Amicus Curiae Brief — Philip Morris USA v. Williams

Fllol

A

Supreqao Court, U.S.

FILBD

15 ju 27 2006

No. 05-1256 | OFRICE G8 TH CLERK

In the

Supreme Court of the United States

+

PHILIP MORRIS USA,

Petitioner,

Vv.

MAYOLA WILLIAMS,

Respondent.

+

On Writ of Certiorari

to the Supreme Court of Oregon

~~

BRIEF AMICUS CURIAE OF PACIFIC LEGAL

FOUNDATION IN SUPPORT OF PETITIONER

+

.

DEBORAH J. LA FETRA

TIMOTHY SANDEFUR

Counsel of Record

Pacific Legal Foundation

3900 Lennane Drive, Suite 200

Sacramento, California 95834

Telephone: (916) 419-7111

Facsimile: (916) 419-7747

Counsel for Amicus Curiae Pacific Legal Foundation

— 2 ere «Ree enn es ee 68 eee

i

QUESTIONS PRESENTED

1. Whether, in reviewing a jury’s award of punitive

damages, an appellate court’s conclusion that a defendant’s

conduct was highly reprehensible and analogous to a crime can

“override” the constitutional requirement that punitive damages

be reasonably related to the plaintiff's harm.

2. Whether due process permits a jury to punish a

defendant for the effects of its conduct on third parties.

QUESTIONS PRESENTED

il

TABLE OF CONTENTS

TABLE OF AUTHORITIES ................eeccee- iv

1.

COURTS MAY NOT AVOID THE

DUE PROCESS REQUIREMENT THAT

PUNITIVE DAMAGES REASONABLY

RELATE TO THE INJURY BY

RETROACTIVELY ANALOGIZING CIVIL

CONDUCT TO CRIMINAL CONDUCT

A. The Due Process Clause Rightly Restricts

the Awarding of Punitive Damages .......... 3

B. Retroactively Describing

Conduct as Analogous to

Criminal Conduct to Evade the Ratio

‘Requirement Violates Due Process ........... 6

C. Allowing Courts to Use a Defendant’s

Egregious Conduct to Depart from the

Gore Ratio Requirement Would Lead to

Inconsistent Punitive Damages Decisions ...... 8

D. Allowing State Courts to Evade

the Ratio Requirement in This

Way Would Harm Society Through

Overdeterrence and Inconsistency ........... 12

ili

TABLE OF CONTENTS—Continued |

’ Page

Il. THE DUE PROCESS CLAUSE

DOES NOT ALLOW COURTS

TO PUNISH DEFENDANTS FOR

CONDUCT TOWARD THIRD PARTIES ....... 17

A. Punitive Damages Awards

Must Comply with Due Process

Standards Including Fair Notice ............ 17

B. Punitive Damages Satisfy

Due Process Only When They

Are Directed at the Defendant’s

Particular Wrong in a Particular Case ........ 22

EY bs ecreeudedws cv anvecesesbeeves ses 26

iV

TABLE OF AUTHORITIES

Page

Cases

Am. Surety Co. v. Baldwin, 287 U.S. 156 (1932) ....... 18

Apprendi v. New Jersey, 530 U.S. 466 (2000) .......... 19

Arch v. The Am. Tobacco Co., Inc.,

BF Wits SP Ce FO. BDDED cc cccccscessessece 18

Austin v. Wilson, ;

58 Mass. (4 Cush.) 273 (Mass. 1849) .......6...... 23

Baribeau v. Gustafson, F

107 S.W.36 32 (Tex. App. 2003) ....cccccccsccccs 11

Barry v. Edmunds, 116 U.S. 550 (1886) .............. 23

BMW of North America, Inc. v. Gore,

ee es SE dike $e ceeds twheeeseneeca passim

Bouie v. City of Columbia,

yo FL EE ene 2-3, 6-7, 17, 19

Brown v. Swineford, 44 Wis. 282 (1878) ........... 23-24

Browning-Ferris Indus. of Vt., Inc. v.

Kelco Disposal, Inc., 492 U.S. 257 (1989) ....... 22, 24

Connally v. Gen. Const. Co., 269 U.S. 385 (1926) ...... 17

Day v. Woodworth, 54 U.S. (13 How.) 363 (1851) ...... 23

Engle v. Liggett Group, Inc., No. SC03-1856,

2006 WL 1843363 (Fla. July 6, 2006) ............. 10

Fay & UX v. Parker, $3 N.H. 342 (N.H. 1872) ......... 23

Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974) ........ 4

Vv

-_

TABLE OF AUTHORITIES—Continued

Page

Gilbert v. DaimlerChrysler Corp.,

685 N.W.2d 391 (Mich. 2004),

cert. denied, 126 S. Ct. 354 (2005) .............. 9-10

Grayned v. City of Rockford, 408 U.S. 104 (1972) ...... 17

Green v. Am. Tobacco Co.,

FOO 2G FOCI. FOU occ cccccvccscsesoess 7-8

Grimshaw v. Ford Motor Co.,

174 Cal. Rptr. 348 (Cal. Ct. App. 1981) ............ 15

Hill v. Colorado, 530 U.S. 703 (2000) .............. 4,6

Honda Motor Co., Ltd. v. Oberg, .

FES thes SOOO 6 sckicoredviwenusia Kia eweke 4

Hurtado v. California, 110 U.S. 516 (1884) ............ 4

- Inre Lead Paint Litigation, No. 58,531

(N.J. Sup. Ct. cert. granted Nov. 17,2005) .......... l

Int'l Bhd. of Elec. Workers v. Foust,

PIB TI GEIS GO c ascii vivccdacncentsaupeensues 8

Johnson v. Ford Motor Co.,

Eee A fe BPP ee TT TTT er 1,11

Jones v. United States, 526 U.S. 227 (1999) ........... 19

Juzwin v. Amtorg Trading Corp.,

705 F. Supp. 1053 (D.N.J. 1989),

vacated in part on reconsideration,

718 F. Supp. 1233 (D.N.J. 1989) .............026. 20

Kelo v. City of New London, 125 S. Ct. 2655 (2005) ..... 5

Kimzey v. Wal-Mart Stores, Inc.,

107 F.3d 568 (8th Cir. 1997) .......0ccecceeceeees 1

vi

TABLE OF AUTHORITIES—Continued

Page

Lankford v. Idaho, 500 U.S. 110 (1991) ...........2.. 17

Lindsey v. Normet, 405 U.S. 56 (1972) ...........045. 18

Marshall v. Burger King Corp., No. 100372,

2006 WL 1703488 (Ill. June 22, 2006) .............. 1

Memphis Cmty. Sch. Dist. v. Stachura,

nn. iid onic Kec eaees setae sensed 24

Michelson v. United States, 335 U.S. 469 (1948) ....... 18

Milwaukee & St. Paul Ry. Co. v. Arms,

Be ee PP OROTED crccccsccccccesesuct’ 23

Pac. Mut. Life Ins. Co. v. Haslip,

EE 20, 23

Powell v. Alabama, 287 U.S. 45 (1932) ............45- 4

Quigley v. Cent. Pac. R.R. Co.,

ES eden ncunceeesdseecees 23

Ripa v. Owens-Corning Fiberglas Corp.,

660 A.2d 521 (N.J. Super. Ct. App. Div. 1995) ...... 20

Romer v. Evans, 517 U.S. 620 (1996) ............... 4-5

Ross v. Philip Morris & Co., Ltd.,

EE, Sno ccncesacecsccsecsacess 7

Schimizzi v. Ill. Farmers Ins. Co..,

928 F. Supp. 760 (N.D. Ind. 1996) ................ 11

Shaffer v. Heitner, 433 U.S. 186 (1977) ...........056. 8

Simon v. San Paolo U.S. Holding Co., Inc.,

ED oo ok kc kee écnsténcens 1,11

Smith v. Wade, 461 U.S. 30 (1983) ...........4.. 9,19, 22

Vii

TABLE OF AUTHORITIES—Continued

Page

Speiser v. Randall, 357 U.S. 513 (1958) .........0055- 18

Standard Oil Co. of Indiana v. State of Missouri

ex inf. Hadley, 224 U.S. 270 (1912) ........ 0c eee 5

State Farm Mut. Auto. Ins. Co. v.

Campbell, 538 U.S. 408 (2003) .............. passim

Sterling v. Velsicol Chem. Corp.,

855 F.2d 1188 (6th Cir. 1988) .................08- 18

Stillson v. Gibbs, 18 N.W. 815 (Mich. 1884) .......... 23

Tennessee v. Garner, 471 U.S. 1 (1985) .............. 22

Texas Dep't of Cmty. Affairs v. Burdine, .

450 U.S. 248 (1981) ........... Sopatevvacesunee 18

Trustees of Dartmouth Coll. v. Woodward,

17 U.S. (4 Wheat.) 518 (1819) ................. 3, 25

TXO Prod. Corp. v. Alliance Res. Corp.,

SEED 6 Och nvbaccecdsndnsevnewaees 20

Wanamaker v. Lewis,

D7e TH. Ba TAD GAIA, IGGD) onc ccccccccvecceces 9

Ward v. Ward, 41 lowa 686 (1875) ..............004. 24

Watts v. S. Bound R.R. Co.,

TE vsvngesubecddsceupasuaes 24

bern & A.R.R. v. Henderson,

nT ccccsapescdancencksatuseebate 18

Williams v. Philip Morris Inc.,

er ee ED cv ndéudsseeonncsase 6, 8, 25

United States Constitution

8 8 RO | errr Ak aad Sas lee 24

~~

Vill

TABLE OF AUTHORITIES—Continued

a SE. ance doceccceenedcaes

Rules of Court

ee ED GN A UE ho cectusereddacesseses

eee EP UU 66 dab sudccéedudecsucuces

Miscellaneous

AMA Board of Trustees, Jmpact of Product

Liability on the Development of New

Medical Technologies (June 1988) ...........

Barrick, J. Stephen, Moriel and the Exemplarly

Damages Act: Texas Tag-Team Overhauls

Punitive Damages, 32 Hous. L. Rev. 1059 (1995) ....

Buchanan, James & Tullock, Gordon, The Calculus

of Consent (Ann Arbor Paperbacks 1965) (1962)

Burgess, Heather, State Limits: Can One State

Rule the Country? One State Awarding

Punitive Damages for Nationwide

Conduct, 31 Pepp. L. Rev. 477 (2004) ........

Chanenson, Steven L. & Gotanga, John Y.,

The Foggy Road for Evaluating

Punitive Damages: Lifting the Haze

from the BMW/State Farm Guideposts,

37 U. Mich. J.L. Reform 441 (2004).........

Cohen, Jon, Js Liability Slowing AIDS Vaccines?,

UUUO, FOR, TO, TORS occ ccctecccccsecsces

Colby, Thomas B., Beyond the Multiple

Punishment Problem: Punitive Damages as

Punishment for Individual, Private Wrongs,

87 Minn. L. Rev. 583 (2003) ................

ix

TABLE OF AUTHORITIES—Continued

Eliot, Edward C., Exemplary Damages,

29 Am. L. Reg. 570 (1881) .........00.eeeeees

H.R. Rep. No. 99-908 (1986),

reprinted in 1986 U.S.C.C.A.N. 6344 ..........

Hines, Laura J., Due Process Limitations on

Pu, itive Damages: Why State Farm Won't Be

the Last Word, 37 Akron L. Rev. 779 (2004) .....

Keeton, W. Page, Prosser and

Keeton on Torts (Sth ed. 1984) ........... Seeks

La Fetra, Deborah J., Freedom, Responsibility,

and Risk: Fundamental Principles Supporting

Tort Reform, 36 Ind. L. Rev. 645 (2003) ........

Le Fetra, Deborah J., A Moving Target:

Property Owner’s Ditty to Prevent

Criminal Acts on the Premises,

27 Whittier L. Rev. _ (forthcoming, 2006) .....

Levy, Robert A., The Conservative Split on Punitive

Damages, 2003 Cato Sup. Ct. Rev. 159 (2003) ...

Lund, Andrew C.W., The Road From Nowhere?

Punitive Damage Ratios After BMW v. Gore

and State Farm Mutual Automobile Insurance

Co. v. Campbell, 20 Touro L. Rev. 943 (2005)... .

McCarthy, Milby Amott, Tobacco Suits Today:

Are Cigarette Plaintiffs Just Blowing

Smoke, 23 U. Rich. L. Rev. 257 (1989) ........

Olson, Walter K., The Rule of Lawyers:

How the New Litigation Elite

Threatens America’s Rule of Law (2003) .......

x

TABLE OF AUTHORITIES—Continued

Page

Rubin, Paul H., et al, BMW v. Gore: Mitigating

the Punitive Economics of Punitive Damages,

5 Sup. Ct. Econ. Rev. 179 (1997) .............. 16, 21

I i iii ici c5 edo sxuveinko 14

Schkade, David, et al.,

Deliberating About Dollars: The Severity

Shift, 100 Colum. L. Rev. 1139 (2000) ............. 11

Schwartz, Gary T., The Myth of the Ford

Pinto Case, 43 Rutgers L. Rev. 1013 (1991) ........ 15

Sunstein, Cass R., et al., Punitive

Damages: How Juries Decide (2002) ....... 10, 15-16

Sunstein, Cass R., Naked Preferences and the

Constitution, 84 Colum. L. Rev. 1689 (1984)......... 5

The Federalist (Clinton Rossiter ed., 1961) ............. 5

Tullock, Gordon, Rent Seeking as a

Negative-Sum Game, in Toward a

Theory of the Rent-Seeking Society

(James M. Buchanan et al. eds., 1980) ............. 14

Viscusi, W. Kip, The Blockbuster

Punitive Damages Awards,

53 Emory L.J. 1405 (2004) ............. 12, 15, 17, 21

Viscusi, W. Kip, The Social Costs

of Punitive Damages Against

Corporations in Environmental and

Safety Torts, 87 Geo. L.J. 285 (1998) .............. 12

White, G. Edward, Tort Law in America:

An Intellectual History (1985) ........6000e eee eee 2

1

INTEREST OF AMICUS CURIAE!

Pacific Legal Foundation (PLF) was founded over 30 years

ago and is widely recognized as the largest and most

experienced nonprofit legal foundation of its kind. PLF

litigates matters affecting the public interest at all levels of state

and federal courts and represents the views of thousands of

supporters nationwide who believe in limited government and

economic freedom. In furtherance of PLF’s continuing mission

to defend economic liberty, the Foundation created its Free

Enterprise Project. Through that project, the Foundation seeks

to protect the free enterprise system from abusive regulation

and a civil justice system that grants excessive liability awards.

PLF has participated in several cases before the Supreme Courts

of California, Illinois, New Jersey, and other states in cases

involving the reach and scope of civil liability and the abuse of

punitive damages. See, e.g., Johnson v. Ford Motor Co.,

113 P.3d 82 (Cal. 2005); Simon v. San Paolo U.S. Holding Co.,

Inc., 113 P.3d 63 (Cal. 2005); Marshall v. Burger King Corp.,

No. 100372, 2006 WL 1703488 (Ill. June 22, 2006); Jn re Lead

Paint Litigation, No. 58,531 (NJ. Sup. Ct. cert. granted

Nov. 17, 2005); and PLF attorneys have published articles on

the dangers that a runaway civil justice system poses to

American consumers and entrepreneurs. See, e.g., Deborah J.

La Fetra, Freedom, Responsibility, and Risk: Fundamental

Principles Supporting Tort Reform, 36 Ind. L. Rev. 645 (2003);

Deborah J. La Fetra, A Moving Target: Property Owner's Duty

to Prevent Criminal Acts on the Premises, 27 Whittier L. Rev.

___ (forthcoming, 2006).

' Pursuant to Supreme Court Rule 37.3(a), all parties have consented

to the filing of this brief. Letters evidencing such consent have been

lodged with the Clerk of the Court.

Pursuant to Rule 37.6, amicus curiae affirms that no counsel for

any party authored this brief in whole or in part and that no person

‘Or—entity made a monetary contribution specifically for the

preparation or submission of this brief.

2

SUMMARY OF ARGUMENT

This case typifies the unfairness which the Due Process

Clause was designed to prevent. Moreover, it is indicative of

the growing trend toward “regulation by litigation,” in which

state courts are enthusiastically participating. This trend

consists of courts using their power not to remedy the particular

injury alleged by a particular party in a particular case, but

instead to pursue broad policy goals thought to be good for

society in general. See G. Edward White, Tort Law in America:

An Intellectual History 178 (1985) (noting trend toward

“conceiv[ing] of tort law as ‘public law in disguise’” instead of

being “concerned primarily with deterring and punishing

blameworthy civil conduct”).

When this occurs, lobbying groups try to exploit the

judiciary as an alternative policymaking tribunal when their

demands have not been met by the legislature. These parties,

and their allies in the offices of state attorneys general, use

crushing punitive damages awards, vaguely defined common

law crimes—or, in this case, the reinterpretation of criminal

statutes decades after the conduct in question occurred—and

other judicial tools to pursue policy goals that are not part of the

judiciary’s proper role. The courts exist to remedy and punish

harms in particular cases, not to pursue a broad policymaking

goal outside the legislative process.

The Due Process Clause sets broad but strong barriers

around the activities of state courts. Among these boundaries

is the rule of fundamental fairness articulated in this Court’s

decisions in BMW of North America, Inc. v. Gore, 517 U.S. 559

(19%) and State Farm Mut. Auto. Ins. Co. v. Campbell,

538 U.S. 408 (2003)-—that punitive damages must bear some

sensible relationship to the compensatory damages awarded in

a particular case. But here, the state court evaded this limit by

redefining the conduct at issue as a crime, even though it was

legal and reasonable when it occurred. Cf Bouie v. City of

3

Columbia, 378 U.S. 347, 352 (1964) (states may not adopt

“unforeseeable and retroactive judicial expansion of narrow and

precise [criminal law] statutory language”).

Moreover, the court below assessed punitive damages on

the basis of Philip Morris’ conduct toward third parties—the

details of which can only remain speculative, based on no other

evidence than the particularly egregious and emotionally

powerful facts of the Plaintiffs own case. Rather than

punishing Philip Morris for its conduct toward Mayola

Williams, therefore, the Oregon Courts essentially passed

judgment on Philip Morris’ behavior as a corporate citizen.

This is not due process of law. State Farm, 538 U.S. at 423 (“A

defendant should be punished for the conduct that harmed the

plaintiff, not for being an unsavory individual or business.”).

ARGUMENT

I

COURTS MAY NOT

AVOID THE DUE PROCESS

REQUIREMENT THAT PUNITIVE DAMAGES

REASONABLY RELATE TO THE INJURY

BY RETROACTIVELY ANALOGIZING

CIVIL CONDUCT TO CRIMINAL CONDUCT

A. The Due Process Clause Rightly Restricts

the Awarding of Punitive Damages

The earliest, and still the best, exposition of the meaning

of “due process of law” came in Daniel Webster’s argument in

Trustees of Dartmouth Coll. v. Woodward, 17 U.S. (4 Wheat.)

518, 581 (1819). Due process of law is “a law which hears

before it condemns, which proceeds upon inquiry and renders

judgment only after trial. The meaning is, that every citizen

shall hold his life, liberty, property, and immunities, under the

protection of the general rules which govern society.” Jd.

(argument of Mr. Webster) (emphasis added). See also

4

Hurtado v. California, 110 U.S. 516, 535-36 (1884); Powell v.

Alabama, 287 U.S. 45, 68 (1932) (incorporating Webster’s

definition).

Later courts have continued to acknowledge these three

basic due process requirements. First, laws must fairly apprise

a party of the conduct that will incur a criminal or civil penalty.

See Hill v. Colorado, 530 U.S. 703, 732 (2000). Second, the

law must fairly apprise a party of the penalties that will be

incurred by violating the law. State Farm, 538 U.S. at 417;

Gore, 517 U.S. at 574. See also Robert A. Levy, The

Conservative Split on Punitive Damages, 2003 Cato Sup. Ct.

Rev. 159, 177 (2003) (“parties must be able to determine which

conduct is necessary to conform to the laws dictates: and legal

outcomes must be reasonably predictable”). Third, Webster’s

generality principle requires government to regulate for the

general welfare, and not for private advantage or satisfaction.

Cf. Romer v. Evans, 517 U.S. 620, 632 (1996).

In Gore and State Farm, this Court recognized that these

due process considerations must apply to the amount of

punitive damages assessed in tort cases. Punitive damages

awards perform some of the same functions as criminal

penalties, but because “civil defendants are not accorded the

protections afforded criminal defendants, punitive damages

pose an acute danger of arbitrary deprivation of property.”

State Farm, 538 U.S. at 417; Honda Motor Co., Ltd. v. Oberg,

512 U.S. 415, 432 (1994).

If due process did not constrain courts to rationality,

predictability, and faimess in assessing punitive damages,

defendants would be exposed to arbitrary and unfair

punishment. Gertz v. Robert Welch, Inc., 418 U.S. 323, 350

(1974) (“juries assess punitive damages in wholly unprec.ctable

amounts bearing no necessary relation to the harm caused”).

This would violate “[e}lementary notions of fairness enshrined

in our constitutional jurisprudence [that] dictate that a person

5

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.

In addition, the Due Process Clause requires that all

government actions advance the genuine welfare of society at

large, and not merely the private welfare of particular

individuals or special interest groups. Romer, 517 U.S. at 632.

See also Cass R. Sunstein, Naked Preferences and the

Constitution, 84 Colum. L. Rev. 1689, 1689 (1984). The

essential difference between due process of law and

-arbitrariness is that arbitrariness results from government

employing its coercive force on behalf of private factions or

individuals rather than society at large. Sunstein, supra; see

also The Federalist No. 51, at 324 (James Madison) (Clinton

Rossiter ed., 1961) (“In a society under the forms of which the

stronger faction can readily unite and oppress the weaker,

anarchy may as truly be said to reign as in a state of nature.”).

Due process requires that government employ its power for the

general welfare, not for the private financial benefit of a few.

See Kelo v. City of New London, 125 S. Ct. 2655, 2661-62

(2005). That is why this Court has declared that the power of

a court to award punitive damages “is limited by the obligation

to administer justice.” Standard Oil Co. of Indiana v. State of

Missouri ex inf. Hadley, 224 U.S. 270, 286 (1912).

This Court established guideposts in Gore and State Farm

to help lower courts ensure against arbitrary and extreme

punitive damages awards, and awards that benefit particular

parties rather than society. In particular, the Court found that

due process requires some reasonable ratio between the

compensatory damages award and the punitive damages award.

Gore, 517 U.S. at 580; State Farm, 538 U.S. at 418, 425. This

ratio requirement ensures that private litigants do not exploit

their individual injuries to obtain punitive damages awards far

in excess of their actual harms, and which inure solely to their

on private benefit. If a jury may award punitive damages in

6

any amount regardless of the compensatory damages, then the

plaintiff's injury might serve as the proverbial tail wagging the

dog of erratic, potentially massive punitive damages awards.

This is the very definition of arbitrary and discriminatory

enforcement. Hill, 530 U.S. at 732.

The courts should not serve as a tool for opportunistic

litigants or their even more opportunistic attorneys to exploit

government power to extract punitive damages—i.e., private

profits—from defendants without some sensible ratio between

the injury actually suffered and the punitive damages awarded.

This Court’s basic holdings in State Farm and Gore were

correct and should be preserved.

B. Retroactively Describing Conduct as

Analogous to Criminal Conduct to Evade

the Ratio Requirement Violates Due Process

The Oregon Supreme Court found that it could

“overrid[e]}” this Court’s due process “concern{s]” by declaring

Philip Morris’ conduct to be highly reprehensible. Williams v.

Philip Morris Inc., 127 P.3d 1165, 1181 (Or. 2006). It found

this reprehensibility by retroactively redefining its criminal laws

So as to analogjze Philip Morris’ conduct to manslaughter. Jd.

at 1179-80. But the court’s hindsight reinterpretation of the

state’s manslaughter statute is fundamentally arbitrary and a

violation of due process standards.

The court essentially recharacterized acts that were neither

reckless at the time, nor committed without due caution, as

analogous to criminal conduct. Yet Philip Morris was never

charged with this crime in its many decades of operation, and

until the lower court’s decision in this case, the idea that Philip

Morris had committed something akin to manslaughter would

have been rejected as an unreasonable application of the law.

Cf. Bouie, 378 U.S. at 353 (state may not make an action which

was innocent when done criminal or aggravate a crime or make

it greater than it was, when committed).

7

In Bouie, civil rights demonstrators entered a store during

normal business hours and took seats in the restaurant section.

An employee posted a no trespassing sign and the police

arrested the plaintiffs, who were convicted of criminal trespass

under South Carolina’s trespass law. This Court reversed the

convictions because the South Carolina Supreme Court’s

interpretation of the trespass law had enlarged the statute’s

reach to include the plaintiff's actions, and then retroactively

applied the new definition to uphold the convictions. Because

this was “punish{ing] them for conduct that was not criminal at

the time they committed it,” the South Carolina Court’s

decision “violated the requirement of the Due Process Clause

that a criminal statute give fair warning of the conduct which it

prohibits.” Jd. at 350. The Court specifically found that when

“construction of a criminal statute is applied retroactively to

subject a person to criminal liability for past conduct, the effect

is to deprive him of due process of law in the sense of fair

warning that his contemplated conduct constitutes a crime.” Jd.

at 354-55.

In a similar manner, the Oregon Supreme Court redefined

the recklessness element of its manslaughter statute to declare

that Philip Morris’ decades-long denial of a scientifically

proven connection between smoking and cancer was criminally

reckless. Yet at the time that Philip Morris did this, when

Ms. Williams began smoking and for many years afterward, it

was reasonable for the company to dispute the early scientific

studies on the danger of its products, and, more importantly,

courts at the time found no civil or criminal fault in the actions

of Philip Morris or other tobacco companies. See, e.g., Green

v. Am. Tobacco Co., 304 F.2d 70, 76 (Sth Cir. 1962) (tobacco

companies “could not be held liable . . . against consequences

of which no developed human skill and foresight could afford

knowledge”); accord, Ross v. Philip Morris & Co., Ltd.,

328 F.2d 3, 10 (8th Cir. 1964). See also Milby Amott

McCarthy, Tobacco Suits Today: Are Cigarette Plaintiffs Just

8

Blowing Smoke, 23 U. Rich. L. Rev. 257 (1989) (“[U]ntil the

1988 decision in Cipollone v. Liggett Group, Inc., no plaintiff

had won a products liability suit against a tobacco company.”).

Indeed, the Fifth Circuit Court of Appeals ruled in 1962 that

cigarettes were reasonably fit for the purpose for which they

were sold. Green, 304 F.2d at 76.

To suggest that Philip Morris’ activities “in 1954” of

selling cigarettes, and disputing the then-uncertain scientific

research on tobacco’s harmful effects “would have constituted

manslaughter,” Williams, 127 P.3d at 1179, is absurd and

arbitrary—a fundamentally ipse dixit conclusion based on a

retroactive reinterpretation of the law. This violates the Due _

Process Clause’s prohibition against “judgments without

notice.” Gore, 517 U.S. at 574 n.22 (quoting Shaffer v.

Heitner, 433 U.S. 186, 217 (1977) (Stevens, J., concurring in

judgement)).

C. Allowing Courts to Use a Defendant’s

Egregious Conduct to Depart from the

Gore Ratio Requirement Would Lead to

Inconsistent Punitive Damages Decisions

lf courts may depart from the ratio requirement of the Due

Process Clause on the grounds that a defendant’s conduct was

especially egregious, lower courts will be free to apply or to

ignore this guidepost essentially at will. An “egregiousness

exception” to the Gore ratio requirement could shield cases

involving unpopular or unsympathetic defendants (insurance

companies, for example) from judicial review, when these are

precisely the cases in which junes are likely to grant excessive

punitive damages awards. See Int'l Bhd. of Elec. Workers.v.

Foust, 442 U.S. 42, 50 n.14 (1979) (“it cannot be ignored that

punitive damages may be employed to punish unpopular

defendants”).

9

A punitive damages award motivated on the basis of

passion or prejudice is fundamentally unfair. Wanamaker v.

Lewis, 173 F. Supp. 126, 128 (D.D.C. 1959); Gilbert v.

DaimlerChrysler Corp., 685 N.W.2d 391, 403 (Mich. 2004),

cert. denied, 126 S. Ct. 354 (2005). Yet the more unpopular the

defendant, the more likely the jury is to decide that the

defendant’s conduct was reprehensible, and the more likely it

is to base its punitive damages award on passion or prejudice

rather than reason and deliberation. See Smith v. Wade,

461 U.S. 30, 59 (1983) (Rehnquist, J., dissenting) (“punitive

damages are frequently based upon the caprice and prejudice of

jurors”). If reprehensibility authorizes juries to disregard the

Gore ratio, therefore, punitive damages awards will be insulated

from due process review in precisely those cases in which

judicial review is most necessary. This problem is accentuated

by the fact that “a jury’s determination of a defendant’s

reprehensibility is notoriously difficult for an appellate court to

review.” Andrew C.W. Lund, The Road From Nowhere?

Punitive Damage Ratios After BMW v. Gore and State Farm

Mutual Automobile Insurance Co. v. Campbell, 20 Touro L.

Rev. 943, 968 (2005).

Moreover, allowing reprehensibility to override the ratio

guidepost invites attorneys to emphasize the sort of emotionally

inflammatory facts, and to employ the type of incendiary

rhetoric, that encourages juries to apply inconsistent and unfair

punitive damages awards. In Gilbert, the Michigan Supreme

Court reversed a compensatory damages award in a sexual

harassment case after the trial attorney employed inflammatory

rhetoric and tactics, including “equat[ing] plaintiff with the

victims of the Holocaust,” 685 N.W.2d at 403, likening the

plaintiff to a dog that had been kicked, id. at 404, and “play[ing]

on prejudice against corporations.” /d. There is no question

that the plaintiff in that case was subjected to reprehensible and

egregious sexual harassment, but these “hyperbolic and vitriolic

argument[s]},” id. at 406, contributed to a jury award of $21

10

million, which was “the largest recorded compensatory award

for a single-plaintiff sexual harassment suit in the history of the

United States.” /d. at 394. Although punitive damages were

not awarded because they are limited by statute in Michigan,

see id. at 400, it is reasonable to assume that such an award

would have been vastly greater had it been allowed.? A

reprehensibility exception to the Gore factors would have

insulated such a verdict from judicial review.

Even in the absence of inflammatory rhetoric by attorneys,

allowing reprehensible conduct to override the Gore ratio

requirement would undermine that requirement’s effectiveness

as a limitation on jury discretion. Juries award punitive

damages with high ratios when a defendant’s acts are highly

offensive, and award punitive damages with low ratios when

the converse is true. Lund, supra, at 953. Therefore, whenever

a jury awards punitive damages with high ratios, judges will use

the defendant’s reprehersibility to justify an otherwise

unconstitutional award, as opposed to the “few” nonratio

awards that the Court envisioned in State Farm, 538 U.S.

at 425. Judges and particularly juries can be convinced of the

propriety of virtually any amount of punitive damages in almost

any case in which the plaintiffhas shown entitlement to receive

some punitive damages. Cass R. Sunstein et al., Punitive

Damages: How Juries Decide 58 (2002) (describing how

> In Engle v. Liggett Group, Inc., No. SC03-1856, 2006

WL 1843363 (Fla. July 6, 2006), the Florida Supreme Court

evaluated the inflammatory rhetoric employed by an attorney in a

notorious tobacco-related lawsuit. Among other things, the

plaintiffs attorney “appear[ed] to compare the tobacco industry with

slavery and, by invoking civil nghts leaders Rosa Parks and Martin

Luther King, appealed to the jury’s sense of outrage for the injustices

visited upon African-Americans in this country.” /d. at *18.

Nevertheless, the court refused to find that the jury’s award of

$145,000,000,000 in punitive damages (one-third of Florida’s entire

GDP) was influenced by passion and prejudice. Jd. at *19.

11

jurors’ predeliberation tendencies to award punitive damages

are transformed into ever more unpredictable and larger awards

through the process of deliberation; e.g., “once the jury has

agreed that there will be a nonzero dollar award, the arguments

for a larger award have a rhetorical advantage and are more

persuasive . . . those who argue that ‘more’ money is necessary

to punish a corporation appear to have an upper hand. The

unbounded dollar scale affords great latitude in the expression

of what ‘more’ means.”). See also David Schkade et al.,

Deliberating About Dollars: The Severity Shift, 100 Colum. L.

Rev. 1139, 1141 (2000) (finding “a systematic rhetorical

advantage held by those arguing for higher dollar awards, an

advantage that operates independently of the particular case at

issue’’).

Since this Court’s decisions in Gore and State Farm,

lower courts have failed to apply the punitive damages

guideposts in a umiform manner. Steven L. Chanenson &

John Y. Gotanda, The Foggy Road for Evaluating Punitive

Damages: Lifting the Haze from the BMW/State Farm

Guideposts, 37 U. Mich. J.L. Reform 441, 468 (2004). See also

Schimizzi v. lil. Farmers Ins. Co., 928 F. Supp. 760 (N.D. Ind.

1996) (reducing punitive damages to approximately 3 times the

compensatory damages of $45,000); Kimzey v. Wal-Mart

Stores, Inc., 107 F.3d 568 (8th Cir. 1997) (reducing punitive

damages award with ratio to compensatory damages of 140:1 to

10:1); Baribeau v. Gustafson, 107 S.W.3d 52 (Tex. App. 2003)

(upholding $200,000 punitive damages award despite only $500

compensatory damages because reducing punitive damages

would not punish or deter egregious conduct); Johnson,

113 P.3d 82 (allowing consideration of effects of defendants’

acts on third parties when assessing punitive damages); Simon,

113 P.3d 63 (reversing primitive damages award based on

speculative potential harms that did not occur).

Although some courts have conscientiously applied the

ratio requirement to restrain punitive damages awards, Lund,

12

supra, at 985, others have regularly ignored or overridden the

ratio requirement by finding that a defendant’s degree of

reprehensibility justifies a punitive damages award with a ratio

to the compensatory damages award greater than four-to-one.

Laura J. Hines, Due Process Limitations on Punitive Damages:

Why State Farm Won't Be the Last Word, 37 Akron L.

Rev. 779, 798 (2004). The result is inconsistent punitive

damages awards. Chanenson & Gotanda, supra, at 468.

D. Allowing State Courts to

Evade the Ratio Requirement

in This Way Would Harm Society

Through Overdeterrence and Inconsistency

“{RJunaway punitive damages are not good for the legal

system.” Heather Burgess, State Limits: Can One State Rule

the Country? One State Awarding Punitive Damages for

Nationwide Conduct, 31 Pepp. L. Rev. 477, 478 (2004)

(quoting Kennedy, J.). They are inconsistent with the State’s

goal of deterring future wrongdoing, and they have damaging

economic consequences. W. Kip Viscusi, Zhe Blockbuster

Punitive Damages Awards, 53 Emory L.J. 1405, 1407 (2004).

Excessive punitive damages awards run a serious risk of

Overdeterrence because the potential of devastating liability in

a single lawsuit will lead companies to hesitate in investing in

or experimenting with new products. These companies owe a

duty to their stockholders, however, which means that they will

become increasingly likely to stick to tried and true products

that have not resulted in lawsuits. The result is to stifle

innovation. See also W. Kip Viscusi, The Social Costs of

Punitive Damages Against Corporations in Environmental and

Safety Torts, 87 Geo. LJ. 285, 326 (1998) (“High damage

levels suppress innovation across the board. Firms in effect stop

innovating because of the substantial penalty that they suffer for

new and uncertain product introductions, as opposed to better

established technologies.”).

13

Consider the hypothetical situation of BetterDrugs, an

established pharmaceutical company that for 50 years has sold

Drug A, which has proven effective for 10 percent of breast

cancer patients, and has no serious side effects. BetterDrugs

considers developing Drug B, a scientific breakthrough which

it believes will cure 50 percent of breast cancer patients. But it

knows that a competing pharmaceutical company,

DifferentDrugs, recently lost a case in which the jury awarded

$1 million in compensatory damages and $97 million in

punitive damages to the victim of an unforeseen side effect of

one of DifferentDrugs’ products. DifferentDrugs had

conducted extensive safety testing and received government

approval, but only discovered the side effect after marketing the

drug. The punitive damages award bankrupts DifferentDrugs.

Knowing that no matter how extensive its testing, there is

always a nonzero chance that Drug B will cause harmful side

effects; BetterDrugs would be acting reasonably and

responsibly to play it safe, selling its old drug and avoid

exposure to potential bankruptcy that would result from

pursuing the new drug. The scientific breakthrough is not

marketed, innovation is discouraged, and society loses.

This, unfortunately, is not an entirely hypothetical

scenario. See generally La Fetra, Freedom, supra, at 648-54.

In 1980, eight pharmaceutical manufacturers produced the DPT

vaccine; yet, by 1986, there were only two. H.R. Rep.

No. 99-908, at 6-7 (1986), reprinted in 1986 U.S.C.C.A.N.

6344, 6347-48. According to the American Medical

Association, “[i]nnovative new products are not being

developed or are being withheld from the market because of

liability concerns or inability to obtain adequate insurance.

Certain older technologies have been removed from the market,

not because of sound scientific evidence indicating lack of

safety or efficacy, but because product liability suits have

exposed manufacturers to unacceptable financial risks.” AMA

Board of Trustees, Impact of Product Liability on the

14

Development of New Medical Technologies 12 (June 1988)

quoted in S. Rep. No. 105-32, at 9 (1997).’ In 1992, Science

magazine reported that two companies hed delayed research on

an AIDS vaccine as a result of liability concerns. Supra, at 10,

citing Jon Cohen, Is Liability Slowing AIDS Vaccines?,

Science, Apr. 10, 1992, at 168-69.

In addition to the overdeterrence effect, the availability of

extreme punitive damages awards encourages individuals and

companies to invest their resources in litigation—either in

seeking opportunities to bring cases for potential windfall

damages awards, or in overpreparing for defense of such

lawsuits—trather than in research, development, or other

economically efficient directions. The availability of windfall

punitive damages awards sets up a classic rent-seeking

situation, which encourages parties to engage in nonproductive

activity such as litigation rather than in wealth-creating activity.

See generally, Gordon Tullock, Rent Seeking as a

Negative-Sum Game, in TOWARD A THEORY OF THE

RENT-SEEKING SOCIETY 16 (James M. Buchanan et al. eds.,

1980); Cf James Buchanan & Gordon Tullock, The Calculus

of Consent 111 (Ann Arbor Paperbacks 1965) (1962)

(“[B]argaining opportunities afforded in the political process

cause the individual to invest more resources in decision-

making, and, in this way, cause the attainment of ‘solution’ to

be much more costly.”). This harms the public because it

distracts people and businesses from productive pursuits.

Finally, allowing excessive punitive damages awards

actually undermines their effectiveness as deterrents to

wrongful behavior. As the amount and frequency of such

awards becomes increasingly unpredictable and disconnected

from the behavior it is intended to deter, companies will seek to

* Available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?db

name=105_cong_reports&docid=f:sr032.105.pdf (last visited

July 15, 2006).

15

avoid such damages, not by avoiding that behavior, but by

insuring against risk as a whole; they will simply assume that

punitive damages are a “cost of doing business,” which cannot

be avoided regardless of their behavior, but must simply be

accepted. “[Ejxtremely large awards . . . are highly

unpredictable. As a result, these large awards do not have a

deterrent effect because the penalties for wrongful conduct are

not anticipated. Indeed, empirical evidence suggests that there

is no significant safety incentive effect from punitive damages.”

Viscusi, Blockbuster, supra, at 1407.

Encouraging the use of a “reprehensibility” criterion

among lower courts will only exacerbate these problems.

Reprehensibility is a highly subjective term, and its lack of

definition will encourage inconsistency in punitive damages

awards. Chanenson & Gotanda, supra, at 443. In some cases,

such as the Ford Pinto case, Grimshaw v. Ford Motor Co.,

174 Cal. Rptr. 348 (Cal. Ct. App. 1981), reprehensibility was

found solely on the basis that a product manufacturer was aware

that there was some amount of risk associated with the product.

See Sunstein et al., supra, at 231 (“any kind of corporate risk

analysis was a ‘red flag’ that increased the rate of verdicts

against the defendant and the magnitude of the dollar damages

award”); Gary T. Schwartz, The Myth of the Ford Pinto Case,

43 Rutgers L. Rev. 1013, 1035-36 (1991). Yet every product

has some risk, which manufacturers must balance against the

product’s benefits. See id. at 1067 (“the process by which

manufacturers render such trade-off design decisions seems not

only to be anticipated but endorsed by the prevailing

risk-benefit standard for design liability”).

Researchers recently conducted over 600 mock-juror

sessions to study juror behavior with regard to punitive

damages. See generally Sunstein et al., supra. These

researchers concluded that when a company adopts a higher

value-of-life estimate in its analysis of what it is worth to save

a life, juries impose punitive damages awards an incredible

16

47% greater than when companies adopt lower value-of-life

estimates. Supra, at 126 (“Undertaking a cost-benefit analysis

of risk does not help a company but instead boosts the value of

punitive damages awarded.”). This has the “perverse effect” of

rewarding companies that place lower values on the risks

involved in their products. Supra, at 129.

Because juries erroneously yet routinely take this cost-

benefit analysis as an indicator of reprehensible conduct,

allowing reprehensibility to overcome the Gore ratio

requirement will accentuate the economic harms caused by

excessive punitive damages awards. As one commentator

notes,

if mere knowledge of risk tradeoffs is taken to

demonstrate an intent to conceal, then manufacturers

could easily be found guilty of concealment by

intent. Manufacturers of potentially injury-causing

products such as automobiles will almost of

necessity generate documents measuring the risk.

No manufacturer could publicize all of these

documents, which typically contain preliminary

estimates that turn out to be erroneous along with

crude estimates of myriad potential harms associated

with reasonable tradeoffs. If the existence and

nondisclosure of such documents becomes evidence

of concealment, and therefore the basis for punitive

damages, then again the system will not operate

properly. Firms would be subjected to unlimited

damages for efficient behavior.

Paul H. Rubin et al.. BMW v. Gore: Mitigating the Punitive

Economics of Punitive Damages, 5 Sup. Ct. Econ. Rev. 179,

190 (1997).

Furthermore, if “a jury believes a defendant is guilty of

outrageous conduct and deserves to be punished, it might award

larger amounts as compensation, particularly if the plaintiff has

17

portrayed the defendant as a large, deep-pocketed Goliath.”

J. Stephen Barrick, Moriel and the Exemplarly Damages Act:

Texas Tag-Team Overhauls Punitive Damages, 32 Hous. L.

Rev. 1059, 1084-05 (1995). The deterrent effect of large

punitive damages is lost as there is no longer any incentive for

businesses to take preventative measures when they cannot

limit their liability. Viscusi, Blockbuster, supra, at 1407.

II

THE DUE PROCESS CLAUSE DOES NOT

ALLOW COURTS TO PUNISH DEFENDANTS

FOR CONDUCT TOWARD THIRD PARTIES

A. Punitive Damages Awards Must Comply with

Due Process Standards Including Fair Notice

Just as vague or overly broad statutes violate due process

by exposing parties to unpredictable punishments and the

possibility of arbitrary and discriminatory enforcement,

Connally v. Gen. Const. Co., 269 U.S. 385, 391 (1926);

Grayned v. City of Rockford, 408 U.S. 104, 108 (1972), so, too,

allowing a party to be subjected to punishment for wrongs it is

assumed to have committed against parties who are not in court,

and whose factual circumstances are impossible to determine,

is a fundamental violation of Due Process. See State Farm,

538 U.S. at 423 (“Due process does not permit courts, in the

calculation of punitive damages, to adjudicate the merits of

other parties’ hypothetical claims against a defendant under the

guise of the reprehensibility analysis.”). A legal regime in

which a party can be charged with responsibility for wrongs

without a hearing, or in which a party can be punished without

an opportunity to assess and challenge the charges brought

against him, is fundamentally unfair, a violation of the

substantive standards that underlie the Due Process Clause in

both its “substantive” and “procedural” dimensions. See, e.g.,

Bouie, 378 U.S. at 352-55; Lankford v. Idaho, 500 U.S. 110,

126-27 (1991).

18

A plaintiff would not, in any other context, be allowed to

ask a court simply to assume that a defendant has committed

similar harms against other parties, and on that basis to

increase the defendant’s punishment. See Lindsey v. Normet,

405 U.S. 56, 66 (1972) (“*Due process requires that there be an

opportunity to present every available defense.” (Quoting Am.

Surety Co. v. Baldwin, 287 U.S. 156, 168 (1932))); Texas Dep't.

of Cmty. Affairs v. Burdine, 450 U.S. 248, 253 (1981) (“The

ultimate burden of persuading the trier of fact [in civil

cases]. . . remains at all times with the plaintiff.”); Speiser v.

Randall, 357 U.S. 513, 524 (1958) (“In civil cases too this

Court has struck down state statutes unfairly shifting the burden

of proof.”); Western & A.R.R. v. Henderson, 279 U.S. 639

(1929) (state may not allow jury to presume negligence in civil

cases). Cf Michelson v. United States, 335 U.S. 469, 475-76

(1948) (character evidence is generally prohibited in criminal

cases because it “weigh[s] too much with the jury and. . . so

overpersuade[s] them as to prejudge one with a bad general

record and deny him a fair opportunity to defend against a

particular charge”). Yet in this case, Philip Morris had its

punishment increased on the basis of speculative presumptions

that it harmed other parties elsewhere.

Even in mass tort litigation brought in the form of class

action lawsuits, the defendant must have an opportunity to

challenge whether “each class member” was injured, and if so,

“whether defendants . . . caused that [injury].” Arch v. The Am.

Tobacco Co., Inc., 175 F.R.D. 469, 489 (E.D. Pa. 1997). See

also id. at 493 (noting that it “would abrogate the constitutional

rights of defendants” for plaintiffs to recover for damages

proven only on a “class-wide basis”). “Although many

common issues of fact and law will be capable of resolution on

a group basis, individual particularized damages still must be

proved on an individual basis.” Sterling v. Velsicol Chem.

Corp., 855 F.2d 1188. 1200 (6th Cir. 1988).

19

Similarly, a criminal defendant cannot be convicted of a

substantively greater crime than that with which he was

charged, simply by redefining an element of a crime as a

“sentencing factor,” and thereby increasing the sentence in the

absence of the jury. See Jones v. United States, 526 U.S. 227,

- 232 (1999); Apprendi v. New Jersey, 530 U.S. 466, 490 (2000)*

(“any fact that increases the penalty for a crime beyond the

prescribed statutory maximum must be submitted to a jury, and

proved beyond a reasonable doubt”). Yet here, Philip Morris

has been punished not only for wrongs done to Mayola

Williams, but for wrongs alleged to have been committed

against an unknown number of unidentified third parties under

unknown circumstances—wrongs analogized to criminal

manslaughter—with no opportunity to contest these accusations

in a court of law.

If punitive damages only punished a defendant for harm to

society, they would work parallel to criminal law but would

lack the due process restrictions provided in criminal law. See

W. Page Keeton, Prosser and Keeton on Torts 11 (Sth ed.

1984) (punitive damages are “in the form of a criminal fine. . .

[but] imposed without the usual safeguards thrown around

criminal procedure, such as proof of guilt beyond a reasonable

doubt, the privilege against self-incrimination, and even the rule

Against double jeopardy”); Wade, 461 U.S. at $9 (Rehnquist, J.,

dissenting) (“although punitive damages are ‘quasi-criminal,’

their imposition is unaccompanied by the types of safeguards

present in criminal proceedings” (citation omitted)). That

would violate the Fourteenth Amendment. Therefore, this and

other courts have found that punitive damages vindicate the

* The principles underlying Jones, Bouie, and Apprendi are not

distinguishable just because those cases involved criminal charges

while this is a civil case. The Fourteenth Amendment prohibits

states from depriving any person of liberty or property without due

process of law, in either criminal or civil proceedings. Gore,

517 U.S. at 574 n.22.

20

particular injury to a particular plaintiff, rather than society’s

interests in general. See, e.g., State Farm, 538 U.S. at 423

(courts may not use the punitive damages award as an

Opportunity to “adjudicate the merits of other parties’

hypothetical claims against a defendant”). Moreover, due

process restrictions do apply to punitive damages. 7XO Prod.

Corp. v. Alliance Res. Corp., 509 U.S. 443, 453-54 (1993); Pac.

Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 19-20 (1991).

Due process is offended when a party is punished for

alleged wrongs without having the opportunity to defend itself

or test each particular charge. Yet it has become routine for

trial level tort attorneys to ask juries to award punitive damages

based on all of the defendants’ allegedly wrongful conduct—the

nature and circumstances of which are _ inherently

speculative—rather than on the injury to the plaintiff herself.

See, e.g., Gore, 517 U.S. at 564 (plaintiffs attorney argued that

jury should “provide an appropriate penalty” for harming 1,000

people); State Farm, 538 U.S. at 415 (parties sought damages

based on projections of “a national scheme to meet corporate

fiscal goals by capping payouts on claims company wide’);

Ripa v. Owens-Corning Fiberglas Corp., 660 A.2d 521, 535

(N.J. Super. Ct. App. Div. 1995) (noting that, “in numerous. . .

cases . . . juries have been requested to punish defendant for its

alleged entire course of conduct”); Juzwin v. Amtorg Trading

Corp., 705 F. Supp. 1053, 1056 (D.N.J. 1989) (“[E]ach jury is

told how many persons have been injured or have died or are

likely to do so as the result of the defendant’s conduct. Those

statistics undoubtedly play a substantial role in the jury’s...

determining the amount [of punitive damages] to be

imposed.”), vacated_in part on reconsideration, 718 F.

Supp. 1233, 1234(D.N.J. 1989) (“The court abides by its ruling

that multiple awards of punitive damages for a single course of

conduct violate the fundamental fairness requirement of the

Due Process Clause, but concludes that equitable and practical

concerns prevent it from fashioning a fair and effective

21

remedy.”). See also Walter K. Olson, The Rule of Lawyers:

How the New Litigation Elite Threatens America’s Rule of

Law 19-20 (2003) (describing how attorneys in tobacco

litigation have evaded requirements for individualized proof of

wrongdoing).

As Professor Colby concludes,

If due process will not permit a defendant to be

tagged with compensatory damages for the wrongs

that it visited upon a large number of people without

being afforded the opportunity to contest individual

elements of each ¢lleged victim’s claim and to raise

victim-specific affirmative defenses, it cannot

tolerate the imposition of punitive damages in these

circumstances . . . . The defendant can be

punished . . . for the harm caused to third parties

only if it committed legal wrongs against all of those

parties.

Thomas B. Colby, Beyond the Multiple Punishment Problem:

Punitive Damages as Punishment for Individual, Private

Wrongs, 87 Minn. L. Rev. 583, 657 (2003).

Unfortunately, courts have been lax in enforcing

traditional due process limits in cases involving punitive

damages. See State Farm, 538 U.S. at 417 (punitive damages

“serve the same purposes as criminal penalties [yet] defendants

subjected to punitive damages in civil cases have not been

accorded the protections applicable in a criminal proceeding.

This increases our concerns.”); Hines, supra, at 780 (“For. ..

125 years . . . no special procedures or precise rules of law were

deemed necessary to constrain state courts’ imposition of such

[punitive] damages.”). Thus, recent years have seen a vast

expansion of the scope and extent of punitive damages. See

Rubin, supra, at 192 (noting “strongly upward trend” in

punitive damages awards); Viscusi, Blockbuster, supra, at 1413

(“extremely large punitive damages awards are increasing in

22

frequency and increasing in total value”). The mere fact that

punitive damages have not received much due process scrutiny

in the past cannot justify allowing such unbridled discretion to

remain. Cf Tennessee v. Garner, 471 U.S. 1, 13-15 (1985)

(“though the common-law pedigree of Tennessee’s rule is pure

on its face, changes in the legal and technological context mean

the rule is distorted almost beyond recognition when literally

applied”).

The realms of criminal law, or of evidence, or of other

areas of the law, are limited by constitutional, statutory, and

common law restrictions which direct the courts’ discretion and

prevent arbitrariness. This Court’s decisions in Gore and State

Farm hold that punitive damages awards must be cabined

within similar fairness principles. State Farm, 538 US.

at 416-17; see also Browning-Ferris Indus. of Vt., Inc. v. Kelco

Disposal, Inc., 492 U.S. 257, 298 (1989) (O’Connor, J.,

concurring in part) (“A governmental entity can abuse its power

by allowing civil juries to impose ruinous punitive damages as

a way of furthering the purposes of its criminal law.”). To

allow states unbridled discretion to award punitive damages for

speculative harms to unidentified third parties under unknown

circumstances, would deprive.defendants of property and liberty

without due process of law.

B. Punitive Damages Satisfy Due Process Only

When They Are Directed at the Defendant’s

Particular Wrong in a Particular Case

Early courts and commentators recognized that punitive

damages awards posed a threat to due process principles. See

generally Colby, supra, at 613-50; Wade, 461 U.S. at 58

(Rehnquist, J., dissenting). See also W. Page Keeton, supra

(“The policy of giving punitive damages has generated much

controversy.”). These early judges and scholars complained

that the concept of punitive damages was not limited by clear’

legal constraints, punished more than once for the same offense,

23

unreasonably combined civil and criminal law, and

“demoralized an honorable profession by the prizes held out to

the litigious and unscrupulous, and their advocates in court

expecting to share in the promised confiscation of another

man’s property.” Quoted in Edward C. Eliot, Exemplary

Damages, 29 Am. L. Reg. 570, 577 (1881).

A famous debate broke out between Professor Simon

Greenleaf of Harvard and U.S. Attorney Theodore Sedgwick,

in which Greenleaf argued” that punitive damages were

unconstitutional and unjust. See Colby, supra, at 617-18.

Sedgwick contended that they vindicated society’s interests

over and above the plaintiff's interest. Jd. at 618. Following

Greenleaf, several courts found that punitive damages should

not be allowed, because of the dangerously vague standards that

apply to them. See, e.g., Fay & UX v. Parker, 53 N.H. 342, 397

(N.H. 1872), Stillson v. Gibbs, 18 N.W. 815, 817 (Mich. 1884);

Quigley v. Cent. Pac. R.R. Co., 11 Nev. 350, 373 (1876)

(Beatty, J., concurring); Austin v. Wilson, 58 Mass. (4 Cush.)

273, 275 (Mass. 1849) (“If [punitive] damages are ever

recoverable . . . they cannot be recovered in an action for an

injury which is also punishable by indictment... . If they

could be, the defendant might be punished twice for the same

act.”).

_ In the nineteenth century, courts resolved this dispute by

holding that, whatever their flaws, punitive damages had been

an accepted common law practice for centuries. See Day v.

Woodworth, 54 U.S. (13 How.) 363, 371 (1851); Milwaukee &

St. Paul Ry. Co. v. Arms, 91 U.S. (1 Otto.) 489, 492 (1875); see

also Pac. Mut. Life Ins. Co., 499 U.S. at 17-18. More

importantly, courts held that the Constitution is satisfied so long

as punitive damages were awarded on the basis of particular

injuries in identifiable cases, and not to vindicate society's

interests in general. See, e.g., Barry v. Edmunds, 116 U.S. 550,

562 (1886) (“[punitive}] damages [are] calculated to vindicate

[the plaintiff's] right[s]”); Brown v. Swineford, 44 Wis. 282,

24

288 (1878) (“Though they are allowed beyond compensation of

the private sufferer, [punitive damages] . . . are for the

punishment of the private tort, not of the public crime.”); Ward ,

v. Ward, 41 lowa 686, 688 (lowa 1875) (“[punitive] damages

are never allowed alone for the purpose of public good through

the example given in their assessment. The effect upon the

public is but an incident . . . .”); Watts v. S. Bound R.R. Co., 38

S.E. 240, 242 (S.C. 1901) (“punitive damages go to the

plaintiff, not as a fine or penalty for a public wrong, but in

vindication of a private right”). -

This view has been reiterated in modern cases. In

Browning-Ferris, 492 U.S. 257, for example, the Court rejected

the argument that the Eighth Amendment limits punitive

damages awards, because the Eighth Amendment is concerned

“with criminal process and with direct actions initiated by

government to inflict punishment,” id. at 260, and punitive

damages are aimed at a party’s own particular injury. See id.

at 275 (“punitive damages advance the interests of punishment

and deterrence . . . [but are still] between private parties”).

Moreover, the Gore proportionality principle is “a direct

remnant” of the view that punitive damages are based on the

injury to the particular plaintiff, and not on the total harms

alleged to have been committed by the defendant. Colby,

supra, at 639. It would make no sense to require that punitive

damages relate to compensatory damages if punitive damages

operated only to vindicate society’s interests, rather than the

plaintiff's own injury. See also Memphis Cmty. Sch. Dist. v.

Stachura, 477 U.S. 299, 306 n.9 (1986) (punitive damages “are

available only on a showing of the requisite intent” to harm the

plaintiff).

The constitutional validity of punitive damages was

therefore resolved on the theory that they punish the “private

wrong to the victim and, in so doing, also benefit the public, but

the public benefit is, in a sense, a welcome incidental effect of

25

private punishment.” Colby, supra, at 636. Constitutionally

valid punitive damages are based on the plaintiff s actual injury,

and are not social remedies assessed for harms against society

as a whole. Societal harms are reserved for criminal, not civil

law.

If this theory is abandoned, and replaced with the view

that punitive damages operate simply to vindicate social policy

against a defendant for social wrongs as a whole, then the due

process concerns that sparked the nineteenth century debate

over the validity of punitive damages are rekindled. In this

case, Philip Morris is alleged to have committed fraud against

an unspecified number of unnamed parties, under unknown

circumstances, and entirely on the basis of judicial speculation.

See, e.g., Williams, 127 P.3d at 1170 n.1 (speculating that

“thousands of Oregonians” were injured by defendant’s

conduct). Without being anchored in proven, compensated

injuries, punitive damages become simply a secondary criminal

law system which can inflict punishments without trial, without

“proceed{ing] upon inquiry” or “hear[{ing] before it condemns.”

Dartmouth Coll., 17 U.S. (4 Wheat.) at 581 (argument of

Mr. Webster), and without other safeguards such as the

protection against double jeopardy, cf State Farm, 538 U.S.

at 423 (noting “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”).

26

—~+

CONCLUSION

The judgment of the Oregon Supreme Court should be

reversed.

DATED: July, 2006.

Respectfully submitted,

DEBORAH J. LA FETRA

TIMOTHY SANDEFUR

Counsel of Record

Pacific Legal Eoundation

3900 Lennane Drive, Suite 200

Sacramento, California 95834

Telephone: (916) 419-7111

Facsimile: (916) 419-7747

Counsel for Amicus Curiae Pacific Legal Foundation