Opposition Brief — Combined Insurance Co. of America v. Ainsworth

No. 89-282 jOSEPH F- Se JR.

Cc «

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1989

COMBINED INSURANCE COMPANY OF AMERICA,

Petitioner,

Vv.

THOMAS AINSWORTH,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE SUPREME COURT OF NEVADA

BRIEF FOR RESPONDENT IN OPPOSITION

H. BARTOW Farr, III *PETER CHASE NEUMANN

JOEL I. KLEIN P.O. Box 1170

ONEK, KLEIN & FARR 136 Ridge Street

2550 M Street, N.W. Reno, Nevada 89504

Washington, D.C. 20037 (702) 786-3750

(202) 775-0184 Pese Some

WILLIAM O. BRADLEY, JR. 127 Wall Street

BRADLEY & DRENDEL, LTD. New Haven, Connecticut 06520

P.O. Box 1987 (203) 432-4846

Reno, Nevada 89505 Att 8 for R lent

(702) 329-2273

, *Counsel of Record

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

~~

hy

QUESTIONS PRESENTED

1. Whether this Court lacks jurisdiction because

petitioner has failed to meet its burden of affirma-

tively showing that the Nevada Supreme Court ruled

on its constitutional claim.

2. Whether, assuming arguendo that jurisdiction

exists, it should be exercised in a case presenting a

novel constitutional challenge when the record is si-

lent on the issue and there have been significant

changes in state law that are not before the Court.

3. Whether the due process clause of the Four-

teenth Amendment prohibits state courts from as-

sessing punitive damages when juries are properly

instructed under established common law standards

and their verdicts are carefully reviewed on appeal.

ii

TABLE OF CONTENTS

QUESTIONS PRESENTED ............ccccscccscccccsccccscccees

TR Ge AAT REED tvccevcssccevecstensecscinsestbcinnies

SEE SRUNEEIIEE . Uiibsplniectdnnlgdtnnstdaceduestiiniecedscninaminnins

REASONS FOR DENYING THE WRIT ............:. ware

I. Combined Has Failed Affirmatively To Dem-

II.

III.

IV.

onstrate That The Nevada Supreme Court

Decided Its Federal Claim. ..................00....

The Record Below Is Inadequate To Allow

For Proper Consideration Of A Major Con-

stitutional Challenge To A Fundamental Doc-

trime OF Ge TU Ta. | cise ccc sesdettnesececccne.

There Have Been Important Changes In Ne-

vada Law That Were Largely Adopted After

The Decision In This Case. ...................e0000

Combined Should Not Be Heard To Complain

Of Its Own Decision Not To Raise A Due

FUCGORS TUNE BE TUE. svcscsssssnctntniseiominicen

CURA ARITS snscsccsgcectichipnennibnieiiesababain piaaalavie

10

16

17

21

24

iii

TABLE OF AUTHORITIES

CASES | Page

Ace Truck and Equip. Rentals, Inc. v. Kahn,

103 Nev. 503, 746 P.2d 132 (1987) ............... passim

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

iii iret icdabaeeatidehilcbnabetnniaeeveantecees 16

Alpark Distrid., Inc. v. Poole, 95 Nev. 605, 600 P.2d

ESERIES RR RE ey AO ee 12

Bailey v. Anderson, 326 U.S. 203 (1945) ............ 10,11,16

Bankers Life & Casualty Co. v. Crenshaw, .108

Be I ok cps a cco ncdecabweascunystosievewerce passim

Barnes v. Delta Lines, 99 Nev. 688, 669 P.2d 709

5 AeA i AT Thin icici nciieaddandiebihssumenyuntoeses 12

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

a an 13

Bill Stremmel Motors, Inc. v. Kerns, 91 Nev. 110,

EO EINIIED invcudconssusheusnbasevososonnaborse 12

Bradshaw v. General Elec. Co., 91 Nev. 124, 531

SEE 12

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

I ED isiicncssccacbassensssnncsseseverees 16,17

Carson Ready Mix, Inc. v. First Nat’l Bank, 97

Nev. 474, 635 P.2d 276 (1981) ........sscessee- ee, 2a

Chicago, I. & L. Ry. v. McGuire, 196 U.S. 128

aN cllnsdnculidcitdusiconmnessncesoases ssiaikedangdecne 11

Day v. Woodworth, 54 U.S. (18 How.) 363

tis ciiincasiniaheeetunnivakantevehevccovencess 20

Desert Chrysler-Plymouth v. Chrysler Corp., 95 Nev.

640, 600 P.2d 1189 (1979), cert. denied, 445

NT ica ills lttccnateticdniwuseneeess 13

Duran v. Mueller, 79 Nev. 453, 386 P.2d 733

ETAL RE Le 12

Evkelberger v. Tolotti, 96 Nev. 525, 611 P.2d 1086

URAC Re OR A Nee 12

iv

Table of Authorities Continued

Page

Exxon Corp. v. Eagerton, 462 U.S. 176 (1983) ..... 9,11,15

Farmers Home Mut. Ins. v. Fiscus, 102 Nev. 371,

FD ee ED itktsthttenseiniatietientctene 00 4

Fireman’s Fund Ins. Co. v. Shawcross, 84 Nev. 446,

Be ee, IE iccenecnsnnbciastnaatieintiledtiiisinans 0 12

Fuller v. Oregon, 417 U.S. 40 (1974) .......... eee 11

Ginnis v. Mapes Hotel Corp., 86 Nev. 408, 470 P.2d

Be I Lecnaiatescha athens thd Agnhcsamaahdasdiaidansereee 12

Heckler v. Campbell, 461 U.S. 458 (1983) seesceereeees 15

Hotel Riviera, Inc. v. Short, 80 Nev. 505, 396 P.2d

ME nitdincechaneibatbicstiteniiaeitaniat das dnbeabssavess 12

Illinois v. Gates, 462 U.S. 213 (19838) ................... 16

Lathrop v. Smith, 71 Nev. 274, 288 P.2d 212

RITE siakvibbdacdbicaicscisscadinwddaaibynadbnadababcpiasstsews 13

McGoldrich v. Compagnie Gen. Transatlantique, 309

Salm HANEY CINE Gkiccnspitidbseteebediie Meetait iat suucsdsenas 15

Michigan v. Long, 463 U.S. 1032 (1983) ............... 11

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

GENIE encieslaithadychisshinalinsaneecdacaiabaAeeanith Maan wines 7,18

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

gt Bs Neem) SA eer 13

Phillips v. Lynch, 101 Nev. 311, 704 P.2d 1083

CR ONID - innivdhnrscdscsaicmneaibagnabiiesabdesdiiciiiacssan 7

Powers v. Johnson, 92 Nev. 609, 555 P.2d 1235

CRIP TED: s<csiesbdecaataaetdniaiadandaiaeiametaliideenns 12

Ross v. Giacomo, 97 Nev. 550, 635 P.2d 298

CRIES isis scsccihetincticeitittiaealiaadiaeiabeglenigilbidbilbtn saline 12

Shoshone Coca-Cola Bottling Co. v. Dolinski, 82 Nev.

GED, GD Fe I itventcciintescnisecsssisccee.. 12

Smith v. Timm, 96 Nev. 197, 606 P.2d 530

DE cabecdihi:ciditemnin eases dnaciuidibannsbbietindesecsess 12

Standard Oil Co. v. Missouri, 224 U.S. “270

UII chin sa scnuanichisuisdscaehd alee ibadaladdnisthasadeeenetnsinee 20

Table of ‘Authorities Continued

Page

Street v. New York, 394 U.S. 576 (1969) .............. 11

United Fire Ins. Co. and United Diversified Corp.

v. McClelland, No. 18705, 105 Nev. Adv. Op.

No. 100 (Sept. CRE 19

United States Fidelity & Guaranty Co. v. Peterson,

91 Nev. 617, 540 P.2d 1070 “1975) seal aleiabiiiene 4

Wadsworth v. Dille, 85 Nev. 86, 450 P.2d 362

CINE inicciainccnencaceeiceticnddniinast tociiceihaaiaiabtehanndens 12

Wagon Wheel Saloon & Gambling Hall, Inc. v. Mav-

rogan, 78 Nev. 126, 369 P.2d 688 (1962) ...... 12

Wilkens v. State, 96 Nev. 367, 609 P.2d 309 ‘4’

| RRS RS ean ea 18

| Statutes & Court RULES f

BT RR ene NE 10

Ala. Code § 6-11-21 (Supp. 1988) ......... 18

Alaska Stat. § 09.17.020 (1986) ..................eeseeeeeeee 18

Ariz. Rev. Stat. Ann. § 12-701 (1989) ..........00000.... 18

Colo. Rev. Stat. § 13-21-102 (1987) ................cccees. 18

Conn. Gen. Stat. Ann. § 52-240b (West 1988) ...... 18

Fla. Stat. Ann. § 768.73 (West Supp. 1988) ......... 18

Ga. Code Ann. § 51-12-5.1 (Supp. 1988) ............... 18

Idaho Code § G-TGDE CERIO) q...cscccccscccscccscccssccvccceess 18

Kan. Stat. Ann. § 60-3701 (Supp. 1987) ................ 18

Dine, Bie. © BED DE Cy cccsccsecesccccccccssneesscceccceses 18

Mo. Ann. Stat. § 510.263 (Supp. 1989) ................. 18

Mont. Code Ann. § 27-1-221 (1987) .................20008 18

ae, Tae Be ae shee esisiibtisnsnnccenrenseni 12,22

Nev. Rev. Stat. Ann. § 42.010 (1989) .......0... 4,19

N.D. Cent. Code § 32-03.2-11 (1987) ..................... 18

N.J. Rev. Stat. § 2A:58C-5 (1987) .............cccccscssees 18

al iieseaiiieaeiniaiiaaniaaiaea ail

vi

Table of Authorities Continued

| Page

Ohio Rev. Code § 2815.21 (1988) ..............cccccccessees 18

Okla. Stat. Ann. tit. 23, § 9 (West 1986) ............. 18

S.C. Code § 15-38-185 (1988) .............ccccccsccscsssseseee 18

BN i Sie MIE chad issansachaveneavenccsaniscdammnenpeenenns 10

Tex. Civ. Prac. & Rem. Code Ann. § 41.007 (Ver-

I I sti aia) a sae acct ctmeiinanebenmnaieaieulinnss 18

Utah Code Ann. § 78-18-1 (1989) ...............ccccssseees 18

Va. Code Ann. § 8.01-38.1 (Supp. 1988) ............... 18

I I A ini seek dabich abl dllieaindiindennhnnoabton 18

OTHER AUTHORITIES

R. Stern, E. Gressman & S. Shapiro, Supreme Court

PE SUED GI: RRP ace cikccnntitencisivdseciacvnccicnss 11

\ -

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1989

ere ca cen ene

No. 89-282

COMBINED INSURANCE COMPANY OF AMERICA,

Petitioner,

Vv.

THOMAS AINSWORTH,

Respondent.

On Petition For A Writ Of Certiorari

To The Supreme Court Of Nevada

BRIEF FOR RESPONDENT IN OPPOSITION

STATEMENT

Petitioner Combined Insurance Company of Amer-

ica seeks review of a punitive damages judgment that

resulted from its oppressive conduct and bad faith

refusal to pay an insurance claim. The relevant facts

are largely set forth in the opinion of the Nevada

Supreme Court. Petitioner’s Appendix 60a (herein-

after ‘‘Pet. App.’”’). In 1969 Respondent Ainsworth

and his wife purchased insurance policies from Com-

bined, which provided coverage for ‘‘ ‘any conceivable

accident.’’’ Jd. at 61a, 66a. After having paid pre-

miums for thirteen years, in January, 1982, Mr. Ain-

sworth suffered a catastrophic accident—a stroke—

during the course of an angiogram, causing him to

lapse into a coma and leaving him permanently dis-

abled. On the advice of Mr. Ainsworth’s physician,

who believed that the stroke was caused by an ac-

cident, Mrs. Ainsworth submitted a claim for the

$9,600 in benefits available under the policies.

Without conducting an independent investigation of

any kind, without contacting Mr. Ainsworth’s physi-

cians, and without reviewing any medical records or

x-rays other than the physician’s report which accom-

panied the claim, petitioner summarily denied the

claim alleging that Mr. Ainsworth’s stroke was the

result of a disease, and not an accident.’ On the ad-

vice of a physician and Combined’s salesman, Mrs.

Ainsworth resubmitted the claim, with additional

medical evidence demonstrating that the stroke was

entirely accidental. Jd. at 62a. Petitioner sent the

claim to its retained physician, Dr. Goldfinger, but

failed to provide him with the additional material pro-

vided by the Ainsworths, and failed to provide him

with medical records from the hospital where the ac-

cident had occurred. Petitioner again denied the claim.

Mrs. Ainsworth resubmitted the claim a third time,

with additional medical evidence. Petitioner again sub-

mitted the claim to its retained physician, this time

with the additional medical information, but wrote

(without sending) a letter of denial before it even

1 The physician’s original report accompanying the Ainsworths’

claim indicated that the stroke was caused by an “‘iJatrogenic

accidental cerebral vascular accident during angiogram.’’ Ignor-

ing this language, Combined claimed to have relied on other

language in the first report stating, “‘stroke occurred from dis-

ruption of arthcromatous plaque dur'ag angiogram.”’

received its physician’s report. When it did receive

the report, petitioner sent a third letter of denial,

even though the report did not indicate that the stroke

was the result of disease, but only that it occurred

during a medical test to determine if there were a

disease.2 Mrs. Ainsworth resubmitted the claim a

fourth time, accompanied by a letter from her hus-

band’s doctor, who confirmed that the angiogram

‘* ‘revealed no pre-existing vascular disease.’”’ Id. at

63a. This time the petitioner responded with an offer

to settle the claim for 20% of what was due under

the policies, provided its insured would execute <e-

lease of all claims. Mrs. Ainsworth rejected the offer

and, for the fifth time, asked for full payment.

Petitioner responded with a repetition of its 20% of-

fer.

These repeate@resubmissions of the claim were

made at a time when the Ainsworths were financially

desperate and in great need of the benefits to which

they were entitled. Mr. Ainsworth’s stroke prevented

him from working. Having been denied the insurance

benefits from petitioner, his financial ability to obtain

critical treatment needed to reverse his severe speech

disability was compromised. As a result, he now suf-

fers permanent and irreversible speech and commu-

nication impairment. Jd. at 68a.

2 The letter that Combined sent to the Ainsworths stated that

the stroke was “directly contributed to by arteriosclerotic dis-

ease.’’ Its doctor’s subsequent report, however, stated only that

the stroke ‘‘was not purely accidental since the [angiogram] was

done to investigate the possible cause of [Mr. Ainsworth’s tran-

sient ischemic attack].” This, in fact, represented a legal, not a

medical conclusion. It was an interpretation of the insurance

contract, asserting that accidents occurring during medical pro-

cedures were not covered.

Petitioner was fully aware of its insured’s financial

difficulties. Id. at 64a-65a. It received this information

both from the Ainsworths, as well as from its’ own

salesman in Nevada, who learned of it while attempt-

ing to collect an additional insurance premium from

Mrs. Ainsworth. Despite this knowledge, petitioner

continued to deny, for many months, the needed ben-

efits. Finally, seeking to take advantage of its in-

sured’s economic distress, petitioner offered to settle

for 20% of the amount due Mr. Ainsworth. 3

On July 8, 1983, Mr. Ainsworth filed the instant

action in state district court, claiming that Combined

had failed to deal with him in good faith, a tort in

Nevada, and that it had breached its contract of in-

surance. Alleging petitioner’s aggravated conduct,

Ainsworth also sought punitive damages, as author-

ized by Nevada law.’ Despite petitioner’s objection

that there was insufficient evidence, the trial court

submitted the punitive damages issue to the jury. Pet.

App. 188a, Instr. No. 24. Petitioner failed to .object

to the content of these instructions; it failed to pro-

pose any substitute or additional instructions; and it

failed to suggest that the jury was required to receive

any instructions on standards to be applied in the

event that the jury assessed punitive damages.

3 Nev. Rev. Stat. Ann. §42.010(2) (1989) provides for punitive

damages in appropriate tort cases in which there is a showing

of “oppression, fraud or malice’ on the part of the defendant.

The Nevada Supreme Court previously had indicated that such

damages could apply to insurance bad faith cases under appro-

priate circumstances. Farmers Home Mut. Ins. v. Fiscus, 102

Nev. 371, 725 P.2d 234 (1986); United States Fidelity & Guar-

anty Co. v. Peterson, 91 Nev. 617, 540 P.2d 1070 (1975).

inh om ee

5

The jury returned a verdict awarding Mr. Ain-

sworth damages of $9,600 under the insurance con-

tract, $200,000 as compensatory damages for the bad

faith refusal of the petitioner to pay the benefits due,

and $5,939,500 in punitive damages.‘ In response,

petitioner moved for a new trial and sought a judg-

ment n.0.v. with respect to the punitive damage

award, arguing that there was insufficient evidence

to sustain the award. These were the only post-trial

grounds of relief petitioner offered. Petitioner failed

to request a reduction through remittitur of the

amount of damages assessed by the jury, and also

failed to question the constitutionality of the award

of punitive damages.

In a reversal of her previous ruling, the trial judge

granted judgment n.o.v. on the punitive damages

award, finding there was insufficient evidence to es-

tablish “malice in fact.”” Pet. App. 78a. Mr. Ainsworth

appealed. As the case came before the Nevada

Supreme Court, it posed only one issue: was the evi-

dence sufficient to support the jury assessment of

punitive damages? Nevertheless, in response to Mr.

Ainsworth’s brief on appeal, petitioner attempted to

raise, for the first time, a constitutional issue. It now

asserted that reinstatement of the award of punitive

damages would violate its constitutional rights under

the excessive fines clause of the Eighth Amendment

and the due process clause of the Fourteenth Amend-

ment.

‘As noted by the Nevada Supreme Court, this assessment

amounted to “5% of Combined’s 1985 net operating gain’’ and

“constitute[d] only .04% cf Combined’s 1985 total assets.” Pet.

App. 68a.

The irrelevance of the constitutional issue to the

appeal was recognized by the Nevada Supreme Court

when it denied petitioner’s request to delay the state

court proceedings to await this Court’s decision in

Bankers Life & Casualty Co. v. Crenshaw, 108 S. Ct.

1645 (1988):

[T]he issue before this court appears to be

the propriety of the district court’s order

granting a judgment not withstanding the

verdict under the circumstances of this case,

rather than the constitutionality of punitive

damages generally.

Pet. App. 13la. Nor did petitioner demonstrate any

seriousness about its belated constitutional claims. In

a sixty-page brief, it devoted only the last two pages

to the constitutional claims, and even that focused

primarily on the Eighth-Amendment issue. It wholly

failed to raise the constitutional issues at oral argu-

ment before the Nevada Supreme Court.

The Nevada Supreme Court unanimously reversed

the trial court, finding the evidence sufficient to sus-

tain an award of punitive damages. The opinion was

based solely on Nevada law regarding punitive dam-

ages and trial court discretion. The court’s primary

determination was based upon the sufficiency of the

evidence of ‘‘oppression’”’:

Combined’s obstinate and unjustified refusal

to pay, in our opinion, constitutes oppression

as contemplated by the statute. The evidence

establishes that the Ainsworths were in des-

perate need of funds, and that Combined had

reason to know of their dire circumstances.

The record clearly supports an inference that

_ a Pe et IE A eo ols me A em NK

Combined consciously disregarded the rights

of its insured ....

Pet. App. 65a.

Reviewing the size of the punitive damages award,

the supreme court applied the standards of its recent

decision in Ace Truck and Equip. Rentals, Inc. v.

Kahn, 103 Nev. 503, 746 P.2d 132 (1987).5 The court

analyzed the jury award in light of these standards,

and concluded:

Traditionally this Court has held that the

amount of a punitive damages award was

subjective, and therefore best left to the ju-

ry’s determination. Phillips v. Lynch, 101

Nev. 311, 704 P.2d 1083 (1985); Miller v.

Schnitzer, 78 Nev. 301, 371 P.2d 824 (1962).

Recently we have attempted to define the

allowable limits of punitive damages in a

more objective fashion. Ace Truck [and

Equip. Rentals, Inc.] v. Kahn, 103 Nev. 503,

746 P.2d 182 (1987). Ace Truck described

several factors which contribute to an ap-

pellate evaluation of a punitive damages

award. We conclude, however, that none of

these factors prevent us from affirming the

award in this case.

5 Ace Truck was decided after oral argument but before de-

cision in the instant case. In it, the Nevada Supreme Court

“attempted to define the allowable limits of punitive damages

in a more objective fashion.” Pet. App. 67a. In particular, the

court set forth several criteria to be applied by trial and ap-

pellate courts in reviewing such awards. See p. 18-20 infra. The

Court apparently applied these standards in the case at bar

under its “inherent authority to issue 2 remittitur of the ver-

dict.”” Pet. App. 14a n.9.

Pet. App. 67a.

In his Reply Brief, Ainsworth had argued that the

constitutional issues were not properly before the

court, because they had not been raised in the trial

court, and were not properly preserved for review.

Pet. App. 10la. The Nevada court did not discuss the

constitutional issues in its decision other than possibly

to include them in its concluding statement: ‘Other

contentions have been considered and are deemed to

be totally without merit.” Pet. App. 69a.§

Petitioner filed a petition for rehearing, arguing

that the punitive damages were excessive under state

law, and raising unfounded and unsubstantiated al-

legations of improprieties by the then-Chief Justice of

the Nevada Supreme Court.’ The Nevada Supreme

Court denied rehearing, finding no impropriety had

occurred, and noted:

Combined’s counsel did not seriously attempt

to present on appeal a factually persuasive

or legally comprehensive argument that the

verdict was so excessive as to warrant a re-

mand or remitticur. To the contrary, counsel

essentially proceeded on an “all or nothing”’

theory that included no particulars concern-

ing the excessiveness of the punitive award.

Pet. App. 13a.

* Petitioner also had presented several claims concerning the

admissibility of certain evidence at trial and the appropriate

burden of proof in a punitive damages case.

‘Mr. Ainsworth also petitioned for rehearing on the basis of

the refusal of the court to award interest on the punitive dam-

ages. This petition was denied.

9

In short, the only merits issue ever discussed by

the Nevada Supreme Court was whether there was

sufficient evidence to support submission of the pu-

nitive damages clairn to the jury.

REASONS FOR DE®YYING THE WRIT

Petitioner seeks review of a single issue—whether

the judgment below violates the due process clause

of the Fourteenth Amendment because the jury al-

legedly was given “unlimited discretion to award pu-

nitive damages without established standards on how

those damages are to be measured.”’ Petitioner’s Brief

at i (hereinafter ‘“‘Pet. Br.”). This issue was never

raised in the trial court and never discussed by the

Nevada Supreme Court. It should not be considered

here for several reasons.

First, the Court lacks jurisdiction to hear the claim

because petitioner has failed to satisfy its heavy bur-

den of showing that the court below “passed upon”

the federal law issue that it seeks to have reviewed.

See, e.g., Exxon Corp. v. Eagerton, 462 U.S. 176, 181

n.8 (1983). Second, even if there were jurisdiction,

the Court has repeatedly made clear that it will not

decide a constitutional challenge to punitive damages

in the absence of a ‘‘well-developed record and a rea-

soned opinion on the merits.” Bankers Life & Cas-

ualty Co. v. Crenshaw, 108 S. Ct. 1645, 1651 (1988).

Third, both the Nevada Supreme Court and the state

legislature recently have responded to the Court’s in-

vitation in Bankers Life, 108 S. Ct. at 1651, to ad-

dress issues concerning the administration of punitive

damages, and have made significant changes in the

governing law. Consequently, this case essentially in-

volves a challenge to a system for assessing punitive

10

damages that no longer exists. At the same time,

further review threatens to unsettle important re-

forms before they have had a chance to become op-

erational. Finally, even if the Court were inclined to

review the issue raised by petitioner, this case is not

an appropriate one in which to do so. Mr. Ainsworth

is elderly and infirm, and has been engaged in op-

pressive litigation with petitioner for more than seven

years. The Nevada Supreme Court has already noted

petitioner’s “misuse [of] the appellate processes of

this court for the sole purpose of delaying a final

resolution of this litigation.’’ Pet. App. 43a.

I. Combined Has Failed Affirmatively To Demonstrate

That The Nevada Supreme Court Decided Its Federal

Claim. .

It is well settled that this Court’s jurisdiction to

review a judgment by a state court must “affirma-

tively appear{] upon the record brought here for re-.

view on appeal.”’ Bailey v. Anderson, 326 U.S. 203,

207 (1945) (emphasis supplied). See 28 U.S.C. § 1257.8

*In furtherance of this requirement, Rule 21.1(h) of this

Court’s rules provides:

If review of the judgment of a state court is sought,

the statement of the case shall also specify the stage

in the proceedings, both in the court of first instance

and in the appellate court, at which the federal ques-

tions sought to be reviewed were raised; the method

or manner of raising them and the way in which they

were passed upon by the court; such pertinent quo-

tation of specific portions of the record, or summary

thereof, with specific reference to the places in the

record where the matter appears (e.g., ruling on ex-

ception, portion of court’s charge and exception

thereto, assignment of errors) as will show that the

11

Thus, “‘when the highest state court fails or refuses

to pass expressly upon a federal question, the party

invoking the Supreme Court’s jurisdiction has the high

burden of showing that the federal question was in

fact properly raised, so that the state court’s failure

to deal with it was not for want of proper presen-

tation.”” R. Stern, E. Gressman & S. Shapiro, Supreme

Court Practice 150 (6th ed. 1986). As the Court has

often stated,when ‘“‘the highest state court has failed

to pass upon a federal question, it will be assumed

that the omission was due to want of proper pres-

entation in the state courts, unless the aggrieved party

in this Court can affirmatively show the contrary.”

Street v. New York, 394 U.S. 576, 582 (1969). Accord,

Exxon Corp. v. Eagerton, supra, 462 U.S. at 181 n.3;

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

v. Anderson, supra, 326 U.S. at 206-07; Chicago I. &

L. Ry. v. McGuire, 196 U.S. 128, 131-33 (1905).°

Petitioner does not even acknowledge this basic re-

quirement, let alone attempt to meet the heavy bur-

federal question was timely and properly raised so as

to give this Court jurisdiction to review the judgment

on writ of certiorari.

® This settled rule is not affected by the “plain statement’’

requirement of Michigan v. Long, 463 U.S. 1032 (1983), whereby

state courts were advised to make clear when they are resting

a judgment on independent state law grounds. That doctrine,

by its terms, applies only ‘‘when .. . a state court decision fairly

appears to rest primarily on federal law, or to be interwoven

with the federal law.” 463 U.S. at 1040 (emphasis supplied). This

rationale has no applicability, however, when, as here, a state

court declines to discuss an issue at all; in this latter circum-

stance, there is no risk that the court will make unreviewable

federal law.

12

den that it imposes. Indeed, petitioner cannot meet

this burden when the Nevada Supreme Court chose

not to discuss the due process claim, because

petitioner’s own failure to raise the issue at trial con-

stituted a state law, procedural barrier to appellate

review.

During the trial, petitioner made no objection—con-

Stitutional or otherwise—to the content of the instruc-

tions on punitive damages. Under Rule 51,

Nev.R.Civ.P., petitioner was thereby barred from

raising, on appeal, any challenge to that jury instruc-

tion. Rule 51 expressly provides: “No party may as-

sign as error the giving or the failure to give an

instruction unless he objects thereto before the jury

retires to consider its verdict, stating directly the

matter to which he objects and the ground of his

objection.”” The Nevada Supreme Court strictly fol-

lows this rule. See, ¢.9., Carson Ready Miz, Inc. v.

First Nat'l Bank, 97 Nev. 474, 475, 685 P.2d 276

n.1 (1981).!° There is no reason to think that it did

© See also Barnes v. Delta Lines, 99 Nev. 688, 669 P.2d 709

(1983); Ross v. Giacomo, 97 Nev. 550, 556, 635 P.2d 298, 302

(1981); Eikelberger v. Tolotti, 96 Nev. 525, 611 P.2d 1086 (1980):

Smith v. Timm, 96 Nev. 197, 606 P.2d 530 (1980); Alpark Dis-

trib., Inc. v. Poole, 95 Nev. 605, 608, 600 P.2d 229, 231 (1979);

Powers v. Johnson, 92 Nev. 609, 555 P.2d 1235 (1976); Bill

Stremmel Motors, Inc. v. Kerns, 91 Nev. 110, 531 P.2d 1357

(1975); Bradshaw v. General Elec. Co., 91 Nev. 124, 581 P.2d

1358 (1975); Ginnis v. Mapes Hotel Corp., 86 Nev. 408, 470 P.2d

135 (1970); Wadsworth v. Dille, 85 Nev. 86, 450 P.2d 362 (1969);

Fireman’s Fund Ins. Co. v. Shaweross, 84 Nev. 446, 442 P.2d

907 (1968); Shoshone Coca-Cola Bottling Co. v. Dolinski, 82 Nev.

439, 420 P.2d 855 (1966); Hotel Riviera, Inc. v. Short, 80 Nev.

505, 396 P.2d 855 (1964); Duran v. Mueller, 79 Nev. 453, 386

P.2d 733 (1963); Wagon Wheel Saloon & Gambling Hall, Inc. v.

13

otherwise in this case." At best, the Nevada Supreme

Court disposed of petitioner’s constitutional claims in

its general remark that: ‘Other contentions ... are

deemed to be totally without merit.” Pet. App. 69a.

Because the state supreme court had been made

aware of the fact that this Court had considered, but

not yet resolved, these constitutional issues, this hold-

Mavrogan, 78 Nev. 126, 369 P.2d 688 (1962); Lathrop v. Smith,

71 Nev. 274, 288 P.2d 212 (1955).

1) Petitioner asserts that the Nevada Supreme Court has “‘{a]

practice of routinely considering constitutional questions raised

for the first time on appeal.” Pet. Br. at 9 n.4. The argument

is both misleading and overstated. In the first place, petitioner

cites no case where the Nevada Supreme Court has agreed to

hear a constitutional challenge to jury instructions that was not

raised in a timely fashion in the trial court. In one of the cases

petitioner cites, Batesel v. Schultz, 91 Nev. 558, 540 P.2d 100

(1975), the dissenting judge took the position that, even though

an objection to the instructions had been made, it was not suf-

ficiently precise to preserve the issue for appeal. The remaining

cases relied on by petitioner involved objections that did not

challenge the validity of the jury instructions. See, e.g., Natchez

v. Board of Optemetry, 102 Nev. 247, 251, 721 P.2d 361, 363

(1986) (due process challenge to composition of state adminis-

trative agency); Desert Chrysler-Plymouth v. Chrysler Corp., 95 -

Nev. 640, 643, 600 P.2d 1189, 1190-91 (1979), cert. denied, 445

U.S. 964 (1980) (separation of powers challenge to automobile

dealership statute). Even in cases not involving jury instructions,

moreover, the Nevada Supreme Court only considers it “‘occa-

sionally appropriate” to take cognizance of a constitutional issue

not raised in the trial court. Desert Chrysler-Plymouth, supra,

95 Nev. at 643, 600 P.2d at 1191. See also Wilkins v. State, 96

Nev. 367, 609 P.2d 309 (1980) (constitutional questions will not

be reviewed in the absence of a sufficiently developed record

which demonstrates that fundamental rights are implicated and

which provides an adequate basis for review) (failure to raise

timely objection to admission of evidence held to be waiver of

Fifth and Sixth Amendment claims).

14

ing could only have represented a judgment based on

state procedural grounds.

Even on appeal, moréover, petitioner’s claim that

“the jury received no proper guidance on the question

of damages” was briefed only in a “superficial and

cursory manner’ and never raised at oral argument.

Pet. App. 14a n.9.!2 Rather, petitioner’s basic argu-

ment on appeal was the same as that at trial: the

evidence was insufficient to support any award of

punitive damages at all. There is thus no basis in the

record for suggesting that the Nevada Supreme Court

‘‘passed upon”’ petitioner’s due process claim.

Nor can petitioner argue that its belated constitu-

tional challenge to the jury instruction is simply an

alternative, legal defense of the judgment below."* The

2 Petitioner relies on the fact that the Court went on to state

that “the major focus of Combined’s argument in its briefs on

appeal was that the verdict constituted an excessive fine or a

violation of due process under the constitution.” Pet. App. l4a

n.9. On its face, this is simply a misstatement. Petitioner’s con-

stitutional claims amounted to little more than a two-page af-

terthought in a sixty-page brief. This statement cannot be

squared with the Court’s prior characterization of petitioner’s

challenge to the jury instructions as “superficial and cursory.”

Ibid. Possibly, the court meant to include in its characterization

of the “excessive fine’’ issue all of the challenges—constitutional

and non-constitutional—to the punitive damage award.

*® By its terms, Rule 51 provides that: ‘‘no party ray assign

as error the giving or the failure to give an instruction unless

he objects thereto.” (Emphasis supplied). While petitioner prop-

erly recognizes “(t]he Nevada Supreme Court follows the rule,

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

judgment on any legitimate ground,” Pet. Br. at 7 n.1, petiticner

fails to realize that when a basis for affirming a judgment is

raised for the first time on appeal, it will be considered “only

15

judgment below had been that the evidence did not

support a punitive damage award at all, and that,

therefore, the issue should never have gone to the

jury. The constitutional issue, however, arises only if

the issue should go to the jury; it raises a question

about the content of the instructions to be given to

the jury. To see that this is not a legal argument in

support of the judgment below one need only consider

the relief to which petitioner would have been entitled

had the Nevada Supreme Court reached the merits

of the constitutional claim and ruled affirmatively in

petitioner’s favor. The relief petitioner would have

obtained could not have been an affirmance of the

judgment below. Rather, petitioner, ct best, could

have hoped for a new trial on the amount of punitive

damages. The law of the case would have remained

that petitioner’s behavior satisfied the state law

standards for an award of punitive damages—pre-

cisely the issue upon which petitioner had won at the

trial level.

In sum, petitioner has failed to meet the heavy

burden of establishing jurisdiction in this Court by

affirmatively demonstrating that the Nevada Supreme

Court actually passed upon its due process claim. In-

deed, this Court has previously held that jurisdiction

was not present in identical circumstances. Thus, in

Exxon Corp. v. Eagerton, supra, the Alabama

Supreme Court declined to “discuss” a federal claim

that had never been raised in the trial court. 462

U.S. at 181 n.3. This Court held that, even though

the federal issue was raised and briefed on appeal,

in exceptional cases.” Heckler v. Campbell, 461 U.S. 458, 468

n.12 (1983) (quoting McGoldrich v. Cempagnie Gen. Transatlan-

tique, 309 U.S. 430, 434 (1940)).

16

the record provided no basis for jurisdiction ‘‘for it

does not affirmatively appear that that issue was de-

cided below.” Ibid. (citing Bailey v. Anderson, 326

U.S. at 206-07). On the contrary, the Court explained,

“(t]he general practice of the Alabama appellate courts

is not to consider issues raised for the first time on

appeal.’’ Jbid. For precisely the same reasons, the

same conclusion follows in this case.

Il. The Record Below Is Inadequate To Allow For

Proper Consideration Of A Major Constitutional

Challenge To A Fundamental Doctrine Of State Tort

Law.

Even if the Court had jurisdiction to review this

case, there are sound reasons to decline to do so. In

fact, in each of the past three terms the Court has

refused to decide due process challenges to punitive

damages awards even though the issue was fully

briefed and argued by the parties. Browning-Ferris

Indus., Inc. v. Kelco Disposal, Inc., 109 S. Ct. 2909,

2921 (1989); Bankers Life & Casualty Co. v. Cren-

shaw, supra; Aetna Life Ins. Co. v. Lavoie, 475 U.S.

813, 828-29 (1986). As the Court explained in Bankers

Life, “[wJhere difficult issues of great public impor-

tance are involved, there are strong reasons to adhere

scrupulously to the customary limitations on our dis-

cretion.”’ 108 S. Ct. at 1651 (quoting Illinois v. Gates,

462 U.S. 213, 224 (1983)). In particular, ‘‘a constel-

lation of practical considerations, chief among which

is our own need for a properly developed record on

appeal,’’ cautions against deciding such an issue pre-

maturely. Jbid. By not rushing to judgment, in short,

the Court can ensure that the “{State] Supreme Court

will have its opportunity to decide the question of

federal law in the first instance, while any ultimate

17

review of the question that we might undertake will

gain the benefit of a well-developed record and a

reasoned opinion on the merits.” Ibid. See also

Browning-Ferris Indus., Inc., 109 S. Ct. at 2921 n.23

(challenge to punitive damages would not be heard

‘in the absence of a record on the due process point

developed in the District Court and the Court of

Appeals’).

The instant case presents the Court with nothing

more than an opportunity to reprise these recent rul-

ings. There is not a word in the opinions of either

the trial court or the Nevada Supreme Court ad-

dressing petitioner’s concerns about jury discretion in

punitive damages cases. This is a glaring omission in

a case that seeks to eliminate, on federal constitu-

tional grounds, jury instructions that have been in

use for decades. A thoughtful analysis of the entire

process of determining and reviewing punitive dam-

ages awards under the challenged system is indis-

pensable to a resolution of that challenge. This

information is simply not available in the record, be-

cause petitioner did not object until after it had lost

under jury instructions that it had previously ac-

cepted. In this circumstance, there is no justification

for departing from the Court’s settled practice of de-

clining to resolve a constitutional claim on an inad-

equate record.

III. There Have Been Important Changes In Nevada

Law That Were Largely Adopted After The Deci-

sion In This Case. 7

In addition to the problems created by an inade-

quate record, the Court in Bankers Life also declined

to resolve the constitutional issues on grounds of com-

ity. Specifically, it noted its clear preference for state

18

court and legislative solutions rather than a consti-

‘tutional ruling in the area of punitive damages, which

is such an important and longstanding part of state

tort law. 108 S. Ct. at 1651 & n.3. In Nevada, this

Court’s invitation has been accepted by both the leg-

islature and the supreme court. In the past two years,

these bodies have adopted significant reforms con-

cerning the process by which such damages are

awarded by the jury, the standards by which they are

to be reviewed by the courts, and their maximum

size. For this reason alone, the instant case is par-

ticularly ill-suited for review by this Court.

The first major changes in state law occurred in

late 1987, when the Nevada Supreme Court decided

Ace Truck, supra. In that case, the court abandoned

its prior policy of according highly-deferential review

to punitive damages awards. See, e.g., Miller v.

Schnitzer, 78 Nev. 301, 371 P.2d 824 (1962). Ex-

pressing its disapproval of the notion that a “trial

judge or jury should have unbridled discretion in set-

ting the amount of punitive damages,” the court de-

'* Many other states also have amended or reformed the pro-

cedural or substantive law of punitive damages since 1986. See,

e.g., Ala. Code § 6-11-21 (Supp. 1988); Alaska Stat. § 09.17.020

(1986); Ariz. Rev. Stat. Ann. § 12-701 (1989); Colo. Rev. Stat.

§ 13-21-102 (1987), Conn. Gen. Stat. Ann. § 52-240b (West 1988);

Fla. Stat. Ann. § 768.73 (West Supp. 1988); Ga. Code Ann. § 51-

12-5.1 (Supp. 1988); Idaho Code § 6-1604 (1980); Kan. Stat. Ann.

§ 60-3701 (Supp. 1987); Minn. Stat. § 549.24 (1986); Mo. Ann.

Stat. § 510.263 (Supp. 1989); Mont. Code Ann. § 27-1-221 (1987);

N.D. Cent. Code § 32-03.2-11 (1987); N.J. Rev. Stat. § 2A:58C-5

(1987); Ohio Rev. Code § 2315.21 (1988); Okla. Stat. Ann. tit 23,

§ 9 (1986); 1987 Or. Laws 774; S.C. Code § 15-33-135 (1988); Tex.

Civ. Prac. & Rem. Code Ann. § 41.007 (Vernon 1987); Utah Code

Ann. § 78-18-1 (1989); Va. Code Ann. § 8.01-38.1 (Supp. 1988).

19

cided ‘‘to develop standards to determine the reason-

ableness of punitive damages in a given case and

thereby limit the upper amount that can be properly

and justly awarded as punitive damages.’”’ Ace Truck,

supra, 746 P.2d at 134-35. In particular, it set out

the following criteria by which courts should review

such awards: (1) the financial wealth of the defendant;

(2) the culpability and blameworthiness of the

defendant; (3) the vulnerability of, and injury suffered

by, the offended party; (4) the offensiveness of the

conduct compared to societal values of justice and

propriety; and (5) the means necessary to control the

offensive conduct. Id. at 137. See also United Fire

Ins. Co. and United Diversified Corp. v. McClelland,

No. 18705, 105 Nev. Adv. Op. 100 (Sept. 6, 1989)

(Ace Truck standards applied).

Cognizant of the decision in Ace Truck, as well as

the decision in the instant case, the Nevada legisla-

ture recently adopted additional reforms in this area.

Effective May 30, 1989, Nev. Rev. Stat. Ann.

§ 42.010(2) imposes new procedural protections in all

cases involving punitive damages, including the re-

quirement that the predicate conduct of oppression,

fraud or malice be proved by ‘‘clear and convincing

evidence.”’ Pet. App. 201a.* In addition, the statute

requires bifurcation of the trial so that the amount

of punitive damages will be assessed in a separate

proceeding, at which the jury will receive -evidence,

for the first time, as to the financial condition of the

15 Although petitioner failed to request at trial that Mr. Ain-

sworth be held to this standard, it argued strongly for precisely

this burden of proof in its appellate briefs to the Nevada Supreme

Court. In fact, this contention was given priority over its Eighth

Amendment and due process claims. Pet. App. 91a.

20

defendant. Jbid. Finally, it sets a “cap” on punitive

awards (three times compensatory damages or

$300,000, whichever is higher), and provides that the

jury may not be advised of this cap in reaching its

verdict. Id. at 202a.'*

These recent changes in Nevada law ensure that

its procedures for administering punitive damages will

withstand constitutional scrutiny under the due proc-

ess clause. See, e.g., Standard Oil Co. v. Missouri,

224 U.S. 270 (1912); Day v. Woodworth, 54 U.S. (13

How.) 363 (1852). More significantly for present pur-

poses, however, these changes make the instant case

a poor candidate for review by this Court in two

significant respects. First, the system of punitive

damages that petitioner asks the Court to review is

no longer in effect in Nevada. The legislative changes

were adopted subsequent to the decision below and,

while the standards in Ace Truck were applied in

affirming the jury’s verdict in this case, those stand-

ards may not have been put to their true test because

petitioner ‘“‘did not address in a meaningful way the

specific factors set forth in Ace Truck’’ Pet. App. 14a

n.9. Indeed, the Nevada Supreme Court frankly stated

that it “‘may have been much more receptive to Com-

bined’s contentions, [regarding excessiveness] if they

had been cogently presented on appeal rather than

belatedly asserted in a petition for rehearing.” Ibid.

\

16 The statute exempts certain categories of claims, such as

bad faith denials of insurance claims, from this cap. Having done

so with particular knowledge of the instant case, the legislature

has expressed its considered view that such behavior requires a

greater measure of deterrence in Nevada than do other torts.

That view, based on an intimate knowledge of local conditions,

should not be lightly set aside on constitutional grounds, as

petitioner would suggest.

21

These recent changes make this case unworthy of

review for another reason as well. Having devoted

significant time and energy to responding to the

Court’s invitation in Bankers Life, the Nevada

Supreme Court and legisiature should not have their

efforts placed in immediate jeopardy by a premature

constitutional ruling that will inject a federal issue

into every case involving punitive damages. Instead,

these reforms should be allowed to develop so that

the state legislature and judiciary can assess their

effects and determine whether other changes are

needed. These institutions, as the Court has previ-

ously indicated, are likely to provide “less intrusive,

and possibly more appropriate, resolutions’ to the

issues presented by the petition. Bankers Life, 108

S. Ct. at 1651.

IV. Combined Should Not Be Heard To Complain Of Its

Own Decision Not To Raise A Due Process Issue

At Trial.

Petitioner, through its admitted bad faith and op-

pressive withholding of accrued benefits, did not

merely cause serious distress to Mr. Ainsworth and

his wife. As the record shows, petitioner’s conduct

aggravated the very physical maladies that its insur-

ance policy bound it to alleviate through payment of

the promised benefits. Pet. App. 68a.

Petitioner forced the disabled and financially dis-

tressed respondent to seek justice through legal ac-

tion. Petitioner was represented at trial by

experienced Nevada counsel. Counsel was given every

opportunity to present petitioner’s case to the jury,

tendering for the jury’s consideration whatever issues

might seem strategically useful. Evidently, petitioner’s

counsel did not desire jury instructions that formu-

22

lated ‘‘standards” by which to assess the amount of

any award of punitive damages. The only objection

petitioner tendered was to the giving of any instruc-

tion on punitive damages at all. No objection was

made to the form of the instruction. No attempt was

made to tender any other instruction. Nor was any

suggestion made to the trial judge by petitioner’s

counsel that an explicit statement of ‘“standards’”’

would even be of value—much less that “‘standards’”’

were essential to due process of law.

Nothing prevented petitioner’s counsel from pre-

senting this position to the trial court, had counsel

believed that an explicit statement of standards was

important. Counsel was aware of Rule 51 and the

need to raise contemporaneously any objection to jury

instructions. The failure to pose such an objection

represented a reasonable tactical decision by

petitioner. The facts reflected in the record point to-

ward the conclusion that any ‘‘standards’’ which may

have been formulated in this case (had petitioner re-

quested them) would have as likely worked against

petitioner’s position, as for it.

The Nevada Supreme Court’s review of the record

in this case, in light of the standards articulated in

Ace Truck, demonstrates this. The facts of the instant

case weighed positively for Mr. Ainsworth, and

against petitioner; they supported an assessment of

substantial punitive damages.’ In short, counsel got

17 Precisely the same reasons supported Combined’s tactical

decision not to ‘‘address in a meaningful way the specific factors

set forth in Ace Truck,” on appeal. Pet. App. 14a n.9.

23

the kind of trial they wanted."* For reasons of their

own, petitioner’s counsel chose to hold the constitu-

tional claim in reserve, until after an unfavorable ver-

dict. The opinions of the Nevada Supreme Court show

that on appeal petitioner continued to engage in an

abusive strategy of delay and obstruction. The court

not only affirmed the jury’s finding that petitioner

had acted in bad faith, as well as “‘oppressively’’ in

its dealings with Mr. Ainsworth; it also condemned,

in the strongest possible terms, numerous procedural

ploys pursued by petitioner. The Court described them

as “reckless[],”’ Pet. App. 20a n.12; “frivolous,” Jd.

at 21a; a “‘nullity,” Jd. at 17a; made “‘irresponsibly”’

Id. at 26a n.15; incapable of being “‘ ‘seriously [] con-

tended,’”’ Id. at 31a; “speculative,” Jd. at 40a;

“wholly insufficient,’ and “‘specious’’ Jd. at 4la &

n.22; and suggestive of a ‘‘misuse [of] the appellate

processes of this court for the sole purpose of delay-

ing a final resolution of this litigation.” Jd. at 43a.

By these tactics petitioner has delayed accountability

on the jury’s verdict for an additional three and one-

half years.

In conclusion, it is submitted that petitioner should

not be allowed to continue this pattern by asking this

Court to grant a new trial! on conditions different

from those which petitioner sought during its day in

court. Mr. Ainsworth is not only elderly, but seriously

ill, in part directly due to petitioner’s oppressive con-

_ 38 Combined’s counsel may also have hoped that the jury would

split the total award between compensatory and punitive dam-

ages. Counsel may have sought to keep in reserve a new con- _

stitutional challenge to the latter. The result of this tactic would

have been not only to defeat the punitive damages, but to sup-

press the compensatory damages as well.

24

duct. If this oppressive litigation is allowed to con-

tinue on issues never raised at trial, there is good

reason to suggest that much or all of what is left of

Mr. Ainsworth’s life will be consumed during the

process.

CONCLUSION

The petition for a writ of certiorari should be de-

nied.

Respectfully submitted,

H. BARTOW Farr, III *PETER CHASE NEUMANN

JOEL I. KLEIN P.O. Box 1170

ONEK, KLEIN & FARR 136 Ridge Street

2550 M Street, N.W. Reno, Nevada 89504

Washington, D.C. 20037 (702) 786-3750

(202) 775-0184 Par wim

WILLIAM O. BRADLEY, JR. 127 Wall Street

BRADLEY & DRENDEL, LTD. New Haven, Connecticut 06520

P.O. Box 1987 (208) 482-4846

Reno, Nevada 89505 Attorneys for Respondent

(702) 329-2273 “Counsel of Remed