Reply Brief — Aetna Life Insurance v. Ace

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Bupreme Court, U.S.

" FILED

No. 98-230 / SEP 16 1998

| OFFICE OF THE CLERK

In the Supreme Court of the Gnited States

OCTOBER TERM, 1998

AETNA LIFE INSURANCE COMPANY,

Petitioner,

SHERRIE ACE,

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

REPLY BRIEF FOR PETITIONER

PHILIP ALLEN LACOVARA

ANTHONY M. SHOL} ’ Counsel of Record

BETHANN B. CHAPM.\N ANDREW L. FREY

Faulkner Banfield JOHN J. SULLIVAN

302 Gold Street Mayer, Brown & Platt

Juneau, AK 99801 2000 Pennsylvania Ave., N. W.

(907) 586-2210 Washington, DC 20006

(202) 463-2000

Counsel for Petitioner

TABLE OF CONTENTS

FABLE OF AUTOR ee 640 PE Se il

A. The Ninth Circuit’s Decision On The Legal

Standard For New Trial Orders Conflicts With

Decisions Of This Court And Other Circuits

Anil is Not: Fest-Boume. 6.6 Se eee 2

1. This Court’s Decisions Emphasize the

Scope of Trial Judges’ Discretion to

ReRen TOG. SU oe a Sk Ne E'S 3

2. The Ninth Circuit’s Standard Conflicts

With At Least the Seventh Circuit’s. .... 5

3. The District Court Plainly Made a

“Reasoned Analysis” of the Weight of

Orne. SS. Se eS 6

4. The Conflict Is Important. .......... 8

B. This Case Presents The Court With An Oppor-

tunity To Clarify The Due Process Require-

ments For Post-Verdict Scrutiny of Punitive

Se TOI ocd Osho K 4s hes 8

C. The Court Of Appeals Erred In Not Remanding

The Case For Clarification Of The District

Comte New trl Geet. ks. cS G

ee. a aS ire ee ee a 10

(1)

TABLE OF AUTHORITIES

Cases: Page(s)

BMW of North Am., Inc. v. Gore,

ae Sh IE i Sa ine ee ae 8

Binder v. Long Island Lighting Co.,

ae 0 Eee ta Ge Se as Cee 3

Gasperini v. Center for Humanities, Inc.,

DAG Wis. WE RIE ok oe a he ee passim

Honda Motor Co. v. Oberg,

512 U.S. 415 (1994) & wed Kk eo A ieee 2, 8

Hulbert v. Wilhelm, 120 F.3d 648 (7th Cir. 1997) ... §

McClain v. Owens-Corning Fiberglass Corp..,

LSP Fe Boat Ce Ge A ok oe ee eS kk 6

Medcom Holding Co. v. Baxter Travenol

Laboratories, Inc., 106 F.3d 1388

(AMEy SSE Sea eres ee eS. 1, 5-6

Miskis v. Howard, 106 F.3d 754 (7th Cir. 1997) .... 5

Neely v. Martin K. Eby Constr. Co..,

ame Mie OAT Ce eS 3

Tennant v. Peoria & Pekin Union Railway Co..,

bk ats Be RE ek bas oe 3-4

To-Am Equipment Co. v. Mitsubishi Caterpillar

Forklift America, Inc., F.3d _—, 1998 U.S.

App. LEXIS 18184 (7th Cir. Aug. 6, 1998) ... 5-6

Rule:

rea. B. Civ. FM es 3,9

REPLY BRIEF FOR PETITIONER

In attempting to avoid review of the important issues

raised by this case, respondent disputes the applicability of

this Court’s controlling precedents, minimizes the inter-circuit

conflict on the questions presented, and tries to mask the

issues in a haze of fact-bound rhetoric. None of these tactics

The legal issues in this case are starkly presented and

unburdened by factual nuance. The Ninth Circuit held

unequivocally, in reversing the district court’s new trial

order, that:

“‘a stringent standard applies when the motion is

based on insufficiency of the evidence.’ * * * A

district court may order a new trial based on insuffi-

cient evidence only if it finds that the jury’s verdict

‘is against the great weight of the evidence, or it is

quite clear that the jury has reached a seriously

erroneous result.’” App. 38a-39a (citations omit-

ted).

This holding conflicts directly with Gasperini v. Center

for Humanities, Inc., 518 U.S. 415, 432-433 (1996), where

the Court stated that “[t}he trial judge in the federal system,

has discretion to grant a new trial if the verdict appears to

[the judge] to be against the weight of the evidence.”

Moreover, the Ninth Circuit’s holding conflicts directly

with the decision in Medcom Holding Co. v. Baxter Travenol

Laboratories, Inc., 106 F.3d 1388, 1397 (7th Cir. 1996),

which the Seventh Circuit has consistently followed. In that

case the court recognized that the “trial judge in the federal

system has discretion to grant a new trial if the verdict

appears against the weight of the evidence” and added: “At

one time we applied [the review] standard * * * more

exacting[{ly] when the district court granted a new trial

because of the Seventh Amendment” but “in light of the

Supreme Court’s decision in Gasperini that an abuse of

discretion standard of review does not violate the Seventh

Amendment * * * we hereby abandon this practice as

unnecessary.” [bid. (emphases added).

The conflict on this important legal issue is not clouded

by factual disputes that this Court would have to resolve.

The district court reviewed the evidence at this modest trial

in a written opinion. The Ninth Circuit reviewed the same

evidence, applied its “stringent standard,” and reached a

different conclusion about whether Aetna was entitled to a

new trial. Thus, this Court can resolve the principal legal

issues presented solely on the basis of the written opinions of

the courts below and decide whether the Ninth Circuit

articulated and applied erroneous legal tests both for trial

judges to use in deciding whether to grant a new trial and for

appellate courts to use in reviewing new trial orders.

Review by this Court of these important issues is further

compelled by the constitutional dimension of the case, which

involves punitive damages liability. The Due Process Clause

requires careful post-verdict scrutiny because “[p]unitive

damages pose an acute danger of arbitrary deprivation of

property.” Honda Motor Co. v. Oberg, 512 U.S. 415, 420,

423 (1994). The Court should encourage trial judges to

conduct this searching review of punitive awards and require

appellate courts to defer to their determinations that a punitive

verdict is against the weight of the verdict.

A. The Ninth Circuit’s Decision On The Legal Standard

For New Trial Orders Conflicts With Decisions Of

This Court And Other Circuits And Is Not Fact-

Bound.

Respondent seeks to divert attention from the questions

presented by raising a false question: whether an appellate

court may “casually” or “lightly substitute its version of the

facts for the jury’s verdict” (Opp. 12). Aetna does not

advocate that position. Aetna does object to the “stringent

standard” applied by the Ninth Circuit in this case. Contrary

to respondent’s argument (Opp. 13-16), not all of the circuits

apply this standard and those that do are in conflict with

decisions of this Court.

1. This Court’s Decisions Emphasize the Scope of

Trial Judges’ Discretion to Grant New Trials. The Ninth

Circuit’s decision reversing the trial court’s new trial order

for Aetna applied a “stringent standard,” under which it will

not permit the trial court to exercise its discretion to grant a

new trial based on the weakness of the evidence, unless the

verdict is against the “great weight” of the evidence or is

“seriously erroneous,” and the court accords minimal

deference to that determination. This legal standard, which

as we demonstrated in the Petition (at 16-17) is also applied

in some other circuits, clearly conflicts with decisions of this

Court and of other circuits. '

Respondent cites this Court’s decision in Tennant v.

Peoria & Pekin Union Railway Co., 321 U.S. 29 (1944), as

supposedly supporting the proposition that appellate courts

Should “review extra carefully any order by a district court

setting aside a verdict” (Opp. 16), and that “[c]ourts are not

free to reweigh the evidence and set aside the jury verdict

merely because the jury could have drawn different inferences

or conclusions or because judges feel that other results are

more reasonable,” 321 U.S. at 35. But that characterization

' We noted in the Petition (at 14-15) that, as the Second Circuit

held until recently, see Binder v. Long Island Lighting Co., 57

F.3d 193, 201 (1995), it is questionable whether conditional new

trial orders are reviewable at all despite the language of Rule

50(c). Respondent cites this Court’s decision in Neely v. Martin

K. Eby Constr. Co., 386 U.S. 317 (1967), for the proposition that

conditional new trial orders are reviewable (Opp. 11). But Neely

did not involve application of Rule 50(c) to a conditional new trial

order. Thus, the Court had no opportunity to address this

question, as the subsequent conflict on the issue in the courts of

appeals attests.

is misleading. In Tennant the Court was reviewing an order

entering judgment notwithstanding the verdict (ibid.), which

requires the trial judge to assume that every conflict in the

evidence must be resolved in favor of the party who won the

verdict. But this case involves a new trial order, which

allows the trial judge to “weigh” the evidence to determine

whether the verdict is consistent with the “fair weight” of the

evidence. The Court’s recent decision in Gasperini reaffirmed

the breadth of the trial judge’s discretion to order the case

retried because the judge is not satisfied that the verdict is

consistent with the weight of ail the evidence.

Respondent objects that Gasperini is not relevant, arguing

that the holding in that case is limited to judicial review of

the amount of damages awarded to a plaintiff, but this case

involves a new trial on liability (Opp. 18). But the Court’s

language in Gasperini, which is consistent with the Court’s

prior holdings (see Pet. 14 (citing cases)), is not so limited.

According to Gasperini,

“[t}he trial judge in the federal system, has discre-

tion to grant a new trial if the verdict appears to [the

judge] to be against the weight of the evidence. * *

* This discretion includes overturning verdicts for

excessiveness and ordering a new trial * * *.” 518

U.S. at 432 (emphases added).

Thus, the broad discretion vested in trial judges and

described in Gasperini “includes” setting aside excessive

damages verdicts, but the power is not limited just to the

amount of damages.’

* Respondent erroneously states that Aetna did not call the

Gasperini standard to the attention of the court of appeals (Opp.

18). In fact, Aetna cited to (and quoted extensively from) the

governing standard articulated by this Court in Gasperini in its

Opening Brief (at 38-41), Reply Brief (at 18), and Petition for

(continued...)

Moreover, the decision in Gasperini removed any

lingering Seventh Amendment concerns about allowing a trial

court to exercise the full measure of its discretion to grant a

new trial based on the weight of the evidence (518 U.S. at

432). This decision thus eliminated the constitutional basis

for the many prior (and erroneous) decisions of the courts of

appeals applying a “stringent standard” of review to new trial _

motions (see Pet. 16-17).

2. The Ninth Circuit’s Standard Conflicts With At

Least the Seventh Circuit’s. In the wake of Gasperini the

Seventh Circuit has expressly rejected its “more exacting”

standard, see Medcom Holding, 106 F.3d at 1397, and now

applies ordinary abuse-of-discretion review to new trial

orders, which may be entered when “the verdict appears

against the weight of the evidence.” Respondent tries to

minimize this clear conflict in the circuits by citing (Opp. 14)

a prior opinion of the Seventh Circuit, which did not consider

the issue or even cite Gasperini. See Miskis v. Howard, 106

F.3d 754, 757 (7th Cir. 1997). Moreover, even this prior

decision noted that the Seventh Circuit in reviewing new trial

orders “defer[s] to the district court because of its unique

position to view the evidence and the course of the trial.”

Ibid.

Underscoring the Seventh Circuit’s new approach, that

court has repeatedly reaffirmed its decision in Medcom

Holding, reiterating that a trial court has “wide discretion” in

deciding a motion for a new trial. Hulbert v. Wilhelm, 120

F.3d 648, 656 (1997); see To-Am Equipment Co. v.

Mitsubishi Caterpillar Forklift America, Inc., __ F.3d ae

2 (...continued)

Rehearing and Suggestion for Rehearing En Banc (at 12) in the

Ninth Circuit. This issue was more than adequately preserved for

review by this Court.

1998 WL 452341 (7th Cir. Aug. 6, 1998) (review of new

trial orders “is for abuse of discretion only”).

Thus, for example, the Seventh Circuit recently upheld

the triai judge’s grant of a new trial because the verdict in a

wrongful death suit was against the weight of the evidence.

Citing both Gasperini and its own decision in Medcom

Holding, the Seventh Circuit applied the “abuse of discretion”

standard of review, explaining that “an abuse of discretion

only occurs when no reasonable person could take the view

adopted by the trial court” and that, in making that inquiry,

the reviewing court “must give the benefit of every doubt to

the judgment of the trial judge.” McClain v. Owens-Corning

Fiberglass Corp., 139 F.3d 1124, 1126, 1128 (7th Cir. 1998)

(citations omitted).

Thus, there is a clear split in the circuits on the legal

standard governing new trial motions. The other decisions

cited by respondent (Opp. 13-16), which do not reconsider

the issue in light of Gasperini, merely add to the confusion

among the circuits, as we described in the Petition (at 16-21).

Respondent tries to denigrate the importance of the disarray,

dismissing the varying legal standards as merely using

“slightly different words” (Opp. 12-13). But “slightly

different” formulations of a legal standard can have real

consequences for litigants, as this case demonstrates (see Pet.

22-24; page 7, infra).

3. The District Court Plainly Made a “Reasoned

Analysis” of the Weight of the Evidence. Respondent

concedes that “‘[w]Jhere the district court makes a reasoned

decision about the quantity and quality of the evidence

supporting a verdict and decides a new trial is appropriate,

the court of appeals should defer to the trial judge’s assess-

ment of the evidence’” (Opp. 20-21 (quoting Pet. 20-21)).

The Ninth Circuit, however, did not apply this standard.

Instead, it expressly applied a more “stringent standard” of

review and substituted its view of the weight of the evidence

for the front-line trial judge’s better-informed evaluation.

Respondent nonetheless contends that review by this

Court is neither necessary nor appropriate because the district

court did not offer a “carefully reasoned decision supporting

a new trial” and that, in any event, the question whether the

district court abused its discretion is “intensely fact specific”

(Opp. 21-22). Neither argument is a plausible barrier to

review.

The argument that the district court did not make a

reasoned decision reviewing the evidence in granting Aetna’s

new trial motion simply ignores the extensive opinion the trial

judge issued (Pet. App. 5la-63a). The judge addressed and

resolved against respondent many of the factual issues that

she now maintains were “undisputed” in her favor. For

example, the district judge reviewed the evidence and, after

an extensive discussion, concluded that, contrary to respon-

dent’s argument (see Opp. 5), Aetna did not apply an “illegal

standard” to “deny benefits to Ace.” Pet. App. 60a.

Thus, the district court’s extensive opinion detailing the

factual basis for its holding is all that is necessary to resolve

the legal issue presented by this case: the appropriate legal

standard governing the grant and review of new trial orders.

There is no need for this Court to engage in any independent

factual analysis. The issue to be resolved is whether the

Ninth Circuit applied the proper legal standards to the factual

analysis and conclusions of the district court.?

* Indeed, it is for this very reason that Aetna is not seeking

certiorari to review the Ninth Circuit’s reversal of the district

court’s judgment as a matter of law for Aetna on respondent’s

claim for punitive damages (App. 37a). This is not a concession

by Aetna on the merits, as respondent suggests (Opp. 2), but

rather a recognition that the Ninth Circuit’s decision on that issue

(continued...)

4. The Conflict Is Important. In this case, the Ninth

Circuit applied a legal standard that differs fundamentally

from the standard the Seventh Circuit would have applied.

The result was to deny /ietna a new trial that would have

been sustained, if this case had arisen in the Seventh Circuit.

It is fundamental to the rule of law in the federal system that

correct and intelligible legal standards be applied fairly and

uniformly across the nation. This Court should grant review

to resolve the conflict on this important legal issue.

B. This Case Presents The Court With An

To Clarify The Due Process Requirements For Post-

Verdict Scrutiny of Punitive Liability Verdicts.

This Court has held, in cases chailenging the size of

punitive damages verdicts, that “[eJlementary notions of

fairness enshrined in our constitutional jurisprudence dictate

that a person receive fair notice * * * of the conduct that will

subject him to punishment.” BMW of North Am., Inc. v.

Gore, 517 U.S. 559, 574 (1996); see also Honda Motor Co.

v. Oberg, 512 U.S. 415, 420, 423 (1994).

Respondent counters that these decisions are inapplicable |

here, because the Ninth Circuit agreed that the punitive |

damages verdict returned against Aetna ($16.5 million) was |

excessive and ordered a remittitur. See Pet. App. 40a-41a.

But the fundamental principles of due process articulated by

this Court — which require notice before any punishment is

imposed — apply regardless of the amount of the monetary

punishment imposed pursuant to a mere remittitur.

> (...continued)

is fact-bound, even though an erroneous application of the correct

legal standard of de novo appellate review. Aetna’s decision not

to raise this issue simply shows that Aetna is not, as respondent

maintains (Opp. 20-23), seeking to raise any fact-bound issues for

review.

Se RE ee ke eee

In this case, the district court reviewed the evidence and

found the record insufficient to impose any punitive liability

on Aetna. As we explained in the Petition (at 24-26), the

Due Process Clause counsels special deference before an

appellate court may re-impose punishment that the trial judge

found unwarranted.

The case thus presents the Court with the opportunity to

address an important constitutional question raised by its

previous punitive damages opinions but never squarely

addressed.

C. The Court Of Appeals Erred In Not Remanding The

Case For Clarification Of The District Court’s New

Trial Order.

Respondent’s opposition to review of the third issue

presented relies, in large measure, on a mischaracterization

of Aetna’s argument. Aetna does not contend that this Court

should adopt an “inflexible rule always requiring an appeals

court to remand for clarification when the district court does

not explain” the grounds for its conditional new trial order.

Opp. 29. Instead, Aetna urges a limited rule requiring a

remand for clarification only when there is fair doubt about

the grounds on which the district court relied and the appel-

late court only addresses and overrules a single ground. This

is the settled practice in other circuits (see Pet. 29).

In this case, as we demonstrated in the Petition (at 27-

29), the trial court’s explanation of its reasons for a condi-

tional new trial was adequate under Fed. R. Civ. P. 50(c)(1).

If the explanation was not adequate, however, the Ninth

Circuit erred in failing to remand the case and thereby created

a conflict in the circuits on the necessity of a remand in this

situation.

The court of appeals compounded its legal error by

“inferring” a solitary ground for the new trial order among

those relied on the trial court, and then finding that this

ground — the trial judge’s view that the evidence was legally

insufficient — was legally erroneous. If the appellate court

was right that the trial judge had not adequately described his

reasons for granting relief, the court could not perform its

review function without ascertaining why the judge had

entered the order.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

PHILIP ALLEN LACOVARA

ANTHONY M. SHOLTY Counsel of Record

BETHANN B. CHAPMAN ANDREW L. FREY