Amicus Curiae Brief — Key Pharmaceuticals, Inc. v. Edwards

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3) | OCT 4 2002

No. 02-342

j__OFFICE OF THE CLERK

In The

Supreme Court of the Anited States

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KEY PHARMACEUTICALS, SCHERING-PLOUGH

CORPORATION AND SCHERING CORPORATION,

Petitioners,

¥.

FREDERICK D. EDWARDS, M.D.,

Respondent.

*

On Petition For Writ Of Certiorari

To The Oregon Court Of Appeals

¢

BRIEF FOR ASSOCIATED OREGON

INDUSTRIES AS AMICUS CURIAE

IN SUPPORT OF PETITIONERS

«

ELIZABETH A. EARLS THOMAS W. SONDAG

ASSOCIATED OREGON INDUSTRIES Counsel of Record

1149 Court Street NE LANE POWELL SPEARS

Salem, Oregon 97301 LUBERSKY LLP

(503) 588-0050 601 SW 2d Avenue,

Suite 2100

Portland, Oregon 97201

(503) 778-2100

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

ee. venenmeanimiasusinans naeseeeizinon : : aeaimaatl ‘sis . 7

TABLE OF CONTENTS

Page

INTEREST OF THE AMICUS CURIAE................0445 1

EE, asoi bis ciecsbicpee binaries 2

I. DESPITE THIS COURT’S DIRECTION IN

IT.

IT.

OBERG, OREGON COURTS HAVE FAILED

TO PROVIDE ADEQUATE REVIEW OF

PUNITIVE DAMAGES AWARDB.................4.

OREGON’S “RATIONAL JUROR” STAN-

DARD FOR PUNITIVE DAMAGES REVIEW

IS CONSTITUTIONALLY INADEQUATE.....

A. Prior to Oberg, Oregon Courts Held Con-

sistently That the Oregon Constitution

Precluded Judicial Review or Modifica-

tion of the Amount of Punitive Damages

PE WF FIT vio scovicrsesneniininsvensesicesess

B. Appellate Review of Punitive Damages

Awards in Oregon After BMW .................

C. Parrott and Its Progeny: The Oregon Su-

preme Court Resurrects the “Rational

I NU Rice ic vss iver rence ssniatoneiones

D. The “Rational Juror” Standard Conflicts

With BMW and Cooper Industries ...........

OREGON’S “RATIONAL JUROR” STAN-

DARD CONFLICTS WITH THE STANDARD

FOR PUNITIVE DAMAGES REVIEW AP-

PLIED IN THE NINTH CIRCUIT.................

EE eit s sivinkcnsdscantngteeverstnnsenrsemanvennsseennor

10

ii

TABLE OF AUTHORITIES

Page

CASES:

Blume v. Fred Meyer, Inc., 963 P.2d 700 (Or. Ct.

BD. TE ticsitarcteaniniaatenan tannin 7,8

BMW of North America, Inc. v. Gore, 517 U.S. 559

(OE csivsersinspunnnsetinioeasennaece ae passim

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

BOR UD. BG I isievcesstsviccicirmmaincedens 3, 10, 11, 18

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

CRO icnxceviiniesnnesieneessineiinastnemeai naman passim

In re Exxon Valdez, 270 F.3d 1215 (9th Cir. 2001) ............ 12

Jensen v. Medley, 11 P.3d 678 (Or. Ct. App. 2000),

review allowed, 52 P.3d 678 (Or. 2002)............. eee 4,8

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

BES P.O LEGG (OR Cir, Be) avivisccsniscssnahecntnsecoserasvvearsons 12

Oberg v. Honda Motor Co., Lid., 888 P.2d 8 (Or.

TID) viscnsvisissconossssscunseoninepeeinunanaiecs een ae ae 7

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

CRIB vinannniscnvnisnienimbaiidepustsnidercanaea ania 12

Parrott v. Carr Chevrolet, Inc., 17 P.3d 473 (Or.

DDE) scciicnscctactcccscmvsiniagpemn aaa 4, 8,9, 10

Parrott v. Carr Chevrolet, Inc., 965 P.2d 440 (Or.

ROD kn vinvisicctivnsiseeninisicinisianesaanestiomnemmmuadiaamama maaan tala am area 8

TXO Production Corp. v. Alliance Resources Corp.,

SOD GE. GOB 1 sisosncsicdscnesoetaaae ecnieese ans 3 |

Van Lom v. Schneiderman, 210 P.2d 461 (1949) ............... 10 :

Williams v. Philip Morris Incorporated, 48 P.3d 824

(Or. Ct. App. 2002) «0.0... seeseesessesessssessesessessensesssesesenssnsees 5

| ‘

ill

TABLE OF AUTHORITIES - Continued

CONSTITUTIONS:

Or. Const., art. VII (amended) § 3

SOOTHE HEHE HEHEHE HETER HSER H HOE HEEE

INTEREST OF THE AMICUS CURIAE'

Associated Oregon Industries (“AOI”) was established

in 1895 as an organization to promote Oregon products.

Today, AOI is a nonprofit statewide business and lobbying

organization representing over 2,400 principal members

and 16,000 associate businesses. Its member businesses

employ approximately 30 percent of Oregon’s entire

private workforce.

AOI members are companies and individuals inter-

ested in Oregon business issues. AOI membership reflects

the diversity of Oregon business, from small start-up

companies to some of the state’s largest employers, span-

ning every county in the state. AOI represents its mem-

bers before the Oregon Legislature, in courts of law,

and before state rule-making agencies in areas such

as education, employment, energy deregulation, environ-

ment, health care, natural resources, retail, taxation,

transportation, workplace safety and workers’ compensa-

tion. Because AOI addresses broad-based business issues,

it does not generally become involved in issues affecting

only a specific aspect of an industry.

* In accordance with Rule 37.2(a) of the Rules of this Court, the

parties have consented to the filing of this brief. Their letters of

consent, accompanying this brief, have been filed with the Clerk of the

Court. In accordance with Rule 37.6 of the Rules of this Court, amicus

states that counsel for the petitioners participated in the authorship of

this brief. No person or entity, other than the amicus curiae, its

members or its counsel, made a monetary contribution to the prepara-

tion or submission of the brief. Petitioner is an associate member of

Associated Oregon Industries.

2

The members of AOI have no single viewpoint regard-

ing the regulation of the pharmaceutical industry, and AOI

takes no position as to the propriety or legality of the

petitioners’ conduct. However, AOI and its members are

profoundly concerned about the refusal of Oregon courts to

provide meaningful review of punitive damages awarded

by juries. AOI believes that the rational juror standard for

review of punitive damages adopted by the Oregon Su-

preme Court is directly inconsistent with the constitu-

tional standards announced by this Court. The application

of that standard by state courts in Oregon deprives liti-

gants of meaningful judicial review of punitive damages

awards. As a result, litigants in Oregon state courts

receive less constitutional protection than they currently

receive in federal court or in the courts of other states.

Unless reined in by this Court, Oregon’s continued pattern

of affirming every jury's award of punitive damages — no

matter how large or disproportionate to the harm caused —

will gravely affect virtually every business in Oregon,

dampen an already-struggling economy and discourage

new business development in our state.

+

ARGUMENT

I. DESPITE THIS COURT’S DIRECTION IN

OBERG, OREGON COURTS HAVE FAILED TO

PROVIDE ADEQUATE REVIEW OF PUNI-

TIVE DAMAGES AWARDS

Eight years after this Court’s decision in Honda Motor

Co., Ltd. v. Oberg, Oregon remains alone in the nation in

its excessive deference to the jury when conducting appel-

late review of punitive damages awards. As this Court

aptly noted in Oberg, “[t]here is a dramatic difference

3

between the judicial review of punitive damages awards

under the common law and the scope of review available in

Oregon.” Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415,

426 (1994) (Oberg (federal)). That observation still holds

true, despite the guidance provided by BMW of North

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

Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424

(2001) on the scope and nature of appellate review of

punitive damages required by the federal Constitution.

Rather than provide constitutionally adequate review of

punitive damages awarded by Oregon juries, Oregon

exhibits stubborn allegiance to a “rational juror” standard

of review — a sufficiency of the evidence standard that

appropriately has been rejected by this Court as inade-

quate under the principles of due process of law. See TXO

Production Corp. v. Alliance Resources Corp., 509 U.S.

443, 456 (1993) (rational basis review of punitive damages

awards insufficient).

In TXO, this Court explained why a rational basis

standard for review of punitive damages awards is consti-

tutionally insufficient: “Under respondents’ rational basis

standard, apparently any award that would serve the

legitimate state interest in deterring or punishing wrong-

ful conduct, no matter how large, would be acceptable.”

TXO, 509 U.S. at 456 (emphasis in original). The Court’s

hypothetical concern has become a reality in Oregon. Since

this Court held that the United States Constitution

compelled Oregon to provide judicial review of punitive

damages awards, Oregon’s appellate courts have consid-

ered fourteen cases presenting the issue for decision. As

the chart attached to the Petition for Writ of Certiorari

demonstrates, 118-a, Oregon appellate courts have af-

firmed the jury’s punitive damages award in thirteen of

4

those cases. In the fourteenth case, the Court of Appeals

significantly remitted the punitive damages, but the

Oregon Supreme Court has granted discretionary review

to consider, in part, whether the Court of Appeals erred in

reducing the jury’s punitive damages award. Jensen v.

Medley, 11 P.3d 678 (Or. Ct. App. 2000), review allowed, 52

P.3d 436 (Or. 2002). In four of the cases, the appellate

courts reinstated jury verdicts that had been reduced by

the trial court. Apart from Jensen, no jury verdict award-

ing punitive damages has ultimately been reduced by

Oregon’s appellate courts. And, given the Oregon Supreme

Court’s history of affirming a jurys punitive damages

award no matter the size, the ultimate result in Jensen

may well be consistent with this pattern.

Neither the size of the jury’s punitive damages verdict

nor the extent of its disproportion to actual harm deters

Oregon appellate courts from sanctioning the jury’s award.

In Parrott v. Carr Chevrolet, Inc., 17 P.3d 473 (Or. 2001),

the Oregon Supreme Court reinstated the jury’s punitive

damages award, which had been remitted by the Court of

Appeals. The Supreme Court concluded that an 87:1 ratio

between punitive and compensatory damages awarded

solely for economic injury was “within the range that a

rational juror would be entitled to award....” 17 P.3d at

490. Shortly thereafter, the Court of Appeals followed the

Supreme Court’s lead when, in a wrongful death action, it

reinstated a jurys punitive damages award that is 97

times the size of the compensatory damages awarded. The

Court of Appeals concluded that: “In light of the 87 to 1

ratio in Parrott, we see nothing in a ratio of 97 to 1 that

raises our judicial eyebrows, given the egregious nature of

defendant’s conduct as implicitly determined by the jury.”

Williams v. Philip Morris Incorporated, 48 P.3d 824, 841

(Or. Ct. App. 2002).

Even the most casual review of the decisions handed

down by Oregon appellate courts after Oberg should raise

this Court’s “judicial eyebrows” out of concern over

whether litigants in Oregon are receiving the scope and

level of review of punitive damages awards mandated by

the federal Constitution. A look at the history of punitive

damages review in Oregon sheds light on why the Oregon

courts have resisted their constitutionally-mandated role

to ensure that punitive damages awards comport with

federal due process and why the standard of review

currently applied by Oregon appellate courts is constitu-

tionally inadequate. The Court should grant the writ of

certiorari in this case to ensure that litigants in Oregon

courts receive the same due process protection against

excessive punitive damages that is provided in federal

court and in the courts of other states.

-

II. OREGON’S “RATIONAL JUROR” STANDARD

FOR PUNITIVE DAMAGES REVIEW IS CON-

STITUTIONALLY INADEQUATE

A. Prior to Oberg, Oregon Courts Held Con-

sistently That the Oregon Constitution

Precluded Judicial Review or Modifica-

tion of the Amount of Punitive Damages

Awarded by a Jury.

Oregon’s unquestioning loyalty to jury awards of

punitive damages has a long history. Since at least 1949,

Oregon courts have considered it a violation of the Oregon

Constitution for a court to review a jury’ determination of

the amount of punitive damages. Under the Oregon

6

Constitution, an Oregon court may not reduce a punitive

damages award; it can only overturn the award in its

entirety. And the court can set aside an award of punitive

damages only if there is no evidence from which a rational

jury could conclude that any award of punitive damages is

warranted. Thus, as a matter of Oregon constitutional law,

once it is determined that there is an evidentiary basis for

a jury's decision to impose punishment, the jury can award

any amount of punitive damages. As a matter of Oregon

law, Oregon courts are constitutionally prohibited from

considering the rationality or proportionality of a jury’s

punitive damages award. Whether the jury chooses to

award one dollar, or a billion, its decision is untouchable.

This Court’s decision in Oberg informed the Oregon

courts that, regardless of the import of the Oregon Consti-

tution, federal due process requires that Oregon provide

“meaningful and adequate review by the trial court and

subsequent appellate review” of the amount of a jurys

award of punitive damages. Oberg (federal), 512 U.S. at

420, 435. But Oregon’s complete deference to jury decision

making was well entrenched. In the eight years since

Oberg, Oregon’s appellate courts have ensured that, as a

practical matter, jury awards of punitive damages remain

inviolate.

On remand in Oberg, the Oregon Supreme Court

fashioned the “rational juror” standard for meeting its

federally-mandated responsibility to review punitive

damages awards for excessiveness:

A jury’s award of punitive damages shall not be

disturbed when it is within the range that a ra-

tional juror would be entitled to award in the

light of the record as a whole; the range that a

rational juror would be entitled to award de-

pends, in turn, on the statutory and common law

factors that allow an award of punitive damages

for the specific kind of claim at issue.

Oberg v. Honda Motor Co., Lid., 888 P.2d 8, 10 (Or. 1995)

(Oberg (state)). In effect, Oregon substituted one suffi-

ciency of the evidence test for another. As is evidenced

below, the “rational juror” standard fails to comport with

this Court’s elucidation of due process requirements for

review of jury awards of punitive damages.

B. Appellate Review of Punitive Damages

Awards in Oregon After BMW.

One year after the Oregon Supreme Court decided

Oberg on remand, this Court decided BMW of North

America v. Gore, to “help illuminate the ‘character of the

standard that will identify unconstitutionally excessive

awards’ of punitive damages....” BMW, 517 U.S. at 568,

quoting Oberg (federal), 512 U.S. at 420. The Oregon

Court of Appeals, at least, seemed to be listening. In 1998,

in Blume v. Fred Meyer, the Court of Appeals acknowl-

edged that the “rational juror” standard was inherently

inconsistent with the standard established in BMW:

Although jury instructions and considerations

may, in fact, properly constrain a jury's consid-

eration of punitive damages, we agree with de-

fendant that a reviewing court’s determination of

whether the punitive damage award is unconsti-

-tutionally excessive is not dependent on instruc-

tions to the jury or on the jury’s consideration.

Under BMW, although the reviewing court ac-

cepts the facts and inferences as the jury found

them, evaluating whether a punitive damage

8

award is excessive requires examination of, but

not deference to, the jury's award.

Blume v. Fred Meyer, Inc., 963 P.2d 700, 706 (Or. Ct. App.

1998).

Over the next three years, the Court of Appeals

consistently applied the BMW analysis and guideposts,

and, in 1999, the appeals court approved the first remitti-

tur of a jury verdict in Oregon history. In Parrott v. Carr

Chevrolet, Inc., 965 P.2d 440 (Or. Ct. App. 1998), the

defendant was found liable for violating Oregon’s Unfair

Trade Practices Act by failing to disclose defects in a

vehicle and its title and discrepancies in the odometer

reading. The jury awarded compensatory damages of

$11,496 and punitive damages of $1 million. The trial

court remitted the punitive damages award to $50,000,

and the Court of Appeals increased the remitted award to

$300,000, still 26 times the compensatory damages

awarded. The next year, in Jensen v. Medley, the Court of

Appeals found the jury’ $1 million award of punitive

damages was unconstitutionally excessive and remitted it

to $175,000 — five times the compensatory damages award.

Jensen, 11 P.3d at 689. It appeared that Oregon courts

finally were conducting the sort of meaningful review of

punitive damages awards that due process requires.

However, the Oregon Supreme Court again intervened to

restore the primacy of the jury in deciding the amount of

punitive damages.

C. Parrott and Its Progeny: The Oregon Su-

preme Court Resurrects the “Rational Ju-

ror” Standard.

In Parrott v. Carr Chevrolet, Inc., the Oregon Supreme

Court reaffirmed its stubborn adherence to the “rational

han

9

juror” standard. The court held that the “rational juror”

standard was “compatible with and does not differ practi-

cally from Gore’s gross excessiveness inquiry, and that

Gore has not ‘superseded’ the rational juror standard that

this court articulated in Oberg (state).” Parrott, 17 P.3d at

484. The court concluded that the BMW standards an-

nounced by this Court were merely “additional factors for

the reviewing court in Oregon to consider as part of the

Oberg (state) rational juror review.” Id. at 484.

Relying on a provision of the Oregon Constitution

different from the one at issue in Oberg, the court reiter-

ated that “[iJn Oregon, calculating punitive damages is the

function of the jury,” id.:

Although the federal requirement of judicial re-

view for excessiveness directly conflicts with the

re-examination clause of Article VII (Amended),

section 3, of the Oregon Constitution, that re-

quirement has not altered the parties’ right, un-

der Article I, section 17, of the Oregon

Constitution to a trial by jury regarding a claim

for punitive damages. As is true in other con-

texts, the proper response of an Oregon court to

the overlapping and potentially conflicting re-

quirements of federal and state constitutional

law is to give effect, to the greatest extent possi-

ble, to all pertinent constitutional require-

ments....

Accordingly, because the amount necessary to

punish what has occurred and deter its repetition

is a question for the jury, we hold that, when re-

viewing a punitive damages award for excessive-

ness, the reviewing court must view the facts in

the light most favorable to the jury’s verdict if

there is evidence in the record to support them.

10

Id. at 485 (emphasis in original). As a result, the Oregon

court reiterated that punitive damages review in Oregon

required nearly unquestioning deference to the jury, and

returned to its earlier pattern of affirming a jury’s punitive

damages award if “a jury could have found” that the

punitive damages award was warranted.

D. The “Rational Juror” Standard Conflicts

With BMW and Cooper Industries.

Today, as 50 years ago, the Oregon Supreme Court’s

approach to excessiveness review is driven by its conclu-

sion that an award of punitive damages is a fact tried by a

jury. Parrott, 17 P.3d at 482, citing Van Lom v. Schneider-

man, 210 P.2d 461, 470-71 (1949); see Oberg (federal), 512

U.S. at 427; Cooper Industries, 5382 U.S. at 437 n.10. It is

that conclusion that led the court to reject excessiveness

review as a matter of state constitutional law, id.; see Or.

Const., art. VII (amended), § 3 (prohibiting judicial reex-

amination of any “fact tried by a jury”), and it is that

conclusion that shapes the “rational juror” review it

grudgingly applies to federal due process challenges today.

Parrott, 17 P.3d at 485.

But the conclusion is flatly at odds with this Court’s

own conclusion that a jury’ determination of the appro-

priate amount of punitive damages to award, if any, is not

a finding of fact. Cooper Industries, 532 U.S. at 437.

Instead, it is an exercise of judgment and discretion about

degrees of culpability, appropriate levels of punishment,

and impacts on future conduct. There are no “facts” in the

record that constrain this exercise of judgment and discre-

tion. A court typically cannot determine what facts the

jury found in setting a punitive damages amount, or how

11

particular facts weighed in the jury’s deliberation. A jury's

decision about punitive damages derives instead from the

conclusions the jury draws about the egregiousness of the

defendant’s conduct and the level of punishment that it

warrants. The Oregon Supreme Court has decreed that

the jury’s conclusions about these issues and the resulting

punitive damages award must be permitted to stand as

long as the evidence, viewed in the light most favorable to

the verdict, would allow the jury to draw those conclu-

sions.

This Court’s decisions in BMW and Cooper Industries

make clear that there is a constitutional limit on the size

of punitive damages awards, and they set forth the stan-

dards for reviewing courts to apply in determining those

limits. The “guideposts” established in BMW were in-

tended to address the question left open in Oberg: “the

character of the standard that will identify unconstitu-

tionally excessive awards’ of punitive damages.” BMW, 517

U.S. at 568, quoting Oberg (federal), 512 U.S. at 420.

These guideposts — the reprehensibility of the defendant’s

conduct, the reasonableness of the relationship of the

punitive damages to the harm suffered by the plaintiff,

and comparable civil sanctions — require more than a

review of the record in search of evidence to support the

jury’ punitive damages award. These guideposts require

the court to exercise judgment about the reasonableness of

punishment and the fairness of notice. They also require

the court to consider some factors beyond the evidentiary

record and other factors, such as the comparability of

other sanctions, that the jury never considers. And the

court must engage in this examination independently,

without deference to a fictional rational juror, to “make[]

certain that the punitive damages are reasonable in their

12

amount and rational in light of their purpose to punish

what has occurred and to deter its repetition.” Pacific Mut.

Life Ins. Co. v. Haslip, 499 U.S. 1, 21 (1991).

Oregon courts do not provide the kind of independent

and searching review of punitive damages awards that

federal due process requires. By deferring to what a jury

“could have found” about culpability and appropriate

punishment, the Oregon court has sanctioned nothing less

than a return to the pre-Oberg era when a jury verdict in

Oregon was inviolate if the record contained any evidence

whatsoever to support it. This deferential standard of

review does not pass constitutional muster.

Ill. OREGON’S “RATIONAL JUROR” STANDARD

CONFLICTS WITH THE STANDARD FOR

PUNITIVE DAMAGES REVIEW APPLIED IN

THE NINTH CIRCUIT

Oregon’s “rational juror” standard of review conflicts

with the standard for punitive damages review applied by

the federal circuit in which Oregon lies. The Ninth Circuit

accepts the binding precedent established by decisions of

this Court and recognizes that federal due process re-

quires plenary, independent and searching review of

punitive damages awards applying the BMW standards

and guideposts as a matter of law. See, e.g., Leatherman

Tool Group, Inc. v. Cooper Indus., Inc., 285 F.3d 1146, 1148

(9th Cir. 2002) (applying “independent review” of punitive

damages in Oregon case); In re the Exxon Valdez, 270 F.3d

1215, 1240 (9th Cir. 2001) (applying “independent review”

standard). Thus, defendants in Oregon are subject to two

very different standards of punitive damages review

depending on whether the punitive damages are awarded

13

in state or federal court. This Court should grant certiorari

in this case to resolve this conflict.

¢

CONCLUSION

Despite this Court’s direction and guidance, the Oregon

Supreme Court’s atavistic standard for the review of

punitive damages has created an unconstitutional prece-

dent that lower courts in Oregon are bound to follow. In the

instant case, the Oregon Court of Appeals affirmed a $22.5

million punitive damages award — 45 times the generous

compensatory damages awarded — to a doctor who effec-

tively misdiagnosed the plaintiff's condition, and then

colluded with the plaintiff to blame the defendant-drug

manufacturer. The appellate court ignored this Court’s

teachings in BMW and Cooper Industries, and instead

applied the “rational juror” standard of review to affirm this

enormous and disproportionate jury award of punitive

damages. Until this Court intervenes, Oregon will continue

to deprive parties of constitutionally adequate review of

punitive damages awarded by juries. This Court should

accept this opportunity to bring punitive damages review in

Oregon in line with the federal Constitution. The Petition

for Writ of Certiorari should be granted.

Respectfully submitted,

ELIZABETH A. EARLS THOMAS W. SONDAG

ASSOCIATED OREGON Counsel of Record

INDUSTRIES LANE POWELL SPEARS

1149 Court Street NE ~ LUBERSKY LLP

Salem, Oregon 97301 601 SW 2d Avenue,

(503) 588-0050 Suite 2100

Portland, Oregon 97201

(503) 778-2100