Amicus Curiae Brief — Philip Morris USA v. Williams

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No. 05-1256 Suge Come US.

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IN THE JUL 28 204

Supreme Court of the Gnited Dfates

OFFICE OF THE CLiRX

PHILIP Morris USA,

Petitioner,

Vv.

MAYOLA WILLIAMS,

Respondent.

On Writ of Certiorari to the

Supreme Court of Oregon

BRIEF AMICUS CURIAE OF THE

ALLIANCE OF AUTOMOBILE MANUFACTURERS

IN SUPPORT OF PETITIONER

H. CHRISTOPHER BARTOLOMUCCI

Counsel of Record

PAUL A. WERNER

HOGAN & HARTSON L.L.P.

555 Thirteenth Street, N.W.

Washington, D.C. 20004

(202) 637-5810

JOHN T. WHATLEY

ALLIANCE OF AUTOMOBILE

MANUFACTURERS

1401 Eye Street, N.W.

Suite 900

Washington, D.C. 20005

(202) 326-5548

Counsel for Amicus Curiae

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 — WASHINGTON, D.C. 20001

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TABLE OF CONTENTS

Te CF RTE CI ccnesesneprevnecsencsnepnscnnspsnurieneseves

STATEMENT OF INTEREST OF AMICUS CURIAE ..

SUMMARY OF ARGUMENT. ............000020...0...0c.ccccsceceees

FIGS sevinanentinaienrivetnnntnereipssinipimnnnincatnnuinansisianie

UNDER THE OREGON SUPREME COURT’S

RULING, AUTOMOBILE MANUFACTURERS

WILL FACE CRUSHING PUNITIVE AWARDS

.- FOR ENGAGING IN RESPONSIBLE AND

LEGAL PRODUCT-DESIGN DECISION

A. Automobiles, Like Other Useful Products, Are

Lawful Because Their Utility Outweighs Their

EID scclin-csicsesiccinbesunbaitydmpeneiendadigndidesiagiiandiaienviniodentden

. Automobile Manufacturers Are Subject To

Random—And Enormous—Punitive Exactions

For Their Product-Design Decisions ...................

. If The Reprehensibility Guidepost May “Over-

ride” Other Due Process Limits On Punitive

Damages, Manufacturers Will Face Even More

Severe Punitive Exactions For Any Product

Design That Carries Risks .......................sceseseeeees

. Punishing Automakers For Making Risk-Utility

Calculations Creates The Wrong Incentives........

(i)

TABLE OF CONTENTS—Continued

Page

Il. PUNISHING A DEFENDANT FOR SPECULA-

TIVE HARMS TO NON-PARTIES IS INCONSIS-

TENT WITH THIS COURT’S PRECEDENTS

EE PD sien stcisienibitenevensnlacetniewinuiitiipees - 20

A. Punitive Damages Must Bear A Rational Rela-

tionship To The Harm Suffered By The Ptain-

SIIE cicisschlasaissescesitneddasienscaccteatitigurigiibdibiainichdatistabnbinigiaidsiiicns 21

B. Permitting Punitive Damages To Be Based On

Theoretical Harms To Non-Parties Results In

Excessive Punishment And Over-Deterrence...... 25

C. Punitive Exactions That Reflect Assumed

Harms To Non-Parties Allow A Single Aber-

rant Jury To Override The Decisions Of Other

Juries And Governmental Regulators .................. 28

See cccinicniisereninapnnentitjslincadiseninabiatizammadinnsctiteleet 29

TABLE OF AUTHORITIES

Cases:

American Sur. Co. v. Baldwin, 287 U.S. 156 (1932) ....

Anderson v. General Motors Corp., Los Angeles

County (Calif.) Superior Court No. BC 116926,

notice of appeal filed, No. B135147 (Cal. Ct. App.

Es: i CE ciscchcpsntsknsssncalesedascindcipabeabehaandbintandneienes

BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996)......

Buell-Wilson v. Ford Motor Co., __ Cal. Rptr. __,

2006 WL 2002858 (Ct. App. July 19, 2006)..............

Carroll v. Otis Elevator Co., 896 F.2d 210 (7th Cir.

Clark v. Chrysler, 310 F.3d 461 (6th Cir. 2002),

vacated & remanded, 540 U.S. 801 (2003), appeal

after remand, 436 F.3d 594 (6th Cir. 2006)...............

Consorti v. Armstrong World Indus., Inc., 72 F.3d

1003 (2d Cir. 1995), vacated & remanded, 518

Sk ae CPD csnisatitinntnicsictnancmnapniabihiiniebaieattedoueneiien

Cooper Indus. Inc. v. Leatherman Tool Group, Inc.,

ee IE iicccctsisiintiniciseinaidinitinddediniaahessines

Corrosion Proof Fittings v. EPA, 947 F.2d 1201,

EE ale CUED Dini nictoninisnninntassitnascanibenienaiansensodee

Davis v. Celotex Corp., 420 S.E.2d 557 (W. Va.

SEPT siinitpehiibinniniipigsiteenans sidiasetadhinlaiceedanitaiidiiadipiaedniapsiiibanccab

Davis v. Ford Motor Co., No. Civ. A. 302CV271LN,

2006 WL 83500 (D. Miss. Jan. 11, 2006)..................

Douglas v. DaimlerChrysler Corp., No. CY2001-

019659 (Ariz. Ct. App. Div. 1 Oct. 13, 2005)............

Flax v. Daimler Chrysler Corp., No. 02C-1288, 2005

WL 1768725 (Tenn. Cir. Ct. June 20, 2005)..............

(iil)

Page

8,9

TABLE OF AUTHORITIES—Continued

Ford Motor Co. v. Ammerman, 705 N.E.2d 539 (Ind.

Ct. App. 1999), cert. «/znied, 529 U.S. 1021 (2000) ..

Ford Motor Co. v. Sasser, 618 S.E.2d 47 (Ga. Ct.

PD: TIO svcccerrectiriatiatiniipietnnciaceiininaaiaaiieaindiias

Gardner v. Chrysler Corp., 89 F.3d 729 (10th Cir.

FINED) pctctninnsmeniucnsstantitibtdiindiiiehiohisingenphichiaddadioniiiainiatitis

General Motors v. Moseley, 447 S.E.2d 302 (Ga. Ct.

RD, TEP TD vcccircicteniintsicdcsrivettiiinavivtaiaiiie- aeidaidaibiidasis

Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974) seid

Grimshaw v. Ford Motor Co., 174 Cal. Rptr. 348 (Ct.

RA): FOGG) cntstncinsiiinpcerscideinchpianatedaicibitnieetapiastminainhe

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

In re Ford Motor Co. Bronco Il Prod. Liab. Litig.,

SES F. Sapp. FEB CED. 16: FSP 7) cccccccceticssennicsoinasepens

In re School Asbestos Litig., 789 F.2d 996 (3d Cir.),

cert. denied, 479 U.S. 852 (1986) ................c2ceseeeerenes

Jablonski v. Ford Motor Co., No. 03-L-2027, 2005

WL 2837524 (Ill. Cir. Ct. Apr. 28, 2005) ..........00......

Jackson v. Johns-Manville Sales Corp., 781 F.2d.394

(Sth Cir.), cert. denied, 478 U.S. 1022 (1986) ..........

Jaramillo v. Ford Motor Co., 116 Fed. Appx. 76 (9th

CR, BO cinccncipnnichltiatisienceiialsigihdeiilicaiadlbaiaataiddeeieaian nied

Johnson v. Ford Motor Co., 113 P.3d 82 (Cal.

Lachance v. American Home Prods. Corp., No. 01-

0890-CV-W, 2006 WL 89850 (W.D. Mo. Jan. 13,

Lindsey v. Normet, 405 U.S. 56 (1972) .....2..cccce:eceecceees

National Union Fire Ins. Co. of Pittsburgh vy. City

Sav., F.S.B., 28 F.3d 376 (3d Cir. 1994) 0000.

TABLE OF AUTHORITIES—Continued

Page

Nissan Motor Co. v. Armstrong, 32 S.W.3d 701 (Tex.

Ct. App. 2000), aff'd in part, rev'd in part & re-

manded, 145 S.W.3d 131 (Tex. 2004) ........ccccceceeceees 16

Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. |

ST diidiclidieiithissaseshitniteidhdininngetadpemencninedetemnmens 13,21

Perez v. Z Frank Oldsmobile, Inc., 223 F.3d 617 (7th

Cir. 2000), cert. denied, 531 U.S. 1153 (2001).......... 19

Racich v. Celotex Corp., 887 F.2d 393 (2d Cir. 1989).. 26

Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832

III Tact tinpthiencirienigiamnesnnaligtneienemgunenate 26

Sand Hill Energy, Inc. v. Ford Motor Co., 83 S.W.3d

483 (Ky. 2002), vacated & remanded, 538 U.S.

1028 (2003), decision on remand, 142 S.W.3d 153

Isnt hacadaeeainlahenieh cinneitamnideamnbainedbasliviaeneine 20, 28

Seaboard Air Lines Ry. v. Seegers, 207 U.S. 73

lanai ear tetera tcimeatinanemiataniinignncans 3

Shatz v. Ford Motor Co., 412 F. Supp. 2d 531 (N.D.

Rie EEE ishintieesnicsinnatnsennenddanniapinensianneptstesininnvinianete 11

Soule v. General Motors Corp., 882 P.2d 298 (Cal.

See acbtictinadenstishianaindadetzemnenegutenieinamnntemaprncceneipneniaseues 6

State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S.

Te NE passim

TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S.

eT cncisitaatndineretinarbeatiantiniiphsiigibendneentninnatpiiomenmen 3,21

Webster v. Boyett, 496 S.E.2d 459 (Ga. 1998).............. 12

White v. Ford Motor Co., 312 F.3d 998 (9th Cir.

ee piensinadipeinntniabsinastmemenmamnenennein 22

Williams v. ConAgra Poultry Co., 378 F.3d 790 (8th

San chinsiencnsatinithipsantatiinnipignniandenmeinuipdiainiie csintmiainnte 22, 24, 27

i hecinsincinstnnntninesicessemateianeinenstenmnaneiotssenatninn easiest 27

TABLE OF AUTHORITIES—Continued

Statutcey and Regulatory Provisions and Rules:

National Traffic and Motor Vehicle Safety Act:

SP ire 0b ED crertrcccnensesntsetneemnatenseieinarentane

Fe in: OP A O eriticnciontnticttitbinnctpticepisinsnecistivtions

52 Fed. Reg. 49,033 (Dec. 29, 1987)...............c.c.escesseeeee

53 Fed. Reg. 34,866 (Sept. 8, 1988) 00.0... cecceeeeeeees

61 Fed. Reg. 28,550 (June 5, 1996)... cece eeeeeeees

64 Fed. Reg. 27,343 (May 19, 1999) 00... ecceeceeeeeeeee

PRE Sib Me OS Sie cecnaiaptosnaintsisiniciiniianiioipesietedpsiasipienisadisienpuiashti

Bae is Sa a incsereisiecienntncininaentasennitiinnictiltpelsiaiahininttatiiabiaiin

| a en

Other Authorities:

Robert S. Adler, Redesigning People Versus Redes-

igning Products: The Consumer Product Safety

Commission Addresses Product Misuse, \\ J.L. &

i ei DP

AMERICAN LAW OF PRODUCTS LIABILITY (Timothy

E. Travers et al. eds., 3d ed. 1997)...............cccecceseseees .

Richard C. Ausness, Retribution & Deterrence: The

Role of Punitive Damages in Products Liability

Eiiatiame, FS BLY. Gd. F CIID cccecscercscscescesscsvesevsesese

Stephen J. Breyer, BREAKING THE VICIOUS CIRCLE:

TOWARD EFFECTIVE RISK REGULATION (1993).......

Lawrence D. Budnick, Toothpick-Related Injuries in

the United States, 1979 Through 1982, 252 J. AM.

eg ke

Andrew C. Clausen & Annette M. Carwie, Problems

Applying the Life of Georgia v. Johnson Case in the

Product Liability Setting: Where Do We Go With

Page

7,13

4-5

vil

TABLE OF AUTHORITIES—Continued

Punitive Damages After BMW v. Gore?, 58 ALA.

es SY Piiicirnivininctescdidepintintepemsndanietugrtinion

Thomas B. Colby, Beyond the Multiple Punishment

Problem: Punitive Damages as Punishment for

Individual, Private Wrongs, 87 MINN. L. REV. 583

James A. Henderson, Jr. & Aaron D. Twerski,

Achieving Consensus on Defective Product Design,

83 CORNELL L. REV. 867 (1998)................cccceceeeeeeeeee

David G. Owen, Problems in Assessing Punitive

Damages Against Manufacturers of Defective

Products, 49 U. CHI1. L. REV. | (1982).....................4.

A. Mitchell Polinsky & Steven Shavell, Punitive

Damages: An Economic Analysis, 111 HARV. L.

EE ee eee

Gary T. Schwartz, Deterrence & Punishment in the

Common Law of Punitive Damages: A Comment,

ee ee

Gary T. Schwartz, The Myth of the Ford Pinto Case,

43 RUTGERS L. REV. 1013 (1991)......0.00.. eee

Cass R. Sunstein, ef a/., Assessing Punitive Damages

(With Notes on Cognition & Valuation in Law),

op SE ee

Aaron D. Twerski, Punitive Damages: Through the

Five Prisms, 39 ViLL. L. REV. 353 (1994) _.......0..0.....

Meiring de Villiers, Technological Risk & Issue

Preclusion: A Legal & Policy Critique, 9

CORNELL J.L. & PUB. POL’Y 523 (2000)..............-.:+.

W. Kip Viscusi, Corporate Risk Analysis: A Reckless

Act?, $2 STAN. L. REV. $47 (2000).................-0eececeees

Page

15, 16

vill

TABLE OF AUTHORITIES—Continued

Page

W. Kip Viscusi, Jurors, Judges, and the Mistreatment

of Risk by the Courts, 30 J. LEGAL STUD. 107

CP denncntiisitinsscicanitiapnppennrstuintcsininmanannniinnnevintoeieesiitn 14

IN THE

Supreme Court of the Anited States

No. 05-1256

PHILIP Morris USA,

Petitioner,

MAYOLA WILLIAMS,

Respondent.

On Writ of Certiorari to the

Supreme Court of Oregon

BRIEF AMICUS CURIAE OF THE

ALLIANCE OF AUTOMOBILE MANUFACTURERS

IN SUPPORT OF PETITIONER

STATEMENT OF INTEREST OF AMICUS CURIAE

The Alliance of Automobile Manufacturers, formed in

1999, is a nonprofit trade association of nine car and light

truck manufacturers.' The members of the Alliance —-BMW

Group, DaimlerChrysler Corporation, Ford Motor Company,

General Motors Corporation, Mazda North American Opera-

tions, Mitsubishi Motors North America, Inc., Porsche Cars

North America, Inc., Toyota Motor North America, Inc., and

! Pursuant to this Court’s Rule 37.6, we note that no part of this

brief was authored by counsel for any party, and no person or

entity other than amicus curiae, its members, or its counsel, made

a ~ te contribution to the preparation or submission of the

brief.

Volkswagen of America, Inc.—account for more than 80%

of motor vehicle sales in the United States.

Alliance members, and other automobile manufacturers,

are affected by the phenomenon of skyrocketing punitive

damages more than perhaps any other type of product

manufacturer or defendant. When motor vehicles are in-

volved in accidents, serious injury or death can result—even

when the vehicles are equipped with the latest and best safety

features. Plaintiffs often seek large punitive awards in such

cases, and juries often award them. The large corporations

that make automobiles are tempting targets for the plaintiff's

bar, and are viewed as deep pockets by some juries.

Countless design choices and engineering trade-offs go into

making an automobile. Some choices are demanded by the

laws of physivs. Others are compelled by cost-benefit

calculations. As a result, automobile manufacturers fre-

quently are subjected to enormous punitive awards by a jury

applying general state common law standards-—even though

the design at issue complies with industry custom and

practice, even though the product meets or exceeds the

standard set by federal regulations, even though plaintiffs’

design defect claim has been considered and rejected by the

federal agency responsible for regulating motor vehicle

safety, and even though numerous previous juries have

returned defense verdicts in cases challenging the design.

The decision below, which effectively eliminates the consti-

tutional ceiling on the amount of punitive damages in any

products liability case involving serious personal injury,

promises to exacerbate the unfairness of this situation.

The Alliance offers this brief because of the great stake that

its members have in seeing that the federal due process limits

on punitive damage awards are clarified and strengthened in

the products liability context. This brief is filed with the

written consent of all parties pursuant to this Court’s Rule

37.3(a).

3 ‘

SUMMARY OF ARGUMENT

The limits placed by this Court on the size of punitive

damage awards find support in both the substantive and

procedural components of due process. “[T]he Due Process

Clause of the Fourteenth Amendment imposes substantive

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

Corp. v. Alliance Res. Corp., 509 U.S. 443, 453-454 (1993)

(plurality opinion) (quoting Seaboard Air Lines Ry. v.

Seegers, 207 U.S. 73, 78 (1907)). In addition to these

substantive considerations, “[e]lementary notions of faimness

* * * dictate that a person 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.” BMW of N.

Am., Inc. v. Gore, 517 U.S. 559, 574 (1996). Although this

Court has established three guideposts for courts to use to

identify and enforce these substantive and procedural limits,

if the ruling under review stands they will henceforth mark

only a one-way climb to ever-higher punitive damage

awards. That consequence is one that would be felt particu-

larly acutely by this Nation’s automobile industry, which is a

pillar of our modern economy and provides products of

immense and obvious benefit.

Automobile manufacturers are already subject to wildly

unpredictable but ever-increasing punitive exactions for

design choices that reflect considered engineering judgments,

that meet or exceed industry standards and federal regula-

tions, and that often have been validated repeatedly by

regulators, judges and juries. But authorizing juries to rely

on the reprehensibility guidepost to “override” any consid-

eration of the relationship that an exaction bears to the harm

the plaintiff suffered—as the Oregon Supreme Court sanc-

tioned here—threatens automobile manufacturers with even

greater punishment for making socially-responsible and

necessary risk-utility trade-offs. Products liability law

encourages manufacturers to weigh the costs and benefits of

any design decision, but juries (and reviewing courts) fre-

gucntly and incorrectly equate that balancing act with intent

to harm the plaintiff—and are provoked to punish the defen-

dant accordingly. If punitive exactions are not meaningfully

anchored to the plaintiff's harm, but are instead keyed only to

a subjective appraisal of the reprehensibility of the defen-

dant’s conduct, such exactions will rocket skyward with

nothing to check them. That outcome is inconsistent with the

proper functioning of the guideposts and, as a consequence,

would dampen product innovation and lead to more costly

but less safe products.

Furthermore, allowing a jury to calculate the amount of a

punitive exaction based on speculations of the total harm that

a product caused the consuming public at large—as did the

court below——conflicts with this Court’s precedents and

fundamental due process principles. It also would increase

the risk of multiple, excessive punishmeuts for a single

course of conduct and permit a lone, aberrant jury to coun-

termand the judgments of other juries and government

regulators.

ARGUMENT

I. UNDER THE OREGON SUPREME COURT’S RUL-

ING, AUTOMOBILE MANUFACTURERS WILL

FACE CRUSHING PUNITIVE AWARDS FOR

ENGAGING IN RESPONSIBLE AND LEGAL

PRODUCT-DESIGN DECISION MAKING.

A. Automobiles, Like Other Useful Products, Are

Lawful Because Their Utility Outweighs Their

Risks.

The case sub judice involves cigarettes, a product very

different from automobiles. Yet the resolution of this case

will have significant consequences, not just for tobacco

products, but for a wide range of consumer goods, including

automobiles. Numerous products are legal to buy, sell and

use despite known and potentially serious health and safety

risks. Even a seemingly innocuous product like the toothpick

poses a safety hazard—‘“over the next 13 years, we can

expect more than a dozen deaths from ingested toothpicks.”

Corrosion Proof Fittings v. EPA, 947 F.2d 1201, 1223 n.23

(Sth Cir. 1991) (citing Lawrence D. Budnick, Toothpick-

Related Injuries in the United States, 1979 Through 1982,

252 J. AM. MED. ASS’N 796 (1984)). For its part, the auto-

mobile remains a key mode of human transportation—

indispensable to the national economy and the modern way

of life—even though thousands are injured or killed annually

in automobile accidents.

Society tolerates the risks posed by toothpicks, automo-

biles, and countless other products because their significant

utility outweighs those risks—thé product’s benefits trump

its costs.. Some of the risks associated with these products

are simply inherent and cannot be alleviated no matter what

value is placed on safety. See Robert S. Adler, Redesigning

People Versus Redesigning Products: The Consumer

Product Safety Commission Addresses Product Misuse, \1

J.L. & POL. 79, 79 (1995) (“Regrettably, if society is to enjoy

the benefits of consumer products, some risks appear un-

avoidable.”); see also Lachance v. American Home Prods.

Corp., No. 01-0890-CV-W, 2006 WL 89850, at *4 (W.D.

Mo. Jan. 13, 2006) (“A knife is an unavoidably unsafe

product because [it is] useful and desirable to society but

cannot be produced without some risk.”). Automobiles

would be a far less valuable mode of transportation if they

could travel only at very low speeds, and toothpicks would

be useless without their sharp ends.

Other safety risks are accepted because their reduction

would come at too high a price. in the case of the automo-

bile, Justice Breyer has notably explained that consumers are

not likely to pay a significant premium for only marginally

safer vehicles. See Stephen J. Breyer, BREAKING THE

Vicious CIRCLE: TOWARD EFFECTIVE RISK REGULATION 13-

14 (1993) (“It seems unlikely that the public would pay 24 to

60 times more per car to save far fewer lives.”). This is so

because “[a]t some point, the cost of additional safety im-

provements becomes so great that additional safety measures

are not worthwhile.” W. Kip Viscusi, Corporate Risk

Analysis: A Reckless Act?, 52 STAN. L. REV. 547, 561

(2000). Since consumers will not pay to alleviate avoidable

safety risks when the price of doing so exceeds the value of

the added safety, manufacturers do not (and should not)

mitigate all known product hazards. Indeed, “[t]he failure to

obtain risk-free products will occur regardless of whether it is

the consumer or the producer who makes the safety deci-

sion.” Jd. “Tradeoffs will and must be made.” /d. at 566.

This inherent cost constraint on product safety is reflected

in the law of products liability. In most jurisdictions, a jury

tasked with determining whether a product is “defective”

must engage in the same sort of risk-utility analysis that

keeps our roads from being clogged with armored personnel

carriers. See, e.g., Soule v. General Motors Corp., 882 P.2d

298, 311 (Cal. 1994) (jury must determine whether automo-

bile design is defective based on “such competing design

considerations as risk, benefit, feasibility, and cost’’); see

generally AMERICAN LAW OF PRODUCTS LIABILITY § 28:17

(Timothy E. Travers et al. eds., 3d ed. 1997) (“[MlJost

jurisdictions resolve the issue of whether the product is

defective by applying some form of risk-utility analysis.”);

id. § 1:22 (“The overwhelming consensus among courts

deciding design defect cases today is in the use of some form

of risk-utility analysis.”). That analysis calls for “balanc[ing]

benefits and costs to society as a whole, including the manu-

facturer and all consumers foreseeably affected, not just the

litigating parties.” Meiring de Villiers, Technological Risk &

Issue Preclusion: A Legal & Policy Critique, 9 CORNELL J.L.

& PuB. POL’y 523, 527 (2000). As commentators have

explained, “[t]he social costs considered in risk-utility

balancing are the costs of adopting better, safer technology,

including both capital and operating costs. The relevant

benefits are reductions in accident costs achieved by reducing

both the likelihood and the severity of product-related

accidents.” James A. Henderson, Jr. & Aaron D. Twerski,

Achieving Consensus on Defective Product Design, 83

CORNELL L. REV. 867, 883 (1998) (footnote omitted).

Thus, whether a manufacturer has struck an appropriate

balance between benefits and costs—-and consequently

whether it is liable for an allegedly defective product—

should ultimately “depend on whether the net increase in

safety (net numbers of lives saved by switching designs)

outweigh[s] the increase in cost and utility.” de Villiers,

supra, 9 CORNELL J.L. & PuB. POL’y at 528. A responsible

manufacturer therefore appropriately considers not only

product safety but also “elements such as marketability,

appearance, ease of operation, durability, freedom from

maintenance or repair, ease of manufacture, and economics

of materials and labor.” Richard C. Ausness, Retribution &

Deterrence: The Role of Punitive Damages in Products

Liability Litigation, 74 Ky. L.J. 1, 88-89 (1986).

B. Automobile Manufacturers Are Subject To Ran-

dom—And Enormous—Punitive Exactions For

Their Product-Design Decisions.

While “[clost-benefit analysis is fundamental to the design

engineer’s trade,” David G. Owen, Problems in Assessing

Punitive Damages Against Manufacturers of Defective

Products, 49 U. Cui. L. REV. 1, 24 (1982), and striking a

balance between cost, utility, and product safety implicates a

“morass of conceptual, political and practical issues,” id. at

37, current constitutional standards afford automobile

manufacturers little protection from unpredictable and

irrational punitive damage awards for making necessary

trade-offs in the designs of their products. These trade-offs

are an integral part of any product design, including the

designs of the various systems in automobiles, but when a

given choice will subject an automobile manufacturer to a

punitive exaction is no more predictable than a lightning

strike. Design choices that mect or exceed federal safety

regulations and industry standards—-or that have been

approved of by numcrous juries and validated by real-world

testing and that reflect responsible design choices—are

routinely the object of juror outrage and the subject of

massive punitive awards. Imposing unlimited punitive

awards for such design choices, without rhyme or reason,

conflicts with the “[e]lementary notions of fairness” and

“adequate notice” embodied in the Due Process Clause.

Gore, 517 U.S. at 574.

Experience shows that automobile manufacturers are fre-

quently punished for making design choices that refiect the

considered, good-faith balancing of-multiple and competing

safety considerations. In Flax v. Daimler Chrysler Corp.,

No. 02C-1288, 2005 WL 1768725 (Tenn. Cir. Ct. June 20,

2005), for example, a Chrysler minivan in which Joshua Flax

was a passenger was rear-ended by a pickup truck. The front

seats yielded rearward, as designed, absorbing the energy of

the impact. As the seat yielded backwards, however, the

front passenger’s head hit Joshua’s head, causing the latter

fatal brain damage. In the @nsuing lawsuit, plaintiff alleged

that the front seat was defectively designed because it was

not sufficiently rigid. Yet, the seat’s design met the industry

standard. Moreover, seatback strength is specifically regu-

lated by Federal Motor Vehicle Safety Standards—which are

required by federal law to “meet the need for motor vehicle

safety,” 49 U.S.C. § 30111(a)*—and the Chrysler seatback

was nearly three times more rigid than required by the federal

standard. And, as explained in another case involving the

same Chrysler yielding seat design—where the jury found

the same seat design non-defective—a more rigid front seat

would increase the risk of injury in many other collisions

because it would “virtually slingshot the occupant in the

event of a rear impact.” Gardner v. Chrysler Corp., 89 F.3d

729, 740 (10th Cir. 1996).

Even though Chrysler’s yiclding design may have been

safer overall than a more rigid design, the jury in Flax levied

a $98 million punitive exaction against Chrysler, aad the trial

court upheld the jury’s verdict. The court found that Chrys-

ler’s conduct was “indeed reprehensible” because Chrysler

“was aware that its yielding minivan seats were causing

2 The National Traffic and Motor Vehicle Safety Act provides

that “[eJach [motor vehicle safety] standard shall be practicable,

meet the need for motor vehicle safety, and be stated in objective

terms.” 49 U.S.C. § 30111(a) (emphasis added). And “motor

vehicle safety” means “the performance of a motor vehicle or

motor vehicle equipment in a way that protects the public against

unreasonable risk of accidents occurring because of the design,

construction, or performance of a motor vehicle, and against

unreasonable risk of death or injury in an accident.” /dZ.

§ 30102(a)(8).

injury and death.” 2005 WL 1768725, at *3. This finding of

reprehensibility is clearly suspect, if not irrational, because

Chrysler was equally aware that rigid seats would a/so cause

injury and deaths; thus, the same basis for arguing that

Chrysler acted reprehensibly by making yielding seats could

have been made had Chrysler made rigid seats. The extent of

the punishment that could be assessed against Chrysler was

at least limited by this Court’s decisions in Gore and State

Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003);

applying those decisions, the trial court reduced the punitive

award from $98 million to $20 million. 2005 WL 1768725,

at *5. If plaintiff in the instant case is correct, however,

Chrysler would have been exposed to unlimited punishment

for what, in truth, might well have been socially responsible

conduct.

The result in F/ax is not unusual. In Anderson v. General

Motors Corp., Los Angeles County (Calif.) Superior Court

No. BC 116926, notice of appeal filed, No. B135147 (Cal.

Ct. App. Sept. 9, 1999), people injured in a post-collision fire

sued General Motors, claiming that placement of the gasoline

tank behind the rear axle in the 1979 Chevrolet Malibu in

which they were riding created an cxcessive danger of fuel-

fed fire in the event of a crash. But fucl system integrity—

like seatback design—is specifically regulated by Federal

Motor Vehicle Safety Standards, and the 1979 Chevrolet

Malibu met all of those requirements. GM engineers indeed

considered placing the Malibu’s fuel tank over the rear axle

(as recommended by plaintiffs expert at trial) but—

3 The Arizona Court of Appeals ‘recently overturned a $50

million punitive damages award against DaimlerChrysler in a case

involving an alleged defect in the front scat strength of a Dodge

Ram club cab pickup truck. See Douglas v. DaimlerChrysler

Corp., No. CY2001-019659 (Ariz. Ct. App. Div. 1 Oct. 13, 2005),

mem. op. ¢ 23. The court recognized that “a proper balance

between seat yield and stiffness was needed to protect passengers

during collisions” and further noted that “Daimler designed its seat

to withstand a rearward movement of 8,759 inch-pounds, almost

three times the required Federal Motor Vehicle Standard 207.” /d.

at 4 17.

following real-world testing of both the over-the-axle and

behind-the-axle designs—they decided to place the vehicle’s

tank in the same location as 98% of the other vehicles

marketed instead: behind the rear axle. In their judgment,

the over-the-axle design on balance posed a greater safety

hazard in the event of a collision, as it was located closer to

the vehicle’s passengers, and was also less functional and

harder to service. The jury nevertheless found the fuel tank

placement defective—although it did so without ever hearing

evidence of the Malibu’s exemplary safety record in the field

because the trial court excluded the evidence GM offered to

show that the Malibu’s fire risk in rear-end collisions was

extremely remote and as low or lower than that of similar

vehicles. And with its verdict, the jury delivered an astonish-

ing $4.8 billion punitive damage award to plaintiffs, an

award that the trial court reduced, based on Gore, to an

almost equally astonishing $1.09 billion.

One more example should suffice to illustrate the sheer

randomness with which punitive awards are imposed on

automobile manufacturers. In Buell-Wilson v. Ford Motor

Co., __ Cal. Rptr. __, 2006 WL 2002858 (Ct. App. July 19,

2006), the driver of a 1997 Ford Explorer lost control of her

vehicle when she swerved to avoid an object in the road. The

vehicle rolled over, and the driver was rendered a paraplegic.

Plaintiff alleged that the Explorer was unreasonably danger-

ous both because it was prone to roll over in emergency

avoidance maneuvers and its roof was insufficiently crush-

resistant. See id. at *2, *6.

It has been generally known for decades that sport utility

vehicles like the Explorer handle differently and are more

likely to roll over than passenger cars. See, e.g., In re Ford

Motor Co. Bronco II Prod. Liab. Litig., 982 F. Supp. 388,.

391-392, 396 (E.D. La. 1997). Nevertheless, the National

Highway Traffic Safety Administration (“NHTSA”) has

repeatedly refused to find SUVs defective for this reason

because SUVs offer advantages that passenger cars do not.

See 64 Fed. Reg. 27,343 (May 19, 1999) (summarizing

NHTSA’s investigations of various SUVs).4 Plaintiffs in

Buell-Wilson condemned the Explorer as having the same

stability defects as the Bronco II, but NHTSA has ¢wice

investigated the Bronco II and refused to find that it is

defective. See 64 Fed. Reg. 27,343. For decades, NHTSA has

been studying ways to measure and evaluate resistance to

rollover, and it has repeatedly rejected the two methods relied

upon by plaintiffs to condemn the Explorer.> And, if permit-

ted, Ford would have presented to the jury accident statistics

showing that Explorers do not roll over any more frequently

than competitive SUVs, but the trial court excluded this

evidence.

Prior to the trial in Buell-Wilson, Ford had never lost an

Explorer rollover case, and 13 juries had returned defense

verdicts in such cases. But the Buell-Wilson jury—

completely uninformed of how the Explorer was actually

performing in the real world—returned a verdict awarding

$246 million in punitive damages. The California Court of

4 For example, NHTSA has recognized that “redesigning a

vehicle to significantly reduce its likelihood of rolling over

necessarily involves making fundamental changes in the vehicle's

dimensions (making it wider, longer, lower, heavier) and compro-

mising its utility to consumers (e.g., by reducing its fucl cfficiency,

ground clearance, load-carrying capacity, off-road capability, or

driveability on snowy roads).” 61 Fed. Reg. 28,550, 28,552 (June

5, 1996).

5 See, e.g., 53 Fed. Reg. 34,866, 34,867 (Sept. 8, 1988) (“the

stability factor [is] not sufficiently reliable or discriminating

among vehicles to identify a defect’); id. (Consumers Union “test

procedures do not have a scientific basis and cannot be linked to

real-world crash avoidance needs, or actual crash data.”); 52 Fed.

Reg. 49,033, 49,035 (Dec. 29, 1987).

cases since that time. See Shatz v. Ford Motor Co., 412 F. Supp.

2d 581 (N.D. W. Va. 2006) (jury verdict in Ford’s favor); Davis v.

Ford Motor Co., No. Civ. A. 302CV271LN, 2006 WL 83500 (D.

Miss. Jan. 11, 2006) (mem. op.) (judgment as a matter of law in

Ford’s favor); cf Jaramillo v. Ford Motor Co., 116 Fed. Appx. 76

(9th Cir. 2004) (initial jury verdict in favor of Ford reversed and

remanded for new trial).

Appeal disregarded the 13 prior verdicts, ruled that evidence

of the Explorer’s performance relative to other SUVs was

irrelevant and inadmissible, and found that Ford’s conduct

was highly reprehensible—even though reasonable people,

including the federal government, might conclude in good

faith that the Explorer was not defective. Nevertheless,

applying this Court’s decisions in Gore and State Farm, the

court reduced the punitive award to $55 million, or two times

the compensatory damages. Thus, once again, the ratio

guidepost at least limited the amount 6f punitive damages

that could be assessed for “highly reprehensible” conduct

that, in truth, probably was not reprehensible at all.

Similar examples abound, demonstrating the unpredictabil-

ity of a jury’s decision to punish an automobile manufacturer

for a design choice and the tendency of reviewing courts to

defer to such jury decisions. See, e.g., General Motors v.

Moseley, 447 S.E.2d 302 (Ga. Ct. App. 1994) ($101 million

punitive award not excessive even though side-saddle fuel

tank design at issue met applicable NHTSA safety standard),

overruled on other grounds, Webster v. Boyett, 496 S.E.2d

459 (Ga. 1998); Clark v. Chrysler, 310 F.3d 461, 469 (6th

Cir. 2002) (punitive award based on door latch design

affirmed because court concluded that the relevant federal

motor vehicle safety standard did not reflect how a latch

would perform in a real accident), vacated & remanded, 540

U.S. 801 (2003), appeal after remand, 436 F.3d 594 (6th Cir.

2006); Jablonski v. Ford Motor Co., No. 03-L-2027, 2005

WL 2837524 (Ill. Cir. Ct. Apr. 28, 2005) (judgment) (puni-

tive damages approved by trial court cven though design of

1993 Town Car’s fucl system met federal motor vehicle

safety standard that did not go into effect until 2006).

The unpredictability of the current legal environment will,

however, be overshadowed by the severity of the punitive

exactions levied and upheld against automobile manufactures

for making conscious design choices if the reprehensibility

guidepost is converted from “the most important indicium of

the reasonableness of a punitive damages award,” Gore, 517

U.S. at 575, into a constitutional trump card that revicwing

courts may play in fulfilling their constitutionally-mandated

role to review punitive damage awards for compliance with

due process. See Pacific Mut. Life Ins. Co. v. Haslip, 499

U.S. 1, 21 (1991) (“[A]ppellate review makes certain that the

punitive damages are reasonable in their amount and rational

in light of their purpose.”).

C. If The Reprehensibility Guidepost May “Over-

ride” Other Due Process Limits On Punitive Dam-

ages, Manufacturers Will Face Even More Severe

Punitive Exactions For Any Product Design That

Carries Risks.

If the reprehensibility guidepost is nothing more than a

“competitive tool[ ]” (Pet. App. 32a) that may be employed

to “overrid[e]” (id. at 33a) the ratio guidepost, the sky is the

limit for punitive damage awards in products liability cases

involving serious personal injury. As Justice Breyer warned

in Gore, “reprehensibility” would be “a concept without

constraining force” because it would be drained of “its

constraining power to protect against serious and capricious

deprivations” of private property. Gore, 517 U.S. at 590

(Breyer, J., concurring).

Although products liability cases do not inherently belong

at the high side of the reprehensibility scale, there is an

erroneous tendency automatically to place them there simply

because such cases usually involve serious injury or death,

and because jurors view the harms suffered by the plaintiff

through the distorting but powerful lens of hindsight bias.

While manufacturers must design products based on multiple

and abstract considerations, jurors (and reviewing courts)

frequently discount considerations such as cost or product

“marketability, appearance, ease of operation, durability,

[and] freedom from maintenance or repair,” Ausness, supra,

74 Ky. L.J. at 88-89, when confronted by real injury or death.

“So long as jurors are drawn—as they must be—from the

general population, it seems unrealistic to expect the jury to

disregard this basic belief [i.e., that life is priceless] either in

determining liability or in ruling on punitive damages.” Gary

T. Schwartz, Deterrence & Punishment in the Common Law

of Punitive Damages: A Comment, 56 S. CAL. L. REV. 133,

152 (1982). Thus, rather than comparing “expected benefits

and costs based on the state of information before the acci-

dent,” jurors instead “may compare the enormous cost to the

victim with the relatively negligible cost of the safety im-

provement” after an accident has already occurred and the

manufacturer haled into court. Viscusi, supra, 52 STAN. L.

REV. at 563.

Judge Easterbrook aptly described this phenomenon in a

case involving a woman injured when someone pressed the

emergency stop button on the escalator she was riding.

The ex post perspective of litigation exerts a hydraulic

force that distorts judgment. Engincers design [products]

to minimize the sum of construction, operation and injury

om > >°*

Come the lawsuit, however, the passenger injured by a

stop presents himself as a person, not a probability. Ju-

rors see today’s injury; persons who would be injured if

buttons were harder to find and use are invisibie. Al-

though witnesses may talk about them, they are spectral

figures, insubstantial compared to the injured plaintiff,

who appears in the flesh. * * * [N]o matter how conscien-

tious jurors may be, there is a bias in the system. Ex post

claims are overvalued and technical arguments dis-

counted in the process of litigation. And the claims of

crippled neighbors receive more weight than do potential

injuries to be felt by passengers (and stockholders) in

other states. [Carroll v. Otis Elevator Co., 896 F.2d 210,

215-216 (7th Cir. 1990) (Easterbrook, J., concurring) (ci-

tation omitted). |

But Judge Easterbrook is not alone in recognizing thé hind-

sight bias problem. See, e.g., W. Kip Viscusi, Jurors,

Judges, and the Mistreatment of Risk by the Courts, 30

J. LEGAL Stub. 107, 116 (2001) (corporations’ “superior ex

ante risk judgments may be outweighed by the ex post reality

of the accident victim”); Viscusi, supra, 52 STAN. L. REV. at

552 (mock juror study showing that proper risk balancing

inflates punitive awards against corporations). As another

commentator explained, “jurors have a natural sympathy for

a seriously injured person that is reinforced when the defen-

dant is a manufacturer, for many persons are hostile toward

major institutions in general and ‘big business’ in particular.”

Owen, supra, 49 U. Cui. L. REV. at 11 (footnote omitted).

This inherent bias—which operates to artificially locate

any products casc at the high-end of the reprehensibility scale

from the outset—-is exacerbated when the plaintiff can

demonstrate that the manufacturer undertook risk-utility

analysis in selecting a product design. Notwithstanding that

responsible manufacturers “think about risks in a systematic

matter and * * * undertake [cost-benefit] calculations to

ensure that there is appropriate risk balancing that is suffi-

ciently protective” (Viscusi, supra, 52 STAN. L. REV. at

550)—and, in most jurisdictions, are subject to liability only

for erroneous calculations—jurors and reviewing courts

frequently regard such assessments as base financial calcula-

tions worthy of extreme sanction. “[O)}ne person’s sound

engineering is another person’s trading lives for profits.”

Owen, supra, 49 U. CHI. L. REV. at 47.

The paradoxical consequence is that, while systematic risk-

utility analysis ex ante is the stuff of responsible corporate

decision-making that products liability law affirmatively

encourages, ex post it is a “red flag{[ ]” signaling nothing

short of “callous disregard for human health” and the con-

comitant need for a serious punishment. Viscusi, supra, 52

STAN. L. REV. at 578. Commentators have noted how this

unfolds in the typical products case: “Regardless of how

high the manufacturer sets the design standard, when an

accident does occur, the plaintiff's lawyer will have an expert

testify ({that] the product could have been made safer, and the

injury prevented, if the manufacturer had just been willing to

spend some additional money.” Andrew C. Clausen &

Annette M. Carwie, Problems Applying the Life of Georgia

v. Johnson Case in the Product Liability Setting: Where Do

We Go With Punitive Damages After BMW v. Gore?, 58

ALA. LAW REV. 46, 48 (1997). And “[a]s a result, an argu-

ment for reprehensibility can be-supported in virtually every

case.” Id. ~

In the products liability setting, therefore, there is a real

danger that the reprehensibility guidepost will become not a

meaningful trigger for imposing punitive awards or identify-

ing excessive ones, but a one-way lever for ratcheting them

ever skyward. Design defect cases necessarily come with

intent to harm the plaintiff “built in,” Aaron D. Twerski,

Punitive Damages: Through the Five Prisms, 39 VILL. L.

REV. 353, 356 (1994), because “a manufacturer’s choices

involving necessary safety trade-offs and statistically inevita-

ble risks always can be viewed in a sense as intentional

wrongs to consumers hurt by such products, as safe on

_ balance as such products may actually be.” Owen, supra, 49

U. Cui. L. REV. at 26 (footnote omitted). See a/so Viscusi,

supra, 52 STAN. L. REV. at 566 (“[U]ndertaking [cost-

benefit] analysis and making a conscious decision to forego

the improvement will subject a company to the charge that it

‘deliberately intended to injure the plaintiff.’”).’ Thus, if

every design adopted in the face of known risks can be

treated as an intentional wrong, “every actor could be held

strictly liable * * * for punitive, in addition to compensatory,

damages for any consequence to any person that was con-

templated in advance of any course of action.” Owen, supra,

49 U. CHI. L. REV. at 22. See also id. at 23 (“The decision to

market a product in a certain condition with certain risks may

have been a good one because the expected benefits were

great, and the product may not have been legally defective at

all, yet under this standard the manufacturer remains subject

to punishment for ‘disregarding’ the lesser risk by proceeding

to sell the product with any danger whatsoever.”).

? A claim of intentional misconduct may, moreover, be even

further aggravated by the manufacturer’s equally conscious—but

lawful and legitimate——decision to market its product. See, e.g.,

Nissan Motor Co. v. Armstrong, 32 S.W.3d 701, 704 (Tex. Ct.

App. 2000), aff'd in part, rev'd in part & remanded, \45 S.W.3d

131 (Tex. 2004). The promotion of a product deemed, in hind-

sight, to be “defective” can be castly—but incorrectly—labeled

“fraud.”

Av the foregoing cases illustrate, juries often punish prod-

uct manufacturers with punitive damage awards for thinking

systematically about risk, and automobile manufacturers’

conscious choices of designs that carry known safety hazards

have frequently provoked particularly severe punishments.

See Ford Motor Co. v. Sasser, 618 S.E.2d 47, 57 (Ga. Ct.

App. 2005) (upholding punitive damages award, in part,

because “various pre-production internal documents dis-

cussed” seat latch safety improvements but “Ford chose not

to adopt” them). The case of Grimshaw v. Ford Motor Co.,

174 Cal. Rptr. 348 (Ct. App. 1981), remains—-even a quarter

of a century later—a classic example. Grimshaw was

severely injured when the Fort Pinto in which he was a

passenger was hit from behind by another vehicle in a way

that caused a fire. He subsequently claimed that the place-

ment of the fuel tank behind the rear axle and the design of

the fuel filler pipe were defective. The jury awarded $125

million in punitive damages (later reduced to $3.5 million)

based, in part, on Ford’s performance of a systematic cost-

benefit analysis.®

Products liability cases already gravitate toward the high

end of the reprehensibility scale, but for reasons unrelated to

the true reprehensibility of the conduct at issue. The ap-

proach of the court below will exacerbate this dynamic by

permitting jurors and reviewing courts to rely exclusively on

the reprehensibility guidepost to punish automobile manufac-

turers for undertaking what might well be viewed, outside of

the courtroom, as responsible risk-utility analysis.

8 One commentator has explained that the corporate document

containing Ford’s cost-benefit analysis “has been assigned an

operational significance that it never possessed, and has been

condemned~as unethical on account of characterizations of the

document that are in signifi€ant part unwarranted.” Gary T.

Schwartz, The Myth of the Ford Pinto Case, 43 RUTGERS L. REv.

1013, 1026 (1991).

D. Punishing Automakers For Making Risk-Utility

Calculations Creates The Wrong Incentives.

Punitive damages, as this Court has repeatedly observed,

are intended to punish misbehavior and thereby discourage

its recurrence. See, e.g., Cooper Indus. Inc. v. Leatherman

Tool Group, Inc., 532 U.S. 424, 432 (2001) (punitive dam-

ages “operate as ‘private fines’ intended to punish the

defendant and deter future wrongdoing”); Gertz v. Robert

Welch, Inc., 418 U.S. 323, 350 (1974) (Punitive damages

“are not compensation for injury. Instead, they are private

fines levied by civil juries to punish reprehensible conduct

and to deter its future occurrence.”). But current constitu-

tional standards for review of such awards do not afford

automobile manufacturers significant guidance in choosing

designs that will not subject them to severe punishment by a

civil jury. ’

The upshot of the ruling below—that the reprehensibility

guidepost may override the ratio guidepost—is not simply

another ripple of uncertainty in the punitive damages terrain.

It will operate to further deter manufacturers from con-

sciously engaging in the responsible, systematic risk-utility

analysis that products liability law is actually intended to

foster because design choices adopted in light of such

analysis will expose them to more severe punishment than

those that are not. As one commentator explained, “[rJisk

analyses and, in particular, analyses that valucs lives highly,

are harmful to the company’s prospects, whereas failing to

think systematically about risks and undervaluing human life

is a less costly corporate strategy.” Viscusi, supra, 52 STAN.

L. REV. at 588; see also Schwartz, supra, 43 RUTGERS L.

REV. at 1037 (“Not only does this risk-benefit liability

standard tolerate situations in which the manufacturer trades

off safety for the sake of cost, but the standard rests * * * on

a philosophy which actually encourages manufacturers to

consider such trade-offs, a philosophy that specifies that the

welfare of society is generally enhanced when the manufac-

turer chooses a design that strikes the right balance between

advantages and disadvantages.”) (emphases in original).

The rule announced by the court below would create per-

verse incentives with untoward consequences for society. In

fact, it would lead to consumer products that are less safe.

Consider that a responsible product manufacturer contem-

plating a given safety improvement will “obtain a thorough

understanding of the risks involved and how the safety

device would affect those risks.” Viscusi, supra, 52 STAN. L.

REV. at 565. While that comprehensive assessment could be

expected to lead the manufacturer to opt for an efficient level

of safety—i.e., it would only adopt the safety improvement if

its benefits outweighed its costs—the manufacturer would

not risk performing the assessment if declining to adopt the

innovation (because its costs exceeded its benefits) would

expose it to a severe penalty for “explicitly trading off lives

against money.” /d.

By the same token, “the more a manufacturer is truly con-

cerned about its product’s safety, the more it will encourage

self-criticism and ‘negative’ analyses of the product within

the company.” Owen, supra, 49 U. Cui: L. REv. at 17.

Indeed, “it often is desirable during the initial stages of a

product’s design to test it to its limits to discover what those

limits are.” Jd. at 17-18. These efforts are desirable to

society because exposing a product’s weaknesses and explor-

ing dissatisfaction with it lead the manufacturer to produce a

superior product. See id. at 18. Nevertheless, a manufacturer

would rethink such efforts if doing so were tantamount to

sowing “the documentary seeds for a punitive damages claim

in a future products suit.” Jd. ,

The exorbitant punitive damage awards in products liability

cases that are a by-product of systematic risk-utility analysis

and product testing also inevitably lead to less innovation.

Such awards “tend to discourage participation in the underly-

ing economic activity.” Perez v. Z Frank Oldsmobile, Inc.,

223 F.3d 617, 622 (7th Cir. 2000). In other words, “if

damages exceed harm, parties may be led to curtail their

activities to an inappropriate extent—to refrain from engag-

ing in them even when the benefits exceed the harms

caused.”” A. Mitchell Polinsky & Steven Shavell, Punitive

Damages: An Economic Analysis, 111 HARV. L. REV. 869,

882 (1998). Consequently, “a firm might be induced to

withdraw its product from the marketplace even though

consumers place a higher value on the product than its full

cost of production, which includes the average harm caused

by the product.” Jd. See also Cass R. Sunstein, et al.,

Assessing Punitive Damages (With Notes on Cognition &

Valuation in-Law), 107 YALE L.J. 2071, 2077 & nn.22-23

(1998) (“[A]s a practical matter, a risk of extremely high

awards is likely to produce excessive caution in risk-averse

managers and companies.”’).

Il. PUNISHING A DEFENDANT FOR SPECULA-

TIVE HARMS TO NON-PARTIES IS INCONSIS-

TENT WITH THIS COURT’S PRECEDENTS

AND DUE PROCESS.

The ruling below approved of the plaintiff's invitation to

the jury to punish Philip Morris for its harm to Jesse Wil-

liams as well as to other, unidentified persons like him that

“have been” similarly injured in the “last 40 years” and the

“many more out there in the future.” Pet. for Cert. 2. This

type of open-ended invitation to punish a defendant for

speculative harms is a common feature of products liability

lawsuits and one that, if the jury accepts it, predictably

rockets punitive exactions into the financial stratosphere.?

9 See Thomas B. Colby, Beyond the Multiple Punishment Prob-

lem: Punitive Damages as Punishment for Individual, Private

Wrongs, 87 MINN. L. REV. 583, 584 (2003) (“The plaintiffs

attorney, although she usually represents only one (or, at most, a

few) of the many victims, will typically ask the jury to impose

punitive damages in an amount sufficient to punish the defendant

not only for harming the plaintiff, but also for the full scope of the

harm that its conduct caused to all victims and all of society.”); id.

at n.3 (citing cases). In Sand Hill Energy, Inc. v. Ford Motor Co.,

83 S.W.3d 483 (Ky. 2002), vacated & remanded, 538 U.S. 1028

(2003), decision on remand, 142 S.W.3d 153 (Ky. 2004), the $20

million punitive exaction imposed on Ford was equivalent to

$100,000 for each of 200 nationwide deaths that plaintiff's counsel

claimed in his closing argument resulted from Ford’s transmission

design.

But it is also one that is fundamentally at odds with this

Court’s punitive damages jurisprudence and basic notions of

fairness and due process.

A. Punitive Damages Must Bear A Rational Relation-

ship To The Harm Suffered By The Plaintiff.

The notion that a jury may impose a punitive damages

award that reflects assumed harms to unknown persons is

irreconcilable with this Court’s analytical framework for

determining whether a punitive damage award comports with

the Due Process Clause and its precedents implementing that

framework. In particular, it is incompatible with this Court’s

second, ratio guidepost as well as this Court’s explanation of

the first, reprehensibility guidepost.

The Court explained in Gore that the “second and perhaps

most commonly cited indicium of an unreasonable or exces-

sive punitive damages award is its ratio to the actual harm

inflicted on the plaintiff’ Gore, 517 U.S. at 580 (emphasis

added). But that was not the first—or last—time that this

Court acknowledged that “the proposition that a comparison

between the compensatory award and the punitive award is

significant.” /d. at 581. See State Farm, 538 U.S. at 418;

TXO, 509 U.S. at 459; Haslip, 499 U.S. at 23. Recognizing

that “traditional practice provides a touchstone for constitu-

tional analysis,” Honda Motor Co. v. Oberg, 512 U.S. 415,

430 (1994), this Court has emphasized this “significant”

proposition’s time-tested pedigree. Gore, 517 U.S. at 580.

While the Oregon Supreme Court did not dispute the im-

port of this guidepost in theory, its holding that a defendant

may be punished for harms to unknown non-parties eviscer-

ates it in practice. Compare Pet. App. 20a (“[W]e conclude

that evidence of similar conduct against other parties may be

relevant to a punitive damage award.”) (emphasis in original)

with id. at 3la (“[W]e conclude that the ratio guidepost

considers only harm to the plaintiff.”). A reviewing court

simply cannot meaningfully evaluate under the ratio guide-

post whether a given punitive damages award reasonably

correlates to the harm suffered by the plaintiff—and therefore

is not excessive—if that very penalty is actually based upon

_ harm to unknown others aside from the plaintiff as well.

Such an undertaking would be an exercise in futility. Indeed,

“if punitive damages were punishment for the full scope of

the wrong to society, rather than simply the wrong to the

plaintiff, it would make no sense to require a reasonable

relationship between the amount of punitive damages and the

amount of the individual plaintiff's compensatory damages.”

Colby, supra, 87 MINN. L. REV. at 607.

Permitting a plaintiff to recover a punitive damages award

that reflects harms to non-parties is not simply facially

incompatible with the ratio guidepost. It is also inconsistent

with this Court’s instructions regarding the proper applica-

tion of the reprehensibility guidepost. In State Farm, the

Court in fact “emphasized that courts cannot award punitive

damages to plaintiffs for wrongful behavior that they did not

themselves suffer.” Williams v. ConAgra Poultry Co., 378

F.3d 790, 797 (8th Cir. 2004). The State Farm Court ex-

pressly rejected Utah’s reliance on the defendant’s “nation-

wide policies rather than * * * the conduct directed toward

the Campbells,” 538 U.S. at 420, as a basis for “awarding

punitive damages to punish and deter conduct that bore no

relation to the Campbell’s harm.” /d. at 422. It explained

that “{djue process does not permit courts, in the calculation

of punitive damages, to adjudicate the merits of other parties’

hypothetical claims against a defendant.” /d. at 423. See

also White v. Ford Motor Co., 312 F.3d 998, 1015 (9th Cir.

2002) (holding that “the jury was permitted to engag[e] in a

due process violation * * * when it arrived at its punitive

damages award” because “it was permitted * * * to award

damages to vindicate the interests of all Ford pickup truck

buyers everywhere” and “measure damages by Ford’s harm

to the whole country”).

Although State Farm held that a jury cannot punish a de-

fendant for harm to non-parties, it did not foreclose a jury

from considering additional harms to others in gauging the

reprehensibility of the defendant’s conduct. The Oregon

Supreme Court thought this distinction too fine, see Pet. App.

18 n.3, but it is one ingrained in this Court’s punitive dam-

ages jurisprudence. In Gore, the Court explained that “the

fact that the Alabama Supreme Court correctly concluded

that it was error for the jury to use the number of sales in

other States as a multiplier in computing the amount of its

punitive sanction does not mean that evidence describing out-

of-state transactions is irrelevant in a case of this kind.” 517

U.S. at 574 n.21. That evidence, the Gore Court explained,

“may [instead] be relevant to the determination of the degree

of reprehensibility of the defendant’s conduct.” /d In

addressing Gore’s contention that BMW’s conduct was

particularly egregious because it constituted part of a “na-

tionwide pattern” of nondisclosure, the Court additionally

accepted that “evidence that a defendant has repeatedly

engaged in prohibited conduct while knowing or suspecting

that it was unlawful would provide relevant support for an

argument that strong medicine is required to cure the defen-

dant’s disrespect for the law.” Jd. at 576-577. In this regard,

it observed that “[o]Jur holdings that a recidivist may be

punished more severely than a first offender recognize that

repeated misconduct is more reprehensible than an individual

instance of malfeasance.” /d. at 577.

The Court struck a similar chord in State Farm. It did not

reject Utah’s “recidivist” theory of punishment out of hand

but held only that the facts of the case did not support it. See

538 U.S. at 423-424. Although “evidence of other acts need

not be identical to have relevance in the calculation of

punitive damages,” id. at 423, the Court explained that the

evidence proffered in the case “had nothing to do with a

third-party lawsuit” and that “[o]ther evidence concerning

reprchensibility was even more tangential.” /d. at 424.

Accordingly, the Court concluded that “[t]he reprehensibility

guidepost does not permit courts to expand the scope of the

case so that a defendant may be punished for any malfea-

sance.” /d. This Court’s precedents thus clearly embrace

the careful distinction that the ruling below rejected.

Permitting a jury to base a punitive damages award on

speculations about harms to non-parties also suffers another

fundamental due process defect of constitutional magnitude.

Of course, a plaintiff cannot recover any punitive damages

from a defendant without first prevailing on the merits of his

underlying lawsuit. See Colby, supra, 87 MINN. L. REV. at

607 (“Under current law, * * * a defendant cannot be made

to pay punitive damages unless the plaintiff establishes an

underlying civil cause of action[.]”). “[I]f the civil action

fails for any reason, the defendant will escape liability for

punitive damages.” /d. Thus, the failure of proof on an

element of a plaintiffs claim—e.g., causation—or the

existence of an affirmative defense—e.g., the running of an

applicable statute of limitations—will bar plaintiff's recovery

of any damages, including punitive ones.

But permitting a plaintiff to recover an award premised on

supposed harms that the defendant caused to others not

involved in the litigation eliminates this basic requirement

that a plaintiff prevail on the merits of his lawsuit. Cf id. at

654 (“Because punitive damages are properly recoverable for

each individual injury only if all of the elements of the

underlying cause of action are present and there are no

affirmative defenses, the defendant must be permitted to

contest causation and other elements of the alleged tort on an

individual basis with respect to the victim and to raise all

affirmative defenses that it has against particular victims.”’).

This essentially means that the defendant is subject to all of

the downside of class action litigation without any of its

corresponding procedural upside. See Williams, 378 F.3d at

797 (“Where there has been a pattern of illegal conduct

resulting in harm to a large group of people, our system has

mechanisms such as class action suits for punishing defen-

dants. Punishing systematic abuses by a punitive damages

award in a case brought by an individual plaintiff, however,

deprives the defendant of the safeguards against duplicative

punishment that inhere in the class action procedure.”).!°

10 See also Colby, supra, 87 MINN. L. REV. at 655 (“[U}nder

current law, if all of the victims were to join together in a class

action, the defendant would be spared the expense of paying either

compensatory damages or punitive damages for any class members

Thus, although “[t}he other wrongs allegedly resulting from

the same course of [defendant’s] conduct will be treated only

peripherally and painted with a very broad brush” at trial,

“(t]he jury will be permitted to punish the defendant for the

whole lot of them.” Colby, supra, 87 MINN. L. REV. at 654.

That state of affairs conflicts with the most elementary

notions of due process. As this Court has held, “ ‘[d]ue

process requires that there be an opportunity to present every

available defense.” ” Lindsey v. Normet, 405 U.S. 56, 66

(1972) (quoting American Sur. Co. v. Baldwin, 287 U.S. 156,

168 (1932)). Indeed, if defendants are “barred from present-

ing defenses and affirmative defenses to claims which have

been filed against them, they would * * * be unconstitution-

ally deprived of their opportunity to be heard.” National

Union Fire Ins. Co. of Pittsburgh v. City Sav., F.S.B., 28

F.3d 376, 394 (3d Cir. 1994). Consequently, juries cannot be

permitted to award damages to individual plaintiffs based on

speculative harms to non-parties consistent with basic

protections afforded by the Due Process Clause.

B. Permitting Punitive Damages To Be Based On

Theoretical Harms To Non-Parties Results In Ex-

cessive Punishment And Over-Deterrence.

Allowing a single plaintiff or a set of plaintiffs to recover a

punitive award that reflects the entire harm caused by a

defendant’s course of conduct disregards the fact that other

plaintiffs—in the same or other jurisdictions—may also bring

suit and seek punitive damages. The consequence of such an

approach is that a defendant is likely to be punished and

deterred over and again for a single course of conduct—and

increasingly severely, for “[o]ne excessive verdict, permitted

to stand, becomes precedent for another still larger one.”

Consorti v. Armstrong World Indus., Inc., 72 F.3d 1003,

1010 (2d Cir. 1995), vacated & remanded on other grounds,

518 U.S. 1031 (1996). The ineluctable result is thus punitive

who could not individually establish their underlying cause of

action.”); see generally Fed. R. Civ. P. 23.

damages overkill—too much punishment, too much deter-

rence.

Various authorities have recognized that this problem bears

a constitutional aspect. See, e.g., Racich v. Celotex Corp.,

887 F.2d 393, 398 (2d Cir. 1989); In re School Asbestos

Litig., 789 F.2d 996, 1003-1005 (3d Cir. 1986); Roginsky v.

Richardson-Merrell, Inc., 378 F.2d 832, 839-840 (2d Cir.

1967). This Court has also voiced concern about it. In State

Farm, the Court observed that punishment for harms done to

others “creates the possibility of multiple punitive damages

awards for the same conduct; for in the usual case nonparties

are not bound by the judgment some other plaintiff obtains.”

538 U.S. at 423. See also Gore, 517 U.S. at 593 (Breyer, J.,

concurring) (noting that “[l]arger damages might also ‘dou-

ble count’ by including in the punitive damages award some

of the compensatory, or punitive, damages that subsequent

plaintiffs would also recover”).

But the solution to the problem proposed by the Oregon

Supreme Court in the ruling under revicw—i.e., that a

defendant can simply pay an award now and reccive credit

for it in later litigation—is neither novel nor realistic. Nearly

40 years ago, Judge Friendly memorably identified its flaws.

He explained that “whatever the right result may be in strict

theory, we think it somewhat unrealistic to expect a judge,

say in New Mexico, to tell a jury that their fellow townsman

should get very little by way of punitive damages because

Toole in California and Roginsky and Mrs. Ostopowitz in

New York had stripped that cupboard bare.” Roginsky, 378

F.2d at 840.

‘Aside from explaining that such an approach is unrealistic

in practice, Judge Friendly also recognized that it inherently

fosters inequity among the injured. See id. at 839-840

(“Neither does it seem either fair or practicable to limit

punitive recoverics to an indeterminate number of first-

comers” because “most laymen and some judges would have

some difficulty in understanding why presumably equally

worthy plaintiffs in the other 75 cases before Judge Croake or

elsewhere in the country should get less or none.”). He is not .

the only authority to question an approach that deprives

future plaintiffs of their rightful share of punitive damages. !!

Such an approach would discourage some plaintiffs from

bringing suit for their injuries. See Colby, supra, MINN. L.

REV. at 595 (unavailability of punitive damages may deter

plaintiffs with low potential compensatory damages from

suing). It also would encourage others to engage in a race to

judgment, see, e.g., Davis v. Celotex Corp., 420 S.E.2d 557,

565 (W. Va. 1992) (“[T]hose plaintiffs whose cases were

heard first would gain the punitive monetary advantage.”);

Colby, supra, MINN. L. REV. at 595 (noting that punitive

damages awarded to first-comers may bankrupt the defen-

dant).

The Eighth Circuit recently identified a solution to this

problem—a solution mandated by this Court’s jurisprudence.

That court explained that only “[t]ying punitive damages to

the harm actually suffered by the plaintiff prevents punishing

defendants repeatedly for the same conduct.” Williams, 378

F.3d at 797. Otherwise, “[i]f a jury fails to confine its

deliberations with respect to punitive damages to the specific

harm suffered by the plaintiff and instead focuses on the

conduct of the defendant in general, it may award exemplary

damages for conduct that could be the subject of an inde-

pendent lawsuit, resulting in a duplicative punitive damages

award.” Jd.

'l See, e.g., Jackson v. Johns-Manville Sales Corp., 781 F.2d

394, 405 (Sth Cir. 1986) (en banc) (“We beliéve that the Missis-

sippi Supreme Court would not deny to its own citizens the right to

recover that which citizens of dozens of other states are already

entitled to recover.”); W.R. Grace & Co. v. Waters, 638 So.2d 502,

505 (Fla. 1994) (court not willing to “place Floridians injured by

asbestos on an unequal footing with the citizens of other states

with regard to the right to-recover punitive damages from compa-

nies who engage in extreme misconduct’’).

C. Punitive Exactions That Reflect Assumed Harms

To Non-Parties Allow A Single Aberrant Jury To

Override The Decisions Of Other Juries And Gov-

ernmental Regulators.

The flip side of the duplicative punishment concern is the

equally disturbing fear that—if juries are permitted to punish

for the universal harm a product may have caused—a manu-

facturer may be punished for the entire supposed harm

caused by a product defect that other juries, judges and

federal regulators have found not to constitute a defect at all.

This is a problem that automobile manufacturers know too

well, as noted above. In Sand Hill Energy, Inc., supra, 83

S.W.3d 483 (Ky. 2002), the Supreme Court of Kentucky

reinstated a $15 million punitive damages award for a Ford

transmission design that NHTSA declined to find defective.

And juries in 15 other jurisdictions also concluded that the

transmission’s design did not contain a defect.

The case of Ford Motor Co. v. Ammerman, 705 N.E.2d

539 (Ind. Ct. App. 1999), presents yet another troubling

example of the problem posed by aberrant awards of punitive

damages based on the assumed total harm caused by a

product. Plaintiffs were ejected and seriously injured when

the Bronco II in which they were passengers rolled over after

it swerved to avoid colliding with another vehicle. See id. at

549. *They alleged that the Bronco II was defective because

its narrow track width and high center of gravity made it too

susceptible to rolling over. See id. at 546. The jury found for

plaintiffs, awarding more than $4 million in compensatory

damages and a $58 million punitive award. See id. at 549.

The trial court reduced that exaction to $13.8 million—a

figure “represent[ing] Ford’s retooling costs, along with an

additional $54.00 representing the cost for additional hard-

ware installed on each vehicle.” Jd. at 559. While other ~

juries returned defense verdicts in Bronco II rollover cases,

the reviewing court concluded the award was “not exces-

sive.” Jd. at 564.

As with the multiple punishment problem, this one obvi-

ously cannot be solved by a pay now, credit later approach

either—there may not be another successful plaintiff from

whom a manufacturer could seek, let alone obtain, credit for

punitive damages already paid to others. The upshot is that

“a defendant that loses a single case would also lose the

benefit of all previous victories against the same claim of

misconduct.” Johnson v. Ford Motor Co., 113 P.3d 82, 94-

95 (Cal. 2005).

CONCLUSION

For the foregoing reasons, the judgment of the Supreme

Court of Oregon should be reversed.

JULY 2006

Respectfully submitted,

H. CHRISTOPHER BARTOLOMUCCI

Counsel of Record

PAUL A. WERNER

HOGAN & HARTSON L.L.P.

555 Thirteenth Street, N.W.

Washington, D.C. 20004

(202) 637-5810

JOHN T. WHATLEY

ALLIANCE OF AUTOMOBILE

MANUFACTURERS

1401 Eye Street, N.W.

Suite 900

Washington, D.C. 20005

(202) 326-5548

Counsel for Amicus Curiae

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