# Amicus Curiae Brief — Union Pacific Railroad Co. v. Barber

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386008_0848%3A4

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2004
- **Citation:** 543 U.S. 940

## Text

‘em Y)

No. 04-47

IN THE

UNION PACIFIC RAILROAD Co.,
Petitioner,
Vv.

CHRIS BARBER, CLAUDETTE BARBER, AND ALLIED WASTE
INDUSTRIES, INC.
Respondents.

On Petition for a Writ of Certiorari to the
Supreme Court of Arkansas

MOTION FOR LEAVE TO FILE BRIEF AS
AMICI CURIAE AND BRIEF OF THE
AMERICAN TORT REFORM ASSOCIATION
AND NATIONAL ASSOCIATION OF
MANUFACTURERS IN SUPPORT OF

PETITIONER
Sherman Joyce Victor E. Schwartz
AMERICAN TORT REFORM (Counsel of Record)
ASSOCIATION Leah Lorber
1101 Connecticut Avenue Kimberly D. Sandner
Suite 400 SHOOK HARDY & BACON L.L.P.
Washington, D.C. 20036 600 14" Street, N.W., Suite 800
(703) 264-5300 Washington, D.C. 20005
(202) 783-8400
Additional Counsel Listed on Attorneys For Amici Curiae

Inside Cover

Jan Amundson

Quentin Riegel

NATIONAL ASSOCIATION OF MANUFACTURERS
1331 Pennsylvania Avenue, N.W.
Washington, D.C. 20004

(202) 637-3000

IN THE

Supreme Court of the United States

No. 04-47

UNION PACIFIC RAILROAD Co..,
Petitioner,
v<

CHRIS BARBER, CLAUDETTE BARBER, AND ALLIED WASTE
INDUSTRIES, INC.
Respondents.

On Petition for a Writ of Certiorari to the
Supreme Court of Arkansas

MOTION FOR LEAVE TO FILE BRIEF AMICI
CURIAE OF THE AMERICAN TORT REFORM
ASSOCIATION AND NATIONAL
ASSOCIATION OF MANUFACTURERS IN
SUPPORT OF PETITIONER

Pursuant to Rule 37.2(b), the American Tort Reform As-
sociation and the National Association of Manufacturers re-
quest leave to file the accompanying brief as amici curiae in
support of the Petition for a Writ of Certiorari.' While the

' In accordance with Rule 37.6, proposed amici state that no counsel

for either party has authored this brief in whole or in part, and no person

—_

2

Petitioner has consented to the filing of this brief, Respon-

dents’ counsel has withheld consent, necessitating the filing
° . 9

of this motion.”

Founded in 1986, the American Tort Reform Association
(“ATRA”) is a broad-based coalition of more than 300 busi-
nesses, corporations, municipalities, associations, and pro-
fessional firms that have pooled their resources to promote
reform of the civil justice system with the goal of ensuring
fairness, balance, and predictability in civil litigation. For
more than a decade, ATRA has filed amicus curiae briefs in
cases before this Court that have addressed important liabil-
ity issues.

The National Association of Manufacturers (“NAM”) is
the nation’s largest industrial trade association, representing
small and large manufacturers in every industrial sector and
in all 50 states. The NAM’s mission is to enhance the com-
petitiveness of manufacturers and improve American living
standards by shaping a legislative and regulatory environ-
ment conducive to U.S. economic growth and to increase
understanding among policymakers, the media, and the gen-
eral public about the importance of manufacturing to Amer-
ica’s economic strength.

This case is of interest to proposed amici because it pro-
vides a sound vehicle for this Court to address the improper
use of wealth evidence in the assessment of punitive dam-
ages awards. In the instant case, the $9.6 billion net worth of
petitioner-defendant Union Pacific Railroad Co. was the only
evidence offered during the punitive damages phase of trial
on non-fatal personal injury negligence claims arising out of

or entity, other than the proposed amici, has made a monetary contribu-
tion to the preparation or submission of this brief.

> Petitioner’s letter of consent has been lodged with the Clerk of the
Court.

See ae

3

a railroad crossing accident. Thus, this case crystallizes the
ongoing debate about the constitutional due process issue
presented by the use of evidence of a defendant’s wealth in
assessing the amount of punitive damages.

Distinguished judges and scholars have grappled for
years with the problems and perceived benefits created by
this so-called “traditional” measure of punitive awards. This
issue is only becoming more pressing in light of modern
mass tort litigation and punitive damages practice and their
effects on consumers and businesses throughout the United
States. This case provides a unique opportunity for this
Court to provide clear guidelines on an important issue — the
extent to which evidence of a corporate defendant’s wealth
can be used to measure an award of punitive damages with-
out violating constitutional due process guarantees.

Particularly in light of the emphasis on the petitioner-
defendant’s wealth in this case, it is important for this Court
to grant certiorari to address the failure by the courts below
to comply with this Court’s directives regarding the im-
proper use of extraterritorial evidence to support punitive
awards in State Farm Mutual Automobile Insurance Co. v.
Campbell, 538 U.S. 408 (2003). Both the trial court and the
Arkansas Supreme Court relied on Union Pacific’s alleged
nationwide policies to put profits over safety when uphold-
ing the punitive award. This is in direct contravention of this
Court’s ruling in Campbell that “a State cannot punish a de-
fendant for conduct that may have been lawful where it oc-
curred. Nor does the State have a legitimate concern in im-
posing punitive damages to punish a defendant for unlawful
acts committed outside of its jurisdiction.” 538 U.S. at 421-
22.

This Court has expressed heightened concern about the
use of wealth evidence in cases where, as here, “the deci-
sionmaker is presented . . .with evidence that has little bear-

4

ing as to the amount of punitive damages that should be
awarded.” /d. at 418 (noting in such cases that strong guide-
lines are needed to “aid the decisionmaker in its task of as-
signing appropriate weight to evidence that is relevant and
evidence that is tangential or only inflammatory.”’).

The proposed amici are active in the business and manu-
facturing communities and their members are the primary
victims of excessive punitive damages awards. They, and
their members, have a unique understanding of the impact of
excessive punitive damage awards inflated by the ill-advised
use of wealth evidence.

For the foregoing reasons, the proposed amici are well-
suited to bring these matters to the Court’s attention. Ac-
cordingly, ATRA and the NAM respectfully request that the
Court grant its motion for leave to file the attached brief.

Respectfully submitted,

Victor E. Schwartz

(Counsel of Record)

Leah Lorber

Kimberly D. Sandner

SHOOK, HARDY & BACON L.L.P.
600 14" Street, N.W., Suite 800
Washington, D.C. 20005

(202) 783-8400

Attorneys for Amici Curiae

Sherman Joyce

AMERICAN TORT REFORM
ASSOCIATION

1101 Connecticut Avenue, Suite 400
Washington, D.C. 20036

(703) 264-5306

AERA et as Cols eet, akan OA

Jan Amundson

Quentin Riegel

NATIONAL ASSOCIATION OF
MANUFACTURERS

1331 Pennsylvania Avenue N.W.

Washington, D.C. 20004

(202) 637-3000

Of Counsel

Dated: September 10, 2004

TABLE OF CONTENTS

Page
TAREE. OF AUT RII ise osccevnsniensvessssosnnsnsssnecesnas ii
INTEREST OF AMICI CURIAE. .........0..:..eccssceesseesses 1
STATEMENT GP THEE CAE. ..ccsccscnssccsssserssonssrenses 3
SUMMARY OF ARGUMENT ..............:ccccsesseeeseeees 3
PRET vaeectas shar ccinansancendescndiciesansenacnsnsmtinciniies 3
I. CE ar RII s. vinsesrsicseeonitsnssasomnnssnrnannetases 3

II. THIS COURT SHOULD PROVIDE GUIDANCE
ON THE CONSTITUTIONAL LIMITS OF THE
USE OF WEALTH EVIDENCE TO SET
PUNITIVE DAMAGE AWARDS. ............605: 5

A. Use of Wealth Evidence Inevitably Arouses the
Passion and Prejudice of the Jury ............ 7

B. Evidence of the Wealth of the Defendant Does
Not Further the Purposes of Punitive Damages
FR OEE LON FINDER T EDTA 11

Ill. © CERTIORARI IS NECESSARY TO ENFORCE
THIS COURT’S RULE BARRING
CONSIDERATION OF OUT-OF-STATE
CONDUCT IN AWARDING PUNITIVE

il

TABLE OF AUTHORITIES

CASES Page(s)

BMW of N. Am., Inc. v. Gore,
Be a, Ce IEE un sesitcceeuteneiacintchepciceuaconaensncce i A

Browning-Ferris Indus. Of Vt., Inc.
uv. Kelco Disposal, Inc.,

We Tie DIE CUED titan chnnicsnneccsccasaseriucasecocstavnnns 5
City of Newport v. Fact Concerts, Inc.,

Se Sree Be AD a ceianendaniitictcackiniacnsiranaceione 6, 7,14
Cooper Indus., Inc. v. Leatherman Tool

Group, Inc., 582 U.S. 424 (2001) ..............ccc000 12, 17
Gertz v. Robert Welch, Inc.

ee Ce OE ans encentinidtnsiientinintiveseuananties 11
Honda Motor Co. v. Oberg,

Be Ses Sie MIE ER ncdicanenkspscetievuienss chectuiclenasnanens 5,17
Laidlaw v. Sage, 158 N.Y. 73 (1899) .......... 10

Pacific Mut. Life Ins. Co. v. Haslip,
Pe ar ne Se Ce on sich stars cacedeanauinenintacsusintouune passim

Rosenbloom v. Metromedia, Inc.,
Se ee ee i veaicaelnshnradckccosminncterieddaidexeies 14

ill

State Farm Mut. Auto. Ins. Co. v. Campbell,

Se re A ED cikcsieassenseisssdercaeawinanersnanensenia passim
Suzore v. Rutherford,

251 S.W.2d 129 (Tenn. App. 1952).................. 14
Toole v. Richardson-Merrell, Inc.,

Ok CARL. Bm, BE GOO (DGB) avs coccsssesserecssancnncsese 8,9
TXO Prod. Corp. v. Alliance Res. Corp.,

Se re eB icriricicnetsnnissocanecemdaninsanenssson’ passim
Union Pac. R.R. Co. v. Barber,

2004 WL 352525 (Ark. Feb. 26, 2004)............. 4,18
United States v. Burch,

873 F.2d 765 (5™ Cir. 1989..............cccsccssssssecees 12
United States v. Burgos,

7G F.Ge TSG AY” Cie, BOOT) vvisssvencesseccscovenssss 12
Washington Gas-Light Co. v. Lansden,

I See ee eee iii eines csniiasnumnseontnrratennerais 7
Zazu Designs v. L’Oreal, S.A.,

979 F.2d 499 (7th Cir. 1992)..............0.0..0sesses. 14, 15, 16
OTHER AUTHORITIES

Kenneth Abraham & John C. Jeffries,
Punitive Damages and the Rule of Law:
The Role of Defendant’s Wealth,.
18 J. Legal Stud. 415 (1989)................:cecesscseee 14

iv

Philip Borowsky & Jay Nicolaisen,
Punitive Damages in California:
The Integrity of Jury Verdicts,
UT UBF. Ee. BRBW. BGT (RBBB) nscccsccscescccssreseseccee 10

Lester Brickman, On the Theory Class’s Theories
of Asbestos Litigation: The Disconnect Between
Scholarship and Reality,
SE FU. Ee. GRY. GR CD cccescvcenserscssereesssexeses 11

Bruce Chapman & Michael Trebilcock,
Punitive Damages: Divergence in Search
of a Rationale, 40 Ala. L. Rev. 741 (1989)....... 15, 16

Robert D. Cooter, Punitive Damages for Deterrence:
When and How Much, 40 Ala. L. Rev.
RS GED aitiicenecencenlnencnlnntinnneminaiant 14-15

Peter W. Huber, LIABILITY: THE LEGAL
REVOLUTION AND ITS CONSEQUENCES (1988)... 10

John Calvin Jeffries, Jr., A Comment on the
Constitutionality of Punitive Damages,
FB Vid. Ee, BUC. TOD CABBB). cccsscrrsceceseresccecsessessces 9, 10

W. Page Keeton et al., PROSSER AND KEETON ON THE
LAW OF TORTS (5th ed. 1984) 20.0.0... eee eeeees 11

Bruce N. Kuhlik & Richard F. Kingham,
The Adverse Effects of Standardless
Punitive Damage Awards on
Pharmaceutical Development and
Availability, 45 Food Drug
CR, Gas Gee Ce iteterniicennninsinsainnnsnccninsansanin 11

|
|
;
2

Jane Mallor & Barry Roberts, Punitive
Damages: Toward a Principled
Approach, 50 Hastings L.J. 969 (1999)...........

Clarence Morris, Punitive Damages
in Tort Cases, 44 Harv. L. Rev. 1173

CRE saccestienjiniceraipenibennniendleesidenieislnlienenannninsnannicinnans

Theodore B. Olson, Rule of Law:
Dangerous National Sport of
Punitive Damages, Wall St. J.,

ie la

Walter K. Olson, THE LITIGATION EXPLOSION,

CIP cistcdsmntnnaneinnensnuensenanchabieinnteinnenineenntennciins

David G. Owen, Problems in Assessing
Punitive Damages Against
Manufacturers of Defective Products,

49 U. Chie L. Rev. 1 (1982)..............cccccccccsesseses

George L. Priest, Punitive Damages
_ and Enterprise Liability,

56 S. Cal. L. Rev. 123 (1982)..............ceseeeseeees

James B. Sales & Kenneth B. Cole, Jr.,
Punitive Damages: A Relic That has
Outlived Its Origins,

BF FO Bi URES CRD itnsnrcsinanessneenserssnens

Victor E. Schwartz et al., PROSSER, WADE
AND SCHWARTZ’S CASES AND MATERIALS

ON TORTS (10th ed. 2000). ....sssssssssssssessseeeeeee

10

10

10

10

11

vi |

Stephen M. Turner et al.,
Punitive Damages Explosion: Fact or Fiction?,
(Wash. Legal Found. Working Paper
Series No. FO, Nov. 1QGB).......cccccccscscscsecsccessvns 10

Symposium Discussion, Punitive Damages,
56 S. Cal. L. Rev. 165 (1963).................ccccccerees 15

United States Sentencing Commission,
Guidelines Manual, §5H1.10 (Nov. 2002) ...... 12

W. Kip Viscusi, Punitive Damages:
How Jurors Fail to Promote Efficiency,
39 Harv. J. on Legis. 139 (2002)................0.... 13

W. Kip Viscusi, The Social Costs of Punitive
Damages Against Corporations,

BT Chae. Lad. FBG (AGRE) wcrsssnicnrvncisccsrtininaseinessss 13
W. Kip Viscusi, Why There Is No Defense

of Punitive Damages,

OT CAO. Rad. GS Cee iiiisrsinitdacnens 13, 15-16

Malcom E. Wheeler, A Proposal for
Further Common Law Development of the
Use of Punitive Damages in Modern Products
Liability Litigation,
40 Ala. L. Rev. 919 (1989)...........................0000 . 10

4

UNION PACIFIC RAILROAD Co.,
Petitioner,
V.

CHRIS BARBER, CLAUDETTE BARBER, AND ALLIED WASTE
INDUSTRIES, INC.
Respondents.

On Petition for a Writ of Certiorari to the
Supreme Court of Arkansas

BRIEF AMICI CURIAE OF AMERICAN TORT
REFORM ASSOCIATION AND NATIONAL
ASSOCIATION OF MANUFACTURERS IN

SUPPORT OF PETITIONER

INTEREST OF AMICI CURIAE'

Founded in 1986, the American Tort Reform Association
(“ATRA”) is a broad-based coalition of more than 300 busi-

' Amici’s motion for leave to file this brief amici curiae is filed simul-

taneously with the brief. No counsel for either party has authored this
brief in whole or in part, and no person or entity other than the amici has
made a monetary contribution to the preparation or submission of this
brief.

2

nesses, corporations, municipalities, associations, and pro-
fessional firms that have pooled their resources to promote
reform of the civil justice system with the goal of ensuring
fairness, balance, and predictability in civil litigation. For
more than a decade, ATRA has filed amicus curiae briefs in
cases before federal and state courts that have addressed im-
portant liability issues.

The National Association of Manufacturers (“NAM”) is
the nation’s largest industrial trade association, representing
small and large manufacturers in every industrial sector and
in all 50 states. The NAM’s mission is to enhance the com-
petitiveness of manufacturers and improve American living
standards by shaping a legislative and regulatory environ-
ment conducive to U.S. economic growth and to increase
understanding among policymakers, the media, and the gen-
eral public about the importance of manufacturing to Amer-
ica’s economic strength.

This case is of interest to amici because it provides a
sound vehicle for this Court to address the improper use of
wealth evidence in the assessment of punitive damages
awards. The members of amici are active in the business and
manufacturing communities and their members are the pri-
mary victims of excessive punitive damages awards. Ulti-
mately, the impact of runaway punitive damages awards is
felt by the consumer who purchases goods and services.
Amici have a unique understanding of the impact of exces-
sive punitive damage awards inflated by the ill-advised use
of wealth evidence.

3
STATEMENT OF THE CASE

Amici adopt and incorporate Petitioners’ statement of the
case.

SUMMARY OF ARGUMENT

This case crystallizes the ongoing debate about the con-
stitutional due process issue presented by the use of evidence
of a defendant’s wealth in assessing the amount of punitive
damages. Distinguished judges and scholars have grappled
for years with the problems and perceived benefits created
by this so-called “traditional” measure of punitive awards.
This issue is only becoming more pressing in light of modern
mass tort litigation and punitive damages practice and their
effects on consumers and businesses throughout the United
States. This case provides a unique opportunity for this
Court to provide clear guidelines on an important issue — the
extent to which evidence of a corporate defendant’s wealth
can be used to measure an award of punitive damages with-
out violating constitutional due process guarantees.

Particularly in light of the emphasis on the petitioner-
defendant’s wealth in this case, it is important for this Court
to grant certiorari to address the failure by the courts below
to comply with this Court’s directives regarding the im-
‘proper use of extraterritorial evidence to support punitive
awards in State Farm Mutual Automobile Insurance Co. vy.
Campbell, 538 U.S. 408 (2003).

For these reasons, the Petition for Writ of Certiorari
should be granted.

ARGUMENT
I. INTRODUCTION

This case puts squarely before this Court the constitu-
tional limits for the use of evidence of a corporate defen-

4

dant’s wealth in measuring a punitive damages award. In the
instant case, the $9.6 billion net worth of petitioner-
defendant Union Pacific Railroad Co. was the only evidence
offered during the punitive damages phase of trial on non-
fatal personal injury negligence claims arising out of a rail-
road crossing accident. An Arkansas jury awarded $5 mil-
lion in compensatory and $25 million in punitive damages, a
5:1 ratio. The trial court denied the petitioner-defendant’s
motion for remittitur, explaining that $9.6 billion “is an aw-
ful lot of wealth” and you “have to look at [that].” Ruling on
Post-Trial Motions, Petitioner’s Abstract at 48a-49a. The
Supreme Court of Arkansas also referenced petitioner-
defendant’s net worth in upholding the punitive award, stat-
ing “there is no doubt that [petitioner-defendant] is in a
strong financial and social condition” and that the award
constituted only 0.260 percent of its net worth. Union Pac.
R.R. Co. v. Barber, No. 03-57, slip op. at 30 (Ark. Feb. 26,
2004), available at 2004 WL 352525; Pet. Abst. at 30a.

In light of the emphasis placed on Union Pacific’s net
worth, this case also cries out for this Court to enforce its
ruling in Campbell barring use of out-of-state conduct in set-
ting punitive awards. As well as citing petitioner-
defendant’s wealth, both the state supreme court and the trial
court explained the $25 million punitive award was justified
based on proof of petitioner-defendant’s alleged participation
in an industry-wide national “policy” that “put company
profits before public safety.” Barber, slip op. at 30, Pet.
Abst. at 30a; see also Ruling on Post-Trial Motions, Pet.
Abst. at 48(a) (trial court explains its reliance on “the proof
throughout the trial of concerning policies of the railroad
company and their actions.”). Evidence admitted to establish
this alleged corporate policy during the liability phase of trial
included, inter alia, expert testimony regarding general rail-
road industry policies and opinions based on petitioner-
defendant’s national filings with government agencies and

5

policy documents. See Pet. Abst. at 42, 126-27, 134, 136.
This is precisely the same type of national policy evidence
that this Court barred in Campbell. It should not have been
used to uphold the punitive damages award here.

II. THIS COURT SHOULD PROVIDE GUIDANCE ON
THE CONSTITUTIONAL LIMITS OF THE USE
OF WEALTH EVIDENCE TO SET PUNITIVE
DAMAGES AWARDS.

This Court repeatedly has been asked to reject the use of
evidence of a defendant’s wealth in the consideration of pu-
nitive damages awards. See, e.g., TXO Prod. Corp. v. Alli-
ance Res. Corp., 509 U.S. 443 (1993); Browning-Ferris In-
dus. of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257
(1989).

While thus far declining to hold this use of wealth evi-
dence to be unconstitutional per se, this Court and its Mem-
bers also repeatedly have emphasized the problems inherent
in allowing a jury to consider a company’s wealth when de-
termining punitive damages: the likelihood of juror bias
against large corporations, especially those from out of
state;” juror attempts at social engineering through the redis-
tribution of wealth from corporations to relatively poorer in-
dividuals;* unpredictable “windfall” verdicts;* and the poten-

* See, e.g., State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408,
417 (2003) (“[T]he presentation of evidence of a defendant's net worth
creates the potential that juries will use their verdicts to express biases
against big businesses, particularly those without strong local pres-
ences.”) (quoting Honda Motor Co. v. Oberg, 512 U.S. 415, 432 (1994));
TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 464 (1993)
(agreeing that “the emphasis on the wealth of the wrongdoer increased
the risk that the award may have been influenced by prejudice against
large corporations, a risk that is of special concern when the defendant is
a nonresident”).

6

tial imposition of undue burdens on interstate commerce and
other societal interests.”

In light of these very real problems, it would be helpful if
this Court could provide specific guidelines on how wealth
evidence can be used consistent with constitutional due
process protections, if at all. In this case — given that Union
Pacific’s net worth was the only evidence introduced during

> TXO, 509 U.S. at 468 (Kennedy, J., concurring in part and concur-
ring in the judgment) (noting that juries bedazzled by evidence of the size
and financial condition of a wrongdoer and feeling “antipathy to a
wealthy, out-of-state corporate defendant” may surrender to “redistribu-
tionist impulses”); id. at 490 (O’Connor, J., dissenting) (“jurors naturally
think little of taking an otherwise large sum of money out of what ap-
pears to be an enormously large pool of wealth”); Pacific Mut. Life Ins.
Co. v. Haslip, 499 U.S. 1, 43 (1991) (O’Connor, J., dissenting) (jurors, if
not properly guided, may “target unpopular defendants ... and redistribute
wealth”).

* — TXO, 509 U.S. at 490 (O’Connor, J., dissenting) (jury instructions
afforded only two objective bases for determination of punitive damages:
actual harm, “a relatively small sum on which the jury obviously did not
rely,” and defendant’s wealth, “a factor that obviously impressed the jury
a great deal,” thus “ensur[ing] that a windfall verdict would result by
inviting the jury to redistribute wealth to respondents ... based solely on
[defendant’s] financial position.); City of Newport v. Fact Concerts, Inc.,
453 U.S. 247, 270-71 (1981) (finding “no compelling reason” to allow
punitive damages in Section 1983 cases against municipalities; juror
awareness of “the unlimited taxing power of a municipality” may preju-
dicially impact the size of the award and “the impact of such a windfall
recovery is likely to be both unpredictable and, at times, substantial”).

* BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 585 (1996) (“The fact
that BMW is a large corporation ... does not diminish its entitlement to
fair notice of the demands that the several States impose on the conduct
of its business. Indeed, its status as an active participant in the national
economy implicates the federal interest in preventing individual States
from imposing undue burdens on interstate commerce.”); accord Fact
Concerts, 453 U.S. at 267 (“punitive damages against a municipality
‘punishes’ only the taxpayers, who took no part in the commission of the
tort.”).

|

7

the punitive phase of trial - wealth evidence was clearly
given the maximum role possible. Absent clear guidelines
from this Court, evidence of a defendant’s financial condi-
tion will be used as “an open-ended basis for inflating
awards when the defendant is wealthy.” BMW of N. Am. v.
Gore, 517 U.S. 559, 596 (1996) (Breyer, J., concurring).

A. Use of Wealth Evidence Inevitably Arouses the Pas-
sion and Prejudice of the Jury.

As the Court has observed, “evidence of a tortfeasor’s
wealth is traditionally admissible as a measure of the amount
of punitive damages that should be awarded.” City of New-
port v. Fact Concerts, Inc., 453 U.S. 247, 270 (1981) (foot-
note omitted). At the same time, the prejudicial impact of
evidence of a defendant’s wealth on a jury has long been
recognized. See Washington Gas-Light Co. v. Lansden, 172
U.S. 534, 556 (1899) (reversing verdict rendering compensa-
tory award for which multiple defendants were jointly and
severally liable; to do otherwise “might work injustice” as
trial court failed to limit use of evidence of sole corporate
defendant’s wealth to punitive damages issues). In 1931,
Professor Clarence Morris, then a Brandeis Research Fellow
at Harvard University, wrote:

The theory is that a penalty which would be suffi-
cient to reform a poor man is likely to make little
impression on a rich one; and therefore the richer
the defendant is the larger the punitive damage
award should be. But it is probable that this very
evidence, instead of aiding the jury to assess a
proper verdict, may prejudice them against the de-
fendant and prevent an impartial judgment, not only
on the size of the verdict, but in deciding who shall
win the case. It is a good guess that rich men do not
fare well before juries, and the more emphasis
placed on their riches, the less well they fare. Such

8

evidence may do more harm than good; jurymen
may be more interested in divesting vested interests
than in attempting to fix penalties which will make
for effective working of the admonitory function.

Clarence Morris, Punitive Damages in Tort Cases, 44 Harv.
L. Rev. 1173, 1191 (1931).

Professor Morris made his prescient comments when
punitive damages claims still were brought predominantly
against defendant individuals for their intentional bad acts
toward a specific person, such as assault and battery. Since
then, fundamental changes in tort law and punitive damages
practice beginning in approximately the 1960s have led to an
explosion of punitive damages claims against businesses in
interstate commerce.® As explained by Justice O’Connor,
corporations are particularly vulnerable to the misuse of
wealth evidence:

Corporations are mere abstractions and, as such, are
unlikely to be viewed with much sympathy. More-

® Such changes in punitive damages practice included the expansion

of the remedy to conduct that was not intentional in nature, such as reck-
lessness, willful and wanton misconduct, or even gross negligence, facili-
tating their award in mass tort litigation. See James B. Sales & Kenneth
B. Cole, Jr., Punitive Damages: A Relic That has Outlived Its Origins, 37
Vill. L. Rev. 1117, 1130-38 (1984) (discussing standards of conduct giv-
ing rise to punitive damages award). The focus of punitive damages also
shifted away from the defendant’s alleged wrongful conduct toward the
actual plaintiff to its misconduct toward the public at large. For example,
while it was difficult to prove a defendant manufacturer marketed and
sold a defective product with the conscious intent of injuring a specific
plaintiff, it was much easier to establish that the defendant did so reck-
lessly in disregard to the possible harm to potential consumers. See, e.g.,
Toole v. Richardson-Merrell, Inc., 251 Cal. App. 2d 689, 715 (1967)
(plaintiff need not prove defendant acted with deliberate intent to harm
plaintiff; plaintiff merely had to prove that the defendant acted recklessly
and in wanton disregard to the possible harm to others when it marketed,
promoted and sold the prescription drug at issue).

9

over, they often represent a large accumulation of
productive resources; jurors naturally think little of
taking an otherwise large sum of money out of what
appears to be an enormously larger pool of wealth.
Finally, juries may feel privileged to correct per-
ceived social ills stemming from unequal wealth
distribution by transferring money from "wealthy"
corporations to comparatively needier plaintiffs.

TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 464
(1993) (O’Conner, J., dissenting). See James B. Sales &
Kenneth B. Cole, Jr., Punitive Damages: A Relic that has
Outlived its Origins, 37 Vand. L. Rev. 1117, 1148 (1984)
(“Permitting the fact finder to consider evidence of a wrong-
doer’s wealth is really nothing more than a camouflaged
mechanism designed to encourage large punitive assess-
ments. In essence, it is a procedural device that promotes the
redistribution of wealth in society.”).

The changes in tort law and punitive damages practice
made business defendants vulnerable to bankrupting punitive
awards in situations where defendant individuals generally
were not. These include strict products liability cases, which
do not require any misconduct whatsoever by the defendant
to establish liability,’ and the repeated imposition of multiple
punitive damages for a single misstep.® And while empha-
sizing the wealth of defendant individuals and businesses

7 See id. (Toole was the first case to find that punitive damages are

recoverable in a strict product liability action). Since then, punitive dam-
ages awards in product liability cases have proliferated.

As one commentator wrote, “[A] single design error, inadequate
warning or recurrent manufacturing mistake can permeate an entire prod-
uct line, resulting in tens, hundreds or thousands of personal injury law-
suits with accompanying punitive damages claims. Individual awards
that appear reasonable can aggregate to threaten the very survival of a
business entity.” John Calvin Jeffries, Jr., A Comment on the Constitu-
tionality of Punitive Damages, 72 Va. L. Rev. 139, 142 (1986).

10

equally upsets the “theory of our government and a cardinal
principle of our jurisprudence that the rich and poor stand
alike in courts of justice,” Laidlaw v. Sage, 158 N.Y. 73, 103
(1899), allowing wealth evidence to inflate punitive damages
awards against corporate defendants also has adverse practi-
cal effects on society.

As plaintiffs’ lawyers became more likely to seek puni-
tive damages from corporate defendants perceived to have
“deep pockets,” the size and me wr of punitive damages
awards “increased dramatically” d “unprecedented num-
bers of punitive awards in product liability and other mass
tort situations began to surface. *!! Now, multi-million dollar
and even billion-dollar punitive damages verdicts have be-
come commonplace.” Numerous companies have been

° Ford Motor Company, for example, reported that less than 0.5% of

the products liability complaints filed against it prior to 1970 contained
claims for punitive damages, while 27.1% of all such complaints in 1980
sought punitive awards. See David G. Owen, Problems in Assessing Pu-
nitive Damages Against Manufacturers of Defective Products, 49 U. Chi.
L. Rev. 1, 54 n.258 (1982). If only personal injury lawsuits are consid-
ered, the 1980 percentage is higher. /d.

10 George L. Priest, Punitive Damages and Enterprise Liability, 56 S.

Cal. L. Rev. 123, 123 (1982).

'! Jeffries, 72 Va. L. Rev. at 142. See also Peter W. Huber, LIABILITY:
THE LEGAL REVOLUTION AND ITS CONSEQUENCES (1988); Walter K. Ol-
son, THE LITIGATION EXPLOSION (1991); Stephen M. Turner, et al., Puni-
tive Damages Explosion: Fact or Fiction? (Wash. Legal Found., Work-
ing Paper Series No. 50, Nov. 1992).

'2 This dramatic increase has led one commentator to suggest that

“[p]unitive damages have replaced baseball as our national sport.”
Theodore B. Olson, Rule of Law: The Dangerous National Sport of Puni-
tive Damages, Wall St. J., Oct. 5, 1994, at Al17. See Malcom E. Wheeler,
A Proposal for Further Common Law Development of the Use of Puni-
tive Damages in Modern Products Liability Litigation, 40 Ala. L. Rev.
919, 919 (1989) (“Today, hardly a month goes by without a multi-million
dollar punitive damages verdict in aproduct liability case.” ) (cited by
O'Connor, J., dissenting, in Haslip, 499 U.S. at 62); Philip Borowsky &

11

driven into bankruptcy or have been forced to close plants,
lay off workers and stop research and production of promis-
ing products as a result of excessive punitive damages
awards.'* The ripple effects reach far into a community, ad-
versely affecting other businesses and individuals that rely
on the defendant company, shareholders and pension plan
investors, and others.

B. Evidence Of The Wealth Of The Defendant Does Not
Further The Purposes of Punitive Damages Awards.

Punitive damages are not ordinary civil or tort law dam-
ages.'* Unlike compensatory damages, which provide pay-
ment for economic losses (e.g., lost wages and medical ex-
penses) and noneconomic injuries (e.g., “pain and suffer-
ing”), punitive damages are not awarded to compensate for a
harm.'° Rather, punitive damages are “quasi-criminal” in

Jay Nicolaisen, Punitive Damages in California: The Integrity of Jury
Verdicts, 17 U.S.F. L. Rev. 147, 150 (1983) (noting trend of “juries . . .
award[ing] substantial punitive damages with increasing frequency”).

'3 See, e.g., Lester Brickman, On the Theory Class’s Theories of Asbes-
tos Litigation: The Disconnect Between Scholarship and Reality, 31
Pepp. L. Rev. 33, 36-37 (2003) (“‘catastrophic” effects of asbestos litiga-
tion and its accompanying punitive awards include about “seventy com-
panies ... bankrupted, thousands of jobs lost, employee 401(k) plans
decimated, and billions of dollars lost to investors”); Bruce N. Kuhlik &
Richard F. Kingham, The Adverse Effects of Standardless Punitive Dam-
age Awards on Pharmaceutical Development and Availability, 45 Food
Drug Cosm. L. J. 693 (1990) (“There is a growing body of evidence that
the threat of punitive damages deters the development and marketing of
beneficial products.”).

4 See Victor E. Schwartz et al., Prosser, Wade and Schwartz’s Cases

and Materials On Torts, 549-50 (10th ed. 2000).

' See Gertz v. Robert Welch, Inc., 418 U.S. 323, 350 (1974) (noting
that punitive damages “are not compensation for injury ... [but] are pri-
vate fines levied by civil juries to punish reprehensible conduct and to
deter its future occurrence”); see also W. Page Keeton et al., Prosser and
Keeton on the Law of Torts, § 2, at 9 (Sth ed. 1984) (explaining that pu-

12

nature and “operate as ‘private fines’ intended to punish the
defendant and deter future wrongdoing.”'® Punitive damage
awards serve an important social purpose. They allow the
public to express its outrage, to punish defendants for repre-
hensible conduct, and to deter such conduct in the future,
where compensatory damages alone in some instances may
not adequately serve these objectives.”

The criminal law seeks to serve the same purposes as pu-
nitive damages: punishment and deterrence. With minor ex-
ceptions not relevant here, the criminal law focuses on the
wrongdoing of the defendant, not his or her wealth; “a de-
fendant’s socio-economic status is never relevant to sentenc-
ing.” United States v. Burgos, 276 F.3d 1284, 1291 (11"
Cir. 2001) (quoting United States v. Burch, 873 F.2d 765,
769 (5" Cir. 1989); see United States Sentencing Commis-
sion, Guidelines Manual, §5H1.10 (Nov. 2002) (defendant’s
socio-economic status is “not relevant in the determination
of a sentence”). This is true from crimes as minor as a
speeding ticket to those as serious as drug dealing. The pen-
alty will focus on how fast the defendant was speeding, not
on the size of his pocket book. It will focus on the scope and
frequency of the drug dealing, not the wallet size of the
dealer.

Members of this Court and other distinguished experts
have concluded that the assessment of punitive damages
based on the wealth of a defendant — particularly a corporate
defendant - actually retards, rather than advances, the re-

nitive damages are awarded to punish defendant, teach defendant not to
“do it again,” and deter others from similar behavior).

'© Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424,
432 (2001) (quoting Haslip, 499 U.S. at 19).

'7 See Jane Mallor & Barry Roberts, Punitive Damages: Toward a
Principled Approach, 50 Hastings L.J. 969, 978-79 (1999).

13

tributive and deterrent purposes served by this remedy.

A well-respected legal and economics scholar at the Har-
vard Law School, W. Kip Viscusi, has closely studied the
extent to which punitive damages work to deter risky behav-
ior.'® He concluded that “[s]tates with punitive damages ex-
hibit no safer risk performance than states without punitive
damages” and that “there is no deterrence benefit that justi-
fies the chaos and economic disruption inflicted by punitive
damages.”'? One reason, he found, is that “when firms look
forward, the prospect of punitive damages is so uncertain
that there is no deterrent effect.””° Professor Viscusi also
found that jurors base their punitive damage awards less on
the defendant’s conduct and instructions from the court than
on amounts suggested at trial, thus highlighting the impact of
emphasizing the defendant’s wealth in the jury’s considera-
tion of damages.”! Indeed,

[t]he degree of admonition — the amount of the
judgment in relation to the [defendant’s] means — is
not ... tied to any concept of what is necessary to
deter future conduct nor is there even any way to
determine that the jury has considered the culpabil-
ity of the conduct involved in the particular case.

8 See, e.g., W. Kip Viscusi, The Social Costs of Punitive Damages

Against Corporations, 87 Geo. L.J. 285 (1998) [hereinafter “Social Costs
of Punitive Damages”]; W. Kip Viscusi, Why There is No Defense of
Punitive Damages, 87 Geo. L.J. 381 (1998) [hereinafter “No Defense of
Punitive Damages”).

'° Viscusi, Social Cost: of Punitive Damages, at 287, 298.

© Viscusi, No Defense of Punitive Damages, at 383.

2! See W. Kip Viscusi, Punitive Damages: How Jurors Fail to Promote

Efficiency, 39 Harv. J. on Legis. 139, 160-63 & n.90 (2002) (finding that
providing a jury with an “anchor” value for punitive damages based on a
defendant’s net worth led to a ten-fold increase in punitive damages).

14

Thus the essence of the discretion is unpredictabil-
ity and uncertainty.

Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 85 (1971)
(Marshall, J., dissenting); cf. Fact Concerts, 453 U.S. at 268-
69 (“it is far from clear that municipal officials, including
those at the policymaking level, would be deterred from
wrongdoing by the knowledge that large punitive awards
could be assessed based on the wealth of their municipality
... the impact on the individual tortfeasor of this deterrence
in the air is at best uncertain.’’).

Proponents of wealth evidence typically argue that it is
important to consider in order to assess a large enough puni-
tive award to get the attention of the defendant and deter fu-
ture misconduct. See, e.g., Suzore v. Rutherford, 251 S.W.2d
129, 131 (Tenn. App. 1952) (“what would be ‘smart money’
to a poor man would not be, and would not serve as a deter-
rent, to a rich man”). Justice O’Connor recognized in her
dissent in TXO the possibility that some “might hypothesize
that a particularly sophisticated jury would realize that im-
posing damages in an amount linked to potential harm or the
defendant's expected gain might provide appropriate deter-
rence.” TXO, 509 U.S. at 486-87.

While this may make sense in determining the appropri-
ate level of punishment for an individual defendant (and it is
not clear that it would),”” commentators are virtually unani-
mous in the view that a corporate defendant’s wealth has no
rational connection to the setting of an appropriate penalty.
See, e.g., Kenneth Abraham & John C. Jeffries, Punitive
Damages and the Rule of Law: The Role of Defendant’s
Wealth, 18 J. Legal Stud. 415, 421-22 (1989); Robert D.

2 Zazu Designs v. L’Oreal, S.A., 979 F.2d 499, 508-09 (7" Cir. 1992)
(Easterbrook, J.) (“‘May’ ... is an important qualifier; the entire penalty
‘includes extra-judicial consequences, such as a loss of business and other
future income, that is likely to be greater for wealthier defendants.”’).

5 i A Da A AP eA a Ll ee ail: Snir a

15

Cooter, Punitive Damages for Deterrence: When and How
Much, 40 Ala. L. Rev. 1143, 1176-77 (1989); Symposium
Discussion, Punitive Damages, 56 S. Cal. L. Rev. 155, 190-
91 (1982) (comments by Professors Jack L. Carr and Mal-
colm E. Wheeler).

This is why. “Corporations ... are not wealthy in the
sense that persons are. Corporations are abstractions; inves-
tors own the net worth of the business.” Zazu Designs v.
L’Oreal, S.A., 979 F.2d 499, 508 (7"" Cir. 1992) (Easter-
brook, J.). “Corporations as such feel no utility or disutility
associated with increases or decreases in wealth.” Bruce
Chapman & Michael Trebilcock, Punitive Damages: Diver-
gence in Search of a Rationale, 40 Ala. L. Rev. 741, 824-26
(1989). In reality, investors, including individual investors
and pension trusts and mutual funds that aggregate the in-
vestments of millions of average persons, are the true payors
of punitive awards as they see the value of their shares de-
crease. Zazu Designs, 979 F.2d at 508.

Professor Viscusi has taken a similar view:

Corporate entities are not children or criminals who
need to be punished. They are institutions. Punitive
damages inflict harm on current shareholders, cus-
tomers, and employees. None of these individuals
may have even been involved in the original safety
decision. For long-term risks, such as asbestos, the
economic players today are quite different from
those who made the risk decisions decades ago at
the time of exposure. Even for contemporaneous
risks, it is not easy to locate the responsible em-
ployee for a large institution's actions. Even if the
responsible employee is identified, that individual
will not suffer the full effects of the punitive dam-
ages award. The employee can simply quit his job,
thus limiting the institution's ability to sanction him.

16

The result is that innocent people who are not re-
sponsible for the risk decision nonetheless will suf-
fer the economic sanction.

W. Kip Viscusi, Why There is No Defense of Punitive Dam-
ages, 87 Geo. L.J. 381, 383 (1998) (internal citation omit-
ted). As a result, “a corporation’s wealth is not a meaningful
proxy for the wealth of its ultimate owners who are the real
principals in the principal-agent relationship.” Chapman &
Trebilcock, 40 Ala. L. Rev. at 824-25. Jurors, however, are
not told this

Moreover, corporate assets finance ongoing operations
and are unrelated to either the injury done to the victim or
the size of the award needed to cause corporate managers to
obey the law. “Net worth is a measure of profits that have
not yet been distributed to the investors. Why should dam-
ages increase because the firm reinvested its earnings?”
Zazu Designs, 979 F.2d at 508. The absolute size of a corpo-
rate defendant is also a questionable reason to inflate puni-
tive awards:

Awards of ordinary damages in [individual cases]
deter wrongful conduct. The net judgment bill of
the firm will increase with its wrongs, without the
need for punitive damages. If a larger firm is more
likely to commit a wrong on any given transaction,
then its total damages will increase more than pro-
portionally to its size without augmentation in any
given case; if a larger firm is equally or less likely
to commit a tort per transaction, then the court
ought to praise the managers rather than multiply
the firm’s penalty. Consider: General Motors is
much larger than Chrysler, and so makes more de-
fective cars, but the goals of compensation and de-
terrence are achieved for both firms by awarding as
damages the injury produced per defective car.

r

SE ORL AO ABO AE aA A ete ws ata Bow

17
Id. at 508-09.

In sum, in light of the societal problems caused by puni-
tive damages “run wild”? under 21" Century punitive dam-
ages practice, “tradition” seems a weak rationale for allow-
ing the unrestrained use of wealth evidence to influence the
amount of punitive damages awards — particularly in light of
scholarship showing that use of wealth evidence fails to fur-
ther the purpose of punitive damages awards. Admittedly,
excessive punitive damages have not been caused exclu-
sively by the use of wealth evidence. This Court, though,
already has set forth clear constitutional guidelines address-
ing other contributing factors, such as the inappropriate use
of out-of-state conduct and conduct towards others, lack of
proportionality, failure to provide adequate judicial review,
and the like. See Campbell, 538 U.S. 408; Cooper Indus.,
Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424 (2001);
Gore, 517 U.S. 558; Honda Motor Co. v. Oberg, 512 US.
415 (1994); Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1
(1991). Similar clear and understandable guidelines are
sorely needed with regard to the use of wealth evidence.

Ill. CERTIORARI IS NECESSARY TO ENFORCE
THIS COURT’S RULE BARRING CONSID-
ERATION OF OUT-OF-STATE CONDUCT IN
AWARDING PUNITIVE DAMAGES.

This Court explained in Campbell that when wealth evi-
dence is introduced on punitive issues:

our concerns are heightened when the decision-
maker is presented ... with evidence that has little
bearing as to the amount of punitive damages that
should be awarded.

Campbell, 538 U.S. at 418 (noting in such cases that strong

3 Haslip, 499 U.S. at 18.

18

guidelines are needed to “aid the decisionmaker in its task of
assigning appropriate weight to evidence that is relevant and
evidence that is tangential or only inflammatory.”).

That is precisely what occurred in this case. In an at-
tempt to establish culpability, plaintiffs launched a broad at-
tack on nationwide corporate “policies” of Union Pacific
(and the entire railroad industry) to put profits over safety.
See Pet. Brief at 4-5. In other words, just as in Campbell,
“this case was used as a platform to expose, and punish, the
perceived deficiencies of [defendant’s] operations through-
out the country.” 538 U.S. at 421. This “scheme” argument
is available, at least in theory, in virtually any case against a
business defendant. Since corporations owe their sharehold-
ers a fiduciary duty to try to make profits, it should surprise
no one that many of their activities in our free enterprise sys-
tem are aimed at furthering that objective. Under Campbell,
of course, this type of argument is prohibited. Jd. at 421, 423
(“A defendant should be punished for the conduct that
harmed the plaintiff, not for being an unsavory individual or
business.”’).

Unfortunately, both the trial court and the Arkansas Su-
preme Court relied on Union Pacific’s alleged nationwide
“policies” when upholding the punitive award. Each ruling
by itself makes it clear that Union Pacific “was being con-
demned for its nationwide policies rather than for the con-
duct directed toward the [plaintiffs].” Jd. at 421-22. The
trial court explained that its decision relied on the proof of
these “policies” admitted throughout trial. See Ruling on
Post-Trial Motions, Pet. Abst. at 48(a). The Arkansas Su-
preme Court explained that it found that the element of “ma-
licious intent” required to support punitive damages under
Arkansas law was satisfied by “the record in this case
[which] reflects the development of a corporate policy at Un-
ion Pacific that put company profits before public safety.”
Barber, slip op. at 30, Pet. Abst. at 30a. This alleged corpo-

19

rate policy was supported by expert opinion testimony, id.,
which was based on information about railroad industry
practices generally, as well as national information specific
to Union Pacific.

This is in direct contravention of this Court’s ruling in
Campbell that “a State cannot punish a defendant for conduct
that may have been lawful where it occurred. Nor does the
State have a legitimate concern in imposing punitive dam-
ages to punish a defendant for unlawful acts committed out-
side of its jurisdiction.” 538 U.S. at 421-22. While the Ar-
kansas Supreme Court purported to apply Campbell in its
reprehensibility analysis, see id. at *12, it ignored this
Court’s directives about punishing a defendants for its extra-
territorial conduct. To avoid injustice in this case and send a
message to courts that may misunderstand the directives in
Campbell, this Court should grant the Petition for Certiorari.

CONCLUSION

For the foregoing reasons, amici curiae the American
Tort Reform Association and the National Association of
Manufacturers request that this Court grant the Petition for a
Writ of Certiorari in this action.

Respectfully submitted,

Victor E. Schwartz

(Counsel of Record)

Leah Lorber

Kimberly D. Sandner

SHOOK, HARDY & BACON L.L.P.
600 14th Street, N.W., Suite 800
Washington, D.C. 20005

(202) 783-8400

Attorneys for Amici Curiae

Dated: September 10, 2004

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386008_0848%3A4. Public record. Not legal advice.