Third Party Damages in Punitive Damage Awards

Philip Morris USA v. Williams

After his death Williams’ widow sued Philip Morris, makers of Williams’ favored brand of cigarettes, for negligence and deceit. A jury found that Williams smoked in significant part because he thought it was safe to do so, and awarded $821,000 n compensatory damages and $79.5 million in punitive damages for deceit. Philip Morris objects first because its jury instruction that the jury could not punish Philip-Morris for anyone not before the court was not accepted arguing that this lead to a significant likelihood that award represented punishment for Philip Morris having harmed others. Philip Morris also objects to the roughly 1:100 ratio of compensatory to punitive damage awards.

Punitive damages may be imposed to punish and deter but may violate the requirement that defendants be provided “fair notice … of the severity of the penalty that a State may impose” if the awards are arbitrary or capricious (BMW of North America, Inc. v. Gore) or run afoul of the dormant commerce clause by allowing one state to effectively impose its policy choice as to certain products merchantability in “neighboring States.” Whether an award is excessive is determined by (1) reprehensibility of defendant’s conduct; (2) whether the award bears a reasonable relationship to the actual and potential harm caused to the plaintiff; and (3) the difference between award and sanction in comparable cases.

Due Process prohibits punishment before a defendant may present all available defenses, which is impossible without notice of the scope of aggrieved parties. Punishment for nonparty victims also deprives the evaluation of any realistic standard. Finally, though the potential harm to the plaintiff is a proper consideration, it must be limited to the actual party before the court. This is not to say that harm, actual or potential, to nonparties cannot be considered under the heading of reprehensibility; but only that “a jury may not go further than this and use a punitive damages verdict to punish a defendant directly on account of harms it is alleged to have visited on nonparties. States must take steps to ensure that this line is being observed by jurors.

Philip Morris’ instructions stated that “[the jury is] not to punish the defendant for the impact of its alleged misconduct on other persons, who may bring lawsuits of their own,” but “may consider the extent of harm suffered by others in determining what [the] reasonable relationship is” between Philip Morris’ punishable misconduct and harm caused to Jesse Williams. Philip Morris’ position was that harm to nonparties could only be considered in determining the “reasonable relationship between the misconduct” and the harm to the party before the court. Oregon held that Philip Morris could be punished for harm to nonparties, and that the only limit was that a jury could not base its award on “dissimilar” acts of a defendant. The Court, here, decides that they were both wrong, and holds that harm to nonparties may be considered and may serve as part of the calculation for punitive damages under the reprehensibility factor (against Philip Morris) but may not serve as the direct basis for award (against the Oregon Court), and that courts cannot authorize procedures that create an unreasonable and unnecessary risk of any such confusion occurring.

Justice Stevens, dissenting: No evidence was offered to establish the appropriate measure of compensatory damages to nonparties, and no one argued that punitive damages would serve such a purpose. He argues that assessing third party harm to evaluate reprehensibility is indistinguishable from doing so to “directly” calculate punitive damages.

Justice Thomas, dissenting, does not believe in substantive Due Process limits on punitive damage awards.

Justices Ginsburg, Scalia, and Thomas, dissenting, argue that punitive damages are meant not to punish harm to third parties but to punish reprehensibility and that the Oregon Court followed this rule because it was punitive damages, not compensatory damages, that were at issue. The right question is the harm that Philip Morris was prepared to inflict on the public. Since the only objection preserved was the denial of Philip Morris’ jury instructions, Justice Ginsburg would hold only that Philip Morris instructions were ambiguous and the Oregon Court rightfully excluded them, and not “reach outside of the bounds of the case as postured.”

Exhaustion Limits in Prisoners' Habeas Petitions

Jones v. Bock

A Roberts opinion:

Jones suffered an injury while in custody and was forced to do work that aggravated that injury. He sued for deliberate indifference but failed to attach the record of his grievance proceedings. Williams objected to denial of a medical procedure on the basis that it was not worth the risk. During the grievance process Williams failed to name any of the people in his later suit in his grievance proceedings. Walton was subjected to the sanction of only receiving food and paperwork via the upper slot of his cell (?) and alleges racial discrimination based on the disparity of his punishment with that of other inmates. Walton failed to name any of the people in his later suit in his grievance proceedings.

The Prison Litigation Reform Act (PLRA) mandates early judicial screening of prisoner complaints and requires prisoners to exhaust grievance procedures before filing suit. The Sixth Circuit held that this requires allegation and demonstration of exhaustion, permits suit only against defendants identified in the grievance procedures, and requires that an entire action be dismissed if exhaustion is incomplete as to any claim.

Federal Rule of Civil Procedure FRCP 8(a) requires only a “short and plain statement of the claim,” and courts have traditionally treated exhaustion requirements as an affirmative defense. The Court has been hostile to “heightened pleading requirements.” The rejects the argument that the early judicial screening requirement evidenced a divergence from traditional rules based on the fact that the various increasingly rigorous screening requirements in the PLRA was put in place before that act, and before any suggestion of an exhaustion requirement. Other theories fail to effectively demonstrate Congress’ intent to make exhaustion a pleading requirement instead of an affirmative defense. “’Whatever temptations the statesmanship of policy-making might wisely suggest,’ the judge’s job is to construe the statute—not make it better.” (Frankfurter).

As to the “name all defendants rule,” nothing of the sort appears in the PLRA and the precedent holding that the PLRA requires proper exhaustion (compliance with both PLRA and grievance process rules themselves) did not cut the pleading off at stage I of the grievance process. There is no discussion of a limiting principle on the grievance process, but the opinion obliquely suggests that it must further the purpose of the PLRA – effectively addressing problems before they reach the courts (ie. not surreptitiously quashing them).

Finally, the rule that dismissal is proper if even one claim is not properly exhausted is based on the use of the word “action” instead of “claim” in the PLRA formulation that “no action shall be brought.” This argument, though valid textually, is dismissed as against common usage in law (citing, among others, Exxon v. Allapath) and traditional practice of taking the good and leaving the bad. The allusion to the total exhaustion requirement in habeas cases is misplaced, as that requirement is based on “comity and federalism,” not statutory construction. Policies are rejected and anomalous results of construction in one direction are countered with equally anomalous results of construction in the other direction (eg. inmates might not be deterred by the requirement but rather file many suits to avoid tainting).

Deviations from, and Meaning of a "Theft Offense"

Gonzales v. Duenas-Alvarez

An alien convicted of “a theft offense … for which the term of imprisonment [is] at least one year” is subject to deportation. In California aiding and abetting someone in ‘taking a vehicle not his own without consent … is guilty of a public offense.” The question here is whether “theft offense” includes aiding and abetting a theft offense.

Taylor v. U.S. defined a “burglary” under the Armed Career Criminal Act as “burglary in the generic sense in which the term is now used in the criminal codes of most States” but suggested that a sentencing court could go beyond the mere fact of conviction where the State’s law deviated from generic burglary. The issue then is whether the elements of generic burglary were proved.

A Ninth Circuit case, Penuliar v. Ashcroft, held that California’s law swept more broadly than generic theft for its lack of an element of taking control of the property. Theft is broadly defined, and the Ninth Circuit defined it, as “taking of property or an exercise of control over property without consent with the criminal intent to deprive an owner of the rights and benefits of ownership, even if such deprivation is less than total or permanent.” Under common law participants are either (1) first degree principals, (2) second degree principals, (3) accessories before the fact, or (4) accessories after the fact (1,2, and 3 have been collapsed).

Under California law an aider and abetter is guilty of the crime he intends, and those that “naturally and probably” result from his intended crime. This is not a deviation from the norm, and to prove such deviation a defendant must present a concrete case, not just hypothetical possibilities, demonstrating that the law would be applied against the generic definition of the crime.

Justice Stevens, concurring in part and dissenting in part is uneasy about interpreting state law before the appellate court.

Does FELA Mandate Equal Causation Standards?

Norfolk Southern R. Co. v. Sorrell

Sorrell was injured when his truck veered of the road (whether by his fault or otherwise) and filed suit under the Federal Employee’s Liability Act (FELA), which provides a cause of action for negligence for failure to provide a “reasonably safe place to work.” The standard for employer negligence, applied to through model jury instructions, was different than that for the employee. FELA claims are controlled by common law, but FELA provides that contributory negligence should not be a defense, but rather should reduce recovery. The standard for negligence and contributory negligence in common law was the same, but FELA overturned a number of common law principles. The question here is whether the equality of standards for negligence and contributory negligence applies after FELA.

Since the statute employs comparative negligence it would at least be odd to compare the negligence of employer and employee as determined by different standards, and the application of a different rule “unduly muddies what may, to a jury, be already murky waters.” Employers are responsible if their actions are responsible “in whole or in part” for the injury, while employees’ liability is defined differently. The Court notes that if an employee were responsible “in whole” no action at all would be proper, and in any case, the difference in language does not indicate a congressional intent because it made sense in one section and not in another. Meanwhile, though the statute was enacted for the benefit of the railroad “it frustrates rather than effectuates legislative inetent simplistically to assume that whatever furthers the statues’s primary objective must be the law. Finally, even if harmless-error analysis is applicable here, that is a question for lower courts.

Justices Souter, Scalia, and Alito, concurring, argue that when Congress abrogated common law rules through FELA, it did so expressly, and that there is nothing about FELA that necessarily mandates a comparative negligence regime as opposed to a proximate cause regime. Why this is a concurrence, and not a dissent is a mystery to me.

Justice Ginsburg does not see, in this opinion, a divergence from any prior rule; that “the causation standard in FELA actions is more ‘relaxed’ than in tort litigation generally.’” Ginsubrg sees the proximate cause standard in Rogers as whether “employer negligence played any part, even the slightest, in producing the injury or death for which damages are sought. Citing Palsgraf v. Long Island R.R., Ginsburg states that whether a defendants’ actions are a proximate cause depends, at leas in part, on “how far down the chain of consequences a defendant should be held responsible for its wrongdoing,” and characterizes the purpose as “remedial” as against the railroads. Justice Ginsburg concludes that the Federal jury instructions, which require “the same rule of causation” should control, if only for the sake of jurors’ comprehension and meanwhile would apply harmless-error-analysis.

I readily admit that I do not understand this decision.

Jurisdictional Limits on Mixed Habes Petitions

Burton v. Stewart

After being convicted of rape, robbery, and burglary Burton was sentenced to within-guidelines sentences for each count, totaling 562. The total was calculated at various times either as an independent 562 month sentence for rape (to run concurrently), or by ordering that all three guideline-based sentences run consecutively (determined to be “exceptional” under Washington law).

Burton’s case worked its way up to a denial of review by the Washington Supreme Court on the issue of sentencing. He filed a petition for habeas corpus in the District court challenging the constitutionality of his convictions, omitting his sentencing claims because they were on direct review. Three years later Burton filed a second habeas petition, this time attacking the constitutionality of his sentencing. Under the AEDPA, before a court can have jurisdiction over a “second or successive” habeas application, the applicant must receive an authorizing order from the court of appeals, and as Burton’s second application challenged the same basis for his custody, this second application counted as a “second or successive” petition. The Ninth Circuit allowed the second petition without the authorization of the appeals court because, it held, Burton had a “legitimate excuse” for not including the sentencing issues in his original petition – those issues were on direct appeal and would have been dismissed for ripeness.

Rose v. Lundy held that for “mixed” petitions, which present both exhausted and unexhausted claims, a petitioner may (1) withdraw the petition, exhaust his remedies, and then refile; or (2) continue with the mixed petition, have the unexhausted claims ruled on, and face substantial procedural obstacles to their reconsideration, obstacles of which Burton’s habeas petition form explicitly warned. The Court had held in Martinez-Villareal) that when a habeas petition is dismissed as unripe, then becomes ripe, and is resubmitted, it is not “second or successive,” but here the claim was not raised in Burton’s first petition. Another case (Slack) held that when a habeas petition is dismissed as unripe before any claim is adjudicated on the merits, its resubmission is not to be considered “second or successive,” but here the court had reached the merits of Burton’s first petition. Finally, the Court finds that both of Burton’s habeas petitions challenged the same judgment because, although he only referred to the first judgment in his first petition, the second judgment was entered before he filed his first petition.

Finally, Burton argues that he had to file his first petition when he did to avoid the AEDPA’s one year limitation. The one year limitation, however, begins when judgment becomes final, defining judgment to include the sentence, and therefore would only have begun upon conclusion of direct review or expiration of the time to seek direct review, which occurred after he filed his first petition. This did not divest the court of jurisdiction over Burton’s first petition, which jurisdiction is allowed where “a person [is] in custody pursuant to the judgment of a State court” because Burton was in custody pursuant to such a judgment, even though that judgment was not final.

Are Declaratory Judgments in Private Actions Cases or Controversies?

MedImmune, Inc. v. Genentech, Inc.

Petitioner entered into a patent license agreement with Genentec to pay royalties on production and sale of a specified antibody, the agreement expressly limited to production or sale that would be covered by Genetec’s patent. Petitioner could terminate with 6 months notice. Genentec notified petitioner of its belief that the patent covered another product, petitioner believing that patent to be valid or enforceable. Does the Constitution’s jurisdictional limitation to Cases and Controversies (as a parallel to the “actual controversy” requirement of the Declaratory Judgment Act) require a patent licensee to terminate or be in breach of its license agreement before it can seek a declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed?

Despite contentions to the contrary, the Court finds that Petitioners’ briefs do seek a declaration of their contractual duties, and that the reduction of its contract arguments to a few pages in the court below “[did] not suggest a waiver; it merely reflects counsel’s sound assessment that the argument would be futile.” In Lear, Inc v. Adkins the Court rejected the argument that a contract providing for royalties “until such time as the patent … is held invalid” obligated payment of royalties until a court ruled on the matter. The same court, however, required that the licensee 1) actually cease payments and 2) provide notice of the reason to the licensor.

Any doubt that the Court could comply with its Case or Controversy jurisdictional requirement and at the same time issue declaratory judgments was dispelled in Nashville, C& St. L. R. Co. v. Wallace (1933). The dispute must be “definite and concrete, touching the legal relations of parties having adverse legal interests,” and must be real and substantial” and “admit of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts. “The justiciability problem that arises, when the party seeking declaratory relief is himself preventing the complained-of injury from occurring, can be described in terms of standing (whether plaintiff is or in terms of ripeness” both of which “boil down to the same question in this case.”

Where threatened action by government is concerned, the Court does not require a plaintiff to expose himself to liability before bringing suit because the threat-eliminating behavior is effectively coerced. In a previous private-action case (Atvater v. Freeman (1943)) where a Court had already issued an injunction, threatening treble damages, the Court held “that the involuntary or coercive nature of the exaction preserves the right to recover the sums paid or to challenge the legality of the claim.” The court suggests the test is about coercion itself, not who does the coercing; “Article III does not favor litigants challenging threatened government enforcement over litigants challenging threatened private action.”

Respondents argue a patent lease is really an insurance policy against litigation, so that permitting the challenge without actual damages alters the terms of their agreement (the implication being that the restriction is voluntary as a bargained term, and therefore not coercive). The Court responds that “promising to pay royalties on patents that have not been held invalid does not amount to a promise not to seek a holding of their invalidity. The other side of this theory is that petitioners should therefore not be allowed, under common law, to challenge the validity of an instrument while at the same time reaping its benefit, to which the court points out that the validity of the instrument is no in question, but only its breadth. Finally, the Court declines discretionary relief.

Justice Thomas, dissenting, notes that the Declaratory Judgment Act could not expand the Court’s jurisdiction, that advisory, moot, or unripe decisions are not “cases” or “controversies” in the meaning of the Constitution, and that the party seeking declaratory judgment has the burden of establishing a case or controversy. Because Petitioner’s contract claim relies on a determination of the validity of its patent, Justice Thomas would not treat this as a contract claim, and since “patent invalidity is an affirmative defense to patent infringement, not a freestanding cause of action” there is no case or controversy here.

Justice Thomas then argues that Altvater is not applicable because (1) it arose as a counterclaim to a bona fide suit; (2) it proceeds on the assumption that no license exists; and (3) the continuing compliance with license terms was under compulsion of an injunction. The dissent also distinguishes previous cases as being based on the particularly coercive nature of governmental power.