Reply Brief — IBP, Inc. v. Wilson

Supreme Court brief1997

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IN THE CLERK

Supreme Court of the Gnited States

OCTOBER TERM, 1996

IBP, INC. AND DIANE ARNDT,

Petitioners,

¥.

KEVIN WILSON,

Respondent.

On Petition for Writ of Certiorari to the

Supreme Court of Iowa

REPLY MEMORANDUM

THEODORE B. OLSON

Counsel of Record

THEODORE J. BOUTROUS, JR.

JERRY S. FOWLER, JR.

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 955-8500

MARK McCorMICK

MARGARET C. CALLAHAN

BELIN LAMSON MCCORMICK

ZUMBACH FLYNN, A P.C.

2000 Financial Center

Des Moines, IA 50309

(515) 243-7100

Attorneys for Petitioners

PRESS OF BYRON S. ADAMS # WASHINGTON, D.C. + 1-800-347-8208 y

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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ......cccccccccoccsesscccccscsces iii

Ba MERIIIAIUIPOIE osc cccscecccansnsscncdivocccesooeds l

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TABLE OF AUTHORITIES

Cases: Page(s)

BMW of North America, Inc. v. Gore, 116

S. GR. BEEP QIPGD sccniccassccscanniatbavseincosiote passim

BMW of N. Am., Inc. v. Gore, No. 1920324,

1997 WL 233910 (Ala. May 9, 1997)................+.. 3

Cooper v. Casey, 97 F.3d 914 (7th Cir. 1996)............. 5

Cox Broad. Corp. v. Cohn, 420 U.S. 469

CIB TAD occcceosesccutivstntinubaigiiiamniimiaiiamsinanniliniedans 1

Eaton v. City of Tulsa, 415 U.S. 697 (1974) ............... 2

Lee v. Edwards, 101 F.3d 805 (2d Cir. 1996).............. 5

Raley v. Ohio, 360 U.S. 423 (1959)...........ccceeeeeeeeeees 6

Spaur v. Owens-Corning Fiberglas Corp..,

510 N.W.2d 854 (lowa 1994).............cssceceeeeeeeees 2

Yee v. City of Escondido, 503 U.S. 519 (1992) ......... 6,7

Statutes:

FP WE, BOD cise cisncitcinsinsitihiimniniinimeiiiniaiaiiiiniiies 4

REPLY MEMORANDUM

Petitioners IBP, inc. ("IBP") and Diane Arndt

respectfully file this memorandum in reply to respondent's

Brief in Opposition ("Opp.") to certiorari.!

In their petition ("Pet."), IBP and Ms. Arndt

demonstrated that the decision of the Iowa Supreme Court

to levy a $2 million fine to punish conduct that caused

$4,000 in presumed harm -- the exact 500-1 ratio struck

down as unconstitutional in BMW of North America, Inc. v.

Gore, 116 S. Ct. 1589 (1996) — plainly violates the Due

Process Clause of the Fourteenth Amendment as interpreted

by this Court in BMW and should be summarily reversed.

Petitioners also showed that the Court should grant plenary

review to decide whether the award violates the Due

Process Clause of the Fourteenth Amendment because a

private plaintiff has pursued punitive damages on behalf of

the State. Although respondent asserts that IBP "does

nothing more than dispute how the Supreme Court of Iowa

found facts and applied [BMW]," Opp. at 7, the facts as

recounted by respondent himself illustrate that the lowa

Supreme Court's decision to increase the punishment in this

case from the $100,000 approved by the trial court to $2

million was in flagrant disregard of this Court's

1 Qn May 27, 1997, IBP filed a notice of appeal from the

constitutional guidance in BMW. The Iowa court's failure

faithfully to apply BMW to this case constituted the kind of

"palpably clear ... constitutional error" that justifies

summary reversal. Eaton v. City of Tulsa, 415 U.S. 697,

707 (1974) (Rehnquist, J., dissenting). Respondent

likewise offers no substantive argument in support of the

constitutionality of lIowa's private -prosecutor law,

incorrectly asserting that petitioners did not preserve this

due process challenge.

1. The reprehensibility of the conduct at issue in this

case did not provide IBP with notice that the State of Iowa

might impose a multimillion dollar penalty. Indeed,

respondent totally ignores -- and therefore does not

dispute -- the fact that this punitive damage award is the

highest ever affirmed by an Iowa court in a reported

decision and that the previous highest award was in a

personal injury case where the plaintiff died and where

compensatory damages were more than $1.4 million. See

Pet. at 14 (citing Spaur v. Owens-Corning Fiberglas Corp.,

510 N.W.2d 854, 857 (lowa 1994)). More to the point,

respondent fails to justify the Iowa Supreme Court's

complete failure to compare the reprehensibility of the

conduct in this case to other conduct for which punishment

may be imposed, as it was required to do by BMW. See

BMW, 116 S. Ct. at 1601. Although the Iowa court

apparently concluded that IBP's conduct was reprehensible,

it failed to follow BMW's guidance by not calibrating the

degree of reprehensibility in light of other punishable

conduct. As a consequence, the court rendered

"'reprehensibility' a concept without constraining force."

BMW, 116 S. Ct. at 1606 (Breyer, J., concurring).

In an attempt to compensate for the Iowa court's failure

to make such a reprehensibility comparison, respondent

purports to compare the reprehensibility of IBP's conduct to

the conduct at issue in BMW, claiming that "[iJn every way

[in] which BMW's conduct could be characterized as less

wrongful, IBP's is more so." Opp. at 9. Even assuming

for argument's sake that IBP's conduct is more

reprehensible than was BMW's, that assumption hardly

supports a $2 million penalty. This Court, of course,

struck down the $2 million penalty in BMW as being

unconstitutionally excessive. After reconsidering the facts

of BMW in light of this Court's guidance, the Alabama

Supreme Court concluded on remand that the

constitutionally acceptable punishment for BMW's conduct

was $50,000. BMW of N. Am., Inc. v. Gore, No. 1920324,

1997 WL 233910, at *16 (Ala. May 9, 1997). Thus, even

if IBP's conduct could be said to be twice as reprehensible

as BMW's conduct -- which is a stretch — it would only

merit a $100,000 punishment -- which was, incidentally,

the remittitur ordered by the trial court in this case. Under

no circumstances, however, can the reprehensibility of the

conduct here justify a $2 million penalty, a conclusion that

the Iowa court surely would have reached if it had faithfully

applied BMW.

2. In an effort to heighten the level of reprehensibility,

respondent strains mightily to assert that IBP's conduct

endangered Mr. Wilson's health and safety. There in fact

was no evidence -- and respondent points to none - that

Mr. Wilson suffered any physical harm from the conduct at

issue in this case,2 that any medical care that he received

2 Indeed, respondent asserts that "IBP caused physical

harm in the manipulation of the medical care provided Wilson by

delaying his needed back surgery." Opp. at 10. Not only does

respondent fail to provide any citation to support this assertion

(because it is totally unsupported by the evidence), he is forced

to admit in the very next sentence that “his disc did not rupture

was below the standard of care, that he had been denied any

workers’ compensation benefits, that any other employee of

IBP ever had suffered physical harm as a result of the

conduct at issue in this case (or even as a result of similar

conduct), or that any other employee ever had received

medical care that was below the standard of care as a result

of the company's workers compensation policies. The sum

total of the conduct at issue in this case -- for which the

Iowa Supreme Court imposed a $2 million fine -- was that

Ms. Arndt allegedly defamed Mr. Wilson to one of his

treating physicians, causing $4,000 in presumed damages to

Mr. Wilson's reputation, and that this defamation allegedly

was a product of a (completely lawful) "climate of

suspicion" of injured workers' claims said to exist at IBP.

Neither respondent nor the Iowa Supreme Court has

reconciled the reprehensibility of this conduct with a $2

million penalty .3

3. Similarly unavailing is respondent's attempt (Opp. at

15) to excuse the Iowa court's dismissal of the second BMW

guidepost -- ratio of punitive damages to actual harm - as

being "{o]f minor significance." Indeed, both cases that

respondent cites in his effort to justify the 500-1 ratio in

this case actually demonstrate the lowa court's palpable

further and cause more neurological problems." Jd. (emphasis

added).

3 Respondent asserts that IBP employees falsified OSHA

records, but there was no evidence that any record pertaining to

Mr. Wilson was falsified, that he suffered any harm from any

such alleged falsification or that any other worker suffered any

harm as a result of such purported conduct. Moreover, the

maximum criminal fine for such an act -- assuming for

argument's sake that IBP could even be punished for it in this

case -- is $10,000. 29 U.S.C. § 666(g).

error in refusing to accord weight to this factor.

Respondent invokes the Seventh Circuit's opinion

approving a $60,000 punishment where compensatory

damages amounted to $5,000. Opp. at 13-14 (citing

Cooper v. Casey, 97 F.3d 914, 919-20 (7th Cir. 1996)).

This result obviously reinforces petitioners’ fundamental

point: an award of $2 million is grossly out of proportion to

(presumed) actual harm of $4,000; an award of $60,000

would be within a constitutionally acceptable range.

Respondent's reliance on Lee v. Edwards, 101 F.3d 805 (2d

Cir. 1996), is also misplaced. See Opp. at 14. In Lee, the

actual damages were only nominal, leading the Second

Circuit to conclude that use of a multiplier was not

meaningful. Lee, 101 F.3d at 811. Thus, the court looked

to punitive damage awards in similar cases “to find limits

and proportions" and concluded that $125,000 was the

appropriate punishment. As pointed out above, neither the

Iowa court nor respondent pointed to any comparable Iowa

case in which a multimillion dollar punishment was

imposed. Moreover, Lee illustrates that the appropriate

magnitude for punishment in cases where actual damages

are nominal (or, as in this case, de minimis) is in the tens of

thousands, nof in the millions.

4. The Iowa Supreme Court did not even mention the

third BMW guidepost: comparison to legislatively

established penalties. Respondent himself attempts to avoid

the guidepost by asserting that "the conduct at issue is not

covered by any statutory measure." Opp. at 15. This

assertion simply misses the point that in Iowa, a corporation

that commits a serious misdemeanor causing $4,000 in

harm faces a maximum fine of less than $10,000, while

IBP, which committed no crime whatsoever, is being fined

$2 million. There is no provision anywhere in the law of

Iowa that put IBP on notice that it could be fined $2 million

for the conduct at issue in this case, and the complete

failure of the Iowa Supreme Court to take that lack of

notice into account in assessing punitive damages in this

case illustrates its flagrant disregard for the constitutional

guidance articulated by this Court in BMW.

5. Respondent makes no argument whatsoever on the

merits of Question 2 of the Petition, resting instead on the

claim that petitioners did not preserve their due process

claim. First, the lowa Supreme Court specifically (though

inadequately) addressed the constitutionality of the

punishment under the Due Process Clause in its opinion.

Appendix to the Petition ("App.") at 24a. "There can be no

question as to the proper presentation of a federal claim

when the [court below] passes on it." Raley v. Ohio, 360

U.S. 423, 436 (1959). Moreover, petitioners vigorously

argued in their petition for rehearing that the Iowa Supreme

Court's decision to disapprove the $100,000 remittitur

ordered by the trial court and to assess instead a $2 million

penalty violated the Due Process Clause. See

Appellees/Cross-Appellants' Petition for Rehearing 6-9

(arguing that the supreme court's “ruling denies IBP due

process of law under the Fourteenth Amendment of the

United States Constitution").

Respondent appears to confuse a due process "claim"

with the particular "arguments" made in support of such a

claim. On this point, respondent seeks support from Yee v.

City of Escondido, 503 U.S. 519 (1992), but Yee directly

supports petitioners. In Yee, this Court would not consider

whether a statute denied substantive due process because

“petitioners did not raise a substantive due process claim in

the state courts, and no state court has addressed such a

claim." Id. at 533 (emphasis added). But the Yee Court

also expressly recognized that "[oJnce a federal claim is

properly presented, a party can make any argument in

support of that claim; parties are not limited to the precise

arguments they made below." Jd. at 534 (emphasis added).

In this case, petitioners clearly raised a due process

claim before the Iowa Supreme Court. Question 2 simply

sets forth another argument in support of that claim and it is

properly before this Court.4

CONCLUSION

The Iowa Supreme Court was obligated faithfully to apply

this Court's guidance in BMW to this case, an obligation

that it manifestly failed to fulfill. The petition for a writ of

certiorari therefore should be granted and the case either

summarily reversed in light of BMW or set for plenary

consideration.

June 25, 1997

Respectfully submitted,