Appendix — Ford Motor Company v. Buell-Wilson, 127 S. Ct. 2250 (2007) (No. 06-1068)

la

APPENDIX A

IN THE COURT OF APPEAL OF THE

STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT,

DIVISION ONE

BENETTA BUELL-WILSON and BARRY S. WILSON,

Plaintiffs, Respondents, and Cross-Appellants,

v.

FORD MOTOR COMPANY and DREW FORD,

Defendants, Appellants, and Cross-Respondents.

On Appeal From The San Diego County Superior Court

The Honorable Kevin A. Enright

No. GIC800836

APPELLANTS’ OPENING BRIEF

THEODORE J. BOUTROUS, JR. THEODORE B. OLson (038137)

(132099) Paut DeCamp (195035)

WILLIAM E. THOMSON (187912) Gipson, DUNN & CrutcHer LLP

Enmeen M. AHERN (216822) 1050 Connecticut Avenue, N.W.

GiBson, DUNN & CrRuTCHERLLP Washington, D.C. 20036-5306

. 333 South Grand Avenue Telephone: 202/955-8500

Los Angeles, CA 90071-3197 — Facsimile: 202/467-0539

Telephone: 213/229-7000 :

Facsimile: 213/229-7520

Attorneys for Ford Motor Company and Drew Ford

2a

Appendix A

TABLE OF CONTENTS

i et ee ee ee Se

STATEMENT OF APPEALABILITY ...........

RSET SIU CUE kcot accuse ovaensscces

oo EE ee Erie Te er ere

L.

Ford Is Entitled To A New Trial Because of

Several Highly Prejudicial, Erroneous

os rrr

A. Admitting Extensive Evidence About The

Bronco II Was Erroneous And Prejudicial

Seerveseeeveaewseeveeeree@esesneensvecedtstresowese &

B. Excluding the Explorer’s Real-World

Safety Record And Comparative Data

Was Erroneous And Prejudicial .......

1. The excluded evidence was relevant

under basic product liability law ..

2. Ford’s evidence was relevant to rebut

plaintiffs’ proffered alternative

GD: < b.0céaercdesekae tn re

3. The .excluded evidence was highly

relevant to rebut plaintiffs’ Bronco II

evidence and claim for punitive

GD: ida vwwseat eu tatu eens

Page

Ll

11

12

22

23

33

38

3a

Appendix A

TABLE OF CONTENTS

Page

Il. As A- Matter Of Law, Punitive Damages

Cannot Be Imposed In This Case ......... 40

A. California Law Bars Punitive Damages

As A Matter Of Law Here Because

Plaintiffs Proved, At Most, That

Reasonable People Can Disagree

Regarding The Design Decisions At Issue

Pe ey Ce ey PON eae ete Let ee 42

1. California law precludes punitive

damages where reasonable people

can disagree regarding the lawfulness

Rr ye er Pe 42

2. This is a classic “reasonable

disagreement” case precluding

pe ee 46

B. If California Law Would Allow

Punishment On This Record, Then The

Law Is Unconstitutionally Vague As

ERS ee we rE ry Try ete 56

1. As applied, Section 3294 failed

to provide Ford a reasonable

opportunity to know what conduct is

SUEY CN gos adcectetaueness 58

2. As applied, Section 3294 permits

arbitrary and _ discriminatory

eee 60

4a

Appendix A

TABLE OF CONTENTS

III. Ford Is Entitled To A New Trial On All Issues,

Or At The Very Least A Substantial Remittitur

Sen enw vesgcewseeneeereeoeo354evestereeeeseee

A. The Noneconomic Compensatory

Damages Award Is Excessive ........

a

The award far exceeds what

plaintiffs’ counsel acknowledged

would be fair compensation ......

Awards in factually comparable cases

confirm the excessiveness of the

ee aids Cav 0b He wee 0s

The compensatory award violates due

ee tw h st cicveev ss

B. The Punitive Damages Award Is

Excessive And The Product Of Improper

ED SE TET TCC CTE

1.

-

CONCLUSION

Admitting evidence of Ford’s overall

financial condition violates this

Division’s R.J. Reynolds ruling ...

The punitive damages award is

excessive under State Farm and

SE

wn ees Se ee eeeeneaee@gcewe@eeeeseeeaeeerses

Page

63

63

65

67

73

v4

75

78

80

Sa

Appendix A

2. The punitive damages award is excessive

under State Farm and California law

Even if liability for punitive damages were not otherwise

precluded, the $75,000,000 punitive judgment would have to

be set aside in its entirety as grossly excessive as a matter of

California law and the Due Process Clause of the Fourteenth

Amendment. This punishment—which began as an outrageous

$246,000,000 punitive damages verdict—further confirms that

the jury was motivated by anger, passion, prejudice, and bias.

The award here is simply off the charts. It is more than three

times larger than the largest punitive damages award ever

upheld in California in an automotive products liability case

in a published opinion. See Romo, 113 Cal.App.4th 738

($23,723,287 award where accident involved three deaths

and three other seriously injured individuals). As of 1997,

the year of plaintiffs’ vehicle, the largest automobile products

liability punitive damages award upheld 1n a published

California decision was $4,000,000, or roughly ///9th of

the punitive damages here. See Hasson, 32 Cal.3d 388. A

new trial is the only way to cure this defect in the

proceedings. See Sabella, 70 Cal.2d at 316 n.2; Wells, 793

F.2d at 683-84.

If the compensatory damages award is upheld, then the

punitive damages award must be set aside because of the

large, clearly punitive noneconomic damages award. “[L]arge

compensatory damage awards . . . have a strong deterrent

and punitive effect in themselves.” Lane v. Hughes Aircraft

Co. (2000) 22 Cal.4th at 424 (Brown, J., concurring); Mirkin

v. Wasserman (1993) 5 Cal.4th 1082, 1106 (same). Heaping

punishment on top of punishment by allowing the separate

punitive damages award to stand would be excessive and

unconstitutional.

6a

Appendix A

Moreover, if the compensatory damages award is

reduced, then the punitive award must likewise be reduced

to maintain a proper ratio. As the Supreme Court stated in

State Farm, where compensatory damages are large (and the

Court deemed a $1 million compensatory award-large),

punitive damages should not exceed the compensatory award.

State Farm, 538 U.S. at 424-28.

Either way, Ford is entitled to a new trial regarding

punitive damages, or at the very least a substantial remittitur.

7a

APPENDIX B

IN THE SUPREME COURT OF CALIFORNIA

BENETTA BUELL-WILSON et al.,

Plaintiffs and Respondents,

v.

FORD MOTOR COMPANY, et al.,

. Defendants and Appellants.

After A Decision By The Court of Appeal,

Fourth Appellate District, Division 1,

Case Nos. D045154, D045579

San Diego County Superior Court

The Honorable Kevin A. Enright

No. GIC800836

PETITION FOR REVIEW

THEODORE J. Boutrous, JR. DANIEL M. KoLkeEy (79102)

(132099)

GiBSON, DUNN & CRUTCHER LLP

WILLIAM E. THoMson (187912) One Montgomery Street

GiBson, DUNN & CRUTCHER LLP San Francisco, California 94104

333 South Grand Avenue Telephone: 415/393-8200

Los Angeles, CA 90071-3197 Facsimile: 415/986-5309

Telephone: 213/229-7000

Facsimile: 213/229-7520

Attorneys for Appellant

Ford Motor Company

THEODORE B. OLSON (038137)

Gipson, Dunn & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036-5306

Telephone: 202/955-8500

Facsimile: 202/467-0539

8a

Appendix B

TABLE OF CONTENTS

Page

ISSUES PRESENTED FOR REVIEW .......... l

WHY REVIEW SHOULD BE GRANTED ....... 2

FACTUAL AND PROCEDURAL BACKGROUND

Aaa Ae A aSRON Mende Pawns te eae 6

A. The Alleged Stability Defect ............. 6

B. The Alleged Roof Defect ...........:... i]

C. Tre VORGCL ARE ABNOR! ...ccccccccesess 12

EE 6k nw 5d 400.0 oon chee eae ee ee uee 13

I. This Court Should Grant Review To Secure

Uniformity Of Decision Regarding The

Admissibility Of Industry Standards and

Custom In Design Defect Actions ......... 13

A. The Court Should Grant Review To

Decide If Industry Standards And Custom

Evidence Is Admissible On The Design

Pcs tngcsaecteeeee been 14

1. Such Evidence Is Relevant To Both

Prongs Of The Barker Defect Inquiry

Ev h va Uae Cubase a ckeeeee 14

2. The Courts of Appeal Are Split On

BEE Sc ecVesede ever eee 19

9a

Appendix B

TABLE OF CONTENTS

Page

3. The Court Of Appeal’s Decision

Contradicts The Restatement Third

PR ii nc wre oe eee ere 20

4. The Court Of Appeal’s Decision is

Inconsistent With The Rule In The

Majority Of Other States. ........ 20

B. The Court Should Also Grant Review To

Make Clear That Such Evidence Is

Admissible On Punitive Damage Issues

Ba Sem Epa oR eg PS eae hy 21

If. This Court Should Grant Review To Address

The Standards For Imposing Punitive

Damages In Product Design Cases Under

EEE v. ctcksodase biwawe seeekens 25

Ill. This Court Should Grant Review To Clarify

The Standards For Scrutinizing Punitive

Damages For Excessiveness Under The Due

Process Clause In The Product Liability

PO Se rere Tr rr rE rer 32

A. Misinterpretation Of The De Novo

MOveew GIMMGETE 20. cece ccccvccess 33

B. Misinterpretation Of The Reprehensibility

ry errr ere 35

See yb vee VECb So and ea oem eueeuens 37

CERTIFICATION OF WORD COUNT .......... 38

10a

Appendix B

ISSUES PRESENTED FOR REVIEW

1. In a product liability design case, is evidence of

industry standards and custom, including the product’s real-

world safety performance relative to comparable products,

relevant to the issues of design defect and punitive damages?

2. In a product liability design case, can malice within

the meaning of Civil Code section 3294 be deemed

established by clear and convincing evidence against a motor

vehicle manufacturer where (a) the vehicle complies with

applicable federal standards that are required by law to “meet

the need for motor vehicle safety,” (b) the federal government

has rejected the precise standards used by plaintiffs’ expert

to condemn the product as defective, (c) the vehicle is as

safe or safer than comparable vehicles, and (d) there is an

objectively reasonable, genuine debate over whether the

product is defective?

3. In evaluating punitive damages pursuant to the federal

due-process de novo review standard, may a court (a) apply

the state-law substantial evidence test to presume that the

jury made findings it did not expressly make and to disregard

objective factors mitigating reprehensibility, and (b) punish

the manufacturer’s lawful conduct, including its sale of a

product to third parties before the court, even where the

manufacturer prevailed in the previous eleven cases involving

that same product?

lla

Appendix B

these important issues.°

At a minimum, this Court should grant and hold this case

pending the Court’s decision in City of Hope v. Genentech,

S129463, which presents some of the same punitive damage

liability issues. See, e.g., Brief of the Product Liability

Advisory Counsel, as amicus curiae therein.

This Court Should Grant Review To Clarify The

Standards For Scrutinizing Punitive Damages

For Excessiveness Under The Due Process

Clause In The Product Liability Context.

Even as reduced, the $55 million punitive damage award

remains the largest single-accident personal injury punitive

damage award ever affirmed on appeal in California history.

The Court of Appeal’s decision upholding this punishment

contradicts State Farm, supra, 538 U.S. 408, and BMW of N.

Am., Inc. v. Gore (1996) 517 U.S. 559, and the decisions of

this Court and other courts, and it will sow confusion and

injustice unless this court grants review.

5. Review is also needed because the Court of Appeal’s

interpretation of Section 3294 renders it unconstitutionally vague as

applied in this case, both because Ford did not have notice sufficient

to tailor its conduct to avoid punishment and because of the risk of

arbitrary and discriminatory enforcement. See, e.g., City of Chicago

v. Morales, 527 U.S. 41, 56 (1999); Connally v. General Constr. Co.,

269 U.S. 385, 391-92 (1926); Southwestern Tel. & Tel. Co. v. Danaher,

238 U.S. 482, 491 (1915); Hewitt v. State Bd. of Med. Exam'rs, 148

Cal. 590, 592-93 (1906).

12a

Appendix B

A. Misinterpretation Of The De Novo Review

Standard.

The Court of Appeal incorrectly interpreted the

“[e]xacting” de novo standard of review of punitive damages

awards (see, e.g., State Farm, supra, 538 U.S. at 418), which,

as this Court has held, requires courts to, among other things,

“mak[e] an independent assessment of the reprehensibility

of the defendant’s conduct” with deference only to the jury’s

“express” findings and without “presum[ing]” the jury made

other findings not stated in the verdict. Simon v. San Paolo

U.S. Holdings Co., Inc., 35 Cal. 4th 1159, 1172-73 (2005).

The need for searching review is compelling here since the

court below found that the jury acted out of passion and

prejudice, not fairness and neutrality, during the first phase

of the trial and those improper motives may well have tainted

the jury’s original $246 million punitive verdict. See State

Farm, supra, 538 U.S. at 417 [discussing danger of jury

bias].

The jury made only one express factual finding

specifically relating to punitive damages—that Ford acted

with “oppression, fraud, or malice”—yet the Court of Appeal

assumed that the jury agreed with plaintiff's every accusation,

and refused to consider any Ford evidence—even

uncontradicted evidence. Slip op., pp.9, 57, 58-61. The court,

in conducting its due process review, simply cited back to

and adopted the same extraordinarily deferential view of the

evidence that it used when applying the state-law substantial

evidence test to the jury’s finding of malice. See n.1, ante.

Consequently, while the court purported to be applying

de novo review, it deferred to unstated “findings of historical

fact” that it presumed the jury had made (slip op., p.57),

13a

Appendix B

wholly distorting its evaluation of the reprehensibility of

Ford’s conduct. For example, the court stated that the

purported evidence of “high” reprehensibility was “primarily

adduced through Ford’s own internal memoranda and

correspondence” (id., pp.59, 61), but it disregarded what

those documents actually say. Compare, e.g., AA2518-2519

with slip op., p.12. The court referred to tests the Explorer

failed (slip op., p.12), ignoring plaintiffs’ concessions and

the evidence that these tests involved prototype, not

production, vehicles. See, e.g., Respondent’s Brief, p.43,

fn.33. The court asserted that the “higher the [stability index |

rating the more stable the vehicle” (slip op., p.10) ignoring

plaintiffs’ own expert testimony and NHTSA’s conclusions

that numerous other factors affect vehicle stability.

RT3712:22-3721:28; AA6U05, 607 [52 Fed. Reg. 49033,

49035 (Dec. 29, 1987)]. The court asserted that “Ford knew

before the Explorer was released for sale that the same

instability characteristics [in the Explorer] led to serious

injuries to Bronco 11 drivers” (slip op., p.46), ignoring

documents written by Ford engineers before the Explorer was

released showing their belief that ‘‘[w]hile the Bronco 11

has FARS statistics in the ‘middle-to-poor’ range, the Explorer

is expected to be ‘near B-1-C’” [Best In Class].” AA2482;

see also, e.g., AA2518-2519. And the court relied on

plaintiffs’ expert testimony that occupants are injured in

rollovers “only when the roof crushes” (slip op., p.14),

ignoring the undisputed fact that a substantial body of

scientific evidence strongly suggests that increasing roof

strength does not reduce injuries. See, p.11, ante.

14a

Appendix B

B. Misinterpretation Of The Reprehensibility

Guidepost.

As a result of its misunderstanding of de novo review,

the Court of Appeal failed to take into account the multiple

objective factors—such as industry standards and custom,

federal regulatory decisions, and the genuine debate on these

complex design issues—discussed above in Sections I and

II, ante. Even if these factors do not completely bar punitive

damages, they are relevant to gauging the reprehensibility of

Ford’s conduct. BMW, supra, 517 U.S. at 565, 570-71, 577-

78 [considering defendant’s compliance with statutes in other

states in evaluating reprehensibility]; Clark v. Chrysler

Corp., 436 F.3d 594, 602 (6th Cir. 2006) [cutting $3 million

punitive award to approximately $470,000 in design defect

wrongful death case where the evidence established at most

“a good-faith dispute over whether B-pillar testing is

necessary’ |.)

The Court of Appeal incorrectly found Ford’s conduct

“more reprehensible” because it was “repeated and not an

isolated incident” (slip op., p.60), based on the fact that Ford

mass-marketed the Explorer as well as the Bronco II. This

ruling contradicts State Farm, as well as Johnson v. Ford

Motor Co., 35 Cal. 4th 1191 (2005), because the court

punished Ford for conduct toward third parties not before

the court and their “hypothetical claims,” “without ever

proving the specifics of those ‘hypothetical claims.’” Jd. at

1210 (quoting State Farm, supra, 538 U.S. at 423).

As the record reflects but the Court of Appeal did not

mention, Ford.won the eleven prior trials alleging defects in

the Explorer. AA11541237. By simply assuming that every

sale of the Explorer is an example of “repeated” misconduct

the court effective » nullified those eleven prior victories

l5a

Appendix B

(and others since), and inflicted punishment based on conduct

exonerated by other juries.° The court has also subjected Ford

to the threat of duplicative punishment in future cases that

rely on the same supposed “repeated” conduct to impose

additional punitive damages for marketing the Explorer.

See Johnson, 35 Cal. 4th at 1209-10; see also Williams v.

ConAgra Poultry Co., 378 F.3d 790 (8th Cir. 2004).

If reprehensibility is properly evaluated, the necessary

conclusion is that Ford’s conduct was not remotely

reprehensible. The proper evaluation of alleged

reprehensibility is a recurring and important issue in product

liability cases that deserves this Court’s attention. At a

minimum, this Court should grant and hold this case pending

the Supreme Court’s decision in Philip Morris USA v.

Williams, 127 P.3d 1165 (Or. 2005) (upholding $79 million

punitive award), cert. granted May 30, 2006, No. 05-1256,

__ US. [126 S. Ct. 2329]; cf Bullock v. Philip Morris

USA, Inc., 8143850.

CONCLUSION

The petition should be granted.

6. Since the verdict here, Ford has prevailed in the majority of

Explorer trials.