# Petition for Writ of Certiorari — Pacific Lighting Corp. v. MGW, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1991
- **Citation:** 499 U.S. 915

## Text

IN THE

Supreme Court of the Anited States
OCTOBER TERM, 1990

PACIFIC LIGHTING CORPORATION,
FREDRICKS DEVELOPMENT CORPORATION, and
DUNN PROPERTIES CORPORATION,
Petitioners,
Vv.

- MGW, INc.
Respondent.

PETITION FOR WRIT OF CERTIORARI
TG THE COURT OF APPEAL OF CALIFORNIA,
FOURTH APPELLATE DISTRICT

*THEODORE B. OLSON
LARRY L. SIMMS
GIBSON, DUNN & CRUTCHER
Of Counsel: 1050 Connecticut Avenue, N.W. |
Washington, D.C. 20036-5303
THEODORE J. BOUTROUS, JR. (202) 955-8500
JOSEPH AVANZATO
GIBSON, DUNN & CRUTCHER JOHN J. SWENSON
1050 Connecticut Avenue, N.W. GIBSON, DUNN & CRUTCHER
Washington, D.C. 20036-5303 2029 Century Park East
Suite 400
KIMBERLY D. REED Los Angeles, California 90067
GIBSON, DUNN & CRUTCHER (213) 552-8500
2029 Century Park East
Suite 4000 Attorneys for Petitioners
Los Angeles, California 90067
*Counsel of Record

PRESS OF BYRON 8. ADAMS, WASHINGTON, D.C. (202) 347-8203

QUESTION PRESENTED

Whether the Due Process Clause of the Fourteenth
Amendment is violated by state laws that permit lim-
itless jury discretion to impose financial punishments
in the absence of explicit statutory or common law
standards and limits establishing in advance the con-
duct that may be punished and the amount of pun-
ishment that may be inflicted for engaging in such
conduct, and, if so, whether the $2,000,000 punitive
damage award imposed in this case violates that
Clause.

ii

STATEMENT OF INTERESTED PARTIES

In addition to the parties named in the caption,
defendants Pacific Lighting Real Estate Group, for-
merly “Pacific Real Estate Projects, Inc.” (““PREP’’),
Home Capital Corporation and Humboldt Financial
Services Corporation were parties in the court below.
Pursuant to Rule 29.1 of the Rules of this Court, the
following constitutes a list of all parent companies
and non-wholly owned subsidiaries of petitioners:

Pacific Enterprises Corporation (‘‘Pacific Enter-
prises’), formerly ‘‘Pacific Lighting Corporation,” was
the parent corporation of Fredricks Development Cor-
poration (“Fredricks”), Dunn Properties Corporation
(‘Dunn’), and PREP, until 1987, when Fredricks,
Dunn, and another Pacific Lighting Corporation sub-
sidiary (The Presley Companies) were sold and re-
organized.

Pacific Enterprises presently owns 93.29% of
Southern California Gas Company, which in turn owns
4% of the Coalition Undertaking Remedial Efforts,
Inc. Pacific Enterprises also owns 100% of The
Thrifty Corporation, which owns 62.5% of FTM Sports
Corporation (‘‘FTM’’). FTM owns 40% of Cactus Golf,
Inc. and 80% of American Diversified Sports, Inc.
The Thrifty Cornoration also owns 100% of Gart
Brothers Sporting Company, which owns 89% of
Sports Castle Travels, Inc.

ill

TABLE OF CONTENTS

Erol eines rcacbhsenshannkangtsnes@inninhenascnce 5
REASONS FOR GRANTING THE WRIT .................. 7

A. The Court Should Grant Review to Decide
the Extent to Which the Due Process Clause
of the Fourteenth Amendment Limits the .
Otherwise Unfettered Discretion of Juries to
Inflict Punitive Damages in Civil Actions In-
PEE RUM BMC cc scesnccscsssscsesccsesneseess 9

B. Only this Court Can Resolve the Question
Presented in the Petition ................ eee 17

ENN “Sct hnahacsinicedsausontuncssncessvcesssceasnssnsscensesss 24

TABLE OF AUTHORITIES

Cases Page

Advanced Medical, Inc. v. Arden Medical System,
Inc., Civ. Action No. 87-3059 (E.D. Pa. Sept.

Di BURIED satis ncsceonassacincnskicceabbaiinonsiabaneeelbeadentactia 22
Aetna Life Insurance Co. v. Lavoie, 475 U.S. 813

FRIED -\clinsescnabindslscnsedaicadanadpeissithinstasneeiabetanalabdebinetiiininis 7
Ay You Man v. Raymark Industries, Nos. 87-14524,

87-14470 (D. Hawaii Nov. 16, 1989) ............... 22
Bankers Life and Casualty Co. v. Crenshaw, 486

Ss We CIEE rks cidineeasubesedininntbcalansvesinionenes 8,16,20
Berra v. United States, 351 U.S. 131 (1956) ........ 14
Bertero v. National General Corp., 13 Cal. 3d 43,

529 P.2d 608, 118 Cal. Rptr. 184 (1974) ....... 6
Brooks v. Hilton Casinos, Inc., No. CV S-84-436

(RDF) (D. Nev. Feb. 1, 1990) .................00eseees 22

Browning-Ferris Industries of Vermont, Inc. v.
Kelco Disposal, Inc., 109 S. Ct. 2909 (1989) .. passim

Buckley v. Ellis, 790 P.2d 875 (Colo. Ct. App. 1989),

cert. pending (NO. 90-191) ...............cccocsssessseees
City of Newport v. Fact Concerts, Inc., 453 U.S.

__ | RIRION SI ioe ORE See 11,12
Danvels v. Williams, 474 U.S. 327 (19886) ............. 16
Davis v. Merrill Lynch, Pierce, Fenner & Smith,

906 F.2d 1206 (8th Cir. 1990) ........................ 21
Day v. Woodworth, 54 U.S. (13 How.) 363

f | RSRRENDRSEI Wes, FINE EIST =o SE ae 19
Dent v. West Virginia, 129 U.S. 114 (18839) ......... 16

Devlin v. Kearney Mesa AMC/Jeep/Renault, Inc.,
155 Cal. App. 3d 381, 202 Cal. Rptr. 208
GEE atinetsadaniaaietehccnadacendiaiideiaieasiniiptaneintiiinenscenis 10,11

Douglas v. Bank of New England/Old Colony, N.A.,
SEG A.2d GES (R.1. TDGCD) ....ccccceccccrcscessesscsesseee 20

Table of Authorities Continued

Page
Downey Savings and Loan Association v. The Ohio
Casualty Insurance Co., 189 Cal. App. 3d 1072,
234 Cal. Rptr. 835 (1987), cert. denied, 486
Em. SUE MII tinsitnsadiseialpniuisiaibanielsiabenuababdecnvicaiis 11,17
Dyna-Med, Inc. v. Fair Emp t & Housing
Commission, 43 Cal. 3d 13 9, 743 P.2d 1323,
241 Cal. Rptr. Bet NED iesstbivnndatnevetctsntnnisecenne 16
Eaton Corp. v. PKL Cos., cert. denied, 109 S.
IED destibicabediesinbianenctinainnaehanienhabcanidbaueneenen 13,18

Eichenseer v. Reserve Life Insurance Co., 881 F.2d
1355 (5th Cir. 1989), stay granted, 110 S. Ct.
1468 (1990), cert. pending (No. 89-1308) ....... 8,13,21

Eichenseer v. Reserve Life Insurance Co., 894 F.2d
1414 (5th Cir. 1990) (dissenting opinion from

denial of rehearing en banc) .............cccsesseeeeees 13
Electrical Workers v. Foust, 442 U.S. 42 (1979) .. 11
Falk v. McNamara, No. 88 C 7293 (N.D. Ill. Mar.

Uk, CU Scikchdastdeiiieandatibadehenidnianbidaashulabcabuiterasses 23
Farazpour v. University of Southern California, 221

Cal. App. 3d 19, 270 Cal. Rptr. 356 (1990) ... 17
Gagnon v. Continental Casualty Co., 211 Cal. App.

3d 1598, 260 Cal. Rptr. 305 (1989) ...........0.... 10

George v. International Society for Krishna_Con-
sciousness of California, 213 Cal. App. 3d 729,
262 Cal. Rotr. 217 bg. stay granted, 110
S. Ct. 1804 itdtteocdasin . pending (No. 89-
STE ssecuicinasinacnbicheanacenisthidiiakaiahiaiindbhediiiancsabene 8,18

General American Li e Insurance Co. v. Simmons,
562 So. 2d 140 (Ala. 1989), stay granted, June
4, 1990 (A-845), cert. pending (No. 90-738) ..... 8,13,19

Germanio v. The Goodyear Tire & Rubber Co., 732
F. Supp. 1297 (D.N.J. 1990) c.ccccssccccssscessceeeese 23

Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974) . 11,21
Giaccio v. Pennsylvania, 382 U.S. 399 (1966) ....... 15

Table of Authorities Continued

Page
Gray v. Armstrong Worid Industries, No. 88-2509
ER Us Me TINIE cxancchenetinncosarnccscsscicvensces 23
“Grayned v. City of Rockford, 408 U.S. 104
SITE sclliaeahacihdnsidabaindhanakbndibeintiaingsineidsanesatiameress 15
Greenwood & Company Real Estate Co. v. C-D In-
vestment Co., No. 523-923 (Super. Ct., Los An-
geles Co., Cal. Mar. I cdeaiahiicinetscunnnneniniee 12
Guarino v. Armstrong World Industries, Inc., No.
88-1087 (S.D. Fla. Oct. 18, 1989) ........ 23
Hart v. Armstrong Cork Co., No. $79-0033 (S.D.
Miss. Sept. 13. II bald nars ot seittichininnithibidibtiessaun 23

Hospital Authority of Gwinnett County v. Jones,
386 S.E.2d 120 (Ga. 1989), cert. pending (No.
III dil hctiashsisdencall Ri candandincnhiddcndastinnttatieatesens 8

In re Joint Eastern and Southern District Asbestos
Litigation, No. 87 Civ. 4483 (E.D. & S.D.N.Y.

RIE TIE ntti sinahiancenndtesshanbtidiinassnsninendionenones 23
Jenkins v. Georgia, 418 U.S. 153 (1974) ............. 5
Juzwin v. Amtorg Trading — 718 F. Supp. 1233

IE indi nud¥ stsleiinindstsbnineblalanasinatanniensces 23

Kraus v. Santa Fe titties Pacific Corp., 878 F.2d
1193 (9th Cir. 1989), cert. dism’d, 110 S. Ct.

SITIES iikicndsis Cohcchseh icschinnnlheincinianinekbunapahicsnndsiicens 21
Lazarus Department Store v. Sutherlin, 544 N.E.2d
III, SIRI. cannes scadnnastnnsansgnanndisenneies 20

Leonardint v. Shell Oil Co., 216 Cal. App. 3d 547,
264 Cal. Rptr. 883 (1989), cert. dism’d, Oct.

By I, MPIIIED sncccschncncscccccenssccnencesescens 18
Leonen v. Johns-Manville Corp., 717 F. Supp 272
IEE siidshiesiahibesilsinnhsisanncihnssibvanbuiannaneienn 23

Massachusetts Mutual Life Ins. Co. v. Collins, No.
No. 88-949 (Ala. 1990), cert. — (No. 90-
DOU Seastreesccsscnsscassconcavensasnanpancgseceanssnsasnencssssneces 8

vii

Table of Authorities Continued

Metromedia, Inc. v. April Enterprises, Inc., cert.
denied,-109 S. Ct. 3242 (1989) .............ccccseeeee

Miller v. Elite Insurance Co., 100 Cal. App. 3d 739,
BR Gi SS CED ccthcticesnintscieiceniseenecee

Missouri Pacific R. Co. v. Humes, 115 U.S. 512
IIIT sill ils scticniciachsed iaaantenaeaindbaimensaaiiaiasapnnennnn

Moradi-Shalal v. Fireman’s Fund Insurance Com-
panies, 46 Cal. 3d 287, 758 P.2d 58, 250 Cal.
SE, BID CR BIID sensericncsvennsenseserennencinsecnsscecssnnee

New Jersey v. Portash, 440 U.S. 450 (1979) .........

Olson v. Walker, 781 P.2d 1015 (Ariz. App.
SIE On August 30, 1990, Justice Kennedy granted petitioners’
application for a stay of the punitive damage portion.of the
judgment (A-156). On September 21, 1990, Justice Kennedy de-
nied respondent’s motion to vacate the stay.

posal, Inc., 109 S. Ct. 2909 (1989); Bankers Life and
Casualty Co. v. Crenshaw, 486 U.S. 71 (1988).
Petitioners’ Due Process Clause objections to punitive
damages are indisputably substantial and worthy of
review by this Court.®

As exemplified by this case, the California system
of state-imposed punitive fines is particularly incon-
sistent with due process. By express statute, California
assesses punitive damages only in cases ‘‘not arising
from contract.’ Cal. Civ. Code § 3294(a) (Deering Supp.
1990) (emphasis added). Yet in this case, a California
appellate tribunal, in an opinion that by law may not
“be cited or relied upon...in any other action or
proceeding,” California Rules of Court, Rule 977,

* Similar issues are before the Court in Pacific Mutual, as well
as a number of other cases. See, e.g., Hichenseer v. Reserve Life
Ins. Co., 881 F.2d 1355 (5th Cir. 1989) ($500,000 punitive dam-
age award), stay granted, 110 S. Ct. 1468 (1990), cert. pending
(No. 89-1303); George v. International Society for Krishna Con-
sciousness of California, 213 Cal. App. 3d 729, 262 Cal. Rptr.
217 (1989) (subsequently ordered to be depublished) ($2,500,000
punitive damage award), stay granted, 110 S. Ct. 1804 (1990),
cert. pending (No. 89-1399); Wollersheim v. Church of Scientol-
ogy, 212 Cal. App. 3d 872, 260 Cal. Rptr. 331 (1989) ($2,000,000
punitive damage award), cert. pending (No. 89-1361); Hospital
Authority of Gwinnett County v. Jones, 386 S.E.2d 120 (Ga.
1989) ($1,300,000 punitive damage award), cert. pending (No. 89-
1315); General American Life Insurance Company v. Simmons,
562 So. 2d 140 (Ala. 1989) ($600,000 punitive damage award),
stay granted, June 4, 1990 (A-845) (Kennedy, Circuit Justice),
cert. pending (No. 90-73); Massachusetts Mutual Life Insurance
Co. v. Collins, No. 88-949 (Ala. 1990) ($750,000 punitive damage
award), cert. pending (No. 90-244); Buckley v. Ellis, 790 P.2d
875 (Colo. Ct. App. 1989) ($125,000 punitive damage award),

cert. pending (No. 90-191).

reinstated the portion of the jury’s punitive damage
verdict that had been overturned by the trial court,
and affirmed the jury’s original $2,000,000 punish-
ment for failure to pay a commission “pursuant to
an oral broker’s agreement,”’ App. A, infra, 2a, an
alleged contract that is explicitly made unenforceable
by California’s statute of frauds. App. A, infra, 4a,
13a. The Court of Appeal did not engage in any ap-
parent analysis of the amount of the award.

The California courts have repeatedly rejected fed-
eral (and state) constitutional challenges to this in-
creasingly erratic system. Only this Court can resolve
the due process question presented in the Petition.

A. The Court Should Grant Review to Decide the Ex-
tent to Which the Due Process Clause of the Four-
teenth Amendment Limits the Otherwise Unfettered
Discretion of Juries to Inflict Punitive Damages in
Civil Actions Involving Private Parties

In California, as in most jurisdictions, the law of
punitive damages allows punishment for deviation
from vague, elastic and evolving ‘‘standards’’ of con-
duct and affords substantially unfettered discretion to
juries to render a punishment in virtually any amount.
Indeed, California Civil Code § 3294, which purports
to define the cireumstances and manner in which pu-
nitive damages may be imposed, articulates neither
limits nor objective factors for determining the level
of punishment necessary to achieve the State’s goals
of retribution and deterrence in a particular case. See
Cal. Civ. Code § 3294 (Deering Supp. 1999).

Nor does the common law provide any meaningful
guidance. The California Court of Appeal has deter-
mined that no limits or formulae exist for calculating

10

punitive damages and that that is precisely the way
it should be in California:

The channeling of just the correct quantum
of bile to reach the correct level of punitive
damages is, to put it mildly, an unscientific
process complicated by personality differ-
ences. Conduct which one person may view
as outrageous another may accept without
feeling, depending on such diverse charac-
teristics as an individual’s background, tem-
perament and societal concerns. The process
is further complicated by the lack of objective
criteria from either the Legislature or the
courts as to “how much” is necessary to pun-
ish and deter.

We have examined a number of appellate de-
cisions in an effort to determine whether we
could discern from the cases a single formula
for calculating punitive damages....
Frankly, we are unable to find that formula.
Instead of making a mathematical break-
through we discovered what everyone prob-
ably already knows: the formula does not
exist. And, we have concluded, that is prop-
erly so. ;

Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc., 155
Cal. App. 3d 381, 388, 202 Cal. Rptr. 204 (1984)
(emphasis added) (footnote omitted); see also Gagnon
v. Continental Casualty Co., 211 Cal. App. 3d 1598,
1604-05, 260 Cal. Rptr. 305 (1989) (‘‘In the final anal-
ysis ...the propriety and amount of punitive dam-
ages depends entirely upon the particular facts of a
case.’’).

11

Appellate review of punitive verdicts in California
is both standardless and highly deferential. The Court
of Appeal has explained:

The calculation of punitive damages _in-
volves, ... ‘‘a fluid process of adding or sub-
tracting depending on the nature of the acts
and the effect on the parties and the worth
of the defendants,” and in this regard juries
have a wide discretion in determining what
is proper.... “The purpose of punitive dam-
ages is to punish wrongdoers and thereby
deter the commission of wrongful acts....”
The more reprehensible the act, the greater
the appropriate punishment.

Downey Savings & Loan Ass’n v. The Ohio Casualty
Insurance Co., 189 Cal. App. 3d 1072, 234 Cal. Rptr.
835 (1987), cert. denied, 486 U.S. 1036 (1988) (cita-
tions omitted). Thus, on appeal, “‘[ajll presumptions
favor the correctness of the verdict and judgment,”’
Devlin, 155 Cal. App. 3d, at 388, and a punitive dam-
age award will not be disturbed unless ‘‘the entire
record viewed most favorably to the judgment indi-
cates the award was rendered as a result of passion
and prejudice.”’ Walker v. Signal Companies Inc., 84
Cal. App. 38d 982, 997, 149 Cal. Rptr. 119 (1978).

The impact of this wholly unlimited and “‘fluid proc-
ess’ of punishment is, as this Court has recognized,
manifestly ‘“‘unpredictable and potentially substan-
tial.’ Electrical Workers v. Foust, 442 U.S. 42, 50
(1979); see also Gertz v. Robert Welch, Inc., 418 U.S.
323, 350 (1974) (‘juries assess punitive damages in
wholly unpredictable amounts bearing no necessary
relation to the actual harm caused’’); City of Newport

I eetaieiaetiiieaceiaasincemiaiaaiaiitine eile

12

v. Fact Concerts, Inc., 453 U.S. 247, 270-71 (1981)
(‘‘the impact of such a windfall recovery is likely to
be both unpredictable and, at times, substantial’’); Ro-
senbloom v. Metromedia, Inc., 403 U.S. 29, 82-83, 84
(1971) (Marshall, J., dissenting) (“the essence of [un-
limited] discretion is unpredictability and uncertainty”’
and it “allows juries to penalize heavily the unortho-
dox and the unpopular and exact little from others’’).

California juries have imposed punitive damages in
radically varying amounts for the same kind of con-
duct—tortious interference with commerical relation-
ships—involved in this case. See, e.g., Shamblin v.
Berge, 166 Cal. App. 3d 118, 212 Cal. Rptr. 313 (1985)
(affirming $2,500 punitive damage award against real
estate agents for tortious interference with a con-
tractual relationship of real estate developer); Shapoff
v. Scull, 222 Cal. App. 3d 1457, 272 Cal. Rptr. 480
(1990) (affirming a $300,000 punitive damage award
against three defendants for intentional interference
with contractual relations in connection with real es-
tate development transaction); Ramona Manor Con-
valescent Hospital v. Care Enterprises, 177 Cal. App.
3d 1120, 225 Cal. Rptr. 120 (1986) (reversing
$2,500,000 punitive damage award for tortious inter-
ference in connection with real estate lease dispute
because, inter alia, the award was “unsupported by
the verdict’); Greenwood & Co. Real Estate v. C-D
Investment Co., Nos. C 523-923, C 560-824 (Super.
Ct., Los Angeles Co., Cal. Mar. 5, 1990) ($30,000,000
punitive damage verdict for tortious interference and
tortious conspiracy in connection with breach of an
oral real estate broker’s agreement) (notice of appeal
filed).’

7 In cases involving the related contract-based tort of ‘breach

13

The punitive damage systems of other jurisdictions
likewise produce random and wholly unpredictable
verdicts. For example, in Eichenseer v. Reserve Life
Insurance Co., 881 F.2d 1355 (5th Cir. 1989), stay
granted, 110 S. Ct. 1468 (1990), cert. pending (89-
1303), Judge Jones “‘review[ed] the range of punitive
damages that have been awarded under Mississippi's
bad faith refusal [to pay an insurance claim] law,”
894 F.2d 1414, 1420-21 (5th Cir. 1990) (dissenting
from denial of rehearing en banc), and found ‘‘a nearly
hundred fold variation in the range of punishments
assessed.’’ Jd. Judge Jones concluded that this ‘‘pun-
ishment without moorings,” id., at 1421, ‘‘mocks our
notions of fundamental fairness embodied in the Due
Process Clause....” Jd., at 1415. See also General
American Life Insurance Co. v. Simmons, 562 So. 2d
140, 151 (Ala. 1989) (Houston, J., concurring) (criti-
cizing the procedural defects of the Alabama punitive
damage system because ‘‘for the same conduct, within
a five-year period, under the same jury instruction,
one jury punishes one insurance company and its spe-
cial agent in the amount of $21,130.86, and another
jury punishes another insurance company and its spe-
cial agent in the amount of $2,490,000’’), cert. pending
(No. 90-73).

The Petition should be granted so that this Court
can finally resolve the question whether a system that
imposes completely unpredictable punishments rang-

of the convenant of good faith and fair dealing,’’ the California
appellate courts have affirmed awards ranging from $150,000,
Miller v. Elite Ins. Co., 100 Cal. App. 3d 739, 161 Cal. Rptr.
322 (1980), to $15,000,000. See Eaton Corp. v. PKL Cos., cert.
denied, 109 S. Ct. 1933 (1989) (Court of Appeal’s opinion un-
published).

14

ing up to tens of millions of dollars for deviation from
undefined or vaguely defined standards comports with
the Due Process Clause. Indeed, this Court should
consider why due process is not violated by the im-
position of any punitive damages in the absence of
an established “range of penalties as to which re-
sponsible officials had deliberated and then agreed.”
Browning-Ferris Industries of Vermont, Inc. v. Kelco
Disposal, Inc., 109 S. Ct. 2909, 2923 (1989) (Brennan,
J., concurring). No ‘responsible officials’’ established
a range of penalties in this case. Moreover, as Justice
Brennan, joined by Justice Marshall, noted in Brown-
ing-Ferris, ‘‘even where a statute sets a range of
possible civil damages . . . the Due Process Clause for-
bids damages awards that are ‘grossly excessive.’”’
Id., quoting Waters-Pierce Oil Co. v. Texas, 212 U.S.
86, 111 (1909). The award in this case is clearly un-
constitutional under the standard articulated by Jus-
tice Brennan.

A criminal fine imposed by a jury against petitioners
in the absence of any statutory limits would surely
be forbidden by the Due Process Clause. See United
States v. Batchelder, 442 U.S. 114, 123 (1979) (‘vague
sentencing provisions may pose constitutional ques-
tions if they do not state with sufficient clarity the
consequences of violating a given criminal statute’’).
In administering punishment in criminal cases, there
is simply no credible argument against the principle
that the law must “fairly and clearly define... the
punishment which can be administered.’”’ Berra v.
United States, 351 U.S. 181, 139 (1956) (Black, J.,
dissenting). Vague penal laws not only fail to provide
“fair warning,” but also ‘impermissibly delegate[ ]
basic policy matters to ...judges... and juries for

15

resolution on an ad hoc and subjective basis, with the
attendant dangers of arbitrary and discriminatory ap-
plication.” Grayned v. City of Rockford, 408 U.S. 104,
108-09 (1972).

In California, the vagueness of the standards for
imposing punitive damages is compounded by the se-
cret system of review practiced by that State in which
appellate courts revise, reinstate, modify or affirm
punitive damage awards in staggering amounts in
“‘unpublished”’ or “‘depublished’’ opinions.®

These same due process principles would prohibit
the imposition of a limitless civil fine payable to the
State.® Indeed, it seems inconceivable that this Court
would uphold a statute enforced by a State that ex-
pressly left with a jury or a judge the right, after
determining liability based upon an elastic standard
such as “despicable conduct,’’© or some other wholly
subjective yardstick, to impose a fine solely in their
discretion. See Giaccio v. Pennsylvania, 382 U.S. 399
(1966). As this Court stated in United States v. Hal-
per, 109 S. Ct. 1892 (1989), in applying the Double
Jeopardy Clause to the punitive component of an os-
tensibly “civil” fine, ‘‘a civil as well as a criminal
sanction constitutes punishment when the sanction as
applied in the individual case serves the goals of pun-
ishment.”’ Jd., at 1901-02. See Browning-Ferris, 109
S. Ct., at 2920 n.21. Under Halper, punishment is
constitutionally distinct from damages constituting
compensation and necessarily implicates due process

* See infra note 11 and accompanying text.

* Moreover, the excessiveness of any such fine seemingly would be
subject to scrutiny under the Eighth Amendment. See Browning-Ferris,
109 S. Ct., at 2914, 2916, 2918 & 2920.

© See Cal. Civ. Code § 3294(c).

16

concerns quite discrete from those invoked by purely
compensatory damages.

In fact, punitive “damages” is a misnomer. Such
awards are state-imposed punishments that serve no
compensatory function but, rather, seek to fulfill the
State’s retributive and deterrent objectives. See, e.g.,
Dyna-Med, Inc. v. Fair Employment & Housing Com-
mission, 43 Cal. 3d 1379, 1387, 743 P.2d 1323, 241
Cal. Rptr. 67 (1987) (‘Punitive damages ... are nei-
ther equitable nor corrective; punitive damages serve
but one purpose—to punish and through punishment,
to deter.””). Punitive damages are therefore generi-
cally in the class of criminal punishments and civil
fines—society’s remedies for public wrongs—and not
at all within the genus “‘damages.”’

As stated by Justice O’Connor, the “grant [to a
jury] of wholly standardless discretion to determine
the severity of punishment appears inconsistent with
due process.”’ Bankers Life, 486 U.S., at 88 (O’Con-
nor, J., concurring in part and concurring in the judg-
ment). ‘‘The touchstone of due process is protection
of the individual against arbitrary action of govern-
ment,” Daniels v. Williams, 474 U.S. 327, 331 (1986),
quoting Dent v. West Virginia, 129 U.S. 114, 123
(1889), and it demands that juries be confined in their
ability to administer punishment by the deliberative
judgments of legislatures regarding: (1) the amount
of punishment necessary to secure society’s interests
in retribution and deterrence; and (2) the standards
under which the jury is to arrive at an appropriate
punishment in a particular case. This question is im-
portant, implicates a broad spectrum of civil litigation
in which punitive damages are available, and should
be decided in this case.

17

B. Only this Court Can Resolve the Question Presented
in the Petition

The fundamental due process defects in the punitive
damage system discussed above can only be cured by
a decision of this Court. The Supreme Court of Cal-
ifornia has turned a deaf ear to repeated constitu-
tional objections to that system, as have the California
lower courts. See, e.g., Faraypour v. University of
Southern California, 221 Cal. App. 3d 19, 39-40, 270
Cal. Rptr. 356 (1990) (citing decisions of ‘‘the Cali.
fornia Supreme Court. ..summarily rejecting consti-
tutional challenges’’ to punitive damages and
concluding that such challenges ‘‘cannot properly be
addressed to any court subordinate to the California
Supreme Court’’) (subsequently ordered to be depub-
lished).

As noted above, such is the antipathy of the Cal-
ifornia courts towards these important constitutional
issues that they routinely affirm seven- and eight-digit
punitive damage awards in ‘‘unpublished’”’ opinions
that simultaneously perpetuate and shield from scru-
tiny the capriciousness of the punitive damage sys-
tem. For example, after noting that the due process
question had been left open in Browning-Ferris, on
August 30, 1989, a California Court of Appeal re-
jected a federal due process challenge to a $2,500,000
punitive damage award, stating that although the
“thrust of defendants’ contentions is not without some
persuasive force,” ‘‘we think it appropriate to rely on
Downey Savings [and Loan Association v. The Ohio
Casualty Insurance Co., 189 Cal. App. 3d 1072, 234
Cal. Rptr. 835 (1987), cert. denied, 486 U.S. 1036
(1988)] pending further action by the United States

i}

18

or California Supreme Courts.’’! The California leg-
islature also has declined to intervene, making only
minor adjustments to California’s law of punitive
damages since this Court’s 1986 decision in Aetna.'*

" George v. International Society for Krishna Consciousness of Cal-
ifornia, 213 Cal. App. 3d 729, 798, 262 Cal. Rptr. 217 (1989) (subse-
quently ordered to be depublished), stay granted, 110 S. Ct. 1804 (1990),
cert. pending (No. 89-1399); see also Eaton Corp. v. The PKL Cos.,
cert. denied, 109 S. Ct. 1933 (1989) ($15,000,000 punitive damage award
affirmed in an unpublished opinion); Metromedia, Inc. v. April Enter-
prises, Inc., cert. denied, 109 S. Ct. 3242 (1989) ($14,000,000 punitive
damage award affirmed in an unpublished opinion); Security Pacific
National Bank v. Williams, 213 Cal. App. 3d 927, 262 Cal. Rptr. 260
(1989) (affirming $2,500,000 punitive damage award) (subsequently or-
dered not to be published); Leonardini v. Shell Oil Co., 216 Cal. App.
3d 547, 264 Cal. Rptr. 883 (1989) (affirming $5,000,000 punitive damage
award) (punitive damage portion of opinion ordered to be depublished),
cert. denied, October 15, 1990 (No. 89-2029); The Ohio Casualty In-
surance Co. v. G. Amador Corp., cert. dism’d (No. 89-1986) (affirming
$10,000,000 punitive damage award in an unpublished opinion). Because
such decisions are “‘unpublished,”’ it is entirely possible that there are
other similar awards affirmed by the California Court of Appeal that
are inaccessible to the public and the bar because of California’s peculiar
official censorship policy. As illustrated by cases like George v. Inter-
national Society for Krishna Consciousness, this censorship policy is
sometimes enforced by the Supreme Court of California by overriding
a Court of Appeal decision ordering its opinion to be published. Under
Rule 977 of the California Rules of Court, such unpublished or depub-
lished opinions generally may not even be cited or relied upon by
litigants. This practice screens from public scrutiny the effects of the
punitive damage system and aggravates the ad hoc and utterly unpre-
dictable nature of punitive damages.

%In 1987, the California legislature enacted a comprehensive ‘‘tort
reform” package, which, inter alia, amended in a number of respects
Cal. Civ. Code § 3294, the statute pursuant to which punitive damages
were and continue to be generally authorized in civil actions without
limit. Prior to its amendment, § 3294 allowed punitive damages in
unlimited amounts to be imposed where a preponderance of the evidence
showed that the defendant had “been guilty of oppression, fraud, or
malice.”” As amended, it now requires proof “‘by clear and convincing
evidence.”’ The definitions of ‘‘malice” and “oppression” also were re-

19

The courts of the other States continue to enter
and affirm punitive damage awards as if this Court’s
concerns had never been articulated. As expressed by
a Maryland appellate court on June 9, 1989, after
citing cases such as Day v. Woodworth, 54 U.S. (13
How.) 363 (1851), for this Court’s “‘approval’’ of the
punitive damage system, ‘‘[w]hat the Supreme Court
has declared constitutional we may not put asun-
der....’’ Potomac Electric Power Co. v. Smith, 79
Md. App. 591, 558 A.2d 768, 792 (Md. Ct. Spec. App.
1989) (affirming $7,500,000 punitive damage award).
In General American Life Insurance Co. v. Simmons,
562 So. 2d 140 (Ala. 1989), stay granted, June 4, 1990
(A-845) (Kennedy, Circuit Justice), cert. pending (No.
90-73), the Supreme Court of Alabama affirmed a
$600,000 punitive damage award, disposing of Due
Process Clause challenges to the award on the basis
of its own previous decisions in which it “has con-
sistently rejected the same arguments ... and has
upheld the constitutionality of punitive damages.” Id.,
at 149.'%

vised to require that the conduct be found “despicable” in certain
circumstances. More broadly, the 1987 legisiation provided that evidence
of a defendant’s financial condition not be admitted prior to a finding
of liability and a finding of ‘‘malice, oppression or fraud’’ warranting
punitive damages, and further provided that complaints for punitive
damages not state an amount. See Cal. Civ. Code § 3295 (Deering Supp.
1990).

18 Similarly, on October 4, 1989, an Indiana appellate court, affirming
a $1,000,000 punitive damage award for false imprisonment and ma-
licious prosecution, observed:

[PJunitive damages have long been recognized as comporting
with the Fundamental Fairness Doctrine of the due process
clause. Missouri Pacific and R. Co. v. Humes (1885), 115
U.S. 512. It is true ... that Justice O’Connor recently com-
mented in a recent opinion about punitive damages and due

20

The federal courts of appeals likewise seem to be
in a state of paralysis in dealing with the constitu-
tional implications of punitive damages. This paralysis
manifests itself in two ways. First, courts of appeals
cling to their own precedents, decided decades before
serious federal constitutional objections to arbitrary
and excessive punitive damage awards were advanced
in and legitimated by this Court in Aetna, Bankers
Life, and Browning Ferris. Thus, in Racich v. Celotex
Corp., 887 F.2d 393, 399 (2d Cir. 1989), the Second
Circuit could not “write upon a clean slate’ on the
due process issue because a twenty-two year-old de-

process protections. See Bankers Life, supra. However, the
Supreme Court in that case and in a subsequent decision
explicitly refused to consider the question. See Browning-
Ferris, supra. Thus, we cannot conclude that the punitive
damage award here violated the fourteenth amendment of
the United States Constitution.

Lazarus Department Store v. Sutherlin, 544 N.E.2d 513, 529-30 (Ind.
App. 1989); see also Olson v. Walker, 781 P.2d 1015, 1022-23 (Ariz.
App. 1989) (‘‘neither the U.S. Supreme Court nor any Arizona court
has decided whether more stringent procedures are necessary in private
civil punitive damages actions to satisfy due process .... The punitive
damage award does not violate due process.’’); Stoner v. Nash Finch,
Inc., 446 N.W.2d 747, 755-56 (N.D. 1989) (discussing Browning-Ferris
and rejecting due process challenges to punitive damages because
“courts which have recently addressed arguments ... that various pu-
nitive damages schemes are unconstitutionally vague in defining conduct
giving rise to liability and in providing standards for assessing the
amount, have found no due process violation’’); Douglas v. Bank of New
England/Old Colony, N.A., 566 A.2d 939, 942 (R.I. 1989) (due process
challenge to punitive damages is “‘not persuasive in light of the fact
that there is no showing that the trial justice’s award ... constituted
an abuse of ... the due process clause of the Federal Constitution
.... See Browning-Ferris Industries of Vermont, Inc. v. Kelco Disposal,
Inc. ...,.”’) (affirming $225,000 punitive damage award).

21

cision of that court had considered and implicitly re-
jected an apparently similar claim."

Second, no Court of Appeals appears to want to
be the first to decide these substantial due process
questions. As the Fifth Circuit has put it, “‘no circuit
court has yet ruled on this issue’ and “we need not
become the first court to resolve this challenging in-
quiry.’’ Eichenseer v. Reserve Life Insurance Co., 881
F.2d 1355, 1365 (5th Cir. 1989) (affirming $500,000
punitive damage award), stay granted, 110 S. Ct. 1468
(1990), cert. pending (No. 89-1303); see also Davis v.
Merrill Lynch, Pierce, Fenner & Smith, 906 F.2d
1206, 1226 (8th Cir. 1990) (‘Assuming without decid-
ing that punitive damages awards must comply with
due process,” and affirming $2,000,000 punitive dam-
age award). The Ninth Circuit brushed off a due proc-
ess challenge with the observation that, ‘“[uJnder
current constitutional standards, the jury’s discretion
regarding punitive damages is not subject to strict
fetters. ‘Jury discretion over the amounts awarded is
limited only by the gentle rule that [punitive damages]
not be excessive.’ ’’!® See also The Post Office v. Por-
tec, Inc., Nos. 88-2836, 89-1034 (10th Cir. Aug. 27,
1990), slip op., at 13 (“Defendant points to no
Supreme Court action that requires us to question
our prior holding’’ that the ‘Colorado [punitive dam-
age] statute did not violate the due process clausef[ ]
of the federal . . . constitution’’) (remitting $1,500,000
punitive damage award to $500,000).

4 Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832, 835, 841-42
(2d Cir. 1967).
Kraus v. Santa Fe Southern Pacific Corp., 878 F.2d 1193, 1200

(9th Cir. 1989) (emphasis added) (quoting Gertz v. Robert Welch, Inc.,
418 U.S. 323, 350 (1974)), cert. dism’d, 110 S. Ct. 1329 (1990).

22

The federal district courts are in comparable dis-
array. On February 1, 1990, a federal district court—
after full briefing of these constitutional issues in the
post-trial motions—entered judgment on a $30,000,000
punitive damage award without any reference to these
issues other than the statement that ‘“[tJhis court has
carefully considered each post judgment motion .
Brooks v. Hilton Casinos, Inc., No. CV S-84-436 (RDF)
(D. Nev. Feb. 1, 1990); see ‘also Advanced Medical,
Inc. v. Arden Medical Systems, Inc., Civ. Action No.
87-3059 (E.D. Pa. Sept. 6, 1990), slip op., at 10
(Defendants’ “‘contention ... that an award of pu-
nitive damages acts as a deprivation of their property
without due process of law . . . provides an interesting
academic argument. It is not, however, the long line
of punitive damages law which this court must fol-
low.’’) (denying post-trial motions challenging jury
verdict of $7,150,000 in punitive damages for ‘“‘tor-
tious interference with existing contractual relation-
ships’).

Other federal district courts have expressly found
Browning-Ferris *o be dispositive authority against
applying the Due Process Clause to punitive damage
awards. For example, in Ay You Man v. Raymark
Industries, Nos. 87-14524, 87-14470 (D. Hawaii Nov.
16, 1989), the District Court rejected a broad due
process challenge to the standardless imposition of
punitive damages, stating that it did ‘‘not find that
the [United States] Supreme Court has given any in-
dication that punitive damages are unconstitutional as
a matter of law and this court will not extract such
a doctrine from defendants’ inaccurate interpretation

en nee eee et eee

leat ee ea ed

23

of Court dicta.’’ Slip op., at 4. Similar post-Browning-
Ferris federal cases abound.’®

Perhaps the Second Circuit has captured as well as
possible the reluctance of the lower state and federal
courts to march into this new constitutional terrain.

16 See Falk v. McNamara, No. 88 C 7293 (N.D. Ill. Mar. 30, 1990),
slip op., at 4 (although ‘“‘Browning-Ferris ... declined to address the
issue herein, the Supreme Court decisions in the area imply that pu-
nitive damage awards do not violate due process as a matter of law’’);
Germanio v. The Goodyear Tire & Rubber Co., 732 F. Supp. 12$7,
1304 (D.N.J. 1990) (“It will take a less skeptical and more adventurous
court than this one to conclude that the Fourteenth Amendment re-
quires higher standards of procedural protection for civil defendants in
[punitive damage] cases than those that have obtained for decades, if
not centuries.”); Gray v. Armstrong World Industries, No. 88-2509
(D.D.C. Feb. 22, 1990), slip op., at 6 (noting a lack of ‘substantial
supporting authority”’ for the argument that ‘‘punitive damages are per
se unconstitutional” and suggesting that this Court rejected ‘‘similar
constitutional challenges” in Browning-Ferris); In re Joint Eastern and
Southern District Asbestos Litigation, No. 87 Civ. 4483 (E.D. & S.D.N.Y.
Oct. 24, 1989), slip op., at 2 (‘‘Celotex’s challenges to the punitive
damages award are also unavailing .... [T]he constitutionality of pu-
nitive damages awards has recently been affirmed” in Browning-Fer-
ris); Guarino v. Armstrong World Industries, Inc., No. 88-1087 (S.D.
Fla. Oct. 13, 1989), slip op., at 4 & n.3 (rejecting due process challenges
to punitive damages because, inter alia, “the Supreme Court has long
held state regulation in the economic realm to be immune from due
process invalidation, where the state has presented a valid basis for
its regulation”); Hart v. Armstrong Cork Co., No. S79-0033 (S.D. Miss.
Sept. 13, 1989) (consolidated cases), slip op., at 9 (“The defendant’s
challenge [to Mississippi's punitive damage standards] appears partic-
ularly unpersuasive in light of the United States Supreme Court’s de-
cision in Smith v. Wade, 461 U.S. 30 (1983).’’); Juzwin v. Amtorg
Trading Corp., 718 F. Supp. 1233, 1235 (D.N.J. 1989) (lower courts
are “powerless to fashion a remedy”’ that will protect the due process
rights of defendants subject to multiple punitive awards until “there
is uniformity either through [United States] Supreme Court decision or
national legislation’’); Leonen v. Johns-Manville Corp., 717 F. Supp.
272, 280 (D.N.J. 1989) (‘‘the United States Supreme Court’s decision
in Smith v. Wade ... puts to rest any question regarding the vague-
ness’ of punitive damage standards).

24

More than three months after this Court’s decision
in Browning-Ferris, that court refused to tread into
what is so obviously this Court’s domain:

[W]e are here asked to hold, in effect, that
the common-law standards applied by the
[state] courts ... for imposition of punitive
damages are unconstitutional .... Under all
the circumstances, we believe that such a
step, if it is to be taken ... is best left for
... higher judicial authority.

Racich v. Celotex Corp., 887 F.2d, at 399. Accord
Simpson v. Pittsburgh Corning Corp., 901 F.2d 277
(2d Cir. 1990), cert. dism’d (No. 90-121).

Based upon the foregoing, petitioners respectfully
submit that the need for this Court’s intervention is
manifest.

CONCLUSION

The California courts have firmly rejected
petitioners’ arguments that the United States Con-
stitution regulates the manner in which punitive dam-
ages may be imposed. This Court’s resolution of the
question presented by petitioners will have a sub-
stantial impact on matters that are arising daily in
the courts of this Nation and are dramatically chang-
ing the character of litigation conducted throughout
the United States. Petitioners respectfully pray that
the Petition be granted and that this question be set
for plenary consideration.

ay es

URSA) wits ~ ~

Canny Mee BLO

lly We PASI ten bd ape DR Bn BA BL OR Go Sa Ba HR

25

October 16, 1990

Of Counsel:

THEODORE J. BOUTROUS, JR.
JOSEPH AVANZATO

GIBSON, DUNN & CRUTCHER
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5303

KIMBERLY D. REED

GIBSON, DUNN & CRUTCHER
2029 Century Park East
Suite 4000

Los Angeles, California 90067

Respectfully submitted,

*THEODORE B. OLSON

LARRY L. SIMMS

GIBSON, DUNN & CRUTCHER

1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5303
(202) 955-8500

JOHN J. SWENSON

GIBSON, DUNN & CRUTCHER
2029 Century Park East
Suite 400

Los Angeles, California 90067
(213) 552-8500

Attorneys for Petitioners

*Counsel of Record

APPENDIX

SEE VO Ce of Oa ie eg ee 7

la

APPENDIX A

NOT TO BE PUBLISHED

IN THE COURT OF APPEAL
OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT

DIVISION THREE

G006654
(Super. Ct. No. 416196)

MGW, INC.,
Plaintiff and Appellant,

Ws

FREDRICKS DEVELOPMENT CORPORATION et al.,
Defendants and Appellants.

COURT OF APPEAL-4TH DIST. DIV. 3
FILED
APR 30 1990
Deputy Clerk

OPINION

APPEAL from a judgment of the Superior Court of
Orange County, Samuel B. Taylor, Jr., Judge. Affirmed
in part and reversed in part.

Perez & McNabb and Richard L. Perez for Plaintiff and
Appellant.

Irell & Manella, Scott D. Baskin, Andra Barmash
Greene, Gibson, Dunn & Crutcher, John J. Swenson, Rob-

2a

ert F. Serio, Higgs, Fletcher & Mack, Woodrow D. Smith,
John M. Morris, Melvin King, Drummy, Garrett, King &
Harrison, Howard F. Harrison and Kathleen Carothers
Paone for Defendants and Appellants.

A jury awarded plaintiff real estate broker damages against
defendant real estate developers for interference with pro-
spective economic advantage and conspiracy after
defendant developers refused to pay plaintiff a commission
pursuant to an oral broker’s agreement. Defendant de-
velopers appeal from the judgment, and plaintiff broker
appeals from orders of dismissal and nonsuit as to other
defendants. We reverse as to defendant Pacific Lighting,
but affirm the judgment in al! other respects.

FACTS

Plaintiff MGW is a commercial real estate brokerage
and investment firm owned and operated by Malcolm
Waitt, Jr., a licensed real estate broker. Waitt is MGW’s
only employee.

Defendant Fredricks Development Corporation is 2 real
estate developer involved in the construction of large-scale
residential tracts. Fredricks is a wholly-owned subsidiary
of Pacific Lighting Corporation.

In 1982 Fredricks made known to Waitt and other local
brokers that it was interested in acquiring a large resi-
dential project along the I-15 corridor in the southern Or-
ange County or northern San Diego County area. Waitt
was told that if he brought in an opportunity Fredricks
undertook and was not paid a broker’s fee by the seller,
Fredricks would see he was fairly compensated. This was
Fredricks’ standard arrangement, and on at least one pre-
vious occasion Waitt was paid for his efforts under this

arrangement. Waitt had no written broker’s contract with
Fredricks.

> od ae se

Bak EE el hah eal ORI el hee RN re eed

ee ee ee

3a

On or about February 14, 1983, Waitt read a newspaper
article which said that Home Capital, which was in the
business of financing developments, had bought out its
prior partner and was looking for an experienced developer
and joint venturer to help build out a 1500-acre mixed
residential/commercial project known as Rancho Carmel.’
The project was located along the I-15 corridor in northern
San Diego County. Waitt, believing this was just the op-
portunity Fredricks was looking for, called Home Capital
and told them Fredricks might be interested in the project.
Home Capital told Waitt that if they struck a deal with
Fredricks they would not pay a broker’s fee and he would
have to look to Fredricks for any commission.

Waitt showed the article to Fredricks. They told him
that neither they nor Pacific Lighting were aware of the
Rancho Carmel opportunity, and on being advised Home
Capital would not pay a broker’s commission, Fredricks
assured Waitt that if they went ahead with the deal he
would be fairly compensated.

On March 21, 1983, Fredricks, Home Capital, and Dunn
Properties Corporation, a wholly-owned subsidiary of Pa-
cific Lighting which builds out commercial tracts, signed
a letter of intent to enter into a joint venture to build the
Rancho Carmel project. The purpose of the letter was to
tie up the property for a period of time in order to allow
Fredricks and Dunn to determine the project’s feasibility.
One of its provisions was that: ‘[Dunn and Fredricks] and
Home [Capital] each hereby represent to one another that
no broker or finders fee will be payable as a result of D
& F and Home entering into the proposed venture and
each indemnifies the other against any such broker or
finders fee.’”’ Dunn became involved because Fredricks
could not handle the commercial end of the project.

‘Humboldt Financial Services Corporation also owned a small part
of the project.

4a

Waitt frequently asked about the project and was led
to believe the deal was progressing smoothly and that
Fredricks intended to compensate him. He was never told
he would not be paid a commission.

The joint venture interest was ultimately purchased on
behalf of Fredricks and Dunn in the name of Pacific Real
Estate Projects (PREP), another wholly-owned subsidiary
of Pacific Lighting. Fredricks, however, refused to pay
Waitt a broker’s commission, claiming the Pacific Lighting
corporations knew of the opportunity before Waitt brought
the newspaper clipping to them. Waitt was told that in
late 1982 there had been rumors the Rancho Carmel proj-
ect might-soon become available, that Dunn had inquired
(through a different broker) whether Home Capital would
sell off just the commercial use, that Home Capital said
it was unwilling to discuss sale of the project until it
bought out its joint venturer, and that Home Capital was
unwilling to sell off just the commercial part of the project
since it viewed the entire development as an integrated
plan. Dunn, however, did not pursue the commercial part
of the project at any time after it became available and
before Waitt brought Fredricks the article.

Waitt filed an action for breach of oral agreement, quan-
tum meruit, tortious breach of the covenant of good faith
and fair dealing, conspiracy and tortious interference with
prospective economic advantage. The complaint named
Fredricks, Dunn, Pacific Lighting, PREP, Home Capital
and Humboldt as defendants.

At trial the court dismissed all of MGW’s contractual
claims on the ground they were unenforceable under the
statute of frauds. A nonsuit was granted in favor of Home
Capital and Humboldt, and a nonsuit was granted to PREP
on the interference with prospective advantage claim. The
jury returned a verdict of $558,000 in damages against
Fredricks, Pacific Lighting, Dunn and PREP, and $2 mil-
lion in punitives against all defendants but PREP. Pacific

5a

Lighting’s motions for judgment notwithstanding the ver-
dict and a new trial were granted. Fredricks, Dunn and
PREP appeal from the judgment. MGW appeals from the
orders of nonsuit, new trial, 2nd judgment notwithstanding
the verdict.

DISCUSSION
I
Fredricks and Dunn Appeal
A

Fredricks and Dunn argue that no cause of action can
be stated for interference with prospective economic ad-
vantage when the underlying agreement violates public
policy. While recognizing that Buckaloo v. Johnson (1975)
14 Cal.3d 815 holds that a broker may state a cause of
action for interference with prospective economic advan-
tage even when the agreement violates the statute of
frauds (id. at pp. 829-830), Fredricks and Dunn argue the
Supreme Court has signalled a change in this rule in its
recent opinion in Phillippe v. Shapell Industries (1987) 43
Cal.3d 1247. We disagree.”

In Buckaloo the court held a purchaser may not, “with
full knowledge of the economic relationship between broker
and seller, intentionally induce[ ] the latter to violate the
terms of the relationship and seek refuge in the unen-
forceability of the contract.” (Buckaloo v. Johnson, supra,
14 Cal.3d at p. 827.) The court explained: ‘‘There is no

2 The five elements for interference with prospective economic ad-
vantage are: “(1) an economic relationship between the plaintiff and
some third party, with the probability of future economic benefit to
the plaintiff; (2) the defendant’s knowledge of the relationship; (3) in-
tentional acts on the part of the defendant designed to disrupt the
relationship; (4) actual disruption of the relationship; and (5) economic
harm to the plaintiff proximately caused by the acts of the defendant.
[Citations.]’’ (Youst v. Longo (1987) 43 Cal.3d 64, 71, fn. 6.)

6a

public policy to be served by encouraging such devious
dealings; on the contrary, such an intrusion into a pro-
tected economic relationship is precisely the conduct con-
demned by the traditional tort of interference with
contract.”’ (Id. at p. 828.) In Phillippe the court reempha-
sized its commitment to the principle that a contractual
claim for a real estate commission is dependent on com-
pliance with the statute of frauds (Phillippe v. Shapell
Industries, supra, 43 Cal.3d at p. 1267), and held a broker
may not avoid the statute of frauds by asserting that he
reasonably relied on an oral agreement. (Jd. at p. 1270.)

Nothing in Phillippe suggests that Buckaloo has been
overruled; indeed, it cites Buckaloo approvingly. If Fred-
ricks and Dunn are correct and the Supreme Court wishes
to repudiate Buckaloo, then that is a matter for its review.
Meanwhile, we are constrained to follow the law as it has
been laid down by the Supreme Court. (Auto Equity Sales,
Inc. v. Superior Court (1962) 57 Cal.2d 450, 455.)

Next, Fredricks and Dunn argue the judgment must be
reversed because Dunn as an agent and wholly-owned sub-
sidiary of Pacific Lighting could not interfere with the
relationship, there was no evidence Fredricks refused to
pay the commission because of what Dunn told it, and
there could be no conspiracy because there was no un-
derlying tort. We disagree.

Although the arguments appear to raise issues of law,
on closer review it is clear they are based on the notion
that there is no substantial evidence to support the jury’s
finding Dunn conspired or could conspire with Fredricks.
In reviewing » claim of insufficiency of the evidence we
‘““*must accept as true all evidence tending to establish
the correctness of the finding as made, taking into account,
as well, all inferences which might reasonably have been
thought.by the trial court to lead to the same conclusion.

—

deere te ih od ak a enn eit alerts See

Ta

Every substantial conflict in the testimony is ... to be
resolved in favor of the finding.’ [Citation.]’’ (County of
Mariposa v. Yosemite West Associates (1988) 202
Cal.App.3d 791, 807; 9 Witkin, Cal. Procedure (3d ed.
1985) Appeal, § 282, p. 293.)

Fredricks and Dunn initially assert Dunn could not in-
terfere with MGW’s prospective economic relationship be-
cause it was not a malicious interloper or stranger to the
disrupted relationship. Relying on selected language in
Buckaloo v. Johnson, supra, 14 Cal.3d at p. 827 and Zim-
merman v. Bank of America (1961) 191 Cal.App.2d 55,
61, they contend Dunn, as a wholly-owned subsidiary in
the Pacific Lighting family, could not interfere with a re-
lationship to which it was a party. The argument is subtly
deceptive. Although Fredricks and Dunn are subsidiaries
of Pacific Lighting, that does not mean they are ‘‘the same
party” and cannot interfere with the other’s economic re-
lationships. Indeed, evidence adduced at trial was that the
two subsidiaries worked independently in different parts
of the development world: Fredricks was involved in the
residential arena while Dunn was involved in the com-
mercial; the two were competitors and had never, up until
Rancho Carmel, worked on a project together; and Pacific
Lighting does not guarantee the obligations of its subsi-
diaries. From this evidence the jury could reasonably con-
clude Fredricks and Dunn were independent entities.

In that same vein, Fredricks and Dunn contend Dunn
could not interfere because it was Fredricks’ agent. While
the complaint alleged the defendants were agents of each
other, the evidence was to the contrary. Moreover, MGW’s
motion to amend the complaint to conform to proof and
delete the allegations of agency was properly granted. (5
Witkin, Cal. Procedure (3d ed. 1985) Pleading, § 1137, pp.
551-552.)

Next, they argue MGW disproved causation because the
evidence showed Fredricks decided not to pay the com-

8a

mission for reasons other than what Dunn said. But the
jury concluded that it was precisely because of what Dunn
said that the commission was not paid. There may be
evidence which could be interpreted differently, but we
must resolve all conflicts in the evidence in favor of the
finding.

Finally, they argue that there could be no actionable
conspiracy because there was no tort. (Manor Iavestment
Co. v. F. W. Woolworth Co. (1984) 159 Cal.App.3d 586,
595.) Here, of course, there was an actionable on and
thus there could be a conspiracy.

C

Finally, Fredricks and Dunn contend the trial court im-
properly instructed the jury.

They argue the court erred in failing to define who
constituted an employee or agent of a party, and improp-
erly used the term parties, rather than interloper, when
describing the one who interferes. This argument cannot
be sustained as no request for a proper instruction was
made below. (Null v. City of Los Angeles, (1988) 206
Cal.App.3d 1528, 1535.)

Next they argue the court improperly instructed the jury
that, ‘‘a broker may have a reasonable expectation of com-
pensation when he is the procuring cause of a buyer’s
purchase, even though the underlying oral agreement, if
any, with the buyer is unenforceable. [{] Now, it is for
you the jury to determine the circumstances and whether
or not the plaintiff's expectation was reasonable in the
light of those circumstances.” Under Phiilippe, it is clear
a broker cannot have a reasonable expectation of payment
when the agreement is oral. (Phillippe v. Shapell Indus-
tries, supra, 43 Cal.3d at p. 1262.) But an element of the
tort is the probability of future economic benefit. (Buckaloo
v. Johnson, supra, 14 Cal.3d at p. 827.) The instruction
given here was the trial court’s effort to incorporate that

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element in its instructions. Perhaps the wording could have
been better, but the instruction did not reduce plaintiff's
burden nor unreasonably focus the jury’s inquiry on the
subjective intent of MGW. The instruction was proper.

Il
PREP Appeal

PREP was held liable on the theory it conspired to
prevent MGW from receiving a broker’s commission. It
asserts the judgment must be reversed because Pacific
Lighting cannot conspire with its wholly-owned subsidi-
aries, the judgment is not supported by substantial evi-
dence, and MGW “has disproved interference.” We
disagree.

In support of its argument that a parent corporation
cannot conspire with its wholly-owned subsidiaries, PREP
relies on Copperweld Corp. v. Independence Tube Corp.
(1984) 467 U.S. 752. In that case, the issue was whether
the coordinated acts of a parent corporation and a wholly-
owned subsidiary could constitute 4 “combination or con-
spiracy” under section 1 of the Sherman Antitrust Act.
(Id. at p. 759.) In holding it could not, the United States
Supreme Court noted that “The officers of a single firm
are not separate economic actors pursuing separate eco-
nomic interests, so agreements among them do not sud-
denly bring together economic power that was previously
pursuing divergent goals.... For these reasons, officers
or employees of the same firm do not provide the plurality
of actors imperative for a §1 conspiracy.” (Jd. at p. 769;
see also Klein v. Oakland Raiders, Ltd. (1989) 211
Cal.App.3d 67, 76.)

Copperweld’s analysis, which is well suited to the anti-
trust field, is ill suited to the civil conspiracy arena where
the focus is not on whether there is a ‘‘combination’”’ of
economic power, but on whether an individual has joined
with another to perpetrate a civil wrong. No California

10a

case has applied Copperweld or its reasoning in this con-
text (MacManus v. A. E. Realty Partners (1987) 195
Cal.App.3d 1106, 1110; see also Pinhas v. Summit Health,
Ltd. (9th Cir. 1989) 894 F.2d 1024, 1033), and we are
unwilling to do so when the evidence showed PREP was
a separate entity wholly responsible for its own obligations.
It purchased the project in its own name and assumed a
large debt without a guarantee by its parent corporation.
It participated, through its officers, in the decision not to
pay MGW a commission. Under the facts adduced at trial,
there is substantial evidence to support the judgment and
to prove PREP interfered with MGW’s economic relation-
ship with Fredricks.

III
MGW Appeal
A

MGW asserts the trial court erred in granting Pacific
Lighting’s motion for judgment notwithstanding the ver-
dict. We agree.

‘“‘*A motion for judgment notwithstanding the verdict
of a jury may properly be granted only if it appears from
the evidence, viewed in the light most favorable to the
party securing the verdict, that there is no substantial
evidence to support the verdict. If there is any substantial
evidence, or reasonable inferences to be drawn therefrom,
in support of the verdict, the motion should be denied.’
[Citation.]’’ (Hauter v. Zogarts (1975) 14 Cal.3d 104, 110.)

The issue, then, is whether there is any substantial evi-
dence which supports the jury’s conclusion Pacific Lighting
interfered, or conspired to interfere with, MGW’s pro-
spective economic advantage. Jim Hunter testified he was
an employee of Pacific Lighting and was responsible for
supervising its real estate subsidiaries, including Fredricks
and Dunn. He was chairman of the board of the subsi-

lla

diaries and was responsible for overseeing their real estate
activities and sales. Hunter was involved in the decision
as to whether MGW should be paid and he counseled
against paying a commission on the ground the Rancho
Carmel project was previously known to the Pacific Light-
ing group. From this testimony, the jury could reasonably
conclude that Pacific Lighting participated in the decision
to refuse to pay the real estate commission, and thus the
motion for judgment notwithstanding the verdict should
have been denied.

MGW also contends the trial court improperly granted
Pacific Lighting’s motion for new trial. Under Code of
Civil Procedure section 657, an order grariting a new trial
“shall be affirmed if it should have been granted upon
any ground stated in the motion, whether or not specified
in the order... .’’ Although Pacific Lighting offers several
reasons why the motion was properly granted, none have
merit.

Pacific Lighting argues the court failed to properly in-
struct the jury as to the prerequisites for awarding pu-
nitive damages. But Pacific Lighting never asked for such
instruction and thus any error on this point was waived.
(Null v. City of Los Angeles, supra, 206 Cal.App.3d at p.
1535.) It then argues that, as a matter of law, a parent
corporation cannot conspire with its wholly-owned subsi-
diaries. We rejected that argument above, however, when
we affirmed the judgment against PREP for conspiracy
to interfere. (MacManus v. A. E. Realty Partners, supra,
195 Cal.App.3d at p.'1110.) Next, Pacific Lighting argues
the judgment was not supported by the evidence. That
argument is meritless because Hunter’s testimony estab-
lished that Pacific Lighting participated in the decision to
not pay MGW its commission. (See Hauter v. Zogarts,
supra, 14 Cal.3d at p. 110.) Pacific Lighting contends the
jury failed to reach a consensus on the issue of damages
in violation of the “‘nine-juror rule,” but it fails to dem-
onstrate that less than nine jurors made the required find-

12a

ing here. (Juarez v. Superior Court (1982) 31 Cal.3d 759,
766; Earl v. Times-Mirror Co. (1921) 185 Cal. 165, 182-
186.) Finally, it argues the award of punitive damages is
supported by insufficient evidence, and punitive damages
are unconstitutional. However, there is sufficient evidence
in the record to support the award, and punitive damages
are constitutional under the Eighth Amendment (Brown-
ing-Ferris v. Kelco Disposal (1989) 109 S.Ct. 2909, 2912),
and the due process provisions of the Fourteenth Amend-
ment (Bertero v. National General Corp. (1974) 13 Cal.3d
43, 66, fn. 18, Zhadan v. Downtown L.A. Motors (1976)
66 Cal.App.3d 481, 501-502; but see Pacific Mut. Life Ins.
Co. v. Haslip (Ala. 1989) 553 So.2d 537, 543, cert. granted
April 2, 1990, 1990 U.S.L.W. 15078, No. 89-1279).

B

Home Capital and Humboldt, sellers of the property,
escaped liability when the trial court granted their motion
for nonsuit. MGW argues the motion should not have been
granted because the evidence demonstrated the sellers par-
ticipated in the conspiracy to interfere with payment of
the commission. We disagree.

“A motion for nonsuit is tantamount to a demurrer to
the evidence and presents a question of law: whether the
evidence offered in support of the plaintiffs’ case could
justify a judgment in the plaintiffs’ favor. [Citation.] In
reviewing the propriety of the trial court’s order granting
the ... motion ..., we must accept plaintiffs’ evidence as
true ... and resolve all conflicts and reasonable inferences
in their favor. [Citations.]’”’ (Lussier v. San Lorenzo Valley
Water Dist. (1988) 206 Cal.App.3d 92, 98.)

Waitt was told at the outset that Home Capital would
not pay him a broker’s fee on sale of the project and that
he would have to look to the buyer for any commission.
While Home Capital entered into a letter of intent with
Fredricks’ which provided it would not pay any broker’s

13a

commission, that was but a restatement of its consistent
position that the buyer would be responsible for any com-
mission. There was no evidence Home Capital signed the
letter of intent to help Fredricks avoid paying a commis-
sion. Indeed, there was testimony Home Capital did not
know Fredricks would refuse to pay a commission for lo-
cating the project. Since there was no evidence Home
Capital and Humboldt conspired to interfere with MGW’s
prospective economic advantage, the motion was correctly
granted.

C

The trial court granted judgment on the pleadings on
the contract causes of action finding they were barred by
the statute of frauds. (Civ. Code, § 1624.) MGW contends
the statute of frauds does not apply because it was asked
to locate a ‘‘business opportunity” and not real property.
The contention is without merit.

A business opportunity is ‘‘the sale or lease of the busi-
ness and goodwill of an existing business enterprise or
opportunity.”’ (Bus. & Prof. Code, § 10030.) However one
may try to portray the “project” Fredricks was seeking
when it told Waitt and other local brokers it was interested
in acquiring a large residential project, Fredricks was not
seeking a “‘business opportunity” as that term is defined
in the Business and Professions Code. Waitt was asked to
locate real property on which Fredricks could build homes.
Since the basic purpose of the agreement was to locate
real estate, the statute of frauds was applicable and re-
quired the broker’s agreement to be in writing. (See Phil-
lippe v. Shapell Industries, supra, 43 Cal.3d at p. 1255;
Tenzer v. Superscope, Inc. (1985) 39 Cal.8d 18, 25-27.)
Thus, the trial court properly granted the motion for judg-
ment on the pleadings as to the contract causes of action.
(See Beck v. American Health Group Internat., Inc. (1989)
211 Cal.App.3d 1555, 1565.)

l4a

DISPOSITION

The judgment is reversed as to Pacific Lighting, and is
affirmed in all other respects. MGW to recover costs from
Fredricks, Dunn, PREP and Pacific Lighting; Home and
Humboldt to recover costs from MGW.

NOT TO BE PUBLISHED

SCOVILLE, J.*
WE CONCUR:
SONENSHINE, Acting P. J.
WALLIN, J.

* Retired Presiding Justice of the Court of Appeal sitting under as-
signment by the Chairperson of the Judicial Council.

15a

APPENDIX B

COURT OF APPEAL - STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
Division Three

G006654
Orange County No. 416196

MGW, INC.
V.
FREDRICKS DEVELOPMENT CORPORATION

COURT OF APPEAL-4TH DIST. DIV. 3
FILED

MAY 2 1990
Deputy Clerk

THE COURT:
The petition for rehearing is DENIED.

/s/ SCOVILLE, P.J.

Presiding Justice
We Concur:

/s/ SONENSHINE, J.
Justice

/s/ WALLIN, J.
Justice

ce: Orange County Clerk
All Counsel

16a

APPENDIX C

ORDER DENYING REVIEW
AFTER JUDGMENT BY THE COURT OF APPEAL

Fourth Appellate District, Division Three, No. G006654
$015966
IN THE SUPREME COURT OF THE
STATE OF CALIFORNIA

IN BANK

SUPREME COURT
FILED

JUL 18 1990
Robert Wendorf Clark
DEPUTY

MGW INCORPORATED,
Appellant
v.

FREDRICKS DEVELOPMENT CORPORATION Et AL.,
Appellants

Petitions for review DENIED.

/s/ PANELLI
Acting Chief Justice

—

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APPENDIX D

IN THE COURT OF APPEALS
FOURTH APPELLATE DISTRICT
STATE OF CALIFORNIA

DIVISION THREE

MGW, INC.,
Plaintiff and Appellant,
vs.

PACIFIC LIGHTING CORPORATION, et al.,
Defendant and Respondent.

APPEAL FROM THE SUPERIOR COURT
OF ORANGE COUNTY
HONORABLE SAMUEL B. TAYLOR, JR.
Superior Court Case No. 416196

BRIEF OF RESPONDENT
PACIFIC LIGHTING CORPORATION

WOODROW D. SMITH GIBSON, DUNN & CRUTCHER
MELVIN KING JOHN J. SWENSON

801 South Grand Avenue ROBERT F. SERIO

Suite 1000 2029 Century Park East

P.O. Box 60043, Terminal Annex Suite 4000
Los Angeles, California 90060 Los Angeles, California 90067
(213) 895-5126 (213) 552-8500

Attorneys for Defendant and Respondent
PACIFIC LIGHTING CORPORATION

endowed with power to control corporate policy. Notwith-
standing MGW’s assertions to the contrary, none of which
are supported by citation to the record, Hunter never tes-
tified, nor was he asked about, his ability to formulate

18a

Pacific Lighting policy. Although MGW places great weight
on Hunter’s statement that “by and large I have always
been an employee of Pacific Lighting”, as already dis-
cussed, this statement was made in a colloquial manner
after a specific factual description of Hunter’s employment
history, which indicated a long affiliation with Pacific
Lighting subsidiaries only. In fact, the statement directly
conflicted with all other factual statements regarding
Hunter’s employment history, and as recognized by the
trial court, ‘‘it is clear this statement was a characteri-
zation, not a statement of actual fact.’’ Order, p. 4.

In fact, even assuming, arguendo, that Hunter’s state-
ment regarding his status as a Pacific Lighting employee
was true, there was no evidence presented as to his job
title, the scope of his employment or authority, or the
nature of his duties or responsibilities with Pacific Light-
ing. Without such additional evidence, it was impossible
for the jury to determine whether Hunter was, indeed, an
officer, director, or managing agent of Pacific Lighting as
required under California Civil Code Section 3294(b). Thus,
the trial court properly reversed the punitive damage
award for lack of substantial evidence in support thereof.

B. The Jury’s Unlimited Discretion To Mete Out Pun-
ishment In The Form Of Punitive Damages Violates
The Due Process Clause Of The Fourteenth Amend-
ment And The Excessive Fines Clause Of The Eighth
Amendment.

Not only was the jury’s punitive damage award unsup-
ported by the record, but it was clearly unconstitutional
as well. In the past few months, the Supreme Court of
the United States has made exceedingly clear its opinion
that the essentially unrestrained discretion vested in juries
to award “‘unlimited’’ punitive damages ‘‘may violate the
due process clause’ and that “the grant of wholly stand-
ardless discretion to determine the severity of [such] pun-
ishment appears inconsistent with due process.” See

19a

Banker’s Life & Casualty Co. v. Crenshaw, __ U.S. —_,
108 S.Ct. 1645, 1656, 100 L.Ed. 2d 62 (1988) (O’Connor,
J. and Scalia, J. concurring). Moreover, the Court has
indicated that such unfettered discretion may result in im-
position of civil fines which greatly exceed the amount of
fines imposed to punish comparable criminal conduct, a
result which violates the Excessive Fines Clause of the
Eighth Amendment to the United States Constitution. 108
S.Ct. at 1651 (noting that “‘whether the Eighth Amend-
ment’s Excessive Fines Clause serves to limit punitive
damages in state civil cases... is a question of some mo-
ment and difficulty’). Although the Supreme Court has
yet to definitively rule upon these issues, it has expressed
the intent to resolve such questions in the context of a
proper procedural challenge. This Court need not await
such action, however, as the present case is one wherein
the award of punitive damages clearly violates Pacific
Lighting’s rights under both the Due Process and Exces-
sive Fines Clauses of the United States Constitution.

1. The Punitive Damage Award Flies In The Face Of
Fundamental Concepts Of Due Process.

It is well-accepted in the present judicial system that
the concept of “‘due process’, as embodied in the Four-
teenth Amendment to the Constitution, prohibits imposi-
tion of either civil or criminal punitive measures in the
absence of clear guidelines limiting such awards.® In fact,
the functional equivalents of modern day punitive damage
awards, amercements and fines, have always been imposed
within a system under which the maximum potential pen-

* The complete rejection in this country of the potential for unlimited,
jury-imposed criminal] fines supports a similar rejection under the Due
Process Clause of unlimited, jury-imposed punitive fines in civil cases.
No principled constitutional distinction can be drawn between criminal
or civil fines as both are imposed to punish and deter. The Due Process
Clause “is not to be avoided by the simpie label the state chooses to
fasten on its conduct or its statute.”’ Giaccio v. Pennsylvania, 383 U.S.
399, 402, 86 S. Ct. 518, 15 L.Ed. 2d 447 (1966).

20a

alty was known in advance by local rule, custom, or stat-
ute.®

Thus, although due process clearly permits sentencing
authorities, whether judges or juries, considerable leeway
in determining the appropriate level of punishment to be
imposed in a particular case, such discretion is exercised
only where its outer limits previously have been circum-
scribed and publicized. Once such limitation has been es-
tablished, the maximum potential punishment for any given
offense is readily ascertainable, and the amount of pun-
ishment actually imposed may be constrained by the Eighth
Amendment. The Due Process Clause therefore funda-
mentally prohibits a system of unlimited punishments in
which the amount imposed is calculated on an ad hoc basis
in each case, even if the maximum amount is limited in
some unspecified, nebulous, and ultimately meaningless
fashion by the amount which the defendant is financially
capable of paying.

Despite this prohibition, however, the parameters for
awarding punitive damages have not yet been statutorily
enunciated, an omission which, perforce, has resulted in a
violation of Pacific Lighting’s due process rights. In the
present case, the jury did not receive one iota of guidance
as to the standards for determining the amount of punitive
damages imposed. As a result, Pacific Lighting essentially
was at the mercy of an uncontrolled jury which could
impose any amount of punitive damages, no matter how
outrageous, without the threat of judicial censure. To allow
such capricious awards not only serves to multiply a
defendant’s uncertainty as to the punishment which may

* The fundamental principle that limits on punishments must be pre-
scribed in advance of their imposition and that such limits may not be
set by juries on an ad hoc basis is traced to the ancient latin canon,
“Nullum Crimen, Nulla Poena, Sine Lege,’”’ the modern translation of
which is: “There can be no crime, and no punishments, except as the
law prescribes it.’’ M. Frankel, Criminal Sentences 3 (1972).

"

2la

accompany his “‘crime’’, but it nullifies the very concepts
of fair play and justice embodied in the Due Process Clause
itself.

2. The Jury’s Capricious Punitive Damage Award
Constitutes An Excessive Fine Imposed In Viola-
tion Of The Eighth Amendment To The United
States Constitution.

Moreover, to allow a jury the unfettered discretion to
impose a “‘fine’”’ in a civil case which greatly exceeds the
monetary penalty imposed for a comparable crime violates
both the letter and the spirit of the Excessive Fines Clause
of the Eighth Amendment. The Eighth Amendment spe-
cifically provides that ‘“‘Excessive bail shall not be required,
nor excessive fines imposed, nor cruel and unusual pun-
ishment inflicted.” U.S. Const. amend. VIII. The theory
underlying this prohibition is that a punishment must “‘fit”’
the crime and that crimes of equal magnitude should be
punished similarly. Solem v. Helm, 463 U.S. 277, 284-85,
103 S.Ct. 300, 77 L.Ed. 2d 637 (1983). To the extent a
civil jury, such as the one empanelled in the present case,
has the power to impose an $800,000 fine for commission
of a tort, intentional interference, which is a penalty
amounting to roughly 800 times the penalty imposed for
a comparable crime, fraud, such unrestrained punitive
power leaves wide open the possibility that juries will
‘“‘punish”’ civil defendants not in accordance with the mag-
nitude of their “crime,’’ but solely based upon their public
image or the size of their bank accounts. Such a result
completely defeats the purpose and protections of the

© Such uncontrolled jury awards also violate the due process rights
guaranteed by the California State Constitution. Article I, Section 13
of the California Constitution provides that ‘‘no person shall be deprived
of property without due process of law,” a stricture which is to be
construed identically in scope and purpose with the Due Process Clause
of the federal constitution. Cal. Const. Art. I, §3; Gray v. Whitmore,
17 Cal. App. 3d 1, 94 Cal. Rptr. 904 (1971).

| ciiiiaiiiamaiaiatsaiciesiii

22a

Eighth Amendment, thereby rendering the verdict against
Pacific Lighting herein clearly unconstitutional.

This conclusion is not altered by the fact that Pacific Light-
ing’s “punishment” is meted out in the form of civil punitive
damages rather than in the form of a jail sentence or a
criminal fine. Although punitive damages are not labeled
“criminal’’, they are completely analogous to criminal pun-
ishments. But for the fact that the Excessive Fines Clause
appears in an amendment which, on its face, addresses sub-
jects such as “bail” and “cruel and unusual punishments”,
topics commonly associated with criminal rather than civil
cases, the plain language of the Excessive Fines Clause rea-
sonably could be interpreted to fully apply to any monetary
“fine” imposed in any civil or criminal proceeding, regardless
of whether the purpose of such a “fine” is limited to pun-
ishment and deterence. The Court therefore properly may
conclude that a monetary fine imposed exclusively for pur-
poses of punishment and deterence, the classic objectives of
criminal penalties (Trop v. Dulles, 356 U.S. 86, 96, 78 S.Ct.
590, 2 L.Ed. 630 (1958)), was intended by the framers of
the Constitution to fall within the rubric of the Excessive
Fines Clause. Thus, any punitive damage award should be
imposed only pursuant to clearly articulated standards and
limitations. As the jury’s punitive damage verdict against
Pacific Lighting was rendered in the absence of such guide-
lines, its award cannot withstand the scrutiny of constitutional
review and must be reversed.

DATED: February 28, 1989 Respectfully submitted,

_ GIBSON, DUNN & CRUTCHER
JOHN J. SWENSON
ROBERT F. SERIO

/s/ Robert F. Serio

Attorneys for Respondent
PACIFIC LIGHTING
CORPORATION

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_0989%3A1. Public record. Not legal advice.