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

Supreme Court, U.S.

| FILED

.

a APR O 4 2007

oy | comice OF THe GUE

No. 06-1068

IN THe

Supreme Court of the Gnited States

FORD MoTor COMPANY.

Petitioner.

\

BENETTA BUELL-WILSON, ET AL..

Respondents

On Petition for a Writ of Certiorari

to the California Court of Appeal

BRIEF FOR THE ALLIANCE OF AUTOMOBILE

MANUFACTURERS AND THE NATIONAL

ASSOCIATION OF MANUFACTURERS AS

AMICI CURIAE IN SUPPORT OF PETITIONER

JOHN T. WHATLEY BRIAN D. BOYLE

ALLIANCE OF AUTOMOBILE (Counsel of Record)

MANUFACTURERS MATTHEW M. SHORS

1401 Eye Street. N.W. NICOLE A. SAHARSKY

Washington. D.C. 20005 O'MELVENY & MyYerRs LLP

1625 Eve Street, N.W.

JAN S. AMUNDSON Washington, D.C. 20006

QUENTIN RIEGE! (202) 383-5300

NATIONAL ASSOCIATION OF

MANUFACTURERS

1331 Pennsylvania Ave.. N.W.

Washington. D.C. 20004

Attorneys for Amici Curiae

i

QUESTION PRESENTED

This brief addresses the following question presented by

the Petition:

Whether the California punitive damages statute deprives

defendants of fair notice, and thus violates due process, when

applied to permit the imposition of punitive damages without

regard to objective indicators of reasonableness, such as in-

dustry custom, governmental safety standards, and the exis-

tence of a genuine debate in the engineering community.

TABLE OF CONTENTS

Page

EAE WERENT 8 TIED cccnecerscorerssovesersessestoncseoeecorssesoveceies i

REE TEE PEGS BRTIUEE BEES cccceccoovecescesorasevecssveseeoeesocecocesens ill

INTEREST OF AMICI CURIAE....... covsersoneeseetevsosenscesvorerees l

REASONS FOR GRANTING THE PETITION ...............0. 3

REVIEW IS NECESSARY TO ADDRESS

THE FAIR NOTICE REQUIRED BY DUE

PROCESS BEFORE PUNITIVE DAMAGES

Si TT ETE sopnisoctsnosecotcortveddeoneoseusiesnquesnevctvoeneons 3

A. The Due Process Clause Requires That

A Defendant Be Afforded Fair Notice

Before Being Subjected To Punitive

B. The Court Of Appeal Improperly Ap-

proved Punitive Damages Even Though

Ford Lacked Fair Notice ......ccrersccssssessessoserseoese 9

C. This Court Should Grant Review Be-

cause Of The Importance Of Fair Notice

In Stopping Runaway Punitive Damages

SITET sldethedenibieasonsvensssevedenceseneyseneermeesereresnreeunes 16

SEITE TITEL IID asatenveccoervessessevssenvenceeseoneessevecsoovsennsénenocaetestes 20

iii

TABLE OF AUTHORITIES

Page(s)

CASES

A.B. Small Co. v. Am. Sugar Ref. Co.,

BT Ete BP EEE ietaiciinitatiiennininiiinnemmnnnntaain 6, 8

Barber v. Nabors Drilling U.S.A., Inc.,

Se ie FRG Le Ge BU Picccerserteceectenintentonrneeieentiasiiin 15

Barker v. Lull Eng'g Co.,

FEE Be Re Cle FF TEE veitsnicericemnensimnennicnvionnnimmmnntii 9

Blue Cross & Blue Shield of Miss. v. Campbell,

SOD BR. Bi PS COR, FPS Ps ccsccccevtctentnrvesccsccedniquerninans 12

BMW of N. Am., Inc. v. Gore,

gis Tt SR nnn ene 5, 6, 13, 16

Boyette v. L.W. Looney & Son,

932 F. Supp. 1344 (D. Utah 1996)............cccscssreesereeee 13

Browning-Ferris Indus. of Vt., Inc. v. Kelco

Disposal, Inc.,

GE Bas Bee Ce ctcneerinicininsicnnnnicnnenicntniamene 4

Carroll v. Otis Elevater Co.,

B96 F.2d ZIO TAR CAz. 1990)...ccccvcecvecsseccsssccssscscesseeseses 17

Champlin Ref. Co, v Corp. Comm'n,

FO ic Bt in ttccsecsenticineentinnnnmitinninmnn 6,8

City of Chicago v. Morales,

SEF See VEIT BO ccercreiercreessecannntieninectaiatentnumennianatt 5,8

Colautti v. Franklin,

SOP ie SIF CST tccctenorienieemmninneniinmsinn 9

Connally v. General Constr. Co.,

FE Er, FP CED cesssinstaminceeinesstiininstiicubinipsetaninnnana 7,8

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

Fae ats. GRO IE cccihnsicessineviininssncenmntnsiiinicinniinminieiian 6

Corrosion Proof Fittings v. EPA,

S67 F.2G TSO1 (See Cie, EDFA )pcccccccsccceseverceserevnccvevscnccees 18

iV

Drabik v. Stanley-Bostitch,

EE Ck Fe CE ee SI iitcrsttin renner 14

Giaccio v. Pennsylvania,

ls BE CR cedintiicatitiiineninniannstinadceitabintreeiet 6, 8

Grayned v. City of Rockford,

Fe as CP FD cetacinnincneinnnintvtivitnsavinntantccinainienrss 3,5

Harris County v. Carmax Auto Superstores, Inc.,

yee Rok oR, eee 1]

Hillrichs v. Avco Corp.,

FEE Bes Oe le PP CIEE UGGS) secnsscecicccsensnsercctinceosnensocennees 15

Honda Motor Co. v. Oberg,

PE Ciel ES OR PG Peerennsincncrseteeccsisicvencanmventsoninicibonins 6, 17

Kolender v. Lawson,

FE SA ee CE hiiraenictersientdelininideinnnsenevitoniialaaniasesniintinn 19

Mattison v. Dallas Carrier Corp.,

POF Cd FF OEE Ces FIO rctiicenstinvigpicersetsenninenmnnnnnnne 6

Nigro v. Remington Arms Co.,

637 A.2d 983 (Pa. Super. Ct. 1993).........cccccessoerererees 15

Pac. Mut. Life Ins. Co. v. Hastlip,

FI Se Wiese ceciaidsaocinsevansavinsepetceststnsinsnntvecsitonincnatticaeiinn 5

Philip Morris USA v. Williams,

EAP Os GO, SOT CNTF ccitsectniniiniesoveinsiiniasnonerenneinionenvee 3, 20

Richards vy. Michelin Tire Corp.,

21 FSG TORS Ch 1G Cir, 1FDG)...ncccsncccccrvsececsonscccsesorsnsees 13

Satcher v. Honda Motor Co.,

Db FIG BSE E CSR CAs. 1995). .ncevisinserccvoerececseovees 13, 14, 15

Soule v. Gen. Motors Corp.,

Be Fe BIO Ce BGO secesnervintovccsnscovanseastennneensvcuseaiees 10

State Farm Mut. Auto. ins. Co. v. ayer

Fe UB. GES GRIGG) ececsevesoresssesccavesevceneetnsvevescsnsncoecverses 5,6

Sw. Tel. & Tel. Co. v. Danaher,

Ee i Se Ch FOF) ritetvcccsscnnssceninienreensenresmnnvenvvionnereens 6,7

TXO Prod. Corp. v. Alliance Res. Corp.,

SAD UB. SS CUFFS) weccecsescccvisvrivesccininnenivtermomesnieaceseoees 17

Vv

United States v. L. Cohen Grocery Co.,

ee Wate OE IEE} seisnciecscercidedccsnasivetnigedoe i aaseniacialaan

United States v. Lanier,

I ees tee CT ss cionidanncclisticciiaanseviointinbacapaauniiebein 6,

Village of Hoffman Estates vy. Flipside,

Te St EC LIRED icashcnesndcsestnssinseevrstanisunrvainaceousinoniins

Welch v. Gen. Motors Corp.,

949 F. Supp. 843 (N.D. Ga. 1996) .........scccccsssrsesssscserees

STATUTES AND REGULATIONS

OF Sl le. 8 AT Eee nrerccndieatntngebidiamdaaiaininmneniian

49 Fed. Reg. 20,016 (May 11, 1984)... csescscetsecceeeetees

64 Fed. Reg. 27,343 (May 19, 1999) 00... cesccecsesseresseeesees

68 Fed. Reg. $9,250 (Oct. 14, 2003).........c.ccccssserservossesenseoees

Re Sree ne DONO Atcisccccacennininbaditnsddasentriutokoieneaanes 10,

OTHER AUTHORITIES

American Law of Products Liability (Timothy E.

TERVOES C0:OE, CCR. 36 OG. IGIT) vcciccssscccceresssiveserncesescsesce

Stephen Breyer, Breaking the Vicious Circle:

Toward Effective Risk Regulation (1993) ........:ccssesceeees

Andrew C. Clausen & Annette M. Carwie,

Problems Applying the Life of Georgia v.

Johnson Case in the Liability Setting: Where

Do We Go With Punitive Damages After BMW

v. Gore?, 58 Ala. Law. 46 (1997) .ccosccssssestosisssoocssoessoess

CR’s Focus on Safety, Consumer Reports, Apr.

SE TE BP wesostarsigiehicisehadelscnanieiseinindeaminaincian

W. Page Keeton, Prosser & Keeton on the Law of

Fe Fe a aeiininsiev seciidcdnicecsndacccgatevstcanseSactcavinde

David G. Owen, Problems In Assessing Punitive

Damages Against Manufacturers of Defective

Products, 49 U. Chi. L. Rev. 1 (1982) ........crecccsocesesees

vi

A. Mitchell Polinsky & Steven Shavell, Punitive

Damages: An Economic Analysis, 111 Harv. L.

le SP Resiciincsnenncceneinnsisipiasanntnptaprenrencetioniginteess 20

Cass R. Sunstein et al., Assessing Punitive Damages

(With Notes on Cognition and Valuation in

Law), 107 Yale L.J. 2071 (1998) .......sccsessessereererreereneees 20

W. Kip Viscusi, Jurors, Judges, and the

Mistreatment of Risk by the Courts, 30

Fo SE I, BF CED cceccecteccnsesencivincrsirservennmennyenienis 17

W. Kip Viscusi, Corporate Risk Analysis: A

Reckless Act?, 52 Stan. L. Rev. 547

BRIEF AMICI CURIAE OF THE ALLIANCE OF

AUTOMOBILE MANUFACTURERS AND THE NA-

TIONAL ASSOCIATION OF MANUFACTURERS

IN SUPPORT OF PETITIONER

The Alliance of Automobile Manufacturers, Inc. (“the

Alliance”) and the National Association of Manufacturers

(“the NAM”) respectfully submit this brief amici curiae in

support of the petition for a writ of certiorari in this case.’

INTEREST OF AMICI CURIAE

The Alliance is a nonprofit trade association formed in

1999 and incorporated in Delaware. The Alliance has nine

members: BMW Group; DaimlerChrysler Corporation; Ford

Moter Company (“Ford”); General Motors Corporation;

Mazda North American Operations; Mitsubishi Motors

North America, Inc.; Porsche Cars North America, Inc.;

Toyota Motor North America, Inc.; and Volkswagen of

America, Inc. The Alliance’s members account for more

than 80% of motor vehicle sales in the United States.

The NAM is the nation’s largest industrial trade associa-

tion, representing small and large manufacturers in every in-

dustrial sector and in all fifty states. The NAM’s mission is

to enhance the competitiveness of manufacturers by shaping

a legislative and regulatory environment conducive to U.S.

economic growth and to increase understanding among poli-

cymakers, the media, and the general public about the vital

role of manufacturing to America’s econemic future and liv-

ing standards.

The Alliance and the NAM often file amicus briefs in

cases — like this one — that are of great interest and conse-

' The parties have consented to the filing of this brief. No counsel

for a party authored this brief in whole or in part, and no person or entity

other than amici, their members, or their counsel contributed monetarily

to the brief.

2

quence to the automobile industry and manufacturers more

generally. They are filing this brief to address only the first

question presented by the Petition, which concerns the fair

notice required before a jury may impose any punitive dam-

ages against a defendant.

The Alliance and the NAM are concerned about the ef-

fects of skyrocketing punitive damages awards on product

manufacturers. For example, accidents involving automo-

biles often result in serious injury or death, even when the

automobile manufacturer has complied with all applicable

safety statutes and regulations and the automobile includes

the latest and best safety features. In manufacturing an

automobile — or any product, for that matter — a manufacturer

must necessarily make tradeoffs between product perform-

ance and safety, taking into account engineering limitations.

Under many state products liability laws, juries are permitted

to hold a manufacturer strictly liable based on post hoc find-

ings that the manufacturer chose wrong in making those

tradeoffs, i.e., that, in the jury’s view, the risks of the product

outweigh its benefits. And, on top of compensatory liability,

juries often award massive punitive damages when they be-

lieve the manufacturer chose wrong, even when the manu-

facturer’s good-faith design choice was consistent with in-

dustry standards and federal regulations and therefore objec-

tively reasonable. As a result, manufacturers simply have no

way of knowing whether their reasonable design decisions

may years later be subject to punishment.

The Alliance and the NAM believe that this Court’s in-

tervention is necessary to ensure that manufacturers are not

punished in the absence of fair notice that their conduct was

unlawful. The decision below allows punishment where rea-

sonable people could disagree about what the law permits,

and that result is inconsistent with due process.

3

REASONS FOR GRANTING THE PETITION

REVIEW IS NECESSARY TO ADDRESS THE FAIR

NOTICE REQUIRED BY DUE PROCESS BEFORE

PUNITIVE DAMAGES MAY BE IMPOSED

This Court should grant the petition to address the impor-

tant issue of whether state laws permitting the imposition of

punitive damages without regard to objective indicators of

reasonable conduct provide the fair notice required by the

Due Process Clause. As a matter of procedural due process,

a person may not be subjected to any punishment — including

punitive damages — unless he has been given notice suffi-

cient to allow a “person of ordinary intelligence a reasonable

opportunity to know what is prohibited” and “act accord-

ingly.” Grayned v. City of Rockford, 408 U.S. 104, 108

(1972). If reasonable people could disagree about whether

conduct violates a statute, then the statute may not be a basis

for punishment, because any punishment would be wholly

arbitrary. This principle is fundamental, and it was recently

reaffirmed in Philip Morris USA v. Williams, where the

Court repeatedly noted its “concern for adequate notice” in

the punitive damages context. 127 S. Ct. 1057, 1064 (2007);

see also id. at 1062, 1063.

The California Court of Appeal’s application of the

State’s punitive damages statute was contrary to that impor-

tance notice principle. California law allows punitive dam-

ages to be awarded upon a showing of “malice,” and the

plaintiffs here argued that Ford acted with malice in choos-

ing a particular design for the Ford Explorer. Ford noted that

there were several objective factors relevant to whether puni-

tive damages were proper, including its conformity with in-

dustry customs, compliance with stringent federal regula-

tions, and the fact that the design resulted from a good-faith

debate among engineers during the design process. Those

factors showed that reasonable people can disagree about the

appropriateness of the design choices Ford made, and thus

4

Ford could not have known that its conduct could be subject

to punitive damages. Yet the Court of Appeal decided that

those objective indicators were “irrelevant” to the question

of whether punitive damages were permissible, Pet. App.

23a, and it approved a $55 million award of punitive dam-

ages without ensuring that Ford had fair notice and an oppor-

tunity to conform its conduct to the law. The decision below

is contrary to this Court’s precedents and to the decisions of

several state and federal courts.

The fair notice issue raised in this case is important. Al-

though this Court has addressed the notice required of the

severity of a punitive damages penalty, it has not addressed

the notice required before certain conduct can be subject to

punishment as a threshold matter. The latter question arises

with great frequency in products liability cases, especially

those involving motor vehicles, where punitive damages

verdicts continue to skyrocket. See, e.g., Browning-Ferris

Indus. of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 282

(1989) (O’Connor, J., concurring in part).

Indeed, in products liability cases, juries routinely award

punitive damages based not on a manufacturer’s malicious

intent to harm consumers but instead on their own second-

guessing of good-faith design decisions made years or dec-

ades ago. Juries often use a manufacturer’s balancing of the

cost of design alternatives with risks to consumers as a basis

for punitive damages, even though that balancing occurs in

the development of every product and any product could ar-

guably be made “more safe.” Without use of objective fac-

tors to guide the jury’s consideration of whether the manu-

facturer acted with the requisite reprehensibility, juries will

be left with standardless discretion to award punitive dam-

ages in products liability cases. This Court should grant re-

view and hold that punitive damages have no place where

reasonable people could disagree about whether a defen-

dant’s conduct was unlawful.

5

A. The Due Process Clause Requires That A Defendant

Be Afforded Fair Notice Before Being Subjected To

Punitive Damages

1. It is a fundamental principle of due process that a per-

son may not be punished for certain conduct without having

received fair notice that engaging in that conduct may sub-

ject him to punishment. A punishment imposed without fair

notice is inherently arbitrary, and due process “prohibits the

imposition of ... arbitrary punishments on a tortfeasor.”

State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408,

416 (2003). “Indeed, the point of due process — of the law in

general — is to allow citizens to order their behavior. A State

can have no legitimate interest in deliberately making the

law so arbitrary that citizens will be unable to avoid punish-

ment based solely upon bias or whim.” Pac. Mut. Life Ins.

Co. v. Haslip, 499 U.S. 1,59 (O’Connor, J., dissenting). Not

only does fair notice ensure that a punishment is not arbi-

trary, but “it also helps to assure the uniform general treat-

ment of similarly situated persons that is the essence of law

itself.” BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 587

(1996) (Breyer, J., concurring).

In terms of what constitutes “fair notice” that certain

conduct may be subject to punishment, this Court has recog-

nized that a statute authorizing punishment is so vague that it

violates due process when it “fail[s] to provide the kind of

notice that will enable ordinary people to understand what

conduct it prohibits.” City of Chicago v. Morales, 527 U.S.

41, 56 (1999). “[B]ecause we assume that man is free to

steer between lawful and unlawful conduct, we insist that

laws give a person of ordinary intelligence a reasonable op-

portunity to know what is prohibited, so that he may act ac-

cordingly.” Grayned, 408 U.S. at 108. “Vague laws may

trap the innocent by not providing fair warning.” /d. A de-

fendant may not be punished, then, based on a “statute which

either forbids or requires the doing of an act in terms so

6

vague that men of common intelligence must necessarily

guess at its meaning and differ as to its application.” United

States v. Lanier, 520 U.S. 259, 266 (1997).

The requirement of fair notice applies equally to both

criminal and civil penalties. See Gore, 517 U.S. at 574 n.22.

This Court has repeatedly invoked the principle to invalidate

civil statutory penalties. See, e.g., Giaccio v. Pennsylvania,

382 U.S. 399, 402-03 (1966); Champlin Ref. Co. v. Corp.

Comm'n, 286 U.S. 210, 241-43 (1932); A.B. Small Co. v.

Am. Sugar Ref. Co., 267 U.S. 233, 238-42 (1925); Sw. Tel. &

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

Punitive damages are one type of civil penalty for which

fair notice is particularly important. This Court has ex-

plained that there are both “procedural and substantive con-

stitutional limitations” on punitive damages awards. State

Farm, 538 U.S. at 416. As a procedural matter, “elementary

notions of fairness enshrined in’our constitutional jurispru-

dence dictate” that a defendant receive fair notice both “of

the conduct that will subject him to punishment” and “the

severity of the penalty that a State may impose.” /d. (inter-

nal quotation marks omitted). While this Court has ad-

dressed the failure to provide fair notice of the severity of a

puiishment, the right to fair notice of the conduct that can

give rise to punishment has an even longer pedigree. See

Mattison v. Dallas Carrier Corp., 947 F.2d 95, 105-06 (4th

Cir. 1991).

Punitive damages pose a particularly “acute danger of

arbitrary deprivation of property.” Honda Motor Co. vy.

Oberg, 512 U.S. 415, 432 (1994). They are “quasi-criminal”

penalties that “operate as private fines intended to punish the

defendant and to deter future wrongdoing.” Cooper Indus.,

ime. v. Leatherman Tool Group, Inc., 532 U.S. 424, 432

(2001) (internal quotation marks omitted). As quasi-criminal

penalties, punitive damages awards are subject to a vague-

ness standard stricter than that which governs in most other

7

civil and administrative contexts. See Village of Hoffman

Estates v. Flipside, 455 U.S. 489, 498-99 (1982).

2. This Court has applied the due process requirement of

fair notice to prohibit punishment in a variety of cases where

reasonable people acting in good faith could disagree on

whether the defendant’s conduct was lawful.

For example, in Southwestern Telegraph & Telephone

Co. v. Danaher, the Court considered whether a state statute

authorizing civil penalties of $100 per day for discriminating

against telephone customers was unconstitutionally vague.

238 U.S. at 485. The statute required telephone companies

to “supply all applicants for telephone connection and facili-

ties without discrimination or partiality” so long as the appli-

cants complied with the company’s “reasonable regulations.”

Id. (quoting Ark. Stat. § 7948). At issue was a telephone

regulation stating that the company would not furnish tele-

phone service to a customer in arrears. Jd. at 486. The Court

held that penalties could not be imposed based on a post hoc

finding that the regulation was unreasonable, explaining that

the regulation had been “adopted in good faith, had been uni-

formly and impartially enforced for many years”; there was

“no decision in the State holding or indicating that it was un-

reasonable” and the statute “left that matter entirely open”;

and “({ljike regulations often had been pronounced reason-

able and valid in other jurisdictions.” Jd. at 489. Under

those circumstances, the penalties assessed were “so plainly

arbitrary and oppressive as to be nothing short of a taking of

its property without due process of law.” Jd. at 491.

Similarly, in Connally v. General Construction Co., this

Court invalidated a statute authorizing penalties for employ-

ers that failed to pay employees at least “the current rate of

per diem wages in the locality.” 269 U.S. 385, 388 (1926)

(quoting Comp. Okla. Stat. § 7255). The Court noted that

the statute “must be sufficiently explicit to inform those who

are subject to it what conduct on their part will render them

8

liable.” Jd. at 391. Because both the terms “current rate of

per diem wages” and “locality” were undefined, the Court

found that “men of common intelligence must necessarily

guess” as to their meaning and the ultimate “application of

the law” would depend “upon the probably varying impres-

sions of juries,” rendering the statute unconstitutionally

vague. Id. at 391, 395.

Further, in Giaccio v. Pennsylvania, the Court struck

down a state statute allowing a jury to require an acquitted

misdemeanor defendant to pay the costs of his trial. 382

U.S. at 400, 402. The Court found that the statute allowing

assessment of costs on a defendant “contain[ed] no standards

at all,” nor did it “place any conditions of any kind upon the

jury’s power to impose costs.” /d. at 402-03. The result was

that “ijt would be difficult if not impossible for a person to

prepare a defense” to an assessment of costs and “judges and

jurors” would be “free to decide, without any legally fixed

standards, what is prohibited and what is not in each particu-

lar case.” Id. at 403-04. The statute as applied was thus

“void for vagueness.” /d.

Numerous other decisions of this Court have reaffirmed

that a statute is unconstitutionally vague if applied to punish

certain conduct without notice sufficient to inform a reason-

able person that the conduct is irnpermissible. See, e.g.,

Morales, 527 U.S. at 56-60 (ordinance prohibiting “loiter-

ing” was void for vagueness because it “fails to give the or-

dinary citizen adequate notice of what is forbidden”); Cham-

plin Ref. Co., 286 U.S. at 241-43 (penalties for “the produc-

tion of crude oil or petroleum . . . in such a manner . . . as to

constitute waste” was unconstitutionally vague because

“waste” “necessarily depends upon many factors subject to

frequent changes”); A.B. Small Co., 267 U.S. at 238-42 (stat-

ute making it unlawful “to make any unjust or unreasonable

... charge” or “exact excessive prices” for “necessaries” in-

valid because it “contained no provision pointing to what

9

should be deemed a just, reasonable and not excessive

price”); United States v. L. Cohen Grocery Co., 255 U.S. 81,

89-92 (1921) (statute imposing penalties for “any unjust or

unreasonable rate or charge” for “necessaries” was unconsti-

tutionally vague because it “forb[ade] no specific or definite

act”). This Court has again and again recognized that no

punishment is allowed where people “can — and do — dis-

agree” on what conduct the law prohibits. Colautti v. Frank-

lin, 439 U.S. 379, 401 (1979).

B. The Court Of Appeal Improperly Approved Punitive

Damages Even Though Ford Lacked Fair Notice

The California Court of Appeal’s affirmance of a $55

million punitive damages award in this case violates due

process because Ford did not have fair notice that its conduct

could result in punitive damages. Extremely relevant to the

question of fair notice are Ford’s compliance with federal

regulations, its conformity with industry standards, and the

existence of a genuine debate in the engineering community

about the design tradeoffs at issue here. Those objective in-

dicators demonstrate that reasonable people could disagree

about the design choices Ford made and that Ford had a sig-

nificant basis for believing its design was reasonable. Yet

the Court of Appeal deemed those factors completely irrele-

vant, subjecting Ford to an enormous punitive damages ver-

dict based simply on one jury’s subjective belief that Ford

should have made the Explorer more safe.

1. California law allows imposition of strict products li-

ability based on a “risk-utility” theory, where a product is

deemed defective if a jury determines that its risks outweigh

its benefits. See, e.g., Barker v. Lull Eng’g Co., 573 P.2d

443, 446 (Cal. 1978). Specifically, once a plaintiff demon-

strates that a product caused her injuries, the burden shifts to

the defendant to show that the benefits of the product as de-

signed outweigh its risks. /d. at 455. The jury must deter-

mine whether the product is defective based on “such com- -

10

peting design considerations as risk, benefit, feasibility, and

cost.” Soule v. Gen. Motors Corp., 882 P.2d 298, 311 (Cal.

1994).? California law is typical. “[{MJost jurisdictions re-

solve the issue of whether the product is defective by apply-

ing some form of risk-utility analysis.” American Law of

Products Liability § 28:17 (Timothy E. Travers et al. eds., 3d

ed. 1997). At the same time, that theory is inherently unpre-

dictable, because it depends upon a single jury’s after-the-

fact determination as to whether a product is sufficiently

safe. This case proves the point: Prior to this jury’s verdict,

judgment had been rendered in favor of Ford in eleven other

cases. See Appellant’s Appendix (“AA”) 1154-1235.

Under California law, a plaintiff may recover punitive

damages when she “prove[s] by clear and convincing evi-

dence that the defendant has been guilty of oppression, fraud,

or malice.” Cal. Civ. Code § 3294(a). As pertinent here,

California law defines “malice” as “conduct which is in-

tended by the defendant to cause injury to the plaintiff or

despicable conduct which is carried on by the defendant with

a willful and conscious disregard of the rights or safety of

others.” Id. § 3294(c)(1).

2. As applied by the Court of Appeal, the California

statute authorizing punitive damages violates due process.

Without reference to objective standards, the statute is so

vague that manufacturers simply cannot know what conduct

a jury might later decide warrants punishment.’

? California law also recognizes another approach to evaluating al-

leged design defects — the consumer expectation approach. See id at

882. Contributing to the vagueness problem here, this case was actually

tried under both theories, but on the last day of trial plaintiffs abandoned

the consumer expectation theory and the case went to the jury only on the

risk-utility theory. See AA 8119-20.

> Amici do not suggest that the California punitive damages statute is

unconstitutionally vague on its face, because there plainly is a “core of

proscribed conduct” to which the statute can constitutionally be applied.

11

In affirming the punitive damages verdict here, the Court

of Appeal set aside all objective indicators upon which rea-

sonable people would rely. The court rejected the argument

that compliance with “all applicable governmental regulatory

standards” bars punitive damages, on the ground that

“{gjovernmental safety standards . . . have failed to provide

adequate consumer protection against the manufacture and

distribution of defective products.” Pet. App. 46a-49a (in-

ternal quotation marks omitted). And the court held that, as

a matter of California law, “compliance with industry stan-

dards or custom [i]s irrelevant . . . to punitive damages.” Jd.

at 23a (emphasis added). Finally, the court rejected Ford’s

contention that “a ‘reasonable disagreement’ among experts

concerning the propriety of its design decisions cannot . . . be

subject to punitive damages” because “there [wa]s substan-

tial evidence that Ford decision makers knew how to make

the Explorer less dangerous, but chose not to do so because

of financial considerations.” Jd. at 43a-44a, 50a. Thus, the

Court of Appeal — like the jury — rested its decision on its

subjective disagreement with Ford’s cost/benefit balancing,

notwithstanding the objective indicators from which Ford

could conclude that its balancing was reasonable.

The Court of Appeal’s application of California punitive

damages law violates due process because it deprived Ford

of fair notice sufficient to allow it to design its products to

avoid punishment. As explained below, ample objective in-

dicators showed that people of “common intelligence” could

“differ” as to whether the Explorer’s design was reasonable.

Lanier, 520 U.S. at 266 (internal quotation marks omitted).

And even if Ford’s conduct could be deemed an unreason-

able balancing of risks and benefits, punitive damages re-

Harris County v. Carmax Auto Superstores Inc., 177 F.3d 306, 325 (Sth

Cir. 1999).

12

quire malice, i.e., a “willful and conscious disregard” for

safety. Cal. Civ. Code § 3294(c)(1).’

3. The facts of this case highlight how the Court of Ap-

peal’s approach conflicts with this Court’s teachings on fair

notice and several courts’ specific holdings that objective

indicators of reasonableness are extremely relevant to the

appropriateness of punitive damages.

At issue in this case were two alleged design defects, re-

lating to the strength of the Ford Explorer’s roof and the al-

leged tendency of the vehicle to roll over. The plaintiffs ar-

gued that Ford acted with “malice” in designing the Ford

Explorer because “Ford had the technology to make the Ex-

plorer stable and to strengthen the roof to protect the occu-

pant, but did not use it.” Reporter’s Transcript (“RT”) 2047-

55, 2070-81, 3557-58. Ford demonstrated that its designs

complied with extensive federal regulations, conformed with

industry standards, and were the subject of genuine debates

in the engineering community about how to best balance per-

formance and safety. Those objective indicators show that

reasonable people could differ concerning whether the bene-

fits of the designs outweighed their risks, and that Ford had

ample basis (including the support of the automobile indus-

try and the federal government) for concluding that its de-

signs were reasonable. In light of those facts, Ford cannot

constitutionally be punished here.

* Under the “malice” standard for awarding punitive damages, a

manufacturer could not have fair notice that its design decision was sub-

ject to punishment unless the court concludes that the risk-utility anaiysis

weighs so strongly against the manufacturer so as to merit, or nearly

merit, a directed verdict on liability. See, e.g., Blue Cross & Blue Shield

of Miss. v. Campbell, 466 So. 2d 833, 843 (Miss. 1985) (holding that, in

the “vast majority” of cases, “unless the trial judge grants a directed ver-

dict to the insured plaintiff on the contract claim, then, as a matter of law,

the insurance carrier has shown reasonably arguable basis to deny the

claim; and, therefore, the carrier should newer be subjected to the possi-

bility of punitive damages based upon ‘bad taith’”).

13

a. First, a manufacturer’s compliance with the strictest

applicable statutory or regulatory safety requirements should

preclude punitive damages. This Court has recognized the

relevance of compliance with regulatory standards in assess-

ing the appropriateness of punitive damages. For example,

in Gore, the Court noted that “BMW could reasonably rely

on state disclosure statutes for guidance” in determining “the

appropriate line between presumptively minor damage [to

automobiles] and damage requiring disclosure to purchas-

ers.” 517 U.S. at 579. Not surprisingly, numerous other

courts have recognized that compliance with state or federal

regulatory schemes makes punitive damages inappropriate.

See, e.g., Richards v. Michelin Tire Corp., 21 F.3d 1048,

1059 (11th Cir. 1994) (evidence insufficient to support find-

ing of “wanton” conduct in light of defendant’s compliance

with federal standards); Welch v. Gen. Motors Corp., 949 F.

Supp. 843, 845 (N.D. Ga. 1996) (rejecting punitive damages

_ Claim because defendant complied with federal regulations);

Boyette v. L.W. Looney & Son, 932 F. Supp. 1344, 1348 (D.

Utah 1996) (dismissing punitive damages claim where de-

fendant complied with federal regulations); see also Satcher

v. Honda Motor Co., 52 F.3d 1311, 1316-17 (Sth Cir. 1995)

(no punitive damages where “no government or agency

thereof ha[d] ever required” the design modification urged

by plaintiffs). Commentators agree that “[iJn most contexts

... compliance with a statutory standard should bar liability

for punitive damages.” W. Page Keeton, Prosser & Keeton

on the Law of Torts 233 n.41 (Sth ed. 1984).

In this case, Ford demonstrated that the Ford Explorer

complied with all applicable warning and safety standards

promulgated by the National Highway Transportation Safety

Administration (“NHTSA”), the expert agency charged with

automotive safety. But the Court of Appeal completely dis-

regarded as irrelevant the fact that the Explorer met or ex-

ceeded Federal Motor Vehicle Safety Standard 216, which

establishes requirements for vehicle roof-crush resistance.

14

See Pet. App. 13a, 49a; RT 2403; see also 49 C.F.R.

§ 571.216. The court similarly ignored the fact that NHTSA

has refused to find SUVs defective as a class because of their

tendency to roll over, and NHTSA twice declined to find that

the Bronco II, the precursor to the Explorer, was defective.

See 64 Fed. Reg. 27,343 (May 19, 1999). And it also ig-

nored the fact that the Explorer passed the tests that NHTSA

recognizes as “the most objective tests of the susceptibility

of vehicles to maneuver-induced on-road rollover,” 68 Fed.

Reg. 59,250, 59,251-52 (Oct. 14, 2003), and that the Ex-

plorer displayed the prominent warning label required by

NHTSA to alert consumers of the potential of vehicle roll-

over. See 49 Fed. Reg. 20,016 (May 11, 1984).

Plaintiffs’ only answer is that NHTSA was wrong and

that its safety standards should have been more stringent.

While that argument might be relevant to whether Ford

should be liable for compensatory damages, it cannot justify

punitive damages. Indeed, it proves Ford’s point — Ford

could not have known that it would be punished for its de-

sign because it complied with federal regulations and guide-

lines. Lacking clear, uniformly applied standards for puni-

tive liability, juries in individual cases should not be allowed

to trump federal safety standards and mete out punishment to

manufacturers whose decisions were consistent with the

most stringent regulations of an expert federal agency.

b. Second, Ford’s compliance with industry standards

further demonstrates that punishment is inappropriate. Nu-

merous courts have recognized that punitive damages cannot

be justified under the amorphous “malice” standard applied

here and in numerous other cases when a manufacturer’s

product comports with then-current industry standards. See,

e.g., Satcher, 52 F.3d at 1316-17 (no punitive damages

where “the industry as a whole categorically reject[ed]” al-

ternative design); Drabik v. Stanley-Bostitch, 997 F.2d 496,

510 (8th Cir. 1993) (“Compliance with industry standard and

15

custom serves to negate conscious disregard and to show that

the defendant acted with a nonculpable state of mind with no

knowledge of a dangerous design defect.”); Nigro v. Reming-

ton Arms Co., 637 A.2d 983, 989-90 (Pa. Super. Ct. 1993)

(“Compliance with industry standard and custom tends to...

negate an inference of wanton indifference to the rights of

others.”).

Here, plaintiffs’ Ford Explorer had “one of the best roll-

over rates compared to other SUVs in its class.” Pet. App.

20a. The Explorer complied with five real-world vehicle

stability tests commonly used by automobile manufacturers.

RT 3635-36, 3657. For ten consecutive years, Consumer’s

Union awarded the Explorer a “recommended” rating for

safety based on independent testing, RT 3232; AA 412, even

though it awarded other SUVs “poor” or “unacceptable” rat-

ings. See, e.g., CR’s Focus on Safety, Consumer Reports,

Apr. 2003, at 29. Those test results reflect the soundness of

the Ford engineers’ judgment and strongly suggest that Ford

had no basis to know that its design could be deemed not

only defective but maliciously defective.

c. Third, a good-faith debate over the best way to bal-

ance costs and benefits of a design empirically demonstrates

that reasonable people could disagree over whether a manu-

facturer’s conduct in designing a product was lawful. Many

state and federal courts have recognized that a genuine engi-

neering debate precludes punitive damages. See, ¢.g.,

Satcher, 52 F.3d at 1316-17 (no punitive damages where

“there is a genuine dispute in the scientific community as to

whether leg guards do more harm than good”); Hillrichs v.

Avco Corp., 514 N.W.2d 94, 100 (Iowa 1994) (punitive

damages inappropriate where “reasonable disagreement” ex-

ists concerning the product); Barber v. Nabors Drilling

U.S.A., Inc., 130 F.3d 702, 710 (Sth Cir. 1997) (reversing

punitive damages award where there was a “good faith dis-

pute” not rising to the level of “reckless indifference”).

16

Here, the record sets forth the extensive good-faith ef-

forts Ford engineers devoted to safety issues when designing

the Explorer. Ford engineers sought to constantly improve

the Explorer. For example, the Explorer was based the

Bronco II (“BIT”), but Ford engineers designed the Explorer

“using a handling philosophy notably different from the

BIl,” AA 2483-88, which ultimately resulted in the Ex-

plorer’s demonstrably superior performance in the Consumer

Union “accident avoidance” test. Ford also adopted several

design changes to further enhance the safety of the Explorer

even after it passed all of Ford’s internal safety tests and the

stability tests independently conducted by NHTSA. AA

2502. In making each of those design decisions, Ford bal-

anced an incremental safety advantage — over and above the

safety levels approved by NHTSA and validated by both

Ford and independent testing — with tradeoffs in cost and in

features consumers find desirable.

Plaintiffs argued that Ford’s choice not to implement two

additional design changes warrants punitive damages. But

the fact that engineers debated those design changes and

came to opposite conclusions shows that Ford was engaging

in precisely the type of “line-drawing,” Gore, 517 U.S. at

579, that a manufacturer must make all the time in choosing

among competing designs. And in this particular debate,

Ford’s engineers were joined by the federal government and

the rest of the domestic automobile industry. The fact that

there was a debate in the engineering and regulatory com-

munity over the proper stability or roof-strength standards

for utility vehicles, such as the Explorer, points strongly

against any award of punitive damages.

C. This Court Should Grant Review Because Of The

Importance Of Fair Notice In Stopping Runaway Pu-

nitive Damages Awards

Punitive damages in products liability cases continue to

become more and more common, and the question of the

17

relevance of objective indicators will continue to recur. Un-

der the Court of Appeal’s approach, juries will be allowed

almost standardless discretion, and manufacturers will be

penalized for responsible corporate behavior. The time has

come for this Court to step in.

1. Punitive damages awards have become commonplace

in products liability cases. “The ex post perspective of litiga-

tion exerts a hydraulic force that distorts judgment.” Carroll

v. Otis Elevator Co., 896 F.2d 210, 215-16 (7th Cir. 1990).

Juries are often faced with sympathetic, severely injured

plaintiffs and told that their injuries could have been pre-

vented if only the manufacturer had just spent more money.

And juries are often urged to award large punitive damages

through explicit references to a defendant’s massive wealth

and lack of a local presence. See Oberg, 512 U.S. at 432

(noting that “the presentation of evidence of a defendant’s

net worth creates the potential that juries will use their ver-

dicts to express biases against big businesses, particularly

those without strong local presences”). As a result, the “fre-

quency and size” of punitive damages awards continues to

“skyrocket[].” T7XO Prod. Corp. v. Alliance Res. Corp., 509

U.S. 443, 500 (1993) (O’Connor, J., dissenting); see also

Pet. 19 n.6 (collecting cases).

2. The Court of Appeal’s approach will exacerbate this

trend by allowing the imposition of punitive damages in es-

sentially any case where the jury finds that a product is de-

fective. The jury will not be constrained by objective indica-

tors of reasonableness; all it need do is make a post hoc de-

termination that the manufacturer should have done some-

thing more. See W. Kip Viscusi, Jurors, Judges, and the

Mistreatment of Risk by the Courts, 30 J. Legal Stud. 107,

116 (2001) (noting the risk that a company’s “superior ex

ante risk judgments may be outweighed by the ex post reality

of the accident victim’’).

18

The unavoidable reality is that manufacturers are always

aware that their design choices will be subject to criticism

because their products could have been made even safer.

Products — particularly those that are designed to transport

people at high speeds — can and do cause serious injury and

death. That unfortunate mathematical certainty, however,

applies to every vehicle sold in this country, as well as to

countless other products. Indeed, “over the next 13 years,

we can expect more than a dozen deaths from ingested tooth-

picks.” Corrosion Proof Fittings v. EPA, 947 F.2d 1201,

1223 n.23 (Sth Cir. 1991). Some risks are unavoidable, and

others are accepted because consumers are unwilling to ac-

cept the tradeoffs required for their reduction. See, e.g.,

Stephen Breyer, Breaking the Vicious Circle: Toward Effec-

tive Risk Regulation 13-14 (1993).

It is thus no overstatement to say that, in every products

liability case, a plaintiff will be able to offer “proof” that

some alternative design, identified years or decades after the

fact, would have made the product safer. As one commenta-

tor has observed, “[rjegardiess of how high the manufacturer

sets the design safety standard, when an accident does occur,

the plaintiff's lawyer will have an expert to testify the prod-

uct could have been made safer, and the injury prevented, if

the manufacturer had just been willing to spend some addi-

tional money.” Andrew C. Clausen & Annette M. Carwie,

Problems Applying the Life of Georgia v. Johnson Case in

the Liability Setting: Where Do We Go With Punitive Dam-

ages After BMW v. Gore?, 58 Ala. Law. 46, 48 (1997). The

malice standard will thus be rendered toothless, and there

will be no gatekeeper for punitive damages awards.

3. The unconstrained jury discretion afforded by the

Court of Appeal’s approach will lead to arbitrary results. As

one of the leading scholars on punitive damages has ob-

served, “[t]he very notion of how much design safety is

enough . . . involves a morass of conceptual, political, and

19

practical issues on which juries, courts, commentators, and

legislatures strongly disagree.” David G. Owen, Problems In

Assessing Punitive Damages Against Manufacturers of De-

fective Products, 49 U. Chi. L. Rev. 1, 37-38 (1982).

Varying impressions of juries on the safety issues involved

in this case is not a mere probability; it is a fact, with numer-

ous defense verdicts having been returned in Explorer cases

both before and after the verdict in this case. Jurors will be

allowed to effectively thwart federal regulations, even

though those regulations were “adopted with studied care”

by expert agencies, often in areas “where the difficulty of

defining defectiveness (the ‘proper’ mix of safety and its

tradeoffs) are especially great.” Owen, supra, at 41-42.

Without the constraint of objective standards, there is a sig-

nificant threat that juries will award punitive damages based

on their own “personal predilections” concerning risk-utility

balancing. Kolender v. Lawson, 461 U.S. 352, 357-58

(1983) (internal quotation marks omitted). This is the pre-

cise result procedural due process is meant to prevent.

4. Moreover, a system in which juries are permitted to

award punitive damages based solely on subjective risk-

utility balancing creates perverse incentives. Empirical evi-

dence shows that many jurors are willing to inflict punitive

damages simply because a defendant has engaged in risk-

utility balancing. W. Kip Viscusi, Corporate Risk Analysis:

A Reckless Act?, 52 Stan. L. Rev. 547, 550-51, 556, 589-90

(2000). This has the effect of punishing defendants that have

thoroughly debated the risks and benefits of various product

designs. /d. at 550, 558. Although that is what responsible

manufacturers do ex ante, ex post it is a “red flag[]” demon-

strating a “callous disregard for human health.” /d. at 578.

Further, if a manufacturer is subject to punishment where

reasonable people can conclude that the product is reasona-

bly safe, there is only one way for a manufacture to order its

affairs to avoid punishment: Stop selling any product that

20

can cause injuries and that some jury may, years or even

decades later, find could have been made more safe. “[A]

firm might be induced to withdraw its product from the mar-

ketplace even though consumers place a higher value on the

product than its full cost of production, which includes the

average harm caused by the product.” A. Mitchell Polinsky

& Steven Shavell, Punitive Damages: An Economic Analy-

sis, 111 Harv. L. Rev. 869, 882 (1998). And for those manu-

facturers that choose to continue making their products, the

specter of punitive damages is likely to chill innovation and

“produce excessive caution in risk-averse managers and

companies.” Cass R. Sunstein et al., Assessing Punitive

Damages (With Notes on Cognition and Valuation in Law),

107 Yale L.J. 2071, 2077 & nn.22-23 (1998).

* * *

This Court recently warned that “[u]nless a State insists

upon proper standards that will cabin the jury’s discretionary

authority, its punitive damages system . . . may threaten arbi-

trary punishments, i.e., punishments that reflect not an appli-

cation of law but a decisionmaker’s caprice.” Williams, 127

S. Ct. at 1062 (internal quotation marks and citation omit-

ted). This case addresses that precise risk. The Court of

Appeal’s approach unmoors punitive damages from any ob-

jective bases for punishment and leads almost inexorably to

arbitrary punishments. This Court should grant review to

ensure that defendants are given fair notice before any puni-

tive damages may be imposed.

CONCLUSION

For the foregoing reasons, the petition for a writ of cer-

tiorari should be granted.

Respectfully submitted,

JOHN T. WHATLEY BRIAN D. BOYLE

ALLIANCE OF AUTOMOBILE (Counsel of Record)

MANUFACTURERS MATTHEW M. SHORS

1401 Eye Street, N.W. NICOLE A. SAHARSKY

Washington, D.C. 20005 O’MELVENY & Myers LLP

1625 Eye Street, N.W.

JAN S. AMUNDSON Washington, D.C. 20006

QUENTIN RIEGEL (202) 383-5300

NATIONAL ASSOCIATION OF

MANUFACTURERS

1331 Pennsylvania Ave., N.W.

Washington, D.C. 20004

Attorneys for Amici Curiae

April 4, 2007