Petition for Writ of Certiorari — Combined Insurance Co. of America v. Ainsworth

AUG 17 1989

No. 89- JOSEPH F. sp

| CLERK Ob Ue

IN THE ae

Supreme Court of the Gnited States

OCTOBER TERM, 1989

COMBINED INSURANCE COMPANY OF AMERICA,

Petitioner,

V.

THOMAS AINSWORTH,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE SUPREME COURT OF NEVADA

*STEPHEN L. MorRIS

M. KRISTINA PICKERING

Of Counsel: LIONEL SAWYER & COLLINS

1700 Valley Bank Plaza

CHARLES ALAN WRIGHT 300 South Fourth Street

727 East 26th Street Las Vegas, Nevada 89101

Austin, Texas 78705 (702) 383-8888

(512) 471-5151

GEOFFREY C. HAZARD, JR.

127 Wail Street .

New Haven, Connecticut 06520

(203) 432-4971 °

Attorneys for Petitioner

*Counsel of Record

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

cm ewe

Cl ee Pee, eee Oe ae, i ele eek a a eee, Ce RO ee

QUESTION PRESENTED

Does the Due Process Clause permit states to give

juries unlimited discretion to award punitive damages

without established standards on how those damages

are to be measured?*

* The caption names all parties to this case. Pursuant to Rule

28.1 of the Rules of this Court, the following is a list of all

parent companies, non-wholly owned subsidiaries, and affiliates

of Combined: Aon Corporation is the parent of Combined. Com-

bined’s affiliates and subsidiaries are Associated Home Life In-

surance Company, FFRL Re Corp., Forth Financial Resources

of Alabama, Inc., Lombard Ryan Dealer Services Limited, Ni-

cholson Chamberlain Colls Limited, Production Life Insurance

Company, Oak Brook Holding, Inc., and Comprehensive Health

Consultants, Inc.

ii

TABLE OF CONTENTS

OPINIONS BELOW ...............cccssccessecssceessseescesoesesees

JURISDICTION ..ccccccsccsscecscvescnsccccsccsscsssccvscessncsscesenes

CONSTITUTIONAL PROVISION INVOLVED ...........

STATEMENT OF' THE CASE ........... icntnbintnannesqanthnes

Be. Tie FG... svenessscsecsicinssevessvkasacasssssssvenpitnewneess

B. The Trial Court’s Judgment Notwithstanding

C.

Trine WENGIIN, ‘-<:ic cicustnntheciedcbuuomasess nenemnneeaiunsas

The Proceedings In The Nevada Supreme

CORE... scniccanasiscaieseninnheaneimadabatibasnbddeeianannteineeny

1. The Constitutional Issues. ...................00+

2. The Decisions of the Nevada Supreme

Court Reinstating the Jury’s Verdict and

Directing the Entry of Jolavamnt Against

COMMIOE, inc inexcncsscssratnvinagssdeneeablnaeianns

8. The Rejection by the Nevada Supreme

Court of Combined’s Constitutional Claim

Under the Due Process Clause. .............

D. The Proceedings Before The Nevada Legis-

Se ae ener en Meera Ek LCST HPCE aN

REASONS FOR GRANTING THE WRIT ...............4.

A. This Case Meets The Expressed Criteria Of

This Court For Review Of The Constitution-

alit. Of Disproportionate, Standardless Pu-

nitive Damage Awards. ........ccccceseeeeeeeeeeeeees

Standardless Awards Of Punitive Damages

Lead To Excessive Awards Wholly Dispro-

portionate To The Offense Or Actual Dam-

ages That Give Rise To Them. ..................

C. Standardless Awards Of Punitive Damages

Deny Due Process Of Law To Targeted

TORING. sc cincssneccsdssacepeinnucs tesa vitdettinetiebinene

CONCLUSION ...ccccccsccscccsssccccccscsccsccscsscsecsscsonsscssesetes

15

18

19

23

—

ili

TABLE OF AUTHORITIES

Cases Pages

Ace Truck & Equipment Rentals, Inc. v. Kahn, 103

Nev. 503, 746 P.2d 182 (1987) ................. 8,10,11,21

Aetna Life Insurance Co. v. Lavoie, 475 U.S. 813

SEES eee ema passim

Bankers Life & Casualty Co. v. Crenshaw, 486 U.S.

TT MIE, BOUT CRONE) vcccsccccnscccesnsscsessescess passim

Batesel v. Schultz, 91 Nev. 553, 540 P.2d 100

iret naiAeaiddbhaeendnadesiccadensespidnnaceiesedvenerese 9

Browning-Ferris Industries, Inc. v. Kelco Disposal,

Beg BO Wis Sie IO CRUD) cacccrcecceccssccacceecess passim

Central Alabama Electric Cooperative v. Tapley,

1989 WL 67556 (Ala. May 12, 1989) (not yet

released for publication) ...... Siihisdebulladibintsantinkss 16

Curtis Publishing Co. v. Butts, 388 U.S. 130

ge RRR pa RAR 9,16,17

Daniels v. Williams, 474 U.S. 327 (1986) ............. 22

Day v. Woodworth, 54 U.S. (138 How.) 363

I NNN iis tink annadaithoneanhdasdndadnsrantacnnesess 9,16,17

Desert Chrysier-Piymouth, Inc. v. Chrysler Corp.,

95 Nev. 640, 600 P.2d 1189 (1979), cert. de-

SRN MN RT ROD acs ccscsccnnsrescnccncrcancnce 9

Downey Savings & Loan Ass’n v. Ohio Casualty

Insurance Co., 189 Cal. App. 3d 1072, 234 Cal.

Rptr. 835 (1987), cert. denied, 108 S. Ct. 2023

SENN Aiabuibdchianaieiaiidinabeadchasabtabstaghiniciinearinncecs 9,17

Elam v. Aleolac, Inc., 765 S.W.2d 42 (Mo. App.

1988), pet. for cert. filed, 58 U.S.L.W. 3013

(June 8, 1989) (No. 88-1992) ........eeeeeeees 18

Federal Deposit Insurance Corp. v. W. R. Grace &

Co., 691 F.Supp. 87 (N.D.Ill. 1988), affd in

part and rev'd in part, 877 F.2d 614 (7th,Cir.

SI INU Ulichdilaciisnatndions kinhahasdndbineupinphinaneesanssweene 16

Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974) . 16,22

iv

Table of Authorities Continued

Giaccio v. Pennsylvania, 382 U.S. 399 (1966) .......

Goldsworthy. v. Johnson, 45 Nev. 355, 204 P. 508

CE wiecnsniccsninccchaccesssiastbenppiavetniennerecsesdesascesese

al

Guy v. Commonwealth Life Insurance Co., 698

F.Supp. 1805 (N.D. Miss. 1988) ................:

Hathorn v. Lovorn, 457 U.S. 255 (1982) ...........04.

Hires v. Republic Insurance Co., Case No. 87-2917,

Second Judicial District Court in and for the

et OT I ak cn aia nskenienmnannanadeeinenns

Horowitz v. Schneider National, Inc., 708 F.Supp.

1E7S CD. Wye. WEBB) ....ccccccrceccscorerascrrosccrcscecsseee

In re Murchison, 349 U.S--133 (1955) ...............066

In re School Asbestos Litigation, 789 F.2d 996 (8rd

Cir.), cert. denied, 479 U.S. 915 (1986) ..........

International Brotherhood of Electrical Workers v.

Fowmst, 442 UB, 22 (EGER) ccciicssccceccccssenccesessese

Jordan v. Clayton Brokerage Co., 861 F.2d 172 (8th

Cir. 1988), pet. for cert. filed, 57 U.S.L.W. 3696

(March 8, 1989) (No. 88-1483) .........cccceeeeeeeeees

Juzwin v. Amtorg Trading Corp., 705 F.Supp. 1053

CED, RUMI ascinsnsncecunsegeetansineapncsnnseitnnpenndnsens

Kociemba v. G. D. Searle & Co., 707 F.Supp. 1517

CE, TID: hess senses ancstaintesencniinesssnanianeastscess

Kraus v. Sante Fe Southern Pacific Corp., 1989 WL

71790 (9th Cir. July 3, 1989) ..........c.cceseeeees

Leonen v. Johns-Manville Corp., 1989 WL 75938

(DIN. Teliy B,, TID) nsccncecsnescsnseercscanccescerseccees

Lightenburger v. Gordon, 89 Nev. 226, 510 P.2d

865, cert. denied, 414 U.S. 1039 (1978) .........

Liljeberg v. Health Services Acquisition Corp., 108

. CR. SERIE CRD ccc eniscercncsenccensescccvccseseeceenecees

Long v. Flanigan Warehouse Co., 79 Nev. 241, 382

I IE TD Satbitinccinsnninenisiianssnssinaceccininsatenn

ate ca RA RBS <a aE

Table of Authorities Continued

Page

Longview Fibre Co. v. Jeannette Paper Co., 378 Pa.

Super. 148, 548 A.2d 319 (1989), pet. for cert.

filed, 58 U.S.L.W. 3021 (June 17, 1989) (No.

DP EIEED cuntcendwbnideliuciine 18

Miller v. Cudahy Co., 858 F.2d 1449 (10th Cir.

1988), cert. denied, 109 S. Ct. 3265 (1989) .... 16

Miller v. Schnitzer, 78 Nev. 301, 371 P.2d 824

Ge RECT NS, EELS aceite aie ee aya 21

Natchez v. Board of Optometry, 102 Nev. 247, 721

fF CERT IS ee ear ee 9

Nelson v. Sierra Construction Corp., 77 Nev. 334,

SE We Me MED eeccc nich abheenctieisnateseccsihtcs.. 7

Nevada Cement Co. v. Lemler, 89 Nev. 447, 514

an ME III paced nice a 4,19

Neu York ex rel. Bryant v. Zimmerman, 278 U.S.

FUE EN Gutbuhakses sitenidcchcsheaaacuitsatandatoicanassdaaentincitle ds. &

O'Gilvie v. International Playtex. Inc., 821 F.2d

1438 (10th Cir. 1987), cert. denied, 108 S. Ct.

| Cabarete SNS 9

Olson v. Walker, 1989 WL 71606 (Ariz. App. June

nis, EE sc tadlabbiainetusambicrweniacelndencunibseamandanitee see 16

Potomac Electric Power Co. v. Smith, 79 Md. App.

Ok, Pe Te CRD Sovvetcctnicintaccdtntiees 16

Radell v. Comora, 259 Cal. Rptr. 891 (Cal. App.

UE Ri, ND eiceieineecibeensiendaasocdideripieinaienniicihahseteaiiias 16

Roberts v. United States Jaycees, 468 U.S. 609

GUTED ourechncnbekunsiidaiesubiasnindbiniadhnenehilamenintiheliahilinddsa 20

Smith v. Wade, 461 U.S. 30 (1988) wu. 9,17

St. Louis, I. M. & S. R. Co. v. Williams, 251 U.S.

Ce ION cessaslsiianiicaiiblinlpetclianeeiaiandiailiheitsilai 18

Summitt v. Nevada, 101 Nev. 159, 697 P.2d 1374

CRIED srbevnseesbiinciecabiocinenaishs iedaiiitiiiladibiibiaitinanee 9

Swartz v. Adams, 983 Nev. 240, 563 P.2d 74

hs. RIT thaleny pee NE We ON fe COMI ay DELO aN mC TER 9

vi

Table of Authorities Continued

Ulster County Court v. Allen, 442 U.S. 140

MUTI oh:si sinc cinkenksitccdsenanneniabatieicinesninnetianaaseeseee 9

United States v. American Railway Express, 265

re MED MINED ckcsacnnentarecsnscccesnessnessencnensescccess

United States v. Batchelder, 442 U.S. 114 (1979) .. 19

Waters-Pierce Oil Co. v. Texas, 212 U.S. 86

~]

EES DEIN ERE enc ae ERR 18

Williams Pipe Line Co. v. City of Mounds View,

704 F.Supp. 914 (D.Minn. 1989) ...........: eee 17

United States Constitution

UE’ os sash snusuipeanenen bases 2

Statutes & Court Rules

28 United States Code § 1257(a) ..............cccceeeeeeees 2

California Probate Code § 10381 (West 1988) ....... 18

Nevada Constitution, article IV, § 2 ............... 13

Nevada Revised Statute § 42.010 (1988) ............... 45,19

Nevada Revised Statute § 686A.183(a)(1) .............. 18

Nevada Revised Statute § 686A.310 ........... ee 18

Nevada Assembly Bill 307 (1989) ....-.........c.se8 5,14,16,18

Nevada Pattern Jury Instructions 10.20 (Michie

a co cesannununnenessannentensac 4,18

Nevada Supreme Court Rule 10 ...........eeee sonia 13

Nevada Rule of Appellate Procedure 28(b) ....... a 8

Nevada Rule of Appellate Procedure 31(d) ............ 8

Articles, Studies, and Other Authorities

American College of Trial Lawyers, Report of the

Task Force on Litigation Issues 4 (1986) ....... 22

a ee tec aa acti, eae ae

vii

Table of Authorities Continued

Levine, Demonstrating and Preserving the Deter-

rent Effect of Punitive Damages in Insurance

Bad Faith Actions, 13 U.S.F. L. Rev. 613

CRITE Slladhbeis us baissneciancnuidaicaiabliaibaeibnindecoetbligantsans

Lucas, Damages, 53 Nev. St. B.J. 11-12 (Dec.

RAT sibeseathisibcintiilabhiaitinkadppshatas snhiaiiieniciaadlecdbedbctar sicatenes

M. Peterson, S. Sarma, & M. Shanley, Punitive

Damages: Empirical Findings (Rand 1987) ....

Owen, Civil Punishment and the Public Good, 56

a eS “2 2. eerie erin

Sella, The 10 Largest Jury Verdicts of 1988, 75

PAR. ID IEE sanietichibshntadiacieitgigaidahesnaeiinianen

Tort Policy Working Group, An Update on the Li-

ability Crisis (U.S. Dept. Justice 1987) .........

Wheeler, The Constitutional Case for Reforming Pu-

Page

20

nitive Damages, 69 Va. L. Rev. 269 (1983) ... 17,21

ee

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1989

No. 89-

—

COMBINED INSURANCE COMPANY OF AMERICA,

Petitioner,

v.

THOMAS AINSWORTH,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE SUPREME COURT OF NEVADA

~

The petitioner, Combined Insurance Company of

America, respectfully prays that a writ of certiorari

issue to review the judgment of the Supreme Court

of the State of Nevada, reinstating a $5,939,500 pu-

nitive damage award in a $9,600 insurance dispute

and rejecting petitioner’s contention that the award

violates Due Process of Law.

OPINIONS BELOW

The Nevada Supreme Court issued two opinions.

The first is reported at 104 Nev., Adv. Op. 92, 763

P.2d 673 (1988). The second is reported at 105 Nev.,

Adv. Op. 58, 774 P.2d 1003 (1989). Both are reprinted

in the appendix. App. la, 60a. The trial court’s order

granting judgment notwithstanding the verdict, which

the Nevada Supreme Court reversed, is unpublished.

App. 71a.

Remittitur issued the day the Nevada Supreme

Court filed its second opinion, and the district court

entered judgment against Combined in conformity

therewith. App. 8la. The Nevada Supreme Court de-

nied Combined’s motion to recall remittitur and stay

execution. On. June 15, 1989, Justice O’Connor

granted Combined’s application for a stay of execu-

tion, conditioned on Combined posting a bond. App.

83a. After litigation over its amount and terms, the

Nevada Supreme Court accepted the bond Combined

tendered. App. 84a.

JURISDICTION

The Nevada Supreme Court entered its original de-

cision on October 26, 1988. Both petitioner and

respondent filed timely petitions for rehearing, which

were denied on May 19, 1989. This petition has been

filed within ninety days of that date. Jurisdiction ex-

ists under 28 U.S.C. § 1257(a).

CONSTITUTIONAL PROVISION INVOLVED

The Due Process Clause of the Fourteenth Amend-

ment provides, in pertinent part:

(Njor shall any State deprive any person of

... property, without due process of law.

STATEMENT OF THE CASE

This case presents much the same facts as Aetna

Life Insurance Co. v. Lavote, 475 U.S. 813 (1986),

and Bankers Life & Casualty Co. v. Crenshaw, 486

U.S. 71, 108 S. Ct. 1645 (1988). It differs from them

and from Browning-Ferris Industries, Inc. v. Kelco

Disposal, Inc., 109 8. Ct. 2909 (1989), however, in

that it comes to the Court with the Due Process issue

first having been debated before and resolved by the

Nevada legislature and that state’s highest court. The

issue described as “‘important’”’ in Aetna, 475 U.S. at

828, “worthy of the Court’s attention,” in Bankers

Life, 108 S. Ct. at 1655 (O’Connor & Scalia, JJ, con-

curring), and expressly left open by Browning-Ferris,

109 S. Ct. at 2921, deserves to be decided. It is

squarely and properly presented by this case.

A. The Facts.

Much as in Bankers Life, this case began as a dis-

pute between an insurer and its insured over medical

evidence of arteriosclerosis and coverage under a pol-

icy that insured against ‘‘accidents’’ but excluded in-

juries ‘‘caused or contributed to by disease.”

Combined’s insured, Thomas Ainsworth, suffered a

stroke while undergoing an angiogram. Relying on

the advice of its outside medical consultant and state-

ments by Mr. Ainsworth’s physician in the original

claim form, the company concluded that arterioscle-

rosis had caused the stroke. Combined viewed arter-

iosclerosis as a disease, and it denied Mr. Ainsworth’s

claim. It stood by its denial despite Mrs. Ainsworth’s

several supplemental submissions and requests for re-

consideration. Finally, Combined offered to compro-

mise the disputed claim at 20% of its face value, an

offer the Ainsworths declined. The policy benefits at

issue were $9,600.

B. The Trial Court’s Judgment Notwithstanding The

Verdict.

At the close of the evidence the trial judge denied

Mr. Ainsworth’s motion for a directed verdict, saying

that whether his claim was covered by Combined’s

policies was an issue of fact for the jury to decide.

After expressing some doubt about doing so, the trial

judge overruled Combined’s objection to giving the

jury an instruction on punitive damages. She said:

I can think of a million reasons why I

shouldn’t do what I’m about to do, but I have

to be cognizant of the purpose of the instruc-

tion for punitive damages, as well as the law

that has been cited to me by the attorneys

in this case ... and I will find that the giving

of a punitive damage instruction is appro-

priate, and I will give the instruction.

Her instruction correctly stated Nevada law. It ad-

vised the jury that to award punitive damages they

had to find ‘‘oppression, fraud or malice, express or

implied.”’ Instruction No. 24, App. 188a; see Nev. Rev.

Stat. § 42.010 (1988). App. 200a. The jury was fur-

ther instructed:

The law provides no fixed standard as to the

amount of such punitive damages but leaves

the amount to the jury’s sound discretion,

exercised without passion or prejudice.

App. 188a. This language, drawn verbatim from Ne-

vada’s Pattern Jury Instructions, also correctly stated

applicable Nevada law. Nev. J.I. 10.20 (Michie 1986);

Nevada Cement Co. v. Lemler, 89 Nev. 447, 452, 514

P.2d 1180, 1183 (1973) (in Nevada, ‘‘the assessing of

punitive damages is wholly subjective [; t]here are no

objective standards by which the monetary amount

can be calculated’); see also Nev. Assembly Bill 307

(1989) (amending Nev. Rev. Stat. § 42.010, effective

May 30, 1989, to limit punitive damages to three

times actual damages or $300,000, whichever is

greater, except in cases involving insurance bad faith,

products liability, toxic or nuclear waste, or defa-

mation claims). App. 20la (hereafter, ‘‘A.B. 307”).

The closing argument by Mr. Ainsworth’s lawyer

emphasized that Nevada law provides juries with ‘‘no

fixed standards.”” He exhorted the jury that, under

Nevada law, they act as the “conscience of the com-

munity’ and must punish as they in their discretion

see fit. App. 190a, 192a, 197a-198a.

' We’re dealing with one of the biggest cor-

porations in America.

*x* * *

You cannot punish an insurance company

which has assets of $1,400,000,000 by just

taxing them a few thousand dollars or even

a few hundred thousand dollars. They'll laugh

all the way to the bank and say: Glad we

got out of there, out of Reno, you know,

without paying more. That’s not going to de-

ter them.

You have an opportunity in this case as

the conscience of this community to set a

standard and make it expensive to break that

standard.

*x* * *

So think your damage award for punitive

damages will have the salutary effect not only

on people like Tom Ainsworth, but I think it

will help the insurance industry as a whole,

and root out this conduct. There’s no other

way to do it. There’s no other mechanism

that the law allows other than what you’re

going to be doing on this jury. There is no

Attorney General, there’s no President of the

United States; Congress won’t do it either.

You do it or nobody does it.

App. 192a, 198a, 199a.

Financial information introduced in evidence showed

that Combined’s net income after taxes for the year

was $118,790,205. Mr. Ainsworth’s lawyer told the

jury that ‘‘a reasonable verdict for the punitive dam-

ages [would be] somewhere between one and ten per-

cent of that.” App. 198a. The verdict was not

unanimous as to punitive damages; one juror dis-_

sented. The seven jurors who voted to award punitive

damages, however, followed the lawyer’s suggestion.

The $5,939,500 verdict represented exactly five per-

cent of the figure the jury was told represented Com-

bined’s net income after taxes.

The trial judge granted judgment notwithstanding

the verdict on the punitive damage claim. App. 71a.

She held that Mr. Ainsworth had not presented suf-

ficient evidence of “oppression, fraud or malice, ex-

press or implied,’ as defined in previous Nevada

cases. Since this ruling was dispositive on the judg-

- ment n.o.v. motion, she did not address Combined’s

alternative argument that the punitive damages were

excessive. The trial judge upheld the jury’s compen-

satory damage award, which comprised the $9,600

under Combined’s policies, plus $200,000 for emo-

tional distress. Combined paid the compensatory

award, together with interest and costs, in full,

$234,000.

C. The Proceedings In The Nevada Supreme Court.

1. The Constitutional Issues.

Combined was the respondent in the Nevada

Supreme Court, defending a judgment in its favor. It

tendered both state and federal law grounds in sup-

port of the judgment, as it was entitled to do.’ The

company squarely presented its Due Process challenge

to reversal of the trial court’s judgment to the Nevada

Supreme Court:

Would reversal of the lower court’s judgment

n.o.v. and reinstatement of the jury’s dis-

proportionate punitive damage verdict, ren-

dered on_ insufficient evidence and

unconstitutionally vague instructions, -_ result

in a denial of Combined Insurance Company

of America’s right to Due Process of Law

and the imposition of an Excessive Fine, in

'The Nevada Supreme Court follows the rule, also adhered

to by this Court, that it will affirm a legally correct judgment

on any legitimate ground, whether addressed in the trial court

or not. Nelson v. Sierra Constr. Corp., 77 Nev. 334, 348, 364

P.2d 402, 406 (1961) (‘[w]e have many times upheld the rule in

this state that a correct judgment will not be reversed simply

because it was based on a wrong reason’’); Goldsworthy v. John-

son, 45 Nev. 355, 363, 204 P. 505, 507 (1922) (“{i]f the judgment

is right upon any theory, even though it be upon one never

thought of by the trial court ..., it is our duty to affirm it’’);

Long v. Flanigan Warehouse Co., 79 Nev. 241, 248, 382 P.2d

399, 403 (1963) (dictum); accord Browning-Ferris, 109 S. Ct. at

2921 n.23 (1989) (“[T]his is not a case in which respondent is

making arguments in support of a judgment .. .”); United States

v. American Ry. Express, 265 U.S. 425, 435-36 (1924).

derogation of the Eighth and Fourteenth

Amendments to the United States Constitu-

tion?

Combined’s Statement of Issues Presented for Re-

view. App. 862.2 This followed state practice to the

letter. But Combined went further to apprise the

state court of the importance of the federal questions

presented.

The company briefed the constitutional issues ex-

tensively. App. 87a. Further, it moved to postpone

oral argument until this Court decided Bankers Life,

for guidance on the constitutional issues here. App.

108a: The court rejected that request. App. 130a.

Prior to argument Combined supplemented its brief

on the constitutional issues, pursuant to Nevada Rule

of Appellate Procedure 31(d). App. 127a. After the

case had been argued but remained undecided for

more than a year, the court permitted Combined and

Mr. Ainsworth to file supplemental briefs. App. 132a,

136a. Combined’s supplement addressed the consti-

tutional impact of the post-argument decisions in Ace

Truck & Equipment Rentals, Inc. v. Kahn, 103 Nev.

508, 746 P.2d 132 (1987), Bankers Life, and other

authorities discussing the circumstances under which

punitive damages are appropriate and limits on their

amount. App. 132a-135a, 141a-144a.

2In light of Browning-Ferris, Combined has abandoned its

Eighth Amendment challenge.

3 The Nevada Supreme Court is Nevada’s only appellate court.

Its rules do not provide for a formal “‘assignment of errors,”

but for a ‘“‘statement of issues’”’ by both appellant and respondent.

See Nev. R. App. P. 28(b). The respondent’s brief itself thus

may be consulted as part of the jurisdictional record. See New

York ex rel. Bryant v. Zimmerman, 278 U.S. 63, 67-68 (1928).

Attias th

Mr. Ainsworth opposed Combined on the merits of

the constitutional questions. He urged Day v. Wood-

worth, 54 U.S. (138 How.) 368 (1851), Curtis Publish-

ing Co. v. Butts, 388 U.S. 180 (1967), and Smith v.

Wade, 461 U.S. 30 (1983), as disposing of Combined’s

constitutional challenge. App. 102a-105a, 117a-123a,

125a-126a. He cited Bankers Life as an. “‘affirmance’”’

of punitive damages, App. 136a, 139a-140a, and

pointed to the denials of certiorari in Downey Savings

& Loan Ass’n v. Ohio Casualty Insurance Co., 189

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

denied, 108 S. Ct. 2023 (1988), and O’Gilvie v. In-

ternational Playtex, Inc., 821 F.2d 1488 (10th Cir.

1987), cert. denied, 108 S. Ct. 2014 (1988), as indi-

cating ‘‘that the United States Supreme Court has

clearly not shown an inclination to hold punitive dam-

ages unconstitutional.’’ App. 138a-140a; see also App.

102a, 114-126a.?

‘Mr. Ainsworth also contended that Combined had not timely

raised the constitutional issues, disregarding Combined’s status

as respondent and the Nevada Supreme Court’s practice of rou-

tinely considering constitutional questions raised for the first

time on appeal. See, e.g., Natchez v. Board of Optometry, 102

Nev. 247, 251, 721 P.2d 361, 363 (1986): Summitt v. Nevada,

101 Ney. 159, 161 n.2, 697 P.2d 1374, 1876 n.2 (1985); Desert

Chrysler-Plymouth, Inc. v. Chrysler Corp., 95 Nev. 640, 643, 600

P.2d 1189, 1190-91 (1979), cert. denied, 445 U.S. 964 (1980):

Swartz v. Adams, 98 Nev. 240, 563 P.2d 74 (1977); Batesel v.

Schultz, 91 Nev. 553, 540 P.2d 100 (1975); Lightenburger v.

Gordon, 89 Nev. 226, 510 P.2d 865, cert. denied, 414 U.S. 1039

(1973). This contention also was urged by Mr. Ainsworth in

Opposition to the stay entered by Justice O’Connor on June 15,

1989, pending the filing of this petition. Neither Justice O’Con-

nor nor the Nevada Supreme Court accepted it. It should li-

kewise be rejected by this Court. See, e.g., Ulster County Court

v. Allen, 442 U.S. 140, 154 (1979) (if a state court fails to

10

2. The Decisions of the Nevada Supreme Court Reinstating

the Jury’s Verdict and Directing the Entry of Judgment

Against Combined.

Ace Truck & Equipment Rentals, Inc. v. Kahn, su-

pra, is the Nevada Supreme Court’s definitive re-

statement of the state’s punitive damage law. See

generally Lucas, Damages, 53 Nev. St. B.J. 11-12

(Dec. 1988). In Ace Truck the Court canvassed its

prior cases on punitive damages and announced that,

from that date forward, it would review punitive dam-

age awards to determine whether they are ‘‘clearly

disproportionate” to the misconduct charged instead

of whether they ‘‘shock the judicial conscience.’’ 746

P.2d at 135-37 (emphasis in original). Verdicts that

are “fair and just and reasonable” will be upheld;

others will not. ‘‘The concept of what is fair and just

and reasonable is a sense that most of us possess

from childhood.’ Jd. at 137. This formula permits

consideration of ‘‘such matters as the financial posi-

tion of the defendant, culpability and blameworthiness

of the tortfeasor, vulnerability and injury suffered by

the offended party, the extent to which the punished

conduct offends the public’s sense of justice and pro-_

priety, and the means which are judged necessary to

deter future misconduct of this kind.’ Jd. (footnote

- omitted).

The Nevada Supreme Court held in this case that

- both the ‘‘clearly disproportionate” test in Ace Truck

‘ndicate that a federal constitutional claim is barred by some

state procedural rule, a federal court implies no disrespect for

the State by entertaining the claim”). Mr. Ainsworth’s “‘pro-

cedural bar,”’ moreover, would not have been valid had it been

directly invoked. See, e.g., Hathorn v. Lovorn, 457 U.S. 255, 263

(1982).

2 ACD A ahha 1000

11

and its earlier ‘‘shock the judicial conscience’’ test

were satisfied in the jury’s $5.9 million verdict. App.

13a-l5a, 67a-69a. Accordingly, it reversed the trial

court’s judgment n.o.v. It held deference due the ju-

ry’s verdict required that ‘the evidence [be] inter-

preted in the manner most favorable” to ‘the party

favored by [the] verdict [, who] gains the benefit of

every inference of fact fairly deductible from the evi-

dence.”” App. 63a. Judgment n.o.v. may not be

granted, even in a punitive damage case, where there

is ‘‘any substantial evidence’’ to support the verdict.

App. 63a-64a. Justice Mowbray’s concurring opinion

on rehearing aptly describes the scope of judicial re-

view_accorded Combined in this case:

This case is a simple lawsuit.

It was tried to a jury and decided by a

jury. The jury heard the evidence. The dis:

trict judge properly charged the jury. At the

conclusion of the presentation of the evidence

the jury found in favor of appellant Ain-

sworth and awarded both compensatory and

punitive damages. The evidence supports the

jury’s verdict.

Respondent, Combined Insurance Company

of America, has presented nothing ... that

challenges in any way the integrity of the

jury's verdict. Therefore, I would let the ju-

ry’s verdict stand.

App. 44a.

12

3. The Rejection by the Nevada Supreme Court of Com-

bined’s Constitutional Claim Under the Due Process

Clause.

Combined’s federal constitutional claims were given

scant attention by the Nevada Supreme Court, but

there is no doubt they were decided, adversely to

Combined. Combined had urged the court to consider

Aetna, 475 U.S. at 828, and Bankers Life, 108 S. Ct.

at 1651, 1654-56, particularly this Court’s statements

that the constitutional issues were “important” and

“of moment and difficulty,” and Justice O’Connor’s

concurring opinion in Bankers Life, wheré she stated

her view that “there is reason to think’ state laws

that, like Nevada’s, give ‘juries discretion to award

any amount of punitive damages in any tort case in

which a defendant acts with a certain mental state

... may violate the Due Process Clause.” See App.

96a-100a, 132a-135a, 141-144a. Nevertheless the Ne-

vada Supreme Court characterized Combined’s con-

tentions as “‘totally without merit.’’ App. 69a.

Denying postponement of argument, the court had

earlier expressed agreement with Mr. Ainsworth that

“there is no indication the United States Supreme

Court will overturn its prior decisions upholding the

constitutionality of punitive damages’ or that ‘‘the

United States Supreme Court will actually decide any

[constitutional] issues relevant’? to this case. App.

130a-131a. In the court’s second opinion (on rehear-

ing) it said

(T]he major focus of Combined’s argument in

its briefs on appeal was that the verdict con-

stituted an excessive fine or a violation of

, due process under the constitution.

13

App. 14a n.9. The court’s second opinion went on to

criticize Combined for having addressed the consti-

tutional issues. Jd. The court adverted to its original

order denying postponement, observed that the state-

ments made in that order were correct, and declared

that Combined’s objections to the rejection of its con-

stitutional claims were “entirely frivolous and war-

rant our summary rejection.”” App. 21a.°

D. The Proceedings Before The Nevada Legislature.

The Nevada legislature meets only once every two

years. Nev. Const. art. IV, § 2. In 1989 the issue of

* While rehearing was pending, Combined moved to disqualify

former Chief Justice Gunderson from the rehearing and for va-

catur based on his participation in the original appeal. Com-

bined’s motion generated an extraordinary public response from

Justice Gunderson. App. 150a. The basis of the motion was his

relationships to and undisclosed dealings with the lawyers who

opposed Combined in the case, including what Combined main-

tains was an illegal and unreported gift by one of them of a

substantial interest in an FCC license venture to Justice Gun-

derson’s wife. Although Justice Gunderson retired following the

Court’s first opinion, he was appointed a Senior Justice pursuant

to Nev. S.C.R. 10. Whether because of Combined’s motion or

his retirement, Justice Gunderson did not participate in the re-

hearing. Although his disqualifying bias was not the pecuniary

interest held violative of Due Process in Aetna but a personal,

subjective one, it is mentioned because of the prominence of the

disqualification proceedings in the court’s second opinion. The

proceedings also illustrate a central point: Without objective

standards by which to verify the propriety of these multi-million

dollar punitive damage awards, justice and the appearance of

justice will never satisfactorily co-exist. See, e.g., In re Murchi-

son, 349 U.S. 133, 136 (1955) (“‘to perform its high function in

the best way justice must satisfy the appearance of justice’’)

(citation omitted), quoted in Aetna, 475 U.S. at 825, and Liljeberg

v. Health Servs. Acquisition Corp., 108 S. Ct. 2194, 2204 (1988).

14

punitive damages and the need for objective limits on

them was debated extensively. App. 204a-225a. The

debate included discussion of the reasons for and

against jury discretion in punitive damage cases, the

constitutional issues identified by this Court in Aetna,

Bankers Life, and Browning-Ferris, and the facts and

law involved in this case.6 The Nevada legislature’s

response was A.B. 307, which makes some procedural

modifications to Nevada’s punitive damage law and

limits the amount of such damages that can be

awarded in certain types of cases to three times com-

pensatory damages or $300,000, whichever is greater.

App. 20la. However, it exempts from those limits

cases involving insurance bad faith, products liability,

defamation, and toxic or nuclear waste. These are the

categories of cases in which objective limits are most

needed.

* Compare the testimony of Margo Piscevich, App. 206a (the

Ainsworth v. Combined case illustrates the problem with punitive

damages, in that “the $5.9 million [awarded] bears no relation-

ship to the harm caused” but appears to be tied exclusively to

“the financial condition of [the] defendant’’) with the testimony

of Lawrence Semenza, App. 209a (the Ainsworth v. Combined

case illustrates how well the system is working: ‘‘[T]he question

is what type of deterrent effect do you want. Is it going to be

like a mosquito on the back of an elephant? Or, are you going

to have hit somebody hard enough alongside the head ... to

get their attention? To get them back to reality. To know what's

wrong. To make those corrections”). See also App. 217a

15

REASONS FOR GRANTING THE WRIT

A. This Case Meets The Expressed Criteria Of This

Court For Review Of The Constitutionality Of Dis-

proportionate, Standardless Punitive Damage

Awards.

In three cases in the last four years this Court has

declined, for prudential or jurisdictional reasons, to

consider the application of the Due Process Clause to

punitive damage awards. Browning-Ferris; Bankers

Life; Aetna. This case involves no such impediments

to considering the Due Process issue on its merits.

Both the Nevada Supreme Court and the Nevada leg-

islature have expressly declined to place any limits

on the discretion of a civil jury in this type of case

to impose punitive damages in whatever amount it

thinks best.

These actions by the state’s highest court and the

state legislature fulfill the prudential requirements of

Bankers Life. Here, even after Bankers Life, the Ne-

vada Supreme Court ‘‘resolve[d] the issue,” Bankers

Life, 108 S. Ct. at 1651, by declaring Combined’s Due

Process claims frivolous and unworthy of discussion.

The legislature, with this case, Bankers Life, and

Browning-Ferris before it, declined “‘to enact legis-

lation addressing punitive damages for bad faith re-

fusal to pay insurance claims,’’ as suggested by this

Court. Jd. Mr. Ainsworth’s counsel told the legislature

that this Court “‘is not going to hold punitive damages

unconstitutional’ and that ‘“‘the legislature must do

what it has to do without addressing the outcome of

the U.S. Supreme Court case.”” App. 218a. The next

speaker addressed the opinion by Justice Marshall in

Bankers Life and the constitutionality of punitive

damages: “‘he [Justice Marshail] explicitly invited the

16

state legislators to address it.’’ App. 205a. The leg-

islature thereafter enacted A.B. 307, which excludes

bad faith insurance actions from any limitation on

punitive damages. App. 201a.

The Due Process issue presented by Combined has

been exhaustively debated not only in Nevada but in

other states as well. In the past year a number of

state and federal courts have considered and sum-

marily rejected Due Process challenges to unlimited

punitive damage awards. These courts acknowledge

this Court’s statements in Aetna, Bankers Life, and

Browning-Ferris, but take the Court’s prior decisions,

some of which Mr. Ainsworth cited to the Nevada

Supreme Court, as adversely dispositive of constitu-

tionality. E.g., Potomac Electric Power Co. v. Smith,

79 Md. App. 591, 558 A.2d 768, 792 (1989) (‘‘[w]Jhat

the [United States] Supreme Court has declared con-

stitutional we may not put asunder, consequently we

hold in the case sub judice the award of punitive

damages did not violate any aspect of the Constitu-

tion,” citing Day v. Woodworth, supra, and Curtis

Publishing Co. v. Butts, supra); see Kraus v. Santa

Fe Southern Pacific Corp., 1989 WL 71790 (9th Cir.

July 8, 1989) (‘““Under current constitutional stand-

ards, the jury’s discretion regarding punitive damages

. is ‘limited only by the gentle rule that [they] not

be excessive,’ ”’ citing Gertz v. Robert Welch, Inc., 418

U.S. 328, 350 (1978)).’

* Accord Central Alabama Electric Cooperative v. Tapley, 1989

WL 67556 (Ala. May 12, 1989) (not yet released for rublication);

Olson v. Walker, 1989 WL 71606 (Ariz. App. June 27, 1989);

Radell v. Comora, 259 Cal. Rptr. 891 (Cal. App. July 21, 1989);

Miller v. Cudahy Co., 858 F.2d 1449, 1459 (10th Cir. 1988), cert.

denied, 109_S.Ct. 3265 (1989); Fed. Dep. Ins. Corp. v. W. R.

panei ane

sean >i ~ lal etl ins cl a NT, NTS AOE RNR

17

There is no reason to believe the law in this area

will develop further without guidance from the Court.

The question of ‘‘whether due process acts as a check

on undue jury discretion to award punitive damages,”’

Browning-Ferris, 109 S. Ct. at 2921, is irresolvable,

given the current state of the law, unless and until

this Court acts.®

Grace & Co., 691 F.Supp. 87, 97-102 (N.D.IIl. 1988), aff'd in

part and rev'd in part, 877 F.2d 614 (7th Cir. 1989); Kociemba

v. G. D. Searle & Co., 707 F.Supp. 1517, 1535-36 (D.Minn. 1989);

Williams Pipe Line Co. v. City of Mounds View, 704 F.Supp.

914, 921 n.7 (D.Minn. 1989); Guy v. Commonwealth Life Ins.

Co., 698 F.Supp. 1305, 1816 (N.D. Miss. 1988); Leonen v. Johns-

Manville Corp., 1989 WL 75938 (D.N.J. July 5, 1989); Horowitz

v. Schneider Nat'l, Inc., 708 F. Supp. 1573, 1578 (D.Wyo. 1989).

The cases relied on by these courts for their unanimous rejection

of the Due Process arguments advanced here include this Court’s _

decisions in Day v. Woodworth, supra, Curtis Publ. Co. v. Butts,

supra, and Smith v. Wade, supra, and the California decision

in Downey Savings & Loan Ass'n v. Ohio Casualty Co., 198 Cal.

App. 3d 1072, 234 Cal. Rptr. 835 (1987), cert. denied, 108 S.

Ct. 2023 (1988). The only exception to the cursory dismissal of

Due Process challenges to punitive damages has been in the

context of mass tort cases, which are sui generis. In re School

Asbestos Litig., 789 F.2d 996, 1002-05 (8rd Cir.), cert. denied,

479 U.S. 915 (1986); Juzwin v. Amtorg Trading Corp., 708

F.Supp. 1053 (D.N.J. 1989); Leonen v. Johns-Manville, supra.

These decisions overlook the fact that neither Day v. Woodworth

nor Curtis Publ. Co. v. Butts considered whether Due Process

permits discretionary punitive damages, or whether Due Process

requires procedural safeguards in a punitive damage case.

Wheeler, The Constitutional Case for Reforming Punitive Dam-

ages, 69 Va. L. Rev. 269, 273-76 (1983) (the Court has not

considered the procedural Due Process requirements of punitive

damages).

® Issues similar to those presented by this petition are before

the Court in Jordan v. Clayton Brokerage Co., 861 F.2d 172

(8th Cir. 1988), pet. for cert. filed, 57 U.S.L.W. 3696 (March 8,

18

B. Standardless Awards Of Punitive Damages Lead To

Excessive Awards Wholly Disproporticnate To The

Offense Or Actual Damages That Give Rise To Them.

The punitive damages in this case are four times

the gross revenues Combined derived from its Nevada

operations in 1986, six times the largest punitive dam-

age award ever previously upheld by the Nevada

Supreme Court, 618 times the policy benefits (con-

tractual damages) involved, and 5,939 times the $1,000

fine the Nevada legislature has specified for acts by

insurers identical to those Combined was found guilty

of having committed here. Nev. Rev. Stat.

§§ 686A.183(a\(1), 686A.310 ($1,000 per offense to

maximum of $10,000). Some states tie punitive dam-

ages to compensatory damages. See, e.g., Cal. Prob.

Code § 10381 (West 1988) (fraudulent sale of dece-

dent’s property); Bankers Life, 108 S. Ct. at 1651

n.38. Nevada has rejected that restriction in cases in-

volving insurers, both by statute and in judicial de-

cision. See A.B. 307; Nev. J.I. 10.20 comment (Michie

1986).

‘“(E]ven where a statute sets a range of possible

civil damages that may be awarded to a private lit-

igant, the Due Process Clause forbids damages awards

that are ‘grossly excessive,’ Waters-Pierce Oil Co. v.

Texas, 212 U.S. 86, 111 (1909), or ‘so severe and

oppressive as to be wholly disproportioned to the of-

fense and obviously unreasonable,’ St. Louis, I. M. &

S. R. Co. v. Williams, 251 U.S. 68, 66-67 (1919).”

1989) (No. 88-1483), Longview Fibre Co. v. Jeannette Paper Co.,

378 Pa. Super. 148, 548 A.2d 319 (1989), pet. for cert. filed, 58

U.S.L.W. 3021 (June 17, 1989) (No. 88-2051), and Elam v. Al-

colac, Inc., 765 S.W.2d 42 (Mo. App. 1988), pet. for cert. filed,

58 U.S.L.W. 3013 (June 8, 1989) (No. 88-1992).

oon ncuanlaraihnibanasionasnada

ent Dee « sei Ain Saints it lady ten sellin whi seoninatt

19 -

Browning-Ferris, 109 S. Ct. at 2923 (Brennan & Mar-

shall, JJ, concurring). This case presents the same

issue.

“C. Standardless Awards Of Punitive Damages Deny Due

Process Of Law To Targeted Defendants.

The $5,939,500 award in this case could as easily

have been the $3,500,000 amount awarded by an Al-

abama jury in Aetna, the $1,600,000 amount awarded

by a Mississippi jury in Bankers Life, or the

$22,500,000 chosen by another Reno, Nevada, jury in

Hires v. Republic Insurance Co., Case No. 87-2917,

Second Judicial District Court in and for the State

of Nevada, noted in Sella, The 10 Largest Jury Ver-

dicts of 1988, 75 A.B.A.J. 45 (1989). These verdicts

and many others manifest a system out of control.

Nothing in Nevada law warned Combined that by

contesting coverage of Mr. Ainsworth’s insurance pol-

icies it would commit a tort for which it would pay

a penalty of almost $6 million. In Nevada, as in many

states, “‘the assessing of punitive damages is wholly

subjective.” Nevada Cement Co. v. Lemler, 89 Nev.

447, 452, 514 P.2d 1180, 1183 (1978); ef. Bankers Life,

108 S. Ct. at 1656 (O’Connor & Scalia, JJ, concur-

ring). Even if Combined had intended to violate Ne-

vada’s punitive damages statute, Nev. Rev. Stat.

§ 42.010, it would have had no idea of the penalty

for doing so. The punishment would have been left

to the ‘‘wholly standardless discretion” of the jury,

as it was here. This ‘‘appears inconsistent with due

process.”’ Id; see United States v. Batchelder, 442 U.S.

114, 123 (1979) (consequences of violating a criminal

statute should be stated); Giaccio v. Pennsylvania,

382 U.S. 399, 403 (1966) (notwithstanding court-im-

posed standards for application of statute, jurors must

20

determine issue on their “notions of what the law

should be,”’ which violates Due Process). The law must

enable citizens to conform their conduct to articulated

requirements of the law and permit “meaningful ju-

dicial review.”’ Roberts v. United States Jaycees, 468

U.S. 609, 629 (1984). The law of punitive damages in

Nevada does not permit either.

This case also confirms what is common knowl-

edge—that “[a]wards of punitive damages are sky-

rocketing.” Browning-Ferris, 109 S. Ct. at 2924

(O’Connor & Stevens, JJ, concurring and dissenting);

M. Peterson, S. Sarma, & M. Shanley, Punitive Dam-

ages: Empirical Findings at vii, 14, 42 (Rand 1987)

(in California between 1980 and 1984, the median

punitive damage award in bad faith actions was

$336,000; the average was $1.6 million; in Cook

County, Illinois, ‘{tJhe total amount of money awarded

as punitive damages increased by 800% ... during

the 1980’s, even after adjusting for inflation’’). Com-

bined is only one of many “‘targets’’ trying to cope

with a system of punishment where guilt and penalty

are adjudicated without reference to ascertainable

standards.

The standardless instruction of juries on punitive

damages exposes potential defendants to uncon-

strained sanctions based on their corporate status and

their wealth. As one prominent plaintiff's attorney

put it, ‘“‘The wealth of the defendant should be the

primary focal point of punitive damages.’”’ Levine,

Demonstrating and Preserving the Deterrent Effect of

Punitive Damages in the Insurance Bad Faith Ac-

tions, 13 U.S.F. L. Rev. 618, 634 (1979). “[P]Junitive

damages are imposed by juries guided by little more

than an admonition to do what they think is best.”’

21

Browning-Ferris, 109 S. Ct. at 2923 (Brennan & Mar-

shall, JJ, concurring). As the Nevada Supreme Court

itself said twenty-seven years ago:

One cannot avoid thinking that the general

rules offered to explain the reviewing court’s

decision [in a punitive damages case] are tai-

lored to fit its feeling about the particular

case before it. If that court does not approve

the verdict it will state that the jury was

motivated by passion or prejudice; or that a

‘reasonable relationship’ between the punitive

and compensatory awards does not exist; or

that the amount of the award is ‘enormous.’

On the other hand, the reviewing court in

affirming the award may rely upon the con-

verse of the reasons just mentioned, or upon

a strong presumption in favor of the verdict

as confirmed by the trial judge in refusing

a new trial, or some other equally plausible

statement. It is evident that such generali-

zations do not provide a workable standard

in most cases.

Miller v. Schnitzer, 78 Nev. 301, 310, 371 P.2d 824,

829 (1962), criticized in Ace Truck, 746 P.2d at 136

(citations omitted).

Ace Truck notwithstanding, these statements in

Miller remain true today. “‘[A]ppellate courts have no

meaningful standard to apply in deciding whether to

uphold punitive damages awards.’’ Wheeler, Zhe Con-

stitutional Case for Reforming Punitive Damages Pro-

cedures, 69 Va. L. Rev. 269, 290 (1983); see also Owen,

Civil Punishment and the Public Good, 56 U.S.C. L.

Rev. 103, 121 (1982) (“[aJs the law of punitive dam-

22

ages has been developed and applied, much in both

fairness and efficiency has been left aside’). The

‘law’ of punitive damages encourages juries to “‘pun-

ish without regard to the true harm threatened » a

defendant’s conduct.”” American College of Trial Law-

yers, Report of the Task Force on Litigation Issues

4 (1986); see Tort Policy Working Group, An Update

on the Liability Crisis 47-52 (U.S. Dept. Justice 1987).

Permitting juries to levy fines at will for the benefit

of private plaintiffs under the ‘gentle rule that they

not be excessive’ does not advance a substantial state

interest. Gertz v. Robert Welch, Inc., 418 U.S. 328,

349-50 (1974). Juries are invited to use ‘‘punitive dam-

ages ... to punish unpopular defendants,”’ Jnt’l Broth-

erhood of Electrical Workers v. Foust, 442 U.S. 42,

50-51 n.14 (1979), such as insurers who, in dealing

with debatable claims, ‘‘have no easy task.’’ Aetna,

475 U.S. at 821.

The essence of Due Process of Law is that it pro-

tects against governmental arbitrariness. Daniels v.

Williams, 474 U.S. 327, 331 (1986). The present sys-

tem of awarding punitive damages, in Nevada as in

most of the United States, is justice by whim rather

than by the rule of law. Defendants in civil cases are

subject to awards that need bear no relation to any

harm defendants may have inflicted and that cannot

be meaningfully reviewed by appellate courts. Vast

and unpredictable awards by lay jurors who are ad-

monished only to ‘‘do what they think is best” are

the epitome of arbitrariness. We have long since aban-

doned the notion of measuring justice by the Chan-

cellor’s foot—but at least the Chancellor, unlike

members of juries, was learned in the law.

23

To hold that the Due Process Clause requires mean-

ingful standards for punitive damages does not mean

that this Court will have to review for excessiveness

every award of punitive damages. It does not mean

that the states are to be put in a straitjacket on what

they may permit by way of punitive damages. The

Due Process Clause does not impose on the states

any particular rule about punitive damages. It says

only that there must be some law by which they are

measured and evaluated.

CONCLUSION

There is much to be said for establishing a common,

coherent starting point from which to continue the

analysis and reform of a system that now permits

unpredictable and unlimited punitive damages for va-

guely defined misconduct. This Court “should serv-

tinize carefully the procedures under which punitive

damages are awarded in civil lawsuits’’ to provide the

Due Process bedrock for that effort. Bankers Life,

108 S. Ct. at 1655 (O’Connor & Scalia, JJ, concur-

ring). This case presents the Court with an unblem-

ished opportunity to do so.

24

Respectfully submitted,

*“STEPHEN L. MORRIS

M. KRISTINA PICKERING

Of Counsel: LIONEL SAWYER & COLLINS

1700 Valley Bank Plaza

CHARLES ALAN WRIGHT 300 South Fourth Street

727 East 26th Street Las Vegas, Nevada 89101

Austin, Texas 78705 (702) 383-8888

(512) 471-5151

— GEOFFREY C. HAZARD, JR.

127 Wall Street :

New Haven, Connecticut 06520

(203) 482-4971

Attorneys for Petitioner

*Counsel of Record

en See eT ae Oe ee ee Re ee

= i see i it 7