COOPER INDUSTRIES v. LEATHERMAN TOOL GRP.
Leatherman Tool Group, Inc., manufactures a multifunction pocket tool, the Pocket Survival Tool (PST). In 1996, Cooper Industries, Inc. used photographs of a modified PST to introduce a competing tool, the ToolZall. The photographs were used in posters, packaging, and advertising materials. Subsequently, Leatherman filed an action asserting claims of trade-dress infringement, unfair competition, and false advertising under the Trademark Act of 1946 (Lanham Act). Ultimately, a trial jury awarded Leatherman $50,000 in compensatory damages and $4.5 million in punitive damages. The District Court then entered judgment, rejecting Cooper's argument that the punitive damages were grossly excessive. In affirming, the Court of Appeals, using an "abuse of discretion" standard, concluded that the District Court did not abuse its discretion in declining to reduce the award.
Did the Court of Appeals review the constitutionality of the punitive damages award against Cooper Industries, Inc. under the correct standard?
Legal provision: Due Process
No. In an 8-1 opinion delivered by Justice John Paul Stevens, the Court held that the Courts of Appeals should apply a de novo standard when reviewing district court determinations of the constitutionality of punitive damages awards. Because the Court of Appeals applied an "abuse of discretion" standard, a less demanding standard, the Court vacated the judgment and remanded the case for a determination on whether the award was grossly excessive under the correct standard.
Argument of William Bradford Reynolds
Chief Justice Rehnquist: We'll hear argument first this morning in Number 99-2035, Cooper Industries, Inc. v. Leatherman Tool Group.
Mr. Reynolds: Thank you, Mr. Chief Justice, may it please the Court--
The Court today considers what is the proper standard of review for appellate courts when faced with a constitutional challenge to a punitive damage award as grossly excessive.
In the instant case, the Ninth Circuit upheld a punitive damage award against Cooper Industries of 4.5 million, which 90 times the $50,000 compensatory award.
It did so using an abuse of discretion review standard.
We submit that that was error, that the court of appeals should have examined the constitutional excessiveness issue independently under a de novo review standard.
This Court framed the gross excessiveness constitutional inquiry as it applies to punitive damages in BMW v. Gore.
It identified there three guideposts for making what is essentially a comparative analysis, looking at the reprehensibility of the offense, the ratio, or relationship of the punitive damages to the compensatory award, in order to discern whether the punishment or any discernible relationship to the offense or was wildly disproportional, and as a third guidepost to look at other available sanctions, whether criminal or civil, that would bear on the question of how society generally punishes this sort of offense.
Justice Scalia: Mr. Reynolds, when you have a standard, what should I say, so wildly extreme, as wildly disproportionate, does it make any difference... does it really... do you really think it makes any difference whether you're reviewing the lower court for a... de novo, or for abuse of discretion?
I mean, the question is whether the court abused its discretion in not considering this wildly disproportionate.
Does that really boil down to any difference for... between whether it is wildly disproportionate... I just find it hard to imagine a situation in which I would be reviewing a district judge for abuse of discretion, and would find that it is... that it is an abuse of discretion, where I wouldn't also find that it was wildly disproportionate.
Mr. Reynolds: Well, Your Honor, I think that you certainly could come to the same conclusion under both standards, but the--
Justice Scalia: Well, the point is, wouldn't you almost... wouldn't you virtually always come to the same conclusion under both standards?
Mr. Reynolds: --I don't know that you would, and I think that the reason de novo review is important is that you have a legal issue here.
You have one that implicates a constitutional right.
It is, I think admittedly, bottomed on guideposts that are fluid concepts, and there's a need to have some kind of a coherent doctrine that develops so as to have a uniform application of the substantive standards.
Chief Justice Rehnquist: Well, do you have much doubt, Mr. Reynolds, that if the standard is de novo review, there will be more determinations of lower... of the district court, trial court upset than if there's abuse of discretion review?
Mr. Reynolds: I believe there probably would be more awards that would be upset, or there would be more remittitur decisions.
Chief Justice Rehnquist: More law would develop in the courts of appeals, presumably.
Mr. Reynolds: That's exactly the point I was trying to make, that I do think that you would get a more coherent body of law.
You would be able to better determine how to apply the standard, and it would be applied in a way that would be more uniform, and I think one of the objectives of the due process protection is that people who are similarly situated be treated the same way for--
Justice O'Connor: Mr. Reynolds, is this a mixed question of fact and law that we're talking about?
Mr. Reynolds: --Justice O'Connor, I think that it could be characterized as a mixed question of fact and law in that, as I understand what that means, it means that if you have established facts, and you're applying a legal principle to those facts, that would be a mixed question of fact and law.
Justice O'Connor: For instance, in the first prong, the reprehensible conduct, presumably a review of the facts is included in the appellate review, so you do seem to have a mixed standard--
Mr. Reynolds: Well, to some--
Justice O'Connor: --mixed question.
Mr. Reynolds: --Excuse me, Your Honor.
To some extent I think I would agree with you.
It does seem to me that what we're talking about here in de novo review is the same thing that the Court does traditionally.
As to historical facts, the Court accords deferential review, and we don't suggest there would be any difference as to that.
But when you get to the legal issue of where you cross the constitutional line, and you start looking at it in a comparative analysis, which really is looking at extrinsic facts that are outside the record, that's where the legal inquiry comes in and de novo review would be required.
Justice Kennedy: On the reprehensibility of the conduct, do you envisage that if you prevail the circuit court will have some sort of standards for reprehensibility, or how will it go about writing this?
Mr. Reynolds: Well--
Justice Kennedy: I could see if it was abuse of discretion, I can hear the circuit court saying, well, trial judges see the witness, and they heard the whole trial, and they're in the position to make this judgment, and we're not going to second guess them.
That's what would happen under the abuse of discretion standard in all likelihood.
What would the circuit court do with this first prong that Justice O'Connor mentioned, reprehensibility?
Mr. Reynolds: --I--
Justice Kennedy: Under your view?
Mr. Reynolds: --As I understand it, Your Honor, the court of appeals would basically take the conduct and, on the established record, that would be the baseline, if you will, for its comparative analysis under the Gore factors.
You would have to look at where that conduct fits on a continuum of blameworthiness, if you will, and that would be essentially a legal question.
What you're doing is very much, it seems to me, Your Honor, what you do under the de novo review standard that this Court announced in Bajakajian, I believe is how you pronounce it.
Justice Ginsburg: Mr. Reynolds, may I interrupt you at that point, because what you described sounded very much to me like what a jury does when it's choosing among negligence degrees of culpability, negligence, gross negligence, recklessness.
Those are quintessentially jury decisions, and they're not reviewed de novo by any judge, not the trial judge, not the court of appeals, so why isn't the degree of reprehensibility exactly the same?
Mr. Reynolds: Well, Your Honor, here the... we are over a threshold of malice that is necessary in order to award a punitive award.
Justice Ginsburg: Just like you would be over a threshold if you decide there's negligence.
Then, if there's negligence, then there would be recovery, but there might be greater recovery if you had a higher standard.
Mr. Reynolds: Right, but I think what the Court has said in BMW v. Gore is that you are going to determine whether or not the punishment that is imposed here is reasonably related to the crime, and whether it rationally serves the interest of punishment and deterrence, and that is an analysis, a legal analysis that looks to this conduct as compared to similar conduct and the way in which that has been treated in the punishment arena, and in other situations.
Justice Scalia: Could you describe the precise test that the court of appeals would be applying under your standard as compared with the precise test that would apply under an arbitrary and capricious standard?
It seems to me the substantive question, which they would apply on de novo, is whether any reasonable person could possibly consider this proportionate.
Isn't that the test?
It has to be wildly disproportionate.
I assume that means no reasonable person could consider it proportionate, right?
Mr. Reynolds: I think that that would--
Justice Scalia: Okay.
Mr. Reynolds: --I don't quarrel with that, Your Honor.
Justice Scalia: Now, if you're using an abuse of discretion standard, you would be asking whether any reasonable judge, whether no reasonable judge could think that any reasonable person would consider this proportionate.
You're sure that the two questions don't boil down to the same thing?
Mr. Reynolds: Well, Your Honor, I--
Justice Scalia: I... it's just too subtle for me to understand the difference between the two.
Mr. Reynolds: --I think that there is a substantive standard that has been announced as being applicable in BMW v. Gore, and we're not going back and suggesting we revisit that.
What we're saying is that it ought to get meaningful application, it ought to be applied so as to allow the courts to give some content to it and through cases to come to a more clear understanding of exactly how it applies in different cases.
It is, I believe, clear, and I agree with the Chief Justice, that the de novo standard would allow courts of appeals, who believe that this was disproportionate punishment, it would allow them to apply a remittitur when, under the abuse of discretion standard, they would feel that they were not compelled to.
Justice Scalia: I understand that, but it seems to me that whenever a court of appeals finds that no reasonable person could possibly consider this proportionate, so it is wildly disproportionate, it would automatically find that no reasonable judge could have thought that a reasonable person would find this proportionate.
I don't know whether you can find one finding--
Mr. Reynolds: Yes, Your Honor.
I don't disagree--
Justice Scalia: --without automatically making the other one, so what are we arguing about?
Mr. Reynolds: --I don't disagree that where you have a punitive award that is so over the line that everybody agrees that it would be unconstitutional, that whichever standard you apply would probably give you the same result.
You're going to have a lot of cases where you're not talking about something that is so over the line.
I happen to believe this case is one that is so over the line, and the point is that you've got a legal question, it's got a constitutional dimension, you've got a standard that is not one that is dependent upon looking at the historical facts and second guessing them, and that, I believe, dictates that you look for de novo review and independent review by the courts of appeals.
Justice Ginsburg: Whatever word you use to describe it, I take it that what you're essentially asking is to have the judge, as a panel of three judges, sit as though they were jurors, as though they were jurors making a determination of reprehensibility.
Mr. Reynolds: As though they were jurors in making the policy judgment as to what the appropriate punishment is in order to fulfill the goals of deterrence and retribution.
Justice Ginsburg: And then if we go back in history, punitive damages, I believe, was considered in the bailiwick of the jury, and not the judge.
In fact, there was a question whether any judge, even the trial judge, could overturn the jury's verdict, is that not so?
Mr. Reynolds: Well, I believe it's clear that you could have a court overturn a verdict if, indeed, it was a verdict that was outrageously excessive, or, as they said in the early cases, driven by juror bias or passion, and was not proportional to the offense, and I believe the common law, as well as the early American law, has said that punitive damages would certainly be reviewable in that regard, as would compensatory, so I think--
Justice Ginsburg: Mr. Reynolds--
Mr. Reynolds: --appellate review is available.
Justice Ginsburg: --I'm not certain of that, and I think that, at least as to compensatory damages, there was some disagreement on this Court whether there was any allowance of--
Mr. Reynolds: Right.
Justice Ginsburg: --appellate review at all.
Justice Scalia and I differed on that--
Mr. Reynolds: I understand--
Justice Ginsburg: --on that question.
Mr. Reynolds: --but I believe in Gasperini you said that there was appellate review.
Justice Kennedy: Would you argue, Mr. Reynolds, different principles to... and different propositions to the circuit court than you would to the jury, or do you just argue the same thing?
Mr. Reynolds: I think that the... well, the arguments to the jury in this regard would depend in large part on the instructions that were given to the jury, and I think there are some instructions that would be very problematic to give the jury in terms of the BMW v. Gore guideposts, so--
Justice Stevens: Mr.--
Justice Kennedy: --So that the court of appeals--
Mr. Reynolds: --I don't think the jury would have the same--
Justice Kennedy: --does consider different propositions, i.e., comparative awards and similar cases in other parts of the country, or something like that?
Mr. Reynolds: --I think that's right.
I think that the... what happens is, this is a check on the excesses of the jury determination with regard to punishment, and it is a test, as I understand BMW v. Gore, that says that we're going to look at what the jury did in this case in order to serve society's interest in punishment and deterrence, and to see whether that is out of line, constitutionally out of line, with the punishment that is visited for similarly situated people who commit similar offenses.
Justice Stevens: Mr. Reynolds--
Mr. Reynolds: It is a check, if you will, at the appellate level on the jury judgment call.
Justice Kennedy: --So if that's true, then Justice Scalia's proposition that no reasonable juror could find the award doesn't quite work, because you're putting forth different contentions to the two different bodies.
You're putting one case to the court of appeals, and another to the jury, i.e.--
Mr. Reynolds: I--
Justice Kennedy: --that this is inconsistent with what other juries and judges have done around the country and therefore just doesn't meet the standard of proportionality under some Nation wide proportionality standard that the jury didn't hear about, or is the answer that the jury can hear about this stuff?
Mr. Reynolds: --I think that certainly there are special instructions that could help to inform the jury's decision that we would not be at all adverse to giving.
I understood Justice Scalia's question to be where the court of appeals was looking to see whether the punitive award was reasonable amount and rational in terms of the purposes that it was intended to serve, and I think--
Justice Ginsburg: Mr. Reynolds, you're looking over one important player.
It's not jury versus court of appeals making this decision.
The court of appeals doesn't get into the picture until a district judge, the trial judge, so it would be de novo review not of the jury's assessment, but of the trial judge's refusal to tamper with the jury's verdict, so isn't it... the court of appeals is reviewing not the jury's action but the trial court's action, isn't that so?
Mr. Reynolds: --That's correct, and I think that as we were saying, Justice Ginsburg, the court of appeals would, in that instance, do the traditional deferential review of the historical facts, or the fact questions, but as to this legal question it would be a de novo review.
Justice Souter: Mr. Reynolds, let me ask you if I am understanding your argument correctly in this respect.
I think you're making two different kinds of arguments for the value of the de novo review.
The first argument is simply that de novo review on its own merits is the better review here.
The second argument is sort of a practical one, that if all you have is abuse of discretion review of what the trial judge does when the trial judge reviews the jury verdict, you're not going to have very many appellate cases, and you're certainly not going to have many appellate cases with exhaustive discussions of the way jury verdicts ought to be examined.
And I think you're saying that if you have de novo review, you're simply going to have more articulations by appellate courts of the way trial courts ought to look at jury verdicts, and if you are making the second argument, I suppose you're making... you're saying what ought to happen in the development of the review of punitive damages is the same thing that I think happened back in the old days on the review of jury verdicts of negligence.
If you go back in the law reports to the twenties and the thirties when negligence law was developing, you find exhaustive appellate discussions of whether, you know, the train was close enough to the intersection for the driver to have been negligent in going out on the track, and so on, and I think you're arguing for a sort of parallel between punitive damages development and maybe the old negligence law development, in that you're saying each one would profit greatly by having plenary treatment in appellate courts.
Is that a fair--
Mr. Reynolds: That is fair, Justice Breyer.
I do think that.
I think that the two arguments go hand in hand.
In other words, I--
Justice Souter: --I agree.
Mr. Reynolds: --My argument that the de novo review is in and of itself--
Justice Souter: But the value is not only in the substantive standard, the value is in the application of that standard in sort of developed appellate discussions.
Mr. Reynolds: --I think that's right, especially in light of the recent decision in BMW v. Gore.
Justice Stevens: May I ask you a question, Mr. Reynolds?
You indicated that you thought the court of appeals would decide what the appropriate award was.
I'm not sure that's right.
It seems to me that the court of appeals decides what is the limit on appropriate awards, and anything over whatever the ceiling is would be inappropriate.
Is it your view that if there is a reversal or remand in the case, that the instruction should always be to enter judgment for the amount that would be the maximum constitutionally permissible award, or would it be to send it back and say to the lower court, you got the range wrong, instead of being 1 million to 10 million, it's 500,000 to 2 million, and you can start over again and put the new award within the permissible constitutional range?
Which way... what are you suggesting?
Mr. Reynolds: I know you're not going to like this answer, because I think that what I would say is, the court of appeals probably could take either approach.
If the court of appeals viewed the award as constitutionally excessive, there is authority that suggests that the court of appeals could set what would be the maximum allowable award constitutionally, on its own.
I think there is also the ability of the court of appeals to do a remand, and to have the district court perform that, so I'm not sure that--
Justice Ginsburg: Mr. Reynolds, is it settled--
Mr. Reynolds: --I have a specific response one way or the other on that.
Justice Ginsburg: --Is it settled that a court of appeals could order a remittitur?
I didn't know that that was a settled question.
Mr. Reynolds: I--
Justice Ginsburg: I thought that was an open question.
Mr. Reynolds: --Well, I... as I said to Justice Stevens, I'm not sure I can say it's settled, so I think that my sense is that they could do either one.
The Eleventh Circuit has in the Johannes case ordered the remittitur at the maximum allowable rate constitutionally, or amount constitutionally.
the Tenth Circuit in Oxy Products on the other hand did not do that, and said it had to be something that was sent back, so--
Justice Ginsburg: But we... this Court has never ruled on that question--
Mr. Reynolds: --No.
Justice Ginsburg: --and it's in the background.
That question comes up in the background of the Seventh Amendment in the Reexamination Clause, doesn't it, whether the court of appeals can--
Mr. Reynolds: Well--
Justice Ginsburg: --Can instruct the entry of a final judgment that's different from the number that the jury came in?
Mr. Reynolds: --Your Honor, I think that the Seventh Amendment Reexamination Clause would not inhibit a court of appeals from directing the maximum amount, and I say that because we're in an area where we aren't concerned with facts tried to the jury.
We're in an area where we have a legal question, where the jury has made a public policy judgment call on the punishment, and what the court of appeals would be saying is that the... that a jury could not have imposed a punishment in excess of whatever that amount is, not constitutionally.
Justice Scalia: Mr. Reynolds, this problem exists no matter how we come out in this case, doesn't it?
Mr. Reynolds: I--
Justice Scalia: What relevance does this have to this case?
I mean, this is going to be a problem whether the review is de novo, or whether the review is for abuse of discretion, and we... it seems to me we shouldn't find for or against you on the basis of how we feel on this point, isn't that right?
Mr. Reynolds: --I think that you would have the same--
Justice Scalia: I mean, whatever standard you're going to use, if you decide that the district court got it wrong, you're going to be confronted with this issue--
Mr. Reynolds: --I--
Justice Scalia: --so it seems to me it has nothing to do with what we're wrestling with, but what I would like to know is why you think that a court of appeals would not be developing law if it's only applying the abuse of discretion standard.
Doesn't it have to come out with a written opinion--
Mr. Reynolds: --I would--
Justice Scalia: --and the written opinion would say, you know, no reasonable judge could consider that this was not wildly disproportionate?
It would make a lot of law, it seems to me.
Mr. Reynolds: --I believe the kind of opinion you're likely to get is what we got in this case, where the Ninth Circuit simply says they do not believe that the district court abused discretion, and it would not provide any enlightenment, or any kind of coherent... doctrinal coherence to the BMW v. Gore factors in an application of that.
Justice Breyer: So what you want is not... I mean, I can't... I'm having trouble seeing what the difference is between the standards.
Like a lot of other things, the answer seems to be, it depends on what's at issue in the particular case.
This is a Federal case.
Mr. Reynolds: This is a Federal case.
Justice Breyer: So they're already reviewing for abuse of discretion under Rule 59 the decision not to give a new trial on the issue.
Mr. Reynolds: That's correct.
Justice Breyer: All right.
So inevitably you're saying, you have to review this for abuse of discretion at least there, and now we get into the constitutional area, so it must be, you know, sort of beyond that, and there are certain things, reprehensibility or harm, you'd say, look, judge, remember, the district court judge saw this and you didn't, and take that into account.
Now, when you get into the comparison of other penalties, as to that, I don't see why the district judge would be in a superior position at all.
The judge would be in a superior position to decide how reprehensible this person's behavior was, and how harmful it was to this plaintiff, but then once we get the outer limits of that, the appellate judge on his own applies the constitutional standard as an element of deference, and there's a big element of no deference.
I mean, what can you say beyond that, and then beyond that, the words de novo and abuse of discretion become slogans.
Mr. Reynolds: I--
Justice Breyer: The people who want a tough review say, de novo, the people who want a weak review say, abuse of discretion, but those are slogans.
In terms of how the judge should act, is it as I described?
Mr. Reynolds: --I think as the judge would act it is as you describe, but I do think it certainly does make a difference what standard you are imposing.
Justice Breyer: Well, all right.
Leaving the slogan out of it, how do you... if what we want to have happen... and I'm not sure there's a disagreement between the two sides on it.
I'll find out... what form of words do we use to get that to happen?
I mean, it's like be a judge.
Mr. Reynolds: Well--
--that would certainly be a good beginning.
I think that what you would be looking at is the kind of standard that you imposed, that was imposed in the, I go back to the Bajakajian... I cannot pronounce that... Bajakajian case, where the Court had the excessiveness issue in the context of a fine and the Eighth Amendment and said de novo review was the appropriate review to determine disproportionality, and went through a not dissimilar kind of an inquiry that BMW v. Gore laid out.
And I believe that the de novo standard would require the kind of demanding or exacting review of those guideposts in a way that would be much more rigid and decipherable, if you will, and understandable, than if you had just an abuse of discretion review and, because it's a due process right, and it's bottomed on the interest of people being treated who are similarly situated in uniform... uniformly in a similarly situated way, there is much to recommend that you go to the de novo standard that will, over time, I think, help to develop a much more articulate and coherent line of inquiry for applying the Gore standards.
Justice Scalia: Isn't it always an abuse of discretion when the trial court makes an error of law?
Mr. Reynolds: I think when the trial court makes an error of law, that it would certainly be an abuse of discretion, but I also would say that I think the standard we use here is one that is compelled by the nature of the inquiry and the fact that it's constitutional, and by the Gore guideposts, and the comparative analysis which are extrinsic to the historical fact record, and that's what requires that there be a de novo review.
I'll save the rest of my time for rebuttal, Mr. Chief Justice.
Argument of Jonathan S. Massey
Chief Justice Rehnquist: Very well, Mr. Reynolds.
Mr. Massey, we'll hear from you.
Mr. Massey: Mr. Chief Justice, and may it please the Court--
We urge an abuse of discretion standard for two principal reasons.
First, there's the historical tradition under which punitive damages were largely committed to the jury with quite limited appellate review, the second reason is the pragmatic argument for abuse of discretion standard.
As Justice O'Connor and Justice Kennedy have recognized, the Gore guideposts are intensely fact specific, reprehensibility perhaps most of all and, as this Court noted in Gore, reprehensibility is perhaps the most important indicator of the reasonableness of an award.
Justice O'Connor: What do we do generally, if you look at our precedents, on mixed questions of fact and law on appellate review?
You see some statements that it's de novo review.
What's the closest analogy, do you suppose?
Mr. Massey: --Well, we believe that reasonableness is maybe a close analogy, because the touchstone of excessiveness is, of course, reasonableness, and it is the sort of grossly excessive standard that Justice Scalia has referred to, and in many contexts reasonableness--
Justice O'Connor: Well, but there is more than one question under the Gore standard, in addition to reprehensibility, the ratio between compensatory and punitive damages awarded, and how the award compares to other sanctions available for comparable misconduct.
Those latter two seem closer to pure questions of law, in a sense.
What has this Court historically done, do you think, on appellate review standard for mixed questions of fact and law?
Mr. Massey: --Well, it's done both, Your Honor.
I mean, Pullman standard against Swint is a case noting the difficulty of precise categorizations, but in the context of reasonableness, Cooter and Gell, for example, the reasonableness of Rule 11, the Pierce v. Underwood, the reasonableness of a... of the legal position taken by the Government in equal access to justice cases.
Cooter and Gell is notable because it discussed how negligence has been traditionally reviewed very deferentially under an... essentially an abuse of discretion standard, so I think Justice Souter's concern about the development of the law can be fully addressed through an abuse of discretion standard, and that--
Justice Breyer: I couldn't find any except the ones... I just had to look this up for another reason, and Justice Ginsburg has a couple in an opinion she wrote, but the case... I mean, this seems not a question of mixed fact and law, but up to a certain point you decide what the facts are.
Now, once the facts are there, it's purely a question of applying the legal label, and so the real question is, under what circumstances does a court of appeals defer, where all that's happened is the trial judge is applying the legal label to a set of undisputed facts.
Now, until we get to the point of dispute, I'll give you all the discretion you want, but once we're in the nondisputed area, at that point, the only two I could find were the ones you mentioned.
There was a Rule 11 case, and she had both, and there was question involving competence of witnesses or something, competence... there was a competence thing.
I can see it on the page.
You know what I'm talking about?
Mr. Massey: --Yes, Your Honor.
Justice Breyer: All right.
Unknown Speaker: [Laughter]
Justice Breyer: I couldn't find any other than that.
Mr. Massey: Well, it's... yes.
We agree that the very last step of the analysis has a strongly legal flavor to it, but--
Justice Breyer: Strongly legal... it isn't a question of degree.
It is a question of black and white.
The question of applying a legal label to a set of undisputed facts is a question of law.
Now, you can give as much weight as you want to the judge before you decide what the nondisputed area is, so I'll give you all that.
Now, I say, defer, defer, defer, as long as there's any factual matter in dispute.
At that point, we reach the area where there's none.
Now, all we're doing is applying the legal label.
Now, on that one, is there anything other than what Justice Ginsburg had in her opinion?
Mr. Massey: --There's Gasperini, Your Honor, which involved a New York statute which did not simply direct district courts to review the historical facts underlying a compensatory award, but instructed them to engage in a comparative analysis, an essentially legal analysis of this compensatory award versus other compensatory awards in New York to see if they were comparable.
Justice Ginsburg: In fact, they gave that instruction to the appellate courts, and this Court said, because of the Seventh Amendment, that job... the only judge positioned to do it in the Federal courts would be the district courts.
Mr. Massey: Exactly, Your Honor, and that was essentially a legal inquiry, but this Court said the court of appeals was constrained--
Justice Breyer: Oh, but then that's exactly the question, because I'd say, I don't see any reason why, once we're in the area of undisputed fact, why there's any reason that a court of appeals here should defer one little bit, any more than it does with any other standard of law, except with a very few exceptions.
Mr. Massey: --Well, as Justice Scalia noted, the question of whether a mistake of law has been made is an automatic abuse of discretion, if there hasn't been a mistake, so traditionally this label of abuse of discretion has been used, even though before Gore, even under State law excessiveness standards, there was always the last step of applying the law to the facts in the court of appeals.
In other words, consider a State which has codified standards for excessiveness of damages, as some States have, like Texas, for example.
That... the district judge has no discretion whether to apply those statutory criteria.
He has no limited right to be wrong, in Judge Friendly's terms.
That's a pure issue of law in the last step, yet the standard of review has always been abuse of discretion.
Chief Justice Rehnquist: I think the Ornelas case from our Court is against your position to a certain extent.
You say that the BMW standards are very fact specific.
Ornelas involved a Fourth Amendment question, which is classically fact specific--
Mr. Massey: Yes.
Chief Justice Rehnquist: --and yet we held there that the review was de novo and not abuse of discretion.
Mr. Massey: Yes, Your Honor, you did.
We believe that case is not controlling, because first there were separate interests there, a need for a national standards of law enforcement, and other reasons that the Court noted.
Chief Justice Rehnquist: Well, but if BMW v. Gore announces a constitutional rule, presumably there's a need for national standards there, just as surely as with the Fourth Amendment.
Mr. Massey: --Well, Your Honor, we think, though, that a district court review would be the best way to promote uniformity in the context of punitive damages, because--
Chief Justice Rehnquist: Well, though, you could have said the same thing about Ornelas.
Mr. Massey: --Well, this Court did note in Ornelas the importance of deferring to local courts and law enforcement officials on the questions underlying the judgments of reasonable suspicion--
Chief Justice Rehnquist: As a part of de novo review.
Mr. Massey: --Yes, Your Honor.
You're correct about Ornelas.
That doesn't involve the jury context and the tradition of appellate review in punitive damages cases, but you're right that... of course, you did also write, though, Ohio v. Robinette, which was a Fourth Amendment voluntariness of consent to search.
Chief Justice Rehnquist: I don't cite Ornelas just because I wrote it.
Mr. Massey: No, I understand.
I understand, Mr. Chief Justice.
I understand, but the Robinette case is a case where you noted that the fact specific nature of reasonableness made bright line rules inappropriate, and you recognized the need to defer to the sort of close people who were closer on the facts and on the scene.
But let me just circle back for a moment, because the Rule 59 context, and motions for remittiturs, those have always been judged by an abuse of discretion standard, and that, of course, is where constitutional excessiveness challenges are ordinarily raised.
There's quite a logic to the Cooter and Gell position that we ought to have a unitary standard of review in this area because the Rule 59 context, as Justice Breyer mentioned, will require the district judge to apply sometimes the very same standards as are in Gore to the judgment under State law requirements.
The third... the second and third Gore guideposts have been tossed out as being primarily legal, but that's not always true.
The second guidepost involves actual harm as well as potential harm.
Gore noted that whether a high ratio is permissible because of a particularly egregious act might have resulted only in a small number of damages.
In other words, there are a number of difficult factual questions associated with each of these guideposts.
Justice Breyer: Well, the difference with 59, I thought, look, BMW is... governs quite extreme cases, you know, and if you say, look, judge, you have a lot of discretion under 59, and you have a lot of discretion to decide how egregious something is, and you have reprehensibility, and how much harm, and all those things.
Now you give him discretion on discretion, then you say at this last step, where you're also applying this legal label that only applies to extreme cases, you're saying, and now there's some more discretion even in that, you don't have much of a rule left.
Mr. Massey: Well, Your Honor, if we think that you will... I mean, Justice Souter's concern that the law be developed in this area we think can be fully accommodated by abuse of discretion.
The General Dynamics amicus brief, and the brief submitted by General Dellinger in this case, both discuss a lot of studies that have been done and cases that have been decided since BMW v. Gore.
One striking thing is the role of courts under an abuse of discretion standard in striking down punitive damages.
There are about six studies discussed, the GAO study, Rand, Michael--
Justice Souter: Are these studies of what trial judges have done in reviewing, or are they studies about what appellate courts have done in reviewing trial judges?
Mr. Massey: --Both, Your Honor.
In... the total of both trial and appellate together is... the range of reversal goes from 54 to 70 percent.
If you want to look just at appellate courts applying abuse of discretion, I believe there are numerous cases in the General Dynamics brief.
Particularly, there's a case called Kim, one called Kimzey, there's an Aetna Life case from the Ninth Circuit, so I don't believe... the abuse of discretion standard is not a toothless standard.
As this Court noted in U.S. v. Taylor, which was a 1980 Speedy Trial Act case which reversed the dismissal of a case under the Speedy Trial Act, this Court described abuse of discretion as permitting thorough appellate review, so we don't share the view--
Justice Souter: Well, but it's thorough appellate review... you say it's not a toothless standard, but I mean, his argument is that his teeth are very far apart, and a lot is going to get through, and sure, there are some teeth, but... I mean, I... it seems to me that your brother's argument is... does not depend, perhaps, on exact parsing of the difference between applying de novo and abuse so much as it does in emphasizing that if you're going to have de novo review it's going to be a more aggressive review, and it's going to be a more articulate review, and doesn't he make sensible points in that respect?
Mr. Massey: --Well, perhaps superficially, but I really... but we believe that, for example, the practical result of telling courts of appeals that they have to review de novo long, burdensome records might be actually to reduce the amount of time they have--
Justice Souter: Yes, but I mean, you've just been telling us that they're going to review carefully on abuse of discretion, and I suppose they're going to have to look at long, burdensome records there, aren't they?
Mr. Massey: --Well, we believe that in a case involving... the headline cases we see in the papers about big, punitive awards can be addressed fully by an abuse of discretion standard.
What's going to happen in the run of the mill cases, where the result is actually reasonable and falls within what this Court described in Gore as the zone of reasonableness, those cases are going to occupy a tremendous amount of appellate resources without many differences in result, and the result of the whole process may be more unpublished opinions in punitive damages cases because the courts of appeals are busy reading records in cases where the abuse of discretion standard would have the same outcome.
So we... as a practical matter, Rule 59 is a familiar standard.
The abuse of discretion review has grown up, not just under Gore, but under the State law excessiveness standards which courts have always applied historically, even though the last step of applying any of these standards could be described as a purely legal issue.
Justice Ginsburg: Well, that's... Mr. Massey, the point that I'm having difficulty with, and I think Justice O'Connor raised it first, there's one of these standards, reprehensibility, degree of reprehensibility that sounds like even at the last step.
It's a judgment call that the jury makes, just as I described gross negligence and recklessness.
I don't really see the difference.
But the other two standards, the seriousness of the injury and the comparable awards in other cases, that the jury isn't so well equipped to deal with, and you can say this is law applied to historic facts.
Mr. Massey: Well, sometimes it is, Your Honor.
Sometimes those... I mean, the second guidepost is almost always part of the jury charge.
The third guidepost is a part of the jury charge in some places.
It wasn't in this case... well, there is an Oregon statute that instructs juries on the criminal and legislative sanctions which could be applied, but even those guideposts will be very factual.
For example, the Cooper brief in this very case, the reply brief, leads off with three pages of factual argument about potential harm and reprehensibility and the legislative sanctions, so even at this level there's still factual disagreement about how to apply this.
Justice Breyer: Well then, you have to take the facts as the plaintiff states them.
I mean, normally, these trials, you take the facts as the plaintiff states them, then the defense comes along on appeal and says, well, you can't take that, because there's no support for that, but you're going to have to do that anyway in any appeal, and so... but you read it with an eye favorably towards the side that won, you know, and there's always an argument you can't read it that favorably, but that's going to be true no matter what standard you have.
But having done that, I don't see what's left that's so tough for the appellate judge to do.
Mr. Massey: Well, Your Honor, in resolving the parties' disputes about what reasonable inferences are possible--
Justice Breyer: No, I'm saying that that kind of thing--
Mr. Massey: --I--
Justice Breyer: --is true in every trial, every appeal.
They're always arguing about that sort of stuff, and that's true whether punitive damages are at stake or not, and that's true... you know, I mean, you get an appeal, there are dozens of arguments like that from a complicated trial, so we always go through that.
I know how to do it.
I mean, I might not do it brilliantly, but I try, and what you do is, you read it with an eye favorably towards the side that won.
Now, that's true regardless.
Now I'm looking at the stage beyond that, and once you're beyond that, I don't see that it's so tough for a... you know, it isn't too complicated.
You now know what your facts are.
So it's at that point that I... and I don't know how to write it to get this... I don't... I see where... you see, I need... I don't think you disagree that much with it, but I'm not sure.
Mr. Massey: --Well, I don't... I agree... I don't think we disagree that much.
We think an abuse of discretion label for the analysis, though, is more appropriate, because that's... in all the cases that you've reviewed you've mostly been applying discretion under Rule 59.
It's not... perhaps in many cases you could say that courts of appeals are--
Chief Justice Rehnquist: Does the court of appeals apply an abuse of discretion standard when it's reviewing the decision of a trial court under Rule 59?
Mr. Massey: --Yes, Your Honor.
Chief Justice Rehnquist: And does one of our cases stand for that proposition?
Mr. Massey: I... this Court's cases... yes.
It's sort of accepted, that's the accepted standard under the... as in the Tri Counties case that you heard earlier, that was the thing that Justice Breyer--
Chief Justice Rehnquist: Which we dismissed as improvidently granted--
Mr. Massey: --Yes, Your Honor.
No, I'm not citing that case as precedent.
Chief Justice Rehnquist: --because we thought it was an open question.
Mr. Massey: Right.
Well, that's a--
Justice Ginsburg: How about Gasperini?
Gasperini said that the standard for the appellate court vis a vis the trial court--
Mr. Massey: --Yes.
Justice Ginsburg: --on compensatory damages is abuse of discretion, and that was a majority opinion--
Mr. Massey: Yes.
Justice Ginsburg: --of this Court.
Mr. Massey: Yes, Your Honor.
Justice Souter: Isn't the difference between the Rule 59 situation a sort of precedent for what we should do here, in the situation we've got here, something like this--
Rule 59 motions are reviewing, sort of, or are intended to review what are claimed to be specific mistakes and problems in individual cases, but what we're dealing with here is regarded somehow as a more serious and a more intractable problem than what Rule 59 addresses, and therefore the argument is, because you have a more intractable problem in trying to get some kind of coherent standard for punitive damages, you've simply got to have a more restrictive remedy or a more intensive review, so Rule 59 really is not a good precedent to appeal to.
Mr. Massey: Well, Your Honor, procedurally the excessiveness challenges are made under the Rule 59 rubric, so that applying the sort of--
Justice Souter: In the sort of normal... I say normal remittitur motions, but I don't think we perceive the problem of remittitur issues as being a problem comparable to the difficulty of trying to get some kind of a coherent standard for punitive damages, and because the problems are different maybe the remedies and terms of judicial review ought to be different.
Mr. Massey: --Well, Your Honor, I think the seriousness with which the lower courts address this problem is not really going to be affected by the standard of review.
I think the message has been sent in Gore and has been received, and the courts have shown themselves quite willing to step in and reverse verdicts that the perceive to be excessive, and I... we believe that the de novo standard is frankly just confusing.
It's beyond what the historical tradition would permit.
Justice Souter: Well--
Mr. Massey: --sort of... yes.
Justice Souter: --When you're finished, I want to go back to the question of historical tradition, but go ahead and finish what--
Mr. Massey: Well, and it fails to recognize the first hand vantage point of the district judge.
This Court has recognized in the habeas context, for example, Professor Baktor's warning that it's sort of debilitating to State courts to be told that they're going to be second guessed by Federal courts.
In this instance, when you have highly fact intensive questions I think the message sent by a de novo review is... might have the unintended consequence of sort of undermining the district court's willingness to grapple with the record, knowing that whatever he does is going to be reviewed again by the... by his brethren on the court of appeals.
Chief Justice Rehnquist: --But that's quite different than the habeas rule.
I mean, there's no writ of habeas pecuniae that says, you know, if you lose a punitive damages award in the State court you can go into Federal court and relitigate it.
That's just the ordinary pressure that any trial judge is subject to knowing he will be reviewed by an appellate judge, appellate court.
Mr. Massey: Yes, Your Honor.
We... I simply meant that the judges now are doing a very conscientious job of restraining--
Chief Justice Rehnquist: Well then, they have nothing to fear.
Unknown Speaker: [Laughter]
Justice Souter: Mr. Massey, going back to the historical point that you alluded to, I'm not sure that I follow your argument, and I'd like you to maybe expand on it.
I realize... I mean, we have faced the argument that historically the review of a jury verdict is very, for this kind of punitive excessiveness is very grudging, but we passed that point and we said, yes, there can be some review, and that review to begin with can take place by a trial judge, and a trial judge who is performing what, I think, functionally is an abuse of discretion review of what the jury did, informed by particular Gore factors and so on, can set it aside.
Once we have passed the point of saying there can be that kind of review by the trial judge, what is it historically that would have a bearing on the question, whether the appellate court's review of the trial judge is either de novo or abuse of discretion?
I would have thought that the force of historical precedent is behind us once we take the position that the verdicts can be reviewed at all?
Mr. Massey: --Well, Your Honor, the common law, though, drew the line between the trial judge and the appeals court, that that... the Seventh Amendment was adopted largely to prevent appellate courts from interfering, not trial judges.
Justice Souter: Well, that might ground an argument saying the trial judge's review is itself unreviewable, but that's not your argument, and if we accept the proposition that the trial judge can be reviewed under some standard, what historically... what does history tell us as to whether that standard ought to be de novo, in which case the appellate court is looking at the jury verdict for abuse, or on an abuse of discretion, in which case the appellate court is looking for an abuse by the trial judge, who reviews for abuse?
What does history tell us when we are at the stage where we are at now?
Mr. Massey: Well, I mean, history would counsel that having gone to abuse of discretion in Gasperini we ought not go further to de novo, because the Gasperini step--
Justice Souter: But the review of the jury... the substantive standard for reviewing the jury verdict is going to be exactly the same in either case.
Mr. Massey: --Well, but that was always true historically.
In other words, even in the 19th Century, judges, the trial judges were reviewed for excessiveness but not courts of appeals and, even before Gore, we had common law standards for reviewing damages awards, or--
Justice Souter: Okay, but if that--
Mr. Massey: --borrowed those--
Justice Souter: --But if that is not a reason for saying there is no appellate review, I don't know why it is a reason for making this choice between two varieties of appellate review.
Mr. Massey: --Well, sort of in for a penny, in for a pound, but we think we ought to--
Unknown Speaker: Yes.
Mr. Massey: --stop where we are, rather than... I mean, the Court in Gasperini made the quite deliberate decision not to go to de novo review, or to tell the courts of appeals--
Justice Ginsburg: And did think there was historical precedent for--
Mr. Massey: --Yes.
Justice Ginsburg: --an abuse of discretion standard, and there was disagreement on the Court whether that was so, but the majority held that there was, but... so unless Gasperini is overruled, then I think this case has got to turn on, is there a significant difference between compensatory damages, where we said abuse of discretion is it, no de novo review--
Justice Scalia: --Except that--
Justice Ginsburg: --and punitive damages.
It's got to turn on that, unless the Court is going to redo Gasperini and say no, the court of appeals can have de novo review there, too.
Mr. Massey: Yes, Your Honor, we agree, and we think the line between--
Justice Stevens: May I just ask you this question?
Mr. Massey: --Yes.
Justice Stevens: Is there not at least conceptually... maybe practically it doesn't matter... a difference between constitutional excessiveness of a damage award and nonconstitutional excessiveness?
In other words, could not... like the damages in Gasperini or the damages here might be excessive in a sense that they violated State law, or they just offended the conscience some way, but did not violate the Constitution.
Does it... is there... is it conceivable that an award could be excessive as a matter of just general common law rulings of one kind or another, but yet not violate the Constitution?
Mr. Massey: Yes, Your Honor.
Justice Stevens: So that this case is conceptually quite different from Gasperini?
Mr. Massey: Well, it is in that way, although of course the Gore factors themselves are distilled from the common law.
I mean, Your Honor did not mint them from new sources.
You traced back to the common law roots, and footnote 24 of Gore in fact refers to their deep rooted nature within the common law.
So we think the common law precedents are still highly instructive.
But going back to the line between compensatories and punitives.
I mean, at common law there was not that line.
The courts did not treat the two differently and, in fact, in footnote 7 of Cooper's reply brief they discuss the common law tradition of treating them similarly, indistinguishably, in fact, in the same verdicts, so we agree that Gasperini here is controlling, and we don't think it should be overruled or modified, and we don't think a meaningful distinction can be drawn between punitive damages and compensatories.
I would just like to add, and this uniformity notion that we've heard about, first we believe the district courts are in a good position, but also, second, this Court in TXO essentially rejected a proposal for intrajurisdictional comparisons.
The BMW factors are guideposts, but only guideposts.
They are nonexclusive, and the question of gross excessiveness lends itself to an abuse of discretion standard rather than the de novo one.
If there are no further questions, thank you very much.
Rebuttal of William Bradford Reynolds
Chief Justice Rehnquist: Thank you, Mr. Massey.
Mr. Reynolds, you have 3 minutes remaining.
Mr. Reynolds: Thank you, Mr. Chief Justice.
On Gasperini, I'd just like to say there's no need to overrule Gasperini.
In that case, the Court was looking at an excessiveness issue as it relates to compensatory damages, not to punitive, where it was very much tied up with a review of the historical facts, and that's why the Court said that deferential review was what was required in Gasperini.
Here we have punitive damages that, as I've explained, are of a much different sort, and they're not tied up with the historical facts, so Gasperini does not, certainly, need to be overruled.
The other point I make under Rule 59--
Justice Scalia: Excuse me, doesn't pain and suffering come into a Gasperini calculation sometimes, or often?
Mr. Reynolds: --But again it goes to the compensation in the compensatory award.
We're looking now at the punishment on the defendant--
Justice Scalia: Yes, but it's... I understand.
I'm not sure the calculation of pain and suffering is much different from calculation, the calculation at issue here.
Mr. Reynolds: --The calculation, I would submit, Mr. Justice Scalia, is on the side of the fact finding, the historical facts, and what the harm is to the injured party.
Here, we are talking about not facts tried to the jury, the historical facts, but the judgment made on the punishment side.
I do think that there is a difference between nonconstitutional excessiveness and constitutional excessiveness.
This Court in Brown and Ferris did say that where you're dealing with an issue of nonconstitutional excessiveness on the punitive damage side, that the deferential review would be the appropriate review, but unless what the Court has said in BMW v. Gore is superfluous, unless we're going to say that there's no difference between the constitutional excessiveness and nonconstitutional, then there is something here that requires a de novo review standard that is not just the deferential review that you have in the nonconstitutional context, and we would submit that the... all the indicia that point to de novo review are in place here.
And I would point the Court to the Salve Regina decision of this Court which does, indeed, explain why, when a de novo review is, is indeed required and necessary on a legal issue, especially of constitutional importance, that abuse of discretion is no answer to that review standard.
Chief Justice Rehnquist: Thank you, Mr. Reynolds. The case is submitted.
Argument of Justice Stevens
Mr. Massey: I have the opinion of the Court to announce in No. 99-2035, Cooper Industries against Leatherman Tool Group.
The respondent Leatherman Tool Group is the country’s leading manufacturer of multifunction pocket tools.
In 1995 petitioner Cooper Industries decided to introduce its own competing product.
In some of its early marketing materials instead of creating its own prototype, petitioner simply used photographs of a modified Leatherman Tool.
Leatherman sued respondent alleging false advertising, unfair competition, and violations of the Federal Trademark Statute.
Leatherman prevailed and the jury awarded Leatherman $50000.00 in compensatory damages and $4.5 million in punitive damages.
Petitioner challenged the punitive damages award arguing that it was grossly excessive and therefore violates the Due Process Clause of the Federal Constitution.
The District Court upheld the verdict and the Court of Appeals, reviewing the District Court’s determination for an abusive discretion affirmed.
We granted Certiorari to decide whether the Court of Appeals applied the correct standard of review.
Petitioner argues that de novo review is appropriate while respondent argues in the favor of review for abusive discretion.
For reasons stated in opinion filed with Clerk, we hold that de novo review is the proper standard.
Compensatory damages and punitive damages served distinct purposes.
The former measure of the concrete loss that the plaintiff suffered by reason of the defendant’s wrongful conduct whereas the latter, are intended to punish the defendant and to deter future wrongdoing.
They have been appropriately described as “quasi-criminal” and as “private fines”.
Because punitive damages do not constitute findings of fact, the Seventh Amendment does not present a bar to de novo review.
Although, States possess broad discretion with respect the imposition of criminal penalties and punitive damages.
The Due Process Clause imposes substantive limits on that discretion.
In the context of both criminal penalties and punitive damages, this Court has enforced these limits by prohibiting grossly excessive punishments.
We have determined the boundaries of this gross excessiveness by focusing on the same general criteria, like degree of reprehensibility of the defendant’s conduct.
The relationship between the penalty imposed and the harm to the victim and the sanctions imposed for a comparable misconduct in other cases.
When enforcing these limits this Court has consistently engaged in an independent examination of the relevant criteria.
The same de novo review that is applied in criminal cases is appropriate in the punitive damages context.
Accordingly, the judgment of the Court of Appeals is vacated and the case is remanded for further proceedings.
Justice Scalia has filed an opinion concurring in the judgment and Justice Thomas has filed a concurring opinion; Justice Ginsburg has filed a disenting opinion.