Opinion ID: 2441435
Heading Depth: 2
Heading Rank: 2

Heading: multiple punitive damage awards and due process

Text: We next consider OCF's claim that any further punitive damage awards levied against it for manufacturing and distributing Kaylo, beginning with the punitive damage awards here, are excessive as a matter of law in violation of the Due Process Clause. OCF argues that continued punitive damage awards for the same course of conduct violate substantive due process because the punishment and deterrence objectives underlying punitive damages have already been achieved by previous punitive damage awards for that course of conduct. OCF contends that because no legitimate purpose is served by additional punitive damage awards against it for manufacturing and distributing Kaylo, continued punitive damage awards, including the ones here, are irrational and arbitrary in violation of the Due Process Clause.
Answering this constitutional argument is no easy task. Professor David Owen, who has studied and written about this issue for the last two decades, has observed that the issue is a problem of enormous complexity which requires much analysis and ingenuity. Owen II, supra, at 394. Courts have also expressed concern and frustration about this issue. See, e.g., Edwards v. Armstrong World Indus., 911 F.2d 1151, 1155 (5th Cir.1990) (If no change occurs in our tort law or constitutional law, the time will arrive when Celotex's [asbestos] liability for punitive damages imperils its ability to pay compensatory claims and its corporate existence.). Of the many courts that have faced this challenge, only one has expressly held that multiple awards of punitive damages for the same conduct violate a defendant's due process rights. See Juzwin v. Amtorg Trading Corp., 705 F.Supp. 1053, 1064 (D.N.J.1989) (Juzwin I), vacated, 718 F.Supp. 1233, 1234 (D.N.J.1989) (Juzwin II) (vacated but abiding by previous ruling that repetitive awards of punitive damages for the same conduct violate a defendant's due process rights). Other courts faced with this argument have rejected it for five principal reasons. First, courts have rejected due process challenges to multiple punitive damage awards by holding that procedural safeguards provide all the protection that is necessary. See, e.g., Scheufler v. General Host Corp., 126 F.3d 1261, 1272 (10 th Cir.1997); Cathey v. Johns-Manville Sales Corp., 776 F.2d 1565, 1571 (6th Cir.1985); Fibreboard Corp. v. Williams, 813 S.W.2d 658, 686 (Tex. App.Texarkana 1991, writ denied). However, we believe that courts must consider multiple punitive damage awards for the same conduct against a party's substantive due process rights. Whether to punish a tortfeasor by means of an exaction of exemplary damages is an exercise of state power that must comply with the Due Process Clause of the Fourteenth Amendment. Honda Motor Co. v. Oberg, 512 U.S. 415, 434-35, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994). While a punitive damage award in an individual case may be fair and reasonable, the cumulative effect of such awards may not be. Juzwin I, 705 F.Supp. at 1055. At some point, punitive damages for the same conduct no longer serve to punish and deter, but instead become grossly excessive in violation of the Fourteenth Amendment's Due Process Clause. See BMW, 517 U.S. at 568, 116 S.Ct. 1589. Accordingly, we decline to follow these cases. Second, some courts have rejected substantive due process challenges out of parochial concerns. See In re School Asbestos Litig., 789 F.2d 996, 1001 (3d Cir.1986). These courts reason that a court-imposed limit on punitive damage awards will only affect claimants within their own jurisdiction, prejudicing those claimants and only providing minimal or arbitrary relief to defendants. See, e.g., Jackson, 781 F.2d at 405 (We believe that the Mississippi Supreme Court would not deny to its own citizens the right to recover that which citizens of dozens of other states are already entitled to recover.); W.R. Grace & Co.Conn., 638 So.2d at 505 (Were we to adopt the position advocated by Grace, our holding would not be binding on other state courts or federal courts. This would place Floridians injured by asbestos on an unequal footing with the citizens of other states with regard to the right to recover damages from companies who engage in extreme misconduct.); Wangen, 294 N.W.2d at 461 ([W]e do not believe this court [Supreme Court of Wisconsin] should abandon the concept of punitive damages in products liability suits and ask the citizens of this state to wait for a national law or legislative reform in all fifty states ....); see also Jeffries, A Comment on the Constitutionality of Punitive Damages, 72 Va. L.Rev. 139, 146 (1986)(noting that when a court denies a litigant punitive damages because its opponent has been sufficiently punished by previous judgments for the same course of conduct, there is no guarantee that other courts will follow suit thereby disadvantaging its own citizens relative to claimants in other jurisdictions). Third, courts have rejected OCF's argument to avoid what those courts perceive as inequitable results. As Judge Friendly pointed out over thirty years ago, it does not seem either fair or practicable to limit punitive recoveries to an indeterminate number of first-comers, leaving it to some unascertained court to cry, `Hold, enough,' in the hope that others will follow. Roginsky, 378 F.2d at 839-40; see also Fischer, 512 A.2d at 478 (reasoning that the fact that a defendant injured a large number of people should not relieve it from multiple punitive damage awards); Davis v. Celotex Corp., 187 W.Va. 566, 420 S.E.2d 557, 565 (1992)([I]t seems highly illogical and unfair for courts to determine at what point punitive damage awards should cease.); Kemp, The Continuing Appeal of Punitive Damages: An Analysis of Constitutional and Other Challenges to Punitive Damages, Post-Haslip and Moriel, 26 Tex. Tech. L.Rev. 1, 68 (1994)(noting that limiting multiple punitive damage awards unfairly advantages the first plaintiff or first few plaintiffs to obtain judgments for punitive damages to the detriment of all others). But c.f. Owen I, supra, at 1325 (questioning the supposed unfairness of rewarding the initial plaintiffs to a greater extent than subsequent plaintiffs). While we sympathize with the second and third reasons for rejecting OCF's constitutional challenge, these concerns should not stand in the way of protecting a defendant's due process rights. Due process mandates at all times, in all circumstances, and for all defendants, `fundamental fairness' at the hands of the law. Jeffries, supra, at 152. As we recognized in Moriel, our duty is to ensure that defendants who deserve to be punished in fact receive an appropriate level of punishment, while at the same time preventing punishment that is excessive or otherwise erroneous. Moriel, 879 S.W.2d at 17. [A]t some point, some jurisdiction must face up to the realities of the asbestos crisis and take a step that might ... lead others to adopt a broader view. Dunn, 1 F.3d at 1399 (Weiss, J., dissenting). Erecting a constitutional barrier to additional punitive damages awards against a particular defendant for the same course of conduct may, to some extent, allow only those plaintiffs who win the race to the courthouse to recover punitive damages. However, punitive damages are not designed to compensate individuals, but are only intended to punish tortious conduct and to deter its repetition. See Moriel, 879 S.W.2d at 16; see also BMW, 517 U.S. at 568, 116 S.Ct. 1589; Wheeler, The Constitutional Case for Reforming Punitive Damages Procedures, 69 Va. L.Rev. 269, 292 (1983)(As courts have uniformly held, no plaintiff has a right to punitive damages ... the purpose of punitive damages is to vindicate the public interest, not that of a particular plaintiff.). Therefore, when engaging in a substantive due process analysis of multiple punitive damage awards for the same conduct, courts should focus on the defendant's due process rights and whether the twin aims of punishment and deterrence have been adequately served rather than on plaintiffs' remedies. See Dunn, 1 F.3d at 1402 (Weiss, J., dissenting); Wilson v. Dukona Corp., N.V., 547 So.2d 70, 73 (Ala.1989) ([T]he focus is on the plaintiff with regard to the propriety of the compensatory damages award, and on the defendant with respect to the propriety of any assessment of punitive damages.). Fourth, some courts have decided that no single court is capable of crafting an acceptable solution to the national problem of multiple punitive damages in mass tort litigation, and have suggested that legislative action is the answer. See, e.g., Dunn, 1 F.3d at 1386 (collecting state cases and noting that both state and federal courts have recognized that no single court can fashion an effective response to the national problem flowing from mass exposure to asbestos products.); Cantrell v. GAF Corp., 999 F.2d 1007, 1017 (6th Cir.1993)(expressing view that relief from multiple punitive damage awards should not be sought from a federal court sitting in a diversity action but, rather, from the legislature under whose law the action is decided); Jackson, 781 F.2d at 406 (The relief sought by [the asbestos defendant] may be more properly granted by the state or federal legislature than by this Court.); Keene Corp. v. Kirk, 870 S.W.2d 573, 582 (Tex.App.Dallas 1993, no writ)(We too conclude that the higher courts and the appropriate legislative bodies should resolve such policy considerations.)(citing Glasscock v. Armstrong Cork Co., 946 F.2d 1085, 1096 (5 th Cir.1991)); W.R. Grace & Co., 638 So.2d at 505 (Any realistic solution to the problems caused by the asbestos litigation in the United States must be applicable to all fifty states. It is our belief that such a uniform solution can only be effected by federal legislation.); Fischer, 512 A.2d at 480 (At the state court level we are powerless to implement solutions to the nationwide problems created by asbestos exposure and litigation arising from that exposure.). It may be that a truly uniform solution can only be fashioned by either the Supreme Court or Congress. Nevertheless, the difficulty or enormity of the task does not grant us leave to avoid OCF's properly preserved due process challenge under applicable constitutional principles and to ensure that its due process rights are not violated. See Moriel, 879 S.W.2d at 16-17. Indeed, a state court's interpretation of federal law about such a challenge is no less important than that of the federal court of appeals in its circuit. See Lockhart v. Fretwell, 506 U.S. 364, 376, 113 S.Ct. 838, 122 L.Ed.2d 180 (1993) (Thomas, J., concurring). Courts should not wait for congressional or legislative action to correct errors made by the courts themselves. Mistakes created by courts can be corrected by courts without engaging in judicial activism. It is judicial paralysis, not activism, that is the problem in [mass tort cases involving successive punitive damages awards]. Dunn, 1 F.3d at 1399 (Weiss, J., dissenting); see also Owen III, supra, 60 n. 227. Finally, courts have rejected due process challenges to multiple punitive damage awards not because such challenges are necessarily unsound as a matter of constitutional law, but because the defendant failed to preserve error on the issue, there was not an adequate record to show a due process violation, or, whatever limits due process may impose on multiple punitive damage awards, that limit clearly was not surpassed on the facts presented. See, e.g., Racich v. Celotex Corp., 887 F.2d 393, 398 (2d Cir.1989)(error not preserved); Pittsburgh Corning Corp., 901 F.2d at 281-82 (no due process violation on record presented); Dunn, 1 F.3d at 1389 (same); Leonen v. Johns-Manville Corp., 717 F.Supp. 272, 285 (D.N.J.1989)(same); Palmer v. A.H. Robins Co., 684 P.2d 187, 216 (Co.1984)(same). Here, OCF preserved its arguments, and as a result of the posttrial evidentiary hearing, the record is adequate for our review. Although we recognize that other courts have struggled with the issue and have discussed valid reasons for rejecting OCF's due process challenge, we join the courts and commentators that have acknowledged that repeatedly imposing punitive damages on the same defendant for the same course of wrongful conduct may implicate substantive due process constraints. See, e.g., Dunn, 1 F.3d at 1385 (The principal issue impelling us to take this otherwise routine product liability case in banc is the effect of successive punitive damages awards in mass tort cases arising from the same course of conduct: We, as well as other courts, have expressed concerns in that regard.); King v. Armstrong World Indus., Inc., 906 F.2d 1022, 1033 (5th Cir.1990) (With some misgivings, the panel holds that it is bound [by previous Fifth Circuit decisions] to reject defendant's argument that multiple punitive damage awards for the same misconduct violated constitutional protections.); Racich, 887 F.2d at 398 (We agree that the multiple imposition of punitive damages for the same course of conduct may raise serious constitutional concerns, in the absence of a limiting principle.); In re School Asbestos Litig., 789 F.2d at 1005 ([P]owerful arguments have been made that, as a matter of constitutional law or of substantive tort law, the courts shoulder some responsibility for preventing repeated awards of punitive damages for the same acts or series of acts.); In re Agent Orange Prod. Liab. Litig., 100 F.R.D. 718, 728 (E.D.N.Y.1983) (There must ... be some limit, either as a matter of policy or as a matter of due process, to the amount of times a defendant may be punished for a single transaction.); In re Northern Dist. of Cal. Dalkon Shield IUD Prods. Liab. Litig., 526 F.Supp. 887, 899-900 (N.D.Cal.1981), rev'd on other grounds, 693 F.2d 847 (9th Cir.1982) (A defendant has a due process right to be protected against unlimited multiple punishment for the same act.); Tetuan, 738 P.2d at 1244 (The concerns expressed in Roginsky of multiple punitive damage awards in mass accident or products liability cases may require consideration by this court at some future time.); Owen III, supra, at 60 n. 227 (As the total punitive damages assessed against the company in different actions mount, there should come a point when the aggregate of such punishment will be deemed sufficient as a matter of law.); Seltzer, supra, at 55 (The aggregate amount of multiple awards ... can reach a level so fundamentally unfair and destructive that any additional awards above that level should not be permitted.); Koenig, Punitive Damage Overkill After TXO Production Corp. v. Alliance Resources: The Need for a Congressional Solution, 36 WM & MARY L.REV. 751, 763 (1995) (The Supreme Court ... could rule that multiple awards trigger `a general concern of reasonableness' and violate substantive due process because they go beyond what is necessary to deter and punish.). The Supreme Court has not considered at what point multiple punitive damages awards arising from the same course of conduct are unconstitutional as a matter of substantive due process. However, if a single punitive damages award becomes unconstitutional when it can fairly be categorized as grossly excessive in relation to a state's legitimate interests in punishment and deterrence, it follows that the aggregate amount of multiple awards may also surpass a constitutional threshold. See BMW, 517 U.S. at 568, 116 S.Ct. 1589; see also Dunn, 1 F.3d at 1404 (Weiss, J., dissenting). Even before BMW held that an individual punitive damage award could exceed constitutional boundaries, many courts and commentators (as we have cited) agreed or expressed concerns, that at some point, the aggregate amount of multiple punitive damage awards becomes fundamentally unfair in violation of due process guarantees. BMW simply lends additional support to the view that multiple punitive damage awards against a party for the same course of conduct can surpass constitutional limits under the Fourteenth Amendment. The aggregate effect of such awards may reach far beyond their purpose to punish and deter, becoming what has been coined `overkill.' Jones et al., Multiple Punitive Damage Awards for a Single Course of Wrongful Conduct: The Need for a National Policy to Protect Due Process, 43 Ala. L.Rev. 1, 1 (1991). In deciding whether multiple punitive damage awards against OCF for the same course of conducthere Kaylo-related claimsoffend OCF's due process rights, courts cannot draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case. Haslip, 499 U.S. at 18, 111 S.Ct. 1032. However, we believe the following criteria, derived from BMW and from the Green Oil factors the Supreme Court endorsed in Haslip, are proper for posttrial constitutional review of whether the purposes of punishment and deterrence have been adequately served by previously paid punitive damage awards for the same course of conduct: (1) the degree of reprehensibility of the defendant's misconduct; (2) the profit earned by the defendant from its misconduct; (3) the defendant's financial position; and (4) criminal sanctions, if any, imposed for the same conduct. See BMW, 517 U.S. at 574-75, 116 S.Ct. 1589; Haslip, 499 U.S. at 22, 111 S.Ct. 1032; Green Oil, 539 So.2d at 223-24; see also Garnes v. Fleming Landfill, Inc., 186 W.Va. 656, 413 S.E.2d 897, 908-10 (1991). Like a single punitive damage award, aggregate awards enter the zone of arbitrariness under the Due Process Clause [o]nly when [the aggregate] award[s] can fairly be characterized as `grossly excessive' in relation to the legitimate interests in punishment and deterrence. See BMW, 517 U.S. at 568, 116 S.Ct. 1589. We agree with the Second and Third Circuits, neither of which has foreclosed the possibility of a successful substantive due process challenge under an aggregate punitive damages award theory, that such a challenge can properly be evaluated only if the defendant develops a sufficient record. See Dunn, 1 F.3d at 1389; Pittsburgh Corning Corp., 901 F.2d at 281. `Only with [sufficient] factual information can the judge determine that the aggregate of prior awards punishes the entirety of the wrongful conduct to the limit of due process.' Dunn, 1 F.3d at 1389 (quoting Pittsburgh Corning Corp., 901 F.2d at 281). In a posttrial review to decide whether a punitive damages award, when aggregated with previously paid punitive damage awards for the same course of conduct, is unconstitutionally excessive, trial courts may consider evidence beyond what is admissible during the trial. After the trial, the danger of unfair prejudice, confusion of the issues, or misleading the jury no longer exists. Moreover, the issue is then one of lawat what point do multiple punitive damage awards arising from the same course of conduct violate due process. Here, the trial court properly allowed OCF to present its enough is enough evidence when Frank testified at the posttrial hearing. The court of appeals also considered Frank's posttrial testimony. Using the criteria we have gleaned from BMW and Green Oil, we now examine the record, including the evidence from the posttrial hearing, to determine whether due process requires an end to further Kaylo-related punitive damage awards against OCF in Texas.
First, and most important, a court should give considerable weight to the degree of reprehensibility of the defendant's conduct. See BMW, 517 U.S. at 575, 116 S.Ct. 1589. [T]he duration of that conduct, the defendant's awareness, any concealment, and the existence and frequency of similar past conduct, are all relevant in gauging reprehensibility. See Haslip, 499 U.S. at 21, 111 S.Ct. 1032 (discussing Green Oil factors). As we discussed when examining the individual punitive damage award in this case, the court of appeals upheld the trial court's judgment finding that OCF's conduct demonstrated indifference to the health and safety of others for many years. This finding weighs in favor of allowing additional punitive damages awards against OCF. See BMW, 517 U.S. at 576, 116 S.Ct. 1589. The punitive damages paid by OCF thus far are not grossly out of proportion to the severity of the offense. See Haslip, 499 U.S. at 22, 111 S.Ct. 1032. Second, a court should examine the profitability of the wrongful conduct. See Haslip, 499 U.S. at 22, 111 S.Ct. 1032 (discussing Green Oil factors). The $3 million in punitive damage awards previously paid by OCF [7] is double the amount of profits OCF claims it earned from its Kaylo sales. Punitive damages, however, are not necessarily confined to the amount of profits. Dunn, 1 F.3d at 1391; Stevens, 57 Cal.Rptr.2d at 534. Where evidence shows that product sales resulted in widespread and devastating injuries and little profit in relation to the seller's overall financial condition, merely taking away that profit may or may not impose much punishment on the seller. See Morris, Punitive Damages in Tort Cases, 44 Harv. L.Rev. 1173, 1191 (1931)([A] penalty which would be sufficient to reform a poor man is likely to make little impression on a rich one....). As other courts considering OCF's same arguments have observed, because Kaylo sales approximated only 2 percent of OCF's total sales, and an even smaller percentage of its total profits, Kaylo profits do not provide an accurate indication of the likely punitive impact of a punitive damage award against OCF. Stevens, 57 Cal.Rptr.2d at 535. Thus, the evidence about the profits, or lack thereof, from OCF's Kaylo sales does not support OCF's due process argument. Third, because courts should ensure that punitive damage awards do not exceed an amount necessary to accomplish society's goals of punishment and deterrence, a court should examine the defendant's financial position. See Haslip, 499 U.S. at 22, 111 S.Ct. 1032 (discussing Green Oil factors). Here, the trial court and the court of appeals considered OCF's enough is enough evidence from the posttrial hearing and determined that OCF's financial position is not so precarious that further punitive damages awards against it should be disallowed. We agree. The evidence reveals that OCF is a solvent, healthy company. In 1993, shortly before this case was tried, OCF reported to its shareholders that [a]t the end of 1991, our company was valued by the market at $932 million; 12 months later, the market value of the company was in excess of $1.5 billion, an increase of 60%! Moreover, in March 1993, OCF reported to the SEC that the additional uninsured and unreserved costs which may arise out of pending personal injury and property damages asbestos claims and additional similar asbestos claims filed in the future will not have a materially adverse effect on the Company's financial position. [8] Thus, we cannot say that the prior paid punitive damage awards against OCF, combined with the punitive damage awards here, have exceeded the goals of punishment and deterrence. Fourth, previously imposed criminal sanctions for the same conduct are relevant in determining whether a defendant has been sufficiently punished and deterred. See Haslip, 499 U.S. at 22, 111 S.Ct. 1032 (discussing Green Oil factors). However, there is no evidence about any such sanctions in this case. OCF has not shown that the aggregate punitive damage awards against it have exceeded the twin goals of punishment and deterrence underlying such awards to constitute a violation of its substantive due process rights. Dunn, 1 F.3d at 1390. Given the nature of OCF's conduct and the concomitant injuries suffered by the plaintiffs, OCF's relatively stable financial position, and the fact that OCF has actually paid only $3 million in punitive damages for the same conduct, we cannot say that the punitive damage awards here, when aggregated with other paid punitive damage awards against OCF, can be characterized as grossly excessive and beyond the legitimate interests of punishment and deterrence. We therefore conclude, as have other courts when considering OCF's same arguments under similar facts, that the evidence produced by OCF falls short of demonstrating a due process violation. Spaur, 510 N.W.2d at 867 (record reflected that OCF had paid $3 million in punitive damages); see also Stevens, 57 Cal. Rptr.2d at 539-40 (Without any showing of punitive damages actually assessed and paid [by OCF], the evidence fell far short of demonstrating `overkill.'). We affirm the court of appeals' judgment in Wasiak.