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

mmm

_—

pec ¢ 2000 1) FILED

No. 99-2035 DEC 4 = 2000

IN THE SUPREME COURT OF THE UNIPED STATES! _-..

COOPER INDUSTRIES, INC..,

Petitioner,

v.

LEATHERMAN TOOL GROUP, INC.,

Respondent.

On a Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

BRIEF OF THE AMERICAN TORT REFORM

ASSOCIATION, NATIONAL ASSOCIATION OF

MANUFACTURERS, CITIZENS FOR A SOUND

ECONOMY FOUNDATION, AMERICAN

CHEMISTRY COUNCIL, HEALTH INSURANCE

ASSOCIATION OF AMERICA, AMERICAN

ASSOCIATION OF HEALTH PLANS, AND

COALITION FOR ASBESTOS JUSTICE, INC.

AS AMICI CURIAE IN SUPPORT OF

PETITIONER

Of Counsel Victor E. Schwartz*

Mark A. Behrens

Sherman Joyce Leah Lorber

AMERICAN TORT REFORM CROWELL & MORING LLP

ASSOCIATION 1001 Pennsylvania Ave., N.W.

1850 M Street, N.W. Washington, D.C. 20004

Suite 1095 (202) 624-2500

Washington, D.C. 20036

(202) 682-1163 Attorneys For Amici Curiae

*Counsel of Record

(Additional Attorneys Listed On Inside Cover)

fo Bupreme Court, 5

Of Counsel

Jan S. Amundson

NATIONAL ASSOCIATION

OF MANUFACTURERS

1331 Pennsylvania Avenue, N.W.

Suite 600

Washington, D.C. 20004

(202) 637-3055

J.V. Schwan

CITIZENS FOR A SOUND

ECONOMY FOUNDATION

1250 Eye Street, N.W.

Suite 700

Washington, D.C. 20005

(202) 942-7695

David F. Zoll

Donald D. Evans

AMERICAN CHEMISTRY COUNCIL

1300 Wilson Boulevard

Arlington, VA 22209

(703) 741-5000

Jeffrey L. Gabardi

HEALTH INSURANCE ASSOCIATION

OF AMERICA

555 Thirteenth Street, N.W.

Washington, D.C. 20004

(202) 824-1600

Louis Saccoccio

AMERICAN ASSOCIATION OF HEALTH PLANS

1129 Twentieth Street, N.W.

Suite 600

Washington, D.C. 20036

(11)

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIEG.................::ccceeee0 iv

INTEREST OF AMICI CURIAE ............00000++ l

STATEMENT OF THE CASE ...............e0eeee+0 4

SUMMARY OF ARGUMENT ..............::::eee08 4

AEA IRARIIE DE ..cccccccccccccccccccccccccercccccscscscorsecesesees 6

I. The Standard Of Review Has Been

Historically Dependent Upon The

Designation Of The Appellate Issue .... 6

II. The Determination That A

Punitive Award Is “Grossly

Excessive” Under The United

States Constitution Is A Mixed

Question Of Law And Fact

Requiring De Novo Review............-..++ 8

A. Whether A Punitive Damages

Award Is “Grossly Excessive”

Is A Mixed Question Of Law

MIE TTI... cccsacensacseucosevoneosossreges )

B. The Goals of Preserving

Individual Constitutional

Rights and Developing A Clear

And Consistent Constitutional

Punitive Damages Doctrine

Mandate De Novo Review .......... 11

Be

(iii) (iv)

III. State Appellate Courts Are UTH

Similarly Required To Adopt A ss iacamasr ns semen

De Novo Standard Of Review In

Order To Uphold Federal — ~~

Substantive Due Process Guarantees.. 15 Adams v. Murakami

54 Ce

IV. De Novo Review Will Help Assure mpshanamieaias .

The Development Of Clear Legal Alexander & Alexander v. B. Dixon

Standards And Regulate Runaway Evander & Assoc., 596 A.2d 687

Punitive Awards ..............:ccccsssseeee, ae 22 | Od. Ct. Spec. App. 1901) ..............cceccccsescessees 17-18

CIEE cxniiiccbiirnitnientacenidneneineemenenneciennennds 24 BMW of North America, Inc. v. Gore,

gg 8 eee passim

Bose Corp. v. Consumers Union

of United States, 466 U.S. 485 (1984)....... 11, 12, 14

Brewer v. Williams,

I 12

Brinegar v. United States,

ay CI ccicnlihiichtchiactidiiasiansitadiiaiibbaeitdnties 23

Browning-Ferris Industies of Vermont, Inc.

v. Kelco Disposal, Inc.,

I 20

Ciba-Geigy Corp. v. Murphree,

653 So. 2d 857 (Miss. 1995) ....................0...0062. 19

Crookston v. Fire Ins. Exch.,

ge ys ER ee 18-19

Daubert v. Merrell Dow Pharmaceuticals, Inc.,

BED UE. Ga CIGD cccccscccsscsccssescsssscssssssssessesesee 15

. ‘

(v)

Davis v. North Carolina,

| EEE en ees ence 12

Dickerson v. United States,

Eee 15-16

Erie R.R. Co. v. Tompkins,

TE eer ncn eee 20, 21

FDIC v. Hamilton,

122 F.3d 854 (10% Cir. 1997) ...................ceeeeee 15

Gamble v. Stevenson,

406 S.E.2d 350 (S.C. 1991) ................. eee 18, 20, 21

Gasperini v. Center for Humanities, Inc.,

I 1l

Guaranty Trust v. United States,

I a oe 21

Harris v. Rivera,

I 16

Harte-Hanks Communications v.

Connaughton, 491 U.S. 657 (1989).................. 1l

Honda Motor Co., Ltd. v. Oberg,

I a passim

Ivy v. General Motors Corp.,

612 So. 2d 1108 (Miss. 1992) ......................2008 19

Keeney v. Tamayo-Reyes

| REISE SSE EE aera ere e ren raeee 7

(vi)

Kim v. Nash Finch Co.,

123 F.3d 1046 (8 Cir. 1997) .............ccccceeeeeeees 16

MacCrone v. Edwards Center,

980 P.2d 1156 (Or. App. 1999)......................04. 17

Mattison v. Dallas Carrier Corp.,

947 F.2d 96 (4 Cir. 1901) .........ccccccccccecsceesseess 21

Miller v. Fenton, 474 U.S. 104 (1985)................... 7,14

New York Times v. Sullivan,

I a a 11, 12

Norris v. Alabama,

I 12

Ornelas v. United States,

I tl passim

Pacific Mutual Life Insurance Co. v. Haslip,

ee passim

Pierce v. Underwood, 487 U.S. 552 (1988)...................... 8

Pullman-Standard v. Swint,

I ll passim

Salve Regina College v. Russell,

ESSE SERRE NTE eee passim

Schmitz v. Aston,

3 P.3d 1184 (Ariz. App. 2000)........................4. 17

Smith v. Phillips,

4 een 16

(vii)

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

ee ee

Spaur v. Owens-Corning Fiberglas Corp.,

510 N.W.2d 854 (lowa 1994)..........c-ssessee000

Thompson v. Keohane,

RO

Townsend v. Sain,

Re Ce SD GED cenencnemancenmaseesnssmnesnenenes

TXO Production Corp. v. Alliance Resources

Corp., 509 U.S. 443 (19938)...................00008.

Waters-Pierce Oil Co. v. Texas,

Williams v. Aetna Finance Co..,

700 N.E.2d 859 (Ohio 1998),

cert. denied, 526 U.S. 1051 (1999)...............

OTHER REFERENCES AND AUTHORITIES

I I

Stephen Daniels & Joanne Martin, Myth

and Reality in Punitive Damages,

FO RD, Be, BERR. Sep eccnccevsscenevescscessencees

Douglas Harkin, BMW of North America,

Inc. v. Gore: A Trial Judge’s Guide to

Jury Instructions and Judicial Review

of Punitive Damages, 60 Mont. L. Rev.

Pe QD cesrecsscnsrerssecsvsenssssseeyeensnsevesvessnconees

pene 19

—_ 22

(viii)

Henry P. Monaghan, Constitutional Fact

Review, 85 Colum. L. Rev. 229 (1985)

No. 99-2035

IN THE SUPREME COURT OF THE UNITED STATES

COOPER INDUSTRIES, INC.,

Petitioner,

v.

LEATHERMAN TOOL GROUP, INC.,

Respondent.

On a Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

INTEREST OF AMICI CURIAE

The American Tort Reform Association (““ATRA”),

founded in 1986 and based in Washington, D.C., is a

broad-based coalition of more than 300 businesses,

corporations, municipalities, associations, and

professional firms who have pooled their resources to

promote reform of the civil justice system with the

goal of ensuring fairness, balance, and predictability

in civil litigation.” For over a decade, ATRA has filed

* Pursuant to Rule 37, letters of consent from the

parties have been filed with the Clerk of the Court.

In accordance with Rule 37.6, amici state that no

counsel for either party has authored this brief in

whole or in part, and no persons or entities, other

(continued...)

2

amicus curiae briefs in cases before this Court that

have addressed important liability issues, including

punitive damages awards.

The National Association of Manufacturers

(“NAM”) — “18 million people who make things in

America” — is the nation’s largest and oldest multi-

industry trade association. The NAM represents

14,000 members (including 10,000 small and mid-

sized companies) and 350 member associations

serving manufacturers and employees in every

industrial sector and all 50 states. Headquartered in

Washington, D.C., the NAM has 10 additional offices

across the country.

The NAM’s mission is to enhance the

competitiveness of manufacturers and improve

American living standards by shaping a legislative

and regulatory environment conducive to U.S.

economic growth, and to increase understanding

among policymakers, the media and the general

public about the importance of manufacturing to

America’s economic strength.

Citizens for a Sound Economy Foundation

(“CSEF”’) is a nonprofit, non-partisan, grassroots

organization devoted to educating the public about

the benefits of the free market system and a less

intrusive government. CSEF’s 250,000 members

nationwide are everyday citizens who are concerned

that larger and larger punitive damages verdicts are

being rendered based on weak burdens of proof,

irrelevant and even prejudicial evidence, and often

than the amici, have made a monetary contribution

to preparation or submission of this brief.

— LLL it iii iggy

3

multiple times against the same defendant for the

same activity. CSEF’s mission includes efforts to

restore predictability and fairness in punitive

damages law, so that such awards are not meted out

in a “litigation lottery’ characterized by

excessiveness and arbitrariness.

The American Chemistry Council (“ACC”) is a

nonprofit trade association whose member

companies produce, market, and use industrial

chemicals. ACC’s member companies comprise more

than ninety percent of the productive capacity for

basic industrial chemicals in the United States.

The Health Insurance Association of America

(“HIAA”), based in Washington, D.C., is one of the

largest associations of health insurance companies in

the world. HIAA is an advocate for the private,

market-based health insurance system. Its more

than 290 members provide medical expense and

supplemental insurance, as well as long-term care

insurance and disability income protection to more

than 123 million Americans. HIAA develops and

advocates federal and state policies which build upon

our health care system’s quality, affordability,

accessibility and responsiveness.

The American Association of Health Plans

(“AAHP”) is a national association for the managed

health care community. AAHP’s' membership

includes health maintenance organizations (HMOs),

preferred provider organizations, third party health

benefits administrators, health care utilization

review organizations, prepaid limited health service

plans, and other integrated health care delivery

systems. AAHP represents more than 1000 health

plans serving nearly 140 million Americans.

4

The Coalition for Asbestos Justice, Inc.

(“Coalition”) was formed in 2000 as a nonprofit

association to address and improve the asbestos

litigation environment. Established by property and

casualty insurers, the Coalition’s mission is to

encourage fair and prompt compensation to

deserving current and future asbestos litigants by

seeking to reduce or eliminate the abuses and

inequities that exist under the current civil justice

system.! The Coalition files amicus curiae briefs in

important cases before state courts of last resort and

the United States Supreme Court that may have a

significant impact on the asbestos litigation

environment.

STATEMENT OF THE CASE

Amici adopt and _ incorporate Petitioner’s

statement of the case.

SUMMARY OF ARGUMENT

This Court’s jurisprudence has firmly established

that punitive damages awards must satisfy the due

process requirements of the United States

Constitution. Now, the Court must allow federal

appellate courts to exercise the exacting type of

1 The Coalition for Asbestos Justice includes the

following insurers: ACE-USA, Chubb & Son, CNA

service mark companies, Fireman's Fund Insurance

Company, The Hartford Financial Services Group,

Inc., Kemper Insurance Companies, Liberty Mutual

Insurance Group, and the St. Paul Fire and Marine

Insurance Company.

——

5

ensure that those constitutional guarantees are not

simply empty platitudes.

In other contexts, federal appellate courts have

traditionally conducted an independent review of the

record when determining whether constitutional

guarantees are violated in individual factual

circumstances. This type of review allows for the

preservation of a litigant’s constitutional rights and

encourages reasoned development of constitutional

jurisprudence. The same careful review using a de

novo standard should be required when a federal

appellate court considers whether a _ punitive

damages award is “so grossly excessive as to amount

to a deprivation of property without due process of

law.” TXO Production Corp. v. Alliance Resources

Corp., 509 U.S. 443, 454 (1993) (quoting Waters-

Pierce Oil Co. v. Texas, 212 U.S. 86 (1909)). Without

such careful review, defendants are subject to the

whims of juries or personal predilections of trial

courts. Permitting a discretionary standard of

review would give trial judges extraordinary latitude

in determining whether punitive damages awards

are excessive. This latitude will substantially

weaken the due process protections established by

this Court — or even render them meaningless.

Because the excessive nature of a punitive award

violates a defendant’s fundamental constitutional

rights, a de novo standard of review must be used by

state appellate courts as well as federal circuits.

Indeed, without directly imposing such a standard

on the states, this Court already has encouraged

state court use of a more exacting review standard.

It did so by suggesting that an adequacy of appellate

review by state courts is essential to assure that

punitive damages awards satisfy procedural due

6

process. See Pacific Mutual Insurance Company v.

Haslip, 499 U.S. 1, 18 (1991). Adopting a deferential

standard of review for federal appellate courts while

promoting a more exacting standard for state

appellate courts will result in inconsistent results

and encourage forum shopping.

A de novo standard of review would further help

assure protection of fundamental constitutional

rights. Under a discretionary standard, some federal

trial judges may feel that they have the liberty to act

as they choose with little regard for appellate

scrutiny. On the other hand, under a de novo

standard, trial judges are likely to self-police their

decisionmaking on the constitutionality of punitive

damages. Not only will this enhance individual

litigants’ constitutional protections, it will also

encourage consistency and predictability in the

development and interpretation of precedent

regarding the constitutionality of punitive damages

awards. In this way, a de novo standard will reduce

the need for appeals and ultimately send litigants

the message that filing lawsuits is not a direct path

to a windfall award — thus helping to ensure that

punitive damages will no longer “run wild.” Haslip,

499 U.S. at 18.

| ARGUMENT

I. Th n f i

Historically Dependent Upon The

Desi i

In the absence of any specific legislative directive,

this Court has _ historically determined the

appropriate standard for appellate review through

its characterization of the issue on appeal. There

have been four primary designations in this regard:

7

historic fact, law, mixed question of law and fact,

and matters of discretion. While the means by

which the Court categorizes the individual issue is

not always clearly defined, the applicable standard

of review is always dependent on the designation

given to the individual issue.

Issues of fact determined by a jury are given

deferential review in accordance with the Seventh

Amendment of the United States Constitution.

When determined by a trial court, factual findings

are reviewed for clear error. See Fed. R. Civ. Pro.

52(a). As this Court explained:

By “issues of fact” we mean to refer to

what are termed basic, primary, or

historical facts: facts “in the sense of a

recital of external events and the

credibility of their narrators... .”

Townsend v. Sain, 372 U.S. 293, 310 n.6 (1963)

(overruled on other grounds by Keeney v. Tamayo-

Reyes, 504 U.S. 1 (1992)) (citation omitted). Issues of

law, on the other hand, are reviewed de novo. See

Salve Regina College v. Russell, 499 U.S. 225, 231-33

(1991) (citing 28 U.S.C. § 1291).

Mixed questions of law and fact, like issues of

law, have been historically examined through de

novo review. See Miller v. Fenton, 474 U.S. 104, 112

(1985). Such mixed questions arise where:

the historical facts are admitted or

established, the rule of law is

undisputed, and the issue is whether

the facts satisfy the [relevant]

standard, or, to put it another way,

whether the rule of law as applied to

8

the established facts is or is not

violated.

Ornelas v. United States, 517 U.S. 690, 696-97 (1996)

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

289 n.19 (1982)). Deferential review of mixed

questions of law and fact may, however, be

warranted where “probing appellate scrutiny will not

contribute to the clarity of legal doctrine.” Russell,

499 U.S. at 233. In this situation, a lower court’s .

exercise of discretion is afforded great deference and

is reviewable only to determine whether the court

abused its discretion. See Pierce v. Underwood, 487

U.S. 552, 558 (1988).

Il. The Determination That A _ Punitive

This Court has repeatedly emphasized that

excessive punitive damages awards may violate due

process rights guaranteed by the United States

Constitution. See, e.g., BMW of North America, Inc.

uv. Gore, 517 U.S. 559, 562 (1996); Pacific Mutual Life

Insurance Co. v. Haslip, 499 U.S. 1, 19 (1991); see

also TXO., 509 U.S. at 454; cf. Honda Motor Co., Ltd.

v. Oberg, 512 U.S. 59 (1996) (prohibition of judicial

review of amount of jury’s punitive damages award

violates the Due Process Clause of Fourteenth

Amendment). Punitive damages are subject to

substantive due process protection because, as this

Court has previously recognized,

lellementary notions of fairness

enshrined in our _ constitutional

jurisprudence dictates that a person

9

receive fair notice not only of the

conduct that will subject him to

punishment, but also of the severity of

the penalty that a State may impose.

Gore, 517 U.S. at 574 (emphasis added); see also

TXO, 509 U.S. at 454 (Due Process Clause imposes

substantive limits “beyond which penalties may not

go”); Southwestern Tel. & Tel. Co. v. Danaher, 238

U.S. 482, 491 (1915) (setting aside penalty imposed

on telephone company because it was so “plainly

arbitrary and oppressive” as to violate the Due

Process Clause). Because of the substantive due

process rights involved, de novo review is required.

A. Whether A _ Punitive Damages

Award Is “Grossly Excessive” Is A

Mixed Question of Law and Fact

The Court’s assessment of the constitutionality of

a punitive damages award requires a careful

balancing of the competing legal interests at stake.

On the one hand, the Court has recognized the

fundamental due process right of citizens to be free

from arbitrary and oppressive government action.

See TXO, 509 U.S. at 454. On the other hand,

governments must be able to fashion damages that

are reasonably necessary to vindicate society's

legitimate interests in punishment and deterrence.

See Gore, 517 U.S. at 568. Recognizing this balance,

this Court has ruled that “[o]nly when an award can

fairly be categorized as ‘grossly excessive’ in relation

to these interests does it enter the zone of

arbitrariness that violates the Due Process Clause of

the Fourteenth Amendment.” Jd. See also id. at 586

(Breyer, J., concurring) (constitutional

determination focuses on whether award is “grossly

10

excessive” in relation to legitimate punitive damages

objectives). Therefore, whether an award is “grossly

excessive” becomes the ultimate question to be

resolved in determining whether a constitutional

violation has occurred.

Balancing the dual interests of the individual and

the State requires a two-part process comporting

with the test for ascertaining the existence of mixed

questions of law and fact as set forth by this Court in

Pullman-Standard v. Swint, 456 U.S. 273, 289 n.19

(1982); see also Ornelas, 517 U.S. at 696. First, the

factfinder must determine the “historical facts” of

the existence and nature of the defendant’s bad acts

that give rise to the punitive award. See Swint, 456

U.S. at 289 n.19 (“the historical facts are admitted or

established...”). Once such underlying factual issues

have been resolved, the second step requires that the

Court make a legal judgment about those facts. See

id. (“[T)]he issue is whether the facts satisfy the

[relevant constitutional] ... standard”).

The applicable rule of law for assessing a

punitive damages award is undisputed. In BMW of

North America, Inc. v. Gore, 517 U.S. 559 (1996), this

Court set forth a three-part standard to guide lower

courts in determining whether a punitive award is so

“grossly excessive” under the circumstances as to

violate due process. First, and most importantly, the

award must take into account “the degree of

reprehensibility of the defendant’s conduct.” Id. at

575. Next, the award must reflect proportionality

between the punitive damages award and the actual

harm sustained by the plaintiff. See id. at 580.

Finally, a reviewing court must consider the civil or

criminal penalties that could be imposed for

comparable misconduct. See id. at 583. The

ll

question then becomes whether, under this

standard, the facts contained in the record are

legally sufficient to support the amount of punitive

damages awarded. See id. at 585; see also Ornelas,

517 U.S. at 696-97.

The process set out by this Court in Gore seeks to

place historical facts within a legal framework. It is

not a re-determination of historical facts themselves.

See Gasperini v. Center for Humanities, Inc., 518

U.S. 415, 459 (1996) (Scalia, J., dissenting) (“Unlike

the measure of actual damages suffered which

presents a question of historical or predictive fact,

the level of punitive damages is not really a ‘fact’

‘tried’ by the jury.”). Such a mixed question of law

and fact requires de novo review. See Ornelas, 517

U.S. at 696.

B. The Goals Of Preserving Individual

De novo review of mixed questions of law and fact

by federal appellate courts does not impermissibly

invade the province of the jury. See New York Times

v. Sullivan, 376 U.S. 254, 285 n.26 (1964) (Seventh

Amendment does not preclude Court from

independently reviewing mixed questions of facts

and law). Moreover, this Court has long held that

where facts implicate constitutional issues, the

federal appellate court may make an “independent”

review of the _ record. See Harte-Hanks

Communications v. Connaughton, 491 U.S. 657

(1989); Bose Corp v. Consumers Union of United

States, 466 U.S. 485 (1984) (First Amendment

12

issues). And similarly, except in cases involving

issues of limited precedential value, such as

individual juror bias, the Court has consistently

accorded de novo review to issues which arise as a

result of Fourth, Fifth or Sixth Amendment

challenges. See, e.g., Ornelas, 517 U.S. at 697 (1996)

(ultimate determinations of reasonable suspicion

and probable cause require independent appellate

review); Thompson v. Keohane, 516 U.S. 99 (1995)

(in Fifth Amendment context, rejecting argument

that “in-custody” determination should be accorded a

presumption of correctness); Davis v. North

Carolina, 384 U.S. 737 (1966) (voluntariness of

confession); Brewer v. Williams, 430 U.S. 387 (1977)

(waiver of Sixth Amendment right to counsel).

The reason for de novo review in such

circumstances is clear. As the Court explained in

Bose, federal judges have:

a constitutional responsibility that

cannot be delegated to the trier of fact,

whether the fact-finding function be

performed in the particular case by a

jury or by a trial judge.

466 U.S. at 501. This responsibility requires the

appellate court “in proper cases, [to] review the

evidence to make certain that [constitutional]

principles have been constitutionally applied.” New

York Times, 376 U.S. at 285; see also Norris uv.

Alabama, 294 U.S. 587, 590 (1935) (Court’s duty is

“to inquire not merely whether a_ [federal

constitutional right] was denied in express terms but

also whether it was denied in substance and effect.

If this requires an examination of evidence, that

examination must be made.”).

13

The use of a discretionary standard to assess the

constitutional limits ci punitive damages awards

will relegate the adjudication of furdamental

constitutional rights to individual trial judges.

While the professionalism and dedication of the

federal judiciary is unquestioned, the notion of

vesting individual judges with such sweeping power

is disconcerting:

One must concede 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 sensibilities.

Haslip, 499 U.S. at 18 (emphasis added). By

contrast, independent de novo review creates a full

and meaningful system of checks and balances to

help preserve individual constitutional rights.

In addition to helping assure that an individual’s

substantive due process rights are preserved,

independent de novo review of excessive punitive

awards by federal appellate courts is necessary to

define the contours of the “grossly excessive” test

established in Gore. See Henry P. Monaghan,

Constitutional Fact Review, 85 Colum. L. Rev. 229,

279 (1985) (de novo review is particularly important

where there is a need for development of a

constitutional norm); Douglas Harkin, BMW of

North America, Inc. v. Gore: A Trial Judge’s Guide

to Jury Instructions and Judicial Review of Punitive

Damages, 60 Mont. L. Rev. 367, 390-91 (1999)

(discussing need for additional guidance on

application of Gore standards).

14

As with other ultimate questions bearing on an

individual’s federal constitutional rights, the “grossly

excessive” principle is a “fluid concept” that takes its

substantive content from the particular context in

which the standard is being assessed. Ornelas uv.

United States, 517 U.S. 690, 696 (1996) (standards

for constitutional determination of reasonable

suspicion and probable cause to search cannot be

reduced to a neat set of legal rules); Bose, 466 U.S.

at 506 n.25 (constitutional standards regarding

. suppression of communications do not readily lend

themselves to generalized definitions). Particularly

in such situations, where

the relevant legal principle can be

given meaning only through its

application to the particular

circumstances of a case, the Court has

been reluctant to give the trier of fact’s

conclusions presumptive force and, in

so doing, strip a federal appellate

court of its primary function as an

expositor of law.

Miller, 474 U.S. at 114; see also Ornelas, 517 U.S. at

697 (independent review is “necessary if appellate

courts are to maintain control of, and to clarify, legal

principles”).

The federal circuit courts, as the “expositors of

law,” are best situated to carry out the “dual goals of

doctrinal coherence and economy of judicial

administration.” See Russell, 499 U.S. at 231. They

are also uniquely “structurally suited to the

collaborative juridical process that promotes

decisional accuracy,” as they can devote their

attention to comprehensively analyzing and

ee ee eee

15

resolving legal issues without concern for developing

the record. Jd. at 232. Finally, since this Court

hears only a small fraction of the cases heard by

federal appellate courts, the circuit courts are given

the primary responsibility of shaping the contours of

the constitutional limitations on excessive punitive

damages awards. As a result, the circuit courts

must have the independence to exercise their

responsibilities through use of de novo review.

Ill. State Appellate Courts Are Similar]

R ir A r

Review I r T ral

iv P r

As discussed, the Court’s determination of the

appropriate standard of review for the amount of

punitive damages awards has an _ important

constitutional dimension; it is more than an exercise

of the Court’s supervisory powers over the lower

federal courts. Compare Daubert v. Merrell-Dow

Pharmaceutical Co., 509 U.S. 579 (1993) (exercising

Court’s supervisory powers and establishing factors

for ascertaining admissibility of scientific evidence in

federal courts). Because the excessiveness of a

punitive damages award can violate a defendant’s

due process rights, state appellate courts, as well as

federal tribunals, must review this fundamental

issue de novo.? See Dickerson v. United States, 120

2 When liability is based on state law, judges must

assess and review a punitive damage award under

both the federal constitutional standards in Gore and

applicable state guidelines. See FDIC v. Hamilton,

122 F.3d 854, 861 (10% Cir. 1997) (whether a

(continued...)

16

S. Ct. 2326, 2333 (2000) (with respect to state court

proceedings, United States Supreme Court has

authority to “enforc[e] the commands of the United

States Constitution”); Harris v. Rivera, 454 U.S. 339,

344-45 (1981) (“Federal judges may... require the

observance of . . . special procedures” in state courts

“when necessary to assure compliance with the

dictates of the Federal Constitution.”); cf. Smith v.

Phillips, 455 U.S. 209, 221 (1982) (“Federal courts

hold no supervisory authority over state judicial

proceedings. . .”) (emphasis added).

Requiring state appellate courts to engage in de

novo review of trial court rulings on _ the

constitutionality of punitive damages awards under

the United States Constitution will preserve

constitutional rights and encourage uniform

application of the principles enunciated in this

Court’s punitive damages jurisprudence.

This Court already has ruled that meaningful

appellate review of a punitive damages award is a

critical part of a constitutionally valid state punitive

damages scheme, see Haslip, 499 U.S. at 21; see also

Honda, 512 U.S. at 432. In Haslip, the Court upheld

Alabama’s scheme for awarding punitive damages

against a charge that punitive awards in Alabama

“punitive damage award violates the Federal

Constitution is a question separate and apart from

Oklahoma state law.”). When liability is based

solely on federal law, only Gore factors apply. See

Kim v. Nash Finch Co., 123 F.3d 1046 (8 Cir. 1997)

(action for employment discrimination under 42

U.S.C. § 1981).

—— _ SS ee

17

had become the product of “unbridled jury

discretion,” in violation of the Due Process Clause.

The Court ruled that although the jury instructions

gave the jury “significant discretion,” this discretion

was properly constrained by Alabama’s

requirements for exacting post-verdict and appellate

reviews and thus “did not cross the line into the area

of constitutional impropriety.” Haslip, 499 U.S. at

24.

State courts have differed in their understanding

and application of MHaslip and this Court’s

subsequent punitive damages jurisprudence. Some

state courts have consistently interpreted Haslip

and Gore as setting forth a “clear. . . constitutional

mandate for meaningful judicial scrutiny of punitive

damage awards” at the appellate level. Honda, 512

U.S. at 418 (citing Adams v. Murakami, 54 Cal. 3d

105, 118 (1991)) (absence of particular evidence

frustrates “fully informed” and “meaningful

appellate review” of reasonableness of size of award

required by Haslip); see Spaur v. Owens-Corning

Fiberglas Corp., 510 N.W.2d 854, 857 (Iowa 1994)

(Haslip requires “substantive” review of punitive

award by appeals court); Schmitz v. Aston, 3 P.3d

1184, 1205 (Ariz. App. 2000) (Haslip requires

independent consideration of substantive criteria by

appellate court); MacCrone v. Edwards Center, 980

P.2d 1156, 1165 (Or. App. 1999) (Gore requires

appeals court to “make an independent assessment

of the jurys award to determine whether it is

constitutionally excessive and in violation of Due

Process under the [Gore] guideposts without regard

to the trial court’s reasoning’) (emphasis added).

In Alexander & Alexander v. B. Dixon Evader &

Assoc., 596 A.2d 687, 711 (Md. Ct. Spec. App. 1991),

18

the Maryland Court of Special Appeals relied on

Haslip when it vacated an excessive punitive

damages award as violative of due process. The

court rejected Maryland’s previous punitive damages

rule generally precluding appellate review of the

excessiveness of a punitive damages award. The

court noted that prior to Haslip, Maryland appellate

courts could review a trial court’s grant or refusal of

a remittitur only “under extraordinary

circumstances,” using an abuse of discretion

standard of review. Alexander & Alexander, 596

A.2d at 710. But the Maryland court ruled that

under Haslip:

[t]he Supreme Court may well have

made a wider degree of appellate

review than heretofore practiced in

Maryland necessary. If faced with a

punitive award that was entered upon

proper procedure but which

nonetheless contravenes due process

because it is out of all proportion to

both the harm caused and the

perniciousness of the conduct, we

could not, on the ground of judicial

impotence, allow the unconstitutional

award to stand.

Id. The Maryland court then proceeded to

independently review the punitive damages award.

Moreover, some states have altered their punitive

damages schemes to tighten up post-verdict review

procedures. See, e.g., Gamble v. Stevenson, 406

S.E.2d 350, 354 (S.C. 1991) (announcing substantive

factors to be considered in post-trial review of

punitive awards); Crookston v. Fire Ins. Exch., 817

19

P.2d 789, 811 (Utah 1991) (tightening post-trial

review standards in order to permit more

substantive analysis of factors warranting punitive

awards on appeal).

Conversely, other states have decided that such

exacting appellate review of a punitive damages

award is not necessary under Haslip. In such cases,

the courts have ruled that an abuse of discretion

standard applies and the award will stand if it “is

not the result of passion and prejudice. ae

Williams v. Aetna Finance Co., 700 N.E.2d 859, 871

(Ohio 1998) (deferring to judgment of jury), cert.

denied, 526 U.S. 1051 (1999); Ivy v. General Motors

Acceptance Corp., 612 So. 2d 1108 (Miss. 1992)

(despite Court’s statements in Haslip, Mississippi

punitive damages scheme is constitutional where it

preserves award unless it “evinces passion, bias and

prejudice of the part of the jury so as to shock the

conscience”) (citation omitted); see also Ciba-Geigy

Corp. v. Murphree, 653 So. 2d 857, 867 (Miss. 1995)

(Supreme Court’s statements in Haslip regarding

constitutionality of Mississippi's punitive damages

system were “unwarranted concerns”); cf. Haslip,

499 U.S. at 21 n.10 (punitive damages scheme

requiring application of detailed substantive

standards on review by Alabama Supreme Court

“distinguishes Alabama’s system from the.

Mississippi scheme[] about which [the] Justices

[have] expressed concern”). A uniform de novo

standard of review will resolve the uncertainties

created by diverse application of this Court’s

punitive damages law.

Interestingly, it is against this backdrop of post-

Haslip state court precedent that this Court must

consider the standard of review applicable to federal

20

appellate courts reviewing the constitutionality of a

punitive damages award. Federal courts, sitting in

diversity, must apply the substantive law of the

state on punitive damages, see Erie R.R. Co. v.

Tompkins, 304 U.S. 64 (1938), but must also abide

by federal procedural rules when reviewing the jury

verdict. See Browning-Ferris Industries of Vermont,

Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 279 (1989).8

As a result, requiring federal courts to use a

deferential standard of review while many state

courts apply an independent standard of review

would create incongruities. Compare Gamble, 406

S.E.2d 350 (establishing elaborate post-trial review

3 The Browning-Ferris Court stated:

In reviewing an award of punitive

damages, the role of the district court

is to determine whether the jury’s

verdict is within the confines set by

state law, and to determine, by

reference to federal standards

developed under Rule 59, whether a

new trial or remittitur should be

ordered.

492 U.S. 257, 279 (1989). While the Court also

suggested that such review should be conducted

under an abuse of discretion standard, the Court’s

Browning-Ferris opinion predated its determination

in Gore that “grossly excessive” punitive damages

awards may violate substantive due process rights.

Amici believe, as discussed supra, that rulings on

the constitutional issue implicated by excessive

awards should be reviewed de novo.

-— —-.

21

for South Carolina courts to avoid due process

violations) with Mattison v. Dallas Carrier Corp.,

947 F.2d 95 (4% Cir. 1991) (noting that while

Gamble’s new South Carolina post-trial review

procedures appeared similar to those held

constitutional under Haslip, “a federal court cannot

apply the Gamble post-verdict review process,

leading to the anomalous result that a decision on a

claim for punitive damages could be significantly

different depending on whether the case was tried in

a federal court.”). These incongruities are contrary

to the policies behind the Erie doctrine. As the

Court has stated previously, “the nub of the policy

that underlies Erie R. Co. v. Tompkins is that for the

same transaction, .. a suit... in a federal court

instead of in a State court a block away should not

lead to a substantially different result.” Guaranty

Trust v. United States, 326 U.S. 99, 109 (1945).

The possible post-Haslip incongruity between

state and federal courts creates significant

opportunities for forum-shopping on the part of both

plaintiffs and defendants, resulting in wasteful and

time-consuming litigation. It also would increase

the “notice problems” created by the already well-

documented unpredictability of punitive damages

awards. See Gore, 517 U.S. at 574. This incongruity

can — and shwvuld — be eliminated through use of the

de novo standard of review by both state and federal

courts considering the constitutionality of punitive

damages awards.

22

IV. De Novo Review Will Help Assure The

Development Of Clear Legal Standards

And Regulate R Punitive A

This Court has recognized that punitive damages

have “run wild” in the American legal system,

jeopardizing fundamenta! constitutional rights.

Haslip, 499 U.S. at 18. This is, in part, a result of

the free-for-all lottery-like aspect of punitive

damages awards. Plaintiffs can “roll the dice” and

try their luck with juries, who, with little guidance

on assessing punitive awards, often award windfall

amounts. This casino-like atmosphere is encouraged

by the lack of a clear set of legal principles governing

the excessiveness of these awards.

The size of punitive damages awards already

vary dramatically from jurisdiction to jurisdiction —

even for the same or similar conduct. If the

constitutionality of punitive awards is reviewed only

for “abuse of discretion,” the development of clear

precedent to guide future courts in their assessments

4 A study of 47 counties in 11 states over a several-

year period showed a high degree of variability:

Punitive damages were awarded in about 25 percent

of the successful verdict cases in some counties and

not awarded at all in others. Median verdicts

ranged from less than $10,000 in some areas to as

much as $204,000 in others. See Stephen Daniels &

Joanne Martin, Myth and Reality in Punitive

Damages, 75 Minn. L. Rev. 1, 31-32, 42 (1990).

23

of such damages will be prevented. As this Court

noted in another constitutional context:

[a] policy of sweeping deference would

permit, “fijn the absence of any

significant difference in the facts,” the

Fourth Amendment’s incidence [to]

tur{n} on whether different trial

judges draw general conclusions that

the facts are sufficient or insufficient

to constitute probable cause.

Ornelas, 517 U.S. at 697 (quoting Brinegar v. United

States, 338 U.S. 160, 171 (1949)).

The resulting lack of clear legal standards will

frustrate the twin goals of punitive damages —

deterrence and retribution. Absent consistent legal

standards on the constitutional excessiveness of

punitive damages awards, defendants have little

notice of the punishment they are likely to receive

under certain circumstances. Arbitrary and

inconsistent punishments with little discernible

relationship to a defendant’s activities provide little

incentive for the defendant to change its behavior.

De novo review will allow federal appellate courts

to develop clear guidelines for the lower courts as to

when a punitive award becomes “grossly excessive.”

“[A]n appropriately respectful application of de novo

review should encourage a district court to explicate

with care the basis for its legal conclusions.”

Russell, 499 U.S. at 233. Trial courts would thus be

required to apply concrete standards in reviewing

those decisions. This should ultimately decrease the

number of appeals of punitive awards. As a state

trial judge wrote:

24

If there are clearly defined guidelines

on the awarding of punitive damages,

the awards of lower courts would more

likely be sustained and needless

litigation of the amounts of the awards

would be reduced.

Douglas Harkin, BMW of North America, Inc. v.

Gore: A Trial Judge’s Guide io Jury Instructions and

Judicial Review of Punitive Damages, 60 Mont. L.

Rev. 367, 383 (1999).

Most importantly, the consistent application of

clear legal standards developed through de novo

review “helps to assure the uniform general

treatment of similarly situated persons that is the

essence of law itself.” See Gore, 517 U.S. at 587

(Breyer, J., concurring).

CONCLUSION

For the foregoing reasons, amici request that this

Court mandate a de novo standard for appellate

review of the excessiveness of punitive damages

awards.

Respectfully submitted,

Victor E. Schwartz*

Mark A. Behrens*

Leah Lorber

CROWELL & MORING LLP

1001 Pennsylvania Ave., N.W.

Washington, D.C. 20004

(202) 624-2500

Attorneys for Amici Curiae

25

* Counsel of Record

Sherman Joyce

AMERICAN TORT REFORM

ASSOCIATION

1850 M Street, N.W.

Suite 1095

Washington, D.C. 20036

(202) 682-1163

Jan S. Amundson

NATIONAL ASSOCIATION

OF MANUFACTURERS

1331 Pennsylvania Ave., N.W.

Suite 600

Washington, D.C. 20004

(202) 637-3055

J.V. Schwan

CITIZENS FOR A SOUND

ECONOMY FOUNDATION

1250 Eye Street, N.W.

Suite 700

Washington, D.C. 20005

(202) 942-7695

David F. Zoll

Donald D. Evans

AMERICAN CHEMISTRY COUNCIL

1300 Wilson Boulevard

Arlington, VA 22209

(703) 741-5000

26

Jeffrey L. Gabardi

HEALTH INSURANCE ASSOCIATION

OF AMERICA

555 Thirteenth Street, N.W.

Washington, D.C. 20004

(202) 824-1600

Louis Saccoccio

AMERICAN ASSOCIATION

OF HEALTH PLANS

1129 Twentieth Street, N.W.

Suite 600

Washington, D.C. 20036

Of Counsel

Dated: December 4, 2000