BROWNING-FERRIS INDUSTRIES v. KELCO DISPOSAL
Legal provision: Prohibition of Excessive Fines
ORAL ARGUMENT OF ANDREW L. FREY ON BEHALF OF PETITIONERS
Chief Justice Rehnquist: We'll hear argument first this morning in No. 88-556, Browning-Ferris Industries of Vermont v. Kelco Disposal.
Mr. Frey: Thank you.
Mr. Chief Justice, and may it please the Court:
The question in this case is whether a $6 million verdict inflicted on Petitioner BFI to punish it for a purely economic tort that caused Respondent Kelco Disposal $51,000 in actual damages is subject to attack on the ground that it is disproportionate to the wrong that BFI was found to have committed.
Now, BFI and Kelco were competitors in the roll-off waste disposal business in Burlington, Vermont and for a period of about six months in late 1982 and early 1983 BFI, which had been losing market share to Kelco, substantially reduced its prices in what the jury found was an effort to put Kelco out of business and to secure a monopoly in the market.
This effort in fact proved unsuccessful.
Kelco maintained its market share.
BFI soon raised its prices.
And, eventually it was BFI that gave up, sold out, and left the Burlington market.
In the meanwhile, this lawsuit had been brought.
The complaint charged an attempt to monopolize in violation of Section 2 of the Sherman Act and in a second count tortious interference with Kelco's business relations in violation of Vermont common law.
Now, the same alleged misconduct, predatory pricing, underlay both causes of action.
After the jury found BFI liable on both counts, it was asked to assess damages, and after a hearing it found that Kelco's injury, as I mentioned, was $51,000.
Under the Federal Antitrust Claim, Kelco was of course entitled to three times that amount together with attorney's fees.
For the state tort, which, remember, involved exactly the same conduct, Kelco was awarded the same $51,000 in compensatory damages and $6 million in punitive damages.
Now, the jury, which had before it a sympathetical local plaintiff and was being asked to punish a large, impersonal, out-of-state defendant, awarded this astronomical amount after a damages hearing in which it was repeatedly urged to send the message to Houston... which is where BFI has its corporate headquarters... and was invited to base its award on BFI's size, which was detailed to it in terms of annual income, revenues, monthly revenues, weekly revenues, hourly revenues.
Now, when BFI challenged the verdict as excessive, both the district court and the court of appeals upheld it.
And in the course of doing so they did not undertake any careful analysis of the circumstances of the case of BFI's conduct.
They simply upheld the award on the basis of their subjective reactions that it was not excessive.
And in the case of the court of appeals essentially on the basis of BFI's wealth.
Now, both Kelco and its amici speak at some length about the generally valuable role played by punitive damages in the modern American legal system.
And they charged BFI with asking the Court to overturn traditional state tort law.
But the Court does not have before it any question of the Constitutionality of punitive damages as such.
By and large, therefore, the impassioned defense that has been made of the Institution of punitive damages is quite beside the point.
There may be many things right or wrong with punitive damages, but the question before the Court is whether federal law prohibits excessive awards of punitive damages.
This is a relatively recent phenomenon, by no means a traditional part of state tort law, and little has been said and little could be said to justify the infliction of excessive punishments on tort-feasors.
Mr. Farr: Well, Mr. Frey, what kind of federal law do you think applies here?
Do we look to Vermont state law in this instance?
How do we get the federal law issue before us?
Mr. Frey: Well, I'm--
Mr. Farr: Is it through your Excessive Fines Clause of the Constitution?
Mr. Frey: --Well, there are three provisions that... three bodies of law or provisions of law that could regulate the excessiveness of damages awards in tort cases, punitive damage awards.
One is the Excessive Fines Clause of the Eighth Amendment and certainly the one we first think of as being potentially applicable.
Mr. Farr: Well, is that the one you're arguing today?
Is that the one--
Mr. Frey: I intend to--
Mr. Farr: --that was raised below?
Mr. Frey: --That was raised below.
The common law argument that this is excessive, apart from the Constitution, was raised below.
The third ground on which the Court could reach the question whether the award is excessive is the due process clause.
Mr. Farr: But was that raised below?
Mr. Frey: The due process argument as such was not raised below.
We believe, however, your Honor, if I can anticipate your next question, that that is not a reason why this Court could not reach the due process question if it found that the Excessive Fines Clause of the Eighth Amendment was inapplicable.
While Kelco in its brief has mentioned several times that the due process issue was not raised below, what it has not done is cite any cases that indicate that that is a detect that blocks the Court from ruling on that question.
And, in fact, in our reply brief we cited several cases, I think City of Revere, Braniff Airways against Nebraska, and I think in fact the instances are legion in which the party has cited... has made the correct substantive attack.
That is, it has identified specifically what its problem is with what happened to it, what it thinks is wrong.
But, it has assigned the wrong provision of the Federal Constitution.
In a case like that, I think the Court has felt free, if need be, to reach the correct provision.
Essentially our claim is that this award is excessive.
It is grossly disproportionate to what was done wrong.
We say that violates the Excessive Fines Clause of the Eighth Amendment.
Mr. Farr: Has this court ever incorporated the Excessive Fines Clause into the Fourteenth Amendment to make it applicable to the states?
Mr. Frey: I'm not sure that I'm aware of any case in which it either has done so or has rejected doing so.
It's clear that it has applied both the Excessive Ball Clause and a Cruel and Unusual Punishments Clause.
In fact, the kinds of provisions that are not incorporated are basically procedural provisions like the jury trial right of the Seventh Amendment or the indictment right under the Fifth Amendment.
We are talking here about a substantive protection of individual rights under the Bill of Rights, I think.
The protection against excessive punishments.
Mr. Farr: How do you define state action here?
Mr. Frey: I define state action because it's going to be... in this case it's federal action really... it's going to be the United States Marshall who is going to come to Browning-Ferris' office if they don't pay the judgment and cart away its property to sell it.
Mr. Farr: So, you would limit this to just suits in Federal Court?
Mr. Frey: Not at all.
Our position... it would be state action if the suit were in state court and the sheriff were going to do it.
It seems... It seems to me clear, Justice O'Connor, that where the punishment is inflicted by virtue of the judgment of a court, even in a private civil action, that constitutes state action.
I don't think the state can avoid the responsibility to adhere to the constitution by using the medium... it's still the power of the state that enforces the judgment.
The medium is simply this trial before a state or federal court between private parties.
Mr. Farr: But, if you are right, it would involve the federal courts and this Court in reviewing every state tort judgment that resulted in punitive damages.
Mr. Frey: Well, I--
Mr. Farr: I mean, it would be a substantial expansion, would it not?
Mr. Frey: --I believe it would not be a substantial expansion at all and I think there are several reasons for that.
First of all, there is no expansion of the number of cases that would be brought.
This is simply an issue that would arise in an existing case.
So, this would not involve the lower federal courts in a single case more than they would otherwise be involved in.
It is simply where a tort suit is brought and a claim for punitive damages is made there is the possibility of raising the claim that the Constitutional award is... that the punitive damages award is excessive.
Mr. Farr: Well, what about state courts, though?
Mr. Frey: State courts--
Mr. Farr: I mean, a lot of these are in state courts.
Mr. Frey: --Well, the second... yes, many of these are in state courts.
And, again, it would require the state courts to do something similar to what they do anyway, which is a normal judicial function, which is to review the excessiveness of verdicts.
Now, we believe that the way many state courts have done this is a constitutionally unacceptable method for approaching it.
That is, it's been purely subjective in the standard--
Mr. Farr: But then petitions for certiorari would be filed and if there is a federal doctrine we've enunciated, that's one more thing we would have to look at.
Mr. Frey: --Well, let me say this about that... about that concern.
I think there are several things to be said.
The first is that if the Court decides this case and it holds that the Eighth Amendment applies, and it sets forth a framework within which the Eighth Amendment analysis is to be conducted, I think you will find that even though in theory it is possible to raise claims, that the incidence of the exorbitant awards will be substantially reduced.
The second thing is that the same thing could be said about the rule that a criminal conviction must rest on evidence that satisfies the reasonable doubts standard.
That is an issue... well, the same thing could be said about applying the Speedy Trial Clause to the states.
Mr. Farr: In a criminal case you have habeas corpus.
A criminal judgment does not become final where a civil judgment does.
Mr. Frey: But that is in fact one of the concerns.
In a case like Jackson against Virginia the concern was that you were creating an additional cause of action a whole new case, that could be brought to review the question of the sufficiency of the evidence.
What we are talking about here is a claim which will arise in a relatively small proportion of the cases, and, indeed, a much smaller proportion of the cases after this Court establishes the analytical framework within which these cases are to arise or these claims are to be evaluated.
And I think it will be easy for this Court unless... this Court would not grant certiorari in particular cases unless it saw a question of general importance about the administration of the punitive damages system.
If it sees a question of general importance, if it sees a recurring type of problem in which excessive punitive damages may be being inflicted, then it seems to me that the duty that the Constitution places upon this court is to explicate the law in this area where it would be useful.
Mr. Farr: Mr. Frey, assuming that the Excessive Fines Clause applies to the states, I find... why must it apply so as to impose a national standard?
I find it difficult to think that the Constitution meant to say every state has to hate predatory pricing the same amount.
Mr. Frey: Well, I don't believe it does and I don't believe it's the burden of our submission that it does.
You have to distinguish between the class of cases... which I hope would increasingly come to be the norm and which is the norm in the case of criminal case finds... where the legislature has established standards.
And in that class of cases our position is that the constitutional inquiry would defer substantially to the legislative judgment.
What the Constitution does--
Mr. Farr: Why not totally?
Is the standard you ask us to impose a national standard or rather should we just look to each individual state and say this award is excessive given what's done within that state, and allow each state to say how much it hates it each individual thing as much as it wants?
Mr. Frey: --Well, by and large I think that is our position because our position is only that the excessive fine inquiry under the Federal Constitution is an outer perimeter.
Within that outer perimeter, the states are free to set the rules as they see fit.
Mr. Farr: No, but we're not in agreement.
I'm not talking about any outer perimeter.
I'm saying that--
Mr. Frey: I understand.
--If the state wants to say for a particular type of offense you can be fined one-quarter of your net worth, that's fine if the state hates a particular thing that much.
So long as the state treats everybody alike.
But I gather what you're mainly complaining about is the flukiness of judgments.
Now, that would be eliminated within each state, at least, wouldn't it, if you applied the Excessive Fines Clause simply to require the state to have some consistency in judgments within its own state.
Well, let me say, Justice Scalia, that I think your position comes to a hard place against Solem against Helm when you come up against that.
And I think what Solem teaches us is that where the legislature sets a boundary, that will be respected.
Mr. Farr: --Do you regard Solem as the last word on that subject?
Mr. Frey: Well, let's say that it's the last case I'm aware of in which this Court has addressed the matter.
But let me back up for a minute.
This is not a case in which Vermont or federal law has authorized in any affirmative way a $6 million verdict.
This is a case in which we have a system of the sky is the limit, we won't tell you what it is.
Whatever amount the jury comes up with, if it doesn't shock our conscience... and we won't tell you how we decide that... is okay.
Mr. Farr: It would be a different case if you had had fifteen $6 million verdicts in Vermont and the Vermont Supreme Court had looked at all of these and said,
"Yeah, we hate predatory pricing that much."
It would be a different case, wouldn't it?
Even without a legislative pronouncement.
Mr. Frey: It would be a different... It would be a different case and I would have a much harder task.
But I'm not prepared to concede that if by some fluke Vermont decided that for double-parking the appropriate penalty was a million dollars, that this Court would have nothing to say about it.
Mr. Farr: Why?
Why would we care how much... maybe Vermont has a real problem with double-parking.
The citizens of Vermont can... you know, can handle that the way they want, can't they?
Mr. Frey: Because I think the Eighth Amendment is a provision that commits to the courts some safety net function in this area.
I mean, I hate... I hate... don't want to, if I can avoid it, prolong this dispute because I don't think it's this case.
That is, I don't see, even if you were correct... unless you want to take the next step and say that a state that has no system, that sets no standards, that the maximum penalty is any amount you can dream of for any wrong that you do, which I think is totally inconsistent with the Eight Amendment.
And I might say that this Court in a federal case should not allow that kind of award to be entered.
I don't believe Vermont law permits that.
Mr. Farr: You were not... all I'm... I just want to get your answer to one question.
You do not... you're not willing to read "excessive" to mean simply excessive with regard to other fines imposed by that state?
Mr. Frey: I'm not willing to--
Mr. Farr: You insist upon some national standard?
Yes or no?
I think that can be answered yes or no.
Mr. Frey: --I am... I am... I think the answer is no, although in this case I would be satisfied, I think, with that reading.
I think we would still win.
Mr. Farr: No... yes, you insist on a national standard?
Isn't that right?
Mr. Frey: I insist on... I don't insist on anything.
I urge the Court--
--that it... that it consider a rule under which the punishment bears some relationship to the crime.
That is, I think the macado is somewhere in the Eighth Amendment.
But I have to stress--
Mr. Farr: Mr. Frey, I don't understand why you're not willing to say it's a national standard.
That's the way I read your brief.
Mr. Frey: --Because I think our position is that the standard--
Mr. Farr: Do you think--
Mr. Frey: --is not the same where there are different legislative judgments.
Mr. Farr: --Yes, but if there are no legislative judgments.
Mr. Frey: --If there are no legislative judgments--
Mr. Farr: Basically we have a system now with no legislative judgments so far.
So, in that ballpark isn't the standard the same everywhere under your submission?
Mr. Frey: --I'm still not sure, Justice Stevens, that I can go that far because the approach that we suggest which is the... in which we are guided by Solem... and maybe I shouldn't be, but it is the most recent word, if not the last word, of the Court on the subject... is a multi-factor approach.
One of the relevant factors is what happens in Vermont, is this in line with the penalties that are inflicted in Vermont for this kind of misconduct?
That is a relevant factor.
So, I am not--
Mr. Farr: Well, assume we thought that a $100 million fine was clearly excessive, do you think it would stop being excessive because Vermont had inflicted it a hundred times?
Mr. Frey: --No.
Mr. Farr: I don't follow that approach.
Mr. Frey: I don't... I'm not suggesting that.
One of the problems I have with looking at other punitive damages awards, as opposed to legislative judgments or even court-made common law explications of rules is that they are all the product of the same, what we feel, defective system that is bound, not regularly, but all too frequently to produce these bloated, irrational, excessive awards.
So, I don't even like looking at other punitive damages awards.
But I guess I'm somewhere... I can imagine a system or a set of rules... and I don't think this is the Court's problem today because it seems to me that whoever is right in this debate, this award is excessive.
If the Eighth Amendment applies to the states, the Eighth Amendment authorizes the striking down of this award.
Mr. Farr: Do you think this award would be excessive if Vermont had a statute that said there should be no punitive damage awards in excess of $10 million in cases... and somehow describe this kind of economic tort?
Mr. Frey: Yes.
Mr. Farr: What if there was a federal... what if the federal antitrust penalties were raised to $10 of criminal penalties and you have this very violation?
Would a $6 million fine violate the Excessive Fines Clause?
Mr. Frey: You mean where this--
Mr. Farr: Well, you have a Sherman Act found violation here.
Mr. Frey: --I think it would be--
Mr. Farr: I would assume--
Mr. Farr: I think it would be--
Mr. Farr: --a judge, if--
Mr. Frey: --I think it would be a much... a much harder argument to make.
Just as in Solem it was a hard argument to make that the legislative determination... it was a five to four case... it's a much harder argument to make.
Now, I will say about the one million dollars that is... authorizes a criminal fine for antitrust violations, that that provides very little benchmark to justify the $6 million here.
Because $1 million represents the Congressional judgment about the penalty that should be imposed for the most severe violations of the antitrust laws.
Now, whatever you may think about the conduct here, and I'm sure Mr.--
Mr. Farr: --Well, that's not quite right--
Mr. Frey: --will tell you--
Mr. Farr: --because you can also go to jail.
Mr. Frey: --Well, a corporation can't.
Mr. Farr: Oh, okay.
Mr. Frey: The penalty for a corporation... in fact, I think there may be a distinction in--
Mr. Farr: Mr. Frey, you take the position... excessive in any state?
Mr. Frey: --This $6 million for this conduct, I think would be excessive anywhere, yes.
Mr. Farr: In any state?
Mr. Frey: We... that is our position.
Mr. Farr: Well, Mr. Frey, you're talking interchangeably about an excessive fine and punishment.
Do you think we have to find that this fine was punishment in order to agree with you?
Mr. Frey: Well, I think... I think you would have to find that it was punishment to agree with us under the Eighth Amendment argument.
Mr. Farr: Uh-huh.
Because you think... because?
Mr. Frey: I think our view is that what the word "fine" means is a monetary exaction for purposes of punishment.
Mr. Farr: But you must be contending that it needn't be criminal punishment?
Mr. Frey: It need not be punishment that is inflicted as a result of a criminal prosecution.
Definitely we are contending that.
In fact... In fact, we think that--
Mr. Farr: Well, why do you have to even talk about punishment then?
Mr. Frey: --Well, I think it's a question of how we use the word punishment.
Only if you define the word punishment as being that which is inflicted after a criminal proceeding.
And I understand that in Ingraham that the Court was talking about a different provision of the Eighth Amendment.
Mr. Farr: Yes.
Mr. Frey: The Cruel and Unusual Punishments Clause.
It said we're going... what we are going to do is to say that you can't punish people except through the criminal process.
Now, I'm not talking about fines but other kinds of punishments.
They are corporal punishment.
Therefore, it said if something is punishment within the meaning of the Cruel and Unusual Punishments Clause, you have to have a criminal prosecution.
Now, we have a different history in the case of civil penalties, civil punishments.
We have a history that goes back to, really, the time of amercements of Magna Carta of punishing people for wrongdoing in civil proceedings.
And where the punishment is monetary only and, therefore, within the contemplation of the Excessive Fines Clause, I think my provision is... my argument is that it doesn't matter whether it's inflicted on a civil or criminal--
Mr. Farr: Well, I guess punitive damages are often talked about as a form of punishment.
Mr. Frey: --They are almost always talked about as a--
Mr. Farr: Yes.
Mr. Frey: --form of punishment for--
Mr. Farr: Yes.
Mr. Frey: --purposes o?
Mr. Farr: --it isn't much of a problem you say?
Mr. Frey: --Huh?
Mr. Farr: It isn't much of an issue?
Mr. Frey: I don't think... I don't think it's a problem for my case, to make that--
Mr. Farr: In the English or the Commonwealth countries, have they relied on the Magna Carta or the English Bill of Rights to set aside any punitive damage award--
Mr. Frey: --We have a--
Mr. Farr: --in a civil case?
Mr. Frey: --We have a footnote in our reply brief which addresses that question, and my understanding is that the tradition is not to refer to the Magna Carta or the English Bill of Rights even... even in setting aside criminal fines as excessive.
It's just simply the way the English do it.
But I think it is understood that it is part of the tradition.
That is, the rights that were protected by Magna Carta.
This Court has always thought it part of what was brought through the English Bill of Rights into the Eighth Amendment.
Mr. Farr: Is there some objective standard apparent there or is it again what seems to shock the conscience of the trial court?
Mr. Frey: You mean what is the standard for--
Mr. Farr: In setting aside--
Mr. Frey: --excessiveness?
Mr. Farr: --Yes.
Mr. Frey: Well, actually--
Mr. Farr: In civil... in civil cases.
Mr. Frey: --Actually, Magna Carta contained a standard which, to my mind, is far more satisfactory than the "shock the conscience" standard.
Mr. Farr: No.
I mean what the English judges do when they set aside punitive damages awards, if they do.
Mr. Frey: They do set them aside.
Mr. Farr: But, do they have an--
Mr. Frey: They do set them aside.
Mr. Farr: --objective standard?
Mr. Frey: Well, I can't tell you that I am as familiar with the details of the English... of the English cases, so I'm not sure that I could tell you--
Mr. Farr: Well, because if we're saying that the Magna Carta and the English Bill of Rights incorporates this idea, then I should think that the English judges would incorporate it somehow with an objective standard, if that's what you say it means.
Mr. Frey: --Well, what it means is that the... I mean, I'm not sure what does it mean to say that a punishment is excessive.
In my mind what it must mean is that the punishment is... you first look at what is the purpose of punishing somebody.
The purpose is to exact just retribution for wrongful conduct, first of all, and secondly, to deter the offender and others like the offender from committing similar offenses in the future.
Now, if you ask yourself whether a punishment is excessive, it seems to me you have to ask yourself whether considering what the offender did, considering what the purposes of the punishment are, is this more than is necessary.
And we have in American law in the area of bail, precisely that kind of analysis.
That is, we ask what is the purpose for releasing somebody on bail and requiring bail when we release somebody before a trial.
The purpose is to insure their attendance at trial.
What amount of bail is excessive?
The amount of bail that is more than reasonably necessary to accomplish that purpose.
Now, I don't see how the protection that... that you are given under the Eighth Amendment or under the Due Process Clause, or that this Court should impose as a discipline on the federal courts in reviewing damages awards can soundly look to a different standard.
Mr. Farr: Is the Due Process Clause equally of assistance to you in this case as... suppose there were no problem with it having been raised, that the Due Process Clause was clearly raised below--
Mr. Frey: I think that--
Mr. Farr: --But does that really incorporate just about the same standard we're talking about?
Mr. Frey: --I think it does, but I know that my brother here thinks that it incorporates only the "shock the conscience" standard which is a purely subjective unreviewable standard.
In my view, he has to explain whether it's under the Due Process Clause or under the Excessive Fines Clause how an award of this size can possibly be justified by the purposes for which... for which BFI is being punished.
And I think that the cases that he relies on make it clear that the Due Process Clause regulates excessive punishments every bit as much as the Excessive Fines Clause does.
The pre-incorporation cases--
Mr. Farr: Mr. Frey, is your due process argument a substantive due process argument entirely or is it partly procedural?
Mr. Frey: --Well, it is almost entirely substantive.
And to the extent it's procedural, it only asks the Court to consider as relevant in determining the excessiveness, the process by which this came up.
That is, we did not object to the procedures as such.
We are, therefore, not making a procedural due process claim.
But, just as the Eighth Amendment brings procedural considerations into the determination of whether a punishment is cruel and unusual and requires procedures as well as substance, we think the procedures that produce this award are irrelevant.
Chief Justice Rehnquist: Thank you, Mr. Frey.
ORAL ARGUMENT OF H. BARTOW FARR, III ON BEHALF OF RESPONDENTS
Mr. Farr: Thank you.
Mr. Chief Justice, and may it please the Court:
Our position today rests on two, I think, relatively straightforward propositions.
First of all, that the Excessive Fines Clause of the Eighth Amendment does not apply to damages, punitive or not, awarded in private state court tort actions.
Second, that in any event there is no basis in the Eighth Amendment, or otherwise, for the sort of intrusive second-guessing of jury verdicts the Petitioners propose.
Now, before turning to the Eighth Amendment, I'd like to just point out briefly the context in which this claim arises.
The issue in this case is not whether there should be any judicial review of punitive damage awards.
State law commonly provides for such review and punitive damage awards are routinely reduced under such standards or sometimes set aside altogether.
The reason that the Eighth Amendment is pressed in this case and in this Court, when it was just an afterthought in the courts below, is that the courts below upheld this award under the traditional common law standards.
Now, turning to the Eighth Amendment issue, I would like to suggest that before this Court adopts a constitutional rule that will be imposed on 50 state tort systems that the constitutional basis for that rule should be clear and fully supportive.
And I would submit to the Court that that standard is anywhere but close to being met in this particular case.
What is absolutely clear, in fact... and I think really not open to dispute... is that in 800 years of history under the amercements clause of the Magna Carta, the Excessive Fines Clause of the English Bill of Rights and the Excessive Fines Clause of the Eighth Amendment no court has ever held that any of these provisions applied to damages awarded in suits between one private litigant and another.
The reason is that damages, the payments between private litigants as part of their remedies, are simply not fines, as that term was commonly thought of and used in 1789 and in 1689.
Nor, are payments between private litigants amercements, as that term was generally known in the 13th and later centuries.
I think it's very important, to understand this fact because there is some slippery history here.
Fines and amercements were always demanded by and paid to the government.
Of course, in England the government typically was represented by the Crown, sometimes by a feudal lord to which the Crown had sold off the right to demand amercements.
But in every instance, fines and amercements were penalties demanded by, and paid to, what we would now think of as government.
Mr. Farr: What about... what about qwe time actions where a private individual brings in effect a criminal action and gets to keep part of the fine himself?
Mr. Farr: Well, I think those... to begin with, I think those are not--
Mr. Farr: Do you think that's--
Mr. Farr: --specifically the concerns at which these particular provisions are aimed.
But there is a situation where the private party maybe stands more closely in the shoes of the government itself.
Mr. Farr: --Well, I mean, that's so because you say it.
Why can't we say this private party, to the extent he's getting punitive damages, is essentially standing in the shoes of the government?
Mr. Farr: Because I think what you've done then is you've not only taken the language out of context, which are fines and amercements... which, again, I don't think at any time has been thought to relate to damages... but I think you've taken the provision out of historical context and out of the context of the evils at which these particular provisions were aimed.
The concern with the Amercements Clause and the concern of the Excessive Fines Clause is not with fines in general, but with the incentive of the Crown, in particular, to demand excessive fines.
Mr. Farr: Well, to give it to the person who brings a qwe time action?
Mr. Farr: But that is not in fact--
Mr. Farr: Do you acknowledge that what goes to the private individual in one of those actions is a fine?
Mr. Farr: --I'm not sure that I think it is, your Honor.
I think if... it is possible, I suppose, that you might fit it within the definition.
Mr. Farr: So you can have fines of unlimited scope so long as you don't make them payable to the government.
Just have an individual bring the suit and keep the money?
Mr. Farr: I think If you... I guess my position, Justice Scalia, is if you are going to go outside what is normally thought of as a situation in which a fine is imposed, which is when the government brings the proceedings, selects the individual, brings its prosecutorial forces to bear on that individual, and in fact keeps the money... that is the traditional notion of what a fine is.
Now, what you have done is to take out one of those elements and say some of the money is going to someone else.
My own personal feeling is that is not enough to bring that kind of proceedings into the category of fines.
Mr. Farr: How about a state like Florida that makes a percentage of punitive damages awards go to the state?
Mr. Farr: I think in that particular situation, again, that perhaps brings it somewhat closer.
And, of course, I will state the obvious, that that is not the situation in this particular case.
But, the concern still is, though, is there any real incentive for the state in that situation to be seeking excessive fines or damages in particular of the sort that was the concern--
Mr. Farr: It probably is if the state is facing a budget deficit.
Mr. Farr: --Well, it is possible.
I mean, I think that given the particular situation in states these days that--
Mr. Farr: Well, don't punitive damages serve a penal function?
Mr. Farr: --They serve a penal--
Mr. Farr: They really do.
They are designed to deter and to punish.
Mr. Farr: --They do serve to deter and to punish.
I don't disagree with that, your Honor.
But they occur in a wholly different setting.
And that is the point that I'm trying... trying to make.
The fact is that to some extent compensatory damages in private tort suits serve the functions of deterring and punishing.
I mean, there is a reason, for example, that the particular defendant--
Mr. Farr: Well, they serve--
Mr. Farr: --pays the damages.
Mr. Farr: --to make the plaintiff whole.
Mr. Farr: Well, there is a particular... you could make the plaintiff whole by having insurance.
There is a reason that the states choose to make plaintiffs whole through a proceeding which forces the wrongdoer to pay the amount that is necessary to make the plaintiff whole often well in excess of actual economic injury.
And that is because the use of the tort system does serve to punish and deter conduct which the state regards as unacceptable.
Even in compensatory damages.
Mr. Farr: Compensatory damages have all the appearance of being penal in nature, and one does have some concern when the amount awarded is more than 600 times the highest possible criminal time--
Mr. Farr: Well, let me say--
Mr. Farr: --for the same conduct.
It's a concern.
Mr. Farr: --Well, I agree that it can be a concern.
But let me address the question that I think we are talking about immediately, which is whether this is the kind of concern that draws into play something like the Excessive Fines Clause.
The reason that the Excessive Fines Clause was used to express the concern of the citizenry in, let's say, 1689, which was the predecessor of the one in our Eighth Amendment, is because the government itself had an interest in the fines being excessive.
The government was using the fines for several purposes.
First of all, to raise revenues at a time when the king was relatively impoverished.
But, more importantly, to punish its political enemies.
So that the king had an interest not just in fines being levied, but, indeed, having the fines be as excessive as they could possibly be in order to either imprison a defendant who couldn't pay or impoverish one who was fined to the full extent of his property.
Mr. Farr: Of course, there is a parallel because in those cases the attorney who is standing before the jury arguing for the court is representing the Crown that gets the money.
Mr. Farr: That's correct.
Mr. Farr: And the parallel is precise here because the attorney standing before the jury arguing for the punitive damages, his client gets the money.
So the parallel is precise, it seems to me.
Mr. Farr: With due respect, I think the parallel you've drawn is right, but I think it's the incorrect parallel.
The fact is that it is the concern about the government abuse... that is what the Constitution is typically aimed at.
Not concerns about what attorneys says for private litigants in private disputes.
Mr. Farr: By why is the incentive by either the parties or the jury any greater to give punitive damages where the government gets the money than where the private plaintiff does, other than the fact that the jurors are taxpayers?
Mr. Farr: Well, Justice Kennedy, I would suggest that the difference is not in the incentive of the juries.
The question is, it is the incentive for abuse by government.
The State of Vermont has no particular interest in whether Kelco gets an excessive amount of punitive damages or not.
In fact, the State of Vermont's view would really be different from the sort of view that would be expressed by the king in common law.
As I said, the king at common law would like to have damages or fines... because that is what the king is seeking... would like to have fines be as large as he can possibly have them be.
That makes them a more effective punishment.
For the State of Vermont, if punitive damages are excessive within the state, the state can be expected to act to respond to that problem.
The state has no interest in punitive damages being more than necessary to deter conduct.
If it overdeters conduct, then the state has an interest in fact in employing common law standards and legislative standards to see that punitive damages are reduced again.
Mr. Farr: I'm not sure that's always true, Mr. Farr.
Each state certainly has some incentive to want to see its courts used to a certain extent, and I think particularly you attract plaintiffs to a state where there are liberal punitive damage rules.
Mr. Farr: Well, your Honor, with all due respect, I would suggest that the states are more likely to be interested in attracting businesses to the state than they are to be interested in attracting plaintiffs to their state court systems.
I mean, I think that the concern that they would have is that if their system does not regulate through imposition of common law rules by the state courts and ultimately through legislative rules, as legislatures are now stepping in in certain states, that that would in fact create the over-deterrence that a state would not want to see have happened.
But that is different--
Mr. Farr: Mr. Farr--
Mr. Farr: --from the situation at hand.
Mr. Farr: --These are the same jurors--
Mr. Farr: I'm sorry, Justice--
Mr. Farr: --In federal and the state court, they are the same people.
Mr. Farr: --They are essentially the same people.
Although I might point out--
Mr. Farr: Talking about the state's interests.
Mr. Farr: --I might point out, Justice Marshall, that BFI constantly stresses the sort of notion that this is to favor local individuals against an out-of-state corporation.
To begin with, that's essentially just its own surmise, but, of course, one of the supposed remedies for that is diversity jurisdiction.
Mr. Farr: Is your position--
Mr. Farr: And this was a case that was brought into federal court.
Mr. Farr: --there is no such thing as an excessive--
Mr. Farr: I'm sorry, your Honor.
Mr. Farr: --No such thing as an excessive verdict or judgment?
Mr. Farr: Your Honor, no.
That is not my position.
And please let me make that clear.
Mr. Farr: Do you know of one?
Mr. Farr: What I am saying is that--
Mr. Farr: Do you know of one that's been upset?
Mr. Farr: --Oh, yes, your Honor.
There have been numerous judgments that have been reduced.
They have not been reduced under the Excessive Fines Clause, and that is the point that I was making.
Mr. Farr: Well, was remittitur used in this case?
Mr. Farr: Remittitur was sought but it was denied because the trial judge found that this was not an excessive verdict but it was a reasonable punitive measure, in his language,--
Mr. Farr: Who decided--
Mr. Farr: --for the conduct.
Mr. Farr: --Who decided that?
Mr. Farr: That was the trial judge who heard the evidence.
Mr. Farr: The trial judge?
Mr. Farr: Well, after the jury returned its award, there was a motion for remittitur in the trial and the trial judge, which had heard the same evidence as the jury found that this was not an excessive award but was a reasonable punitive measure in light of the conduct.
Mr. Farr: And you say it got up to the Second Circuit?
Mr. Farr: That's correct, your Honor.
Mr. Farr: You are saying that there's no such thing as an excessive award of punitive damages as far as the Federal Constitution is concerned?
Mr. Farr: Well, your Honor--
Mr. Farr: Aren't you saying that?
Mr. Farr: --I think that is probably an accurate statement of our position.
Mr. Farr: All right.
Could I talk about due process for a minute, which you haven't alluded to.
Mr. Farr: All right.
Mr. Farr: Suppose a state runs a system in which it does not have any judge review of damages award?
Not punitive damages, but compensatory.
He lets the jury, you know, pick a number.
And the judge doesn't review it at all.
Would that violate the Due Process Clause?
Mr. Farr: I look at that differently, Justice Scalia.
And let me at least explain, if I can, why I do.
I think there we are not simply saying that the role of a court under the Constitution is to do what I think BFI is asking, which is just to pick another number, a number which is unspecified by BFI, but is apparently lower than $6 million.
What would happen in that situation is that you would look at the overall procedures.
Whether in fact the overall system of awarding punitive damages, including the legislative standards if any, the instructions given to the jury, the process of review by the courts, would meet with... I believe that's a procedural due process issue.
Mr. Farr: It is a... well, it is a procedural due process issue, but you can tell whether the procedure is working, I suppose, by whether you have rough uniformity of treatment.
I'm not sure that the result is any different from excessive fines.
It wouldn't produce a $6 million verdict versus a $100,000 verdict in the same kind of case.
Mr. Farr: Well, your Honor, let me make three points, if I may.
First of all, let me make sure I stress that is not a claim that ever been raised in this case, just to start with.
So, even if I agreed with all you said, I think that it would make no difference to the outcome in this case.
Secondly, however, I don't think quite fairly you can say that the way you determine whether procedural due process has been met is to look at the outcome of the process.
If that was true, then you would open up procedural due process claims in all sorts of cases where I think the court has pretty much closed them down... where somebody comes in and says,
"Here is what happened in my case in state court; this is the result I got."
It couldn't have complied with due process.
There is no way I could have had a judgment like this awarded against me, or some other particular relief awarded against me, if the procedures had been fair.
But the Court has always said there that you look at the procedures.
It may be that in a perfectly fair system there is an inexplicable result.
I don't think this is one.
But that is not... does not mean the procedural due process itself has been violated.
Mr. Farr: Well, certainly, all procedures are directed to securing an objective and a fair result, are they not?
Mr. Farr: That's correct.
That certainly should be the goal of procedures.
The only point I'm making, Justice Kennedy, is I don't think that the analysis works backwards.
I don't think you say that a litigant comes in and says,
"Here is the result that I submit to you as an absolute figure is unfair."
for whatever reason, and therefore you should conclude from that there is no procedural due process.
And, in any event, that is not a claim that BFI has made here.
Now, again, I would like to turn just for a second to what it is that BFI wants the Eighth Amendment to do if it would apply in this case.
As I've just discussed, this is not a case about standards for the jury.
BFI, quite properly, concedes that it did not make any claim that the jury should have been instructed any differently.
In fact, BFI specifically said that all it wanted was the jury to be instructed in accordance with traditional Vermont law.
So, what BFI is really saying is that the court should simply make a different finding of that amount as a matter of its own judgment, and in the process of doing that, give greater weight to certain factors which it says that the jury must have given less weight to and give some less weight to factors that it says the jury must have given too much weight to.
That is basically a rebalancing test.
Now, the first point I guess I would make about that is that I really don't see that that is a proper function of the Eighth Amendment as a general application of that amendment.
The Court in Rummel, for example, and in Solem, has made clear that it is the extremely rare case in which the Eighth Amendment would be used to strike down on constitutional grounds a determination made below.
In those cases, of course, criminal sentences.
And the Court has also made clear that it's the rare case in which even an extended analysis will be necessary.
Now, in Rummel, in particular, the Court found that it was constitutional, without an enormously detailed analysis, to sentence a particular defendant to life imprisonment for what were three relatively small economic crimes.
I simply don't understand the concept of the Eighth Amendment that says that that sentence of life imprisonment is constitutional and that system of review is acceptable, and yet says that the Eighth Amendment requires very stringent review of an award of damages for, let's say, fraud or business misconduct that involves a greater amount of money.
There is certainly nothing in the history of the Eighth Amendment that I'm aware of that--
Mr. Farr: I suppose one can ask whether Rummel was the last word on the Eighth Amendment.
Mr. Farr: --Well, I'm like Mr. Frey.
I can't say I'm not aware of a case after Rummel.
However, I should point out, as the Court is well aware, the Court in Solem said that it was not in any sense overruling Rummel and that Rummel still stood for good law.
Mr. Farr: Of course, Rummel wouldn't... wouldn't stand in the way of an interpretation of the Excessive Fines Clause that simply applies it on a state by state basis.
In Rummel there was no indication that that particular sentence was excessive as far as what that same state would do in another case.
It might have been considered by some excessive on the basis of a national standard.
But on the basis of a state standard there were clear limits established within the state by the legislature.
Mr. Farr: Well, in that situation I suppose that's true, although that is, of course, not any sort of analysis that was made in Rummel.
Mr. Farr: I understand.
Mr. Farr: Nor, for that matter, your Honor, was that the analysis that was followed in Solem.
I mean, the Court did not say in making these determinations under the Eighth Amendment,
"We will look at other penalties only within the same state."
in order to determine whether we think it falls in or out of the particular analysis it was applying.
So, I think in that sense I agree with Mr. Frey.
That the emphasis in Solem, at least, was on a standard that would have to be applied nationwide.
And I'm certainly saying that there is no... nothing that I can see in the history of the Eighth Amendment that would call for that sort of nationwide standard in a situation like this.
Now, I would just like to touch on one or two other brief points, if I might, because I think they do bear on the question of how the Eighth Amendment would apply, if it does.
And I repeat again that I don't believe that it does.
The principal argument I think, as I understand it made for BFI in this situation, is that the Eighth Amendment does not require the same sort of deference to jury verdicts that it requires for decisions made on sentencing by a judge within legislative guidelines.
I guess I just have two points about that.
First of all, the idea itself is basically contrary to the constitutional framework in which jury determinations are given the greatest of deference in most situations where cases are properly before the jury.
And there isn't any question that this is a case that properly went to the jury on the issue of punitive damages and on the amount of punitive damages.
Second and more specifically, though, I would point out that this is totally inconsistent with the history of the Excessive Fines Clause itself which, after all, is the clause that BFI is invoking to get into this in the first place.
The one thing that is absolutely clear from the Eighth Amendment, the Amercements Clause, whatever antecedent you wish to look at, is that there was no concern in addressing any of these provisions about jury misconduct or jury excessiveness.
Indeed, in the 13th Century, the jury was regarded as the principal safeguard against the sort of abuses that the Amercement Clause was addressed at.
Mr. Farr: Well, I take it you're not claiming that this Excessive Fines Clause applies only in criminal cases?
Mr. Farr: Your Honor, I think quite frankly that is its root.
Mr. Farr: Well, there are... the Federal Government imposes what's called fines in civil cases, doesn't it?
Do you think this provision is applicable to those situations?
Mr. Farr: I don't know, your Honor, to be perfectly honest.
Mr. Farr: You don't know?
Well, I would suppose you would have to know to make this argument.
Mr. Farr: Well, I would feel I had to know a little bit more if I was here--
Mr. Farr: Well--
Mr. Farr: --representing the government in a civil fines case.
Mr. Farr: --Well, here is a fine that is called a fine and it's in a civil case and it's paid to the government.
Now, is this provision amercements?
I thought you would... I thought one of your points was that... that if it's paid to the government, then the clause is applicable.
Mr. Farr: --That is one of the points, your Honor.
As you'll recall--
Mr. Farr: Well--
Mr. Farr: --from the discussion, I had--
Mr. Farr: --Well, what about--
Mr. Farr: --several points that--
Mr. Farr: --What about--
Mr. Farr: --Let me say this.
That the Court in Ingraham said... and I think correctly said... that the Eighth Amendment is properly interpreted in light of its history.
Now, if that is in fact applied to the Eighth Amendment Excessive Fines Clause, it would apply strictly in criminal cases.
That is what the Excessive Fines Clause specifically was addressed at.
Mr. Farr: --But you don't think it's... you don't think that when you use the word "fine"... just fine... it can be a fine imposed in a civil case by the government?
Mr. Farr: Well, what I would certainly say is that the language of the Eighth Amendment fits more naturally, even with a civil fine, than obviously it does with a separate concept like damages which were known at the common law and are used separately.
In my own view, if you stay with the historical analysis which was approved in Ingraham, you still would not get into the civil context.
But I do agree that where the government is using essentially its prosecutorial power in a civil context in seeking fines, that that certainly is a closer analogue to what the concerns of the Eighth Amendment were initially.
Mr. Farr: Well, so, you aren't prepared to concede, though, that the clause applies to those fines by the government in civil cases?
Mr. Farr: Your Honor, I see no particular reason to concede it or not concede it in this case.
But my feeling is that it does not apply by its historical terms to that.
Whether the Court felt that in a particular situation a provision that was--
Mr. Farr: Well, I think your answer is... your answer is that obviously, no, it doesn't apply.
Look to history and it doesn't apply.
If you looked at history, it does not apply, Justice White.
That is correct.
But that is in fact the analysis that the Court has had in other provisions which are clearly intended to apply and, in fact, specifically limited by their terms, to criminal cases.
The Court has not automatically said we apply them.
Even in civil cases in which the government is the moving force, the Court has sometimes applied an analysis to say is this fine essentially something that we can call... even though it's a denominated civil... criminal in nature?
And if that's the kind of situation, like in United States v. Ward, the Court has not said this applies outside the criminal context.
It says this is basically something that is criminal in nature and has moved it into the context that way.
That is possible.
I'm not suggesting that that could not be appropriate in a case in which those standards were met.
But that is very different from a situation which is simply a dispute between private parties.
If the Court has no further questions, thank you.
Chief Justice Rehnquist: Thank you, Mr. Farr.
Mr. Frey, do you have rebuttal?
Mr. Frey: Yes, please, your Honor.
First of all, in looking to history let me just say that Mr. Farr neglects to mention or explain why every single commentator who has written on this subject disagrees with him.
This notion of the role of juries that he espouses is in fact inconsistent with the history because after Magna Carta the writ of misericordia was available to reduce excessive jury amercements.
I don't want to get bogged down in the history which has been thoroughly briefed on both sides.
Let me say with respect to the Rummel point that was discussed that what Mr. Farr persists in ignoring is the element of legislative deference.
Rummel was a mandatory life sentence established by Texas, and in that context the Court said it wasn't going to find that the Eighth Amendment refused to permit that.
The principle, though, and the principle of the dissenters in Solem against Helm was you have to defer where the legislature has made a judgment.
That was the dispute in Solem.
There is no legislative judgment in this case that underlies this award.
Now, I don't want the Court to forget our common law non-constitutional review of excessiveness argument because it's of course much more interesting to debate the Eighth Amendment, but even if you decide the Eighth Amendment is inapplicable, you have to ask yourselves whether you have a responsibility in a federal case to establish a reasonable federal rule.
REBUTTAL ARGUMENT OF ANDREW L. FREY ON BEHALF OF PETITIONERS
Mr. Farr: From a federal court?
Mr. Farr: A case from a federal court.
A state law question coming up from a federal court.
I don't think there is any disagreement in the briefs that the federal law governs not the question of whether punitive damages should be inflicted... that's governed by state law... but this sort of excessiveness question.
Now, use of the word Mr. Farr is a shell game because what he wants to do is collapse compensatory damages, which are a completely different animal, with punitive damages.
The concern of the Eighth Amendment is with punishments, and our argument is addressed solely to the punitive part.
The fact that the Courts have been highly deferential traditionally to compensatory damages awards takes them, I think, exactly nowhere.
And, finally, I'd like to discuss this question of the use of the word fine... rather, the fact that a fine is paid to a private citizen.
One of the points I want to mention is... and I think it was brought up in the argument... is that this is a problem, not a virtue of the system, because you don't have a neutral prosecutor deciding what charge to bring, deciding how much to press for.
This is like in Young against Futon, where the Court was troubled by the idea of having a self-interested private prosecutor.
Now, that institution does exist and we're not suggesting that it be set aside.
We are suggesting, however, that it is a concern that should inform the court's decision.
A hundred years ago in Missouri Pacific Railway against Humes the Court addressed specifically this question of who a punishment is paid to, and we quoted it in our brief.
The Court said the additional damages being by way of punishment, it is not a valid objection... I'm sorry.
Chief Justice Rehnquist: Your time has expired, Mr. Frey.
The case is submitted.