Opposition Brief — Allstate Insurance v. Hawkins
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] Supreme Vourt, U.os
y) FILED
No. 87-40 SEP 3 B87
—— ero JR.
/ CLERK
IN THE
Supreme Court of the United States
OCTOBER TERM, 1987
ALLSTATE INSURANCE Co.,
Petitioner,
v.
JACK RANDY HAWKINS and CYNTHIA HAWKINS,
Respondents.
On Petition for Writ of Certiorari to the
Supreme Court of Arizona
BRIEF IN OPPOSITION
September 3, 1987
BRUCE J. ENNIS, JR. *
KIT ADELMAN-PIERSON
PAUL R. FRIEDMAN
ENNIS FRIEDMAN & BERSOFF
1200 17th Street, N.W.
Washington, D.C. 20036
202-775-8100
ROGER O’SULLIVAN
7007 East Indian School Road
Scottsdale, Arizona 85251
602-947-4333
Attorneys for Respondents
* Counsel Of Record
WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001
TABLE OF CONTENTS
TABLE OF AUTHORITIES .................... iustahiaes
St ATE. OF THE CASE. ......................................
SUMMEARE OF ARGUMING onan inns ..n-.ecccsccsesnvcnceseees :
ARGUMENT .
I. THE ARIZONA SUPREME COURT DID NOT
II.
CONSIDER ANY OF THE CONSTITUTIONAL
QUESTIONS PETITIONER SEEKS TO
RAISE HERE, BECAUSE PETITIONER
WAIVED SOME QUESTIONS AND FAILED
TO RAISE OTHERS IN A TIMELY MANNER,
AS REQUIRED BY CONSISTENTLY AP-
PLIED STATE PRACTICE ................................
A. Petitioner’s Eighth Amendment Argument
Was Explicitly Waived In The Arizona Su-
preme Court .........-....... ‘i
B. Petitioner’s Due Process Claims Were Not
Raised Below In A Timely Manner .............
C. Even If Petitioner’s Due Process Challenges
to the Preponderance Of The Evidence
Standard and To The Jury’s Consideration
Of The “Duration” Of Petitioner’s Miscon-
duct:Had Been Timely, The Arizona Supreme
Court Would Not Have Considered Those
Challenges Recause Petitioner Failed to Ob-
ject to Jury Instructions That Were Directly
Inconsistent With Those Challenges ............
EVEN IF PETITIONER HAD PROPERLY
RAISED ITS CONSTITUTIONAL CLAIMS
BELOW, IT WOULD BE INAPPROPRIATE
TO GRANT CERTIORARI .......................:-....
A. Petitioner’s Claim That the Punitive Dam-
age Award Was Excessive Under the Con-
stitution Does Not Warrant Discretionary
BIE siictacasstiibiictlispcaphdtiaaiiaasiionen
10
10
11
12
15
17
18
ii
TABLE OF CONTENTS—Continued
Page
1. Petitioner’s Eighth Amendment Argu- ,
enone il ili 18
2. Petitioner’s Due Process Arguments ....... 19
B. Petitioner’s Claim That Punitive Damages
Can Only Be Imposed If Every Constitu-
tional Safeguard Available in Criminal
Trials Has Been Provided Does Not War-
rant Discretionary Review ...............---..-.-------- 21
C. Petitioner’s Claim That Even In “ivil Cases
The Due Process Clause Requires “Clear
and Convincing Evidence’ Before Punitive
Damages Can Be a Does Not Warrant
Discretionary Review .. Py eo RN a 26
D. Petitioner’s Claim That The Due Process
Clause Requires That Common Law Rules
Restricting the Imposition of Punitive Dam-
ages Be Applied To All Civil Cases Pending
on Appeal Does Not Warrant Discretionary
WNIT onic ionsclaa ccs nicbnectenincenoceinnteteiaamnenentontiin 28
COMI CLIIIIOIN a nsccsirsn sites nscceeeenisstnensromensntninsineanenenntemsennss 30
iii
TABLE OF AUTHORITIES
CASES: Page
Acheson v. Shafter, 107 Ariz. 576, 490 P.2d 832
REESE NREL SPE COS ee eee 20
Addington v. State of Texas, 441 US 418 (1979).... a7
Aetna Life Insurance Co. v. Lavoie, 475 US 813
i cna ce atndiatinaenstnnnsibs 8, 9,11
Ahmed v. Collins, 23 Ariz. App. 54, 530 P.2d 900
ESS ERLE SSS RRS SSIES ee 17
Andrew Brown Co. v. Painters Warehouse, Inc.,
111 Ariz. 404, 531 P.2d 527 (1975) ...........002200...... 16
Arizona Public Service Co. v. Mountain States
Telephone and Telegraph Co., 149 Ariz. 239,
|, EEC ee ee ee ee 15
Bailey v. Anderson, 326 US 208 (1945) _.............. 12
Ballew v. Georgia, 485 US 223 (1978) _.......0.......... 26
Bankers Life and Casualty Co. v. Crenshaw, Sup.
EE ES passim
Barr v. Columbia, 378 US 146 (1964) —......0000000.. 13
Barrio v. San Manuel Division Hospital, 143 Ariz.
eS EB NG. Cr ene enane 14
Brotherton v. Celotex Corp., 202 N.J. Super. 148,
NB Bg SEE ee 22
Brown v. Louisiana, 447 US 323 (1980) ................ 24
California Bankers Ass’n v. Shultz, 416 US 21
i ca ssnctsndccecs- 24
Cardinale v. Louisiana, 394 US 487 (1969) _.......... 11
Chevron Oil Co. v. Huson, 404 US 97 (1971) .......... 29, 30
Daugherty v. Firestone Tire & Rubber Co., 85
ieee We Ane Com, 1900) .............-.0:............... 18
Defnet and Investment Co. v. State, 103 Ariz. 388,
A I Fi css chiamstndamorcnidininennsnsicoens 14
District of Columbia Court of Appeals v. Feldman,
ETS SSE TE eC 12
Downey Savings and Loan Ass’n v. Ohio Casualty
Insurance Co., 234 Cal. Rptr. 885 (Cal. App.
aici heii ibaa tial Hib lia sihiithediediedi Low: 18, 22
Exxon Corp. v. Eagerton, 462 US 176 (1983) ........ 12
Filasky v. Preferred Risk Mutual Ins. Co., 735 P.2d
_ Ff s ¢ eee ee thie ins 21
iv
TABLE OF AUTHORITIES—Continued
Page
First National Bank of Boston v. Bellotti, 435 US
Be IE sisal oa ecinacttescuicinAdhaniaeascanlanoiamingen 24
Flieger v. Reed, 120 Ariz. 31, 583 P.2d 1351
CRITI ities aipncscimegptntborennreenallmccninrinigiadidiiplipdiariqan 20
Gibson v. Gibson, 15 Cal. App. 3d 943, 93 Cal.
BEE CRIED scl etesieneentescbanenistretneaneitoonenicr ies 22
Godchaux Co. v. Estopinal, 251 US 179 (1919) ...... 12
Grant v. Arizona Public Service Co., 133 Ariz. 434,
ee en oaainenmianennen 17
Griffith v. Kentucky, 93 L.Ed.2d 649 (1987) ......-... 29
Grimshaw v. Ford Motor Co., 119 Cal. App. 3d 757,
SFG CE TE. Te CED octet ineieiicen ti 22
Gurule v. Illinois Mutual Life & Cas. Co., 735 P.2d
OG Clan: Dr abicticccit eh rnin cise 21
Hansen v. Johns-Manville Products Corporation,
734 F.2d 103 (5th Cir. 1984), cert. denied, 470
a cslintnipiamiateeds 22
Hart-Anderson v. Hauck, Civ. No. 85-498 (Mont.
pT 8 Rg SES ee eae nene 18
Hawkins v. Allstate Insurance Company, 733 P.2d
I i laccaniaaens passim
Ingraham v. Wright, 480 US 651 (1977) ................ 18, 19
Johnson v. New Jersey, 384 US 719 (1966) -......... 24
Judy’s Foods, Inc. v. A & B Food Services Corp.,
TE i a sreisehocrning epee tenes rancostintaniatinees 9,14
Koway Enterprises, Ine. v. Pennsylvania Public
Utility Commission, 85 Pa. Comm. 1, 480 A.2d
Fy ie en REIN RA IU Ii a a Oo 24
Layne & Bowler Corp. v. Western Well Works,
Fs Te ee I | iinet pecenerstpecemesmqnrcnnseees 27
Linthicum v. Nationwide Life Ins. Co., 150 Ariz.
E.R RAR cae iO passim
Maricopa County v. Corporation Commission, 79
Ariz. 307, 289 P.2d 183 (1955) ............................. 15
McCray v. New York, 461 US 961 (1983) -............. 28
McDermott v. Kansas Public Service Co., 238 Kan.
Fe Ek IR AN Ae een IEN 22
McGoldrick v. Compagnie Generale, 309 US 430
fp, queen one Bolh Sc2ith 27, SIRE REN EDA OO OC PEO TEE 12
v
TABLE OF AUTHORITIES—Continued
Palmer v. A.H. Robins, 684 P.2d 187 (Colo. 1984)
AP RE ac IRE RRMA cle Ce Ee ee
People v. Superior Court, 115 Cal. Rptr. 812 (Supr.
+ OR Coie i bere sciatica
Peterson v. Superior Court, 181 Cal. Rptr. 784, 642
ph Ree ek Ay pera mene ee
Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d 565
gh i Geren nteled Sans torial suena eat AR
Rice v. Sioux City Memorial Park Cemetery, 349
Ce estas bce
Rubi v. Transamerica Title Ins. Co., 181 Ariz. 403,
RE I I i ae sninensci cn dincnodasiencbuosenss
Ruth v. Industrial Commission, 107 Ariz. 572, 490
Pr a des
Santanello v. Cooper, 106 Ariz. 262, 475 P.2d 249
Bast LESS aI Siege Rig Rnd Taka see
Santosky v. Kramer, 455 US 745 (1982) ................
Sedima, S.P.R.L. v. Imrex Co., 473 US 479
(SP RAR a AE RAR CER, CO RTE
Silkwood v. Kerr-McGee Corp., 464 US 238
5 | Dies fe 8 TES REY SR Rat oe ie
Southern Pacific Transportation Co. v. Lueck, 111
Ariz. 560, 585 P.2d 599 (1975) ...............2--.0........
Sparks v. Republic National Life Ins. Co., 182 Ariz.
529, 647 P.2d 1127 (1982), cert. denied, 459 US
Pe ERR mice a my a ON RR oe
Street v. New York, 394 US 576 (1969) ................
Sullivan v. Little Hunting Park, 396 US 229
8 SRRRMEIR EE PSs 5 NE eae ey EO ae
Tacon v. Arizona, 410 US 351 (1978) -.......00....20.....
Toole v. Richardson-Merrell Inc., 60 Cal. Rptr. 398
A a EE citing ncaa iokeatsicaadiciddonmmneceneneune
Town of South Tucson v. Board of Supervisors, 52
FX, ee . & Fe fe. | | eee
Unified School District No. 490 v. Celotex Corpora-
tion, 6 Kan. App. 2d 346, 629 P.2d 196 (1981)...
United States v. Ward, 448 US 242 (1980) ............
Webb v. Webb, 451 US 493 (1981) 2.00...
Whitney v. California, 274 US 357 (1927) ............
Page
18
23
22
21
27
20
14.
18, 22
vi
TABLE OF AUTHORITIES—Continued
Page
Williams v. Florida, 399 US 78 (1970) ............------ 26
Wilson v. Cook, 327 US 474 (1946) ...........--.--...-.--- 12
Zhadan v. Downtown L.A. Motors, 66 Cal. App. 3d
481, 1386 Cal. Rptr. 182 (1976) ..-.......-....-------.---- 19
STATE CONSTITUTIONAL PROVISIONS:
Arizona Constitution, Art. 2, § 31 -.....................----.--- 26
Arizona Constitution, Art. 18, § 6 ~.....................---..--- 26
STATUTES, RULES AND REGULATIONS:
Arizona Rule of Civil Procedure 51 (a) ...................--- 16
MISCELLANEOUS:
Criminal Safeguards and the Punitive Damages
Defendant, 34 U. CuI. L. REv. 408 (1967) ........... 24
"Tae Boones, Aug. 1, 19GT .........--00.0.-<--..-2+0.--00--- 9
RESTATEMENT (SECOND) OF TORTS § 908 (1979)... 20
Stern, Gressman & Shapiro, SUPREME COURT PRAC-
I EE i os cicereenemenenngupercen 13
STATEMENT OF THE CASE
By presenting the “relevant” facts in a selective and
misleading manner, petitioner Allstate Insurance Com-
pany implies that this case involves little more than an
insurer’s $200 underpayment of an insurance claim aris-
ing out of the “total loss” of an insured automobile, for
which the insurer was subjected to a $3.5 million puni-
tive damage award. A more complete and accurate pre-
sentation of the record reveals that the underpayment to
respondents Jack and Cynthia Hawkins was substan-
tially greater and was not an isolated event. Instead,
that underpayment was the result of a conscious and
longstanding corporate policy to profit Allstate millions
of dollars by deliberately underpaying all such claims.
Pursuant to that policy, petitioner repeatedly engaged
in a broad range of malicious actions, all in a conscious
effort to coerce respondents to accept less than the fair
market value of their automobile.
It is undisputed that the policy required petitioner to
pay “the actual cash value” of the destroyed automobile,
that actual cash value meant the automobile’s “fair mar-
ket value just prior to destruction,” and that the jury
was so instructed, without objection. Trial Transcript
(hereafter, “Tr.”), vol. 6, p. 5. See also id., vol. 5, pp.
15-18, and the Appendix to Petition For Review to the
Arizona Court of Appeals (hereafter, “Ariz. Rev.
App.”), No. 5 at 9. It is also undisputed that the policy
obligated petitioner “to deal fairly in handling a claim
made by its insured under the policy, and . . . to make
full payment of promised benefits to its insured,” and
the jury was so instructed, without objection. Tr., vol.
6, p. 6 (emphasis added).
Despite these obligations, the evidence at trial- estab-
lished that petitioner refused to make full payment of
fair market value, and that its refusal was consistent
with and required by petitioner’s longstanding corporate
policy of “chiseling” its insureds. Testimony of Jan
Mauritz, Esq., a former Senior Claims Representative
2
for petitioner. Tr., vol. 4A, p. 38, Ariz. Rev. App., No.
13 at 38. This policy was designed to reduce the pay-
ments petitioner would have to make on legitimate claims
by amounts that were relatively small in individual cases,
but very substantial in the aggregate, so that all pay-
ments would be “substantially below fair value.” Id.
The jury, the Court of Appeals, and the Arizona
Supreme Court all concluded that the evidence justified
an award of punitive damages. Those factual findings
are not at issue here, so respondents will note only some
of the evidence that supported the award:
Petitioner’s claims adjuster determined, using the
“Blue Book” retail value, that the fair market value of
respondents’ car immediately before the accident was
$6,545. Ariz. Rev. App., No. 7. In making this deter-
mination, however, the adjuster ignored many features
and options of the insured car (such as power windows,
undercoating, etc.) that would have increased its Blue
Book value. Jd.; Hawkins v. Allstate Insurance Co., 733
P.2d 1073, 1076 (Ariz. 1987); Appendix to Petition for
Writ of Certiorari (Pet. App.) 3a. The adjuster ad-
mitted at trial that the value of those options and fea-
tures should have been added to his determination of
Blue Book value, and that the resulting fair market
value, per the Blue Book, would have been at least
$7,300. Ariz. Rev. App., No. 10 at 37; Tr., vol. 3, p. 37.
Blue Book valuations already take into consideration
“the car’s condition immediately prior to the loss.” 733
P.2d at 1076; Pet. App. 3a. Blue Book valuations “in-
clude deductions for the condition of the exterior of the
car, paint, bumpers, upholstery, glass, tires and clean
up,” if those deductions are “needed to bring the car to
average retail condition.” 733 P.2d at 1076; Pet. App.
3a. Nevertheless, after supposedly determining the Blue
Book value of respondents’ car, considering its condition
and cleanliness, petitioner’s claims adjuster further re-
duced that value by automatically deducting a $35
“clean-up fee” from the Blue Book estimate. Ariz. Rev.
3
App., No. 7. He did so even though he had indicated on
the Blue Book appraisal form that the “condition” of
the car was “ok” in every respect, including cleanliness.
Id.
The adjuster then obtained, by telephone, dealer esti-
mates, ranging from $6,150 to $6,300, of the value of
allegedly “similar” cars. These estimates were based on
the adjuster’s knowingly incomplete description of the
insured car to those dealers, in which he failed to men-
tion many of the insured car’s more valuable features
and options. 733 P.2d at 1076; Pet. App. 3a. Based on
these dealer estimates, petitioner’s adjuster estimated
the value of respondents’ car at $6,200 -and, again, auto-
matically deducted a $35 cleaning fee from that “mar-
ket” estimate. 733 P.2d at 1076; Pet. App. 3a-4a.
The adjuster then selected four allegedly “similar”
cars and instructed respondents to see if one of them
would be a satisfactory replacement. However, when
respondents chose one of the cars selected by the ad-
juster, he “would not let [respondents] have the car they
selected,” even though it was ore of the four cars he
had selected as “similar” to their destroyed car. 733 P.2d
at 1076; Pet. App. 4a. The adjuster claimed that car
was not comparable to respondents’ car because respond-
ents’ car allegedly had “excessive mileage.” Tr., vol. 1,
p. 41. Ariz. Rev. App., No. 8 at 41. In fact, in his first
conversation with respondents the adjuster had said “he
would have to deduct approximately [$]300 off” the
average retail value of respondents’ car because of the
allegedly excessive “amount of miles” on the car. Tr.,
vol. 4A, p. 12. Ariz. Rev. App., No. 13 at 12. The ad-
juster knew this statement was false and that respond-
ents’ car actually had fewer miles than the average car
of its age. Indeed, because of its unusually low mileage,
respondents’ car was entitled to a Blue Book “mileage
factor” credit of $250, which the claims adjuster included
on his worksheet when estimating its Blue Book value.
Ariz. Rev. App., No. 7.
4
After rejecting respondents’ choice among the four
cars identified by petitioner, petitioner’s adjuster “se-
lected one of the other cars and insisted that [respond-
ents] take it.” 733 P.2d at 1077; Pet. App. 4a. Re-
spondents refused because this car “had few of the op-
tions their insured car had and was not comparable in
either quality or gas mileage.” Id.’
At that point, although petitioner’s adjuster had him-
self concluded, based on his determinations of Blue Book
value and dealer estimates, both of which he knew were
less than fair market value, that the car had been worth
at least $6,200-$6,545, he nevertheless told respondents,
“in a take-it or leave-it fashion” (Pet. App. 41a), that
“unless they took the car he had selected” he would only
“nay them $4,500 in cash.” 733 P.2d at 1077; Pet. App.
4a. See also Tr., vol. 1, p. 41; Ariz. Rev. App., No. 8 at
41. They refused. “Later, during the same conversation,
[the adjuster] threatened to deliver a check for $5,000.”
Id.
Three days after petitioner’s agent made this threat,
respondents agreed to accept the car petitioner had in-
sisted they accept. They purchased the car only after
they were assured by petitioner’s agent that the replace-
ment car (which lacked power windows, had inferior
gas mileage, and lacked other features of the insured
car) would “be brought up to the insured car’s stand-
ards.” 733 P.2d at 1077; Pet. App. 5a. That assurance
was not honored. For example, although respondents
were not able to have power windows installed for less
than $600, petitioner would only pay $125 towards that
installation. 733 P.2d at 1077; Pet. App. 5a. Petitioner
“refused to make any other adjustments and closed the
file.” Id.
1 An auto mechanic familiar with both cars testified that “there
was no comparison,” that the car selected by petitioner’s claims
adjuster was worth “probably 75 percent of [respondents’] car,”
and that the “original car was [a] much, much better car, it was
better equipped, more economical ...” Tr., vol. 2, pp. 65-66; Ariz.
Rev. App., No. 9 at 65-66.
5
Testimony by three of petitioner’s former claims ad-
justers, including an adjuster employed at the Phoenix
office that handled respondents’ claim, established that
this conduct was consistent with and required by a long-
standing corporate policy. This testimony showed, inter
alia, that petitioner’s adjusters were instructed to make
various deductions, including a $35 clean-up fee, from
the fair market value of all claims, even though market
value already reflected cleanliness, tire-wear, etc., and
regardless of the insured car’s actual condition.”
Adjusters were also instructed “to offer an insured the
lowest value of a ciaim because the insured probably
would take it in order to get his car fixed quickly;” and
adjusters were “frequently” told that “if you could save
one dollar on a million claims, you would save the com-
pany as much as a million dollars.” These practices were
clearly established “corporate policy.” They were taught
to adjusters at petitioner’s regional claims schools, were
repeated and emphasized by supervisors, and “were
promulgated through corporate literature and policy
statements.” 733 P.2d at 1078; Pet. App. 6a-8a. This
corporate policy had been in effect for up to 18 years.
733 P.2d at 1085; Pet. App. 21a.
Indeed, there was substantial evidence that adjusters
who failed to implement this corporate policy would
jeopardize their “opportunity to be promoted.” Tr., vol.
4A, p. 38. Adjusters’ “promotion potential” was regu-
larly evaluated on the basis of how “severe” they had
been in paying claims. 733 P.2d at 1078; Pet. App. 7a.
Although adjusters who had not been sufficiently severe
reduced their chances for promotion, “[i]f an adjuster
does exceptionally well,” and his claim payments were
“substantially below the average” of the other adjusters
2In fact, an ex-claims adjuster from Petitioner’s Phoenix office
testified that adjusters were instructed to deduct the $35 clean-up
fee even if the car was “brand new” and was destroyed as it left
the dealer’s lot. Tr., vol. 3A, pp. 28-24; Ariz. Rev. App. No. 11,
pp. 23-24,
6
(all of whom were implementing petitioner’s policy), “he
would receive praise for it.” This practice provided an
“incentive . . . to offer as little as possible because it
works to the adjuster’s personal benefit.” *
The jury concluded that petitioner’s longstanding pol-
icy of deliberately paying less than fair market value
on all automobile total loss claims warranted an assess-
ment of $3.5 million in punitive damages. The trial
judge, however, granted petitioner’s motion for judg-
ment notwithstanding the verdict on the ground that the
evidence was insufficient to sustain an award of punitive
damages. In the alternative, the trial judge ordered a
new trial. The court of appeals reversed the judgment
n.o.v., concluding that the evidence of petitioner’s “hard-
ball tactics,” Pet. App. 41a, was sufficient to justify an
award of punitive damages. The court of appeals affirmed
the order for a new trial, however, ruling, on state law
grounds, that testimony by one witness was improperly
admitted, and that the amount of the punitive damage
award was not justified by the evidence.
The Arizona Supreme Court, which has a record of
carefully reviewing punitive damage awards in insur-
ance bad faith cases to determine if they were excessive,
see note 15 infra, reinstated the jury verdict. After rul-
ing that all of the challenged evidence was properly ad-
mitted, it ruled that the evidence was sufficient to sup-
port a punitive damage award of $3.5 million. The court
considered whether the amount of damages was excessive
“in light of the particular nature of [petitioner’s] con-
duct,” and held that “[t]he jury could have rationally
concluded that [petitioner’s] conduct was highly repre-
hensible and resulted in harm to countless insureds,”’ who
“would be unlikely to discover or prosecute this miscon-
3 Tr., vol. 4A, p. 46. See also id. at 39 (“the message inescapable
to an adjuster is that the lowest dollar is the best dollar as far
as his performance rating is concerned”); Tr., vol. 3A, p. 39 (dis-
cussing petitioner’s computerized “severity printouts” and its
weekly meetings to evaluate adjusters’ severity performance) .
7
duct.” 733 P.2d at 1085; Pet. App. 2la (emphasis
added). The court also found that these “deceptive
claims practices” had been “established company policy”
for “up to 18 years.” Id. And the court found that the
punitive damage award was not “disproportionate” to
the nature of the offense or to petitioner’s financial po-
sition, because the award represented petitioner’s net in-
come for only 3% days, or 1/25th of 1% of its total re-
ported assets of $8.6 billion. 733 P.2d at 1084; Pet. App.
at 20a.
The Arizona Supreme Court expressly declined to con- _
sider any of petitioner’s constitutional challenges to puni-
tive damages because those challenges were “belatedly
urged” for the first time in a supplemental brief filed
after oral argument in that court. 733 P.2d at 1086;
Pet. App. 24a.
SUMMARY OF ARGUMENT
Certiorari should be denied because: a) petitioner ex-
pressly waived its Eighth Amendment argument, and
failed to present its Due Process arguments below in a
timely manner, as required by consistently applied state
practice; b) petitioner waived two of its Due Process
arguments by failing to object to jury instructions that
were squarely inconsistent with those arguments; c) the
decision below is not even alleged to be in conflict with
any other lower court decision; d) the decision below is
not even alleged to be directly inconsistent with any prior
decision of this Court; and e) there is no urgent reason,
in the context of this case, for the Court to resolve these
constitutional questions, which implicate important and
longstanding state interests.
The Eighth Amendment and Due Process challenges
to punitive damage awards petitioner attempts to raise
here are not novel legal theories. They have been raised
without success in numerous lower courts over the past
two decades. In this case, petitioner deliberately chose
not to raise its Eighth Amendment challenge at any
8
stage below. And it chose not to raise any of its Due
Process challenges at trial, in the intermediate appellate
court, or in a cross petition to the Arizona Supreme
Court. Instead, petitioner raised its Due Process chal-
lenges for the first time in a supplemental brief filed
after oral argument in the Arizona Supreme Court. That
court invoked a consistently applied state practice and
expressly declined to consider those “belatedly urged”
post-argument claims because “[el]fficient and orderly
administration requires some point in time at which it
is too late to raise new issues on appeal.” 733 P.2d at
1086; Pet. App. 23a.
This Court has previously noted that the applicability
of the Eighth Amendment and the Due Process Clause to
punitive damage awards raises important questions that
“in an appropriate setting, must be resolved,” Aetna Life
Insurance Co. v. Lavoie, 475 US 813, 89 L.Ed.2d 823,
837 (1986) (emphasis added). But this is not an appro-
priate setting in which to consider those questions.
First, although petitioner claims that its Eighth
Amendment argument “is presently swb judice in this
Court in Bankers Life and Casualty Co. v. Crenshaw,
No. 85-1765” and is therefore “manifestly deserving of
plenary consideration” (Pet. at 15), petitioner expressly
waived that Eighth Amendment argument in the Ari-
zona Supreme Court.* Point L.A.
Second, because petitioner failed to present any of its
Due Process questions below in a timely manner, and
the Arizona Supreme Court declined to consider them
on a legitimate and consistently applied state ground,
*Even in Bankers Life the Court did not separately grant cer-
tiorari to consider that Eighth Amendment issue, which is pending
before the Court only on a tag-a-long writ of certiorari as ancillary
to an appeal issue the Court was required to hear. The Appellee
in Bankers Life has urged the Court to dismiss certiorari on that
issue as improvidently granted on the ground that in that case, as
here, the Eighth Amendment issue was not raised in the court
below.
9.
this case is not “an appropriate setting” to consider
them. That is the lesson of Judy’s Foods, Inc. v. A & B
Food Services Corp., 107 S Ct 460 (1986), which was
decided after Lavoie. There, as here, petitioners asked
the Court to consider the applicability of the Due Proc-
ess Clause (and the Eighth Amendment) to a punitive
damage award. The respondents argued that those ques-
tions were not appropriate for review because they had
been raised for the first time in supplemental post-
argument briefs in the highest court below. The Court
denied review there, and petitioner has suggested no
reason why review would be more appropriate here.
Point I.B.
Third, petitioner waived two of its Due Process argu-
ments—its challenge to the preponderance of the evi-
dence standard and its challenge to the jury’s considera-
tion of the “duration” of its wrongful conduct—by
failing to object to jury instructions that were squarely
inconsistent with those arguments. Point I.C.
Furthermore, even if petitioner had raised its consti-
tutional claims below in a timely manner, certiorari
would still be inappropriate. The presumed decision
below is not even alleged to be in conflict with any other
decision, state or federal, and is not even alleged to be
directly inconsistent with prior decisions of this Court.
To the contrary, none of petitioner’s constitutional argu-
ments has been adopted by any court, and most of them
have been rejected by several lower courts. Moreover,
petitioner relies largely on policy arguments in urging
this Court to overturn that substantial body of case law,
and those policy arguments are being actively consid-
ered by state legislatures.© In these circumstances, the
Court need not and should not re-examine this uniform
body of case law to consider a constitutional resolution of
5 THE ECONOMIST, Aug. 1, 1987, at 29 (in recent years 41 states
have modified their tort systems, and the rest are considering
changes).
10
issues that are currently being addressed through the
legislative process.® Point II.
ARGUMENT
I. THE ARIZONA SUPREME COURT DID NOT CON-
SIDER ANY OF THE CONSTITUTIONAL QUES-
TIONS PETITIONER SEEKS TO RAISE HERE,
BECAUSE PETITIONER WAIVED SOME QUES-
TIONS AND FAILED TO RAISE OTHERS IN A
TIMELY MANNER, AS REQUIRED BY CONSIST-
ENTLY APPLIED STATE PRACTICE.
It is undisputed that the Arizona Supreme Court did
not consider any of the constitutional questions petitioner
seeks to raise here. It is undisputed that petitioner ex-
pressly waived its Eighth Amendment argument. It is
undisputed that petitioner’s Due Process arguments were
asserted, for the first time, after oral argument in the
Arizona Supreme Court. In these circumstances, the Ari-
zona Supreme Court’s refusal to consider those constitu-
tional questions rested on adequate and independent state
grounds. ‘a
6 Punitive damage awards have a two century history in state
tort law. For years, the insurance industry did not question the
constitutionality of such awards. In recent years, the industry
has launched an aggressive campaign in legislatures and courts
to restrict punitive damage awards. Although dressed in consti-
tutional clothes, that campaign is based largely on policy argu-
ments. For example, in urging the Court below to consider its
constitutional arguments, petitioner argued that Arizona has
strong policy interests that allegedly require limitations on such
awards. Supplemental Brief of Appellees at 45 (warning that
because of punitive damage awards “everyone in the state will
suffer as a result of increased insurance premium rates. The State
of Arizona has a very real interest in seeing to it that the pendulum
does not swing too far against the insurance industry.”). Those
arguments are best addressed by the legislative process. If the
insurance industry convinces legislatures that punitive damages
are contrary to public policy and should be restricted, it will not be
necessary for this Court to resolve the many constitutional issues
raised by petitioner and other insurance companies.
11
A. Petitioner's Eighth Amendment Argument Was
Explicitly Waived in The Arizona Supreme Court.
Petitioner’s Eighth Amendment argument is inappro-
priate for review because petitioner expressly waived
that argument below. In seeking the Arizona Supreme
Court’s permission to file post-argument briefs, petitioner
suggested, for the first time, that the punitive damage
award might violate the Eighth Amendment’s Excessive
Fines Clause. Motion for Leave to File Supplemental
Briefs and for Additional Oral Argument at 6. In not-
ing that potential issue, petitioner was fully aware of the
consequences if it failed to press that issue in the Arizona
Supreme Court. In petitioner’s words: “[wlithout the
opportunity to brief this issue for consideration by the
Arizona Supreme Court, it is unlikely that appellee would
be_afforded an opportunity to seek relief in the federal
court system if punitive damages in any amount were
untilmately [sic] assessed against appellee.” Jd. at 5-6.
Nevertheless, although petitioner did file a_ post-
argument brief, petitioner decided not to assert that
Eighth Amendment argument, and instead expressly
waived that argument. In its post-argument brief, after
observing that Lavoie involved constitutional challenges
to punitive damages based on the Contracts Clause, the
Eighth Amendment and the Due Process Clause, peti-
tioner stated: “[f]lor purposes of the case before the
court at this time, the constitutional argument will be
confined to the third-noted constitutional claim in
Lavoie—the due process argument.” Supp. Br. at 37.
Thus, petitioner made a deliberate decision to waive any
reliance on the Eighth Amendment.
Because petitioner expressly waived any reliance on
the Eighth Amendment below, its attempt to invoke that
Amendment for the first time in this Court should be
denied. See, e.g., Cardinale v. Louisiana, 394 US 487,
438 (1969) (Supreme Court will not “decide federal con-
12
stitutional issues raised here for the first time on review
of state court decisions.” ).”
B. Petitioner’s Due Process Claims Were Not Raised
Below In A Timely Manner.
Untimeliness is an adequate state ground that bars
review by this Court. It has long been established that
for this Court to have jurisdiction to review a state court
decision “the essential federal question must have been
especially set up there at the proper time and in the
proper manner... .” Godchaux Co. v. Estopinal, 251
US 179, 181 (1919) (emphasis added). Where a state
supreme court decides, in accord with the consistent prac-
tice of that state, that an issue is untimely, that con-
stitutes an adequate state ground for resolving the issue,
and this Court lacks jurisdiction. E.g., Exxon Corp. v.
Eagerton, 462 US 176, 182-183 n.3 (1983).
Petitioner acknowledges Arizona’s “general rule that
an appellate court will not consider a question not first
raised in the lower court.” See Petitioner’s Supp. Br. at
35. In this case, the Arizona Supreme Court correctly
observed that petitioner had failed to “raise its constitu-
tional arguments in the pleadings, post-trial motions,
court of appeals, petition (or cross-petition) for review,
response to petition for review, or at oral argument.”
733 P.2d at 1086; Pet. App. 23a-24a. The court declined
to consider those issues because “[i]n light of this proce-
dural history, we believe it does not promote sound appel-
late practice to consider issues so belatedly urged.” 733
P.2d at 1086; Pet. App. 24a (emphasis added).
7 Accord District of Columbia Court of Appeals v. Feldman, 460
US 462, 482 n.i6 (1983); Webb v. Webb, 451 US 493, 499
(1981); Wilson v. Cook, 327 US 474, 483-84 (1946); McGoldrick
v. Compagnie Generale, 309 US 430, 434-35 (1940); Whitney v.
California, 274 US 357, 362-63 (1927); Tacon v. Arizona, 410
US 351, 252 (1973); Street v. New York, 394 US 576, 582
(1969) ; Bailey v. Anderson, 326 US 208, 207 (1945).
13
Petitioner argues, relying primarily on Town of South
Tucson v. Board of Supervisors, 52 Ariz. 575, 583, 84
P.2d 581 (1938), that the Arizona Supreme Court acted
improperly in declining to consider petitioner’s post-
argument claims. There, the court held that although it
“ordinarily” would not consider issues raised for the first
time on appeal, it could do so if the issue was “of a gen-
eral public nature, affecting the interests of the state at
large... .” 84 P.2d at 584. Petitioner argues that
under that exception to the general rule, the Arizona
Supreme Court should have considered its post-argument
constitutional claims because they concerned matters of
statewide importance.®
In making that argument, however, petitioner has been
able to cite only cases in which a state’s procedural re-
quirements were not evenhandedly applied. See Barr v.
Columbia, 378 US 146, 149 (1964); Sullivan v. Little
Hunting Park, 396 US 229, 245 (1969) (Harlan, J., dis-
senting).® Petitioner’s contention that the Arizona Su-
preme Court’s decision not to consider petitioner’s post-
§ Actually, one of petitioner’s principal issues—that due process
requires “clear and convincing” proof before a jury can award
punitive damages—was not an issue of statewide importance be-
cause, prior to the decision in this case, the Arizona Supreme
Court decided, as a matter of common law policy, to require that
standard in all future punitive damages cases. Linthicum v.
Nationwide Life Ins. Co., 150 Ariz. 326, 723 P.2d 675 (1986).
® Although in Sullivan the Court distinguished discretionary and
jurisdictional rules, the great weight of authority suggests that
even where procedural requirements have some element of dis-
cretion, these rules can serve as adequate state grounds where the
rule is applied evenhandedly and furthers legitimate state inter-
ests. Thus Stern, Gressman & Shapiro have explained that “as
long as the local procedure is applied evenhandedly and consistently,
does not discriminate against the raising of federal claims, and is
not used to stifle a federal claim or to evade vindication of federal
rights [citing cases], the Supreme Court is likely to respect the
local procedural requirement and to hold a ruling grounded on
state procedure is adequate to support the judgment.” R. Stern,
E. Gressman & S. Shapiro, SUPREME COURT PRACTICE 181 (6th ed.
1986) (citations omitted).
14
argument claims constituted a “complete departure” from
its settled practice, Pet. at 17-18, is completely un-
founded. In the fifty years following its decision in Town
of South Tucson, the Arizona Supreme Court has agreed
to decide new issues raised by appellants because of their
“statewide” significance in only a few cases, and im every
one of those cases the issue was raised by the party in a
timely manner.° As the court below correctly reasoned,
declining to consider petitioner’s post-argument claims
was compelled by the policy underlying its general rule:
assuring the efficient and orderly administration of jus-
tice. 733 P.2d at 1086; Pet. App. 23a.
Petitioner has not cited a single case, and respondents
are not aware of any, in which the Arizona Supreme
Court considered an issue raised by a party for the first
time after oral argument in that court. Accordingly,
there is no support for petitioner’s contention that Ari-
zona’s timeliness rule has been applied in an inconsistent
manner.
Because the Arizona Supreme Court’s decision not to
consider petitioner’s Due Process claims was based on the
adequate and consistently applied state ground that they
were untimely, the petition for certiorari should be
denied." See Judy’s Foods, Inc. v. A & B Food Services
10In Town of South Tucson, Ruth v. Industrial Commission,
107 Ariz. 572, 490 P.2d 828 (1971), and Defnet Land & Investment
Co. v. State, 103 Ariz. 388, 442 P.2d 835 (1968), the appellants’
new arguments were raised at the outset of their appeals to the
Arizona Supreme Court. The other case cited by petitioner, Barrio
v. San Manuel Division Hospital, 143 Ariz. 101, 692 P.2d 280
(1984), provides no support for petitioner’s position because in
that case the parties did not belatedly ask the Court to address
issues they had neglected to raise below. Instead, in Barrio the
court itself determined that there were additional issues that re-
quired briefing and it ordered the parties to address those issues.
11 The second basis for petitioner’s contention that the lower
court should have considered its constitutional claims merits only
brief response. Petitioner argues that “an appellee . . . may raise
on appeal any argument in support of the judgment below so long
as that argument would not, if successful, expand its rights under
15
Corp., 107 S Ct. 460 (1986) (denying certiorari in simi-
lar circumstances) .
C. Even If Petitioner’s Due Process Challenges to the
Preponderance Of The Evidence Standard and To
The Jury’s Consideration Of The “Duration” Of
Petitioner's Misconduct Had Been Timely, The
Arizona Supreme Court Would Not Have Con-
sidered Those Challenges Because Petitioner Failed
to Object to Jury Instructions That Were Directly
Inconsistent With Those Challenges.
Although the Court should deny certiorari on all of
petitioner’s Due Process claims because they were not
raised in a timely manner, Point I.B., the Court should
the judgment or contract the rights of the appellant.” Pet. at 18.
The only case petitioner cites, Maricopa County v. Corporation Com-
mission, 79 Ariz. 307, 289 P.2d 183, 185 (1955), does not support
the proposition that appellees can raise claims on appeal that were
not raised below. Indeed, as Maricopa and other Arizona cases
make clear, even if a claim was raised below, an appellee cannot
rely on that claim on appeal unless the appellee has complied
with additional procedural requirements. If the claim was raised
and rejected below, the appellee cannot “present [that] rejected
claim []” on appeal unless the appellee files “a cross-appeal.”
Maricopa, 289 P.2d at 185. Thus, because appellee’s -claims in
Maricopa had been raised but rejected in the lower court, the
‘ppellate court refused to consider those claims on appeal since “it
was necessary for appellee to cross-appeal by giving notice of
appeal.” Jd. Furthermore, if a claim was raised but not decided
in the lower court, the appellee need not file a “cross-appeal,” but
must nevertheless file a “designation of cross-question presented”
or a “cross-assignment of error” in order to rely on that claim
on appeal. Santanello v. Cooper, 106 Ariz. 262, 475 P.2d 246, 249
(1970) ; Arizona Public Service Co. v. Mountain States Telephone
and Telegraph Co., 149 Ariz. 239, 717 P.2d 918, 922 (Ct. App.
1985).
Furthermore, even if the legal principle stated by petitioner
were correct, it would be inapplicable to petitioner’s constitutional
arguments because acceptance of those arguments would expand
petitioner’s rights under the trial court’s new trial order. In
particular, petitioner would have a right at the new trial to
numerous procedural protections that were not afforded by the
trial court’s order.
16
also be aware that two of petitioner’s Due Process
claims—its challenge to the preponderance of the evidence
standard, Pet. at 25-27, and to the jury’s consideration of
the “duration” of its misconduct, id. at 22—were not
properly before the Arizona Supreme Court for an addi-
tional reason. Petitioner waived these constitutional chal-
lenges by interposing no objection to jury instructions
that were squarely at odds with them.’* Although the
trial court made explicit determinations about the appro-
priate standard of proof and the relevance or irrelevance
of the duration of petitioner’s misconduct, petitioner did
not object to those determinations, or to the jury instruc-
tions that embodied them.
The Arizona Rules of Civil Procedure explicitly provide
that “{n]o party may assign as error the giving . . . of
an instruction unless he objects thereto before the jury
retires to consider its verdict...” Ariz. R. Civ. P.
51(a). Accordingly, it is well established in Arizona
that “[a] failure to object waives the right to attack
such . . . instructions on appeal.” Andrew Brown Co. v.
12 Petitioner did object to any instruction on punitive damages,
on the ground that there was insufficient evidence to allow the
jury even to consider an award of punitive damages. Tr., vol. 5,
pp. 16-19. But the trial court denied that objection, and petitioner
did not then object to the form or content of the court’s punitive
damage instructions concerning the standard of proof or the jury’s
consideration of the duration of petitioner’s misconduct. Accord-
ingly, at trial the jury was instructed without objection that
“Cilf you find by a preponderance of the evidence that the conduct
of the Defendant . . . has been wanton, malicious, oppressive, willful
or in reckless disregard of the rights of others, as those terms have
been defined for you, then, you may in your sole discretion assess
additional damages . . . known as punitive or exemplary dam-
ages ....” Tr., vol. 6, p. 9 (emphasis added). The jury was also
instructed, without objection, that in determining the amount of
any punitive damage award it could consider the defendant’s wealth,
“the harm caused, the duration of any misconduct, the profitability
of any misconduct, and the degree and nature of such Defendant’s
conduct, and the sum which might be sufficient to require such
Defendant to alter its conduct and to deter it, and others from the
same sort of conduct in the future.” Id. (emphasis added).
ee
17
Painters Warehouse, Inc., 111 Ariz. 404, 531 P.2d 527,
530 (1975).
Petitioner’s failure to object to the jury instructions in
this case is especially inexcusable because of the decision
of the Arizona Court of Appeals in Ahmed v. Collins, 23
Ariz. App. 54, 530 P.2d 900 (1975). In Ahmed, the
defendants argued on appeal (as petitioner sought to
argue in the Arizona Supreme Court and here), that “the
method by which the jury was allowed to assess [puni-
tive] damages was unconstitutional.” The court refused
to consider that claim, ruling that “the instructions on
punitive damages were not objected to in the trial court
and defendants cannot now complain.” 530 P.2d at 904.
In view of that recent and controlling decision petitioner
was plainly on notice that its failure to object to the trial
court’s instructions concerning the method by which the
jury would assess punitive damages would constitute a
waiver of its right to challenge on appeal the standard of
proof and the jury’s consideration of the duration of its
misconduct.
II. EVEN IF PETITIONER HAD PROPERLY RAISED
ITS CONSTITUTIONAL CLAIMS BELOW, IT
WOULD BE INAPPROPRIATE TO GRANT CER-
TIORARI.
Even if petitioner had timely raised all of its constitu-
tional claims, and the Arizona Supreme Court had re-
solved all of them against petitioner, this would still not
be an appropriate case in which to grant discretionary
review. Petitioner does not argue that such a decision
would have been in conflict with any other decision, state
or federal, and it would not. Petitioner does not argue
that such a decision would have been directly inconsistent
with any prior decision of this Court, and it would not.
13 F.9., Grant v. Arizona Public Service Co., 183 Ariz. 484, 652
P.2d 557 (1982); Sparks v. Republic National Life Ins. Co., 182
Ariz. 529, 647 P.2d 1127, 1135 (1982), cert. denied, 459 US
1070 (1982); Southern Pacific Transportation Co. v. Lueck, 111
Ariz. 560, 535 P.2d 599, 612 (1975).
18
Moreover, as respondents will now show, such a decision
would not have raised important issues that urgently
require resolution by this Court.
A. Petitioner’s Claim That the Punitive Damage
Award Was Excessive Under the Constitution Does
Not Warrant Discretionary Review.
1. Petitioner’s Eighth Amendment Argument.
After making a deliberate decision that its Eighth
Amendment argument did not even warrant briefing in
the Arizona Supreme Court, petitioner has resurrected
that argument in its petition. Although petitioner’s pur-
suit of that argument here is plainly foreclosed by its
waiver below, even if this were not so it would be inap-
propriate to grant certiorari on petitioner’s Eighth
Amendment claim. Because that claim has been raised
as a tag-a-long issue in Bankers Life and Casualty Co. v.
Crenshaw, No. 85-1765, see note 4 supra, and has been
extensively briefed in that case, respondents here will
only briefly state the reasons why there is no urgent rea-
son to review that issue in the context of this case.
First, petitioner’s Eighth Amendment argument is di-
rectly contrary to this Court’s prior decisions that the
Eighth Amendment is inapplicable to civil proceedings.
Ingraham v. Wright, 480 US 651 (1977) (reasoning
that Eighth Amendment was intended to protect those
“convicted of crimes” and to limit the power of govern-
ment to fine or punish for its own benefit) ; see Appellee’s
Brief in Bankers Life at 27-28.
Second, petitioner’s position has been uniformly re-
jected by the lower courts. See Hart-Anderson v. Hauck,
Civ. No. 85-498 (Mont. March 17, 1987); Downey Sav-
ings and Loan Ass’n v. Ohio Casualty Insurance Co., 234
Cal. Rptr. 835, 852 (Cal. App. 1987); Palmer v. A.H.
Robins, 684 P.2d 187, 217 (Colo. 1984) (en bance);
Unified School District No. 490 v. Celotex Corporation,
6 Kan. App. 2d 346, 629 P.2d 196, 206 (1981) ; Daugh-
mii adhe De heft eM nA ita ate eo ~
19
erty v. Firestone Tire & Rubber Co., 85 F.R.D. 698, 695
(N.D. Ga. 1980); Zhadan v. Downtown L.A. Motors, 66
Cal. App. 3d 481, 136 Cal. Rptr. 182, 144 (1976).
Third, this Court’s decision in Ingraham, and the
unanimous body of lower court decisions, are so clearly
supported by the common law and colonial history of the
Eighth Amendment that there is no need for reexamina-
tion of this issue. Appellee’s Brief in Banker’s Life at
30-35. And see in that case the brief of amici Consumers
Union of U.S., Consumer Federation of America and
National Consumer League at 6-40.
Finally, even if the Excessive Fines Clause did impose
substantive limits on the size of punitive damage awards
to plaintiffs in civil litigation, an award would only be
“excessive” if it was not proportional to the gravity of
petitioner’s offense or deprived petitioner of its means of
livelihood. Appellee’s Brief in Banker’s Life at 37-41.
Because the Arizona Supreme Court applied this test as
a matter of common law, and determined that the jury’s
award was not excessive, acceptance of petitioner’s argu-
ment would not dictate a different result in this case.
2. Petitioner’s Due Process Arguments.
In the first of its many due process arguments, peti-
tioner asserts that the jury’s award was reinstated “only
after an extraordinary exercise by the court below of
judicial gymnastics in which the rules of the game were
changed or ignored wherever necessary in order to rein-
state the excessive award,” and that the alleged impro-
prieties of the Arizona Supreme Court violated the Due
Process Clause. Pet. at 22. In petitioner’s view, these
so-called “gymnastics” included the court’s holding that
the “duration” of petitioner’s misconduct could be con-
sidered in determining the amount of punitive damages
that should be assessed, and deciding that the verdict was
not excessive when that issue allegedly “had not been
presented to the court by respondents.’ Each argument is
meritless.
20
Petitioner’s claim that the Arizona Supreme Court
changed “the rules of the game” by considering the dura-
tion of petitioner’s conduct is remarkable in view of the
fact that the trial court instructed the jury on this very
issue, without any objection from petitioner. Thus, from
the first stage of these proceedings the petitioner knew
the “rules of the game” and accepted them as an accurate
statement of Arizona law. That acceptance is not sur-
prising, because the Arizona courts’ view that duration
of misconduct can be considered in deciding the amount
of punitive damages is a straightforward application of
the well established principle that the egregiousness of a
defendant’s conduct and the amount required to deter
future misconduct are relevant in determining the appro-
priate award."*
Petitioner’s assertion that in sustaining the amount of
the punitive damage award the Arizona Supreme Court
decided issues that were not before it, and thereby denied
petitioner due process, is equally meritless. In challenging
the court of appeals’ conclusion that “the punitive dam-
ages were excessive because there was no proof of the
specific amount of illicit profit made” by petitioner, re-
spondents expressly raised as one of the questions before
the Arizona Supreme Court whether the jury’s “assess-
ment of punitive damages amounting to 314 days net
14 See, e.g., Rubi v. Transamerica Title Ins. Co., 181 Ariz. 403,
641 P.2d 891, 894 (1982); Flieger v. Reed, 120 Ariz. 31, 583 P.2d
1351 (1978); Acheson v. Shafter, 107 Ariz. 576, 490 P.2d 832
(1971) ; RESTATEMENT (SECOND) OF ToRTS § 908 (1979) (purpose
of punitive damages is “to deter him and others like him from
similar conduct in the future”). If a defendant has repeatedly
engaged in certain misconduct for a long period of time, this
misconduct is likely to have generated larger profits, and is more
likely to be ingrained, than isolated misconduct, and the duration
of that misconduct would therefore justify a larger awar’' to
deter similar misconduct in the future. On appeal, petitioner
conceded that “duration of misconduct may be a factor that can be
considered” if the past misconduct is relevant to the misconduct
currently at issue. Response to Petition For Review to Arizona
Court of Appeals at 12.
ni Ss an TaN
or ek ents Sst AF Babette thy sant KE
ee
21
income of the defendant and based upon evidence of a
systematic and profitable scheme of misconduct affecting
many people’’ could be upheld even without evidence of
the specific amount of petitioner’s illicit profit. Pet. App.
71a, 67a. In its briefs in the Arizona Supreme Court,
petitioner did “not take issue with the principle that a
jury may determine the amount of punitive damages upon
sufficient evidence,” but argued at length that the jury’s
award of $3.5 million in punitive damages was “unsup-
ported by the evidence.” Appellee’s Supplemental Reply
Brief at 2; see Supplemental Brief of Appellee at 31-34
(arguing that “the evidence does not support the jury’s
$3.5 million punitive damage award”).
On this record, it is difficult to understand the basis
for petitioner’s claim that the Arizona Supreme Court
violated petitioner’s constitutional rights in deciding
whether the jury verdict was excessive. Petitioner seems
to be implying that the Arizona Supreme Court simply
manipulated the law and the issues before it in an
unprincipled effort to uphold the punitive damage award.
This implication is completely unsupported by the record,
and is frivolous in view of the Arizona Supreme Court’s
history of carefully scrutinizing punitive damage awards
in insurance bad faith cases.®
B. Petitioner’s Claim That Punitive Damages Can
Only Be Imposed If Every Constitutional Safe-
guard Available in Criminal Trials Has Been
Provided Does Not Warrant Discretionary Review.
Petitioner’s suggestion that the “constitutional protec-
tions due to defendants in criminal cases” must be af-
forded to defendants in civil cases before punitive dam-
15The Arizona Supreme Court has struck down virtually every
punitive damage award it has reviewed in insurance bad faith
cases. See Gurule v. Illinois Mutual Life & Cas. Co., 735 P.2d 85
(Ariz. 1987) ; Filasky v. Preferred Risk Mutual Ins. Co., 735 P.2d
76 (Ariz. 1987); Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d
565 (1986) ; Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326,
723 P.2d 675 (1986).
22
ages can be awarded has been uniformly rejected by the
lower courts.’* Furthermore, even if petitioner’s claim
16 Hansen v. Johns-Manville Products Corporation, 734 F.2d 1036,
1042 (5th Cir. 1984) (holding double jeopardy clause inapplicable to
punitive damage award to private litigant because the determina-
tion in such a proceeding “does not carry with it the consequences”
necessary for a proceeding to be deemed “essentially criminal,” the
defendant would “not suffer the stigma normally accompanying
criminal proceedings,” and “this is not an action brought by the
state, but one brought by a private individual”), cert. denied, 470
US 1051 (1985); Downey Savings & Loan Ass’n v. Ohio Casualty
Ins. Co., 234 Cal. Rptr. 835, 852 (Cal. App. 1987) (rejecting de-
fendant’s contention that imposition of punitive damage award
without safeguards present in criminal proceedings was a denial
of due process, because punitive damage action was civil rather
than criminal in nature) ; McDermott v. Kansas Public Service Co.,
238 Kan. 462, 712 P.2d 1199, 1203 (1986) (rejecting claim that
punitive damage award violated due process because of its allegedly
quasi-criminal nature); Brotherton v. Celotex Corp., 202 N.J.
Super. 148, 493 A.2d 1337, 1344-45 (1985) (rejecting claim that
punitive damage award “constitutes criminal punishment requiring
constitutional guarantees,” because court could find “no case law
supporting these propositions,” and award of punitive damages
did not involve finding that defendant violated criminal laws, no
stigma attached to punitive award, and the action was privately
filed and funded); Peterson v. Superior Court, 181 Cal. Rptr. 784,
642 P.2d 1305 (Supr. Ct. 1982) (rejecting claim that ex post facto
clause was applicable to civil case involving punitive damages,
because “[t]he potential punitive damage award in this case is
unquestionably a penalty civil in nature. There is no possibility
of the stigma of a-criminal conviction nor the potential loss of
personal freedom.”); Unified School District No. 490 v. Celotex
Corp., 6 Kan.App.2d 346, 629 P.2d 196, 206 (1981) (holding that
imposition of punitive damages did not violate constitutional guar-
antee of due process or defendant’s right to protection against
double jeopardy, reasoning that the imposition of punitive damages
“does not approach the severity of criminal sanctions and does
not demand the same safeguards as do criminal prosecutions”) ;
Grimshaw v. Ford Motor Co., 119 Cal.App.3d 757, 174 Cal. Rptr.
848, 383 (1981) (rejecting claims that ex post facto and double
jeopardy prohibitions were applicable to award of punitive dam-
ages in civil case); Gibson v. Gibson, 15 Cal.App.3d 943, 93 Cal.
Rptr. 617, 621 (1971) (rejecting claim that “due process principles
regarding incompetent counsel in criminal proceedings should be
transported into civil proceedings” involving punitive damages) ;
ea Dae hdeaeh Caan NE
we Nie
enone tory Wenn or enon
23
did raise substantial constitutional questions, it would be
inappropriate to review those questions in the posture
they are presented here. Instead of arguing that it was
denied a particular constitutional right, and seeking
review of that discrete issue, petitioner asserts that every
constitutional right provided in criminal proceedings must
be afforded in civil cases when punitive damages are
sought. This blunderbuss claim therefore encompasses
an extraordinarily broad range of criminal procedures
and rules, including the right against double jeopardy,
the right of confrontation, proof beyond a reasonable
doubt, trial by jury (and associated rights concerning the
size of the jury and the need for a unanimous verdict),
the right to effective assistance of counsel, the right to
a speedy trial, the right against self-incrimination, and
many others.
As this Court has often explained, “[e]ach constitu-
tional rule of criminal procedure has its own distinct
functions, its own background of precedent, and its own
People v. Superior Court, 115 Cal. Rptr. 812, 819 (Supr. Ct. 1974)
(availability of punitive damages “does not convert a civil action
into a criminal action” and privilege against self-incrimination
is inapplicable to that action); Toole v. Richardson-Merrell Inc.,
60 Cal. Rptr. 398, 417-18 (Ct. App. 1967) (rejecting claim that
imposition of punitive damages in civil case was unconstitutional
because defendant received only six peremptory challenges, a
unanimous verdict was not required, the vote of nine jurors was
allowed to impose a penalty, and defendant was denied the pre-
sumption of innocence). See generally United States v. Ward, 448
US 242 (1980) (provision in Federal Water Pollution Control
Act authorizing penalty payable to government “revolving fund”
of up to $5,000 for each violation of Act, which was assessed by
considering the size of the business, the effect on the owner’s ability
to continue in business, and the gravity of the violation, was a
civil penalty and Fifth Amendment’s protection against self-
incrimination was inapplicable); Sedima, S.P.R.L. v. Imrezx Co.,
473 US 479 (1985) (expressing doubts that plaintiff in civil action
under Racketeer Influenced and Corrupt Organizations Act must
prove that predicate criminal offenses for RICO violation were
committed “beyond a reasonable doubt” despite availability of
treble damages if plaintiff prevailed).
24
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 US
719, 728 (1966); accord Brown v. Louisiana, 447 US
323 (1980). For example, as we have explained, the
Eighth Amendment is clearly inapplicable to punitive
damage awards to private litigants, because the historical
function of that Amendment has been to afford protection
against the government.’ Similarly, this Court has ruied
that some of the criminal protections available to individ-
ual criminal defendants are “personal” rights and are
not available to corporate entities.“ Rather than deciding
whether these procedures should be imposed en masse in
civil proceedings in which private litigants seek punitive
damages from corporate entities, if this Court decides to
review these constitutional issues it should do so in cases
where specific procedures have been requested and have
been at issue, so the Court can carefully consider the his-
tory and function of each specific procedure and its appli-
eability to proceedings seeking punitive damages from
corporate entities.
This approach is dictated not only by the distinct his-
tories and functions of different criminal procedures, but
also by considerations of judicial restraint. Acceptance
of petitioner’s draconian position would have extraordi-
17 Cf. Criminal Safeguards and the Punitive Damages Defendant,
84 U. CHI. L. REv. 408, 430-31 (1967) (“Of the many policies
which authorities have suggested as underlying the privilege
against self-incrimination, several reflect a common fear of abuse
of government power through the criminal process.”).
18 Petitioner’s claim assumes, for example, that a corporate
entity can invoke the right of an individual criminal defendant
not to incriminate himself. This Court has ruled to the contrary.
California Bankers Ass’n v. Shultz, 416 US 21 (1974); ef. Koway
Enterprises, Inc. v. Pennsylvania Public Utility Commission, 85
Pa. Comm. 1, 480 A.2d 1317 (1984) (holding that Cruel and
Unusual Punishment Clause does not protect corporations); see
generally First National Bank of Boston v. Bellotti, 485 US 765,
778-79 n.14 (1977) (“certain ‘purely personal’ [constitutional]
guarantees ... are unavailable to corporations”).
25
nary consequences for state tort systems.’® To provide
only a few of countless possible examples: (1) If the
Double Jeopardy Clause were applicable to all civil cases
in which punitive damages were sought (encompassing
a very bread range of conduct regulated by the common
law), governmental law enforcement efforts to challenge
the same or related conduct would be significantly im-
peded. To avoid having criminal prosecutions (or civil
cases seeking punitive damages) foreclosed by other pro-
ceedings to which “jeopardy” attaches, law enforcement
officials (and private litigants) would be forced to en-
gage in a “race to the courthouse.” (2) Because plain-
tiffs can ordinarily seek punitive damages only in civil
cases in which compensatory or other damages are avail-
able, and because criminal safeguards are not even argu-
ably required before these other damages can be awarded,
acceptance of petitioner’s position would require radical
changes in the conduct of civil cases where punitive dam-
ages are sought. Although criminal safeguards would
be required on the punitive damages issues, the other
issues would be governed by the procedures traditionally
employed in civil cases: thus, lower courts and juries
would have to apply one set of rules for punitive dam-
ages. claims and different rules for the plaintiff’s other
claims (e.g., a less than unanimous verdict would be per-
missible on the other claims, different standards of evi-
dence would apply, etc.) .
In short, the unprecedented path on which petitioner
asks this Court to embark would require wholesale revi-
sion of state tort systems by the judiciary (at a time
19 See generally Silkwood v. Kerr-McGee Corp., 464 US 238,
255 (1984) (recognizing that “[p]unitive damages have long
been a part of traditional state tort law’).
2° Similarly, a civil plaintiff’s ability to take discovery—even
with respect to its claim for compensatory damages—would be
significantly impeded, because no individual could be compelled to
provide information that could arguably subject him to a puni-
tive damage award and ihus violate his right against “self-
incrimination.”
26
when the legislative and electoral process is actively con-
sidering the wisdom of legislating procedural and sub-
stantive changes).2! Even if the Court decided it was
essential to address some of these constitutional issues
now, instead of waiting until this nationwide legislative
debate is completed, it would be appropriate to do so in
a cautious and careful manner. For this reason, the
Court should decline to review petitioner’s effort to raise
all of those issues here.
Finally, it would be inappropriate to allow petitioner
to raise the applicability of any of these criminal pro-
cedural protections, all of which apply at the trial level,
because petitioner did not request any of these proce-
dural protections at trial. Petitioner never claimed below
(or even here) that respondents’ lawsuit actually sub-
jected petitioner to double jeopardy or forced petitioner
to incriminate itself, or violated petitioner’s right to a
speedy trial. Petitioner did not object to jury instruc-
tions embodying the civil standard of proof, the size of
the jury (eight) would have been constitutionally suffi-
cient even in a criminal case,2* and the jury’s verdict
was, in fact, unanimous. Tr., vol. 6, pp. 10, 138.
C. Petitioner’s Claim That Even In Civil Cases The
Due Process Clause Requires “Clear and Convinc-
ing Evidence” Before Punitive Damages Can Be
_— Imposed Does Not Warrant Discretionary Review.
Although petitioner did not object when the trial judge
instructed the jury that punitive damages could be
awarded if the requisite showing was made by a “pre-
21 Art. 2 Section 31 and Art. 18 Section 6 of the Arizona Consti-
tution prohibit statutory limitations on the amount of damages
that can be recovered for injuries. A referendum initiative, Propo-
sition 103, that would have amended the Constitution to permit
legislative restrictions on the amount. of punitive damage awards
was defeated by the electorate at the Fall, 1986 election.
22 Williams v. Florida, 399 US 78 (1970) (upholding consti-
tutionality of six person jury in criminal cases); see Ballew v.
Georgia, 4835 US 223 (1978).
ee nd
27
ponderance of the evidence,” petitioner now claims that
the Due Process Clause requires the “clear and convinc-
ing” standard of proof even in civil proceedings, before
punitive damages can be imposed. Relying on cases in
which the Court required this higher standard to be met
before the government could permanently terminate pa-
rental rights,** and before the government could involun-
tarily commit an individual to a mental institution for
a potentially unlimited period of time,” petitioner argues
that a multi-billion dollar corporation being sued for pu-
nitive damages by one of its insureds is entitled to the
same heightened protection.
Even if the Arizona Supreme Court had considered
this constitutional claim and had resolved it against pe-
titioner, that decision would not be appropriate for re-
view because any decision by this Court would directly
affect only petitioner, and would not affect any other
persons subject to the jurisdiction of the court below.
Rice v. Sioux City Memorial Park Cemetery, 349 US 70,
79 (1954) (““t is very important that we be consistent
in not granting the writ of certiorari except in cases
involving principles the settlement of which is of im-
portance to the public as distinguished from that of the
parties’”) (quoting Layne & Bowler Corp. v. Western
Well Works, Inc., 261 US 387, 398 (1923)). Because
the Arizona Supreme Court has now decided, as a matter
of common law policy, that all future punitive damage
cases in that state will be governed by the “clear and
convincing” standard, this issue is no longer of impor-
tance in the only jurisdiction bound by decisions of the
Arizona Supreme Court. See Linthicum v. Nationwide
Life Ins. Co., 150 Ariz. 326, 723 P.2d 675 (1986).
It would also be inappropriate for the Court to review
petitioner’s claim concerning the standard of proof in
order to resolve this issue immediately and establish a
binding constitutional rule for other jurisdictions. In
23 Santosky v. Kramer, 455 US 745 (1982).
24 Addington v. State of Texas, 441 US 418 (1979).
28
contrast to petitioner’s other constitutional arguments,
respondents are aware of no lower court case in any
jurisdiction that has decided this constitutional claim.
The doctrine of judicial restraint teaches that this issue
can most appropriately be resolved by first allowing the
lower courts to consider and address different arguments
concerning this issue, and thereby develop an informed
body of case law this Court can look to if it ultimately
proves necessary to review this issue. See, e.g., McCray
v. New York, 461 US 961, 963 (1983) (Opinion of
Stevens, J., joined by Blackman, J., and Powell, J., re-
specting denial of several certiorari petitions) (denying
certiorari “to allow the various States to serve as labor-
atories in which the issue receives further study before
it is addressed by this Court”). This is especially true
in the circumstances of this case, for if the insurance
industry is successful in persuading lower courts, as a
matter of common law, or state legislatures, as a matter
of policy, to adopt a clear and convincing evidence stand-
ard, it will not be necessary for this Court to consider
petitioner’s constitutional argument.**
D. Petitioner’s Claim That The Due Process Clause
Requires That Common Law Rules Restricting the
Imposition of Punitive Damages Be Applied To
All Civil Cases Pending on Appeal Does Not War-
rant Discretionary Review.
Petitioner’s final constitutional challenge to the puni-
tive damage award is based on the fact that after adopt-
ing the “clear and convincing” standard as a matter of
common law in Linthicum v. Nationwide Life Insurance
Co., 150 Ariz. 326, 723 P.2d 675 (1986), the Arizona
Supreme Court declined to apply that standard to this
case, even though this case was argued on the same day
as Linthicum. Petitioner states that “[i]t would be diffi-
cult to posit two cases in which two similarly situated
25 See Pet. at 25-26 & nn. 9 & 10 (indicating that four state
courts have modified the common law on policy grounds, and six
states have passed legislation, to impose a heightened standard
of proof in punitive damage actions).
29
defendants had been subjected to more disparate treat-
ment ....” Pet. at 28. Petitioner argues that under
the principle established by this Court’s decision in
Griffith v. Kentucky, 98 L Ed 2d 649 (1987), it is un-
constitutional for a state court not to apply a common
law restriction on punitive damages to civil cases pend-
ing on appeal. Id.”*
In claiming that it was treated differently from the
defendant in Linthicum, petitioner has neglected to men-
tion a crucial fact. The Arizona Supreme Court found
the evidence before it in Linthicum insufficient to justify
punitive damages, but it did not reach that result because
of its application of a higher standard of proof. Instead,
the court expressly stated that the evidence was insuffi-
cient to permit punitive damages “irrespective of whether
the burden of proof is clear and convincing evidence or
the lesser standard of a preponderance of the evidence.”
723 P.2d at 681 (emphasis added). Thus, there is no
factual basis for petitioner’s claim that it was a victim
of “disparate treatment.”
Furthermore, even if there were a factual basis for
petitioner’s claim, petitioner’s legal claim does not present
a substantial issue. In Griffith, this Court held that the
constitution requires that new rules governing “the con-
duct of criminal prosecutions” must be applied retro-
actively to pending cases. 93 L Ed 2d at 661 (emphasis
added). At the same time, the Court expressly reaffirmed
the well established and quite different rule for civil
cases, stating that “the area of civil retroactivity ...
continues to be governed by the standard announced in
Chevron Oil Co. v. Huson, 404 US 97, 106-107 (1971).”
26 Petitioner also briefly suggests that if the Court addresses
the tag-a-long issue in Bankers Life and holds that “the Eighth
Amendment applies to . . . punitive damage awards in civil cases,”
the Court will need to decide the applicability of that holding to
this case. Pet. at 28. As explained earlier, however, no Eighth
Amendment issue is properly raised in this case because petitioner
expressly waived its Eighth Amendment claim in the court below.
Point I.A.
30
93 L Ed 2d at 657 n.8. That is the standard the Arizona
Supreme Court applied. 733 P.2d at 1087; Pet. App. 25a.
Because the lower courts have uniformly rejected con-
tentions that cases seeking punitive damages must be
treated like criminal cases, see Point II.B, supra, there is
no need to reexamine the lower court’s decision to apply
Huson’s civil test here.*"
CONCLUSION
For the foregoing reasons, the petition for certiorari
should be denied.
Respectfully submitted,
BRUCE J. ENNIS, JR. *
KiT ADELMAN-PIERSON
PAUL R. FRIEDMAN
ENNIS FRIEDMAN & BERSOFF
1200 17th Street, N.W.
Washington, D.C. 20036
202-775-8100
ROGER O’SULLIVAN
7007 East Indian School Road
Scottsdale, Arizona 85251
602-947-4333
Attorneys for Respondents
* Counsel Of Record
27 Applying the Huson test, the Arizona Supreme Court held
that the Linthicum rule need not be applied retroactively. Peti-
tioner has not argued here that the Arizona Supreme Court incor-
rectly applied the three prongs of the Huson test. In particular,
the Arizona Supreme Court ruled that retroactive application of
the Linthicum rule was not compelled by the policy underlying
that rule. 733 P.2d at 1087; Pet. App. 26a. The Arizona Supreme
Court was of course well acquainted with the policy considerations
that led it to adopt the Linthicum rule as a matter of Arizona
common law, and was therefore best situated to determine whether
those policy considerations required retroactive application of that
common law rule in this case.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.