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

la

APPENDIX A

Case No. __

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. (132099)

WILLIAM E. THOMSON (187912)

GIBSON, DUNN & CRUTCHER LLP

333 S. Grand Avenue, Suite 4700

2a

Angeles, CA 90071

. (213) 229-7000

Fax: (213) 229-7520

THEODORE B. OLSON (038137)

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036-5306

Telephone: (202) 955-8500

Facsimile: (202) 467-0539

DANIEL M. KOLKEY (79102)

GIBSON, DUNN & CRUTCHER LLP

One Montgomery Street

San Francisco, CA 94104

Tel: (415) 393-8200

Fax: (415) 986-5309

Attorneys for Appellant Ford Motor Company

ISSUES PRESENTED FOR REVIEW

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

dustry 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 estab-

lished by clear and convincing evidence against a motor ve-

hicle manufacturer where (a) the vehicle complies with ap-

plicable federal standards that are required by law to “meet

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

ment 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?

3a

3. In evaluating punitive damages pursuant to the fed-

eral 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 dis-

regard objective factors mitigating reprehensibility, and (b)

punish the manufacturer’s lawful conduct, including its sale

of a product to third parties not before the court, even where

the manufacturer prevailed in the previous eleven cases in-

volving that same product?

WHY REVIEW SHOULD BE GRANTED

The decision below creates new and draconian rules for

product liability cases, including a virtual liability-without-

fault standard for punitive damages. Unless reviewed and

overturned, that decision will render it irrelevant that a manu-

facturer’s design decisions resulted in a product that complies

with industry standards and custom, comports with relevant

federal safety standards and reasonable policy judgments,

and performs as well or better than comparable competing

products. In place of these knowable standards, the decision

substitutes a vague regime that will permit tens of millions of

dollars of punishments to be imposed if a jury deems a manu-

facturer’s conduct “despicable” on the strength of nothing

more than a finding that, as will almost always be the case,

the product might possibly have been made “safer” if more

money had been spent in making it. That is neither constitu-

tional nor rational. Review is necessary to conform Califor-

nia’s product liability and punitive damage law to reason,

common sense, and the United States Constitution.

Before this product design trial, eleven Ford Explorer

cases involving similar claims had gone to judgment, and in

all eleven cases judgment was entered in favor of Ford Motor

Company (hereafter “Ford’”’). (Appellant’s Appendix 1154-

1237 (hereafter “AA”).) But in this case, the jury returned

split verdicts finding that the Explorer was defective, and that

Ford had acted with “malice” in designing it. The jury

4a

awarded an astonishing $368 million in compensatory and

punitive damages.

Although the Court of Appeal found that the jury was in-

flamed by “passion and prejudice” and not acting as a “fair

and neutral trier of fact” (Buell-Wilson v. Ford Motor Com-

pany (August 17, 2006, D045154, D045579) slip opinion, p.

37 (hereafter “slip opn.”)), and thus reduced the compensa-

tory and punitive damages to $82.6 million, it otherwise af-

firmed the judgment. In so doing, the court declared that the

jury was empowered to regulate automotive safety ~ even to

the point of overriding the federal agency expressly charged

by Congress with this responsibility - “because

‘[g]overnmental safety standards ... have failed to provide

adequate consumer protection.’” (/d., pp. 49-50.) At the

same time, in deciding three important issues of law, the

court jettisoned as irrelevant the most reliable and objective

information for making decisions about product design and

safety.

First, the court held as a matter of law that industry stan-

dards and custom — including comparative accident statistics

showing that the product was as safe or safer than compara-

ble products — are “irrelevant not only to the issue of defect,

but also to punitive damages.” (Slip opn., p. 24.) This hold-

ing departs from the reasoning of Barker v. Lull Engineering

Co. (1978) 20 Cal.3d 413 (hereafter Barker), extends a split

among the California courts of appeal, and places California

at odds with the majority of other jurisdictions, as well as the

Restatement Third of Torts, Product Liability. The court’s

ruling that it is “reversible error” (slip opn., p. 23) to allow

introduction of such data regarding how products coinpara-

tively perform in the real world will preclude both plaintiffs

and defendants from providing juries with the most crucial

information — precisely the kind that actual governmental

regulators themselves would rely on — for making decisions

about public safety. (See Daly v. Gen. Motors Corp. (1978)

5a

20 Cal.3d 725, 746 [“Product designs do not evolve in a vac-

uum, but must reflect the realities of the market place,

kitchen, highway, and shop”]; Bammerlin v. Navistar Int’l

Transp. Corp. (7th Cir. 1994) 30 F.3d 898, 901 [“Jurors are

not engineers, and data on accident rates speak more loudly

than abstract arguments” ].)

Second, the court held that juries are authorized to deem

a manufacturer’s design decisions malicious, and impose se-

vere punishment, even where undisputed, objective indicators

— such as ongoing genuine debate in the engineering commu-

nity, accident data showing the product is among the safest in

its class, and governmental regulatory decisions confirming

the manufacturer’s judgment — affirmatively refute malice as

a matter of law. This ruling contradicts California law, deci-

sions from other jurisdictions, and due process. This issue is

especially important because punitive damages “pose an

acute danger of arbitrary deprivation of property.” (State

Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408,

417-18 (hereafter State Farm).) The danger is heightened in

design defect cases, which require jurors to second-guess

complex policy judgments, in hindsight, regarding whether a

product’s utility outweighs its risks, and always in the con-

text of an accident resulting in tragic personal injuries likely

to provoke the jury’s passion.

Third, the court misinterpreted the due-process exces-

siveness standards governing punitive damages. These stan-

dards require “exacting” de novo judicial scrutiny (see State

Farm, supra, pp. 417-18), but the court conflated de novo

review with state-law Substantial evidence analysis and, as a

result, declined to consider key objective factors in upholding

a record-setting $55 million punishment. Instead, the court

relied on factors condemned by State Farm, such as Explorer

sales to consumers not before the court, even though Ford

had prevailed in the eleven prior Explorer cases.

For these reasons, this Court should grant review.

6a ”

* * * * *

Ii. This Court Should Grant Review To Address

The Standards For Imposing Punitive Damages

In Product Design Cases Under Section 3294

Civil Code section 3294 permits punitive damages only

where it is proven by clear and convincing evidence that the

defendant has been guilty of “malice.” Section 3294, subdi-

vision (c)(1) defines “malice” as “despicable conduct which

is carried on by the defendant with a willful and conscious

disregard of the rights or safety of others.” The “despicable

conduct” requirement, which was added in 1987, requires

proof of “conduct that is so vile, base, or contemptible that it

would be looked down on and despised by reasonable peo-

ple.” (CACI No. 3945; see also College Hosp., Inc. v. Supe-

rior Court (Crowell) (1994) 8 Cal.4th 704, 725 [“the adjec-

tive ‘despicable’ is a powerful term that refers to circum-

stances that are ‘base,’ ‘vile,’ or ‘contemptible’”’)

The Court of Appeal held that punitive damages could

be assessed against Ford in this case even though (i) the Ex-

plorer complies with applicable federal standards (FMVSS

216 governing roof crush); (ii) the federal government has

rejected the precise stability standards used by plaintiffs to

condemn the Explorer as defective (the stability index and

CU testing); (iii) the Explorer is one of the safest vehicles in

its class with respect to rollovers; and (iv) there is an objec-

tively reasonable, genuine debate about whether the Explorer

was defective.

Collectively, these facts compel an affirmative finding

that Ford’s conduct was not despicable. The Court of Ap-

peal, however, relying on Grimshaw, which was decided five

years before the despicability requirement was added to sec-

tion 3294, disregarded the federal government’s actions and

decisions, finding that ““[g]overnmental safety standards and

the criminal law have failed to provide adequate consumer

protection” and punitive damages therefore “remain as the

7a

most effective remedy for consumer protection.” (Slip opn.,

pp. 49-50.)

The Court of Appeal did not cite any evidence to support

this assertion. Moreover, twelve years after Grimshaw, in

Ramirez v. Plough (1993) 6 Cal.4th 539, this Court recog-

nized the deference that should be given to federal standards

in tort actions involving “matters that are peculiarly suscepti-

ble to legislative and administrative investigation and deter-

mination.” (Jd. at p. 553.) Ramirez was a product liability

action alleging that nonprescription drug manufacturers

failed to provide warnings in Spanish. While the Food and

Drug Administration (FDA) regulated the labeling of nonpre-

scription drugs, and had studied and encouraged the use of

multilingual labeling, it had taken no action to require warn-

ings in any language other than English. (/d. at pp. 549-550.)

The FDA had “presumably” concluded that “despite the ob-

vious advantages of multilingual package warnings, the asso-

ciated problems and costs are such that at present warnings

should be mandated only in English.” (/d. at p. 552, italics

added.) Recognizing-that courts “lack{] the procedure and

resources to conduct the relevant inquiries” into matters of

this nature, this Court “adopt[ed] for tort purposes the exist-

ing legislative and administrative standard of care on this 1s-

sue” and affirmed summary judgment for the drug manufac-

turers on compensatory damages. (Id. at pp. 553, 555.)

This Court’s deference to the presumed decisions of one

federal agency in Ramirez starkly contrasts with the Court of

Appeal’s lack of deference to the actual decisions of another

tederal agency. Roof crush and rollover issues present at

least as much complexity as issues relating to multilingual

warnings. (See, e.g., AA661-671 [64 Fed.Reg. 27343-27353

(May 19, 1999)].) And NHTSA has demonstrated consider-

able attention and “sensitivity” to rollover and roof crush is-

sues. (See ibid.) In fact, while this Court in Ramirez had to

“presume[]” from the FDA’s inaction that it had made a de-

8a

liberate decision not to require multilingual warnings, there is

no need to presume or infer anything in this case: NHTSA

has expressly adopted a safety standard on roof crush, and it

has expressly rejected both stability index and CU testing as

methods for making defect determinations. (See pp. 8-11,

ante.)

The Court of Appeal also rejected Ford’s contention that

Ford is not subject to punishment under section 3294 if rea-

sonable people could disagree about whether the Explorer

was defective. (Slip opn., p. 46.) But if “despicable” con-

duct means “conduct that is so vile, base, or contemptible

that it would be looked_down on and despised by reasonable

people” (CACI No. 3945), it follows that the sale of an alleg-

edly defective product cannot be despicable if people could

reasonably disagree with the jury’s conclusion that the prod-

uct was defective. Numerous courts have applied some ver-

sion of this analysis in deciding whether punitive damages

are barred in a variety of contexts. (See, e.g., Satcher v.

Honda Motor Co. (Sth Cir 1995) 52 F.3d 1311, 1317 [vacat-

ing punitive award where, inter alia, “there is a genuine dis-

pute in the scientific community” regarding reasonableness

of design]; Hillrichs v. Avco Corp. (lowa 1994) 514 N.W.2d

94, 100 [“an award of punitive damages is inappropriate

when room exists for reasonable disagreement over the rela-

tive risks and utilities of the conduct and device at issue’’].)

California courts have for years applied this analysis in

the insurance bad faith and other areas of the law. (See

Chateau Chamberay Homeowners Assn. v. Associated Int'l

Ins. Co. (2001) 90 Cal.App.4th 335, 348, 351, fn. 10 [when

tnere is a “genuine dispute” over legal and factual issues,

evidence will not support punitive damages]; see also

Lusardi Constr. Co. v. Aubry (1992) | Cal.4th 976, 996-997

(“{C]ourts refuse to impose civil penalties against a party

who acted with a good faith and reasonable belief in the le--

gality of his or her actions.”]; Kendall Yacht Corp. v. United

9a

Cal. Bank (1975) 50 Cal.App.3d 949, 958-959 [rejecting

claim for punitive damages because it “remains purely specu-

lative as to whether the Bank acted with such malice rather

than out of a bona fide disagreement over how far the Bank

was required to go in helping the Kendalls with their finan-

cial problems”].)!

The arguments for such an approach are even more

compelling in the product liability context. Professor David

Owen, upon whose writings the court in Grimshaw so heav-

ily relied, made this precise point more than a quarter of a

century ago:

If [design] decisions fall within any reason-

able distance of the ‘defect line,’ even if in

hindsight proven wrong, fairness requires that

they ordinarily be judged to have been made

in good faith. Stated in another way, even if

the product is finally found “defective,” the

ease for punitive damages almost always will

be quite weak if a plausible case for nondefec-

tiveness was made the other way. Such dam-

ages usually will not be appropriate unless the

product was very defective, and plainly so, at

the time it was sold. A plaintiff usually

should be entitled to a directed verdict on de-

fectiveness, or close thereto, before the puni-

tive damages issue is properly before the jury

at all.

| The Court of Appeal dismissed such authority as “cases where

there was simply a failure of proof to support a punitive damages

award.” (Slip opn., pp. 46-47.) But this is wrong, because the

proof failed in these cases precisely because the defendant had ob-

jectively reasonable grounds for its conduct.

10a

(Owen, supra, 49 U.Chi.L.Rev. at pp. 37-38.)

The Court of Appeal interpreted this argument to mean

that “punitive damages would never be allowed in cases

where the defendant simply had an expert that disagreed with

the plaintiff's expert.” (Slip opn., p. 46.) But this substan-

tially oversimplifies Ford’s argument, Professor Owen’s

analysis, and the holdings of the cases on which Ford relies.

A mere disagreement between testifying experts would not

necessarily preclude punitive damages, if the jury has a basis

for concluding that the defendant’s expert’s opinion is so

lacking in logic and support in the scientific community that

there is no arguable justification for the defendant’s deci-

sions. On the other hand, if the disagreement between the

-testifying experts in the courtroom is reflects a serious and

significant policy debate in the larger engineering, scientific,

and regulatory communities, punitive damages are not a sen-

sible way to resolve that debate. (Cf. Self, supra, 42

Cal.App.3d at p. 7 [“prosecution of a lawsuit is a poor way to

design a motor vehicle”]; W. Kip Viscusi, Corporate Risk

Analysis: A Reckless Act? (2000) 52 Stan.L.Rev. 547, 550-

551, 556, 589-590.)

In short, if the issue of product defect is reasonably de-

batable and the conduct of the manufacturer comports with

the policy judgment of governmental experts and the product

is one of the safest in its class, malice cannot be established

by clear and convincing evidence.

The Court of Appeal, while not disputing any of these

facts, nevertheless found substantial evidence existed to sup-

port the jury’s punitive damage verdict because “Ford deci-

sion makers knew how to make the Explorer less dangerous,

but chose not to because of financial considerations.” (Slip

opn., p. 47.) But this statement conflates a manufacturer’s

knowledge that a product can be made “safer” (which is al- -

most always possible, though perhaps to the detriment of

other desirable product attributes, including cost to the con-

lla

sumer) with a manufacturer’s “knowledge” that a product

should be made safer, 1.e., that it is “defective.” Barker holds

that “the financial cost of an improved design” is a perfectly

legitimate factor to-consider in determining whether a prod-

uct is defective. (20 Cal.3d at p. 431.) Accordingly, a manu-

facturer’s decision not to make a product it believed to be

safe even safer for reasons of cost is not even negligent, let

alone despicable. (See Phillips v. Cricket Lighters (Pa. 2005)

883 A.2d 439, 447 [“We flatly reject [the plaintiffs] asser-

tion that [the defendants’] weighing of financial concerns in

determining whether to incorporate additional safety features

into its product on a unilateral basis establishes that [the de-

fendants] acted wantonly”].)

This Court has not addressed the liability of product

manufacturers for punitive damages since section 3294 was

amended in 1987; in fact, this Court has not addressed this

issue for almost a quarter century. As a result, the Grimshaw

decision continues to distort the law in this area. While Ford

believes that the Court of Appeal erred in its interpretation of

section 3294, the court thoroughly examined the arguments

of Ford and the amicus curiae, providing this Court with an

especially good record for examining these important issues.”

* * * * *

2 Review is also needed because the Court of Appeal’s interpre-

tation of section 3294 renders it unconstitutionally vague as ap-

plied in this casc, 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 Chi-

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

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

Co. v. Danaher (1915) 238 U.S. 482, 491; Hewitt v. State Bd. of

Med. Exam’rs (1906) 148 Cal. 590, 592-593.)

12a

Il. 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.

* * * * *

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 | 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 pp. 565, 570-571,

577-578 [considering defendant’s compliance with statutes in

other states in evaluating reprehensibility]; Clark v. Chrys-

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

$3 million punitive award to approximately $470,000 in de-

sign defect wrongful death case where the evidence estab-

lished 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 opn., p. 60), based on the fact that

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

13a

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

Ford Motor Co. (2005) 35 Cal.4th 1191, 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.’” (/d. at p. 1210,

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

As the record reflects but the Court of Appeal did not

mention, Ford won the eleven prior trials alleging defects in

the Explorer. (AA1154-1237.) By simply assuming that

every sale of the Explorer is an example of “repeated” mis-

conduct the court effectively nullified those eleven prior vic-

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

conduct exonerated by other juries.3 The court has also sub-

jected 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 Ex-

plorer. (See Johnson, 35 Cal.4th at pp. 1209-1210; see also

Williams v. ConAgra Poultry Co. (8th Cir. 2004) 378 F.3d

790.)

If reprehensibility is properly evaluated, the necessary

conclusion is that Ford’s conduct was not remotely reprehen-

sible. 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 (Or. 2005) 127

P.3d 1165 (upholding $79 million punitive award), cert.

granted May 30, 2006, No. 05-1256, U.S. __ [126 S.Ct.

2329]; cf. Bullock v. Philip Morris USA, Inc., 8143850.

* * * * *

3 Since the verdict here, Ford has prevailed in the majority of

Explorer trials.

14a

APPENDIX B

No. D045154

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

PETITION FOR REHEARING

THEODORE J. BOUTROUS, JR. (132099)

WILLIAM E. THOMSON (187912)

EILEEN M. AHERN (216822)

GIBSON, DUNN & CRUTCHER LLP

333 S. Grand Avenue, Suite4700

Los Angeles, CA 90071-3197

Tel: (213) 229-7000

Fax: (213) 229-7520

THEODORE B. OLSON (038137)

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036-5306

Telephone: (202) 955-8500

Facsimile: (202) 467-0539

Attorneys for Appellant Ford Motor Company

and Drew Ford

* * * * *

The Court Erred In Holding That Industry

Standards And Custom Evidence Is Irrele-

vant To The Jury’s Punitive Damages

Analysis

The Court incorrectly holds that industry standards and

custom evidence is “irrelevant” to the issue of punitive dam-

ages, again erroneously relying upon Grimshaw. Op. 24, 50.

The Court incorrectly finds it insignificant that Grimshaw

predates the important 1987 amendments to section 3294,

which added, among other things, the requirement that a-

plaintiff prove that a defendant’s conduct was “despicable.”

Grimshaw’s version contained no definition of “malice” at

all, and provided for the imposition of punitive damages

based on an undefined “implied” malice. See Op. 50; see

also Cal.Civ.Code § 3294, amended by Stats. 1987, ch. 1498

§ 5; Grimshaw, 119 Cal.App.3d at 807-8, 818.

The Explorer’s safety record is highly relevant to the ob-

jective inquiry into whether Ford’s design decisions with re-

gard to the Explorer were “despicable,” which is defined as

conduct “so vile, base, or contemptible that [they] would be

looked down on and despised by reasonable people.”

CACI 3945; Civ.Code § 3294(c)(1). This standard is one for

which evidence of, inter alia, comparative industry data,

l6a

standards, and customs is clearly relevant. It was highly

prejudicial error to exclude this evidence.

Moreover, such evidence was highly relevant here to the

due process issue of the degree of reprehensibility of Ford’s

conduct. See State Farm Mut. Auto Ins. Co. v. Campbell,

538 U.S. 408, 418-19; see Section I.I., infra.

* * * * *

4. The Court Misapprehends The Nature Of

Ford’s Challenge To Civil Code Section 3294

On Vagueness Grounds

The Court erroneously rejected Ford’s challenge to puni-

tive damages on vagueness grounds, stating that “Ford made

just this argument 25 years ago in Grimshaw, supra, 119

Cal.App.3d 757. The Court of Appeal rejected it, concluding

that ‘punitive damages are recoverable in a nondeliberate or

unintentional tort where the defendant’s conduct constitutes a

conscious disregard of the probability of injury to others.’”

Op. 54. But the challenge in Grimshaw was a facial chal-

lenges to the statute and punitive damage standards, i.e., an

argument that the standards are unconstitutionally vague in

all cases. See Grimshaw, 119 Cal.App.3d at 811 (rejecting

challenge to constitutionality of statute on general ground it

has been “clear that a manufacturer of a dangerous, defective

product might be liable for punitive damages if it knowingly

exposed others to the hazard”). Ford’s argument here is not

that section 3294 is, on its face invalid; Ford agrees that the

statute can in fact be constitutionally applied to some fact

patterns.

Instead, Ford’s vagueness challenge asserts that, while

the statute’s language might be constitutional as applied to

certain kinds of conduct, that same language can be unconsti-

tutionally vague when applied in other contexts, and thus

“vagueness challenges ... must be examined in the light of

the facts of the case at hand.” United States v. Mazurie

17a

(1975) 419 U.S. 544, 550; see also A.B. Small Co. v. Am.

Sugar Ref. Co. (1925) 267 U.S. 233, 239; Cranston v. City of

Richmond (1985) 40 Cal.3d 755, 775 (vagueness challenge

must be evaluated “in light of the facts of the case at hand”)

(citing Mazurie).

No California decision, including Grimshaw, addresses

whether Section 3294’s punitive damage liability standard,

while adequate in some other contexts, is unconstitutionally

vague as applied to the design defects alleged in this case.

As Ford demonstrated, section 3294, is unconstitutionally

vague as applied to the facts here.

Indeed, the Opinion drives home just how vague the pu-

nitive damages standard is as applied in this context. The

Court holds that manufacturers cannot rely on federal regula-

tions to guide their. conduct because “[g]overnmental safety

standards . . . have failed to provide adequate consumer pro-

tection.” (Op. 49-50) They cannot consider industry stan-

dards or custom, or even actual data regarding how the prod-

uct is performing in the real world, because this is “irrelevant

not only to the issue of defect, but also to punitive damages.”

(Op. 24) And they cannot rely on the judgment of their engi-

neers and managers that a product is safe, where other engi-

neers have proposed other design changes. (Op. 46-47). If

this is a correct interpretation of California law, then section

3294 is unconstitutionally vague as applied here because

Ford has no guidance as to the legality of its conduct. Cf

A.B. Small, 267 U.S. at 239-40 (statute unconstitutionally

vague because “there was no accepted and fairly stable

commercial standard which could be regarded as impliedly

taken up and adopted by the statute”); ACLU v. Board of

Education (1963) 59 Cal.2d 203, 218.

* * * * *

18a

I. The Court’s Ruling That The $55 million Puni-

tive Damage Award Comports With Due Process

Is Erroneous And Warrants Rehearing

This Court concluded that the $75 million punitive dam-

age award was “excessive,” and reduced it to $55 million.

Op. 57. But this is still grossly excessive and unconstitu-

tional. Indeed, it remains the largest single accident personal

injury punitive damage award ever affirmed on appeal in

California history. This Court should grant rehearing and

hold that, as a matter of due process, the punitive damage

award should be set aside in its entirety because Ford’s con-

duct was not sufficiently reprehensible to justify an addi-

tional sanction over and above the $27.6 million compensa-

tory damage award. See State Farm, 538 U.S. at 419 (“{iJt

should be presumed a plaintiff has been made whole for his

injuries by compensatory damages, so punitive damages

should only be awarded if the defendant’s culpability, after

having paid compensatory damages, is so reprehensible as to

warrant the imposition of further sanctions to achieve pun-

ishment or deterrence”) (emphases added). In the alterna-

tive, the Court should further reduce the punitive damage

award so that it bears no more than a 1:1 ratio to the compen-

satory award.

* * * * *

3. The Court also committed constitutional error in its

interpretation of the State Farm/Gore reprehensibility guide-

post by failing to consider any objective factors bearing on

that issue. Applying its erroneous and highly deferential

standard of review as to the facts, and referring back to its

earlier analysis of the facts under state law, the Court states

that the “reprehensibility of Ford’s acts was high” (Op. 59-

60), but in doing so the Court disregards all of Ford’s evi-

dence to the contrary as well as numerous objective factors

that must be considered in deciding reprehensibility in the

product liability context, including whether (a) there are rea-

19a

sonable, good faith grounds for disagreement regarding the

product design issues that form the basis for liability; (b) the

product conforms to governmental safety standards or policy

decisions; (c) the product conforms to industry standards and

custom; and (d) the challenged conduct was part of a good

faith effort by the manufacturer to design a lawful product

that consumers would find desirable.

These factors are directly relevant to whether Ford’s

conduct “evinced a reckless disregard for the safety of its

customers” (Op. 60) and was “reprehensible” for purposes of

the due process analysis.! Along with the other portions of

the record the Court refused to consider, these factors show

Ford acted in good faith in seeking to design a reasonably

safe vehicle, refuting both malice and reprehensibility. AOB

40-56; ARB 32-34,36-44, 46-49. There is substantial evi-

dence that Ford management and engineers believed that the

Explorer would be an exceedingly safe and stable vehicle,

which it was—though the Court excluded Ford’s “real

world” evidence on that point. Ford’s good faith belief that

its conduct was lawful was based on, among other things, its

compliance with federal safety standards and industry cus-

tom, and eliminates, or at the very least mitigates signifi-

cantly, any reprehensibility. See BMW of N. Am., Inc. v.

Gore (1996) 517 U.S. 559, 565, 570-71, 577-78 (defendant’s

reliance on other state statutes authorizing the conduct at is-

sue was reasonable and substantially mitigated reprehensibil-

| The Court states that the purported evidence of such reprehen-

sibility was “primarily adduced through Ford’s own internal

memoranda and correspondence.” Op. 61. The Court omits that

such a conclusion could be deduced only from: (1) misleading

snippets of those documents, from which the opposite conclusion

is drawn if the documents are read as a whole, and (2) a failure to

appraise the record as a whole.

20a

ity); see also Clark v. Chrysler Corp. (6th Cir. 2006) 436

F.3d 594, 602 (cutting $3 million punitive award to approxi-

mately $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”’).

4. This Court erroneously placed undue emphasis on the

injuries suffered by Mrs. Wilson as part of the reprehensibil-

ity analysis. Op. 59-60. A// products pose risks that persons

will be seriously injured or killed when using the products,

see Corrosion Proof Fittings v. E.P.A. (5th Cir. 1991) 947

F.2d 1201, 1223 n.23 (“over the next 13 years, we can expect

more than a dozen deaths from ingested toothpicks”), so an

analysis focusing on whether the manufacturer “knew” of

such risks and whether such risks were realized as to the

plaintiff provides no meaningful guidance, especially in the

context of automobiles, which by their very nature pose sig-

nificant safety risks.

By placing so much emphasis on the pain suffered by

Mrs. Wilson in its reprehensibility analysis (Op. 59) the

Court effectively double punished Ford because the large

non-economic damage award already addresses Mrs. Wil-

son’s pain and siffering in violation of State Farm. 538 U.S.

at 426 (“The compensatory damages for the injury suffered

here ... likely were based on a component which was dupli-

cated in the punitive award.

5. The Court incorrectly found Ford’s conduct “more

reprehensible” because it was “repeated and not an isolated

incident.” Op. 60. To the extent that the Court is suggesting

that Ford’s conduct was “repeated” because Ford mass-

marketed the Explorer, this ruling violates due process. It

flatly violates State Farm, as well as Johnson v. Ford Motor

Co. (2005) 35 Cal.4th 1191, because the Court is punishing

Ford for its conduct as to third parties not before the Court

and “hypothetical claims” of those third parties, “without

ever proving the specifics of those ‘hypothetical claims.’”

2la

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

as the record reflects but this Court does not mention, Ford

won the 13 prior trials alleging defects in the Explorer. By

simply assuming that every sale of the Explorer is an exam-

ple of “repeated” misconduct this Court has effectively wiped

out those thirteen prior victories (and others since), and in-

flicted punishment based on conduct exonerated by other ju-

ries. The Court has also subjected Ford to the threat of du-

plicative punishment in future cases that rely on the same

supposed “repeated” conduct to impose additional punitive

damages against Ford for marketing the Explorer. See John-

son v. Ford, 35 Cal.4th at 1209-10; see also Williams v.

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

Court’s endorsement of the use punitive damages as a regula-

tory mechanism to augment supposedly inadequate consumer

protection efforts by the government, Op. 49-50, suffers from

the same due process problems.

To the extent the Court’s “repeated misconduct” analysis

intended to refer to plaintiffs’ claim Ford repeated its pur-

ported design errors in the Bronco II when it designed the

Explorer, it violates due process for similar reasons. This

mode of analysis punishes Ford for its design of the Bronco

II, a vehicle that is not at issue in this case, and for conduct as

to Bronco II purchasers, third parties not before the Court.

This, in turn, eradicates Ford’s victories in Bronco II cases,

imposes duplicative punishment to the extent Ford has al-

ready been subjected to punitive damages in a Bronco II

case, and punishes Ford for conduct that is dissimilar from

the conduct that harmed the plaintiffs before this Court.

State Farm, 538 U.S. at 423.

5. The Court’s statement that “the jury finding that Ford

acted with ‘oppression, fraud or malice’ demonstrates that

Ford’s actions were intentional” (Op. 61), is both factually

and legally incorrect. Ford did not intend to injure the Wil-

22a

sons and the theory of underlying liability is strict liability—

the opposite of an intentional tort.

This Court’s analysis, however, conflates an intentional

act, a design decision, with an intent to cause harm. Under

State Farm and Gore, the relevant “intent” is an intent to

cause injury, not an intent to adopt the challenged design.

6. The Court erroneously stated that Ford’s considera-

tion of “financial incentives” makes its conduct reprehensi-

ble. Op. 60. As discussed above, it was wholly appropriate,

indeed legally required, for Ford to consider financial costs in

designing products. See Phillips, 883 A.2d 439 at 4457

(“[we] flatly reject [the plaintiff's] assertion that [the defen-

dants’| weighing of financial concerns in determining

whether to incorporate additional safety features into its

product on a unilateral basis establishes that [the defendants]

acted wantonly”).

7. The Court also erroneously concludes that the pur-

ported reprehensibility of Ford’s conduct was high because

Ford’s “target” was “vulnerable” consumers who “would not

understand vehicle design, development and manufacture.”

Op. 60. The proper inquiry is whether the defendant targeted

“financially vulnerable” persons—and this factor is intended

to be used in financial tort cases, not in a product liability

case. See State Farm, 538 U.S. at 419. There was no evi- -

dence that Ford targeted plaintiffs for this reason, or that

plaintiffs were financially vulnerable, or that any financial

vulnerability contributed to their injuries. Finally, this analy-

sis improperly punishes Ford for its alleged conduct as to

third parties not before the Court—supposed other “vulner-

able” consumers—in further violation of due process.

8. The Court also misapplied the ratio of punitive dam-

ages to compensatory damages guidepost here. The Court

erroneously concludes that a two-to-one ratio is warranted

because Ford’s reprehensibility is purportedly high. Op. 63.

As discussed supra, the Court has misapplied the reprehensi-

23a

bility guidepost and is mistaken in this conclusion, and thus

there is no basis for a two-to-one ratio here. Moreover, given

the enormous and punitive nature of the noneconomic dam-

ages award here, even a one-to-one ratio is too high here.

See State Farm, 538 U.S. 435 (“[w]hen compensatory dam-

ages are substantial, then a lesser ratio, perhaps only equal to

compensatory damages can reach the outermost limit of the

due process guarantee”).

* ra * + *

APPENDIX C

No. D045154

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,

7 a

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. (132099)

WILLIAM E. THOMSON (187912)

EILEEN M. AHERN (216822)

GIBSON, DUNN & CRUTCHER LLP

333 S. Grand Avenue, Suite 4700

Los Angeles, CA 90071-3197

25a

Tel: (213) 229-7000

Fax: (213) 229-7520

THEODORE B. OLSON (038137)

PAUL DECAMP (195035)

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036-5306

Telephone: (202) 955-8500

Facsimile: (202) 467-0539

Attorneys for Appellant Ford Motor Company

and Drew Ford

INTRODUCTION

The jury awarded the sole occupant in a single-vehicle

rollover accident (and her husband) more than $368,000,000.

The superior court reduced the award to $750,000,000, but

that judgment itself is unlawful, unprecedented, and uncon-

stitutional.

This case involves the 1997 Ford Explorer 4x4, a popu-

lar sport utility vehicle. Before this trial, thirteen Explorer

cases involving similar claims went to judgment, and in al/

thirteen cases judgment was entered in favor of Ford. Sev-

eral juries expressly found the Explorer non-defective. In

this case, plaintiffs were allowed to focus much of their case,

over Ford’s continuing objection, on a different, older vehi-

cle: the Ford Bronco II. Bronco II evidence, spanning dec-

ades, permeated the trial, and plaintiffs’ primary strategy was

to blur the distinction between the Explorer and the Bronco I

.ad confuse the jury so that it would impose liability and

punishment based on a vehicle that did not injure these plain-

tiffs and was not at issue in the case.

While admitting extensive irrelevant evidence about the

Bronco II, the trial court also excluded highly relevant evi-

26a

dence about the vehicle at issue, the 1997 4-door Explorer.

Among other things, plaintiffs were allowed to attack the Ex-

plorer with the allegedly excessive rollover rate of the

Bronco II compared to other vehicles, but the court precluded

Ford from defending the Explorer with its own real-world

rollover rate compared to other vehicles. This evidence was

critical both to distinguish the Explorer from the Bronco II

and to show that the Explorer’s risk of injury from rollover is

not excessive. Evidence of the extent of the risk that plain-

tiffs’ claim is excessive is obviously relevant to the basic li-

ability issue—i.e., whether the risks of the challenged design

exceed its utility—as well as central to the punitive damage

inquiry. It also would have served to debunk plaintiffs’ pri-

mary theory that the so-called “static stability index” of a ve-

hicle determines its risk of rollover and that the Explorer was

defective simply because its static stability index was similar

to that of the Bronco II.

The double-barreled effect of these erroneous eviden-

tiary rulings, which allowed plaintiffs to conduct a full trial

of the Bronco II while preventing Ford from defending the

Explorer, was highly prejudicial, and violated both California

law and due process, as evidenced by the grossly excessive

verdict. The jury awarded $//8,000,000 in non-economic

damages, which was more than five times the amount even

plaintiffs contended the evidence supported. The court re-

duced the compensatory award to $75,000,000, but it remains

irrational, punitive, tainted by passion and prejudice, and

grossly excessive, especially when compared to the largest

awards upheld for similar injuries in other California cases.

In addition to finding the Explorer defective, the jury de-

termined—by the slimmest of margins (9-3)—that the Ex-

plorer’s design warranted severe punishment. But the 1997

Explorer:

e complied with all relevant government safety

standards,

27a

e passed all of the handling and stability tests

advocated by plaintiffs’ own expert,

e passed all of Ford’s internal handling and sta-

bility tests,

e passed the Consumers Union test, which

plaintiffs suggested throughout the trial was

the most important of all the tests of stability

in “accident avoidance maneuvers” like

those involved in this case, and

e has a risk of rollover comparable to other

SUVs.

The regulatory agency responsible for automotive safety has

consistently rejected plaintiffs’ theory that a minimum “static

stability index” well above that of the Explorer and other

SUVs is necessary for automotive safety. And as noted

above, numerous juries presented with the same defect

claims have concluded the Explorer is not defective, and

some of the jurors in this case agreed.

In short, there indisputably 1s a sufficient basis for rea-

sonable people, including Ford engineers and managers, to

conclude that the Explorer’s design was not defective. Plain-

tiffs presented evidence that, at most, would allow reasonable

people to disagree. California law does not allow punitive

damages when reasonable people can disagree about the law-

fulness of the conduct at issue. Indeed, if California law

were interpreted to allow punitive damages in this case, that

law would be unconstitutionally vague as applied in violation

of the Due Process Clauses of the California and U.S. Consti-

tutions because it failed to provide fair notice of what con-

duct is punishable and allows arbitrary and discriminatory

law enforcement by individual juries.

Yet the jury awarded $246,000,000 in punitive damages,

more than twice the amount plaintiffs requested. The court

reduced that award to a still record-setting, grossly excessive,

28a

and unconstitutional $75,000,000. The court also allowed

the jury to base its punishment on Ford’s worldwide wealth

and profits in direct violation of this Court’s decision in Peo-

ple v. R.J. Reynolds Tobacco Co. (2004) 116 Cal:App.4th

1253, 1289.

Accordingly, Ford is entitled to judgment in its favor re-

garding punitive damages and a new trial as to all other is-

sues.! At a minimum, this Court should order a new trial on

all issues or a very substantial remittitur.

* * * * *

ARGUMENT

I. Ford Is Entitled To A New Trial Because Of Sev-

eral Highly Prejudicial, Erroneous Evidentiary

Rulings

* * * * *

The superior court abused its discretion with respect to

two key evidentiary issues, in violation of California law and

due process. The importance of these errors is underscored

by the serious due process implications of preventing a de-

fendant facing unprecedented punishment from presenting

relevant evidence in its defense (see People v. Reeder (1978)

82 Cal.App.3d 543, 552-53) and allowing irrelevant and im-

proper evidence to be used in support of such punishment.

See State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538

U.S. 408, 423.

| A reversal of the judgment also would require a reversal of the

post-trial order awarding costs.

29a

A. Admitting Extensive Evidence About The

Bronco II Was Erroneous And Prejudicial

The plaintiffs in all thirteen previous Explorer cases to

go to verdict lost. AA1154-1237.2 Faced with that record,

plaintiffs pulled a bait-and-switch by basing much of their

presentation not on the relevant vehicle—the Explorer—but

on a different vehicle, the Bronco II, which had ceased pro-

duction by 1990. The decision to allow this irrelevant evi-

dence over Ford’s objection was erroneous and prejudicial.

Plaintiffs argued throughout trial that the Explorer was

merely a renamed, retooled Bronco II; focused much of their

opening and closing arguments on the Bronco II; spent the

better part of four days examining witnesses about the

Bronco IJ; and based much of their experts’ testimony on the

design and stability characteristics of the Bronco II, as well

as evidence of some unspecified parts carryover from the

Bronco II to the Explorer. See, e.g., RT662:19-690:13,

1255:6-17, 1269:11-1272:17, 1274:26-1275:19, 8169:5-

'8179:14, 8508:22-24, 8509:8-9; AA2533. They argued the

Bronco II had been “singled out ... among compact utility

vehicles” because of its “death record” (RT669:12-17) and

elicited testimony from their experts that “data shows the

Bronco II to have a higher fatal rollover rate relative to cer-

tain competitors,” and that its “rollover rate is three times

higher than the Chevy S-10 Blazer.” E.g., RT1265:1-

1266:27; 1247:12-1252:27, 1265:1-1266:27, 1269:11-

1270:5, 2847:5-2851:11, 2852:2-15, 2858:13-2879:25,

2890: 18-20; AA2111-2476, 2524-2526. Plaintiffs examined

witnesses at length about the BroncolII’s development

2 The superior court refused to allow Ford to present argument

about those verdicts to the jury in defense of the punitive damage

claim. RT8452:22-8453:5, 8534:26-8537:15; 8516:12-26.

30a

(RT1247:12—1304:17, 2858:13-2945:25, 2970:15-3058:2,

3266:18-3313:18); marketing strategy (RT2982:24-2983:1);

litigation, including discovery responses (RT1241:9-12,

2848:24-27); and allegedly missing Bronco Il documents

from the 1970s and early 1980s. RT2877:19-2878:3.

Plaintiffs’ counsel even encouraged the jury to impose

punitive damages based on the Bronco II alone: “They go

ahead and release the Bronco II in 1983 ... without recom-

mended track width and [center of gravity] changes, knowing

it will roll over and kill and or catastrophically injure many

people, which it has. Fraud, oppression, malice, these are

issues that relate to the last question on the verdict form ...

the most importance [sic] you will give in this case. And that

is yes. Hopefully.... [Y]ou learned about the Office of the

General Counsel confiscating [Bronco II] stability docu-

ments. 53 of those documents are missing. This is the report

to the Consumers Union. Bronco ll.... Quotation in the

document. ‘We are in deep trouble regarding our rollover

rates. Our rollover rate is three times higher than the Chevy

S-10 Blazer. We think, however, we have clouded their

minds.’... Conscious, deliberate, oppressive, fraudulent

conduct.” RT8172:17-8174:3. See also RT2879:7-25,

8172:27-8173:6.

Allowing this irrelevant and inflammatory evidence and

argument, particularly to the extent it was allowed here, was

highly prejudicial error requiring a new trial.> Indeed, plain-

tiffs’ invocation of the Bronco II as a basis for punitive dam-

3 Although some incidental references to the Bronco II might

have becn unavoidable because certain carly Explorer design

documents referenced the Bronco II as Ford’s earlier 2-door SUV,

that did not make evidence about the Bronco II relevant to whether

the 1997 4-door Explorer is defective.

3la

ages, in and of itself, is unconstitutional and grounds for re-

versal, because due process forbids imposing punitive dam-

ages against a defendant for conduct other than the specific

conduct that harmed the plaintiffs before the court. State

Farm, 538 U.S. at 423.4

* * * * *

3. The excluded evidence was highly rele-

vant to rebut plaintiffs’ Bronco II evi-

dence and claim for punitive damages.

Plaintiffs were allowed to put on misleading evidence

and argued at length to the jury that the Bronco II’s supposed

“real world” rollover rate told Ford’s engineers and “upper

management” that their decisions regarding the Explorer

were wrong. F.g., RT1265:5-27, 8509:2-7. In both opening

statement and closing argument, plaintiffs’ counsel empha-

sized that the Bronco II supposedly had a “fatal rollover rate”

that was three times as high as its closest competitors, includ-

ing the Chevy Blazer. RT663:20-27; 8173:20-25. Plaintiffs

claimed that Ford willfully disregarded the “what they knew”

based on this comparative “fatal rollover rate.” RT8171:4-

8174:3.

But the court’s rulings precluded Ford from proving that

the Explorer’s “fatal rollover rate’—which is based on the

4 The California Supreme Court’s recent decision in Johnson v.

Ford Motor Co. (2005) -- Cal.4th --, 29 Cal.Rptr.3d 401, confirms

that a defendant may not be punished for conduct that did not harm

the plaintiff (see id. at 413 fn.6), that only conduct similar to that

which injured the particular plaintiff is even potentially relevant to

the punitive damage analysis (see id. at 411), and that “in the con-

text of civil actions courts must ensure the conduct in question rep-

licates the prior transgressions.” Jd. (quoting State Farm, 538 U.S.

at 423-24) (emphasis added).

32a

same government database upon which plaintiffs relied to

attack the Bronco Il—compared very favorably to that of its

closest competitors, and was nearly identical to that of the

Blazer. In other words, plaintiffs were allowed to attack the

Explorer with the “fatal rollover rate” of the Bronco II com-

pared to other vehicles, but Ford was precluded from defend-

ing the Explorer with its own “fatal rollover rate” compared

to other vehicles, including the very same vehicles plaintiffs

used for comparison. It is difficult to imagine a more irra-

tional, unfair, and prejudicial combination of evidentiary rul-

ings.

Ford’s safety record evidence was highly relevant to the

punitive damage inquiry, which required the jury to evaluate

whether Ford’s conduct in choosing the Explorer design was

“despicable” and “malicious” under California Civil Code

section 3294 and whether Ford “willfully and consciously”

disregarded a manifestly unreasonable risk of serious injury.>

Given that all vehicles pose some degree of risk, including

rollover risk, manufacturers must always make design deci-

sions weighing risks and benefits. Indeed, plaintiffs argued

that Ford’s engineers should have considered more closely

alleged statistical evidence of rollover rates in making their

design decisions. RT1265:20-22, 1266:3-5, 1266:15-27.

5 In denying Ford’s new trial motion, the court overlooked the

punitive damages aspect of Ford’s argument. Compare AA2055

(court’s statement that “Ford advocates that evidence of the safety

of other SUVs is necessary to show the safety of the Ford Ex-

plorer”) with AA1062-1063 (Ford’s argument that excluding this

evidence was “highly prejudicial to the jury’s evaluation of

whether Ford’s conduct in choosing the Explorer design was ‘des-

picable’ and ‘malicious’ within the meaning of California Civil

Code section 3294”).

33a

As discussed above (supra Part LA), even plaintiffs’

evidence showed that Ford employees expected the Explorer

to be safer than the Bronco II. But Ford was precluded from

showing that the Explorer’s actual safety record proved those

Ford employees right and proved plaintiffs’ assertion that the

1997 Explorer was a thinly-disguised Bronco II wrong.

This violated not only California law but the Due Proc-

ess Clause, as it unjustifiably restricted Ford from defending

itself against the threat of unprecedented punishment. See

State Farm, 538 U.S. at 417-18. Had even one more juror

voted for Ford, several of the liability and damages verdicts

would have been different, and there would be no punitive

award. The rulings are a clear and prejudicial abuse of dis-

cretion, violate due process, and must be reversed. See

Osborn, 5 Cal.App.4th at 254-55.

Ii. As A Matter Of Law, Punitive Damages Cannot

Be Imposed In This Case

* * * * *

As shown below, California law and basic due process

principles require that judgment be entered for Ford on puni-

tive damages.

* * * * &

B. If California Law Would Allow Punishment

On This Record, Then The Law Is Unconsti-

tutionally Vague As Applied

If Section 3294 would permit an award of punitive dam-

ages against Ford, then that statute is unconstitutionally

vague as applied to this case.

As a matter of due process under the California and

United States Constitutions, a quasi-criminal law is unconsti-

34a

tutionally vague where either of two conditions is met.®

“First, it may fail to provide the kind of notice that will en-

able ordinary people to understand what conduct it prohibits;

second, it may authorize and even encourage arbitrary and

discriminatory enforcement.” People v. Castaneda (2000) 23

Cal.4th 743, 751 (quoting City of Chicago v. Morales (1999)

527 U.S. 41, 56); accord, e.g., Hill v. Colorado (2000) 530

U.S. 703, 732. “[A] fair warning should be given to the

world in language that the common world will understand, of

what the law intends to do if a certain line is passed.” Arthur

Andersen LLP v. United States (2005) 544 U.S.--, 125 S.Ct.

2129, 2134 (citation omitted). See also State Farm, 538 U.S.

at 417; Simon v. San Paolo U.S. Holding Co. (2005) —

Cal.4th —, 29 Cal.Rptr.3d 379, 392. Clarity is “particularly

appropriate here, where the act underlying” the liability find-

ing—manufacturing an automobile—“is by itself innocu-

ous.” Arthur Andersen, 125 S.Ct. at 2134. If California law

allows punishment under the circumstances here, where rea-

sonable people can and do disagree with the scientific reli-

ability of plaintiffs’ theory of defect, it is unconstitutional as

applied, under both prongs of the vagueness doctrine.

1. As applied, Section 3294 failed to pro-

vide Ford a reasonable opportunity to

know what conduct is punishable

“{B]lecause we assume that man is free to steer between

lawful and unlawful conduct, we insist that laws give the per-

son of ordinary intelligence a reasonable opportunity to know

what is prohibited, so that he may act accordingly.” Grayned

6 Punitive damages are “quasi-criminal” and “operate as ‘private

fincs’ intended to punish the defendant and detcr future wrongdo-

ing.” Cooper Indus., Inc. v. Leatherman Tool Group, Inc. (2001)

532 U.S. 424, 432.

35a

v. City of Rockford (1972) 408 U.S. 104, 108; accord

Morales, 527 U.S. at 56 (fair notice principle serves the pur-

pose of “provid[{ing] the kind of notice that will enable ordi-

nary people to understand what conduct [a law] prohibits”).

States may not enforce a “statute which either forbids or re-

quires the doing of an act in terms so vague that men of

common intelligence must necessarily guess at its meaning

and differ as to its application.” United States v. Lanier

(1997) 520 U.S. 259, 266; accord, e.g., Gatto v. County of

Sonoma (2002) 98 Cal.App.4th 744, 773-74 (same). This

standard forbids punishment when people of common intelli-

gence can differ on whether that conduct is unlawful.’

7 See, e.g., United States v. Capital Traction Co. (D.C. Cir.

1910) 34 App.D.C. 592; Connally v. Gen. Constr. Co. (1926) 269

U.S. 385, 391-95 (endorsing Capital Traction); Southwestern Tel.

& Tel. Co. v. Danaher (1915) 238 U.S. 482, 490-91; Colautti v.

Franklin (1979) 439 U.S. 379, 395-96; People v. Mirmirani (1981)

30 Cal.3d 375; People v. Barksdale (1972) 8 Cal.3d 320; Hewitt v.

State Bd. of Med. Exam’rs (1906) 148 Cal. 590, 592-93 (“Taking a

given advertisement by a physician, the members of one board

might conclude that it contained ‘grossly improbable statements,’

while another board might reach an entirely opposite conclusion.

One might conclude that the statement while ‘improbable’ was not

‘grossly’ so. the advertisement of a physician which one board

had determined did not come within the inhibition of the rule ac-

cording to its judgment, a succeeding board might conclude did.”);

People v. North (2003) 112 Cal.App.4th 621; see also Lanier, 520

U.S. 259 (noting qualified immunity test provides same protection

as vagueness doctrine); Anderson v. Creighton (1987) 483 U.S.

635, 641 (cited in Lanier; officer entitled to argue for summary

judgment on grounds that “he could, as a matter of law, reasonably

have belicved that [his conduct] was lawful”).

36a

If a manufacturer is subject to punishment for selling a

product it has reasonable grounds to conclude is not defec-

tive, the only way that any manufacturer can avoid punish-

ment is to cease producing products that might be subject to

criticism by other reasonable people with differing views.

This, in effect, means that manufacturers can avoid punish-

ment only if they stop selling products, because all products

can cause injury and litigation experts can be retained to

criticize almost any aspect of a product that results in injury.

This case is a graphic illustration of this point. Other

than the federal safety standards with which the Explorer in-

disputably complied, that is no objective legal measure of

how resistant to rollover or roof crush a vehicle must be in

order to be deemed “non-defective.” Reasonable people can

disagree on those issues. In the face of such inherent uncer-

tainty, whether a particular design is defective, much less

may subject Ford to punishment, can be known only by the

after-the-fact determination of a particular jury. And different

juries are likely to reach different conclusions. Such an im-

precise standard is so vague that reasonable people “must

necessarily guess at its meaning and differ as to its applica-

tion.” Castaneda, 23 Cal.4th at 751. If Section 3294 permits

an award of punitive damages in this case, it is unconstitu-

tionally vague as applied.

2. As applied, Section 3294 permits arbi-

trary and discriminatory enforcement

“{I]f arbitrary and discriminatory enforcement is to be

prevented, laws must provide explicit standards for those

who apply them.” *Grayned, 408 U.S. at 108-09; see also

Giaccio v. Pa. (1966) 382 U.S. 399, 403-04. That is because

“{a] vague law impermissibly delegates basic policy matters

to policemen, judges, and juries for resolution on an ad hoc

and subjective basis, with the attendant dangers of arbitrary

and discriminatory application.” Jd.; see also Morales, 527

U.S. at 56; Castaneda, 23 Cal.4th at 751; Kolender v. Law-

37a

son (1983) 461 U.S. 352, 357-58; Gatto, 98 Cal.App.4th 744;

People v. Superior Court (1982) 31 Cai.3d 797; Hewitt, 148

Cal. at 594.

The danger of arbitrary and discrinvinatory enforcement

is particularly acute in this case. First, Ford is a large, multi-

national corporation with neither its headquarters nor its

principal place of business in California. “Punitive damages

pose an acute danger of arbitrary deprivation of property,”

and “creat[e] the potential that juries will use their verdicts to

express biases against big businesses, particularly those

without strong local presences.” Honda Motor Co. v. Oberg

(1994) 512 U.S. 415, 432. Second, in the product liability

context the test for determining whether a product is defec-

tively designed is not clear but is instead fraught with ambi-

guities and uncertainty. The jury must consider “a list of

competing considerations ... to evaluate in determining the

existence of a design defect” (Anderson v. Owens-Corning

Fiberglas Co. (1991) 53 Cal.3d 987, 1001 (emphasis

added)), and conducts this unguided “balancing” process

“through hindsight.” Barker, 20 Cal.3d at 430 (emphasis

added). Given the inevitable, and often legitimate, differ-

ences of opinion regarding the proper mix of these and other

conflicting goods, many product liability cases fall within a

range of reasonable disagreement:

There is therefore a vast defect “no man’s

land” where a manufacturer has no idea

whether it is on the right or wrong side of the

law.... The very notion of how much design

safety is enough, and to a lesser extent how

much safety information is enough, involves a

morass of conceptual, political and practical

issues on which juries, courts, commentators

and legislatures strongly disagree.

38a

David G. Owen, Problems In Assessing Punitive Damages

Against Manufacturers Of Defective Products, 49

U.CHL.L.REV. 1, 37 (1982).

Moreover, while there is no dispute that a risk-utility test

is appropriate in many contexts, empirical evidence shows

that many jurors are prejudiced against risk-utility balancing.

Research shows juries are more likely to inflict punitive

damages where a defendant has engaged in such a process

during the design of a vehicle. W. Kip Viscusi, Corporate

Risk Analysis: A Reckless Act?, 52 STAN.L.REV. 547, 550-

51, 556, 589-90 (2000). But California law, by making risk-

utility balancing part of its test for design defect, requires a

manufacturer to engage in such balancing. See Barker, 20

Cal.3d at 432. If California law permits juries to award puni-

tive damages based on their own “personal predilections”

concerning risk-utility balancing, then California law is un-

constitutionally vague. Kolender, 461 U.S. at 358.

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

Or At The Very Least A Substantial Remittitur

* * * * *

B. The Punitive Damages Award Is Excessive

And The Product Of Improper Considera-

tions -

The punitive damage award, even as remitted; violates

due process and California law. This Court has an obligation

to engage in “exacting” de novo review of the size of the pu-

nitive award to ensure it comports with due process. State

Farm, 538 U.S. at 418; see also Simon v. San Paolo U.S.

Holding Co., Inc. (2005) --Cal.4th--, 29 Cal.Rptr.3d 379,

387-88.

39a

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 outra-

geous $246,000,000 punitive damages verdict—further con-

firms that the jury was motivated by anger, passion, preju-

dice, and bias. The award here is simply off the charts. It is

more than three times larger than the largest punitive dam-

ages award ever upheld in California in an automotive prod-

ucts liability case in a published opinion. See Romo, 113

Cal.App.4th 738 ($23,723,287 award where accident in-

volved three deaths and three other seriously tmjured indi-

vidials). As of 1997, the year of plaintiffs’ vehicle, the larg-

est automobile products liability punitive damages award up-

held in a published California decision was $4,000,000, or

roughly 1/1 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.

“{Ljarge compensatory damage awards . . . have a strong de-

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

Aircraft Co. (2000) 22 Cal.4th at 424 (Brown, J., concur-

ring); Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1106

(same). Heaping punishment on top of punishment by allow-

ing the separate punitive damages award to stand would be

excessive and unconstitutional.

Moreover, if the compensatory damages award is re-

duced, then the punitive award must likewise be reduced to

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

40a

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 puni-

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

* * * * *

4la

APPENDIX D

No. D045154

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’ REPLY BRIEF

THEODORE J. BOUTROUS, JR. (132099)

WILLIAM E. THOMSON (187912)

EILEEN M. AHERN (216822)

GIBSON, DUNN & CRUTCHER LLP

333 S. Grand Avenue, Suite 4700

Los Angeles, CA 90071-3197

42a

Tel: (213) 229-7000

Fax: (213) 229-7520

THEODORE B. OLSON (038137)

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036-5306

Telephone: (202) 955-8500

Facsimile: (202) 467-0539

Attorneys for Appellant Ford Motor Company

and Drew Ford

* * * * *

IV. PUNITIVE DAMAGES ARE, AS A MATTER

OF LAW, PRECLUDED HERE

A. Punitive Damages Cannot Be Imposed

Where Plaintiffs Proved, At Most, The Exis-

tence Of A Reasonable Disagreement Re-

garding The Explorer’s Design.

As Ford demonstrated in its opening brief, it is a funda-

mental principle of California and American jurisprudence

that, where a defendant has reasonable grounds for believing

its conduct is lawful, it cannot be subjected to punitive dam-

ages, even if the evidence is sufficient for purposes of assess-

ing compensatory liability. AOB58-60 (citing cases); see

also, e.g., Southwestern Tel. & Tel. Co. v. Danaher (1915)

238 U.S. 482, 490 (holding that a $6,300 civil penalty vio-

iated due process where defendant had a good faith belief

that its conduct was lawful). In response, plaintiffs do not

really dispute this principle, but instead fall back on slogans,

mischaracterizations and the assertion that there is only one

right answer to the complex engineering questions posed to

43a

the jury in this case. RB43-47.! But if the record makes one

thing clear, it is that these issues have been the subject of

genuine and vigorous dispute in the engineering community

for decades, with plaintiffs’ experts and others on one side of

the debates and the federal Safety Administration, Ford and

other auto manufacturers on the other.

Regardless..of who an individual jury agrees with on

these reasonably debatable issues, California law, due proc-

ess, and common sense prohibit the use of punitive damages

to punish Ford for its positions in these debates—indeed, a

vital feature of science and engineering is the process of de-

bate and disagreement that leads to technological advance-

ment. Daubert v. Merrell Dow Pharm., Inc. (1993) 509 U.S.

579, 596-97 (“open debate is an essential part of ... scien-

tific analyses.... Scientific conclusions are subject to per-

petual revision.”). To hold otherwise would not only be un-

fair but it would discourage precisely the kind of free and

open discussion that is essential to safety innovation and im-

provement.

Thus, to decide this issue, Ford is not asking this Court

to decide who is correct or to override factual determinations

made by the jury, as plaintiffs wrongly suggest. RB44-45.

Instead, the issue presented is purely a legal one: were there

grounds for reasonable disagreement regarding the lawful-

| As Ford pointed out in its opening brief, it made an offer of

proof in the trial court to show that 13 Explorer verdicts were ren-

dered in favor of Ford before the jury’s verdict here, including

some that specifically rejected defect claims like those advanced

here. Plaintiffs’ professed indignation at Ford’s reference to these

verdicts (RB24) is especially misplaced in light of plaintiffs’ heavy

reliance on other cases—none of which involved the Explorer—

that went against Ford. RB9, 20-21, 51.

44a

ness of the conduct at issue in this case? The answer is

clearly “Yes,” and the punitive damage award therefore must

be set aside as a matter of law.

* * * * *

V. THE PUNITIVE DAMAGE AWARD IS UN-

CONSTITUTIONALLY EXCESSIVE

* * * * &

A. The Punitive Damages Award Does Not

Comply With Constitutional Guideposts.

Plaintiffs claim the punitive damages award was proper

because Ford’s conduct was “highly reprehensible” for five

reasons: (1) it caused physical, not economic, harm; (2) it

evinced an indifference to the safety of others; (3) its target

was financially vulnerable; (4) it had a “pattern of deficient

design regarding safety in favor of increased financial re-

turns”; and (5) the harm was not accidental. RB53-54.

Plaintiffs ignore the proper standard of review. The

United States Supreme Court has held that courts have a spe-

cial obligation, as a matter of federal due process, to engage

in “[e]xacting” de novo review of punitive damages awards,

see, e.g., State Farm, 538 U.S. at 418, which requires courts

to, among other things, “makje] an independent assessment

of the reprehensibility of the defendant’s conduct” without

deference to any “implied” “findings” by the jury. Simon v.

San Paolo U.S. Holdings, Co., Inc. (2004) 35 Cal.4th 1159,

1172-73 (due process precludes deference to anything other

than jury’s express factual findings). Not only did the jury

here not make specific factual findings on the malice point,

but it split 9-3 on punitive liability—underscoring the fact

that Ford’s conduct was far from the sort of clearly reprehen-

sible behavior that warrants substantial punishment.

The five factors plaintiffs invoke are derived from State

Farm, but this Court’s review must eschew plaintiffs’ me-

chanical application, and instead use these and other factors

45a

to situate the conduct at issue within a rational spectrum of

behavior all of which is in some sense “reprehensible”

enough to warrant some punitive damages. A proper analysis

necessarily recognizes that every product liability case will

involve physical injury and some conduct that can be charac-

terized as “indifference” to safety. Indeed, virtually al/ prod-

uct manufacturers to some degree must “know” or “expect”

that their products will cause injury—even serious injury—

but not every product liability case falls at the high end of the

spectrum. See AOB74, 78-79; see also, e.g., Corrosion

Proof Fittings v. E.P.A. (5th Cir. 1991) 947 F.2d 1201, 1223

n.23 (“over the next 13 years, we can expect more than a

dozen deaths from ingested toothpicks”) (original emphasis).

Thus, plaintiffs’ first factor is not determinative here be-

cause product liability cases always involve physical, not

merely economic, harm. With regard to the second factor, as

discussed in detail above, Ford’s good faith belief that its

conduct was lawful was based on, among other things, its

compliance with federal safety standards and industry cus-

tom, and significantly lessens any reprehensibility. See BMW

of N. Am., Inc. v. Gore (1996) 517 U.S. 559, 565, 570-71,

577-78 (defendant’s reliance on other state statutes authoriz-

ing the conduct at issue was reasonable and substantially

mitigated reprehensibility).

With regard to the third factor, plaintiffs do not point to

any evidence they were particularly financially vulnerable, or

that this contributed to their injuries. Their suggestion that

Ford’s superior knowledge regarding “design” somehow

translates to targeting “financially vulnerable” consumers is

nonsensical. See RB53. State Farm, which involved an in-

surance bad faith case, makes clear this factor is meant to ad-

dress circumstances such as fraudulent schemes in which the

defendant intentionally preys on the poor or the harm in-

flicted is directed to the targets’ financial helplessness. 538

U.S. at 419 (“State Farm amplified the harm by at first assur-

46a

ing the Campbells their assets would be safe from any verdict

and by later telling them, postjudgment, to put a for-sale sign

on their house.’’).

With regard to the fourth factor, plaintiffs invoke their

slogan that Ford “put profits ahead of safety” based on its

alleged conduct first in the design of the Bronco II and then

the Explorer. See RB53 (citing RB, section II(D)). But not

only is there no substantial evidence of this, it is doubly im-

proper to impose punitive damages here based on any alleged

conduct in connection with the Bronco II, which never in-

jured plaintiffs.

Finally, regarding the fifth factor, there is no evidence—

and it defies common sense to claim—Ford intended to harm

plaintiffs. Plaintiffs’ claim that Ford made “deliberate deci-

sions” that harmed plaintiffs relies on the same distortions

discussed in Section IV(D), supra.

* * * * *