Opposition Brief — Combustion Engineering, Inc. v. McGill

No. 99-252

IN THE

Supreme Court of the United States

COMBUSTION ENGINEERING, INC..

Petitioner.

V.

Lois A. MCGILL. ET AL..

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THI

UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUTI

BRIEF IN OPPOSITION TO

PETITION FOR A WRIT OF CERTIORARI

JOHN C. BELL, JR. WILLIAM A. PANNEL!

619 Greene Street Post Office Box 810

Augusta, GA 3090] Alpharetta, GA 30009

(706) 722-2014 (770) 619-0810

JOHN M.B. LEWIs, [V KENNETH J. CHESEBRO*

HUGUENIN, ANNAS & LEWIS JONATHAN S. MASSEY

4024 Washington Road 1600 Massachusetts Avenue

Augusta, GA 30917 Cambridge, MA 02138

(706) 855-5000 (617) 661-4423

Counsel for Respondents

* Counsel of Record

September 10, 1999

ore

TABLE OF CONTENTS

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

A. Statement ofthe Facts ....................... 2

B Procedural History ............ccccccccccce. 1]

REASONS FOR DENYING THE PETITION ............. 15

I. THIS CASE IS NOT AN APPROPRIATE

VEHICLE FOR ADDRESSING THE

QUESTION PRESENTED BY COMBUSTION ....... 15

A. This Case Does Not Present the Question of the

Reasonableness of a $4 Million Punitive Award .. 15

B. The Question Framed by Combustion

Is Not Presented by This Case ................ 17

Il. IN ANY EVENT, THE $1 MILLION PUNITIVE

AWARD IN THIS CASE IS PLAINLY REASONABLE,

RENDERING THE “RATIO” ISSUE IRRELEVANT .. 22

A. The Award is Reasonable by Reference

to Combustion’s Actual Gain ................. 23

B. The Award is Reasonable by Reference

to Legislatively Approved Penalties ............ 28

C. The Award is Reasonable by Reference

to Combustion’s Size and Financial Position ..... 29

a SE OE He RS ne i SEES 30

TABLE OF AUTHORITIES

CASES: PAGE:

Big Apple BMW, Inc. v. BMW of North Am., Inc.,

974 F.2d 1358, 1361 (3d Cir. 1992), cert. denied,

See Se NE 5.0 65 54440 oe Od ee ERE el he 19

BMW vy. Gore, 517 U.S. 559 (1996) ..... 14, 16-20, 24-25, 28-30

Bogan v. Stroud, 958 F.2d 180 (7th Cir. 1992) ............. 26

Brooks v. Ready Mix Concrete Co.,

OG S..e £19 CR. AO TRSO) iv covoccdscsesecceevasns 24

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

PE Ghia eT CE oe eect 4b ket 20, 27, 30

Coleman v. Kaye, 87 F.3d 1491 (3d Cir. 1996),

cart, Getlad, S19 US. TUBS CGS) cn ccccvvcccvvesseses 21

Combustion Chemicals, Inc. v. Spires, 433 S.E.2d 60

(Ga. App. 1993), cert. denied, 1993 Ga. LEXIS

Sr es Rc SEE 8 ko as eee eee eee 6, 7

Continental Trend Resources, Inc. v.

OXY USA, Inc., 101 F.3d 634 (10th Cir. 1996),

cart. Gamiad, $20 GB. VAS CUFGT) vc vivccccevciovivnsees 30

Cooper v. Casey, 97 F.3d 914 (7th Cir. 1996) .............. 21

Edwards v. Beach, 3 Day 447 (Conn. 1809) ................ 26

Elder v. Gaffney Ledger, Inc., 511 S.E.2d 383 (S.C. App. 1999) 21

Erie R.R. v. Tompkins, 304 U.S. 64 (1938) .............2008. 26

Hoffman v. Atlanta Gas Light Co., 426 S.E.2d 387

(Ga. App. 1992), cert. denied, 1993 Ga.

Lae Soe CC. AGP, © TFG) oboe secseencaeeneces 19, 24

Hudgins & Co. v. J & M Tank Lines, Inc.,

450 S.E.2d 221 (Ga. 1994), cert. denied,

1995 Ga. LEXIS 461 (Ga. Feb. 23, 1995) ........... 18,24

Hunt v. Washington State Apple Advertising Comm'n,

BSE UG: FIP CCD. 2.456 a6 es cannes ae 18

Jacque v. Steenberg Homes, Inc., 563 N.W.2d 154 (Wis. 1997) 20

Kingsley Mill Corp. v. Edmonds, 67 S.E.2d 111 (Ga. 1951) ... 23

Lee v. Edwards, 101 F.3d 805 (2d Cir. 1996) ............... 20

Lochner v. New York, 198 U.S. 45 (1905) ............-00e 26

Newport v. Fact Concerts, Inc., 453 U.S. 247 (1981) ....... 30

Mattison v. Dallas Carrier Corp., 947 F.2d95 (4th Cir. 1991) 27

(ii)

NTINUED): PAGE:

Pacific Mutual Life Insurance Co.

Fey Ge We CCIDPE) on wc cc ccc ccccvevece 20, 25, 30

Ponce de Leon Condominiums v. DiGirolamo,

SSe Dilaede G2 (GO. FTI) ow. ccc ccccccccccsecs 12, 18, 24

Quinones-Pacheco v. American Airlines, Inc.,

POUe a F CUUE Gs BUUED 5 vse ccvdeceedveccvewsreecs 26

Satterfield v. Rowan, 9 S.E. 677 (Ga. 1889) ................ 23

Schaffer v. Edward D. Jones & Co.,

992 N.W.2d 801 (S.D. 1996)... ccc ccc ccc cece 21

Sims v. Mulcahy, 902 F.2d 524 (7th Cir.),

cert. denied, 498 U.S. 897 (1990) .................005. 26

Southeastern Sec. Ins. Co. v. Hotle,

473 S.E.2d 256 (Ga. App. 1996) .......... 0... cccccee 20

Stevens v. Owens-Corning Fiberglas Corp.,

49 Cal.App.4th 1645 (1996), review denied,

1997 Cal. LEXIS 61 (Cal. Jan. 15, 1997) .......0..0.... 21

Thompson v. Consolidated Gas Utilities Corp.,

se 26

[XO Prod. Corp. v. Alliance Resources Corp.,

a Ot) 18, 20, 22, 25

United States v. Big D. Enterprises, Inc., 1999 U.S.

App. LEXIS 15121 (8th Cir. July 9, 1999) ............ 20-21

Walston v. Monumental Life Ins. Co.,

Pee Wo OP I, FOPOD ona cc nncccccccccncsccececs » ar

Will v. Comprehensive Accounting Corp., 776 F.2d 665

(7th Cir. 1985), cert. denied, 475 U.S. 1129 (1986) ..... 25-26

Wilson v. IBP, Inc., 558 N.W.2d 132 (Iowa 1996),

cert. denied, 118 S. Ct. $52(1997) oo. cc ccc ccc cee 20

STATUTES:

ee ie ew ep wane views 23

RSM EMEMPLUEED 5 ooo c cane ccuccevccscuccvucccenc 12

SM PRIUS on cece ca vecvccscrccccceccunecs 12

SRR UPEMMICINED 5 cen ccvvevevccvccccvcceccs 12, 28

Sl SE a 29

oak 7 29

(iii)

BOOKS:

PAGE:

Annotation, Punitive Damages: Reiationship to Defendant's

Wealth, As Factor in Determining Propriety

of Award, 87 A.L.R.4TH 141 (1995)

RESTATEMENT (SECOND) OF TORTS (1979)

| LAURENCE H. TRIBE, AMERICAN

CONSTITUTIONAL LAW (3d ed. 2000)

14B CHARLES ALAN WRIGHT, ARTHUR R. MILLER

& EDWARD H. COOPER, FEDERAL PRACTICE

AND PROCEDURE: JURISDICTION 3D (1998)

ARTICLES:

Guido Calabresi & A. Douglas Melamed, Property Rules,

Liability Rules, and Inalienability: One View of the

Cathedral, 85 HARV. L. REV. 1089 (1972) .............. 27

Ronald Dworkin, Js Wealth a Value?, in

A MATTER OF PRINCIPLE 237 (1985) ...........000-00ee

Thomas C. Galligan, Jr., Augmented Awards:

The Efficient Evolution of Punitive Damages,

Re ry erty emery

Anthony T. Kronman, The Value of Moral Philosophy,

SEE Pee. Ben Bes Ce CEE coc cross cweevescerneveda

Philip D. Oliver, Once is Enough: A Proposed Bar of the

Injured Employee's Cause of Action Against a Third

Party, 58 FORDHAM L. REV. 117 (1989) ................ 28

Richard A. Posner, The Problematics of Moral and Legal Theory,

POS Been ts es BPE CEE set eccncerseetsauneess

Symposium: Property Rules, Liability Rules,

. and Inalienability: A Twenty-Five-Year

Be Retrospective, 106 YALE L.J. 2081 (1997) .............. 27

28

28

(iv)

BRIEF IN OPPOSITION

Respondents Lois A. McGill, et a/., respectfully request that

this Court deny the petition for a writ of certiorari filed by

Combustion Engineering, Inc. (“Combustion’’) in this case.

STATEMENT OF THE CASE

This water pollution case involves a punitive damage award

of $1 million, not “a punitive award of over $4,000,000” as

Combustion suggests in the opening sentence of its petition. Pet.

1. The $1 million punitive award that Combustion has actually

brought before this Court is the last remaining judgment in a set of

13 separate judgments entered against Combustion as a result of

its pollution of Graves Mountain, Georgia. Combustion has

chosen to settle 12 of these 13 judgments, and it contests before

this Court only the $1 million punitive award held by respondents.

In light of these settlements — the discussion of which

Combustion relegates to a footnote in the middle of its petition,

see Pet. 10 n.3 — Combustion, through its own actions, has failed

to present a live controversy concerning the “punitive award of

over $4,000,000” that “the court of appeals sustained,” which is

the central focus of its petition. Pet. 1. The petition should be

denied for this reason alone.

The reasonableness of the $1 million punitive award still at

issue in this case is plain from the undisputed fact established at

trial that Combustion retained at least $6 million in extra profits

through its failure to employ proper remediation measures on its

Georgia minesite between 1987 and 1993. Tr. 1216-17.' Asa

result, the owners of the land surrounding Combustion’s minesite,

including respondents here, suffered from severe pollution in their

streams. This violated well-settled Georgia law, which gives the

surrounding landowners an absolute right against such a trespass

' The trial transcript, which appears in Volumes 9 and 10 of the record,

is cited throughout this opposition as “Tr. __.”. The transcript of the hearing

on the posttrial motions held on April 25, 1994, which appears in Volume 12

of the record, is cited as “4/25/94 Tr. _..”

on their riparian rights, even with reference to a mining company

such as Combustion that could derive enormous benefit from

polluting streams rather than cleaning up the pollution before it

reaches the streams in question.

In order to recover more than $250,000 each in punitive

damages, under controlling Georgia law plaintiffs were required

to demonstrate, by clear and convincing evidence, that Combus-

tion acted with specific intent to cause harm. The jury, district

court (twice), and the court of appeals (twice) all determined that

such specific intent to cause harm was shown.

To strike the punitive award would effectively give Combus-

tion and similarly situated wrongdoers a power of private eminent

domain to trespass intentionally on the property of others by

appropriating their waterways to serve as waste-disposal systems

for toxic materials. The relief Combustion seeks would undermine

the ability of the States to protect private property rights —

allowing defendants, backed by the federal judicial power, to

engage in government-enforced private takings of property that

would themselves raise serious questions under the “public use”

requirement of the Takings Clause. Thus, although the federal

Constitution is typically invoked as a constraint on damage

awards, here the Fifth Amendment affirmatively supports

upholding the punitive award as reasonable.

A. Statement of the Facts

During the relevant time period Combustion knew that,

absent concerted efforts both at reclamation (i.e., long-term

restoration) and remediation (i.e., immediate pollution treatment),

huge quantities of toxic pollutants would flow into the four

streams running onto the land of the surrounding landowners

(hereinafter, “plaintiffs”), which in this litigation have been

referred to as the Goldman, Long, Maloof, and McGill streams.

To keep as much profit as possible, Combustion for years made

only trivial reclamation efforts and no attempts at remediation, in

the process retaining at least $6 million in extra profits. Not until

Se

1991, five years after mining stopped, did Combustion begin

remediation efforts on any of plaintiffs’ streams. Even then,

Combustion acted only because it was ordered to do so by state

authorities and had already been sued by plaintiffs. The vast

majority of Combustion’s cleanup efforts occurred after suit was

brought in this case in August 1991, and after the State of Georgia

cited Combustion for a violation of law — a point not mentioned

by Combustion in its continuing effort to claim credit for efforts

taken under compulsion. See Pet. 3-5. Moreover, virtually all of

the cleanup efforts that Combustion did make were focused on

dismantling its plant and on relatively cheap reclamation efforts

on its own land that did not benefit plaintiffs. The evidence at trial

showed that Combustion made no serious effort to use readily

available, effective measures to remediate the acid mine drainage

being released onto plaintiffs’ property, despite full knowledge

that plaintiffs’ streams were being polluted.

1. Combustion deliberately refused for years to adopt

adequate cleanup measures. When mining ceased on Graves

Mountain in 1986, the site had been reduced to a cratered, rock-

strewn plateau whose sides were pock-marked with at least 166

acres of open ditches, dams, and tailings ponds. See DX-12 at I,

4-5: see also PX-3 (aerial photo of minesite taken in 1991).

The tailings in these open storage pits contained large

quantities of pulverized pyrite which, when exposed to water and

oxygen, creates sulfuric acid. Tr. 178-79. Through its failure to

follow the standard industry practice of reclaiming the land while

the mining was ongoing, Tr. 941, 1217, Combustion had created

a “continuous supply . . . of sulfuric acid” that caused the water to

become dangerously acidic (by lowering its pH) and to dissolve

and transport heavy metals like iron, manganese, and aluminum.

Tr. 99. 177-79. Streams were more prone to erosion and flooding.

Tr. 181-82. Expert testimony established that “[y]ou have acid

mine drainage coming from the old tailing and pyrite ponds and

much of that is coming from the seepage from those areas and sub-

surface flow. So it is not just a problem that you have when there

4.

is a rainfall event.” Tr. 107-08. It is this water — thousands of

times more acidic than normal, and laced with toxic heavy metals

— that has regularly flowed onto plaintiffs’ property. £.g., Tr.

108-10, 111-12, 178-82, 185, 190-92; PX-12 at 2.

Combustion failed to make any cleanup efforts for at least

two years after mining ended in 1986, despite its obligation under

a cleanup plan filed with state regulatory officials in 1985. See

Court’s Exhibit |. The plan was designed to “protect[] adjacent

watersheds” (cover page), and it specifically promised state

regulators that no water “will be allowed to leave or flow from

affected lands without proper treatment” meeting state and federal

effluent standards (e.g., pH no lower than 6.0). /d at 9. In

particular, “to protect contiguous natural resources from

suspended or dissolved solids,” id., the plan required Combustion

to employ “timely and sufficient” remediation and reclamation

techniques. The plan required that the cleanup be completed

within 18 months, id. at 5 — a time limit that is standard industry

practice. Tr. 717.

Combustion did not meet this deadline, and internal company

memoranda showed that the delay was intentional. One memo,

dated October 27, 1987, stated that the Georgia Department of

Natural Resources (“DNR”) was greatly concerned with acid mine

drainage. PX-23, at 1. Rather than proposing action, the memo

stated that Combustion’s “relationship” with regulators “has been

and should continue to be cultivated.” Jd. at 2. Another memo

explained that the DNR official in charge of Graves Mountain —

who had been pursuing the matter vigorously — was being

replaced. The memo reported that the personnel change was

“good news for [Combustion] because of the good working

relationship we have established” with the replacement official.

PX-39, at 1.

Even so, the DNR repeatedly raised concerns with

Combustion about the pollution problem. For example, as a

Combustion official summarized an October 1987 meeting:

«$e

The single most important concern of the DNR is

present and potential acid run-off. Mr. Tinley [a DNR

official] produced a map on which had been noted

several pH readings from streamlets in the area with

origins both from the site works and natural springs.

Although the natural springs from the area exhibited

relatively low pH’s of around 5, the water from the site

works showed pH’s of around 2.25 to 3 (hundreds of

times more acidic than the natural streams].

PX-23 at 3. The DNR conducted some 70 pH tests; almost half

demonstrated pH levels 1,000 times more acidic than normal. PX-

7, PX-9. Despite this notice, by early March 1988 — when

Combustion was supposed to have finished cleaning up Graves

Mountain — the sum total of its supposed response had been to

take a total of 10 pH readings from unimpacted streams and

certain ditches and ponds, and to contemplate “plans” for future

action. Tr. 947; PX-39; DX-5.

On March 15, 1988, Broughton Caldwell, a DNR scientist,

visited the mountain to do more tests. He confirmed that pH

values were highly acidic; that “iron precipitate” coated the leaves

in the stream at one site; and that insect communities at each site

were close to nonexistent. He concluded that the lack of biological

diversity or abundance was related “in large part to the low pH

values” and resulting “strongly acidic” water. PX-7. The day

after Caldwell completed his study, DNR officials met with

Combustion and reemphasized their concerns about “controlling

_. . water discharge.” PX-39. Combustion then agreed to begin

some “preliminary work” “next week” and submit a “reclamation

program and schedule . . . to the DNR.” Id.

Yet after being notified in 1987 and 1988 by the DNR of the

severe pollution flowing into plaintiffs’ streams, Combustion

failed to continue testing the streams, neglecting even to monitor

the level of acid mine drainage that it knew was flowing onto

plaintiffs’ property. Tr. 372-73, 374, 391-92. Not until the end of

1988 — more than two years after the cessation of mining — did

. Ss

Combustion adopt a revised reclamation plan. A county-environ-

mental health specialist testified that the measures consisted of

“smooth{[ing] up the roads, plant{[ing] some grass,” Tr. 539, which

would clear up the pollution in plaintiffs’ streams only indirectly

and only after many years. Revegetation is necessarily a long-

term cleanup measure because the vegetative cover has little, if

any, effect on the pollution problem until it reaches the requisite

thickness and maturity. Tr. 1017. John Brett, a top Combustion

executive personally in charge of the site, testified that his hope

was no more than that these reclamation measures would

“evenually” stop the flow of pollution. Tr. 952.

Plaintiffs’ expert witness, Dr. Claude Terry, testified that

Combustion’s efforts were “trivial.” Tr. 748. Indeed, Dr. Terry

testified that, in practice, Combustion did not follow its own plan.

Tr. 737. For example, Combustion attempted to avoid its obliga-

tion under the 1985 reclamation plan to bury the tailings and pyrite

ponds under four feet of topsoil to prevent oxidization of the

pyrite, by starting the “West Pond |” project, a futuristic

greenhouse experiment in which Combustion scientists attempted

to grow a kind of “miracle grass” — ground cover that could

somehow thrive on bare mill tailings (toxic pulverized rock) that

contained “considerable acidity” and were “almost devoid of

nutrients essential to plant growth.” DX-15 at 1, 3. Not surpris-

ingly, this experiment failed; at the time of trial, nothing was

growing on these areas, which Combustion had simply left bare.

PX-3.

Combustion failed to correct the pollution problem even after

a lawsuit was filed in May 1988 by other neighbors of Combustion

on Graves Mountain. Combustion Chemicals, Inc. v. Spires, 433

S.E.2d 60 (Ga. App. 1993), cert. denied, 1993 Ga. LEXIS 969

(Oct. 12, 1993). The issue was brought into special focus at trial

through the testimony of John Brett, who testified that the sole

reason that remediation measures were not started prior to

plaintiffs’ suit in August 1991 was that “we never had reason to

believe there was a problem there.” Tr. 965. Brett was ultimately

forced to concede that Combustion knew of the acid mine drainage

zs

problem at least as early as May 1988, because plaintiffs’ counsel

confronted him with the fact that the Spires lawsuit had been filed

at that time and that Brett had actually sat through the Spires trial.

Tr. 291.

The jury also heard the test results of environmental consul-

tants hired by Combustion in 1989 during Spires, which confirmed

the existence of pollution and demonstrated that Combustion knew

of the acid mine drainage problem long before plaintiffs filed their

lawsuit in 1991. The first study, conducted by Dames & Moore

in 1989, compared three of the streams running across plaintiffs’

property (the McGill, Long, and Goldman streams) to a reference

stream unimpacted by mining activity. Plaintiffs’ three streams

had pH levels as low as 2.6, thousands of times more acidic than

the water sampled at the unpolluted reference stream; specific

conductivity levels as high as 2,210, approximately 18 times

higher than normal; and dissolved iron levels up to 199 milligrams

per liter, over 200 times those of the reference stream. PX-12 at

2. The second study commissioned by Combustion in 1989,

conducted by Drs. Arnold and Miller (two agronomy professors

at the University of Georgia), focused on the Long stream and

produced similar results. PX-13.

2. Combustion’s 1991 cleanup efforts were initiated only

under heavy pressure on two fronts. \n the summer of 1991,

Combustion finally began addressing the pollution that had been

flowing into plaintiffs’ streams, essentially unchecked, since

mining operations ended on Graves Mountain in 1986. Even

Combustion’s 1991 limited cleanup efforts directed toward

plaintiffs’ streams, which began five years behind schedule, came

about only based on the pressure exerted by plaintiffs through their

lawsuit, and by the DNR through its administrative action.

In June 1991, the DNR cited Combustion for “a violation of

law” (the Georgia Water Quality Standards) involving acid mine

drainage with a pH of 2.9 — more than 1,000 times more acidic

than normal water — “coming from the pyrite pond and leaving

the mine site,” and discharges from the holding pond with a pH of

-8-

3.2. Tr. 984-85; see also Tr. 109.- These discharges violated

Combustion’s permit. Tr. 984-85.

After plaintiffs filed the instant suit in August 1991,

Combustion entered into a consent decree with the DNR in

September 1991 in which Combustion was compelled to adopt

certain remediation measures. By Combustion’s own calculation,

it had spent only $700,000 on reclamation measures between 1986

and June 1991. Tr. 389, 949-50. Uncontroverted evidence at trial

established that by taking inadequate cleanup measures between

1987 and 1993, Combustion was able to retain additional profits

of $6 million. Tr. 1216-17.

Moreover, Combustion did not take sufficient steps to ensure

that even its new cleanup efforts were adequate. For example, the

environmental consultant hired by Combustion to plan reclamation

of the minesite, Jerry Williams, warned the company in a 1989

proposal that water would eventually leach away “most of the

acidity from the material” in the tailings ponds and that this

“would probably contribute to problems downstream,” requiring

liming and other remediation techniques. DX-15 at 3. Combus-

tion, however, hired Williams solely to “revegetate” its own

minesite; Williams was not asked to test or otherwise address the

acid mine drainage going into plaintiffs’ nearby streams. Tr.

1009-11, 1014. Nor was anyone else. Paul Hall, the Combustion

official in charge of Graves Mountain between 1986 and 1990,

admitted that Combustion’s efforts were not aimed at addressing

“whether or not there was acid mine drainage going on to the

property of adjacent landowners.” Tr. 392. This policy continued

for the next four years after John Brett replaced Hall, through the

time of trial in 1994. Tr. 311-15, 338-39, 990-92.

Dr. Terry, plaintiffs’ expert witness, testified that it has been

common knowiedge witlun the mining community since the 1970s

that both reclamation and remediation measures are necessary to

stop acid mine drainage. Tr. 737, 1217-18. Dr. Terry further

testified that the minesite was “treatable by a number of

technologies.” Tr. 192. Dr. Terry testified without contradiction

that, to effectively reclaim the area, Combustion would have had

-9.

to: (1) “strip and reclaim the area as you go,” which “typical” mine

reclamation plans entail, Tr. 1217; see also Tr. 941; (2) add lime

to the soil in the reclaimed area so that “when you do have

flooding in an area [it] will increase the pH of any run off,” Tr.

1217; (3) “use... clay caps” “to keep oxygen from coming into

contact with potentially acidic materials such as pyrite,” id.; and

(4) build wetlands to “disrupt the flow” of water from the site,

raise the water’s pH and filter out dissolved heavy metals. Tr.

714-21. Combustion adopted none of these measures.

Even at the time of trial in June 1993, Combustion had failed

to use the measures recommended by Dr. Terry to “remediate [the]

toxic discharge.” Tr. 734. Combustion’s remediation efforts were

limited to the water flowing into only one stream (the Goldman

stream) of the four streams flowing across plaintiffs’ property.

Expert testimony established that these limited efforts did not stop

the pollution in even this stream. Tr. 112-13, 170-71, 1043. A

team of expert hydrologists found in 1992 that, despite

Combustion’s “treat{ing] the water coming out of the holding

pond” into the Goldman stream, this stream showed a content of

dissolved solids that was abnormally high, sulfate levels over 40

times higher than normal, a “tremendous amount of sediment,”

and “periodic releases of very low pH water from [the mine]site.”

Tr. 112-13, 170-71, 1043; PX-10.

Pollution continued to flow into all four of plaintiffs’ streams

as of the time of trial, Tr. 111-13, 158-59, 167-68, 175, 308-11,

517, 695-97, 725, as Combustion admitted. Tr. 126-27, 309, 1215-

16. Plaintiffs’ hydrology experts who examined the streams

between January and September 1992 concluded that there was a

“constant” “problem[] with acid mine drainage” flowing from the

minesite (not merely a problem resulting only occasionally from

rainfall). Tr. 107-08. The experts concluded that the streams

“ha[d] been severely impacted” by acid mine drainage flowing

from Combustion’s property. Tr. 109-13, 121-122, 159, 161-62,

166-68, 170-71; PX-10. These conclusions were corroborated by

the findings of a professor of stream ecology at the University of

Georgia, who examined the streams in April 1992. Tr. 1043.

x eee oe

-10-

3. Combustion made no serious response to pre-1991

complaints that put it on notice of the pollution. Combustion

asserts that plaintiffs rarely complained to it during the close to 20

years that it conducted mining operations on Graves Mountain,

and that when owners of downstream properties did complain

about escaping water, silt build-up or other problems, it responded

decisively to remedy those problems. Pet. 3. Here, again, Com-

bustion distorts the record.

The record reflects that, as early as the 1970s, the father of

two plaintiffs (and their predecessor in title), repeatedly called

Combustion’s site manager to complain about untreated mine

waste draining from one of the tailings ponds into the Maloof

stream. Tr. 401, 414, 419-20. In 1982, an investigator from the

DNR relayed complaints to the minesite manager about a large

berm (earthen dam) underneath the west tailings pond that had

leaked “[f]or years and years” and flowed across Hepzibah Church

Road into the Long stream. Tr. 516. Another neighbor wrote to

the county health department in 1986, complaining of fish dying

in his stream, Tr. 538; his complaint was referred to the minesite

manager. Tr. 539. A county health department official talked to

Combustion’s manager “numerous times” about problems with the

streams, Tr. 539, and in 1991 conveyed his concerns to

Combustion’s attorneys as well. Tr. 539.

After it retook possession of the site in 1986, Combustion

would likely have received even more complaints but for the fact

that it has no office on Graves Mountain, receives no mail there,

and stations no representative there to receive complaints. Tr. 990.

The closest employee is 75 miles away. Tr. 991. Of course, as

already discussed, Combustion was further put on notice of the

pollution problems in 1988 and 1989 as a result of litigation

brought against it by plaintiffs’ neighbors, during which

Combustion received reports from its own _ consultants

documenting the high levels of pollution. See pp. 6-7, supra.

With respect to Combustion’s assertion that it has diligently

responded to all complaints, the record shows that Combustion, in

general, responded to complaints by doing only “enough to

at.

pacify” the neighbors so that they would “stay home and shut up.”

Tr. 420. For example, a county environmental official testified

that he complained to Combustion about a leaky berm as long ago

as 1977, but “[{t]he leak is still there because they never did

anything . . . to it” except to try to plug it with dirt and grass. Tr.

535-36. “The water still runs down through there.” Tr. 517; see

also Tr. 725 (“water is flowing again”). Combustion never even

tested the water flowing from the seeps for which it received

complaints. Tr. 992, 997, 1010, 1014. Further, Combustion made

no effort to notify its neighboring landowners of the levels of

pollutants being released into their streams, not even when there

were sudden overflows of millions of gallons of polluted water

(events of which plaintiffs only learned during discovery in this

case). PX-10, Tr. 474, 481, 484, 1211-13.

B. Procedural History

Plaintiffs filed this suit against Combustion on August 9,

1991. As provided under Georgia law, plaintiffs elected to sue

only for injunctive relief, together with compensation for loss of

use and enjoyment, declining to press a claim for damages to the

value of their property. This permitted them to preserve their

ability to obtain injunctive relief and other future remedies with

respect to the pollution of their streams.

A ruling in Combustion’s favor on a motion in limine,

entered on June 4, 1993, granted Combustion all the relief it

sought against the introduction of supposedly prejudicial evidence,

including evidence of regulatory violations by Combustion. R5-

64.2 During trial, Combustion objected to plaintiffs’ attempt to

introduce evidence on the value of the property polluted by

Combustion. In so doing, Combustion agreed not to raise any

future objection concerning the absence of such evidence, Tr. 622-

2 For citations to the record, the number immediately following the “R”

is the volume number; the number after the dash is the docket entry number;

if another number appears after a dash, it refers to a particular page in the

document referenced.

NM ae

aa

ESRI (OY ee ae ae ee

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a.

23, 631-32, a promise that it has now forgotten. See p. 17, infra.

The trial was bifurcated so that the jury did not even consider

punitive damages until it had first awarded compensatory damages

— a method even more favorable to Combustion than the method

provided for in Georgia state court by O.C.G.A. § 51-12-5.1(d).

See 4/25/94 Tr. 57-58, 94. The jury awarded the plaintiffs a total

of $47,000 for Combustion’s interference with their right to the

enjoyment and possession of their land, Tr. 1172-74, plus

uncontested out-of-pocket expenses of $137,000 and attorney’s

fees of $90,000. Tr. 352, 1191. The $227,000 in expenses and

fees was based on the jury’s finding (never appealed) that

Combustion had acted in “bad faith,” see, e.g., Ponce de Leon

Condominiums v. DiGirolamo, 232 S.E.2d 62, 64 (Ga. 1977).

During the jury’s deliberations on punitive damages, the

district court announced its factual findings concerning the claim

for equitable relief based on “the same evidence that the jury has

heard.” Tr. 1244. The district court found that Combustion had

“committed a trespass against the land of the named plaintiffs,”

causing “substantial injury to the neighboring property.” Tr. 1252.

The court specifically noted the jury’s finding that “the defendant

had acted in bad faith.” Tr. 1245.

To recover any punitive damages at all, plaintiffs were

required as a matter of Georgia law — regardless of the federal

Constitution — to prove by clear and convincing evidence that

Combustion’s actions “showed willful misconduct, malice, fraud,

wantonness, oppression, or that entire want of care which would

raise the presumption of conscious indifference to consequences.”

O.C.G.A. § 51-12-5.1(b). To recover more than $250,000 each,

plaintiffs were required to demonstrate, again by clear and

convincing evidence, that Combustion acted “with the specific

intent to cause harm.” /d. at § 51-12.5.1(f). Asked to return an

award that would “take the profit out of polluting” and deter and

punish similar wrongdoing, Tr. 1240-41, the jury awarded punitive

damages in the amount of $3 million to each of the 15 sets of

plaintiffs (or their heirs) who owned the 16 parcels of land at

issue, for a total of $45 million. Tr. 1255-57; Pet. App. 3a.

“

~t%.

In ruling on Combustion’s posttrial motions, the district court

found the jury’s $45 million award to be excessive, but held that

$15 million would not be excessive and offered plaintiffs the

option of electing a remitted award of that amount, in lieu of a new

trial. The district court rejected Combustion’s post hoc “theory to

the effect that this defendant . . . had consistently followed, abided

by and complied with all state laws and regulations and licensing

requirements, [but] had been called to task in this courtroom and

brought over a barrel.” 4/25/94 Tr. 103. The court bluntly stated:

“(T]hat’s not the case.” /d. The court further observed that the

jury was entitled to conclude that the cleanup money spent by

Combustion prior to plaintiffs’ suit was “peanuts,” simply

designed to be “a cheap way of buying time,” especially in light of

“powerful evidence” that Combustion had spent the money not out

of any concern for plaintiffs’ riparian property rights, but only

when compelled to do so by state regulators. /d. at 104-05.

The district court properly did not “abrogate the jury's verdict

in its entirety” or “write it down to an insignificant” level. Id. at

109. The court recognized that, “if I am to preside over jury trials,

take their time, take them away from their home, their offices and

their labors, I have an obligation to support and defend their

efforts.” Jd. at 108. Accordingly, the court announced that it

would do “what the jury said to do, but I will do it in an amount

that is sufficient, but not superfluous.” /d. at 109. The court

explained that a punitive award of $1 million would be “a mere

inconvenience” — “as much corporate blood as a mosquito would

draw.” Jd. The court made clear that it did not arrive at the $15

million figure lightly; to the contrary, the judge revealed that “I

don’t think that there has been a single 48-hour period that’s gone

by since June 25th, 1993, that I haven’t thought about the amount

of punitive damages in this case.” Jd. at 106.

The district court expressly held that the jury’s verdict was

not infected by passion or prejudice and categorically rejected any

suggestion that “these proceedings were, in any way, contaminated

or permeated by any aspects of prejudice or bias or favor or

affection for or against either party.” Jd. at 92-93. “There is no

-14-

way that I can make a finding that this trial was fundamentally

unfair on the basis of any suggestion or intonation of prejudice or

bias or regional or national favoritism. It wasn’t.” Jd. at 95.

On appeal, Combustion challenged the award on both state

law and federal constitutional grounds. Combustion argued that

there was insufficient evidence of willful misconduct and specific

intent to cause harm. Yet the Eleventh Circuit soundly rejected

Combustion’s excessiveness objection, affirming the $15 million

award in all respects without opinion, just one week after oral

argument. 67 F.3d 314.

On petition for certiorari, this Court first held the petition

(No. 95-1072) in abeyance pending BMW v. Gore, 517 U.S. 559

(1996), then vacated the judgments and remanded the case to the

Eleventh Circuit, 517 U.S. 1217 (1996), which in turn remanded

the case to the district court. The scope of the remand was limited

to the effect of Gore on the judgments

The district court on remand reduced the punitive award to

a total of $4.35 million, while acknowledging that “‘a review of the

evidence shows that the jury must have inferred specific intent [to

cause harm] from a finding of deliberate indifference.” R8-266-6.

The Eleventh Circuit affirmed. It found that “the Georgia

statutes provided fair notice to [Combustion] that it might be

subject to a substantial penalty for pollution of the streams running

through its property.” Pet. App. 27a. The court of appeals also

noted that “(t]he actual damages awarded were relatively small;

yet the state’s interest in deterring the conduct — environmental

pollution — is strong. In order to achieve this goal, ratios higher

than might otherwise be acceptable are justified.” /d. at 26a. The

court further held that the punitive award was “justified by the

need to deter this and other large organizations from a ‘pollute and

pay’ environmental policy.” /d. at 27a.

Subsequently, Combustion completed its settlements of 12

of the 13 judgments in this case, leaving only the $1 million

punitive judgment held by the respondents.

.. 3

REASONS FOR DENYING THE PETITION

Combustion’s petition makes extensive reference to other

cases in an effort to persuade this Court that this case should be

used to resolve the question of whether a 100-to-1 ratio between

punitive and compensatory damages is reasonable. Combustion’s

extensive reliance on other cases points to the first reason for

denying the petition: this particular case is not an appropriate

vehicle to review the question that Combustion has presented

given factual peculiarities attributable to Combustion’s tactical

choices during this litigation.

Further, from the record of this case there is little reason to

believe that the “ratio” arguments on which Combustion seeks

plenary review, even if accepted, would affect the result of this

case — providing a second reason why this Court should deny

review in this case and address these “ratio” arguments further, if

at all, in one of the cases in which such arguments might actually

matter.

I. THIS CASE IS NOT AN APPROPRIATE

VEHICLE FOR ADDRESSING THE

QUESTION PRESENTED BY COMBUSTION

The inappropriateness of this case as a means of reviewing

the question presented by Combustion is clear in two separate

respects: (a) Combustion seeks review of the court of appeals’

decision “sustain{ing] a punitive award of over $4,000,000,” Pet.

1, yet it has settled the large bulk of this dollar total; and (b)

Combustion’s petition sets out a factual predicate for review that

simply does not square with the record of this case. We discuss

each in turn.

A. This Case Does Not Present the Question of the

Reasonableness of a $4 Million Punitive Award

Combustion begins its petition by asserting that “the court of

appeals sustained a punitive award of over $4,000,000.” Pet. l.

tit

This statement is highly misleading. As Combustion well knows,

it has deliberately chosen to settle 12 of the 13 punitive awards in

the case. The remaining judgment, held by respondents, is for

only $1 million, Pet. App. 39a — less than 25% of the total of

$4.35 million in punitive judgments recently sustained below.

In and of themselves, these settlements make this case an

unsuitable candidate for this Court’s review. Combustion has

strategically decided to resolve 12 of the 13 judgments against it,

and to present only one for this Court to examine. Such artificial

engineering will hamper a fair resolution in this case. The posture

in which Combustion seeks to present this case to this Court is

dramatically different from the posture in which the case was tried

before a jury in 1993; from the posture in which the district court

conducted its first posttrial review in 1994; from the posture in

which the first appeal was heard in 1996; from the posture in

which this Court vacated the then-extant judgments in light of

BMW vy. Gore; from the posture in which the district court

conducted its second posttrial review in 1997; and from the

posture in which the court of appeals heard the case below.

In short, the record in this case has been assembled, and the

decisions below have been rendered, in a different setting from the

one that Combustion now seeks to present to this Court. Both

constitutional and prudential principles of justiciability strongly

counsel against reviewing Combustion’s arguments focusing on

the “punitive award of over $4,000,000” that “the court of appeals

sustained,” Pet. 1, after which Combustion settled all but one of

the judgments, thus mooting the issues earlier posed by the $4.35

million in punitive damages. See, e.g., | LAURENCE H. TRIBE,

AMERICAN CONSTITUTIONAL LAW §§ 3-7, 3-8, 3-11 (3d ed. 2000).

Furthermore, the $1 million award remaining in this case is

a poor candidate for assessing the ramifications of BMW v. Gore

for punitive awards. The $1 million judgment held by respondents

was produced by the district court as part of its 1994 weight-of-

the-evidence remittitur procedure. See pp. 13-14, supra. The

award has been untouched since that time. It was not produced by

the district court’s application of the Gore factors during its 1997

at

second posttrial review and it was left unchanged by the court of

appeals’ review of the judgments under the Gore factors.

B. The Question Framed by Combustion

Is Not Presented By This Case

The question framed by Combustion is “whether a punitive

award that is 100 times the compensatory damages is constitu-

tionally permissible when the compensatory damages are more

than nominal and the defendant’s conduct is not reprehensible.”

Pet. i. This question is not in fact presented by this case for

several reasons.

1. The ratio between punitive and compensatory damages

in this case relied on by Combustion is largely meaningless, given

unique aspects of the record created by Combustion’s own tactical

litigation choices. The award of use-and-enjoyment damages in

this case simply cannot be viewed as representing compensation

for all of “the actual harm inflicted on the plaintiff[s],” which this

Court has instructed is the relevant focus. Gore, 517 U.S. at 580.

The $10,000 compensatory award for respondents’ loss of

use and enjoyment of their land reflects only one minor element of

the actual harm caused by Combustion. Under Georgia law,

plaintiffs were forced to waive their claim for loss of market value

in order to preserve their right to injunctive relief. Tr. 17, 622-23,

629-32: R-3-63 at 13-17. The damages awarded plaintiffs thus do

not include the injury done to the value of plaintiffs’ land, or the

cost of repairing the wrongs intentionally inflicted by Combustion.

Tr. 629-30. In fact, at trial Combustion objected to plaintiffs’

tender of evidence of the value of the land, Tr. 622-23, and the

district court excluded such evidence based on Combustion’s

agreement that it would “not be heard, within the confines of this

lawsuit, ever to complain that there has been a failure or an

absence of any showing of fair market value or any disparity

between the present polluted and non-polluted fair market value.”

Tr. 631-32. Combustion has effectively renounced this agreement

and now seeks to have the matter both ways.

St

—_s

-18-

Under this aspect of Gore, any “ratio” evaluation of the

punitive award must also place a value on the claim for injunctive

relief, given that awards of nominal damages or equitable relief,

without any recovery of compensatory damages, are enough to

support an award of punitive damages under Georgia law. Ponce

de Leon Condominiums v. DiGirolamo, 232 S.E.2d 62, 64 (Ga.

1977); Hudgins & Co. v. J & M Tank Lines, Inc., 450 $.E.2d 221

(Ga. 1994), cert. denied, 1995 Ga. LEXIS 461 (Ga. Feb. 23,

1995). For example, the courts have long recognized that a claim

for injunctive relief should be regarded as having monetary value

for purposes of meeting jurisdictional amount requirements. See

Hunt v. Washington State Apple Advertising Comm'n, 432 U.S.

333, 347-48 (1977); 14B CHARLES ALAN WRIGHT, ARTHUR R.

MILLER & EDWARD H. COOPER, FEDERAL PRACTICE AND PROCE-

DURE: JURISDICTION 3D § 3708, at 239 (1998).

Moreover, the actual ratio between the punitive and compen-

satory awards here is approximately 4-to-1, not 100-to-1 as

Combustion erroneously suggests. Respondents’ compensatory

award was not limited to $10,000 for the loss of the use and

enjoyment of their land. It also included $227,000 awarded to all

the plaintiffs (including respondents) for their out-of-pocket

expenses and attorneys’ fees based on the jury’s finding (never

appealed) that Combustion had acted in “bad faith.” See p. 12,

supra. In TXO Prod. Corp. v. Alliance Resources Corp., 509 U.S.

443 (1993), this Court considered the plaintiffs’ litigation costs, as

awarded by the jury, in computing the ratio between punitive and

compensatory damages. /d. at 451, 453 (plurality opinion).

Considering those costs here, which were a specific item of

damages awarded by the jury to plaintiffs, produces a ratio of $1

million divided by $237,000, or about 4.2-to-1, not 100-to-1.

For all these reasons, the ratio cannot be computed based

solely on respondents’ $10,000 use-and-enjoyment award.

2. The ratio computed by Combustion is also meaningless

because the use-and-enjoyment damages sustained by plaintiffs

were difficult to quantify. The evidence showed that the injury

-19-

sustained by plaintiffs was severe, both economic and non-

economic. | Combustion’s pollution rendered the streams

unsuitable for “normal usage or recreational or farm purposes,” Tr.

161, and it interfered with plaintiffs’ attempts to raise cattle, Tr.

400, 403-05, 427, 429, 430, 432, 499, 554; rent their land, Tr. 576,

577, 580, 644, grow timber, Tr. 442, 592, 606, 616; fish in the

streams, Tr. 442, 448, 598; drink from them, Tr. 484-85; swim in

them, Tr. 480; and pass the land down to their children and

grandchildren in a pristine state. Tr. 329, 442, 454, 465, 482, 502,

554.3 Thus, Combustion is incorrect in insisting that there is no

evidence of “diminution in property value, damage to crops or

animals, or other economic loss.” Pet. 7. In any event, this Court

in Gore explained that the non-economic dimension of an injury

gives greater (not less) validity to a punitive award, because “the

monetary value of noneconomic harm might have been difficult to

determine.” 517 U.S. at 582.

> Combustion suggests that any harms were the result of the mining

operations that had ceased in 1986 and hence fell outside the statute of

limitations. That is false. The evidence at trial showed that Combustion’s

pollution persisted from 1987 to the time of trial. See pp. 4-9, supra.

Moreover, under Georgia law, liability for tortious acts that cause continuing

pollution within four years of the filing of the suit is not barred by the statute

of limitations even though the acts causing the continuing trespass occurred

more than four years before suit. Hoffman v. Atlanta Gas Light Co., 426

S.E.2d 387, 389-90 (Ga. App. 1992), cert. denied, 1993 Ga. LEXIS 336 (Ga.

Apr. 8, 1993).

Further, Combustion misstates the relevance of the statute of limitations.

Throughout its two decades of mining on Graves Mountain, Combustion

knew that, absent concerted efforts at reclamation (i.e., long-term restoration)

and remediation (i.e., immediate pollution treatment), its operations would

inevitably produce huge quantities of toxic pollutants that would flow into

plaintiffs’ streams. Evidence of Combustion’s pre-1987 knowledge was at

minimum admissible under Fed. R. Evid. 404(b) to establish state of mind

and to show that Combustion has long been on notice of the need for effective

action. See, e.g., Big Apple BMW, Inc. v. BMW of North Am., Inc., 974 F.2d

1358, 1361 (3d Cir. 1992), cert. denied, 507 U.S. 912 (1993); see also TXO,

509 U.S. at 450 n.10, 457, 461 (plurality opinion) (relying on evidence of

fraud and other misconduct not part of plaintiff's slander of title claim).

-20-

3. More generally, the appropriate ratio between punitive

and compensatory damages in a particular case is not a legal

talisman, but an inherently fact-bound issue which is not suitable

for this Court’s review. In Gore, this Court held that the ratio

between punitive damages and “the actual harm inflicted on the

plaintiff’ was one factor for a reviewing court to consider. /d. at

580. But the Court made clear that “we have consistently rejected

the notion that the constitutional line is marked by a simple

mathematical formula, even one that compares actual and potential

damages to the punitive award.” /d. at 582 (emphasis in original);

see also TXO, 509 U.S. at 459-62 (1993) (upholding 526-to-1 ratio

between punitive and compensatory damages); Pacific Mutual Life

Ins. Co. v. Haslip, 499 U.S. 1, 23 (1991) (200-to-1 ratio between

punitive damages and out-of-pocket expenses); Browning-Ferris

Indus. v. Kelco Disposal, Inc., 492 U.S. 257, 262 (1989) (ratio of

punitive to compensatory damages over 100-to-1). In fact, Gore

explained that a high ratio between punitive and compensatory

damages may be appropriate in some cases:

[L]ow awards of compensatory damages may properly

support a higher ratio than high compensatory awards,

if, for example, a particularly egregious act has

resulted in only a small amount of economic damages.

A higher ratio may also be justified in cases in which

the injury is hard to detect or the monetary value of

noneconomic harm might have been difficult to

determine.

517 U.S. at 582 (emphasis added). In the wake of Gore, some

courts have permitted high ratios between punitive damages and

compensable harm,‘ while others have not, see, e.g., Pet. 13-15,

* See, e.g., Jacque v. Steenberg Homes, Inc., 563 N.W.2d 154, 164-65

(Wis. 1997) (100,000-to-1); Lee v. Edwards, 101 F.3d 805, 810-13 (2d Cir.

1996) (75,000-to-1); Southeastern Sec. Ins. Co. v. Hotle, 473 S.E.2d 256,

260-61 (Ga. App. 1996) (45,000-to-1); Wilson v. IBP, Inc., 558 N.W.2d 132,

148 (Iowa 1996), cert. denied, 118 S. Ct. 52 (1997) (500-to-1); United States

a oe

i.

depending on the particular facts of individual cases. In upholding

a punitive damage award with a 12-to-1 ratio, for example, Chief

Judge Posner explained that “a mechanical ratio, such as two to

one or three to one or four to one or even ten to one, would not

make good sense.” Cooper v. Casey, 97 F.3d 914, 919 (7th Cir.

1996). “The smaller the compensatory damages, the higher the

ratio of punitive to compensatory damages has to be in order to

fulfill the objectives of awarding punitive damages.” Jd.‘

v. Big D. Enterprises, Inc., 1999 U.S. App. LEXIS 15121, *15-*17 (8th Cir.

July 9, 1999) (100-to-1); Stevens v. Owens-Corning Fiberglas Corp., 49

Cal.App.4th 1645, 1652, 1658-68 (1996), review denied, 1997 Cal. LEXIS

61 (Cal. Jan. 15, 1997) (78-to-1); Schaffer v. Edward D. Jones & Co., 552

N.W.2d 801, 817 (S.D. 1996) (30-to-1); Elder v. Gaffney Ledger, Inc., 511

S.E.2d 383, 390 (S.C. App. 1999) (30-to-1); Walston v. Monumental Life Ins.

Co., 923 P.2d 456, 468 (Ida. 1996) (26-to-1); Coleman v. Kaye, 87 F.3d 1491,

1506 (3d Cir. 1996), cert. denied, 117 S. Ct. 754 (1997) (23-to-1).

Combustion discounts some of these cases that have upheld high ratios

as involving “nominal or very low damages,” see Pet. 20 n.5, but does not

explain why this is a distinction with a difference. Combustion asks this

Court to set out numerical ratio guidelines to govern when compensatory

damages “are more than nominal,” Pet. i, and it offers ratios that it believes

should control where compensatory damages fall “between $10,000 and

$50,000,” as in this case. Pet. 13. Combustion offers no justification for such

categories, which lend themselves more to the practice of numerology than

the practice of law.

* See also Thomas C. Galligan, Jr., Augmented Awards: The Efficient

Evolution of Punitive Damages, 51 LA. L. REV. 3, 65 (1990) (“The greater the

divergence between the compensatory damages awarded and the actual costs

the conduct imposes upon society, the greater the need for an award greatly

exceeding the compensatory damages.”); Philip D. Oliver, Once is Enough:

A Proposed Bar of the Injured Employee’s Cause of Action Against a Third

Party, 58 FORDHAM L. REV. 117, 153-54 n.136 (1989) (“[I]t seems that low

compensatory damages would require a greater deterrent in the form of puni-

tive damages than necessary when compensatory damages are high. ... [I]f

A and B engage in equally wrongful conduct, but A causes $100,000 in harm

and B $1,000,000, by what logic is it held that B, having paid ten times as

much in compensatory damages, now should be held liable for greater

punitive damages than A?”).

Reo

4. The award in this case is necessary to achieve deterrence

by removing Combustion’s wrongful gain. A punitive damage

award in this case on the order of a few times the $10,000 in use-

and-enjoyment damages collected by respondents would give a

wrongdoer such as Combustion no incentive to institute necessary

remediation and reclamation efforts in a timely fashion, knowing

that it stands to save $6 million by doing nothing. As in 7XO,

here a high ratio is constitutionally unobjectionable, especially

when the punitive award is compared with the economic gain from

the wrongdoing. In this case, the ratio between respondents’ $1

million punitive award and Combustion’s $6 million actual gain

from its intentional, bad-faith trespass is only 1-to-6 (that is, only

a small fraction of actual gain) — sixty times lower than the 10-to-

| ratio that this Court in XO suggested would be reasonable. 509

U.S. at 459-62. No case or legal principle cited by Combustion

remotely establishes that a punitive damage award of a fraction of

an intentional wrongdoer’s illicit gain should be considered

grossly excessive under the Fifth Amendment.

Il. IN ANY EVENT, THE $1 MILLION PUNITIVE

AWARD IN THIS CASE IS PLAINLY REASONABLE,

RENDERING THE “RATIO” ISSUE IRRELEVANT

Even if the question framed by Combustion were actually

presented, this Court’s review would be unwarranted because a $1

million punitive award in this case is plainly reasonable. The

court of appeals held that the punitive award was “justified by the

need to deter this and other large organizations from a ‘pollute and

pay’ environmental policy.” Pet. App. 27a. The Eleventh Circuit

was correct: Combustion retained an illicit gain of $6 million in

this case, and a substantial punitive award was justified. The

award is also reasonable in light of legislatively authorized

penaltics in Georgia, which put Combustion on notice of its

potential liability, and in light of Combustion’s size and financial

position.

Thus, the court of appeals’ judgment would not change even

if Combustion’s argument about ratios between punitive and

compensatory damages had any merit. Review should be denied

because the “ratio” argument, which is the basis of Combustion’s

question presented, would not affect the proper constitutional

analysis in this case.

A. The Award is Reasonable by Reference

to Combustion’s Actual Gain

An expert witness called by plaintiffs, whose qualifications

and methodology for reaching his opinion were unchallenged,

testified that Combustion was able to save $6 million between

August 1987 and the 1993 trial by failing to adopt proper

measures to correct the problems with acid mine drainage entering

plaintiffs’ property. Tr. 1216-17. This figure does not include

pre-1987 profits, such as the gain to Combustion from failing to

reclaim while mining operations were ongoing, which in itself was

contrary to standard industry practice. Tr. 941, 1217. Combustion

had ample opportunity to respond to this testimony but did not

rebut it.

Plainly, the imposition of a $1 million punitive award to

redress an illicit gain of $6 million is hardly irrational. If

anything, the award should have been greater. Under Georgia law,

plaintiffs are lower riparian owners who have the absolute right

“to have water flow upon [their] land in its natural state free from

adulteration,” Kingsley Mill Corp. v. Edmonds, 67 S.E.2d 111, 112

(Ga. 1951), regardless of whether mining is more profitable than

other uses of the land. See Satterfield v. Rowan, 9 S.E. 677, 679

(Ga. 1889) (“[Plaintiff] was entitled to have the water flow upon

his land from [defendant mining company’s] land in its natural

state . . . whether the stream of water was more useful for the

purpose of mining than it was for domestic purposes”).*

° See also O.C.G.A. § 51-9-7 (“The diverting of the stream in whole or

in part from its natural and usual flow, or the obstructing thereof. . ., or the

-24-

The Georgia courts have repeatedly held that the failure

properly to remediate pollution constitutes a trespass, subjecting

the trespasser to punitive damages, and that a defendant cannot

immunize itself merely by showing that it made some half-hearted

efforts at remediation.’ The jury found at trial that Combustion

trespassed on plaintiffs’ riparian rights with full knowledge that it

was doing so, with “specific intent” to continue trespassing, and

in “bad faith.” These findings remain the law of the case.

Accordingly, this Court’s decision in BMW y. Gore fully

supports, rather than undermines, the punitive damage award here.

Gore specifically upheld the power of a State to impose punitive

damages “to further a State’s legitimate interests in punishing

unlawful conduct and deterring its repetition” in order to “protect[]

its own consumers and its own economy.” 517 U.S. at 568, 572.

In 7XO, which was reaffirmed in Gore, a plurality noted, “in

addition to TXO’s vast wealth, the tremendous financial gains that

TXO hoped to achieve” and “the lucrative stream of royalties” that

TXO hoped to win. 509 U.S. at 461-62. This Court indicated that

polluting thereof so as to lessen its value to the owner of such land shall

constitute a trespass upon the property”); Brooks v. Ready Mix Concrete Co.,

96 S.E.2d 213, 214-16 (Ga. App. 1956) (citing Gainesville, J. & S. R. Co. v.

Edmondson, 29 S.E. 213 (Ga. 1897)) (reaffirming ancient and absolute right

against trespass caused by defendant’s use of its real property as distinguished

from, for example, a railroad’s negligent discharge of sparks incident to its

operation of a train along a right of way).

” See Ponce de Leon Condominiums v. DiGirolamo, 232 S.E.2d 62, 64

(Ga. 1977) (punitive damages warranted even though defendant relied on

expert advice that its activities would cause no water run-off problem, and

subsequently “made some effort to alleviate” the effects of problem);

Hudgins & Co. v. J&M Tank Lines, Inc., 450 S.E.2d 221, 222 n.1 (Ga. App.

1994), cert. denied, 1995 Ga. LEXIS 461 (Ga. Feb. 23, 1995) (a knowing

failure to effectively remediate pollution, even if defendant “did take some

actions to remediate,” is willful misconduct that warrants punitive damages);

Hoffman v. Atlanta Gas Light Co., 426 S.E.2d 387, 389-91 (Ga. App. 1992),

cert. denied, 1993 Ga. LEXIS 336 (Ga. Apr. 8, 1993) (knowing failure to

clean up hydrocarbon spillage from pipeline constitutes continuing trespass,

even after the leaks have been fixed, permitting award of punitive damages).

an.

an award of even ten times the size of TXO’s expected gain would

be reasonable. In Haslip, which was also reaffirmed in Gore, the

Court approved consideration of “the profitability to the defendant

of the wrongful conduct and the desirability of removing that

profit and of having the defendant also sustain a loss” as a factor

in judging the reasonableness of an award. 499 U.S. at 22.

Combustion’s real quarrel is with substantive Georgia law.

It contended below that it should not be punished in any

substantial amount for polluting plaintiffs’ land, because the cost

of cleaning up its streams containing acid mine drainage before

they reach plaintiffs’ land was supposedly greater than the

diminution in the alleged market value of plaintiffs’ land. This

argument is triply flawed.

1. Combustion’s argument is inconsistent with the jury

instructions in this case. The jury was instructed as follows:

In considering whether you will award punitive

damages and in what amount: Such award is not meant

to be compensation, but should be fixed in an amount

necessary to deter future acts of a similar nature. It is

an amount, as measured by the enlightened conscience

of an impartial jury, which will be required to deter

future wrongful acts.

Tr. 1195 (emphasis added). The jury was not instructed that

punitive damages should be limited by the value of plaintiffs’ land

or any similar factor. Instead, consistent with the jury instructions

focusing on deterrence of future wrongful acts, the jury was urged

in closing argument — without objection — to “take the profit out

of polluting” and to render a verdict that would “restore the dignity

of property rights.” Tr. 1240-41.

Whether the punitive award is excessive must be measured

by applying the jury instructions to the factual record, which are

now law of the case, not by asking whether the facts would

support the award under some alternative version of the law. See,

e.g., Will v. Comprehensive Accounting Corp., 776 F.2d 665, 675

-26-

(7th Cir. 1985), cert. denied, 475 U.S. 1129 (1986); see also

Quinones-Pacheco v. American Airlines, Inc., 979 F.2d 1, 4 & n.3,

5 (Ist Cir. 1992); Bogan v. Stroud, 958 F.2d 180, 183-84 (7th Cir.

1992); Sims v. Mulcahy, 902 F.2d 524, 535-36 (7th Cir.), cert.

denied, 498 U.S. 897 (1990).

2. Combustion’s argument is simply off limits to a federal

court under Erie R.R. v. Tompkins, 304 U.S. 64 (1938).

Combustion contends that, whatever substantive Georgia law has

to say on this subject, the federal Constitution somehow

commands that a State can never impose a penalty on a polluter

who trespasses on the property owned by another, if that penalty

is linked not to the fair market value of the land (a “pollute and

pay” system), but is instead designed to deter the polluter from

causing the harm in the first place, by setting the penalty in

reference to the level of the financial benefit the polluter receives

from refusing to implement the necessary cleanup measures.

Combustion’s argument is nothing short of Lochnerism. Georgia

is no more required to adopt Combustion’s view of economics

than it is required to adopt “Mr. Herbert Spencer’s Social Statics.”

Lochner v. New York, 198 U.S. 45, 75 (1905) (Holmes, J.,

dissenting). Further, “pollute and pay” is inconsistent with the

traditional ~approach to property rights in this country.

“{O]therwise, a person so disposed might forcibly dispossess

another of any article of property at his pleasure, and compel the

owner, however unwilling, to accept of the value in its stead.”

Edwards v. Beach, 3 Day 447, 450 (Conn. 1809). Indeed, giving

polluters like Combustion what is, in effect, a judicially

enforceable power of private eminent domain would raise serious

constitutional questions under the “public use” requirement of the

Takings Clause. E.g., Thompson v. Consolidated Gas Utilities

Corp., 300 U.S. 55, 77-80 (1937) (Brandeis, J.).

3. Third, Combustion’s argument is also profoundly flawed

as a matter of elementary legal principle because it confuses

property rules with liability rules. Some rights and assets, such as

the entitlement to be free from breaches of contract or negligently

27

caused accidents, are protected only by liability rules. A defendant

who violates such an entitlement need pay only ordinary

compensatory damages. But the distinguishing characteristic of

a “property right,” such as the right under Georgia law to

unpolluted water, see pp. 23-24 & n.6, supra, is that “someone

who wishes to remove the entitlement from its holder must buy it

from him in a voluntary transaction.” Guido Calabresi & A.

Douglas Melamed, Property Rules, Liability Rules, and

Inalienability: One View of the Cathedral, 85 HARV. L. REV.

1089, 1092 (1972); see also Symposium: Property Rules, Liability

Rules, and Inalienability: A Twenty-Five-Year Retrospective, 106

YALE L.J. 2081 (1997).

Even if social welfare would be increased if the property

right in question — here, the right to control the level of pollution

in plaintiffs’ streams on Graves Mountain — were in the hands of

Combustion rather than plaintiffs, that would be no reason to

allow Combustion unilaterally to decide to pollute and pay merely

compensatory damages. This property right, initially vested in

plaintiffs under well-settled Georgia law, can easily be transferred

to Combustion through legitimate avenues of market exchange.

Indeed, Combustion’s settlements with respect to 12 of the 13

judgments effectuated this very type of property transfer.

If Combustion had bargained with plaintiffs, the purchase

price would have been determined by the value of the property to

plaintiffs (which was not in evidence before the jury)* and the

* Combustion asserted below that the estimated aggregate fair market

value of plaintiffs’ land (which of course might be less than the value of the

land to plaintiffs personally) was $1.347 million. But this figure was never

introduced into evidence at trial. Indeed, on Combustion’s own motion, all

evidence of the land’s value was barred as irrelevant to the case. Tr. 622:10-

623:7, 631:18-632:14, 659:21-660:9. Combustion explicitly waived any

argument that might depend on the value of plaintiffs’ land. Tr. 17, 622-23.

629-32; R-3-63 at 13-17. A federal court “cannot, consistent with the

Seventh Amendment, evaluate a jury’s verdict based on evidence that the

jury was not permitted to consider at trial.” Mattison v. Dallas Carrier

Corp., 947 F.2d 95, 108 (4th Cir. 1991): see also Browning-Ferris Indus. v.

Kelco Disposal, 492 U.S. 257, 280 n.26 (1989),

-28-

value of the property to Combustion (at least $6 million).

Permitting Combustion to escape such a bargaining process by

authorizing it to trespass at the price of paying only compensatory

damages would improperly allow it to retain all the gains from

exchange that would have been divided between the parties had

they freely bargained over the sale of the property.’

B. The Award is Reasonable By Reference

to Legislatively Approved Penalties

In Gore, this Court made clear that “[c]omparing the punitive

damage award and the civil or criminal penalties that could be

imposed for comparable misconduct” provides another test for

judging excessiveness. 517 U.S. at 583 (emphasis added). This

factor demonstrates the reasonableness of the award in this case.

First, this Court in Gore considered the size of awards “that

would be permissible under [state tort-reform] statutes.” /d. at 582

n.36. Here, it is notable that this case was tried under a Georgia

statute capping punitive damages at $250,000 except where a

plaintiff can prove specific intent to cause harm. O.C.G.A. § 51-

12-5.1(f). Thus, the Georgia legislature has decided not to impose

a limit on punitive damages in cases like this one. It has singled

out such cases as ones in which severe punishment is warranted.

In addition, this action was brought by 23 separate plaintiffs

owning 16 different plots of land. Even if each plaintiff had

received no more than the $250,000 allowed by the Georgia

* It bears emphasis that even if the property right in question could not

easily be transferred, there is no obvious basis for questioning the policy

judgment under Georgia law that mining companies such as Combustion still

may not pollute the streams in question, even if such pollution could increase

societal wealth. See, e.g., Richard A. Posner, The Problematics of Moral and

Legal Theory, 111 HARV. L. REV. 1637, 1669-70 & n.62 (1998) (observing

that to rely on principles of economics to justify a societal goal of wealth

maximization is a “doomed effort”). See also Ronald Dworkin, /s Wealth a

Value?, in A MATTER OF PRINCIPLE 237, 242-44 (1985); Anthony T.

Kronman, The Value of Moral Philosophy, 111 HARV. L. REV. 1751, 1752 &

n.5 (1998).

-29.

legislature in cases not involving specific intent to harm, the total

punitive damage award in this case permitted under Georgia law

would have been $5.75 million. In this case, of course, the jury

found that Combustion acted with specific intent to cause harm, a

finding that was upheld in the earlier appeal. Hence, the Georgia

legislative scheme provides additional support for the award.

Also relevant in assessing the reasonableness of the instant

award is the Georgia Water Control Act, which Combustion

violated. Tr. 984-86. Under this Georgia statute, civil penalties

of up to $100,000 per violation per day may be assessed for

repeated violations. O.C.G.A. § 12-5-52(a). In addition, the Act

carries criminal penalties; knowing violations are punishable as

felonies. O.C.G.A. § 12-5-53(a) & (c). The district court acknow-

ledged that, if the maximum legislatively authorized penalty had

been imposed on Combustion, it would have faced a $146 million

fine. R8-266-10. Gore instructs a focus on the “maximum civil

penalt[ies]” “that could be imposed,” 517 U.S. at 583-84 (empha-

sis added), not on the patterns of administrative enforcement.

C. The Award is Reasonable by Reference

to Combustion’s Size and Financial Position

The punitive award is also eminently reasonable in light of

Combustion’s 1990 purchase price of $1.6 billion. Tr. 1199. The

district court previously explained that this was “one of the most

apposite cases” for considering the defendant’s financial position,

since an award of “one million dollars” would be “a mere

inconvenience” — “as much corporate blood as a mosquito would

draw.” 4/25/94 Tr. 109.

This Court has repeatedly noted the “well-settled law” that

the size of a punitive damage award may be justified as constitu-

tionally reasonable by reference to a defendant’s wealth. TXO,

509 U.S. at 462 n.28 (plurality opinion). Justice Breyer, joined by

Justices O’Connor and Souter, explained in Gore that “one can

understand the relevance of this factor to the State’s interest in

retribution.” Gore, 517 U.S. at 591 (concurring opinion); see also

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Haslip, 499 U.S. at 21-22; Browning-Ferris, 492 U.S. at 300

(O’Connor, J., joined by Stevens, J., concurring in part and

dissenting in part); Newport v. Fact Concerts, Inc., 453 U.S. 247,

270 (1981) (evidence of wealth “is traditionally admissible as a

measure of the amount of punitive damages that should be

awarded”); Continental Trend Resources, Inc. v. OXY USA, Inc.,

101 F.3d 634, 641-42 (10th Cir. 1996), cert. denied, 117 S. Ct.

1846 (1997) (conciuding that wealth remains relevant under

Gore); RESTATEMENT (SECOND) OF TORTS § 908(2) & comment e

(1979); Annotation, Punitive Damages: Relationship to

Defendant's Wealth, As Factor in Determining Propriety of

Award, 87 A.L.R.4TH 141, 151 (1995) (noting that the “vast

majority of courts” permit wealth to be considered).

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

JOHN C. BELL, JR. WILLIAM A. PANNELL

619 Greene Street Post Office Box 810

Augusta, GA 30901 Alpharetta, GA 30009

(706) 722-2014 (770) 619-0910

JOHN M.B. LEwis, [V KENNETH J. CHESEBRO*

HUGUENIN, ANNAS & LEWIS JONATHAN S. MASSEY

4024 Washington Road 1600 Massachusetts Avenue

Augusta, GA 30917 Cambridge, MA 02138

(706) 855-5000 (617) 661-4423

Counsel for Respondents

* Counsel of Record

September 10, 1999