Opposition Brief — American Home Products Corp. v. Oregon

No. 99-784

INTHE [

Supreme Court of the United Wiates

AMERICAN HOME PRopUCTS CORPORATION,

Petitioner,

DouGLas J. AXEN,

Respondent.

On Petition for a Writ of Certiorari to the

Court of Appeals of Oregon

BRIEF IN OPPOSITION

JOHN PAUL GRAFF

GRAFF & O’NEIL

2121 S.W. Broadway, Suite 100

Portland, Oregon 97201

(503) 222-4545

JEFFREY B. WIHTOL *

JEFFREY B. WIHTOL, Esq.

2121 S.W. Broadway, Suite 100

Portland, Oregon 97201

(503) 228-1210

Attorneys for Respondent

December 21, 1999 * Counsel of Record

WILSON-EPES PRINTING Co., INC. - (202) 789-0096 - WASHINGTON, D.C. 20001

LIST OF PARTIES

Contrary to the caption of the petition, the State of

Oregon is not a respondent in these proceedings. Rule

12.6. See, discussion at pages 3-4, infra. The only parties

are petitioner American Home Products Corp. and re-

spondent Douglas J. Axen.

(i)

TABLE OF CONTENTS

Page

sy SIE aie i

De I er I oi scenes sctdineceose snsticsarscnseernece V

STATEMENT OF THE CASED ...0..........c.0c...0..-0--.0-c0.-. 1

A. Introduction and Background ............................... 1

B. Petitioner Withheld Information From Physi-

cians And The FDA In Knowing Violation Of

ON oo 4

C. Petitioner Acted In Wanton Disregard For The

Health, Safety And Welfare Of Persons In

Oregon Who Use Amiodarone .............................. 7

REASONS FOR DENYING THE PETITION ............. 13

I. THE PRESENT CASE IS NOT AN APPRO-

PRIATE VEHICLE TO CONSIDER THE AP-

PLICATION OF THE EXCESSIVE FINES

CLAUSE TO AN AWARD OF PUNITIVE

DAMAGES TO A PRIVATE PARTY .............. 14

A. Oregon’s Split-Recovery Statute Has Been

Declared Unconstitutional ..........00000.00.0......... 14

B. The Excessive Fines Issue Is Not Timely.... 15

C. The Court of Appeals’ Decision Adheres To

The Rationale And Substance of Browning-

PSE SRS ere aan FT OO Oe ee 17

D. This Court’s Forfeiture Decisions Since

Browning-Ferris Are Inapposite ................... 21

E. The Decision Below Does Not Conflict With

Decisions Of Other Jurisdictions ............... 22

(iii)

iv

TABLE OF CONTENTS—Continued

Page

Il. THE TRIAL COURT’S FAILURE TO EX-

PLAIN ITS AFFIRMANCE OF THE PUNI-

TIVE DAMAGES AWARD DOES NOT

PRESENT A SUBSTANTIAL FEDERAL

NRE III ahditicianss nenesnceiedteiciheneat itera ee 25

A. Petitioner Forfeited Any Right It May Have

Had To An Explanation Of The Trial Court’s

ERE OT DIREC MRS RI ee oN TOTO N A ET» i et OT 25

B. The Trial Court’s Failure To State Reasons

For Its Ruling On Petitioner’s Challenge To

The Size Of The Punitive Damages Award

Is Not A Constitutional Violation ................... 26

RPGR Sie ieee ee ea 30

APPENDIX

Opinion of the Circuit Court of Multnomah

County, State of Oregon in Bocci v. State of Ore-

GON, TRB FIO, DIGI wvncincniescscincscanthitascbccinachanns la

v

TABLE OF AUTHORITIES

Cases: Page

Alexander v. United States, 509 U.S. 544 (1998).. 21

American Employers Ins. v. Southern Seeding

Serv., 981 F.2d 1453 (11th Cir. 1991) 220000000000... 29

Andor v. United Air Lines, Inc., 303 Or. 505, 739

me es SiR BR: Cian) Milde mth Sh ee ro 12

Austin v. United States, 509 U.S. 602 (1998)........ 21

BMW of No. America, Inc. v. Gore, 517 U.S. 559

to) BRITRGRELINS 20h eet iiy Fe lea MOPOE Yen SOAS Re Ae: SORE 2, 28

Bocci v. State of Oregon, Multnomah County Cir-

cuit Court No. 9806-04765 (1999) 0.00000. 14-17

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

Oe Why ee ER ities ee i, passim

Burke v. Deere & Co., 6 F.8d 497 (8th Cir. 1998).. 24

Coffey v. Fayette Tubular Products, 929 S.W.2d

aes a aes la a ahi ale 30

Gamble v. Stevenson, 305 S.C. 104, 406 S.E.2d 350

Ca ee ee a ee 29-30

Garnes v. Fleming Landfill, Inc., 186 W.Va. 656,

GED ites OR CRIED eceeniktitea St 29

Hammond v. City of Gadsden, 498 So.2d 1874

CIs SE beleneitncaiaiahacathel acct ei tak 26

Farmelin v. Michigan, 501 U.S. 957 (1991) ........... 20

Hodges v. S.C. Toof & Co., 833 S.W.2d 896 (Tenn.

OTR ERD: Re SEI Me TMNT ENN ESS LOU, COPE MEER 30

Honda Motor Co. v. Oberg, 512 U.S. 415 (1994).... 26-28

Honeywell v. Sterling Furniture Co., 310 Or. 206,

oe Bo es | Sener cae eee eae 20

Interstate Busses Corp. v. Holyoke St. Ry. Co.,

Ae A AEP nists detente adie 25

Mack Trucks, Inc. v. Conkle, 263 Ga. 539, 436

Ne CS EY ail saiistnstnssissancsststnserttlachoasad sick dude 22

McBride v. General Motors Corp., 737 F. Supp.

pe Re RE Lk OE ee 23

Morgan v. Woessner, 997 F.2d 1244 (9th Cir.

BUND Sdilanciintalasetaripivcinchablalinsatecaccectedcd tn apted teee a tS: 26

Oberg v. Honda Motor Co., 320 Or. 544, 888 P.2d

8 (1995), cert. denied, 517 U.S. 1219 (1996)... 28-29

Pacific Mutual Life Insurance Co. v. Haslip, 499

Wash. EAD: sceetciineneceaaheds be Co 26, 30

vi

TABLE OF AUTHORITIES—Continued

Page |

Robertson Oil Co. v. Phillips Petroleum Co., 930

if @ & Ee Rt ROR te ee 29

Rodriguez v. Suzuki Motor Corp., 996 S.W.2d 47

CORNIA UNI cceiditssencuiithicscasnecepdhatiditiisnieeniiihind tele hheniitas 24

Spaur v. Owens-Corning Fiberglas Corp., 510

Af & 8 | | eR enna 23-24

State v. Ehly, 317 Or. 66, 854 P.2d 421 (1993)... 28

State v. Jacobus, 318 Or. 234, 864 P.2d 861

CIID init thinilesapnicetiadebibinnatetncniaicihleeces a) cee 28

Tenold v. Weyerhaeuser Co., 127 Or. App. 511,

873 P.2d 4138 (1994) (en banc), review dis-

missed, 321 Or. 561, 901 P.2d 859 (1995)... 17-18

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

Ue dle, SII RIED saiictienstlnccitiittesiniticaiiicsnstsines celia ee nae. 2, 26

United States v. Bajakajian, 524 U.S. 321 (1998).. 21

Vancil v. Poulson, 236 Or. 314, 388 P.2d 444

bs, : Ra AE UN Ae MET Rr IO SS 13

Yakus v. United States, 321 U.S. 414 (1944)........ 25

Constitutional Provisions:

U.S. Constitution, Fifth Amendment ...........00.......... 24

U.S. Constitution, Eighth Amendment ................. 1, passim

U.S. Constitution, Fourteenth Amendment ......... 16, 25, 26,

28, 29

Oregon Constitution, Article I, Section 18 ............... 1,14

Statutes:

Si UB; BB AD ccccicrictiidiind des eee A

BT CUI. B SOD cketethnscittscasititiitnadacstin ait cteciciaes! 4

me me FFE, | Fea heme, wee eae 21

BE TAR eR) D pikiditichss chen ctttbbcatnndiiia dee 21

Bis Use } . EERE. my eee mee 24

31 USGS. Be CED candies. Susi te 24

ys Emel t | Res case a ue em Oe 24

BS To SL S 5 See Reis aeaee Ca rene 25

Rk to! |! LY ; Pa OMe NEMN SF 25

Ga. Code Ann. § 51-12-5.(1) (e) (2) 0.0... er 23

Or. Bow. TR BI kk. ie 1, passim

Or. Rev. Bint. § 19.200€2) ascents ek. isis 3

Gr, Raw. Baak, 5 BOG Ce) vcceceteseccsenseslalnh hs 2 4

NO ee

vii

TABLE OF AUTHORITIES—Continued

Regulations: Page

ee te ATE UD pisces snidaccnienicbinertnacdenietmnsihacnnnndicnaliaapilies 5,13

a 5

Fe ee INET TI is cicicucn Saacdaetaonteheceancpotecanniaacen 5, 13

eB EE | Sf |) Re ee OE Ee 5, 13

Re RRS IV NER Sane Roses one oe RECN eae 6,7

ean CSA EE ne AE ae a 6

RT EB Se Sey FITS SCS OE 6

i 6

Sek ee eR OO ieee tee 6

Re Me UE MII sichiictcciinachintrnanciaieaninnnditamitsnietanidiecdacuaueaon 6, 7

BRIEF IN OPPOSITION

Respondent Douglas J. Axen submits this brief in oppo-

sition to the petition for a writ of certiorari filed by peti-

tioner American Home Products, Inc. in this case.

STATEMENT OF THE CASE

A. Introduction and Background.

This case is not an appropriate vehicle for addressing

either question presented by petitioner. As a result of a

recent development in Oregon law, the award of punitive

damages in this case may not raise any Eighth Amend-

ment issue at all. Oregon’s punitive damages split-recovery

Statute, Or. Rev. Stat. § 18.540, has been held to violate

the takings clause, Article I, Section 18, of the Oregon

Constitution in another case, and the matter is currently

on appeal to the Oregon Court of Appeals. If that ruling

is affirmed, the Excessive Fines Clause does not apply to

punitive damages awards in civil actions between private

litigants in Oregon because the government neither seeks

to impose a monetary sanction on an individual nor is

entitled to a share of the damages awarded. Browning-

Ferris Indus. v. Kelco Disposal, Inc., 492 U.S. 257, 272,

275-76 (1989).

In addition, the trial court’s failure to state reasons for

affirming the punitive damages award does not present a

substantial federal question. Not only did petitioner fail

to request an explanation from the trial court, but a

plurality of this Court has already held that a trial court's

failure to articulate reasons for affirming a punitive dam-

1The split-recovery statute in effect at all times material to

these proceedings is Or. Rev. Stat. § 18.540 (1991). That statute

is correctly reproduced in the appendix to the petition at A. 59a-

6la. There, however, it is incorrectly designated “Or. Rev. Stat.

61a. It is incorrectly designated “Or. Rev. Stat. § 18.540 (1987).”

Unless indicated otherwise, all references to Or. Rev. Stat. § 18.540

in this brief are to the 1991 version of the statute.

i)

ages award challenged on grounds of excessiveness is not

a constitutional violation. TXO Prod. Corp. v. Alliance

Resources Corp., 509 U.S. 443, 465 (1993) (opinion of

Stevens, J.).

1. Petitioner’s statement of facts is incomplete and

misleading. When the circumstances giving rise to the

jury’s award of damages are properly understood, it is

plain that this case presents no constitutional issue war-

ranting review by this Court. Based on those circum-

stances, the Court of Appeals of Oregon held that there

was sufficient evidence to support an award of punitive

damages to respondent and that $20 million was not an

excessive award under BMW of No. America, Inc. v.

Gore, 517 U.S. 559 (1996). Petitioner does not chal-

lenge those rulings here.

In August, 1994, respondent, then age 56, was diag-

nosed as having a heart condition for which his cardiolo-

gist prescribed amiodarone, a drug distributed by petitioner

in the United States and Canada under the trade name

of Cordarone. A. 4a. In September, respondent first no-

ticed changes in his vision but did not associate them with

amiodarone. A. 4a; Tr. 869. Respondent’s sight deterio-

rated further in October, and he complained about the

problem to his cardiologist. A. 4a; Tr. 870, 1783. The

cardiologist referred respondent to an ophthalmologist,

who discovered optic nerve swelling and hemorrhaging in

each eye and recommended that respondent discontinue

taking amiodarone. A. 4a; Tr. 1783, 1750-52. On No-

vember 7, 1994, respondent stopped using the drug on

instructions from his cardiologist. A. 5a; Tr. 870-72,

1794. Respondent’s vision continued to deteriorate to the

point where he became legally blind. A. 5a; Tr. 626-27,

822, 1753-55; PX. 1, 30. Respondent was eventually

diagnosed as suffering from amiodarone-induced toxic

optic neuropathy, which caused irreversible degeneration

3

and atrophy of the optic nerve in each eye. A. Sa; Tr.

1753-1755.

2. Respondent commenced this action against peti-

tioner, the State of Oregon, and Wal-Mart Stores, Inc., in

the Circuit Court for Multnomah County, Oregon, seeking

compensatory and punitive damages.? The State, which

operated the hospital where respondent’s treating physi-

cians practiced, and Wal-Mart, which sold the drug to

respondent, were dismissed as parties before trial, and they

took no further part in the proceedings. The jury awarded

respondent $1,907,265.75 as compensatory damages and

$20 million as punitive damages. Judgment was entered

on the verdict. The judgment designated the State of

Oregon as a judgment creditor with respect to a portion

of punitive damages, as required by Or. Rev. Stat. § 18.540.

A. 53a. The trial court denied petitioner’s post-verdict

motions for new trial challenging the amount of punitive

damages as excessive. A. 58a. The Court of Appeals of

Oregon affirmed the judgment, A. 47a, 52a, and the Su-

preme Court of Oregon declined to review that decision.

A. la.

The State of Oregon was not designated as an adverse

party in petitioner’s notice of appeal. Respondent filed a

notice of cross-appeal challenging the constitutionality of

the split-recovery statute, Or. Rev. Stat. § 18.540. The

State was designated as the adverse party in the cross-

2 Respondent’s wife, Sandra Axen, was also a plaintiff in that

action. She was awarded $936,392 as damages for loss of con-

| sortium, which the court of appeals reduced to $500,000. Her por-

tion of the judgment is not an issue in this Court.

3 Although the State had been dismissed from the action, it con-

tinued to be designated as a defendant in the title of the action.

Under Oregon law, a notice of appeal must contain the title of

the action designating all of the parties named in the trial court.

Or. Rev. Stat. § 19.250(1). Petitioner’s notice of appeal accordingly

designated the State of Oregon as a defendant but not as an ad-

verse party in the appeal.

4

appeal. Upon a joint motion by respondent and the State

to which petitioner did not object, the cross-appeal was

dismissed for want of appellate jurisdiction on the grounds

that a justiciable controversy did not yet exist between

respondent and the State on the constitutionality of Or.

Rev. Stat. § 18.540. After the cross-appeal was dismissed,

the State took no further part in proceedings before the

Court of Appeals of Oregon and the Supreme Court of

Oregon. It, like Wal-Mart Stores, Inc., was designated a

defendant in the decisions of those courts. A. la, 2a.

Therefore, Oregon was not a party to the appeal in the

state courts and, contrary to the caption of the petition

here, is not properly a party to the proceedings in this

Court. Its sole interest is as a non-party judgment creditor

with respect to a portion of the punitive damages awarded

to the respondent.

B. Petitioner Withheld Information From Physicians

And The FDA In Knowing Violation Of Federal

Regulations.

Oregon law prohibits punitive damages from being

awarded against a pharmaccutical company unless the

plaintiff proves, by clear and convincing evidence,

“that the [company], either before or after making

the drug available for public use, knowingly in viola-

tion of applicable Federal Food and Drug Adminis-

tration regulations withheld from or misrepresented

to the agency or prescribing physician information

known to be material and relevant to the harm which

the plaintiff allegedly suffered.”

Or. Rev. Stat. § 30.927(2). There was clear and con-

vincing evidence that petitioner knowingly violated several

federal regulations.

1. The Food, Drug and Cosmetics Act prohibits dis-

tribution of a drug “if its labeling is false or misleading

in any particular.” 21 U.S.C. §§331(a) and 352(a).

5

Labeling includes not only the package insert, but also

advertising and promotional materials. 21 CFR § 202.1

(/)(2); Tr. 1006. Labeling on or in the package must

include a “Warnings” section which:

“

. Shall describe serious adverse reactions and

potential safety hazards, limitations in use imposed

by them, and steps that should be teken if they occur.

The labeling shall be revised to include a warning

as soon as there is reasonable evidence of an associ-

ation of a serious hazard with a drug; a causal rela-

tionship need not have been proved.”

21 CFR § 201.57(e) (emphasis added). Thus, if a

pharmaceutical company obtains reasonable evidence of

a serious hazard associated with an approved drug, the

company must add or strengthen its warnings. Because

of the FDA’s paramount interest in public safety, neither

proof of a causal relationship nor prior approval from the

FDA is necessary. 21 CFR §§ 201.57(e), 314.70(b) (3)

and 314.70(c)(2) (i); PX. 49; Tr. 1005-08.

Petitioner was aware of the medical literature that asso-

ciated the risk of permanent vision loss with amiodarone.

Tr. 1121-22, 1130-31, 1184. It conceded at trial that it

did not warn American physicians of this risk in the pack-

age insert, promotional materials, “Dear Doctor” letters,

or otherwise. Tr. 1033-34, 1208, 1210-11, 1587. Nor

did petitioner caution American physicians to watch for

early signs of vision loss or recommend regular eye

examinations to patients taking the drug. PX. 3: Tr. 1204.

2. Even before the FDA authorized the marketing of

amiodarone in the United States, petitioner knew of con-

cerns that a risk of permanent vision loss might be asso-

ciated with the drug. In 1984, the FDA Advisory Com-

mittee that recommended approval of amiodarone ex-

pressed concern about the lack of detailed, well-controlled

clinical studies, the extraordinary risks associated with the

6

drug, and the prospect of “permanent loss of vision,”

which some members believed had not been adequaicly

studied or researched. PX. 46 at 43, 58-64, 69, 81-82,

199-200, 230-33, 237-42. The Committee recommended

FDA approval, but also recommended further research

and study of the drug's risks. PX. 46 at 242, 244-45;

Tr. 345-46. The FDA approved amiodarone for sale in

the United States in late 1985, subject to the condition

that petitioner “review regularly all published clinical

literature On amiodarone, as well as any other data of

interest, so that the labeling can be modified and updated

as needed” and provide to the FDA “a review of new

literature approximately quarterly with recommendations

for labeling revision as needed.” PX. 2; Tr. 346-49,

992-93, 1235.

Two federal regulations, 21 CFR §§ 314.80 and 314.81,

also required petitioner to make certain reports to the

FDA. Under 21 CFR §§ 314.80(b) and (c), petitioner

was required to review reports in the scientific literature,

as well as unpublished scientific papers, for references to

adverse drug experiences involving amiodarone and to

notify the FDA of those reports. A serious or unexpected

adverse experience like vision loss that is not listed in the

labeling needed to be reported to the FDA no later than 15

days after petitioner learned of it. 21 CFR $§ 314.80(a)

and 314.80(c)(1)(1). A. 22a. In addition, 21 CFR

§ 314.81 required petitioner to submit to the FDA a com-

prehensive report each year within 60 days of the anni-

versary date of approval of petitioner’s application to

market amiodarone. The report was to include published

clinical trials of the drug or abstracts of those trials, con-

ducted by or otherwise obtained by petitioner.

Within a year after FDA approval, reports associating

amiodarone use with vision loss began to appear in the

medical literature. Petitioner knew of these reports as

they were published. Tr, 1121-22, 1183-84. Between

7

1986 and 1993, at least ten articles appeared in the medi-

cal literature documenting or discussing the association

between amiodarone and optic neuropathy or vision loss.

PX. 16, 17, 18, 21, 22, 24, 25, 26, 27 and 28. Two of

these—the Mayo Clinic and the Mansour articles—are

especially important.* In violation of the terms of the

FDA's approval and 21 CFR &§ 314.80 and 314.81,

petitioner did not submit either article or otherwise report

the information contained in them to the FDA. A. 22a,

n. 13; PX. 2, 25; Tr. 361, 1012-13, 1217, 1409-10,

1415, 2012.

C. Petitioner Acted In Wanton Disregard For The Health,

Safety And Welfare Of Persons In Oregon Who Use

Amiodarone.

There was clear and convincing evidence that petition-

er’s conduct showed wanton disregard for the health,

safety and welfare of amiodarone users in Oregon. In

May 1988, petitioner proposed to modify its labeling for

amiodarone to include “optic neuritis” as an adverse

reaction occurring in less than one percent of patients.

PX. 60. The FDA approved the change, but again re-

minded petitioner of its duty to report scientific literature

to the FDA. PX. 61. Petitioner had not reported the

* The first article, “Optic Neuropathy and Amiodarone Therpay,”

Was published in 1987 in Mayo Clinic Proceedings. It described the

results of a study of 2 number of patients undergoing amiodarone

therapy at Mayo Clinic. PX. 18. Thirteen of the patients developed

optic neuropathy, eight of whom suffered vision loss. The incidence

of optic neuropathy was 1.79 percent, six times greater than the

0.3 percent incidence in an age-matched population. The authors

found this sixfold increase to be significant and stated the loss of

vision could be “severe and irreversible or recovery could be pro-

longed.” They recommended amiodarone patients undergo thorough

eye examinations, including periodic evaluation of the ocular

fundus. PX. 18. The second article, by Dr. Mansour and others,

was published a year later in the Journal Of Clinical Neuro-

Ophthalmology. This was the only published report of extensive

histopathologic studies of the toxic effect of amiodarone on the

optic nerve. PX. 26.

8

Mayo Clinic or Mansour articles to the FDA, and the

addition of “optic neuritis” as a possible adverse reaction

did not inform cardiologists that permanent visual loss

may occur. Tr. 971-72, 1033-34.

Petitioner has had the contractual right to market, dis-

tribute and promote amiodarone in Canada since Sep-

tember 1987, PX. 37, 38, 39, and its Canadian product

is identical to its American product. PX. 4; Tr. 473. In

September 1988, four months after petitioner added optic

neuritis to the rare adverse reactions section of the Amer-

ican package insert, its Canadian subsidiary sent the Mayo

Clinic article to the Canadian counterpart of the FDA

with a request for approval to and a warning in the

Canadian labeling for “some cases of visual impairment

and decreased visual acuity in up to 2% of patients.”

PX. 5. The Canadian agency found the proposed warning

inadequate “based on the submitted data,” and required

the following warning:

“. . . Cases of optic neuropathy, usually resulting in

visual impairment have been reported in patients

treated with Cordarone. A causal relationship to the

drug has not been clearly established. If such symp-

tom appears, prompt ophthalmologic examination is

recommended. Appearance of optic neuropathy calls

for re-evaluation of Cordarone therapy. .. .

“Regular ophthalmological examination, including

fundoscopy and slit lamp examination, is recom-

mended during administration of Cordarone.”

PX. 6. It also required that optic neuropathy be added

to the list of adverse ophthalmologic reactions, “in up to

two percent of patients.” 7d. The Canadian labeling has

contained these warnings since October 1988. PX. 7-15.

Petitioner was aware of this change in the Canadian

labeling, but did not believe the American warning needed

to be changed, based “on the experience . . . in our

9

country.” Tr. 1185-86. That experience included the

Mayo Clinic article that prompted the additional warnings

in Canada but was withheld from the FDA.

By May, 1989, petitioner was in possession of a confi-

dential memorandum from the European manufacturer of

amiodarone which reviewed much of the literature on the

association between amiodarone use and optic neuropathy

and concluded:

“These data thus require careful follow-up in the

context of the pharmacovigilance organizations set

up by the SANOFI Group at international level.

For the moment and in view of the potential severity

of the problems reported (possible progression to

optic atrophy), it would seem ethical to complete

the product information for physicians concerning

the drug as suggested in the attached covering letter.”

PX. 65. Petitioner did not produce the attached letter,

so it was unavailable at trial. Tr. 1603.

In September, 1989, petitioner acknowledged that ami-

odarone may cause blindness in a letter to a physician

who had lost his vision while taking amiodarone:

“Optic neuropathy occurs in less than 1% of the

patients requiring Cordarone therapy and may result

in blindness. Since the marketing of Cordarone, there

have been 22 cases of optic neuropathy reported, of

which 15 were from literature sources and 7 were

from spontaneous sources. Once again, the risk-

benefit ratio of discontinuing Cordarone therapy

must be considered.”

PX. 66, 81 (emphasis supplied).

Then, the first in a series of events occurred which gave

petitioner notice that understating the risks of ami-

odarone is a violation of federal law punishable by crim-

inal and civil sanctions which include seizing the drug

10

and enjoining further sales. In December, 1989, the FDA

accused petitioner of violating federal law by making false

and misleading statements about certain hazards of the

drug in its labeling, and it threatened to seek criminal

sanctions and enjoin sales of the drug. PX. 68A. AI-

though none of the hazards in question related to ocular

side effects of amiodarone, there was evidence that this

letter should have caused petitioner to evaluate its product

labeling carefully to make sure it provided adequate warn-

ings against all known hazards associated with the drug,

including vision loss. Tr. 481-83, 486, 493-94, 1016-18.

As one witness put it, the 1989 letter should have “put

the fear of the Lord” into petitioner. Tr. 483.

An internal memorandum in June, 1990, documented

petitioner’s concern about possible Senate hearings on pro-

motional practices used in the pharmaceutical industry.

PX. 78. Following the hearings in December, 1990, Sen-

ator Kennedy issued a press release accusing petitioner

of a poor record of compliance with FDA rules on pro-

motion. PX. 69. There was evidence that a prudent and

safety-conscious pharmaceutical company, upon learning

of Senator Kennedy’s remarks, would have re-examined

its labeling for amiodarone to determine whether it con-

tained adequate warnings of all serious hazards known to

be associated with its use. Tr. 493-94, 1028. Petitioner

acknowledged at trial that Senator Kennedy’s remarks and

the Senate hearings should have spurred it to look care-

fully at whether the risks of the drug were being under-

stated. Tr. 1583-84.

In July, 1991, petitioner acknowledged that optic neu-

ritis and optic neuropathy are different conditions and

that only the former is included in the labeling for ami-

odarone in the United States. PX. 62. In a memorandum

to the European manufacturer of amiodarone, it described

the difference between the two conditions as “significant”:

11

“Since neuritis denotes an inflammation of the optic

nerve and neuropathy refers to the degeneration of

the optic nerve, our medical monitors deemed the

difference between these two conditions to be signifi-

PRE

PX. 62; Tr. 1238-39. This admission makes a mockery

of petitioner’s contention below, renewed here, Pet. at 4,

that the warning against optic neuritis was sufficient com-

pliance with federal labeling regulations to immunize it

from liability for punitive damages because the terms

“optic neuritis” and “optic neuropathy” are different

names for the same condition that can be used inter-

changeably. See A. 27a-28a.

In February, 1992, the FDA again accused petitioner

of violating federal law by selective listing of side effects

and minimizing other risks of amiodarone in promotional

pieces. PX. 70, This letter should also have caused peti-

tioner to look carefully at its labeling to verify it was

adequately informing physicians and patients of the risks

known to be associated with the drug. Tr. 1029.

By October, 1992, petitioner knew enough about the

loss of vision associated with amiodarone to know it was

usually “progressive.” A physician employed by petitioner

wrote:

“[A Canadian physician] reported that one of her

patients, a female, became blind in the left eye during

the use of Cordarone 400 mg daily (five days per

week). The appearance of blindness was rather sud-

den and not progressive like usually seen with ami-

odarone. She also became blind in the right eye

within the following week.”

PX. 67, 81; Tr. 1200 (emphasis supplied).

Respondent began amiodarone in August, 1994. PX. 1:

Tr. 695. In addition to the medical literature document-

12

ing an association between the drug and the risk of vision

loss, by 1994 petitioner had received 27 spontaneous

adverse drug experience reports of amiodarone patients

experiencing visual loss or optic nerve injury. PX. 81, 82.

Between that time and trial, petitioner received 21 more

such reports. PX. 83, and still did not warn of the risk.

Tr. 1212.

The Court of Appeals of Oregon concluded that the

evidence permitted the jury to find, by clear and con-

vincing evidence,

“that [petitioner] knew of the association between

amiodarone use and optic neuropathy; that optic

neuritis and optic neuropathy were not interchange-

able diagnoses; that optic neuropathy could cause

permanent vision loss; and that [petitioner] made a

conscious choice not to warn of optic neuropathy.”

A. 28a. The evidence also permitted the jury to find

that petitioner’s choice not to warn was motivated, at least

in part, “by financial concerns related to its ability to

market the product.” 7d. Under Oregon law, wanton dis-

regard for the health, safety or welfare of others may be

shown by evidence that a person acted with extraordinary

disregard of or indifference to known or highly probable

risks of harm to others. Andor v. United Air Lines, Inc.,

303 Or. 505, 517, 739 P.2d 18, 26 (1987). The court

of appeals concluded that the evidence permitted the jury

to find that petitioner’s conduct exhibited such extraordi-

nary disregard or indifference to warrant an award of

punitive damages. A. 28a-29a. These conclusions rest

solely on the application of Oregon law, and petitioner

does not challenge them here.

Petitioner’s assertion that there was no peer-reviewed

scientific evidence that amiodarone can cause vision loss

is untimely, misleading and irrelevant. Pet. at 3-4, 17.

It is untimely because petitioner did not contend at trial

13

that there was insufficient evidence that amiodarone can

cause vision loss to support the verdict.> It is misleading

because, although causation was contested at trial, peti-

tioner did not object to expert opinion testimony that

amiodarone can cause permanent vision loss, Tr. 977,

1962-64, 1965-67, and in fact did cause respondent’s

blindness. Tr. 616-17, 644-45. It is also irrelevant be-

cause petitioner had known that vision loss was a risk

associated with amiodarone at least seven years before the

drug was prescribed for respondent, and reasonable evi-

dence of an association between amiodarone and vision

loss triggers the duty to warn, 21 CFR § 201.57(e), no

matter what petitioner may have subjectively believed

about the presence or absence of a causal link between

amiodarone and vision loss.

Petitioner notes there was no evidence the FDA ob-

jected to the label’s warning on optical side effects or

asked that it be changed. Pet. at 8, 17. There was no

need for such evidence. Aside from the fact that peti-

| tioner withheld information from the FDA about adverse

) ocular reactions associated with amiodarone, its duty to

} warn did not depend upon a request or approval from the

FDA. Petitioner was required to warn against a serious

adverse side effect of amiodarone as soon as it had reason-

able evidence of its association with the drug. 21 CFR

§§ 201.57(e), 314.70(b)(3) and 314.70(c) (2) (i).

REASONS FOR DENYING THE PETITION

Petitioner presents two issues. First, it argues that the

mere existence of a state law permitting Oregon to share

5 Petitioner complains that the court of appeals declined to ad-

: dress the question of whether there was sufficient evidence to show

| that it knew or should have known amiodarone could cause optic

neuropathy resulting in vision loss. Pet. at 17. The court of ap-

peals could not consider this issue under Oregon’s procedural rules,

: see Vancil v. Poulson, 236 Or. 314, 320-21, 388 P.2d 444, 448 (1964),

| because petitioner did not present it to the trial court. A. 27a.

14

in the recovery of punitive damages triggers the Eighth

Amendment’s prohibition against excessive fines and that

this prohibition in the punitive damages context is stricter

than the limits on punitive damages imposed by the Due

Process Clause. This issue is hopelessly premature, does

not warrant review by this Court, and is not well-presented

in this case. Second, petitioner asserts that the trial court

violated the Constitution by failing to make express find-

ings concerning the propriety of the punitive damages

award in this case. There is no substantial constitutional

defect in the trial court’s process, and the issue plainly

does not warrant review by this Court.

I. THE PRESENT CASE IS NOT AN APPROPRIATE

VEHICLE TO CONSIDER THE APPLICATION OF

THE EXCESSIVE FINES CLAUSE TO AN AWARD

OF PUNITIVE DAMAGES TO A PRIVATE PARTY.

A. Oregon’s Split-Recovery Statute Has Been Declared

Unconstitutional.

On July 7, 1999, while petitioner’s petition for review of

the court of appeals’ decision was pending in the Supreme

Court of Oregon, an Oregon trial court ruled that Or. Rev.

Stat. § 18.540 violates the takings clause, article I, section

18, of the Constitution of Oregon. Bocci v. State of

Oregon, Multnomah County Circuit Court case no. 9806-

04765. See respondent’s appendix (RA), la. The plain-

tiff in Bocci argued that Or. Rev. Stat. § 18.540 violates

several provisions of the state and federal constitutions.

The trial court addressed only the state takings claim.

It ruled that a verdict awarding punitive damages to

a party establishes a constitutionally protected property

interest in the award with which the State may not inter-

fere without just compensation.

“The effect of Or. Rev. Stat. § 18.540 is solely to

reallocate what would have been the plaintiff's, based

on the verdict of the jury, and make it the property

of the State....

15

“There is no dispute that but for the operation of

Or. Rev. Stat. § 18.540, plaintiff would receive the

entire punitive damage award. Consequently, the

funds at issue are the plaintiff's property, taken by

the State without just compensation.”

RA. 6a, 7a. The State of Oregon appealed, and the

matter is currently pending before the Court of Appeals

of Oregon, case no. CA A107736. Until the issues in that

case are resolved, the government’s right to a share of

punitive damages awarded to respondent is uncertain at

best.

If the ruling in Bocci is affirmed on appeal, Oregon’s

Criminal Injuries Compensation Account will have no

right to share in punitive damages awarded to a private

party in a civil action. In that event, the excessive fines

issue petitioner asks the Court to review will be moot.

As the Court held in Browning-Ferris, the Excessive Fines

Clause would not apply to the punitive damages awarded

here because the government neither prosecuted the action

nor would be entitled to a share of respondent’s recovery.

On the other hand, if the trial court’s ruling in Bocci is

reversed on appeal, the case will be remanded for con-

sideration of the plaintiff's remaining state and federal

constitutional contentions. In that event, it may be several

years before the Criminal Injuries Compensation Ac-

count’s right to a share of punitive damages awards in

civil actions is settled. In the face of such fundamental

and continuing uncertainty about the validity of Or. Rev.

Stat. § 18.540 and of the government’s right to share

in the punitive damages awarded to a private party, the

question of whether the Excessive Fines Clause applies to

the punitive damages awarded to respondent is not ripe

for review.

B. The Excessive Fines Issue Is Not Timely

Petitioner’s claim that the punitive damages awarded

to respondent is an excessive fine is not timely until the

16

State of Oregon is a party to litigation in which it can

be addressed. Contrary to the posture of the litigation

below, petitioner adds the State of Oregon as the first-

named respondent, thereby implicitly acknowledging the

deficiencies in this case as a vehicle for deciding whether

the award even remotely implicates a serious Eighth

Amendment issue. Oregon was dismissed from the ac-

tion prior to judgment and was not a party to the

appeal in the state courts. Hence, the State of Oregon is

not a respondent in this Court, and its absence under-

mines any effort to decide the Eighth Amendment issue.

Respondent has not violated the Eighth Amendment and

there will be no excessive fines issue if he is allowed to

keep the entire award.

If the State of Oregon acquires a share of the punitive

damages awarded to respondent, petitioner may then

assert any Eighth Amendment argument it has directly

against the State. Litigation in that context can address

whether the Excessive Fines Clause has been incorporated

in the Due Process Clause of the Fourteenth Amendment,

whether the Eighth Amendment applies to corporations,

and whether the standards of excessiveness under the

Eighth Amendment differ from those under the Due

Process Clause. All of those questions must be answered

before an Eighth Amendment violation can be declared

with respect to the punitive damages award in this case.

None of them, however, was briefed, argued or decided in

the lower courts, and the State of Oregon has not been

heard on any of them. With those issues still awaiting

development, it makes no sense for this Court to inter-

vene at this time.

Moreover, if the Court grants certior2:i and any part

of the award is invalidated as an excessive fine, respond-

ent would suffer an injustice if the unconstitutionality of

the Criminal Injuries Compensation Account’s interest in

punitive damages awards is eventually affirmed in Bocci.

|

17

In that event, the Criminal Injuries Compensation Ac-

count would not have a right to share in any punitive

damages awarded to a private person in a civil action, the

Eighth Amendment would be inapplicable after all, and

respondent would be entitled to the full amount of puni-

tive damages awarded to him.®

C. The Court of Appeals’ Decision Adheres To The

Rationale And Substance of Browning-Ferris.

Petitioner asserts that “Oregon has effectively overruled

the substance of Browning-Ferris.” Pet. at 11-12. Not so.

The Court of Appeals of Oregon in this case adhered to

its earlier decision in Tenold v. Weyerhaeuser Cox “27

Or. App. 511, 873 P.2d 413 (1994) (en banc), review

dismissed upon settlement of case, 321 Or. 561, 901 P.2d

859 (1995), and Tenold faithfully followed Browning-

Ferris.

In Tenold, the court of appeals reviewed Browning-

Ferris’s teachings about the history and purpose of the

Eighth Amendment. It noted this Court’s statements, 492

U.S. at 266, 268, that the Framers were concerned with

“the potential for governmental abuse of its ‘prosecutorial’

power” and that the Excessive Fines Clause was “intended

to limit only those fines directly imposed by, and payable

to, the government.” Tenold, 127 Or. App. at 528, 873

P.2d at 423 (emphasis added by the court of appeals).

It quoted the following statement from Browning-Ferris:

“This Court] has never held, or even intimated,

that the Eighth Amendment serves as a check on the

power of a jury to award damages in a civil case.

6 Respondent will file an action challenging the Criminal Injuries

Compensation Account’s right to share in punitive damages once

there is a recovery on the judgment and the issue becomes ripe for

adjudication. That action. like B-eci. will give the parties in in-

terest an opportunity to raise these issues and the Oregon courts

an opportunity to rule on them: The Court may be asked to address

one or more of those issues in that case in a few years from now.

18

Rather, our concerns in applying the Eighth Amend-

ment have been with the criminal process and with

direct actions initiated by government to inflict pun-

ishment. Awards of punitive damages do not impli-

cate these concerns.’ 492 U.S. at 259, 109 S. Ct.

at 2912.”

Tenold, 127 Or. App. at 528, 873 P.2d at 423 (emphasis

added by the court of appeals). The court of appeals

stated that even though Or. Rev. Stat. § 18.540 makes the

government a “beneficiary” of a portion of a punitive

damages award after a verdict has been entered, a private

party, not the government, sued the defendants, and the

jury awarded punitive damages to punish and deter them

from engaging in future misconduct. Concluding that the

purposes of the Eighth Amendment would not be fur-

thered if applied under such circumstances, the court of

appeals declined to hold that the punitive damages award

in Tenold was subject to the Excessive Fines Clause. /d.

at 528-29, 873 P.2d at 423-424. That conclusion, far

from rejecting the rationale of Browning-Ferris, is rooted

in it.

Petitioner’s argument to the contrary rests on a dis-

torted reading of Browning-Ferris. Petitioner asserts that

the Court held that the Excessive Fines Clause “does not

apply to punitive damages that are awarded entirely to a

private party.” Pet. at 8-9 (emphasis added). That, how-

ever, is not what the Court held. The Court expressed

its holding in the following language:

“Whatever the outer confines of the Clause’s reach

may be, we now decide only that it does not con-

strain an award of money damages in a civil suit

when the government neither has prosecuted the ac-

tion nor has any right to receive a share of the

damages awarded.”

492 U.S. at 264 (emphasis added). The precise holding

of Browning-Ferris is that the Excessive Fines Clause does

19

not apply to an award of punitive damages in a civil

action where the government does not prosecute the action

and does not share in the damages awarded.

Petitioner asks the Court to focus on Oregon’s right to

receive a share of the punitive damages awarded to re-

spondent and to ignore the fact that, as in Browning-

Ferris, a private party rather than the government prose-

cuted the action. Selectively quoting from Browning-

Ferris, 492 US. at 272, petitioner asserts that the Court

“explicitly restricted its Eighth Amendment holding to

cases in which ‘the government has no Share in the re-

covery’.” Pet. at 9. Once again, that is not what the

Court said. At the cited page, the Court rejected the

argument that the amercements clause of the Magna Carta,

which limited abuses of power by King John, is a hasis

for concluding that the Excessive Fines Clause limits the

ability of a civil jury to award punitive damages. The

concerns addressed by the amercements Clause, the Court

Stated,

“are clearly inapposite in a case where a private

party receives exemplary damages from another

party, and the government has no share in the

recovery.”

492 US. at 272 ( emphasis added). The emphasized lan-

guage underscores the holding of Browning-Ferris: the

Excessive Fines Clause does not apply to an award of

punitive damages in a civil action if a private party rather

than the government seeks punitive damages and the gov-

ernment has no share in their recovery.

The Court in Browning-Ferris did not address the ques-

tion of whether the Excessive Fines Clause applies to a

punitive damages award in a civil action if a private party

seeks punitive damages and the government is entitled to

share in their recovery. Neither the holding nor the ration-

ale of Browning-Ferris warrants the inference that the

20

Excessive Fines Clause applies in those circumstances,

however. In fact, the rationale of Browning-Ferris sup-

ports the opposite conclusion.

The test of whether a sanction is subject to the Ex-

cessive Fines Clause is whether it is “a payment to a

sovereign as punishment for some offense.” Browning-

Ferris, 492 U.S. at 265. When the Eighth Amendment

was adopted and ratified, the term “offense” meant “offense

against the King.” Jd. at 265, n.6. Because petitioner

was not charged with or found guilty of an offense, the

Criminal Injuries Compensation Account’s share of the

punitive damages awarded to respondent is not a payment

to the government as punishment for an offense. Hence,

it is not a fine within the meaning of the Eighth Amend-

ment. Moreover, the Framers intended the Excessive

Fines Clause to limit “the ability of the sovereign to use

its prosecutorial power, including the power to collect

fines, for improper ends,” Browning-Ferris, 492 U.S. at

267, not the power of a properly instructed jury to award

punitive damages as permitted by state law to a private

party in a civil action. Where the government does not

sue to exact payment as punishment for some offense, it

is not using its prosecutorial power. Therefore, no abuse

of government prosecutorial power was even possible in

this case.

The Court relied upon “precisely the lack of this incen-

tive for abuse in holding that ‘punitive damages’ were not

‘fines’ within the meaning of the Eighth Amendment” in

Browning-Ferris. Harmelin v. Michigan, 501 U.S. 957,

979, n. 9 (1991) (opinion of Scalia, J.). In accordance

with Oregon law, Honeywell v. Sterling Furniture Co.,

310 Or. 206, 211, 797 P.2d 1019, 1021 (1990), the jury

in this case was not told that any punitive damages it

might award would be apportioned. The jury awarded

damages to respondent, not the government. The prospect,

unknown to the jury, that the Criminal Injuries Compen-

21

sation Account might receive a share of the punitive dam-

ages award neither invites, nor is an instance of, the abuse

of governmental power that the Excessive Fines Clause

was intended to constrain. Under the rationale of Brown-

ing-Ferris, the government’s right as a non-party judgment

creditor to a statutory percentage of respondent’s punitive

damages award is insufficient to subject the award to the

Excessive Fines Clause.

D. This Court’s Forfeiture Decisions Since Browning-

Ferris Are Inapposite.

Petitioner’s assertion that the court of appeals’ decision

violates this Court’s Eighth Amendment rulings after

Browning-Ferris is also mistaken. In Alexander v. United

States, 509 U.S. 544, 558-59 ( 1993), the Court held that

an in personam criminal forfeiture of businesses used in

the commission of racketeering offenses and profits from

racketeering activities was a fine within the meaning of

the Excessive Fines Clause. Similarly, United States v.

Bajakajian, 524 U.S. 321, 327-28 (1998), held that an

in personam criminal forfeiture of currency being carried

out of the country was subject to the Excessive Fines

Clause because it was punishment for the offense of willful

failure to report removal of more than $10,000 from the

United States. In Austin v. United States, 509 U.S. 602,

620-22 (1993), the Court held that an in rem civil for-

feiture under 21 U.S.C. §§ 881(a)(4) and (a)(7) of a

mobile home and auto body shop used in the commission

of a drug offense constituted “payment to a sovereign as

punishment for some offense” and was therefore subject

to the Excessive Fines Clause.

These cases are inapposite. In each of them, the govern-

ment commenced a criminal or civil action seeking for-

feiture of the instrumentalities or proceeds of criminal

activity. Here, a private party, not the government, com-

menced a civil action to recover damages for physical

injury, and punitive damages were not imposed as punish-

22

ment for an offense, but as punishment under the com-

mon law of Oregon for failure to warn of a known risk

of serious bodily harm in wanton disregard for the safety

and health of respondent and other users of amiodarone

in Oregon. What was said of the government of Vermont

in Browning-Ferris applies equally here:

“Here the government . . . has not taken a positive

step to punish, as it most obviously does in the crim-

inal context, nor has it used the civil courts to

extract large payments or forfeitures for the purpose

of raising revenue or disabling some individual.”

492 U.S. at 275. Other than obtaining a dismissal of the

claims and cross-appeal against it, the State of Oregon

has not used the civil courts in this case at all.

E. The Decision Below Does Not Conflict With Deci-

sions Of Other Jurisdictions

Petitioner cites three decisions by state courts and three

federal decisions in support of its contention that the de-

cision of the court of appeals conflicts with decisions of

other jurisdictions. However, none of those decisions held

that the Excessive Fines Clause applies to an award of

punitive damages in a civil action between private litigants

where the government has a right to share in the award.

There is, therefore, no split among lower courts on the

question presented.

The Supreme Court of Georgia in Mack Trucks, Inc. v.

Conkle, 263 Ga. 539, 545, 436 S.E.2d 635, 640 (1993),

did not address the threshold question of whether the

Eighth Amendment applies to punitive damages awards

shared with the government. Without discussion or an

express holding, the court simply assumed that it did, and

ruled that a punitive damages award shared with the State

under Georgia’s split-recovery statute did not violate the

Eighth Amendment.

23

In McBride y. General Motors Corp., 737 F. Supp.

1563 (M.D. Ga. 1990), the district court did not hold

the Excessive Fines Clause applies to an award of punitive

damages in a civil case between private litigants. It held

instead that Ga. Code Ann. § 51-12-5.(1) (e)(2), which

makes the State of Georgia a non-party judgment creditor

entitled to 75% of any award of punitive damages in a

product liability action, is unconstitutional because, among

other reasons, it violates the excessive fines clauses of the

State and federal constitutions. McBride, 737 F. Supp.

at 1579. This conclusion, if applied to Or. Rev. Stat.

§ 18.540, would invalidate Oregon’s split-recovery statute,

thereby undercutting petitioner’s argument in this Court.

Far from conflicting with the decision below, the deci-

sion in Spaur y. Owens-Corning Fiberglas Corp., 510

N.W.2d 854 (Iowa 1994), bolsters it. As applied in

Spaur, Towa’s split-recovery statute required the defendant

to pay approximately 75% of the punitive damages award

after costs and fees to a civil reparations trust fund ad-

ministered by the state court administrator. The court

rejected the defendant’s contention that because the trust

fund is controlled and Supervised by the state’s executive

counsel there is sufficient government sharing in the award

to transform the plaintiff's product liability action into a

government prosecution, thereby triggering the protections

of the Excessive Fines Clause. The court noted that the

trust fund is distinct from the general state treasury and

that damage awards are not commingled with state reve-

hues but are used Only to support indigent civil litigation

Or insurance assistance Programs. 510 N.W.2d at 868-69.

Quoting Browning-Ferris, 492 US. at 275 (“The fact

that punitive damages are imposed through the aegis of

the courts and serve to advance governmental interests is

insufficient to support the step petitioners ask us to take”),

the court did not “find that the limited nature of the

State’s interest in a share of any punitive damage award

24

transforms [the split-recovery statute] into either a crimi-

nal or quasi-criminal statute.” Jd. at 869. Although the

Eighth Circuit Court of Appeals expressed concern

whether Iowa’s split-recovery statute “may implicate .. .

constitutional issues of due process and excessive fines,”

Burke v. Deere & Co. 6 F.3d 497, 512, n. 26 (8th Cir.

1993), it did not reach those issues in Burke.

The defendant in Rodriguez v. Suzuki Motor Corp.,

996 S.W.2d 47 (Mo. 1999) (en banc), did not contend

that punitive damages awarded against it constituted an

excessive fine. Rather, it challenged the constitutionality

of Missouri’s split-recovery statute, contending the statute

violated the Excessive Fines or the Takings Clauses. /d.

at 53. The Supreme Court of Missouri held that defend-

ant’s constitutional contentions gave it jurisdiction of de-

fendant’s appeal, but reversed the judgment on state law

grounds without addressing the constitutional issues. /bid.

The decision of the Court of Appeals of Oregon does

not conflict with any of the foregoing decisions. Nor does

it conflict with district court decisions applying the Exces-

sive Fines Clauses to awards of punitive damages in qui

tam actions under the False Claims Act. In qui tam

actions, the government, or a private person on the govern-

ment’s behalf, brings suit against another to collect a civil

penalty between $5,000 and $10,000 and up to three

times the damages sustained by the United States as a

result of fraud against the government. 31 U.S.C. § 3730.

The action must be brought in the name of the govern-

ment. 31 U.S.C. § 3730(b)(1). The government has the

right to take over the action from the qui tam plaintiff

and prosecute the action itself. 31 U.S.C. § 3730(b) (4).

Whether the action is conducted by the qui tam plaintiff

or by the government, any recovery is payable to the

government except for an amount, limited by statute, that

may be awarded to the qui tam plaintiff as reasonable

25

compensation for collecting the civil penalty and damages.

31 U.S.C. § 3730(d)(1) and (d)(2). Qui tam actions

are thus prosecutions by or in the name of the govern-

ment to collect civil penalties payable to the government,

with the qui tam plaintiff receiving a share of the recovery.

Those features are not present here. The fact that some

district courts have applied the Excessive Fines Clause to

False Claims Act penalties is therefore no basis for con-

cluding that it applies to the punitive damages awarded

to respondent and certainly no reason for this Court to

grant review here.

Il. THE TRIAL COURT'S FAILURE TO EXPLAIN ITS

AFFIRMANCE OF THE PUNITIVE DAMAGES

AWARD DOES NOT PRESENT A SUBSTANTIAL

FEDERAL QUESTION.

A. Petitioner Forfeited Any Right It May Have Had

To An Explanation Of The Trial Court’s Ruling.

No one doubts the value of having a trial court explain

the basis for a ruling on the record. Not only does this

Practice enable the parties to understand the reasons for

the ruling, it facilitates appellate review. Assuming argu-

endo that the Due Process Clause gave petitioner the right

to a statement of reasons on the record, that right can be

forfeited. Yakus v. United States, 321 US. 414, 444-45

(1944) (“a constitutional right may be forfeited in. .

civil cases by the failure to make timely assertion of the

right before a tribunal having jurisdiction to determine

it”); Interstate Busses Corp. v. Holyoke St. Ry. Co., 273

U.S. 45, 52 (1927) (dus company, having failed to apply

for a license required by state law, lacked standing to

attack the law as violating due process). * In this Case, it

was.

When petitioner moved for a new trial on the ground

that punitive damages were excessive, it requested that

the proceedings be reported. At no time, however, did it

request that the trial court articulate reasons for its rulings.

26

Having moved for review of the verdict under Pacific

Mutual Life Insurance Co. v. Haslip, 499 U.S. 1 (1991),

Pet. at 5, petitioner was aware of the significance of

having a statement of reasons on the record, yet it failed

to request one. It thereby forfeited whatever right it had

to an explanation of the trial court’s ruling.

B. The Trial Court’s Failure To State Reasons For

Its Ruling On Petitioner’s Challenge To The Size

Of The Punitive Damages Award Is Not A Con-

stitutional Violation.

Petitioner’s argument that the trial court did not pro-

vide the post-verdict review of punitive damages required

by the Due Process Clause relies solely on the fact that its

motions for judgment notwithstanding the verdict or for

a new trial were denied by the trial court without explana-

tion. Citing Haslip, and Honda Motor Co. v. Oberg, 512

U.S. 415 (1994), it contends it had a constitutional right

to a statement of reasons from the trial court. Pet. at

9-10. Those cases do not support that contention.

In Haslip, the Court held that procedural protections

provided by Alabama common law to ensure the reason-

ableness of punitive damages awards did not violate due

process.? 499 U.S. at 23. In Hammond v. City of Gads-

den, 493 So. 2d 1374, 1379 (Ala. 1986), the Supreme

Court of Alabama established one such protection when

it required trial courts “to reflect in the record the reasons

for interfering with a jury verdict, or refusing to do so,

on grounds of excessiveness of the damages.” However,

the Supreme Court of Alabama did not hold that due

process requires such an explanation. Neither did this

Court do so in Haslip. Because the trial court in Haslip

had in fact explained its ruling on the record, 499 USS.

at 23, the issue was not presented.

7The Court did not find that the protections provided by Ala-

bama law were necessary to comply with due process, but merely

sufficient. Morgan v. Woessner, 997 F.2d 1244, 1256 (9th Cir.

1993).

Pecoraro erro

Ph la aa aiid ha ed cll

Bt be be) iy ote hina ren tins

27

When the issue was presented, a plurality of the Court

declined to hold that a trial court’s failure to explain its

denial of a motion to reduce or eliminate a punitive dam-

ages award challenged as excessive Was a constitutional

violation. TXO, 509 US. at 465 (1993). Because TXYO

has already resolved the issue on which petitioner seeks

review, the trial court’s failure to State its reasons in this

case does not present a substantial federal question.

Petitioner attempts to marginalize the ruling in TXO.

It states that the plurality pointed out the trial judge “had

orally explained his agreement with the jury’s appraisal

of the conduct.” Pet. at 21 (emphasis added). That,

however, is not what the plurality said. Justice Stevens

noted that, although the trial judge did not articulate his

reasons for upholding the award, he “did give counsel an

adequate hearing on TXO’s post-verdict motions, and

during one colloquy indicated his agreement with the

jury’s appraisal of the egregious character of the conduct

of TXO’s executives.” 509 USS. at 465 (emphasis added).

Two conclusions follow from this statement. First, an

indication of agreement with the jury’s assessment of the

defendant’s conduct is not an articulation of reasons for

denying the motion. If it were, the question of whether

the trial judge’s failure to explain his ruling was a consti-

tutional violation would not have arisen. Second, the

failure to articulate reasons does not, as petitioner con-

tends, render a hearing “inadequate.” If it did, the

Post-verdict hearing afforded counsel in TXO would have

been inadequate for that reason alone. Yet, the plurality

characterized the hearing on TXO’s motions as adequate,

notwithstanding the fact that the trial judge did not

explain the basis of his ruling.

The reminder in Oberg, 512 US. at 420, of Haslip’s

emphasis on the need for meaningful and adequate review

by a trial court is not to the contrary. The issue de-

cided in Oberg was “whether the Due Process Clause

28

requires judicial review of the amount of punitive damages

awards,” 512 U.S. at 420, not whether the Due Process

Clause requires a reviewing court to articulate the reasons

for its decision on the record. The latter issue was not

discussed in Oberg.

Petitioner asserts that the Court of Appeals of Oregon

ruled “that inadequate review by the trial court did not

matter.” Pet. at 19. That is a gross distortion of the

court’s ruling. What the court of appeals stated is that

“because the constitutional issue is purely a legal issue,

the trial court’s reasoning in support of its decision, while

helpful, has no direct bearing on our review.” A. 35a.

That statement is a simple application of Oregon’s rule

that an appellate court is not bound by the trial court’s

legal conclusions, State v. Jacobus, 318 Or. 234, 240,

864 P.2d 861, 864 (1993), which are reviewed for errors

of law. State v. Ehly, 317 Or. 66, 75, 854 P.2d 421, 427

(1993).8

Petitioner similarly distorts the significance of a state-

ment made by the Supreme Court of Oregon in Oberg v.

Honda Motor Co., 320 Or. 544, 888 P.2d 8 (1995),

cert. denied, 517 U.S. 1219 (1996), after remand from

this Court. After defining the standard of review to be

applied in post-verdict and appellate review of the size

of punitive damages awards, the court turned to the

question of whether the case should be remanded to the

trial court to apply the new standard in the first instance.

It decided not to remand, for three reasons.

“First, on remand from the Supreme Court of the

United States, this court has resolved questions of

law and has determined how Oregon law will com-

8 The court of appeals in fact conducted a thorough, independent

review of the punitive damages awarded to determine whether the

amount of the award violated petitioner’s right to substantive due

process. A. 25a-42a. The court concluded that the award was not

excessive under BMW, and petitioner does not challenge that ruling

here.

29

port with the requirements newly articulated by the

Supreme Court. We are in as good a position as

would be the trial court to apply a legal standard

to the evidence in the record. Second, by applying

that new standard to the facts in this case, we may

be able to give some guidance to trial courts that

will need to follow this standard in the future. Third,

the judgment was entered more than five years ago;

we see no reason to delay resolution of this case

any longer.”

320 Or. at 551-552, 888 P.2d at 12 (emphasis added).

Oregon’s appellate courts have never asserted that trial

court review of a punitive damages award does not matter.

Finally, petitioner cites five failure-to-state-reasons cases

in support of its claim that the decision in this case con-

flicts with holdings of other federal and state courts. Pet.

at 22. All but one of the cited cases were decided before

TXO, and none held that the Due Process Clause re-

quires a trial court to explain its decision on the record

where such an explanation was not requested.

In American Employers Ins. y. Southern Seedling Serv.,

931 F.2d 1453 (11th Cir. 1991), and Robertson Oil Co.

v. Phillips Petroleum Co., 930 F.2d 1342 (8th Cir. 1991 ),

federal district courts, applying Alabama and Arkansas

law, respectively, made summary rulings on excessiveness

challenges to a punitive damages award. The cases were

remanded with instructions to the district courts to place

the reasons for their rulings on the record. Remand was

not based on the ground that due process had been vio-

lated, but on the ground that the appellate courts were

unable to tell whether the district court had reviewed the

Punitive damages award under state common law stand-

ards and principles. American Employers, 911 F.2d at

1464; Robertson Oil Co., 930 F.2d at 1347.

In Garnes v. F leming Landfill, Inc., 186 W. Va. 656,

413 S.E.2d 897 (1991), and Gamble y. Stevenson, 305

30

S.C. 104, 406 S.E.2d 350 (1991), the Supreme Courts

of West Virginia and South Carolina, in response to

Haslip, announced new common law procedures to guide

juries and trial courts in awarding and reviewing, respec-

tively, punitive damages. In each case, trial courts were

required to explain the bases for their rulings on the rec-

ord. Neither case held that this requirement was a matter

of due process, however. The South Carolina Supreme

Court specifically noted that while Haslip sustained Ala-

bama’s method for awarding punitive damages,

“The Court . . . did not hold that each and every

procedural protection furnished to Alabama defend-

ants need be afforded to all defendants in all cases

throughout the land. In our opinion, and as noted

by Haslip itself, it is sufficient that the protections

meet ‘general concerns of reasonableness’ and are

foilowed by ‘adequate guidance’ from the trial court.”

Gamble, 305 S.C. at 110, 406 S.E.2d at 354.

Finally, in Coffey v. Fayette Tubular Products, 929

S.W. 2d 326, 328 (Tenn. 1996), decided after TXO,

the Supreme Court of Tennessee followed its earlier deci-

sion in Hodges v. S.C. Toof & Co., 833 S.W. 2d 896

(Tenn. 1992), in which it had required, again as a matter

of state law, trial courts conducting post-verdict reviews

of punitive damage awards to set forth specific reasons

for their rulings.

Unlike other states, Oregon does not expressly require

its trial courts to provide such explanations. In sum, the

fact that the trial court in this case failed to provide an

unrequested explanation does not give rise to a substantial

federal question and does not warrant further review.

CONCLUSION

For the reasons stated, the petition for a writ of

certiorari should be denied.

December 21, 1999

Respectfully submitted,

JOHN PAUL GRAFF

GRAFF & O’NEIL

2121 S.W. Broadway, Suite 100

Portland, Oregon 97201

(503) 222-4545

JEFFREY B. WIHTOL *

JEFFREY B, WIHTOL, Esq.

2121 S.W. Broadway, Suite 100

Portland, Oregon 97201

(503) 228-1210

Attorneys for Respondent

* Counsel of Record

APPENDIX

la

APPENDIX

IN THE CIRCUIT COURT

OF THE STATE OF OREGON

FOR THE COUNTY OF MULTNOMAH

Case No. 9806-04765

Paut R. Bocci, Jr., guardian ad litem

for Paut R. Bocct, III, an incapacitated individual,

Plaintiff,

v.

STATE OF OREGON,

Defendant.

OPINION AND ORDER

INTRODUCTION

This matter comes before the court on plaintiff's and

defendant’s cross-motions for summary judgment. The

pleadings raise purely legal issues and each party asserts

it is entitled to judgment as a matter of law on each of

plaintiff's claims.

The court determines that plaintiff is correct in his

assertion that ORS 18.540 operates as a “taking” without

just compensation, in violation of the Oregon Constitution,

Article I, section 18, In light of this ruling, the court

declines to reach the other grounds on which plaintiff

asserts the punitive damages allocation Statute is invalid.

2a

BACKGROUND

In the underlying personal injury case, Multnomah

County Circuit Court case number 9210-07050, plaintiff

sued Key Pharmaceuticals, Inc., and others, for both

compensatory and punitive damages. The jury returned

a verdict finding defendants at fault (and plaintiff com-

paratively negligent) and determined that plaintiff's eco-

nomic damages were $1,605,805, that his non-economic

damages were $7,427,500. The jury also made the find-

ings necessary to support an award of punitive damages

and answered “What are the Plaintiff Paul R. Bocci, III’s

punitive damages?” with “35 million.”

When it entered judgment, the trial court reduced

plaintiffs economic and non-economic damages by his

percentage of fault, reduced his compensatory damages

by $250,000 (the amount of prior settlements) pursuant

to ORS 18.455, and made the State of Oregon a judgment

creditor “in an amount equal to one-half of the punitive

damages awarded to Plaintiff after payment of attorney

fees,” pursuant to ORS 18.540.

The underlying case was settled while an appeal was

pending, and the funds were placed in trust. The settle-

ment was approved by the State of Oregon. The com-

pensatory damages and 50% of the punitive damages have

been released to plaintiff. The only dispute remaining is

as to the other 50% of the punitive damages and the

validity of ORS 18.540. That statute purports to allocate

a portion of punitive damage awards to the Criminal

Injuries Compensation Account.

Plaintiff brought this action against the State of Oregon

seeking a declaration that ORS 18.540 is unconstitutional

on an[y] number of grounds, and that he is entitled to the

remaining 50% of the punitive damages.

3a-

This court was much assisted by the thorough briefing

and clarifying arguments of counsel.

ANALYSIS

State “Takings” Claim

This court is mindful of the strong presumption that

Statutes are constitutional. Plaintiff has a heavy burden

to clearly show the unconstitutionality of the statute to

reach the outcome he seeks in this case. Nevertheless, it

is the duty of the court to uphold the constitution as the

Supreme law of the land, and to protect the public if the

legislature has overreached its constitutional bounds. This

is the fundamental role of the judiciary in acting as a

check upon and a balance against the other, co-equal,

branches of government.

The 1993 [sic] version of the punitive damages alloca-

cation law, ORS 18.540, governed the underlying case.

That statute provided:

(1) Upon the entry of a judgment including an

award of punitive damages, the Department of J ustice

shall become a judgment creditor as to the punitive

damages portion of the award to which the Criminal

Injuries Compensation Account is entitled pursuant

to paragraph (c) of this subsection, and the punitive

damage portion of the award Shall be allocated as

follows:

(a) The attorney for the prevailing party shall

be paid the amount agreed upon between the

attorney and the prevailing party.

(b) One-half of the remainder shall be paid to

the prevailing party.

(c) One-half of the remainder shall be paid to

the Criminal Injuries Compensation. Account' to

4a

be used for the purposes set forth in ORS

chapter 147. However, if the prevailing party

is a public entity, the amount otherwise payable

to the Criminal Injuries Compensation Account

shall be paid to the general fund of the public

entity.

Oregon Constitution, Article I, Section 18, provides

in pertinent part:

Private property shall not be taken for public use...

without just compensation[.]

Plaintiff contends that ORS 18.540 operates to “take”

a portion of his award of punitive damages without

compensation.

Defendants [sic] contends that nothing has been taken

from plaintiff, because plaintiff had no cognizable, protect-

able property right to punitive damages. According to de-

fendant, plaintiff has no vested right in the amount of puni-

tive damages that may be awarded, and the legislature may

limit or condition the recovery of punitive damages with-

out impairing constitutional rights. Furthermore, the State

contends that because the allocation statute was in exist-

ence before the plaintiff brought his claim, he could never

have acquired an interest in or right to more than a 50%

interest in whatever judgment was entered for punitive

damages.

The contention that plaintiff could never have a prop-

erty interest in more than 50% of the punitive damages

because the allocation statute existed when he brought his

claim is resolved by reference to Webb’s Fabulous Phar-

macies, Inc. v. Beckwith, 449 U.S. 155, 101 S.Ct. 446,

66 L.Ed.2d 358 (1980) and Phillips v. Washington Legal

Foundation, 524 U.S. 156, 118 S.Ct. 1925, 141 L.Ed.2d

174 (1998).

:

:

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5a

In Webb’s, the Supreme Court held analyzed a state

Statute pursuant to whic’: a county, in addition to a fee

charged for services, tock as its own the interest accruing

on an interpleader fund deposited in the registry of the

county court. The Court concluded that the statute caused

an unconstitutional taking. The Florida Supreme Court

had upheld the statute on the theory that the funds were

public funds during the time they were held by the court,

that the statute took only what it created, and the interest

earned was not private property. The United States

Supreme Court rejected this reasoning, characterizing it

as ipse dixit.

In Phillips the respondents challenged a Texas Interest

on Lawyers Trust Account (IOLTA) program, under

which the interest earned on client funds deposited in

lawyers’ trust accounts was paid to foundations that finance

legal services for low-income individuals. The issue before

the Supreme Court was whether the interest was “private

property” of either the attorney or client for purposes of

the Takings Clause of the Fifth Amendment to the United

States Constitution. Petitioners argued that respondents

had no protectable right in the interest because, under

Texas law, interest follows principal only if the interest is

allowed by law or fixed by the parties. The Supreme Court

rejected this reasoning, noting that interest on lawyer trust

accounts was allowed by Texas law. The dispute con-

cerned who owned the interest that was actually earned.

Defendant seeks to distinguish the Webb’s and Phillips

decisions on the grounds that they concern interest and the

deeply-rooted notion of property rights that “interest fol-

lows principal.” Punitive damages, the State argues, do

not have the same relationship to compensatory damages

as interest does to principal. The court agrees that there

are significant differences. The distinction does not help

6a

the State, however, where the issue is an attempt to change

ownership rights that may arise in the future by legislative

declaration.

Whether the legislature has the authority to cap or

completely eliminate punitive damages as the State contends

is debatable. The parties agree that punitive damages in

Oregon are a creature of the common law. Oregon Con-

stitution, Article VII (Amended) section 3. See Lakin v.

Senco Products, Inc., 144 Or. App. 52, 925 P.2d 107

(1996), rev. allowed 325 Or. 438 (1997); Tenold v.

Weyerhaeuser Co., 127 Or. App. 511, 873 P.2d 413

(1994). This court need not resolve that question, how-

ever, because cap or eliminate is not what the legislature

purported to do in enacting ORS 18.540.

The statute does not abolish punitive damages, nor does

it limit the amount of punitive damages a jury may award

against a defendant or in favor of a plaintiff. No money

stays in the tortfeasor’s pocket as a result of the statute.

The effect of ORS 18.540 is solely to reallocate what

would have been the plaintiff's, based on the verdict of

the jury, and make it the property of the State. This is a

confiscation,- not a limitation or elimination.

Perhaps the situation can be seen most clearly by focus-

ing not on what the plaintiff “loses” by operation of the

statute, but on what the State gains. In this case, if the

State is correct and ORS 18.540 is valid, the State will

acquire a large sum of money. That fund does not exist

because of any effort by the’ State. The State had no

role in initiating or prosecuting the action. To quote the

Court of Appeals in its disposition of the Eighth Aniend-

ment “excessive fines” argument in Tenold: “In this case,

a private party brought an action against defendants, and

the jury directly imposed the judgment [sic] against de-

fendants to deter future misconduct.” 127 Or.App. at 529.

~

[ee ge

7a

After the verdict, the funds are not rightfully the defend-

ants’, because the jury has awarded punitive damages

against them. According to our Supreme Court: “There

is nothing that we have found in the language or the

legislative history of ORS 18.540 indicating the legislature

intended to change the purposes behind punitive damage

awards when it enacted a new mandate for the distribution

of the proceeds of such awards.” Honeywell v. Sterling

Furniture Co., 310 Or. 206, 210-11, 797 P.2d 1019

(1990) (holding it was reversible error to instruct the

jury on the distribution to the state of a portion [of]

punitive damages awarded because it would invite the jury

to award the damages for the impermissible purpose of

enhancing the Criminal Injuries Compensation Account).

There is no dispute that but for the operation of ORS

18.540, plaintiff would receive the entire punitive damage

award. Consequently, the funds at issue are the plaintiff's

property, taken by the State without just compensation.

Judgment shall be entered for plaintiff.

Dated this 7th day of July, 1999.

/s/

JANICE R. WILSON

Circuit Court Judge