Amicus Curiae Brief — Union Security Life Insurance v. Crocker

©

No. 95-740

Jn the Supreme Court of the United States

OCTOBER TERM, 1995

UNION SECURITY LIFE INSURANCE COMPANY, Petitioner

V.

EVELYN CROCKER, Respondent

On Petition for a Writ of Certiorari

to the Supreme Court of Alabama

BRIEF OF THE CHAMBER OF COMMERCE OF

THE UNITED STATES OF AMERICA AS AMICUS

CURIAE IN SUPPORT OF THE PETITIONER

STEPHEN A. BOKAT

Counsel of Record

ROBIN S. CONRAD

National Chamber Litigation

Center, Inc.

1615 H Street, N. W.

Washington, D.C. 20062

(202) 463-5337

Counsel for Amicus Curiae the Chamber of

Commerce of the United States of America

TABLE OF CONTENTS

INTEREST OF THE AMICUS ..............

REASONS FOR GRANTING THE PETITION ....

A. Punitive Damages Awards Have Continued

Unabated Since The Court Granted The Petition

For Certiorari in BMW ..............

B. Union Security’s Petition Is An Ideal Vehicle

For Addressing The Issue Of Excessive Punitive

NE OS i A

I aS ee aa BIE bie dike ate «

(i)

6

10

ii

TABLE OF AUTHORITIES

Cases

BMW of North America, Inc. v. Gore,

ee eee a ee ee ee

mains: Pe Indus. of Vermont, Inc.

v. Kelco Disposal, Inc., 492 U.S. 257

COIS aks is 9k 2 de 4 Re ea ca

Fraidin v. Weitzman, No. 94-1230 .......

Honda Motor Co. v. Oberg, 114

S. Ce. SSE CR is ve Nw Re

Honda Motor Co. v. Oberg, No. 94-1890 .. .

Independent Life & Accident Ins. Co. v.

Harrington, No. 94-2016 ..........

aie Mut. Ins. Co. v. Chemstar, Inc. ,

oO

y PGE ss eh CRA ee 8

Owens-Corning Fiberglas Corp. v.

Pickering, No. 94-1476 ...........

OXY USA Inc. v. Continental Trend

Resources, Inc., No. 94-1838 .......

TXO Prod. Corp. v. Alliance Resources

Corp., 113 S. Ct. 2711 (1993).......

Union Security Life Ins. Co. v. Crocker,

No. A-299 (filed Oct. 3, 1995) ......

Wolfberg v. Greenberg, No. 95-433 ......

Zazu Designs v. L’Oréal, S.A., 979 F.2d

Gao Cree GR, SPs in FCA eee as

Miscellaneous

$6 Million Award in Implant Case, N.Y.

Be, POR. 5, Fee ket wea ese

$12M in Punitives Awarded in Retrial o

Contract Case, NAT’L L.J., Aug. 7, 1995

TABLE OF AUTHORITIES — Continued

$500 Million Awarded in Death of 9-Year-Old,

WASHINGTON Post, Sept. 30, 1995......

Abraham & Jeffries, Punitive Damages an?

the Rule of Law: The Role of

Defendant’s Wealth, 18 J. LEGAL STUD.

EE Lee GGaS 6 wigs < <0 0 0 0 s

Alaska Jury Finds Defect in 7’ Belt,

AUTOMOTIVE Nee, Nov. 13,

2 AMERICAN LAW INSTITUTE, REPORTER’S

STUDY, ENTERPRISE RESPONSIBILITY

FOR PERSONAL INJURY (1991) .........

Bad Faith Spelled Big Bucks, SACRAMENTO

Ee og ne bbe oo W's

Boardman, Big Suits: Bio-Medical > saa

tions Management Co. Inc. et al. v.

Dallas Ne logy Associates,

a.

Bryant, Movers Win $12 Million Jury

Award, ST. LOUIS PosT-DISPATCH,

GM Gs Pei hb O90 0 0 0

Burdman, J s Insurer Acted in Bad

Faith, $.F. CHRON., June 10, 1995 ......

Burton, Dow Chemical Is Ordered to Pa

Punitive Damages in Implant Trial, WALL

CT Ci Ms clws. esc 9-6 ¢0 0 «

Calif. Jury Finds Fraud in Handling of

Bank Loans, NAT’L L.J., July 31, 1995 ...

Chapman & Trebilcock, Punitive Damages:

Divergence in Search of a Rationale, 40

te, es PEEP LA 6 6 elec 60 0 os

Company to Get $22.14M in Suit over $350

ax Bill, NAT'L L.J., Aug. 7, 1995 .....

ear

Pages

iv

TABLE OF AUTHORITIES — Continued

Cooter, Punitive Damages for Deterrence:

When and How Much?, 40 ALA. L. REV. 1143

( Deelah a yy See es bw a oh ee Fk

Couch, Jowa Firm Wins Case Against

Insurer, DES MOINES REG., Nov. 17, 1995 ..... 4

Debt Collection Outrages Carry $11

—— Penalty, NAT’L L. J., Oct. 2,

Epstein, $38.5M Award Against Bank in

Car Loan Case, AM. BANKER, Jan. 30,1995 .... 4

Ex-Olsten Executive is Awarded Damages in

eh nen Suit, WALL ST. J., Nov. ;

Foremost Corp. Hit with $15M Jury Verdict

in Ala. Suit, DOW JONES INT’L NEWS SERV.

5954500, FED Eas Se ie OSs. eee. 4

Frank & Markels, Coca-Cola Loses ADA Case

for Firing Alcoholic in Treatment, WALL

OF. 5. TE Be Be FOES Ai £4 Wie « 5

Geyelin, Jury Orders Ford to Pay $25

Million for Death Linked to Bronco II

Rollover, WALL ST. J., June 23, 1995 ........ 4

Granelli, Daewoo Must Pay O.C. Piano

Dealer $10 Million More, L.A. TIMES,

CN, Wk ea eas a oo a ele eh er ee eke 4

Gruber, $/0 Million Award a Lot to

Swallow for Subway Shops, Cui. TRIB.,

WU a I on a a ds oo oe 4

Insurer Must Pay $20.33M in Bad-Faith

Action, NAT’L L.J., Sept. 18, 1995 .......... 4

Vv

TABLE OF AUTHORITIES — Continued

Pages

Insurers to A $8.3 Million Award to

Woman Denied Full Payment, BNA HEALTH CARE

SN UC I aS bd cad. uct ad cs ee ae

Jackman, $350M Jury Verdict in Crash,

a A Re a a a ae 4

Jackman, Wal-Mart Verdict Cut to $5

Million, K.C. STAR, Nov. 21, 1995 ......... 5

Judge Cuts Ford’s Damages on 1992

Rollover Accident, AUSTIN AMERICAN-

STATESMAN, Aug. 26,1995 .............. 5

Jury Awards $500 Million to Funeral

Home Owner, NAT’L L.J., Dec. 11, 1995 ...... 4

Jury Awards Retiree $25M in Fraud Case,

yy Me ye Se ee ere 4

Jury Says Film Com Defrauded Former

CEO, NAT’L Ly. ge EE a oe ei 4-5

Kueterman, Ford Loses Big in Bronco II

Rollover Case, NAT’L L.J., Nov. 13, 1995 ..... 4

Loewen Reviews Options for “ene?! Big

Bond, WALL ST. J., Nov. 21, 1995 .......... 5

Louis, Dentist Gets $10 Million

Settlement, S.F. CHRON., Feb. 2, 1995 ....... 4

Macon Jury Tells GM to Pay Ex-Auto Dealer

$26 Million, BIRMINGHAM NEws, June 9, 1995 .. 4

Maker of Water Heater Told to Pay $15

Million, NAT’L L.J., Oct. 16,1995 .......... 4

Miller, DuPont Told to Pay About $23.9

Million in Benlate Case, WALL ST. J.,

pe RASS Sp Aa eae a ee 4

vi

TABLE OF AUTHORITIES — Continued

Pages

O'Hara, Judge Slashes Damages Against

Trustmark in Case Involving Force-

Placed Insurance, AM. BANKER, Aug. 9,

FS 003 00 tre COR ap bee cers 5

Rankin, Suzuki Decides to Fight, Loses,

POAT L, Ried eg FOE Ae oe Ca 6 oan oe eae ee 4

Riley, Paralyzed Woman Awarded $8

Million: Jury Decision Holds Fraternity

Liable, ST. Louis Post-DisPATCH, Nov. 3,

ISOS, wic'dd falas eae SOW We cee ces 5

Ryder Must Pay Millions, K.C. STAR,

Nov. 35, Reet). .o.% canted cee eas eta eee 5

Samoan Gov't Wins $86.7M in Insurance

Bad-Faith Suit, NAT'L L.J., Oct. 23, 1995 ..... 4

Sanford, Battery Company Awarded

$4,087,000, BIRMINGHAM NEws, July 10,1995 .. 5

Suzuki Appealing Accident Ruling, ST.

LoulIs Post-DisPATCH, Nov. 15, 1995 ........ 5

Wal-Mart Ex-Worker Awarded $50 Million in

eT nat ge Suit, WALL ST. J., June

) BPS cence eee Cae ated cere ey arc En 4

BRIEF OF THE CHAMBER OF COMMERCE OF

THE UNITED STATES OF AMERICA AS AMICUS

CURIAE IN SUPPORT OF THE PETITIONER

The Chamber of Commerce of the United States of

America (hereinafter “the Chamber”) respectfully submits this

brief as amicus curiae in support of the petition for a writ of

certiorari.'

INTEREST OF THE AMICUS

The Chamber, a nonprofit corporation organized and

existing under the laws of the District of Columbia, is the

largest federation of business, trade, and professional

organizations in the United States. It represents the interests

of over 215,000 corporations, partnerships, and

proprietorships, as well as several thousand state and local

chambers of commerce and trade and professional

associations. The Chamber regularly represents the interests

of its members in critical matters before the courts, the

United States Congress, the Executive Branch, and

independent regulatory agencies of the federal government.

The Chamber has a significant interest in the issue of

excessive punitive damages presented in this case. In recent

decades, punitive damages have become increasingly

common, reaching into the millions and even hundreds of

millions of dollars in individual cases. Businesses such as

those represented by the Chamber are the primary target of

punitive damages claims and often suffer unpredictable and

arbitrary awards. As a consequence, the Chamber and its

members have a strong interest in ensuring that such awards

are imposed in a manner that is fair, rational, and consistent

with the Constitution’s guarantee of due process.

' The parties’ letters of consent have been filed with the Clerk pursuant

to Rule 37.2 of the Rules of this Court.

2

REASONS FOR GRANTING THE PETITION

This Court granted certiorari in BMW of North America,

Inc. v. Gore, No. 94-896, to consider, among other issues,

the question whether the $2 million punitive award in that

case is unconstitutionally excessive. As the Court recognized

in its most recent punitive damages case, although it is now

well established that the Due Process Clause imposes a

substantive limitation on the amount of punitive damages that

may be exacted, to date the Court has not provided much

guidance as to the “character of the standard that will identify

unconstitutionally excessive awards.” Honda Motor Co. v.

Oberg, 114 S. Ct. 2331, 2335 (1994). The BMW case

presents the Court with an opportunity to begin the process of

defining the standard. But as the Chamber pointed out in its

amicus brief in that case, the Court should not need to reach

the excessiveness issue in BMW because the petitioner is

entitled to a new trial as a consequence of the by-now

conceded unconstitutional extraterritorial punishment that took

place there.

If the Court agrees with the Chamber in BMW and

therefore does not reach the excessiveness issue in that case,

the Chamber submits that the Court should grant one of the

several petitions presenting that issue that are being held in

abeyance pending the Court’s disposition of BMW. The issue

of excessive punitive damages is not a quirky one; it recurs

on a weekly (if not more frequent) basis. Juries continue to

mulct corporate defendants at an alarming rate and in ever-

increasing amounts. Reviewing courts continue to need

guidance as to how to evaluate these massive exactions. The

present case is a perfect example. The punitive damages in

this case bear no reasonable relationship to either the

plaintiff's harm, the defendant’s gain, or the gravity of the

defendant’s misconduct. Indeed, in this case (as in many

others coming out of Alabama) it is questionable indeed

whether the defendant did anything wrong at all.

3

A. Punitive Damages Awards Have Continued

Unabated Since The Court Granted The Petition

For Certiorari in BMW.

The petition for certiorari in BMW contained an eye-

opening list of multi-million dollar punitive exactions that had

been imposed in the three months preceding the filing of the

petition. That list was not aberrational. In the ten months

since the Court granted the petition in BMW, the media have

reported literally dozens of punitive verdicts that were equal

to or greater than the one under review in BMW.

This parade of massive exactions includes punishments of

$400 million against Loewen Group, $300 million against

Durex Industries and its parent William Recht Co., $175

million against Turbomeca Engine Corporation and its French

parent, $60 million against Suzuki, $58 million against Ford,

$57.8 million against Affiliated FM Insurance Company, $50

million against Walmart, $38 million against Trustmark

National Bank, $25 million against Prudential Insurance

Company, $25 million against Dallas Nephrology Associates,

$25 million against California Federal Bank and one of its

subsidiaries, $22.5 million against Ford, $21.42 million

against VF Corp, $20 million against General Motors, $20

million against State Compensation Insurance Fund; $15

million against Foremost Insurance Company, $14.3 million

against Dupont, $12 million against Rheem Manufacturing

Company, $12 million against Gilbert Commonwealth of

Michigan and its corporate grandparent, $10.1 million against

Unocal, $10 million against Dow Chemical Company, $10

million against Daewoo America, $10 million against

Fireman’s Fund Insurance Company, $10 million against

Subway Sandwich Shops, $9 million against Household

Credit Services, Inc., $8 million against Southwestern Bell,

$8 million against Foremost Insurance Company, $7.5

million against North American Life and Casualty Company,

$7.15 million against American Film Technologies, Inc, $6

million against Coca-Cola, $5.6 million against General

Motors, $5 million against Olsten Corporation, $4.5 million

4

against the Phi Sigma Kappa fraternity, $4 million against

Ryder Commercial Leasing, $4 million against East Penn

Corporation, $3.9 million against United Services Automobile

Association, and $3.5 million against Baxter Healthcare Corporation.”

2 See Jury Awards $500 Million to Funeral Home Owner, NaT’L L.J.,

Dec. 11, 1995, at A17; $500 Million Awarded in Death of 9-Year-Old,

WASHINGTON Post, Sept. 30, 1995, at A2; Jackman, $350M Jury Verdict

in Crash, NAT'L L.J., Aug. 7, 1995, at A6; Rankin, Suzuki Decides to

Fight, Loses, NAT'L L.J., July 24, 1995, at A6; Kueterman, Ford Loses

Big in Bronco Il Rollover Case, NAT'L L.J., Nov. 13, 1995, at All;

Samoan Gov't Wins $86. 7M in Insurance Bad-Faith Suit, NAT'L L.J., Oct.

23, 1995, at Al7; Wal-Mart Ex-Worker Awarded $50 Million in Sex-

Harrassment Suit, WALL ST. J., June 30, 1995, at B12; Epstein, $38.5M

Award Against Bank in Car Loan Case, AM. BANKER, Jan. 30, 1995, at

1; Jury Awards Retiree $25M in Fraud Case, NAT'L L.J., Sept. 25, 1995,

at A13; Boardman, Big Suits: Bio-Medical Applications Management Co.

inc. et al. v. Dallas Nephrology Associates, TEXAS LAW., Feb. 27, 1995,

at 16; Calif. Jury Finds Fraud in Handling of Bank Loans, Nat’ L.J.,

July 31, 1995, at A9; Geyelin, Jury Orders Ford to Pay $25 Million for

Death Linked to Bronco Il Rollover, WALL St. J., June 23, 1995, at B2;

Company to Get $22.14M in Suit over $350 Tax Bill, NAT'L. L.J., Aug.

7, 1995, at Al3; Macon Jury Tells GM to Pay Ex-Auto Dealer $26

Million, BIRMINGHAM NEws, June 9, 1995, at 1; Insurer Must Pay

$20.33M in Bad-Faith Action, NaT’L L.J., Sept. 18, 1995, at A13;

Foremost Corp. Hit with $15M Jury Verdict in Ala. Suit, Dow JoNEs

INT'L NEws SERV. 11:43:00, June 13, 1995; Miller, DuPont Told to Pay

About $23.9 Million in Benlate Case, WALL ST. J., Jan. 27, 1995, at BS;

Maker of Water Heater Told to Pay $15 Million, NaT’L L.J., Oct. 16,

1995, at All; $/2M in Punitives Awarded in Retrial of Contract Case,

Nat’. L.J., Aug. 7, 1995, at Al3; Bad Faith Spelled Big Bucks, SACRA-

MENTO BEE, May 14, 1995, at El; Burton, Dow Chemical Is Ordered to

Pay Punitive Damages in Implant Trial, WALL ST. J., Oct. 31, 1995, at

B11; Granelli, Daewoo Must Pay O.C. Piano Dealer $10 Million More,

L.A. TIMES, Oct. 21, 1995, at 1; Louis, Dentist Gets $10 Million

Settlement, S.F. CHRON., Feb. 2, 1995, at D1; Gruber, $/0 Million

Award a Lot to Swallow for Subway Shops, CH. TRIB., Nov. 29, 1995,

at Bus. 3; Debt Collection Outrages Carry $11 Million Penalty, NAT'L L.

J., Oct. 2, 1995, at All; Bryant, M Win $12 Million Jury Award,

St. Louts Post-DispaTcH, May 5, 1995, at 1A; Couch, lowa Firm Wins

Case Against Insurer, DES MOINES REG., Nov. 17, 1995, at 10; Insurers

to Appeal $8.3 Million Award to Woman Denied Full Payment, BNA

HEALTH CarE DAILY, June 7, 1995; Jury Says Film Company Defrauded

5

Although trial courts ordered remittiturs in several of

these cases, the amounts left standing generally remained

enormous. For example, the $60 million punis:ment against

Suzuki was reduced to $20 million, while the $50 million

punishment against Wal-Mart and the $38 million punishment

against Trustmark each were reduced to $5 million and the

$22.5 million punishment against Ford was reduced to $4

million.’ Moreover, trial courts have refused to disturb even

a penny of the $400 million punishment against the Loewen

Group, the $21.4 million punishment against VF Corp., the

$12 million punishment against Gilbert Commonwealth, and

the $7.5 million punishment against North American Life and

Casualty.*

Former CEO, NaT’t L.J., July 10, 1995, at All; Frank & Markels,

Coca-Cola Loses ADA Case for Firing Alcoholic in Treatment, WALL ST.

J., July 3, 1995, at BS; Alaska Jury Finds Defect in Jimmy Belt,

AUTOMOTIVE News, Nov. 13, 1995, at 52; Ex-Olsten Executive is

Awarded Damages in Discrimination Suit, WALL St. J., Nov. 10, 1995,

at B8; Riley, Paralyzed Woman Awarded $8 Million: Jury Decision Holds

Fraternity Liable, St. Louts Post-DisPATCH, Nov. 3, 1995, at 1A; Ryder

Must Pay Millions, K.C. STAR, Nov. 15, 1995, at B1; Sanford, Battery

Company Awarded $4,087,000, BIRMINGHAM News, July 10, 1995, at

7B; Burdman, Jury Says Insurer Acted in Bad Faith, S.F. CHRON., June

10, 1995, at A19; $6 Million Award in Implant Case, N.Y. TIMES, Feb.

5, 1995, at 18, col.4.

> See Suzuki Appealing Accident Ruling, St. Louis Post-DisPaTcu,

Nov. 15, 1995, at 3B; Jackman, Wal-Mart Verdict Cut to $5 Million,

K.C. STAR, Nov. 21, 1995, at B2; O'Hara, Judge Slashes Damages

Against Trustmark in Case Involving Force-Placed Insurance, AM.

BANKER, Aug. 9, 1995, at 8; Judge Cuts Ford's Damages on 1992

Rollover Accident, AUSTIN AMERICAN-STATESMAN, Aug. 26, 1995, at DS.

* See Loewen Reviews Options for Obtaining Big Bond, WALL ST. J.,

Nov. 21, 1995, at A4; VF’s Wings Clipped, WOMEN’S WEAR DAILY,

Sept. 21, 1995, at 11. The Chamber has not located news accounts of the

trial courts’ rulings regarding Gilbert Commonwealth and North American

Life and Casualty. The Chamber’s information regarding these cases is

based upon representations of counsel for Union Security who represent

both Gilbert Commonwealth and North American Life and Casualty in

6

As this survey reflects, the punitive damages crisis is

very much real and enduring. The issue of excessive punitive

damages thus remains an exceedingly important one that this

Court should address either in BMW or in one of the cases

that is pending at the time it decides BMW. As we next

discuss, the present case is an ideal one in which to reach the

issue if the Court does not do so in BMW.

B. Union Security’s Petition Is An Ideal Vehicle For

Addressing The Issue Of Excessive Punitive

Damages.

In the event_that the Court does not reach the

excessiveness issue in BMW, Union Security’s petition

presents an ideal opportunity to do so. Unlike many of the

petitions that the Court is holding for BMW,° Union

Security’s presents only an excessiveness issue. Accordingly,

if the Court grants Union Security’s petition, there is no

possibility that some threshold issue would prevent it from

reaching the excessiveness question.

Moreover, unlike some of the petitions that are now

pending,° there is no real dispute in this case about the nature

of the defendant’s conduct. The parties and lower courts all

are in agreement that Union Security was held liable for

having its product sold by a banker who, on a single, isolated

occasion, failed to disclose to a debtor that inaccuracies on a

their state-court appeals.

> See, e.g., Fraidin v. Weituman, No. 94-1230; Liberty Mut. Ins. Co. v.

Chemstar, Inc., No. 94-1337; Owens-Corning Fiberglas Corp. v.

Pickering, No. 94-1476; Honda Motor Co. v. Oberg, No. 94-1890;

Independent Life & Accident Ins. Co. v. Harrington, No. 94-2016.

* See, e.g., Fraidin, supra; OXY USA Inc. v. Continental Trend

Resources, Inc., No. 94-1838; Wolfberg v. Greenberg, No. 95-433.

7

health statement could result in the rescission of coverage.’

The Court thus would be free of the kind of factual wrangling

that has characterized some of its other punitive damages

cases and instead would have a “clean shot” at the question

whether the punishment is disproportionate to the gravity of

the misconduct.

The Court is unlikely to find a better case than this one

for reining in excessive punitive damages. As the petition

demonstrates, the $2 million punishment here bears no

reasonable relationship to the three central factors in the

7? See, e.g., Opposition to a Stay of Execution of Judgment Pending the

Filing of a Petition for Writ of Certiorari at 16, Union Security Life Ins.

Co. v. Crocker, No. A-299 (filed Oct. 3, 1995) (“Petitioner is

responsible, through respondeat superior, for the fraud of its agent

Taylor.”); Pet. App. 6a (“[T]he jury could reasonably find that Taylor had

a duty to disclose to the Crockers that the policy benefits might not be

paid if Mr. Crocker in fact had had health problems and that his failure

to do so induced them to obtain the credit life coverage, for which

premiums were paid until coverage was denied at Mr. Crocker’s death.”)

(emphasis added); id. at 19a (“This case involved misrepresentations made

by the agent for defendants as well as concealment by the agent of

material facts from the plaintiff and her deceased husband in the purchase

of credit life insurance.”) (emphasis added); id. at 20a (“There is no

evidence either defendant engaged in similar misrepresentations or

concealments/suppressions in their dealings with other credit life insureds.

In other words, there is no evidence of repeated similar wrongs being

committed by either of the defendants.”); id. at 23a (“[T]his Court has

found no repeated wrong-doing by either defendant. This was an isolated

incident.”).

To be sure, the Alabama Supreme Court characterized as wrongful

Union Security’s practice of deferring the investigation of the accuracy of

health statements until after a suspicious claim is made. Pet App. 12a.

However, there is no factual dispute about that practice. The only

questions are whether that practice should be considered in setting the

punishment and, if so, whether it justities a punishment of the magnitude

involved here. The Chamber is of the view that Union Security's practice

should not be considered at all because (1) it was not the basis for the

jury’s verdict (See Pet. 15) and (2) the practice was permitted by Alabama

law at the time Union Security discovered the misstatement in Mr.

Crocker’s health statement (see Pet. 15-16 & n.13).

8

excessiveness calculus — the harm to the plaintiff (actual and

potential), the gain to the defendant, and the gravity of the

misconduct.*

Petitioner has persuasively demonstrated that the

punishment is thoroughly disproportionate to any measure of

harm to the plaintiff or gain to the defendant. See Pet. 17-20.

As for the gravity of the misconduct, the Court need do

little more than read the opinion of the Alabama Supreme

Court to ascertain that Union Security was the victim of an

attempted fraud, not the perpetrator. It is obvious from the

opinion and from the undisputed testimony cited by the

petitioner that either the agent (Taylor) or the Crockers or

both acting in concert intended to “slip one by” Union

Security.’ The agent was aware that if the health statement

indicated a pre-existing condition, Union Security would

* The Chamber submits that consideration of a corporate defendant's

financial condition is legitimate only as a mitigating factor. A defendant's

substantial net worth is not a basis for upholding a punitive judgment that

bears no relationship to the harm to the plaintiff, the gain to the defendant,

and the gravity of the misconduct, particularly when, as here, the jury was

not exposed to evidence of the defendant's financial circumstances. It

bears emphasizing, moreover, that there is a broad —° and to our

knowledge unchallenged — consensus among economists that in cases

involving corporate defendants a punishment need not and should not be

larger merely because the defendant has substantial assets or other indicia

of wealth. See, e.g., Zazu Designs v. L’Oréal, S.A., 979 F.2d 499, 508-

509 (7th Cir. 1992) (Easterbrook, J.); 2 AMERICAN LAW INSTITUTE,

REPORTER'S STUDY, ENTERPRISE RESPONSIBILITY FOR PERSONAL INJURY

253-255 (1991); Abraham & Jeffries, Punitive Damages and the Rule of

Law: The Role of Defendant's Wealth, 18 J. LEGAL STuD. 415 (1989);

Chapman & Trebilcock, Punitive Damages: Divergence in Search of a

Rationale, 40 ALA. L. REV. 741, 824-826 (1989); Cooter, Punitive

Damages for Deterrence: When and How Much?, 40 ALA. L. REv. 1143,

1176-1177 (1989).

* The most likely scenario involves the Crockers’ knowing participation.

After all, if Taylor were acting on his own, he could have had no

assurance that the Crockers would not read the health statement, correct

the material misstatements, and thereby foil his scheme.

9

decline to issue coverage, that the bank (of which he was a

branch manager) would not have its loan payments secured,

and that he would not receive credit toward a bonus. At the

same time, the Crockers’ prior experience made them fully

aware that, if Mr. Crocker disclosed his health condition,

they either would not receive coverage at all or would be

forced to pay substantially higher premiums. The record in

this case reflects that Union Security never authorized Taylor

or any other agent to submit materially inaccurate health

statements. Indeed, as the trial court repeatedly observed,

this was an “isolated incident.” Pet. App. 20a, 23a.

Moreover, given the short contestability period applicable to

credit life policies, Union Security plainly had no incentive to

encourage agents either to falsify health statements themselve:

or to look the other way when an applicant does so. Once

the one-year contestability period elapses, Union Security

cannot revoke coverage no matter how blatant the

misrepresentation on the health statement and no matter how

substantial the risk of loss on the policy.

In short, this case involves no “bad facts” that might

come to light only after the Court grants certiorari. Unlike

TXO Prod. Corp. v. Alliance Resources Corp., 113 S. Ct.

2711 (1993), the record in this case is devoid of evidence of

some sort of corporate scheme to defraud or oppress.

Compare id. at 2715-16, 2717 n.12, 2722 (plurality opinion);

id. at 2726 (Kennedy, J., concurring). Moreover, since the

stay proceedings, respondent has been represented by experi-

enced Supreme Court counsel who specializes in punitive

damages litigation.'° It is therefore exceedingly unlikely

‘© Counsel of record for respondent has represented the respondents in

BMW, Honda, and TXO. In addition, he has testified before Congress

against punitive damages reform and has written articles in praise of

punitive damages.

Petitioner’s counsel also are highly experienced in the area of

punitive damages. Indeed, petitioner’s counsel of record argued three of

the Court’s five most recent punitive damages cases -- BMW, Honda, and

10

that, if certiorari is granted, respondent will unearth at the

merits stage some new legal theory not mentioned in the

opposition that would dramatically alter the Court’s

perception of the case. Compare TXO, 113 S. Ct. at 2734

(O’Connor, J., dissenting) (“Respondents’ $5.0 to $8.3

million estimate [of potential harm] appeared for the first time

after this Court granted certiorari, having been produced

exclusively for our consumption. ”).

CONCLUSION

The petition for certiorari should be granted.

Respectfully submitted.

STEPHEN A. BOKAT

Counsel of Record

ROBIN S. CONRAD

National Chamber Litigation

Center, Inc.

1615 H Street, N. W.

Washington, D.C. 20062

(202) 463-5337

Counsel for Amicus Curiae the Chamber of

Commerce of the United States of America

DECEMBER 1995

Browning-Ferris Indus. of Vermont, Inc. v. Kelco Disposal, Inc., 492

U.S. 257 (1989).