Greetings Court fans!
Three new opinions today, and an order list. Since the opinions today were relatively big ones, I’ll start there.
First, in State Farm Mutual Auto. Ins. Co. v. Campbell (01-1289), the Court (Kennedy for himself, Rehnquist, Stevens, O’Connor, Souter, and Breyer) held that a $145 million punitive damages award was grossly excessive in violation of the Due Process Clause when the full compensatory damages were only $1 million. (For those defending punitive damages claims, or trying to get them overturned on appeal, this opinion has some nice language.) This case originated when State Farm refused to settle or pay on a tort judgment arising out of a car accident caused by one of its insureds, Campbell. Although State Farm eventually paid the judgment, Campbell pursed a bad faith claim against State Farm, and ultimately obtained a judgment for $1 million in compensatory damages and $145 million in punitive damages. The evidence in support of punitive damages consisted primarily of evidence that State Farm’s decision in Campbell’s case was part of a nationwide scheme to meet corporate fiscal goals by capping payouts companywide. The Utah Supreme Court upheld the punitive damages award, but the Supreme Court reversed.
Kennedy began by discussing the purposes of punitive damages awards, and the rationale for constitutional limitations on those awards. He then jumped right in to applying those limitations, the so-called “Gore factors” from BMW v. Gore. First, the Court looked at the degree of reprehensibility of the defendant’s conduct. Although State Farm’s conduct towards Campbell was not praiseworthy, and maybe even worthy of a punitive damages award, the award in this case went well beyond punishing State Farm for its treatment of Campbell and punished State Farm for nationwide policies. But states may not punish a defendant for conduct that may have been lawful where it occurred, and (generally) may not punish a defendant for unlawful acts committed outside the state’s jurisdiction. The award was also improper because it was designed to punish conduct that bore no relation to Campbell’s harm. Due process doesn’t allow courts, through the adjudication of punitive damages, to adjudicate the merits of other parties’ hypothetical claims against the defendant. This type of award creates the possibility of multiple punitive damage awards for the same conduct. Second, on the ratio between compensatory and punitive damages, the Court refused to establish a bright-line rule, but did state that “in practice, few awards exceeding a single-digit ratio” will satisfy due process. In any event, courts must ensure that the measure of punitive damages is both reasonable and proportionate, and here, the award was neither. The Court specifically noted that the wealth of a defendant cannot justify an otherwise unconstitutional award. Third, the Court considered the disparity between the punitive damage award and the civil penalties authorized. According to the Court, the existence of a criminal penalty bears on the seriousness of the action, but has less utility in determining the amount of a punitive damage award. Here, the most analogous penalty was a $10,000 fine for fraud, an amount “dwarfed” by the punitive damage award. In sum, the Court held that while State Farm’s actions might justify a punitive damage award at or near the amount of the compensatory damages, the $145 million award was grossly excessive.
Thomas and Scalia both wrote one paragraph dissents to say that that they don’t think the due process clause provides substantive protection against excessive punitive damage awards. Ginsburg dissented because she believes the Court should not intrude into this area traditionally reserved to the states, and in any event, State Farm was really reprehensible!
In another big opinion, Virginia v. Black (01-1107), the Court upheld Virginia’s cross burning statute, at least in part. Virginia law makes it unlawful for any person “with the intent of intimidating any person or group of persons, to burn . . . a cross on the property of another, a highway or other public place. . . Any such burning of a cross shall be prima facie evidence of an intent to intimidate a person or group of persons.” Respondent Black led a Ku Klux Klan rally that culminated in the burning of a cross, while respondents Elliott and O’Mara burned a cross in a neighbor’s yard, apparently because the neighbor (who was African-American) complained about gunshots coming from Elliott’s backyard. O’Mara pleaded guilty to attempted cross burning (apparently they didn’t quite succeed in cross burning) but Elliott and Black went to trial. At Black’s trial, in an effort to give meaning to the “prima facie evidence” language of the statute, the court instructed the jury that the burning of a cross by itself is sufficient evidence from which to infer the intent to intimidate. The judge in Elliott’s case omitted this instruction, telling the jury merely that the state must prove intent to intimidate. The Supreme Court of Virginia held that the statute unconstitutional on its face under RAV v. St. Paul.
For practical purposes, this opinion breaks down into two questions: (1) whether a state may ban cross burning carried out with the intent to intimidate, and (2) whether the “prima facie evidence” section is constitutional. On the first question, O’Connor (for herself, Rehnquist, Stevens, Scalia, and Breyer) said “yes.” O’Connor began by noting that “burning a cross in the United States is inextricably intertwined with the history of the Ku Klux Klan” and then retracing some of that intertwined history. In sum, throughout it’s history, the “modern” Klan has used cross burnings to communicate threats of violence and messages of shared ideology. (The original Klan was basically wiped out by the end of Reconstruction.) Today, regardless of the message (political or intimidation), the burning of a cross is a symbol of hate. And given the history of violence associated with the Klan, when a cross burning is used to intimidate, “few if any messages are more powerful.” Turning from the Klan to the First Amendment, O’Connor laid out basic principles: The First Amendment protects symbolic or expressive conduct as well as speech, but the First Amendment is not absolute. It does not protect, for example, “fighting words” or “true threats” (i.e., threats where the speaker means to communicate a serious expression of an intent to commit an act of unlawful violence to a particular individual or group of individuals). In this case, the respondents did not contest that some cross burnings fit within the category of true threats. O’Connor continued by responding to lower court’s holding that the statute is unconstitutional under RAV. In that case, the Court invalidated a statute that banned certain symbolic conduct when such conduct would arouse anger, alarm, etc. on the basis of “race, color, creed, religion, or gender.” This statute, according to the Court, discriminated on the basis of content, but the Court was careful to note that not all content-based discrimination would be invalid: “When the basis for the content discrimination consists entirely of the very reason the entire class of speech at issue is proscribable, no significant danger of idea or viewpoint discrimination exists.” Here, unlike the statute in RAV, Virginia’s statute does not single out only that speech directed toward a disfavored topic; it bans all cross burning, whether done with intent to intimidate because of race, gender, political affiliation, homosexuality, etc. In sum, the First Amendment permits Virginia to outlaw cross burnings because burning a cross is a particularly virulent form of intimidation.
On the second question, O’Connor wrote only for herself, Rehnquist, Stevens and Breyer to hold that the prima facie evidence language of the statute, as interpreted through the jury instruction in Black’s case, is unconstitutional. This language is unconstitutional because it permits prosecution and conviction based solely on the fact of cross burning itself, and would therefore create an unacceptable risk of the suppression of ideas. As recounted in the history section of the opinion, cross burning is not always intended to intimidate; sometimes it is intended as a statement of ideology. Thus, Black’s conviction cannot stand, and Elliott’s and O’Mara’s must be vacated and remanded.
Now for the separate opinions: Stevens concurred in one paragraph to say that cross burning with an intent to intimidate is not protected by the First Amendment and that is enough to uphold the Virginia statute. Scalia and Thomas wrote to argue that the Court should vacate and remand Elliott’s and O’Mara’s convictions so that the Virginia Supreme Court could authoritatively construe the prima facie evidence language. Souter (for himself, Kennedy, and Ginsburg) concurred in the judgment and dissented in part. According to Souter, the statute fails under RAV, and it does not, contrary to O’Connor’s opinion, fall within RAV’s exception for content discrimination on a basis that “consists entirely of the very reason the entire class of speech at issue is proscribable.” Because Souter would affirm the lower court’s judgment in its entirety, he concurred in the Court’s judgment as to Black, but dissented as to respondents Elliott and O’Mara.
Finally, Thomas dissented. He agrees with the conclusion that it is constitutionally permissible to ban cross burning carried out with the intent to intimidate, but believes the majority errs by imputing an expressive component to cross burning. According to Thomas, whatever expressive value cross burning has, “the legislature simply wrote it out by banning only intimidating conduct undertaken by a particular means.” Thomas proceeds to recount history in support of his view that Klan is a terrorist organization that uses cross burning as a tool of intimidation. Because he understands cross burning to be conduct, there is no need to analyze it under the First Amendment. But even assuming that the statute implicates the First Amendment, the fact that it allows an inference of an intent to intimidate from cross burning itself presents no constitutional problem. Thomas concludes his opinion with the following sentence: “Because I would uphold the validity of this statute, I respectfully dissent.” Query why his opinion is not better characterized as an opinion “concurring in the judgment in part, dissenting in part.” I don’t really have an answer for this question except to say that that is how he characterized his opinion.
In the third opinion today, Pacificare Health Systems v. Book (02-215), the Court punted. Here, doctors sued managed care organizations for failing to reimburse them for health care services provided to covered patients. The presented their claims under a variety of statutes, including RICO. The defendants moved to compel arbitration, but the lower courts denied the motion with respect to the RICO claims. According to the courts, the arbitration agreements arguably prohibited an award of punitive damages and thus the plaintiffs could not obtain “meaningful relief” on their RICO claims because RICO authorizes treble damages. In the Supreme Court, the managed care organizations argued (1) that an arbitrator (not a court) should decide whether the remedial limitations rendered the arbitration agreements unenforceable, and (2) alternatively, that the court should compel arbitration because the remedial limitations did not invalidate the arbitration agreements. The Court (Scalia for everyone but Thomas who did not participate) refused to address either argument, finding them premature. According to the Court, it is not at all clear that the remedial limitations in the arbitration agreements in this case preclude an award of treble damages under RICO. The Court noted that treble damage awards are not completely punitive, and thus it was unclear whether the limitations on awards of punitive damages would apply to RICO’s treble damages provision. Because there is no way to know how an arbitrator will interpret the remedial limitations, the questions whether they will render the parties’ agreements unenforceable and whether it is for courts or arbitrators to decide in the first instance are too abstract. The proper course is to compel arbitration.
Finally, on the order list, the Court dismissed the writ of certiorari in Medical Board of California v. Hason (02-479). (If you recall, this was an ADA case filed by the State of California. On further reflection (read: political pressure) the State decided it didn’t want to pursue the petition, so it asked the Court to dismiss the writ.) The only other item of interest on the order list was a request that the Solicitor General provide the views of the United States in Duke University v. Madey (02-1007). This is a patent case out of the Federal Circuit on the scope/applicability of the experimental use defense in a patent infringement case brought against a nonprofit university. In a patent infringement case against Duke, the Federal Circuit held that Duke could not invoke the experimental use defense because the allegedly infringing act was in furtherance of Duke’s legitimate business (i.e., education).
That’s all for today. Thanks for reading. As always, I welcome any corrections, comments or questions.
Sandy
From the Appellate Practice Group at Wiggin & Dana.
For more information, contact Mark Kravitz, Jeff Babbin, or Sandy Glover