to ensure adequate protection for this important

constitutional right, the Nation's appellate courts must

scrutinize punitive damage awards with care to make

sure they satisfy the requirements of due process. The

24

judgment of the court of appeals should therefore be

vacated, and the case remanded for independent

appellate review of the punitive damages award.

Respectfully submitted.

OF Counsel WILLIAM J. KILBERG

BRYAN BAUMEISTER Counsel of Record

THE BOEING COMPANY THOMAS G. HUNGAR

2201 Seal Beach Bivd. GIBSON, DUNN & CRUTCHER LLP

Seal Beach, CA 90740 1050 Connecticut Avenue, N.W.

(562) 797-1016 Washington, D.C. 20036

(202) 955-8500

Counsel for Amici Curiae

December 4, 2000