Opposition Brief — Atlantic Richfield Co. v. Nielsen

No. 87-1196

In the Supreme Cou

OF THE

United States

OCTOBER TERM 1987

ATLANTIC RICHFIELD COMPANY,

Petitioner,

Vv.

JOHN V. NIELSEN,

Respondent.

On Petition for Writ of Certiorari to the Court of

Appeal of California, Fourth Appellate District

BRIEF IN OPPOSITION

GEORGE J. BERGER*

DEARING D. ENGLISH

JENNINGS, ENGSTRAND &

HENRIKSON

A Professional Law Corporation

401 W. “A” Street, Suite 2200

San Diego, CA 92101

(619) 557-7800

BRUCE J. ENNIS, JR.

DONALD B. VERRILLI

ENNIS FRIEDMAN & BERSOFF

1200 17th Street, N.W.

Washington, D.C. 20036

(202) 775-8100

Attorneys for Respondent

*Counsel of Record

Bowne of Los Angeles, Inc., Law Printers (213) 742-6600.

TABLE OF CONTENTS

STATEMENT OF THE CASE .................

i, I Pe ek ie cic eee in es

BECAUSE ARCO DID NOT PROPERLY RAISE

ANY FEDERAL QUESTION IN THE STATE

COURTS, ITS PETITION MUST BE DENIED

II

EVEN IF ARCO HAD PROPERLY RAISED

CONSTITUTIONAL CLAIMS BELOW, IT

WOULD BE INAPPROPRIATE TO GRANT

veer ee err Ce yee er roe

A. Even In This Court, ARCO Appears To

Adopt Current California Law But Complains

Re wre PEGE WU go i ies eens

B. The Eighth Amendment Excessive Fines

Clause Does Not Invalidate California’s

Long-Standing Standards ................

C. ARCO’s Due Process Clause Argument Does

Not Justify Granting The Petition.........

COE Gee eke keane Gah kee DUNE RES

14

21

21

il

TABLE OF AUTHORITIES

Cases

Aetna Life Ins. Co. v. Lavoie, 475 U.S. 813, 89 L. Ed.

26 Sie (I9G6) sncccesccn tae 13,17

Alhino v. Starr, 112 Cal. App. 3d 158, 169 Cal. Rptr.

136 (3980) 2. .55550423000ee ee ee 22

Allstate Ins. Co. v. Hawkins, 733 P.2d 1073....... 20, 21

Bertero v. Nat'l Gen. Corp., 13 Cal. 3d 43, 118 Cal.

Mote. 166 (3978) .. 3.3 eee 12

Betts v. Allstate Ins. Co., 1454 Cal. App. 3d 688, 201

Cal. Rptr. S36 (1006)... <2 ee 23

Bd. of Directors of Rotary Int'l v. Rotary Club, 481

U.S. —..., 9% Le. Bd, BB OES Ce . ws... 19

Brown v. Louisiana, 447 U.S. 323 (1980) ........ 26

Burnett v. Nat'l Enquirer, Inc., 144 Cal. App. 3d

991, 193 Cal. Hote. SOR (ieee cosa da eee 22

Chandler v. Florida, 449 U.S. 560 (1981) ........ 24

Curtis Publishing Co. v. Butts, 388 U.S. 130 (1967) 16

Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc., 155

Cal. App. 3d 381, 202 Cal. Rptr. 204 (1984) ... 23, 26

Downey Sav. & Loan Ass’n v. Ohio Casualty Ins. Co.,

189 Cal. App. 3d 1072, 234 Cal. Rptr. 835 (1987)

Peer re 10, 11, 12, 20, 24, 25, 26

Egan v. Mut. of Omaha Ins. Co., 24 Cal. 3d 809, 157

Cal. Rptr. 462 (8079)... oa35.50.2 13

Engle v. Isaac, 456 U.S. 107 (1982) .......... 16, 18, 20

Exxon Corp. v. Eagerton, 462 U.S. 176 (1983) .... 14,19

Fletcher v. Nat'l Life Ins. Co., 10 Cal. App. 3d 376,

$9 Cal. Eptr. 78 (0S) ieee 12

Fuller v. Oregon, 417 U.S. 40 (1974) ............ 19

ili

TABLE OF AUTHORITIES

CASES

Gibson v. Gibson, 15 Cal. App. 3d 943, 93 Cal. Rptr.

Cir ls Cet y eke dna ek hae e bad oe we

Goshgarian v. George, 161 Cal. App. 3d 1214, 208

4 Se SL | PPP Peer eee ee eeeeeeere

Grimshaw v. Ford Motor Co., 119 Cal. App. 3d 757,

Pe ED COORD 6c cca cccccnccsescas

Hannon Eng’g, Inc. v. Rem, 126 Cal. App. 3d 415,

SG) er

Hartman v. Shell Oil Co., 68 Cal. App. 3d 240, 137

oe SS ee er re

Hasson v. Ford Motor Co., 32 Cal. 3d 388, 185 Cal.

a ee eee ee

Jahn v. Brickey, 168 Cal. App. 3d 399, 214 Cal.

| Pere er eee Tee eee Tee eee

Johnson v. New Jersey, 384 U.S. 719 (1966) ......

Michigan v. Tyler, 436 U.S. 499 (1978) ..........

Misener, In re, 38 Cal. 3d 543, 213 Cal. Rptr. 569

NG EA eee par eee iy eee eee

Moore v. Am. United Life Ins. Co., 150 Cal. App. 3d

ee bee Gee, Meee, SIO C19C4) © vices caceeas

People v. Stamper, 195 Cal. App. 3d 1608, 241 Cal.

eo re eee ee

People v. Superior Court, 12 Cal. 3d 421, 115 Cal.

a | | rer ECL Eee Te Tee

Peterson v. Superior Court, 31 Cal. 3d 147, 181 Cal.

SE ME OUND Leek kc nach ert ee Casio te rade

Ramona Manor Convalescent Hos. v. Care Enter., 17

Cal. App. 3d 1120, 225 Cal. Rptr. 120 (1986) .

iv

TABLE OF AUTHORITIES

CASES

Page

Related Asbestos Cases, In re, 543 F.Supp. 1152

ey Dg os eas Sa es Se eee. 13

Rosener v. Sears, Roebuck & Co., 110 Cal. App. 3d

740, 168 Cal. Rptr. 237 (1980) ............... 22, 23

Samuels v. Dist. of Columbia, 770 F.2d 184 (D.C.

ED ba bo chee oe aie eee 25

Selleck v. Globe Int'l, Inc., 166 Cal. App. 3d 1123,

212 Cal. Rptr. 838 (1985) ................... 19

Silkwood v. Kerr-McGee Corp., 464 U.S. 238 (1984) 27

Smith v. Murray, 477 U.S. ___, 91 L. Ed. 2d 434

PPP BAIS Peary Pore ee re 15

Sprague v. Equifax, Inc., 166 Cal. App. 3d 1012,

Re NE oo a cd ce aa cawe ss ay 22

State Farm Mut. Auto. Ins. Co. v. Duel, 324 U.S. 154

I cies Geert sere ae Se orn pig ath ne 18

Street v. New York, 394 U.S. 576 (1969) ......... 19

Toole v. Richardson-Merrell, Inc., 251 Cal. App. 2d

689, 60 Cal. Rptr. 398 (1967) ................ 12

Wayte v. Rollins Int'l, Inc., 169 Cal. App. 3d 1, 215

ee, Sa ea en 21

Wetherbee v. United States Ins. Co. of Am., 18 Cal.

App. 3d 266, 95 Cal. Rptr. 678 (1971) ........ 12

Zhadan v. Downtown L.A. Motors, 66 Cal. App. 3d

481, 136 Cal. Rptr. 132 (1976) ............... 12

TABLE OF AUTHORITIES

Statutes & Rules

eS) errr rere ye eee re Te res

California Civil Code, See. 3294 .............46-

Cal. Civil Liability Reform Act of 1987..........

Miscellaneous

Stern, Gressman & Shapiro, Supreme Court Prac-

tice, 144 (6th ed. 1986) ..........--- eee eeee

14

No. 87-1196

In the Supreme Court

OF THE

United States

OCTOBER TERM 1987

ATLANTIC RICHFIELD COMPANY,

Petitioner,

V.

JOHN V. NIELSEN,

Respondent.

On Petition for Writ of Certiorari to the Court of

Appeal of California, Fourth Appellate District

BRIEF IN OPPOSITION

STATEMENT OF THE CASE

This ease arises out of petitioner Atlantie Richfield

Company's (“ARCO”) crash program to salvage its retail

gasoline division by converting retail stations into new

units combining self-service, low-priced gasoline with

high-priced convenience grocery stores. This program

involved a dealer rent and gasoline sales structure that

guaranteed ARCO’s profits even though many indepen-

dent dealers could not and did not survive under the new

program. Acquiescence of independent dealers in the new

program was crucial to ARCO. Therefore, to induce its

independent dealers to abandon profitable going coneerns

and invest in the new program, ARCO withheld data it

developed in-house regarding both actual and projected

dealer profits, but supplied station operators with false

to

profit data and misleading descriptions of its analyses

and expertise.

Respondent John V. Nielsen, a successful independent

ARCO dealer, was fraudulently misled and pressured into

participating in the new program. In 1981, Nielsen sued

ARCO in the California courts. Trial commenced on

August 7, 1985 (RT 4).’ On September 24, 1985, the jury

found ARCO engaged in fraud and deceit and rendered a

verdict in favor of Nielsen in an amount of $525,788 for

compensatory damages and $3,500,000 for punitive dam-

ages. ARCO unsuccessfully challenged the verdict in

motions for a new trial and for judgment notwithstanding

the verdict. In an unpublished opinion (“Op.”), the Cali-

fornia Court of Appeal unanimously affirmed the verdict,

except for striking $50,000 awarded for emotional dis-

tress. ARCO petitioned the Court of Appeal for rehearing.

This petition was denied in an order modifying the opin-

ion (“M. Op.”). ARCO then petitioned the California

Supreme Court for review, which was denied on October

14, 1987.

In a petition for certiorari to this Court, ARCO chal-

lenges the punitive damages award on the grounds that

the size of the award violates the Excessive Fines Clause

of the Eighth Amendment and the Due Process Clause of

the Fourteenth Amendment. Neither these nor any other

federal constitutional challenges to the punitive damages

award were raised in or decided by the California courts.

Petitioner never mentioned the Due Process Clause of the

Fourteenth Amendment in any pleading or argument to

the California courts. Nor did petitioner ever argue to any

California court that the punitive damages award should

'“RT” or page and line references such as “111:00" refer to the

reporter's transeript. “CT” refers to the clerk's transeript.

—_—

be overturned as inconsistent with the Excessive Fines

Clause. Petitioner is thus precluded from raising these

federal questions for the first time in this Court.

A. Substantive Facts

Petitioner ARCO has misrepresented or omitted many

material facts in its statement of the case. Accordingly, a

eoncise counterstatement is necessary to make clear that

there is ample evidence in the reeord to support the

verdict as well as the successive post-trial decisions by

the California courts.

ARCO’s vice president of retail marketing testified that

in 1974 its retail gasoline operation lost $45,000,000 ‘‘and

there was a real serious question” whether ARCO would

“stay in the retail service station business.” 1764:25-

1765:2. He explained the mini-market program ‘‘was the

first major project” for ARCO to get back on track and

‘make a lot of money for the company.” Had the program

failed, it “almost was tantamount to the failure of the

marketing department, the retail marketing department.”

1765:6-17.

Under the mini-market program, ARCO’s profit in-

creased spectacularly and was virtually risk-free because:

(1) ARCO gasoline sales increased as much as 300% due

to low dealer profit margins coupled with self-serve equip-

ment (759:16-20);° (2) ARCO charged dealers a high

“Every gallon sold is ARCO gas. Thus, high volume gasoline

sales benefit ARCO regardless of whether the operator survives. In

the words of ARCO’s first San Diego mini-market dealer representa-

tive, “{[Ojur primary fur<tion was to have throughput... .° 254:11-

12. ARCO’s former national mini-market (“AM/PM") franchise

manager testified “the primary responsibility’ of an ARCO dealer

representative was “to make sure...we are trying to sell all the

gasoline that is available.” 1641:9-13; 1642:12-17.

4

minimum rent on the grocery store plus a percentage of

all grocery sales above the minimum (254:18-24; Ex.

1049), plus “rent” for ARCO’s gas the dealer sold

(765:20-22); (3) ARCO was the only major company

offering gas and convenience food at all conversions

(1762:26-1763:2); (4) ARCO had virtually no risk of

operating the unit, passing all risks to the independent

dealer/operator, and if a dealer could not survive ARCO’s

wholly-owned subsidiary was designed to take over.

Thus, in 1977, ARCO decided to convert 500 units in

three years. 1756:2-24; 1775:4-8. Its $5.5 million conver-

sion budget for 1978 increased to $8.8 million for 1979

(568:5-16). In February 1978, ARCO’s top management

admonished that units were not being converted quickly

enough, particularly in the West. Ex. 133. A year and a

half later, months after serious questions had been re-

peatedly voiced within ARCO about the soundess of the

program and the dealers’ ability to survive (Exs. 149, 182,

308), ARCO had weekly checks to assure the budgeted

dollars were still being spent and targeted conversions

completed. Ex. 177. Promotions of ARCO people de-

pended on success in convineing dealers to convert. 255:4-

21.

A major impediment to ARCO’s conversion schedule

was that most, if not all, of its independent dealers were

on leases that had to be regularly renewed under appliea-

ble law, barring exceptional circumstances. RT 263:1-

264:4. Therefore, ARCO could not simply terminate deal-

ers not willing to convert. Also, the entire ARCO organi-

zation recognized independent dealers were more

motivated, harder working and more committed than

company employees. 262:20-28; 263:1-264:4, 786:27-787:4.

ARCO’s analysts established minimum sales volume pro-

jections (“VP’s’’) and other information to assure ARCO

5)

recovered its investments with an acceptable profit mar-

gin, but the independent dealers were not given the

survey information which ARCO developed for itself

(425:1-7). Instead, ARCO’s disclosure policy to dealers

was to always give a “positive answer,” and to present

positive data in order to win the dealer over (247:17-21;

254:28-255:10).

To prevent having to close and sell units after a dealer

was exhausted and broke, ARCO moved in its wholly-

owned subsidiary, Prestige Stations, Ine. (“PSI’’). One

of PSI’s principal functions was to quickly take over any

unit given up by an independent dealer. 1396:20-1397:1.

Even though ARCO strongly preferred independent oper-

ators, by December of 1982, PSI had to operate over half

(15 of 29) of ARCO’s mini-markets in San Diego County;

coincidentally, Nielsen’s unit was the first (1396:7-19;

2158:24-27).

Nielsen had become a Richfield dealer in 1967. In the

next eleven years, he had a profitable business and an

outstanding reputation, receiving uniformly good to out-

standing reports from ARCO supervisors. Exs. 105, 86,

95; RT 1698:7-15; 1732:5-19; 267:3-6. He had the same

mechanie for eleven years, a loyal crew of attendants and

470 steady customers. 828:26-27; 830:19-25. He had ample

free time and opportunities to travel. 624:19-26; 829:13-21;

830:26-832:2. ““He was a very successful, very healthy

man.” 978:8.

He had no desire to give up his business and life-style

until numerous ARCO meetings, presentations, entreat-

ies, a slick brochure and ostensibly hard data won him

over. In this process, and consistent with its larger

scheme, ARCO:

1. Failed to disclose either its first or second analysis

both of which showed conversion of Nielsen’s unit would

be a disaster for him;

2. Fabricated a third analysis to justify conversion,

the results of which it did give Nielsen;

3. Decided before conversion that it would increase

Nielsen’s minimum rent after conversion, and that it

would delete essential pumping capacity, but did not

inform him until Nielsen had agreed to convert, his

original station had been torn up, and it was economically

impossible for him to turn back;

4. Failed to disclose that ARCO regarded the conver-

sion program as experimental, particularly for Nielsen's

station; and

5. Failed to disclose existing mini-market conversions

were actually doing far worse than indicated by the profit

figures ARCO gave Nielsen.

At about the time of ARCO’s second analysis, Nielsen

had several meetings with ARCO representative,

Mr. Abbott, and was “encouraged” by “the company” to

think about converting. Even though Abbott had the

discouraging results of ARCO’s second analysis, Abbott

told Nielsen ARCO had performed surveys on his site and

thought it would be a very successful unit. 834:23-836:6.

Nielsen repeatedly asked for the speeifies contained in

the surveys, but Abbott never gave any answers. 836:7-21.

Nielsen was asked to come to a restaurant meeting where

at least five and possibly six ARCO representatives “ex-

plained” the program to him alone. 1725:3-18; 1733:5-10.

Still, he was undecided (“borderline”). 837:25-27.

ARCO’s principal factual contention at trial and on

appeal was that it used accurate demographic information

in its third analysis, the results of which were given to

Nielsen at yet another meeting, in September 1978 (Ex.

300). In facet, ARCO’s manager of the Anaheim Region

and the manager responsible for deciding which units to

eonvert (C.T. Fulkerson) instructed the sales forecaster

(W. Ottman) to revise his earlier calculations using

incorrect and unsupportable demographic data. Fulker-

son instructed Ottman to assume a 200% population

increase from the earlier calculation (Ex. 1087K) even

though the actual population increase was 18-26%

(1053:3-1054:13; 462:2-21; Ex. 15). Fulkerson told Ott-

man to assume a housing density increase of some 600%

(Ex. 1087K), even though the actuai housing density

inerease was 50% (1054:14-27). As the Court of Appeal

Opinion noted, ARCO’s appellate counsel was forced to

eoncede there was an exhibit showing the “housing unit

density factor was not accurate and Ottman ignored the

data in his own files on the direction of Fulkerson.” Op.,

App. 17a:5-9.

After the September 1978 meeting, ARCO reassessed

its own profitability and expenditures in light of federal

gas allocation restrictions. First, it deleted a $20,000

projected expenditure for lengthened pump islands and

new pumps at Nielsen’s unit. Nielsen was not told about

this until the end of May 1979, when his unit was already

torn up and his old business abandoned. 858:22-859:27.

To further protect its own profits, ARCO raised Niel-

sen’s minimum store rent from $2,000 (Ex. 300) to

$3,000/meonth, and also charged rent for self-serve equip-

ment. On May 8, 1979, after Nielsen had signed all the

new agreements but before ARCO started construction,

Fulkerson signed off on ARCO’s fourth analysis inecorpo-

rating — in-house — these rent increases. Ex. 9B. Niel-

sen did not know about the amount of the rent increase

until Deeember 1979, five months after he opened the

converted station (870:12-28).

Despite ARCO’s professed experience and competence

(Ex. 301) asserted to Nielsen and other dealers, ARCO

was, in mid-1978 to 1979, still very much in an experimen-

tal mode. 2140:27-2141:10. On May 2, 1979, an ARCO

internal memo said of units (like Nielsen’s) whose pro-

jected food sales were less than $250,000, they ‘will be

considered experimental.” Ex. 2024 at 3. No one ever

hinted to Nielsen his conversion was actually “considered

experimental” by the company.

During the time Nielsen’s unit was being converted,

ARCO’s own top management acknowledged in writing

that ARCO lacked sophisticated knowledge, that the pro-

gram was still early and that its volume projections were

faulty. J.J. Conway (Manager of Sales and Sales Develop-

ment) wrote top management that units should be con-

verted “back” if the dealer could not survive. But ARCO

vetoed the idea. Ex. 149.

Nor did ARCO disclose to “prospects” like Nielsen, the

actual profitability of units that had already been con-

verted. Under an ARCO internal memo (written months

before Nielsen was econvineed to convert), the dealer

profitability of all 89 existing mini-markets was summa-

rized. Ex. 305. Only seven of the 89 units averaged a

dealer profit of $3,600/month or more, the figure ARCO

gave Nielsen. Thirty-six were averaging less than $500 per

month operator profit; many were losing money for the

dealer. Because Nielsen’s unit was small, had ‘‘minimal”’

foot traffic (Ex. 16), was in an “upper middle income”

area (Ex. 15), had many elderly surrounding it, was not

near a freeway off-ramp (see 1702:24-28) or industrial

area (see 1702:11-17), it was ludicrous to project that it

would on average out-perform all but seven of the 8&9

9

existing units.’ But no data such as Exhibit 305 were ever

disclosed to Nielsen.

Except for sales of gasoline, Nielsen closed his conven-

tional unit in May 1979, and reopened as a mini-market

August 4, 1979.

During the twenty months he operated the mini-market,

grocery sales never approached the levels ARCO had

given him. Meanwhile, the rent charged by ARCO

mounted steadily until it became intolerable. By August

1980, less than a year after opening, the total rents

eharged by ARCO for the store, gas, self-service equip-

ment, ete., were over $4,000/month, or over $2,000 more

per month than ARCO had told Nielsen would be charged

for much higher sales. See Exs. 1005, 2044A.

After all his funds were gone, Nielsen asked ARCO for

advice. ARCO advised selling out and a prospective pur-

chaser made an offer (RT 892-895), but ARCO decided

the buyer was unqualified. Nielsen was at the end of his

tether and turned the keys over to ARCO’s subsidiary

PSI, on April 1, 1981."

‘ARCO knew these factors are critically important to the suecess

or failure of a mini-market. ARCO had comprehensively studied and

reported these factors in-house, but never explained them to dealers.

See, e.g., Ex. 302.

*ARCO asserts that in the view of the trial court, the verdict “could

have gone the other way.” Pet. 8:8-9. ARCO has left out the trial

eourt’s other remarks: “Your verdict, in my opinion, is entirely

consistent with the evidence you heard .... I see nothing inconsistent

with the evidence you heard in this case, in this courtroom.” RT

2531:18-22.

At the hearing on ARCO’s post-trial motions, the trial court said,

{T]he case was fairly and aecurately tried, and the damages found

by the jury were well within the range of evidence and range of

reasonableness, ... 1 think the jury could have arrived reasonably at

10

B. The Procedural Facts

At no time in the six years of proceedings before the

California courts did petitioner raise a federal constitu-

tional challenge to the claim or award of punitive dam-

ages. Before trial, ARCO raised ten separate affirmative

defenses, but made no mention of a federal constitutional

defense to punitive damages (CT 259-261). ARCO filed

seven briefs respecting various im limine matters at trial

(CT 426-465), none of which mentioned constitutional

objections to punitive damages. ARCO ehallenged the

compensatory damages jury instructions on a number of

grounds (RT 2397), but made no constitutional objection

to the standard “BAJI” California punitive damages

instructions (RT 2394). Nor did ARCO raise. econstitu-

tional issues in post-trial motions.

On November 3, 1986, ARCO filed its opening brief to

the California Court of Appeal. Neither this brief nor

ARCO’s reply brief (filed on Mareh 2, 1987) mentioned

any possible constitutional restrictions on the punitive

damages award. In April 1987, prior to oral argument,

both ARCO and Nielsen wrote letter briefs to the Court of

Appeal regarding the then recent Downey decision of the

California Court of Appeal.’ This ease held that neither

the Excessive Fines Clause of the Eighth Amendment nor

the Due Process Clause’s criminal safeguards are applica-

ble in civil suits for punitive damages. 189 Cal.App.3d at

1100-01. Despite explicit discussion of those constitu-

tional issues in Downey, ARCO continued to refrain from

raising any such issue in the present case. In facet, ARCO

a larger number [for punitive damages] than they did.” RT Post

Trial Hearing 22:6-28.

*Downey Sav. & Loan Ass'n. v. Ohio Casualty Ins. Co., 189 Cal.

App. 3d 1072, 234 Cal. Rptr. 835 (1987), no. 87-159 on Petition to this

Court.

11

argued that the Downey analysis of punitive damages

supported its position for reversal. ARCO Letter Brief,

April 13, 1987. And in neither oral argument before the

Court of Appeal nor on petition for rehearing to that

court did ARCO raise any constitutional challenges to the

punitive damages award.

On August 17, 1987, ARCO filed a petition for review in

the California Supreme Court. Review by that court is

discretionary. ARCO’s petition (‘“Cal. Pet.’’) argued at

length against the punitive damages award, but the argu-

ment was carefully and deliberately limited to an adop-

tion of California’s traditional three factors that ‘ ‘afford

guidance’ for the review of punitive damages: (1) the ©

reprehensibility of the... conduct; (2) the actual injury

suffered; and (3) the wealth of the defendant.” Cal. Pet.

12:14-17 (citation omitted). ARCO did not challenge the

constitutionality of this analysis; it endorsed the analysis

and argued that the lower courts had misapplied tradi-

tional California law.

In a footnote to the petition to the California Supreme

Court in the midst of its argument relying on current

California law, ARCO made one oblique reference to the

Excessive Fines Clause of the Eighth Amendment.” But

this footnote did not urge reversal of the punitive dam-

ages award on Eighth Amendment grounds. This footnote

"ARCO’s footnote mention of the constitutional issue came immedi-

ately after the following words:

[A]ll three of the factors are “grounded in the purpose and

function of punitive damages” and therefore should be consid-

ered. 21 Cal.3d at 92%.

Consideration of these factors is necessary to ensure that the

punitive damage award is not excessive.

Cal. Pet. 13:5-10.

12

merely suggested that if the United States Supreme

Court should establish Eighth Amendment limits on puni-

tive damages in the pending case of Bankers Life and

Casualty Co. v. Crenshaw, No. 85-1765, then ARCO

“would also argue to” the California Supreme Court that

the award violated the Excessive Fines Clause. The Due

Process Clause was never mentioned.

Throughout this litigation, ARCO had ample opportu-

nity to raise federal constitutional challenges to the

punitive damages award and was on notice of-the exis-

tence of the claims it now seeks to assert for the first

time. Probably the leading modern California case involv-

ing constitutional challenges to California’s punitive dam-

ages law, Toole v. Richardson-Merrell, Inc., 251 Cal. App.

2d 689, 716-17, 719, 60 Cal. Rptr. 398, 417-18 (1967),

rejected the application of criminal procedures and quan-

titative standards to civil punitive damage determina-

tions. The last California challenge to punitive damages

on constitutional grounds decided during the pendency of

this ease is Downey. Between Toole and Downey, numer-

ous other litigants challenged the constitutionality of

California’s punitive damages law.‘

‘See, e.g., Fletcher v. W. Nat'l Life Ins. Co., 10 Cal. App. 3d 376, 404-

05, 89 Cal. Rptr. 78 (1970) (challenge on vagueness of punitive

damages being allowed for “oppression, fraud, or malice’). Wetherbee

v. United Ins. Co. of Am., 18 Cal. App. 3d 266, 272, 95 Cal. Rptr. 678

(1971) (punitive damages challenged as imposition of a fine without

benefit of constitutional rights afforded eriminals). Gibson v. Gibson,

15 Cal. App. 3d 943, 949, 93 Cal. Rptr. 617 (1971) (same as to right to

competent counsel). Bertero v. Nat'l Gen. Corp., 13 Cal. 3d 43, 66 n.

13, 118 Cal. Rptr. 184 (1974) (challenge on lack of standards).

People v. Superior Court, 12 Cal. 3d 421, 432-33, 115 Cal. Rptr. 812

(1974) (challenge that punitive damages case must allow invocation

of privilege against self-inerimination). Zhadan v. Downtown LA.

Motors, 66 Cal. App. 3d 481, 501-02, 136 Cal. Rptr. 132 (1976)

13

Similarly, California federal cases have spotlighted the

constitutional questions. In re Related Asbestos Cases, 543

F.Supp. 1152, 1157 (N.D. Cal. 1982) (court rejected

various constitutional challenges at the pre-trial stage as

“inappropriate... at the present time....’’).

Finally, this Court on April 22, 1986, squarely invited

resolution of constitutional limits on punitive damages

stating, “These arguments raise important issues which,

in an appropriate setting, must be resolved;...” Aetna

Iife Ins. Co. v. Lavoie, 475 U.S. 813, , 89 L. Ed. 2d

823, 837 (1986). This Court’s decision in Lavoie was

rendered several months before ARCO filed its opening

brief to the Court of Appeal. Despite this widespread

judicial discussion of the constitutionality of punitive

damages — and ARCO’s awareness of the discussion —

ARCO never saw fit to raise the constitutional issues in

the California courts.

(challenge for lack of standards as to amount of punitive damages

and that punitive damages were “cruel and/or unusual” punish-

ment). Egan v. Mut. of Omaha Ins. Co., 24 Cal. 3d 809, 819-20, 157

Cal. Rptr. 482 (1979) (challenge to Cal. Civ. Code § 3294 as unconsti-

tutional). Hannon Eng’g, Inc. v. Reim, 126 Cal. App. 3d 415, 430-31,

179 Cal. Rptr. 78 (1981) (challenge to lack of standards for punitive

damages). Grimshaw v. Ford Motor Co., 119 Cal. App. 3d 757, 811,

174 Cal. Rptr. 348 (1981) (challenge to punitive damages on ex post

facto, double jeopardy and “fair warning” grounds). Hasson v. Ford

Motor Co., 32 Cal. 3d 388, 402 n. 2, 185 Cal. Rptr. 654 (1982)

(challenge to punitive damages statute as unconstitutional on “a

number of theories’). Peterson v. Superior Court, 31 Cal. 3d 147, 160-

61, 181 Cal. Rptr. 784 (1982) (challenging punitive damages on due

process and ex post facto grounds).

14

ARGUMENT

I

BECAUSE ARCO DID NOT PROPERLY RAISE ANY

FEDERAL QUESTION IN THE STATE COURTS,

ITS PETITION MUST BE DENIED

It is essential to the jurisdiction of this Court that a

substantial federal question was properly raised in state

court proceedings. Rule 21.lh requires the petition to

“specify the stage in the proceedings, both in the... first

instance and in the appellate court, at which the federal

questions... were raised;...” ARCO did not raise or

even mention its due process challenge at any stage. It

has belatedly and conditionally mentioned the Excessive

Fines Claus. of the Eighth Amendment, but it never

asked the California courts to rule that the punitive

damages award violated the Eighth Amendment. Hence,

this Court lacks jurisdiction. Exxon Corp. v. Eagerton,

462 U.S. 176, 182-83 n. 3 (1983) and cases cited therein.”

Indeed, ARCO concedes it did not “assert an Eighth

Amendment (or Due Process) right to be free of exces-

sive civil punitive damages, ...” in the California courts.

Pet. 10:4-6. This concession alone requires ARCO’s peti-

tion be denied. ARCO nonetheless, appears to assert two

justifications for failing to raise these issues. Its primary

justification is that “then-existing law did not recognize

any such right” and henee it could not have waived the

right to raise the point. Pet. 10:5-7; 10:28-11:3.

If ARCO’s argument were to be followed, the rule

requiring federal issues first be properly raised in the

state courts would be meaningless in every ease unless

“See Stern, Gressman & Shapiro, Supreme Court Practice, 144 (6th

ed. 1986).

a

15

and until some court had squarely held the specifie fed-

eral right in question to exist or some statute had so

decreed. If accepted, ARCO’s argument would eliminate,

for most cases, the deeply rooted and sensible rule that

state courts must be given a meaningful opportunity to

deal with federal challenges to their law as applied to a

particular ease before this Court may be asked to review

that ease. Hence, it is not surprising that ARCO does not

cite, and we have not found, any decision which holds

that, as a predicate to review by this Court, the federal

issue need be raised in the state courts only when the

federal right has been previously established.

On the contrary, this Court has recently held in a

closely analogous context the perceived novelty or futility

of a claim does not excuse the failure to raise it, particu-

larly where other counsel have raised it and the issue has,

as with the issues here, been fermenting in California and

other courts for years. Where “various forms of the

[constitutional] claim...had been percolating in the

lower courts for years...it is simply not open to argue

that the legal basis of the claim... was unavailable... .”

Smith v. Murray, 477 U.S. —_, 91 L. Ed. 2d 434, 446

(1986).

If a defendant perceives a constitutional claim and

believes it may find favor in the federal courts, he

may not bypass the state courts... because he thinks

they will be unsympathetic ....

Where the basis of a constitutional claim is available,

and other defense counsel have perceived and liti-

gated that claim, the demands of comity and finality

counsel against labelling alleged unawareness of the

16

objection as cause for a procedural default. {fn.

omitted |]

Engle v. Isaac, 456 U.S. 107, 130-134 (1982).

ARCO cites only one totally inapposite case in support

of its non-waiver argument. Curtis Publishing Co. v. Butts,

388 U.S. 130 (1967). Butts did not deal with the long-

standing jurisdictional requirement that substantial fed-

eral questions must be properly raised in the state court

as a predicate to jurisdiction in this Court. Rather, Butts

started in the United States District Court for the North-

ern District of Georgia. The plurality quote cited by

ARCO dealt with whether it was reasonable for the

publishing company to not raise an affirmative defense at

the pretrial stage in anticipation of developing but unset-

tled federal law. Butts had nothing to do with the jurisdic-

tional requirement, or the policies of comity and

federalism that are central to this Court’s review of state

court cases.

A second justification asserted by ARCO for not rais-

ing constitutional issues is that the California courts

should have anticipated and used constitutional factors

“nonetheless.” ARCO’s precise statement is:

While framed under state law. petitioner's argu-

ments nonetheless should have caused the courts to

examine some or all of the factors that this Court will

likely hold are relevant to the inquiry under either

the Eighth Amendment or the Due Process Clause,

Pet. 9:17-23.

ARCO is at once arguing out of both sides of its mouth.

First, it asserts it could not have known of its potential

constitutional protections, but then says the California

courts should have used “some or all of the factors” that

17

are “relevant” to the constitutional “inquiry.” This admis-

sion totally destroys ARCO’s non-waiver argument. If the

eourts should have sua sponte “examined” the factors

“relevant” to the constitutional “inquiry” without the

issue ever being raised, ARCO cannot eredibly claim it is

excused from raising and arguing the issues in the first

place.

Recognizing that it had not raised any constitutional

issue either in the trial court or in the Court of Appeal,

ARCO asserts it nevertheless “called the California

courts’ [sic court’s] attention to the Constitutional issue

when it appeared that this Court could announce a new

right.” Pet. 11:18-20. This statement is incorrect. As

noted, this Court invited scrutiny of constitutional issues

in Lavoie (April 1986), and numerous recent published

California cases had previously framed the issues.”

If ARCO and its counsel’ genuinely intended to prop-

erly apprise the California courts of the constitutional

issues, they would have squarely challenged (instead of

adopting) traditional California punitive damages law.

Furthermore, ARCO should have first presented to the

California courts the request it now seeks from this Court,

namely the request that the Court of Appeal hold its

decision pending this Court’s decision in Bankers Life.

ARCO did none of this. Under these circumstances,

ARCO has waived not only the right to assert the eonsti-

‘In its opening paragraph under “REASONS FOR GRANTING

THE WRIT.” ARCO asserts the Eighth Amendment and Due Pro-

cess Clause issues “are substantial and recurring.’ Pet. 13:14-15.

There is no doubt they are recurring; that is the very reason ARCO

should have properly raised them in the state courts if it intended to

assert them now.

4 RCO had seven counsel on its appellate briefs to the California

courts. from three firms and in-house.

18

tutional issues but also has waived the right to request an

order that the Court of Appeal vacate and reconsider its

decision pending the decision in Bankers Life. ARCO’s

decision to wait until now to assert constitutional issues

may result “from...ignoranee,” a tacticai decision or a

deliberate choice, “to withhold a claim in order to ‘sand-

bag’....” Engle v. Isaac, 456 U.S. 107, 129 n. 34 (1982).

In any event, ARCO should not be relieved from the

consequences of its actions.'!

"ARCO cites State Farm Mut. Auto. Ins. Co. v. Duel, 324 U.S. 154

(1945), in support of its claim that this Court should vacate the

Court of Appeal decision in this case until after Bankers Life is

decided. Duel, however, provides no support for the action petitioner

urges. To the contrary, Duel held that “since the [state] Supreme

Court did not pass on the [federal] question, we may not do so.” 324

U.S. at 160 (emphasis added). The language petitioner quotes in

support of its suggested disposition is plain dictum. In any event,

even petitioner's quotation from Duel fails to support petitioner for

two reasons.

First, in every case cited in the relevant portion of Duel, this Court

had already properly exercised jurisdiction to hear other federal

questions in the case, and the question was whether the Court should

go on to resolve the issues properly before it or to defer resolution. In

these cases, a supervening change in the law since the time of the

judgment under review would have obviated the need for the Court to

reach the federal questions properly before it. Thus, in order to avoid

unnecessary adjudication of federal questions, in each of these cases

this Court vaeated the opinion below and remanded the case for

reconsideration in light of the supervening law. No such rationale

supports petitioner in the present case. ;

Second, Duel’s dictum suggested no more than that a remand

might be appropriate “in the interests of justice,” if a party had been

genuinely surprised by unforeseen “new quesions” in the law which

had just “emerged.” 324 U.S. at 161. As we have demonstrated,

ARCO ean claim no such surprise in the present case because the

“questions” ARCO now seeks to raise have been the subject of

extensive discussion in the opinions of this Court and others for

| seen

19

Any suggestion that footnote 6 in ARCO’s petition to

the California Supreme Court adequately raised the

Eighth Amendment issue is squarely disposed of by this

Court’s recent decision in Bd. of Directors of Rotary Int'l

v. Rotary Club, 481 U.S. ——, 95 L. Ed. 2d 474, 487 n. 9

(1987). There appellants had asserted in their brief to the

California Court of Appeal that California’s Unruh Act

might be unconstitutionally vague. But there, as here, the

assertion occurred “in the course of an argument that the

Unruh Act should be applied only to [certain organiza-

tions].”” Jd. This Court held, “This casual reference to a

federal case, in the midst of an unrelated argument, is

insufficient to inform a state court that it has been

presented with a claim subject to our appellate jurisdic-

tion....” Id. Similarly, ARCO’s casual reference to the

Excessive Fines Clause “in the midst of an unrelated

argument” in favor of applying California’s traditional

punitive damages analysis is insufficient.”

years. ARCO had ample opportunity — and sufficient information —

to raise these issues in the California courts.

"In any event, the California Supreme Court's failure to pass on

the federal questions forecloses any further reveiw. When “the

highest state court has failed to pass upon a federal question, it will

be assumed that the omission was due to want of proper presentation

in the state courts, unless the aggrieved party in this Court can

affirmatively show the contrary.” Street v. New York, 394 U.S. 576, 582

(1969). See also Exxon Corp. v. Eagerton, 462 U.S. 176, 181 n. 3

(1983); Fuller v. Oregon, 417 U.S. 40, 50 n. 11 (1974). ARCO does

not dispute that under applicable California procedural require-

ments, “‘[{a] elaimed violation of a constitutional right must be

raised in the trial court to preserve the issue for appeal’.” Pet. 12:8-

10. Selleck v. Globe Int'l, Inc., 166 Cal. App. 3d 1123, 1133 n. 5, 212

Cal. Rptr. 838 (1985). Thus, ARCO’s failure to present the constitu-

tional questions in conformance with state procedure is an adequate

and independent ground barring review in this Court. Michigan v.

Tyler, 436 U.S. 499, 512 n. 7 (1978) and eases cited therein.

=

~- 20

At bottom, ARCO seeks to coattail on any potentially

favorable ruling in Bankers Life and Downey, but to do so

without having complied with the jurisdictional predicate

that has been met in Bankers Life (in this Court on direct

appeal), and in Downey (constitutional issues squarely

raised in, decided and discussed by one California Court

of Appeal).’* Denial of ARCO’s petition would be consis-

tent with this Court’s denial of the similar petition in

Judy’s Foods, Inc. v. AEB Food Services Corp., No. 86-515,

cert. denied (1986) (constitutionality of punitive damages

not raised until after oral argument on appeal to United

States Court of Appeals for the Sixth Circuit), and more

recently of Allstate Ins. Co. v. Hawkins, 733 P.2d 1073

(Ariz. 1987), No. 87-40.

In Hawkins, the Arizona Supreme Court ruled that

constitutional issues, respecting a $3.5 million punitive

damage award, raised and argued in a supplemental brief

to the Arizona Supreme Court after oral argument there

came too late. This case would be procedurally analogous

to Hawkins if ARCO had briefed the constitutional issues

‘Downey's holding is no justification for ARCO's failure to raise

the constitutional issues to the Court of Appeal in this case. There are

six districts of the California Court of Appeal; they are divided into

separate divisions for a total of 18 divisions in the state. Downey was

decided by the Firt District, this case by the Fourth District. It is not

uncommon for different districts to reach opposite conclusions on

important, current issues, and decisions of one district are not

binding on another. People v. Stamper, 195 Cal. App. 3d 1608, 1615,

241 Cal. Rptr. 449 (1987).

Moreover--this Court reeognizes that “a state court that has

previously rejected a constitutional argument may decide, upon

reflection, that the contention is valid.” Engle v. Isaac, 456 U.S. 107,

130 (1982).

21

to the Court of Appeal’* after argument by supplemental

brief or on its petition for rehearing. But ARCO waited

even longer to mention the Excessive Fines Clause and

never raised that issue. Therefore, it is precluded from

raising that issue now even more than petitioner in Haw-

kins, where at least the Arizona Supreme Court was

squarely presented the issues and given an opportunity to

decide.

II

EVEN IF ARCO HAD PROPERLY RAISED CONSTI-

IFUTIONAL CLAIMS BELOW, IT WOULD BE IN-

APPROPRIATE TO GRANT CERTIORARI

A. Even In This Court, ARCO Appears To Adopt

Current California Law But Complains It Was Not

Followed

ARCO commences its substantive argument with the

assertion that “ ‘carte blanche [is] currently given to, and

regularly exercised by juries’”’ to determine punitive

damages and that the “root cause” of the growth in these

awards is “abdication by appellate courts of their obliga-

tion to reduce excessive punitive damage awards.” Pet.

13:25-14:4. Reeent published decisions in California show

that juries do not have carte blanche and California

appellate courts have not abdicated anything.””

“The California Court of Appeal was the only appellate court

reviewing this ease as a matter of right. Review by the California

Supreme Court is discretionary.

Ramona Manor Convalescent Hos. v. Care Enter., 177 Cal. App. 3d

1120, 225 Cal. Rptr. 120 (1986) (Court of Appeal remanded $2.5

million punitive damage award); Wayte v. Rollins Int'l, Inc., 169 Cal.

App. 3d 1, 215 Cal. Rptr. 59 (1985) (affirmed trial court’s reduction

to $200,000 of one $950,000 punitive damages award, and reduction of

Next, says ARCO, the Court of Appeal relied “‘exelu-

sively on ARCO’s wealth” in reviewing the case and

thereby failed “to consider the other controlling factors”

under well-settled California law. Pet. 14. This is ineor-

rect. The Court of Appeal expressly noted the factors

which “provide guidance in determining whether the pur-

pose and function of punitive damages is served in any

particular case.” M. Op., App. 44a. These, wrote the Court

of Appeal, are, “Wealth of the wrongdoer... degree of

reprehensibility of...the act,...” and “the reasonable

proportion of punitives to the actual harm suffered.” Op.,

App. 4la; M. Op., App. 44a. It concluded, ‘“[U]nder any

traditional formula the amount awarded is reasonable.”

Op., App. 4la (emphasis added).

Later, ARCO argues that under a variety of published

California decisions, the arithmetic ratios in this case

show the award “certainly is excessive when compared to

other such awards in California.” Pet. 18:4-19:24. This is

ineorrect. This ease was neither a trend-setter, nor

two other awards to $50,000 from $200,000); Jahn v. Brickey, 168 Cal.

App. 3d 399, 214 Cal. Rptr. 119 (1985) (affirmed trial court's

reduction of $250,000 to $100,000 in punitive damages); Sprague v.

Equifax, Inc., 166 Cal. App. 3d 1012, 213 Cal. Rptr. 69 (1985)

(affirmed trial court’s reduction of $5 million punitive damage award

to $1 million); Goshgarian v. George, 161 Cal. App. 3d 1214, 208 Cal.

Rptr. 321 (1984) (Court of Appeai reduced $15,000 punitive damages

award to $7,500); Burnett v. Nati Enquirer, Inc., 144 Cal. App. 3d

991, 193 Cal. Rptr. 206 (1983) (trial court reduced $1.3 million

award to $750,000; Court of Appeal reduced it further to $150,000);

Grimshaw v. Ford Motor Co., 119 Cal. App. 3d 757, 174 Cal. Rptr. 348

(1981) (trial court reduced $125 million jury award to $3.5 million);

Alhino v. Starr, 112 Cal. App. 3d 158, 169 Cal. Rptr. 136 (1980)

(Court of Appeal remanded $150,000 punitive damage award);

Rosener v. Sears, Roebuck & Co., 110 Cal. App. 3d 740, 168 Cal. Rptr.

237 (1980) ($10 million punitive damage award reduced to $2.5

million by Court of Appeal).

23

unique, nor out-of-line under state law. In arithmetic

terms, the punitive damage award is a smaller proportion

of ARCO’s net worth ($6.7 billion) or annual net income

($986 million) than several published California deci-

sions decided before trial. '* The punitive/ compensatory

damage award ratio ($3.5 million/$475,000"’ or about

7.37/1) is also well within recognized limits in California.

See generally Devlin v. Kearny Mesa AMC/Jeep/Renault,

Inc., 155 Cal. App. 3d 381, 202 Cal. Rptr. 204 (1984);

Moore v. Am. United Life Ins. Co., 150 Cal. App. 3d 610,

197 Cal. Rptr. 878 (1984) (ratio is 83:1).

Even if ARCO’s points that juries have carte blanche,

that appellate courts have abdicated, and that the Court

of Appeal did not apply settled California law or reasona-

ble arithmetic ratios were all true, this Court has no

'®Betts v. Allstate Ins. Co., 154 Cal. App. 3d 688, 711, 201 Cal.

Rptr. 528 (1984) ($3 million punitive damages represented “less

than one-half week’s earnings of Allstate.” One-half week’s earnings

of ARCO would be over $9 million). Moore v. Am. United Life Ins. Co.,

150 Cal. App. 3d 610, 197 Cal. Rptr. 878 (1984) ($2.5 million punitive

damages represented 3.2% of defendant’s net worth and 6.6% of its

annual income. In contrast, the $3.5 million assessed against ARCO

was 0.052% of ARCO’s net worth and 0.35% of ARCO’s annual

income). In Rosener v. Sears, Roebuck & Co., 110 Cal. App. 3d 740,

750, 168 Cal. Rptr. 237 (1980) the final $2.5 million punitive damages

award was something “less than [0.06125%] of Sears’ net assets.”

"ARCO argues the compensatory damages were $79,061. This

amount was only the actual “out-of-pocket” loss as distinguished

from future lost profits, allowable under California law as compensa-

tory damages for certain kinds of fraud.

'“ARCO asserts in several places that Nielsen contended a

$15,000 punitive damage case, Hartman v. Shell Oil Co., 68 Cal. App.

3d 240, 137 Cal. Rptr. 244 (1977), was “ ‘closely analogous’.” Pet. 9

n. 5; 18:14. Nielsen argued that Hartman is closely analogous on the

compensatory damages issues, but never argued that it is analogous

on the punitive damage issues. See App. 2&a ef seq.

i |

24

supervisory jurisdiction over state courts and, in review-

ing a state court judgment, is confined to evaluating it

only in relation to the Federal Constitution. Chandler v.

Florida, 449 U.S. 560, 570 (1981).

B. The Eighth Amendment Excessive Fines Clause

Does Not Invalidate California's Long-Standing

Standards

The Excessive Fines Clause issues — historical and

practical — have been fully briefed in Bankers Life.

Therefore, only a few additional comments will be made

here.

Appellant in Bankers Life, petitioner in Downey, and

ARCO here, argue that under an Excessive Fines analog,

= criminal fines for similar conduct in the range of $500 to

$2,500 (see Pet. 18 n. 8) is the maximum punitive dam-

ages amount that ean constitutionally be allowed. This

argument not only fails to adequately respond to the

countless cases over the centuries both in England and

the United States which have refused to apply any such

limits to punitive damages, but also, as to California,

ignores the California legislature’s current attention to

and decision about the cluster of considerations relevant

to determining what is “excessive” punitive damages in a

given case.

Effective January 1, 1988, California enacted the Civi’

Liability Reform Act of 1987. One of its major provisions

modified existing statutory law on punitive damages,

eodified at California Civil Code § 3294. Among the

changes are that oppression, fraud or malice which give

rise to punitive damage liability must now be “proven by

clear and convincing evidence’; previously these had to be

established by a preponderance of the evidence. Also, the

25

statutory definitions of “malice” and “oppression” were

amended to add that the conduct must be “despicable.”

The California legislature is aware of and regularly

reacts to case law in its jurisdiction as well as the impact

of its previously enacted statutes. ““‘We must... assume

that in passing a statute the Legislature acted with full

knowledge of the state of the law at the time [citations].”

In re Misener, 38 Cal. 3d 543, 552, 213 Cal. Rptr. 569

(1985); to similar effect is Samuels v. Dist. of Columbia,

770 F.2d 184, 194 and n. 7 (D.C. Cir. 1985) for Congress.

The legislature did not, although it certainly could have,

set monetary limits or fixed ratios on punitive damages.

Thus, at least as to California, the legislature after as-

sessing and reevaluating the myriad of policy considera-

tions chose not to draw the analog to eriminal fines or to

otherwise set a fixed limit on punitive damages. By

implication, the subjective societal value judgment advo-

eated by petitioners in Bankers Life, in Downey, and in

this ease has been rejected by the duly elected legislature

in California, and should not be second-guessed. The

legislature, well aware of all criminal penalties — fines or

otherwise — is, at least for the present, satisfied that civil

punitive damages are not “excessive” under current jury

discretion, judicial scrutiny and controlling case law.

C. ARCO’s Due Process Clause Argument Does Not

Justify Granting The Petition

ARCO’s due process, really tag-along, argument is that

it ‘should receive ... all of the rights [it] would have in a

criminal trial.” Pet. 20:6-10. Before speculating on what

ARCO might mean by this blunderbuss, one important

point is noted.

ARCO does not and cannot argue that it was subjected

to liability without notice or under changing law. Thus,

ne

26

ARCO’s due process argument is fundamentally weaker

than either Bankers Life or Downey where defendants

both claim they were subjected to substantive law which

had been formulated in the respective states after the

complained-of conduct. In contrast, ARCO was found

liable for fraud and deceit (failure to disclose) (CT 640-

41) under well-defined law. Moreover, California has

since 1872 codified that punitive damages in civil cases

are allowed for fraud. Likewise, California case law has

long held that the amount of punitive damages is to be

determined under the three-factor guidelines previously

discussed. See generally Devlin v. Kearny Mesa

AMC/Jeep/Renault, Inc., 155 Cal. App. 3d 381, 202 Cal.

Rptr. 204 (1984), for a complete historical tracing of

California’s punitive damages law. Neither at trial, nor to

the Court of Appeal nor to the California Supreme Court

did ARCO ever argue that the jury was not properly

instructed under this long-standing law, nor that the law

was unfair in substance or application, nor that the law

changed to ARCO’s surprise.

Even if ARCO’s claim did encompass substantial due

process questions, it would be inappropriate to review

them as presented here. ARCO’s due process claim in-

cludes the entire range of criminal procedures and safe-

guards. As this Court has often explained, “[e]ach

constitutional rule of eriminal procedure has its own

distinet functions, its own background of precedent, and

its own impact on the administration of justice, and the

way in which these factors combine must inevitably vary

with the dictate involved.” Johnson v. New Jersey, 384 U.S.

719, 728 (1966); accord Brown v. Louisiana, 447 U.S. 323

(1980). Among these procedural rules and rights are the

Double Jeopardy Clause, the right against self-inerimina-

tion, unanimous jury verdicts (both for acquittal and

criminal liability), lability “beyond a reasonable doubt,”

|

and the right to competent counsel, as well as appointed

counsel if the accused is indigent. ARCO’s position would

have extraordinary consequences for state tort systems

(see Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 255

(1984) (“Punitive damages have long been a part of

traditional state tort law.’’)) and indeed require whole-

sale revision of state tort systems.

Given that ARCO has not objected to, identified, dis-

eussed or argued any particular due process right af-

forded eriminal defendants, given that neither the trial

eourt, nor the California Court of Appeal nor the Califor-

nia Supreme Court has been presented any such argu-

ment or issue as applied to this case, given that ARCO

never even mentioned “due process’ until now, this Court

should not grant review on the due process issues raised.

28

CONCLUSION

For the foregoing reasons, the petition for certiorari

should be denied.

February 10, 1988

Respectfully submitted,

GEORGE J. BERGER*

DEARING D. ENGLISH

JENNINGS, ENGSTRAND &

HENRIKSON

A Professional Law Corporation

401 West “A” Street, Suite 2200

San Diego, California 92101

(619) 557-7800

BRUCE J. ENNIS, JR.

DONALD B. VERRILLI

ENNIS FRIEDMAN & BERSOFF

1200 17th Street, N.W.

Washington, D.C. 20036

(202) 775-8100

Attorneys for Respondent

*Counsel of Reeord

PROOF OF SERVICE BY MAIL

I am a citizen of the United States and a resident of the

City and County of Los Angeles; I am over the age of

eighteen years and not a party to the within action; my

business address is: 1706 Maple Avenue, Los Angeles,

California.

On February 10, 1988, I served the within Brief in

Opposition in re: “Atlantic Richfield Company -v- John V.

Nielsen” in the United States Supreme Court, October

Term 1987, No. 87-1196;

On the Parties in said action, by placing Three copies

thereof enclosed in a sealed envelope with postage fully

prepaid, in the United States post office mail box at Los

Angeles, California, addressed as follows:

Hughes Hubbard & Reed Anderson, Ablon, Maseda

Ronald C. Redeay & Lewis

Charles Avrith Stephen B. Maseda

555 South Flower Street 3435 Wilshire Boulevard

Suite 3700 Suite 2000

Los Angeles, CA 90071 Los Angeles, CA 90010

Richard C. Morse Benes & Fiorello

W. John Rathje Richard H. Benes

Paul J. Richmond 401 West A Street

Atlantie Richfield Company Suite 1300

515 South Flower Street San Diego, CA 92101

Los Angeles, CA 90071

All Parties required to be Served have been Served.

I certify (or declare), under penalty of perjury, that the

foregoing is true and correct.

Executed on February 10, 1988, at Los Angeles,

California iy :

/ 4 &

ff “£77 2 Fi

q / sf, f ify, —— . é

Cv Le f4O Ht7 OL 7oE2LS

~CE CE MEDINA