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

No. 04-47

Supreme Court US

(2) SEP 1 0 2004

OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

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 Arkansas Supreme Court

BRIEF OF THE PRODUCT LIABILITY

ADVISORY COUNCIL AS AMICUS CURIAE

IN SUPPORT OF PETITIONER

Of Counsel:

HUGH F. YOUNG, JR.

PRODUCT LIABILITY

ADVISORY COUNCIL, INC.

1850 Centennial Park Drive

Suite 510

Reston, VA 20191

(703) 264-5300

THEODORE B. OLSON

Counsel of Record

THEODORE J. BOUTROUS, JR.

THOMAS H. DUPREE, JR.

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, NW

Washington, DC 20036-5306

(202) 955-8500

Counsel for Amicus Curiae

QUESTIONS PRESENTED

In this personal injury case arising from a grade crossing

accident, the Arkansas Supreme Court affirmed a $25 million

punitive damage award against Union Pacific on the theory

that the company “prioritized monetary gain” over “personal

safety,” disregarding the fact that Union Pacific operated its

train in conformance with the federal standards governing

train speed.

Amicus will address the following questions:

1. Whether the Arkansas court misapplied the reprehen-

sibility guidepost, and violated this Court’s decision in State

Farm v. Campbell, by disregarding Union Pacific’s compli-

ance with federal speed requirements and holding that Union

Pacific acted with “a high degree of reprehensibility” based

on a purported “corporate policy” of favoring profit over

safety and its alleged litigation misconduct.

2. Whether the Arkansas court erred in upholding a 5:1

ratio of punitive to compensatory damages, despite this

Court’s holding in State Farm that “[w]hen compensatory

damages are substantial,” even a 1:1 ratio between punitive

and compensatory damages “can reach the outermost limit of

the due process guarantee.”

ll

TABLE OF CONTENTS

Page

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UPA © OOP PAFUIGIN DE 55. ccssnesccsesesevcerecsnsasssesenssesies 3

EE geared asa cees ae cdetcannmreri ee iiabiwsekn vn 4

I. THE ARKANSAS COURT MISAPPLIED

THE REPREHENSIBILITY GUIDEPOST ........... 5

A. Union Pacific’s Compliance With The

Federal Speed Regulations Is Highly

Relevant To The Reprehensibility

| ___ER ar nI SD OE Re R 5

B. The Arkansas Court’s “Profits Over

Safety” Rationale Is Misguided...................... 10

C. Union Pacific Was Improperly Punished

For Its Alleged Litigation Misconduct ........... 13

II. THIS COURT SHOULD GRANT REVIEW

TO CLARIFY THAT A 9:1 RATIO IS NOT

PRESUMPTIVELY CONSTITUTIONAL ........... 14

A. The Ratio Requirement Is A Crucial

Constitutional Protection ........................00000 14

B. Many Lower Courts Are Evading State

Farm’s Ratio Requirement............................. 17

CA a ARNO ve nantaspesscncaaceeieen oay eis ens as enask teats oleate 20

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TABLE OF AUTHORITIES

Page(s)

Cases

BMW of N. Am., Inc. v. Gore, 517 U.S. 559

i csi vais sskscennushaxesssednnsarstass aiaseeo ets passim

Bocci v. Key Pharmaceuticals, Inc., 76 P.3d 669

EI MIs chcsasnes.ssessnciansavasecsivaunsaxinsvacensonvensns 19

Buell-Wilson v. Ford Motor Co., No.

GIC800836 (Cal. Super. Ct. Aug. 19, 2004).............. 9,17

Campbell v. State Farm, 2004 WL 869188

RIE, i, SIP cessnrescrsssescnanesasessnesnssizesence 14, 16, 18

Chrysler Corp. v. Wolmer, 499 So. 2d 823.

cada ae dane inna take snichgenganaxecaiassncnemsicassiens 8

Colautti v. Franklin, 439 U.S. 379 (1979).........00.00cccceeeeeee 6

Cooper Indus., Inc. v. Leatherman Tool Group,

By ee We FE acces tssnscccssdssnancsenvnseasseseess passim

Corrosion Proof Fittings v. E.P.A., 947 F.2d

1201 (Sth Cir. 1991)....... easesauoesenaseenasenssnssecesssessesoseasenes 11

CSX Transp., Inc. v. Easterwood, 507 U.S. 658

ae bac set one scasecanasand dash cdjaxasavansndacasaxenssrs 6

Daka, Inc. v. McCrae, 839 A.2d 682

ane anid asisnehdeadnunsnaaksnacssansisssoarnsenvess 4

Douglas v. DaimlerChrysler Corp.,

No. CV2001-019659 (Ariz. Super. Ct.

RAS IREE SS ERR 9, 18-19

Hangarter v. Provident Life & Accident Ins.

OM TS Te Oe | ree 17

Honda Motor Co. v. Oberg, 512 U.S. 415

Asha sirens sais in oieaintonsaanieninvanensey 12

1V

In re New Orleans Train Car Leakage Fire

Litig., 795 So. 2d 364, 373, 375 (La. Ct.

App. 2001), petition for cert. dismissed per

stipulation, Louisiana Supreme Court

NE arn eer ancl racemes 10

Legal Servs. Corp. v. Velazquez, 531 U.S. 533

RI ecto de tars ec cen ra coe ee ace ei Agee ee 14

Malley v. Briggs, 475 U.S. 335 (1986)... 6

Mathias v. Accor Economy Lodging, Inc., 347

Pe ee ee CO ae osetia ccna ocergiitexcsswnainuetis 14

McClain v. Metabolife Int’l, Inc., 259 F. Supp.

ee Rae Ce SR IE inher rcics cavcnensoacicamsaeennieas 17

NAACP v. Button, 371 U.S. 415 (1963) ........... eee. 14

Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1

PR aecnitcstce renee ie eccecitlccaci se tindsatcntsiasis cones tatieanionscuons 14-15

Richards v. Michelin Tire Corp., 21 F.3d 1048

NE IRI sh Sale acerca stergs Nie leaeictebicvausxecootavocens 8

Romo v. Ford Motor Co., 113 Cal. App. 4th 738

ee Slt IN AD Sasccascachisprincicocsinnensiciasennssriol 19-20

Saicher v. Honda Motor Co., 52 F.3d 1311

8. MRR MeL Nene aces Se OTS ee ee 8

Southwestern Tel. & Tel. Co. v. Danaher,

ee eras linen ctintanpecrnneneenns 6

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

Ae Se CD osha datciscnonsaspetncnd eck Feasisisesaacnin passim

TXO Prod. Corp. v. Alliance Res. Corp., 509

ike Ste We INI cs Sha eedanre cine atin tpcagael chases caeseanansnicl 4

United States v. Carroll Towing Co., 159 F.2d

I Nara saa sia thtenceuaaand 11

United States v. Lanier, 520 U.S. 259 (1997)... 6

Village of Hoffman Estates v. Flipside, 455 U.S.

a bs | wR Ra ON ten oE urn sanon ta dace EN Yen er puis 6

Waddill v. Anchor Hocking, Inc., 78 P.3d 570

RUSE A Marri a keane errr 19

White v. Ford Motor Co., No. 95-0279

Sas ah: NN Seg I casirrincncinenucictnrclnsteencealtaccramtbnareens 18

Williams v. Philip Morris, Inc., 92 P.3d 126

Re: Sak FIR Bs decteknenticsvorndacrepesiacancla aaa 18

Constitutional Provisions

Rae: Gir MII, GIN se ncictciscndthccanarsdecseaxmurercinacetionnd passim

Statutes and Regulations

EF re ee ee gscciscacacisnstrercabhesnasneanegeamneenia 8

Gr ie ee batts recheeicaisan edaameaene 5

A TE, BP SI Ds aiincdstctekcceccanivetehs remo encnmeomencae 8

Bal. TT. eB RGB okies crs elneinscacwanessscensassuanesnaiasen 8

Other Authorities

David G. Owen, Problems In Assessing Punitive

Damages Against Manufacturers Of

Defective Products, 49 U. Chi. L. Rev. 1

James A. Henderson, Jr., Design Defect

Litigation Revisited, 61 Cornell L. Rev. 541

James A. Henderson, Jr., Judicial Review of

Manufacturers’ Conscious Design Choices:

The Limits of Adjudication, 73 Colum. L.

BU: See a ioikisaiescsnngianet rasmus 12

v1

Jane Spencer and Cynthia Crossen, Why Do

Americans Feel That Danger Lurks

Everywhere? Fixation on Risk, Fed By

Labs, Law and Media, Haunts The World’s

Safest Nation, Wall St. J., Apr. 24, 2003 .........0...00.008. 11

Reid Hastie et al., Looking Backward in

Punitive Judgments: 20-20 Vision?, in Cass

R. Sunstein et al., Punitive Damages: How

PPAR PIE We Ga svn scare eventos caendteaceascashececscasos 12

is Restatement (Second) of Torts § 908 (1977).............0...00008. 16

Restatement (Third) of Torts: Products Liability

Br EE car rerctsacbendanad atl oboe aan 11

Selection and Installation of Grade Crossing

Warning Systems, 60 Fed. Reg. 11,649

ONE ha WOMB sivspktaversssiccentxtasseioseeek ae eae 5

W. Kip Viscusi, Corporate Risk Analysis: A

Reckless Act?, 52 Stan. L. Rev. 547 (2000)................... 12

W. Page Keeton, et al., Prosser and Keeton on

the Law of Torts § 36 (Sth ed. 1984)... eee 8

BRIEF OF THE PRODUCT LIABILITY

ADVISORY COUNCIL AS AMICUS CURIAE

IN SUPPORT OF PETITIONER

INTEREST OF AMICUS CURIAE!

The Product Liability Advisory Council, Inc. (PLAC) is

a non-profit association with over 130 corporate members

representing a broad cross-section of American and interna-

tional product manufacturers. These companies seek to con-

tribute to the improvement and reform of law in the United

States and elsewhere, with emphasis on the law governing

the liability of manufacturers of products. PLAC’s perspec-

tive is derived from the experiences of a corporate member-

ship that spans a diverse group of industries in various facets

of the manufacturing sector. In addition, several hundred of

the leading product liability defense attorneys in the country

are sustaining (non-voting) members of PLAC. Since 1983,

PLAC has filed over 650 briefs as amicus curiae in both state

and federal courts, including this Court, presenting the broad

perspective of product manufacturers seeking fairness and

balance in the application and development of the law as it

affects product liability. A list of PLAC’s corporate mem-

bers is attached in the Addendum.

Because plaintiffs routinely seek punitive damages in

product liability cases, the fair administration of punitive

civil sanctions is an issue of great importance to product

manufacturers, and PLAC has filed amicus briefs in this

Court’s three most recent decisions involving constitutional

excessiveness challenges to punitive damage awards: BMW

of North America, Inc. v. Gore, 517 U.S. 559 (1996), Cooper

Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S.

1 Pursuant to this Court’s Rule 37.3(a), letters of consent from all par-

ties to the filing of this brief have been filed with the Clerk Pursuant to

Rule 37.6, PLAC states that this brief was not authored in whole or m

part by counsel for any party, and that no person or entity other than

PLAC or its counsel made a monetary contribution to the preparation or

submission of this brief.

424 (2001), and State Farm Mutual Automobile Insurance

Co. v. Campbell, 538 U.S. 408 (2003). As set forth below,

PLAC believes that the constitutional limitations on such

awards should be faithfully enforced, and manufacturers

should not be punished for reasonable design decisions that

were made in good faith and in conformance with federal

safety standards and regulations.

STATEMENT

Respondent Chris Barber was injured when he was trav-

eling in a garbage truck that was struck by a Union Pacific

train at a grade crossing. Petitioner’s Appendix (“Pet. App.”)

la-2a. A jury found Union Pacific negligent and awarded

Mr. Barber and his wife $5.1 million in compensatory dam-

ages and $25 million in punitive damages. Jd. at la.

The Arkansas Supreme Court affirmed, rejecting Union

Pacific’s challenge that the punitive damage award was un-

constitutionally excessive under State Farm v. Campbell, 538

U.S. 408. See Pet. App. 29a-36a. Although a federal track

inspector had testified that the track at the grade crossing was

“Class 4” track safe for travel up to 60 miles per hour, and

although it was undisputed that the Union Pacific train was

traveling less than 60 miles per hour at the time of the colli-

sion, the court nonetheless held that Union Pacific’s conduct

“was indicative of a high degree of reprehensibility.” See

Pet. 4, Pet. App. 33a. The court stated that Union Pacific had

a “corporate policy ... that put company profits before pub-

lic safety,” asserting that “Union Pacific prioritized monetary

gain over the personal safety of those crossing its train

tracks.” Pet. App. 30a, 32a. The court added that the puni-

tive sanction was further warranted because Union Pacific

allegedly engaged in litigation misconduct by “intentionally

destroy[ing]” evidence. /d. at 32a.

The court held that a 5:1 ratio of punitive to compensa-

tory damages was constitutionally permissible under State

Farm. It asserted that “[t]he standard to be employed is

whether the ratio is ‘breathtaking,’” citing this Court’s obser-

vation that “‘[s]ingle-digit multipliers are more likely to com-

port with due process, while still achieving the State’s goals

of deterrence and retribution, than awards with ratios in the

range of 500 to 1, or of 145 to 1.” Pet. App. 33a (quoting

State Farm, 538 U.S. at 425 (ellipses omitted)). The court

concluded that “[u]nder the circumstances of this case, a mul-

tiplier of 5 is justified.” Pet. App. 33a.

SUMMARY OF ARGUMENT

The Arkansas Supreme Court misapplied and evaded the

reprehensibility guidepost established in State Farm and

Gore in ways that are becoming increasingly common in the

lower courts, particularly in product liability cases involving

personal injury. The court ignored Union Pacific’s good-

faith compliance with the federal speed regulation; it penal-

ized Union Pacific for allegedly “put[ting] corporate profits

before public safety”; and it focused heavily on Union Pa-

cific’s alleged litigation misconduct in justifying the $25 mil-

lion sanction. This type of reasoning has persisted even after

State Farm and deprives the reprehensibility guidepost of any

constraining force in cases involving physical harm, opening

the door to arbitrary and excessive punitive damage awards.

This Court’s guidance is needed to reinforce and clarify that

a defendant’s reasonabie belief that its conduct is lawful—for

example, as reflected in its compliance with federal safety

standards—is highly relevant to the reprehensibility analysis,

and that a corporation does not act maliciously simply be-

cause it sought to make a profit or because its product or ser-

vice caused physical injury.

The decision below further contradicts State Farm by

misapplying the ratio guidepost. The Arkansas Supreme

Court is not alone in this regard: many courts, including

courts that were specifically directed to reconsider cases in

light of State Farm, have ignored this Court’s liolding that

where “compensatory damages are substantial, then a lesser

ratio, perhaps only equal to compensatory damages, can

reach the outermost limit of the due process guarantee.” 538

U.S. at 425. Faithful enforcement of the ratio guidepost is

particularly important in product liability cases, where the

compensatory damage awards are often substantial, yet the

defendant’s level of reprehensibility is low. This Court

should grant review to reinforce and clarify that the 1:1 ratio

is a meaningful limitation on punitive damage awards that

should not be ignored as a matter of course as the Arkansas

Supreme Court did here, and as most courts have been doing

since the day the Court announced its decision in State Farm.

ARGUMENT

This case vividly demonstrates how many lower courts

are disregarding or evading this Court’s ruling in State Farm.

The trend is particularly apparent in negligence cases involv-

ing personal injury, such as the case at bar. Whereas this

Court’s prior decisions involving due process challenges to

punitive damage awards have involved intentional torts caus-

ing economic injury such as fraud (Gore), unfair competition

(Cooper Industries), and bad-faith failure to settle (State

Farm), this case alleges negligence causing physical harm.

See Pet. App. la. As Justice Kennedy recognized in TXO

Production Corp. v. Alliance Resources Corp., punitive dam-

ages that would be appropriate in the context of an inten-

tional tort may not be appropriate in “a case of negligence

[or] strict liability.” 509 U.S. 443, 468 (1993) (Kennedy, J.,

concurring); see also Daka, Inc. v. McCrae, 839 A.2d 682,

701 n.24 (D.C. 2003) (applying State Farm and noting that

negligence is “a degree of culpability ordinarily insufficient

to support punitive damages at all’’).

Moreover, this case occurs against the backdrop of a

heavily regulated industry. The Federal Railroad Admini-

stration—the federal agency mandated by law with ensuring

rail safety—has specifically recognized that complex judg-

ments as to what constitutes a “safe” grade crossing 1s best

left to the judgment of federal regulators rather than the ad

hoc determinations of state juries. The agency has explained

that allowing juries to second-guess federal safety judgments

through civil damage awards would lead to “misallocation of

scarce resources” and would pressure railroads to install

safety systems “not where research and data indicate they

will do the most good, but where a judge or jury determined,

after the fact, that such a system should have been installed.”

Selection and Installation of Grade Crossing Warning Sys-

tems, 60 Fed. Reg. 11,649, 11,651 (Mar. 2, 1995).

This case thus presents the Court with an excellent op-

portunity to resolve important questions concerning the

proper application of State Farm and Gore in the context of a

negligence case involving personal injury. As evidenced by

the significant number of massive punishments juries have

returned in recent years in product liability cases—including

cases where the product is subject to a thorough scheme of

federal regulation—these issues are recurring with increasing

frequency, and guidance from this Court is needed.

I. THE ARKANSAS COURT MISAPPLIED

THE REPREHENSIBILITY GUIDEPOST

The lower court’s application of the reprehensibility

guidepost cannot be reconciled with State Farm or Gore.

Although PLAC agrees with Union Pacific that the court’s

analysis was flawed in many respects, this brief addresses

three aspects of the ruling that often arise in product liability

cases and are of particular importance to PLAC’s members.

A. Union Pacific’s Compliance With The

Federal Speed Regulations Is Highly

Relevant To The Reprehensibility Analysis

Plaintiffs’ complaint alleged that Union Pacific acted

negligently by operating its train “at an excessive speed for

the conditions.” Pet. App. 2a. Specifically, plaintiffs con-

tended that Union Pacific “failed to issue a ‘slow order’ call-

ing for a speed restriction over that rail crossing.” Jd. at 4a.

Although a federal track inspector testified that the track in

question was “Class 4” track safe for travel up to 60 miles

per hour (Pet. at 4; 49 C.F.R. § 213.9(a))—and although it

was undisputed that the train was traveling slower than 60

miles per hour at the time of the collision (Pet. at 4)—the

trial court permitted the jury to punish Union Pacific under

Arkansas law for failing to operate its train at a slower speed.

PLAC agrees with Union Pacific that plaintiffs’ state-

law negligence claim is pre-empted under CSX Transporta-

tion, Inc. v. Easterwood, 507 U.S. 658 (1993). But at a

minimum, the fact that Union Pacific’s conduct conformed to

an on-point federal standard is highly relevant to the repre-

hensibility inquiry under Gore and State Farm because it is

an objective indicator of the company’s good faith and the

reasonableness of its conduct. The Arkansas Supreme Court

erred by disregarding it.

This Court has long recognized that a defendant’s rea-

sonable belief that its conduct was lawful strongly mitigates

reprehensibility, and in some cases may foreclose punitive

damages altogether. For example, in Southwestern Tele-

graph & Telephone Co. v. Danaher, 238 U.S. 482, 490

(1915), the Court held that a $6,300 civil penalty violated due

process where the defendant was “well justified in regarding

[its conduct] as reasonable and in acting on that belief’ even

assuming that the defendant “should have known that the Su-

preme Court of the State . . . might hold the [conduct] unrea-

sonable.” The Court has also recognized this principle in the

context of qualified immunity, explaining that “if officers of

reasonable competence could disagree on th[{e matter at] is-

sue, immunity should be recognized.” Malley v. Briggs, 475

U.S. 335, 341 (1986). Indeed, any other rule would raise se-

rious vagueness problems with regard to quasi-criminal pun-

ishments such as punitive damages. See United States v.

Lanier, 520 U.S. 259, 270-71 (1997) (qualified immunity test

is “simply the adaptation of the fair warning standard to give

officials (and, ultimately, governments) the same protection

from civil liability and its consequences that individuals have

traditionally possessed in the face of vague criminal stat-

utes”); Colautti v. Franklin, 439 U.S. 379, 401 (1979) (state

abortion statute is unconstitutionally vague when the prohib-

ited conduct depends on “a complex medical judgment about

which experts can—and do—disagree”). See also Village of

Hoffman Estates v. Flipside, 455 U.S. 489, 499 (1982) (strict

vagueness scrutiny applies to statute that imposes quasi-

criminal penalties).

peat

Compliance with a statutory standard is compelling evi-

dence that a defendant possessed a reasonable belief that its

conduct was lawful. In Gore, the jury found that the defen-

dant’s policy with respect to the disclosure of factory repairs

constituted “‘gross, oppressive, or malicious’ fraud” even

though that policy was consistent with statutes defining dis-

closure obligations in about 25 States. 517 U.S. at 565. Ala-

bama had no such disclosure statute, and this Court “ac-

cept[ed] . . . the jury’s finding that BMW suppressed a mate-

rial fact which Alabama law obligated it to communicate.”

517 U.S. at 579-80. Nevertheless, this Court recognized that

BMW, in attempting to determine what it was required to

disclose, “could reasonably rely on [other] state .. . statutes

for guidance.” Jd. at 579. The Court also noted that the “di-

versity” of state laws “demonstrates that reasonable people

may disagree about the value of a full disclosure require-

ment.” Jd. at 570. The Court concluded that a failure to dis-

close is “less reprehensible . . . when there is a good faith ba-

sis for believing that no duty to disclose exists,” id. at 579-

80, and when “a corporate executive could reasonably inter-

pret” the law to allow nondisclosure. Jd. at 578.

Where, as here, the standard is part of an extensive fed-

eral regulatory scheme, a defendant that relies on the stan-

dard is acting reasonably, and there is a serious question as to

whether any punitive damages are constitutionally permissi-

ble. The facts of this case exemplify the sort of situation

contemplated in State Farm, where the Court stated that “[i]t

should be presumed a plaintiff has been made whole for his

injuries by compensatory damages, so punitive damages

should only be awarded if the defendant’s culpability, after

having paid compensatory damages, is so reprehensible as to

warrant the imposition of further sanctions to achieve pun-

ishment or deterrence.” 538 U.S. at 419 (emphases added).

Many of PLAC’s members design and sell products that

are subject to an extensive federal regulatory scheme. For

example, automobile manufacturers design their vehicles to

comply with the Federal Motor Vehicle Safety Standards,

promulgated pursuant to the Motor Vehicle Safety Act, 49

U.S.C. § 30101 et seg. Even if a manufacturer can be held

liable under state negligence law for designing a vehicle that

fully complies with federal safety standards, the manufac-

turer’s reliance on, and compliance with, the federal stan-

dards should negate any finding that the manufacturer acted

reprehensibly. At a bare minimum, courts should regard

such compliance as evidence that strongly mitigates the

manufacturer’s level of reprehensibility.

This due process principle is consistent with the ap-

proach followed by the many courts that have treated a de-

fendant’s good-faith reliance on federal safety standards as

sufficient to bar punitive damages altogether. For example,

in Richards v. Michelin Tire Corp., 21 F.3d 1048, 1059 (11th

Cir. 1994), the Eleventh Circuit reversed a punitive damage

award against a tire manufacturer because “the record dem-

onstrates that [the manufacturer] complied with all requisite

Federal Motor Vehicle Safety Standards” governing the chal-

lenged design. Similarly, in Satcher v. Honda Motor Co., 52

F.3d 1311, 1316-17 (Sth Cir. 1995), another product liability

case, the court held that punitive damages were barred where

no government agency had ever required the design feature

plaintiff claimed the defendant should have utilized. See also

Chrysler Corp. v. Wolmer, 499 So. 2d 823, 825 (Fla. 1986)

(punitive damages impermissible where manufacturer com-

plied with federal standards). As one of the leading torts

treatises recognizes, “[i]n most contexts . . . compliance with

a statutory standard should bar liability for punitive dam-

ages.” W. Page Keeton, et al., Prosser and Keeton on the

Law of Torts § 36, at 233 n.41 (Sth ed. 1984).

Many state codes reflect this principle by providing that

a manufacturer’s compliance with safety standards creates a

presumption that the product is not even defective. See, e.g.,

Fla. Stat. § 768.1256(1) (when a manufacturer complies with

relevant federal regulations, “there is a rebuttable presump-

tion that the product is not defective or unreasonably danger-

ous and the manufacturer or seller is not liable”); Ky. Rev.

Stat. § 411.310(2) (“In any product liability action, it shall be

presumed, until rebutted by a preponderance of evidence to

the contrary, that the product was not defective if the design,

methods of manufacture, and testing conformed to the gener-

ally recognized and prevailing standards . . . .”).

The Arkansas court’s refusal to consider Union Pacific’s

reasonable, good-faith belief that its conduct was lawful,

based (among other things) on its compliance with the fed-

eral speed standard, directly conflicts with Gore and State

Farm. Even if some amount of punitive damages can be im-

posed because plaintiffs’ witnesses disagree with Union Pa-

cific and the federal government, the existence of grounds for

reasonable people to disagree on this issue, and of strong ob-

jective indicators that Union Pacific’s conduct was both law-

ful and reasonable, surely is relevant to the reprehensibility

analysis, just as the state disclosure statutes were relevant to

that issue in Gore.

Guidance from this Court is necessary because many

lower courts, even in the wake of State Farm, persist in ap-

proving massive punitive damage awards based on the opin-

ions of plaintiffs’ litigation experts, even though reasonable

people, reasonable experts, and the United States government

can and do disagree with those opinions. For example, in

Buell-Wilson v. Ford Motor Co., No. GIC800836 (Cal. Su-

per. Ct. Aug. 19, 2004), the court awarded $150 million ($75

million in punitive damages and $75 million in non-

economic damages) on the basis of an alleged design defect

in a vehicle, even though the vehicle fully complied with all

federal safety standards and even though the verdict had been

preceded by thirteen consecutive defense verdicts in other

cases alleging the same defect. Similarly, in Douglas v.

DaimlerChrysler Corp., No. CV2001-019659 (Ariz. Super.

Ct. July 2, 2004), the court upheld a $50 million punitive

damage award against DaimlerChrysler on the basis of an

allegedly “weak” seatback design that more than tripled fed-

eral strength requirements. Verdicts like these end up deter-

ring conduct that is entirely lawful and even socially desir-

able, simply because it is not above criticism from paid liti-

gation experts—or they end up deterring nothing, because

they provide no rational way for product manufacturers to

10

distinguish in advance between conduct that will be punished

and conduct that will not.

The problem is not confined to the automotive industry.

In 1997, CSX Transportation (“CSXT”) was assessed with

$2.5 billion in punitive damages by a New Orleans jury in

connection with a tank car fire that occurred after the car was

left at CSXT’s facility. CSXT’s “reprehensible” conduct was

its failure to discover that the tank car was leaking a combus-

tible substance. In affirming a remitted $850 million award,

the Louisiana Court of Appeal gave no weight to the undis-

puted evidence that CSXT’s tank car inspection practices

conformed with all federal and other legal requirements,

were fully consistent with industry standards of good prac-

tice, had never resulted in a tank car accident at the facility

except for the accident at issue, and that CSXT had been

commended by the New Orleans City Council for its conduct

in connection with the fire. See Jn re New Orleans Train Car

Leakage Fire Litig., 795 So. 2d 364, 373, 375 (La. Ct. App.

2001), petition for cert. dismissed per stipulation, Louisiana

Supreme Court No. 2001-C-2485.

When government agencies have reached the same con-

clusion as the defendant, the degree of reprehensibility under

State Farm (if reprehensibility exists at all) is necessarily

very low. This Court should grant plenary review to clarify

this important and undeniably recurring issue.

B. The Arkansas Court’s “Profits Over Safety”

Rationale Is Misguided

The Arkansas Supreme Court also punished Union Pa-

cific because it allegedly implemented a “corporate policy

.. . that put company profits before public safety.” Pet. App.

30a. This flawed rationale is common in product liability

cases, where courts often hold that a manufacturer should be

punished because in designing its product it did not take

every possible precaution to maximize safety.

Courts that follow this approach ignore precisely what

the Arkansas court ignored in this case: corporate decisions

often implicate tradeoffs and require an assessment of rela-

1]

tive costs and benefits. In the context of train operation, the

railroad must weigh the dangers associated with a given

speed against the many benefits that flow from faster trains,

including the faster carriage of passengers and consumer

goods—benefits that flow to the public and society as a

whole. The fact that an accident occurred does not automati-

cally mean the train was traveling “too fast.” If all trains

traveled at 5 miles per hour, there would be fewer accidents,

but the overall loss to commerce and society as a whole

would outweigh the safety benefits. Cf United States v. Car-

roll Towing Co., 159 F.2d 169, 173 (2d Cir. 1947) (applying

cost-benefit analysis in context of negligence inquiry).

The same tradeoffs occur in product design decisions. In

designing a product, a manufacturer must balance the risks of

a given design against the benefits in cost and utility. As the

Restatement recognizes, “[s]ociety does not benefit from

products that are excessively safe—for example, automobiles

designed with maximum speeds of 20 miles per hour—any

more than it benefits from products that are too risky.” Re-

statement (Third) of Torts: Products Liability §2 cmt. a

(1998). The fact that a manufacturer could have struck the

balance at a different point, and sacrificed cost or utility in

order to incorporate an additional safety feature, should not

subject the manufacturer to a massive punitive sanction if an

accident occurs. Many products by their very nature pose

risks of serious injury and death that cannot be materially re-

duced without significant cost to society in the form of in-

creased prices, less convenience or utility, or even less safety

in other circumstances. See Jane Spencer and Cynthia

Crossen, Why Do Americans Feel That Danger Lurks Every-

where? Fixation on Risk, Fed By Labs, Law and Media,

Haunts The World’s Safest Nation, Wall St. J., Apr. 24, 2003,

at Al (noting that thousands of injuries were caused in 2001

by pillows, books, crayons, nails and electric Christmas

decorations, among other products); Corrosion Proof Fittings

v. E.P.A., 947 F.2d 1201, 1223 n.23 (Sth Cir. 1991) (“over

the next 13 years, we can expect more than a dozen deaths

from ingested toothpicks”). The decision as to which design

12

strikes the proper balance among competing interests is often

complex and rests upon a “morass of conceptual, political

and practical issues on which juries, courts, commentators

and legislatures strongly disagree.” David G. Owen, Prob-

lems In Assessing Punitive Damages Against Manufacturers

Of Defective Products, 49 U. Chi. L. Rev. 1, 37 (1982).

Juries are often ill-suited to make these sorts of hindsight

determinations in the context of individual cases involving

tragic personal injuries, on the basis of a highly technical re-

cord and arcane and often conflicting opinion testimony from

engineers and scientists. See W. Kip Viscusi, Corporate Risk

Analysis: A Reckless Act?, 52 Stan. L. Rev. 547, 586-90

(2000) (noting that jurors often demonstrate bias against

companies that engage in risk-safety balancing); Reid Hastie

et al., Looking Backward in Punitive Judgments: 20-20 Vi-

sion?, in Cass R. Sunstein et al., Punitive Damages: How

Juries Decide 96, 108 (2002) (concluding that “hindsight

bias is almost inevitable when jurors make punitive damages

decisions”). Such cases pose great danger that juries will

“use their verdicts to express biases against big businesses.”

Honda Motor Co. v. Oberg, 512 U.S. 415, 431-32 (1994).2

Just as it is no answer to say that a manufacturer should

be punished because its product caused injury, it is no answer

to say that punishment is warranted because the corporation

sought to make a profit. Pet. App. 30a. A// businesses seek

to make a profit, and the fact that a jury found a defendant to

have struck the risk/safety balance at the wrong point does

not automatically prove the existence of a “corporate policy

[to] put company profits before public safety.” Jd. See also

2 Nor are courts necessarily well-suited to make such determinations

either. See James A. Henderson, Jr., Judicial Review of Manufacturers’

Conscious Design Choices: The Limits of Adjudication, 73 Colum. L.

Rev. 1531, 1534 (1973) (“courts are not suited to the task of establishing

specific product safety standards in the course of applying general rea-

sonableness tests to determine the adequacy of allegedly defective prod-

ucts”); James A. Henderson, Jr., Design Defect Litigation Revisited, 61

Comell L. Rev. 541 (1976).

13

State Farm, 538 U.S. at 420 (rejecting as unconstitutional the

punishment of a defendant for its “nationwide policies”

rather than for the conduct directed toward the plaintiff).

This Court should grant plenary review to clarify the proper

application of the reprehensibility guidepost in the context of

a case where the defendant’s conduct was not intrinsically

wrongful—as in the case of an intentional tort or a knowing

violation of a statute—but at the very worst reflected a negli-

gent misjudgment concerning the relative costs and benefits

of the challenged course of conduct.

C. Union Pacific Was Improperly Punished For

Its Alleged Litigation Misconduct

The Arkansas court erred, and further contradicted State

Farm, by punishing Union Pacific for its purported litigation

misconduct that had nothing to do with plaintiffs’ injury.

The court held the alleged misconduct directly relevant to the

reprehensibility analysis and the amount of the punitive dam-

age award. See Pet. App. 32a (“the record reflects that Union

Pacific engaged in acts of affirmative misconduct after being

notified of the accident and the lawsuit against it”); id. (“The

evidence shows that Union Pacific intentionally destroyed

track records and voice tapes.”).

This rationale cannot be reconciled with State Farm,

which holds that “[t]he reprehensibility guidepost does not

permit courts to expand the scope of the case so that a defen-

dant may be punished for any malfeasance.” 538 U-S. at

424. Rather, this Court explained, a defendant may be pun-

ished only “for the conduct that harmed the plaintiff, not for

being an unsavory individual or business.” Jd. at 423. In ad-

dition, because discovery misconduct may be addressed

through the sanctioning provisions of the Federal Rules of

Civil Procedure, permitting it to be considered for purposes

of punitive damages raises the danger of duplicative punish-

ments. See State Farm, 538 U.S. at 423 (emphasizing due

process dangers of “the possibility of multiple punitive dam-

ages awards for the same conduct”).

14

Here too, the Arkansas court’s approach reflects a grow-

ing trend. In Mathias v. Accor Economy Lodging, Inc., 347

F.3d 672, 677 (7th Cir. 2003), a decision that relied on State

Farm, the Seventh Circuit emphasized the defendant’s “great

stubbornness with which it has defended [the] case” as a ma-

jor justification for a large amount of punitive damages. And

in the Utah Supreme Court’s decision on remand in State

Farm itself, the court punished State Farm based in large part

on the “lack of remorse” and “callousness” the court suppos-

edly discerned in State Farm’s pleadings. See Campbell v.

State Farm, 2004 WL 869188, *8 (Utah Apr. 23, 2004). As

PLAC has shown in its amicus brief in support of State

Farm’s pending petition for certiorari, such an approach can-

not be reconciled with the First Amendment’s protection of

free speech and the right to petition government. See Legal

Servs. Corp. v. Velazquez, 531 U.S. 533, 547 (2001) (restric-

tions on the type of arguments attorneys may make in court

“implicate[ ] central First Amendment concerns”); NAACP v.

Button, 371 U.S. 415, 429 (1963) (First Amendment “pro-

tects vigorous advocacy”); PLAC Br. in State Farm vy.

Campbell, No. 04-116, at 5-14 (discussing authorities).

The Arkansas court’s erroneous reliance on Union Pa-

cific’s alleged litigation misconduct provides another reason

for this Court to grant review: to make clear that punitive

damages may not be used to sanction a party’s conduct in

connection with court proceedings, or to deter a party from

mounting a vigorous defense.

Ii. THIS COURT SHOULD GRANT REVIEW TO

CLARIFY THAT A 9:1 RATIO IS NOT

PRESUMPTIVELY CONSTITUTIONAL

A. The Raiio Requirement Is A Crucial

Constitutional Protection

This Court’s decision in State Farm reflected and en-

shrined the important constitutional principle that a punitive

sanction must bear a reasonable relationship to the actual

harm to the plaintiff caused by the defendant. See 538 U.S.

at 424-28. The Court recognized that in Pacific Mutual Life

15

Insurance Co. v. Haslip, 499 U.S. 1, 23-24 (1991), it had

concluded “that an award of more than four times the amount

of compensatory damages might be close to the line of con-

stitutional impropriety.” 538 U.S. at 425. The Court empha-

sized that it had “cited that 4-to-1 ratio again in Gore,” and

“further referenced a long legislative history, dating back

over 700 years and going forward to today, providing for

sanctions of double, treble, or quadruple damages to deter

and punish.” Jd. (citing Gore, 517 U.S. at 581). Importantly,

this Court held that in cases where “compensatory damages

are substantial, then a lesser ratio, perhaps only equal to com-

pensatory damages, can reach the outermost limit of the due

process guarantee.” 538 U.S. at 425 (emphasis added).

The Arkansas Supreme Court’s ruling in this case cannot

be reconciled with State Farm. The $5.1 million compensa-

tory damage award was undeniably “substantial.” Cf State

Farm, 538 U.S. at 426 (holding that a $1 million compensa-

tory damage award “was substantial”). Yet the Arkansas

court affirmed a punitive damage award that is nearly five

times the compensatory award, relying on this Court’s state-

ment that “‘single-digit multipliers are more likely to com-

port with due process.’” Pet. App. 33a (quoting State Farm,

538 U.S. at 425). The Arkansas court utterly ignored this

Court’s directive that in cases where the compensatory award

is substantial, a 1:1 ratio may be the constitutional maximum.

This Court should grant certiorari and confirm that State

Farm means what it says: although a 9:1 ratio may be the

presumptive outermost constitutional limit, it is not the norm,

and for cases such as this one, a 1:1 ratio (or something very

close to it) may not be exceeded.

Indeed, in many cases, even a 1:1 ratio can result in an

excessive and unconstitutional sanction. For example,

awards of compensatory damages often include a large com-

ponent of non-economic damages, such as awards for pain

and suffering or emotional distress. As this Court recognized

in State Farm, these types of non-economic damage awards

are very similar to punitive damage awards in that they “con-

16

tain [a] punitive element,” and “‘fijn many cases in which

compensatory damages include an amount for emotional dis-

tress, such as humiliation or indignation aroused by the de-

fendant’s act, there is no clear line of demarcation between

punishment and compensation and a verdict for a specified

amount frequently includes elements of both.’” 538 U.S. at

426 (quoting Restatement (Second) of Torts § 908, cmt. c, p.

466 (1977)). Moreover, non-economic damages are often

plagued by the same problems as punitive damages, such as

inadequate guidance to juries, lack of objective criteria

against which to measure outcomes, and the general absence

of principled bases for judicial review—all of which leads to

radically varying and arbitrary awards.

Here, a large portion of the compensatory damage award

was intended to compensate the plaintiffs for non-economic

harm. In closing argument, plaintiffs’ counsel asserted that

plaintiffs suffered only $2.6 million in economic harm,

Tr. 6578-79, yet the jury—having been instructed that it

could award damages “for any pain and suffering or mental

anguish experienced in the past and reasonably certain to be

experienced in the future” (Tr. 6550)—awarded $5.1 million

in total compensatory damages in a general verdict. This is

further evidence that the $25 million punitive damage award

is grossly excessive and unconstitutional.

Other courts have similarly misapplied this aspect of

State Farm or ignored it altogether. For example, in the Utah

Supreme Court’s decision on remand in State Farm itself, the

court held that the presence of non-economic damages actu-

ally requires a /Jarger award because “conduct which causes

$1 million of emotional distress and humiliation is markedly

more egregious than conduct which results in $1 million of

economic harm.” See 2004 WL 869188, at *9.

The ratio requirement is particularly important in prod-

uct liability cases, where juries frequently award large

amounts of compensatory damages—often containing a sub-

stantial non-economic component—so that even a 1:1 ratio

can result in a severe and unconstitutional sanction. See, e.g.,

17

Buell-Wilson v. Ford Motor Co. (upholding $75,000,000 in

non-economic damages and a $75,000,000 punitive damage

award even though the vehicle design complied with gov-

ernment safety standards and industry custom). Moreover, in

many such cases the defendant’s level of reprehensibility is

low: the alleged defect is not readily apparent, and the claim

involves a reasonable disagreement over a complex design

judgment that the manufacturer made in good faith. A strong

affirmation of the ratio principle will help ensure that this

crucial constitutional protection is faithfully enforced.

B. Many Lower Courts Are Evading State

Farm’s Ratio Requirement

This Court’s guidance on the proper application of the

ratio analysis is needed, as the decision below reflects a

growing trend. Many lower courts have essentially disre-

garded State Farm’s holding that a 1:1 ratio is the presump-

tive limit in cases where compensatory damages are “sub-

stantial.” As the Ninth Circuit recently declared, “State

Farm’s 1:1 compensatory to punitive damages ratio is not

binding, no matter how factually similar the cases may be.”

Hangarter v. Provident Life & Accident Ins. Co., 373 F.3d

998, 1014-15 (9th Cir. 2004).

Like the court below, these courts have misinterpreted

State Farm’s language that “in practice, few awards exceed-

ing a single-digit ratio between punitive and compensatory

damages, to a significant degree, will satisfy due process,”

538 U.S. at 425, as presumptively authorizing ratios of up to

9:1 in any case. For example, one court reasoned that “a red

flag goes up” only if the award exceeds a 9:1 ratio, and sug-

gested that any lower ratio “presumptively passes muster un-

der the Due Process Clause.” McClain v. Metabolife Int'l,

Inc., 259 F. Supp. 2d 1225, 1231 (N.D. Ala. 2003).

Ironically, perhaps the most blatant disregard of this

Court’s ratio holding is the Utah court’s decision on remand

in State Farm, where the court imposed a punitive damage

award that is nine times the compensatory award—in defi-

ance of this Court’s admonition that “application of the Gore

18

guideposts to the facts of [State Farm] .. . likely would jus-

tify a punitive damages award at or near the amount of com-

pensatory damages.” 538 U.S. at 429. The Utah court

deemed this Court’s ratio holding “plausible as an abstract

proposition,” but not binding on remand-because it “does not

account for the circumstances of the compensatory damages

award in this case.” 2004 WL 869188, at *9. See PLAC Br.

in State Farm v. Campbell, No. 04-116, at 14-20.

This trend is especially apparent in several recent deci-

sions involving products. For example, in White v. Ford Mo-

tor Co., No. 95-0279 (D. Nev. Sept. 1, 2004), the court ap-

proved a remitted $42 million punitive damage award that is

thirty times the amount of compensatory damages. The court

dismissed “State Farm’s single-digit guideline” as “not nec-

essarily binding,” concluding that Ford should have been “on

notice” that “punitive judgments in Nevada courts may ap-

proach a 30:1 ratio.” Slip op. at 43.

In Williams v. Philip Morris, Inc., 92 P.3d 126 (Or. Ct.

App. 2004), following a GVR in light of State Farm, the

court upheld a 96:1 ratio and imposed a $79 million punitive

damage award against Philip Morris. Even though the case

was brought by the estate of a single plaintiff, the court up-

held the award by theorizing that other individuals not before

the court may have been harmed by the defendant’s con-

duct—and that the punishment could be justified by reference

to these hypothetical persons and imaginary harms. Thus,

the court reasoned, because the defendant “inflicted potential

harm on the members of the public in Oregon,” a punitive

award of $79 million was permissible, even though the plain-

tiff had been awarded only $820,000 in compensatory dam-

ages. Jd. at 144. Acknowledging that the award vastly “ex-

ceed[s] a single-digit ratio,” the court opined that “it is diffi-

cult to conceive of more reprehensible misconduct” and thus

the “unique facts in this case . . . justify more than a single-

digit award under the Due Process Clause.” /d. at 145.

In Douglas v. DaimlerChrysler Corp., the court affirmed

a $50 million punitive damage award against DaimlerChrys-

19

ler—over 13 times the amount of the substantial $3.75 mil-

lion compensatory damage award—for a purported design

defect in a Dodge Ram truck. Relying on the interpretation

offered in a law review article by a plaintiff's attorney rather

than this Court’s plain language, the Arizona court held that

“contrary to reports, [State Farm] does not require that puni-

tive damages be no more than nine times greater than com-

pensatory.” Slip op. at 5. Moreover, the court held that for

purposes of the ratio analysis, the “denominator’—i.e., the

baseline amount of compensatory damages—should include

the compensatory damages attributable to a nonparty defen-

dant that was held 50 percent responsible for the harm. Jd. at

1. In short, the court held that DaimlerChrysler could be

punished for harm committed by another party—a result that

violates Stare Farm and bedrock principles of due process.

In Waddill v. Anchor Hocking, Inc., 78 P.3d 570 (Or. Ct.

App. 2003), the plaintiff was injured when her fishbow] shat-

tered. She sued the manufacturer, and was awarded

$100,000 in compensatory damages and $1 million in puni-

tive damages. Following a GVR from this Court, the Oregon

court declined to reduce the award to a 1:1 ratio, but rather

held that “the maximum constitutionally permissible award

in this case is four times the compensatory damages for

which defendant is responsible.” Jd. at 576.

In Bocci v. Key Pharmaceuticals, Inc., 76 P.3d 669 (Or.

Ct. App. 2003), the court approved a 7:1 ratio in a product

liability case following a GVR in light of State Farm. The

court held that “[uJnder the circumstances of [the] case,” it

was “willing to approve a ratio in excess of the 4-to-1 ratio

that apparently is something of a benchmark for the United

States Supreme Court.” Jd. at 675.

Finally, in Romo v. Ford Motor Co., 113 Cal. App. 4th

738 (Cal. Ct. App. 2003), another case GVR’d for reconsid-

eration in light of State Farm, the California Court of Appeal

held that a 5:1 ratio was appropriate in a defective design

case, even though the compensatory damage awards of ap-

proximately $5 million were undeniably “substantial,” and

20

even though a significant portion of the compensatory awards

reflected non-economic harm. The court made clear that it

did not consider itself “strictly constrained by the single-digit

multiplier set forth in State Farm,” 113 Cal. App. 4th at 763,

let alone by this Court’s holding that where “compensatory

damages are substantial, then a lesser ratio, perhaps only

equal to compensatory damages, can reach the outermost

limit of the due process guarantee.” 538 U:S. at 425.

This Court should grant review to confirm that, when

compensatory damages are substantial, a 9:1 ratio is not pre-

sumptively constitutional, and a 1:1 ratio is the maximum

due process permits.

CONCLUSION

For the foregoing reasons, this Court should grant Union

Pacific’s petition and schedule this case for plenary review.

Respectfully submitted.

Of Counsel: THEODORE B. OLSON

HUGH F. YOUNG, JR. Counsel of Record

PRODUCT LIABILITY THEODORE J. BOUTROUS, JR.

ADVISORY COUNCIL, INC. THOMAS H. DUPREE, JR.

1850 Centennial Park Drive GIBSON, DUNN & CRUTCHER LLP

Suite 510 1050 Connecticut Avenue, NW

Reston, VA 20191 Washington, DC 20036-5306

(703) 264-5300 (202) 955-8500

Counsel for Amicus Curiae

September 10, 2004