Supreme Court 1995-1996: Litigation Wrap-Up

Bradford A. Berenson*

In its most recent Term, the Supreme Court decided a number of cases of particular interest to litigators. The Court held that most common law tort claims against the manufacturers of medical devices are not preempted by federal statute. See Medtronic, Inc. v. Lohr, 116 S. Ct. 2240 (1996). It held that abstention-based orders dismissing or staying federal claims in favor of state proceedings are immediately appealable and that abstention-based remands or dismissals are appropriate only for equitable or otherwise discretionary claims; damages claims in federal court can at most be stayed when abstention is called for. See Quackenbush v. Allstate Ins. Co., 116 S. Ct. 1712 (1996). The Court recognized a broad federal psychotherapist-patient evidentiary privilege, see Jaffee v. Redmond, 116 S. Ct. 1923 (1996), and it confirmed that class action settlements in state court proceedings can release federal securities claims, even though such claims are within the exclusive jurisdiction of the federal courts, see Matsushita Elec. Indus. Co., Ltd. v. Epstein, 116 S. Ct. 873 (1996).

But perhaps the most interesting and significant litigation-related development of the 1995 Term was its pronounced tilt toward expanded judicial involvement in, and control over, the trial process. The Court considered five separate cases that implicated issues of judicial control, and in all five it resolved the issues in favor of greater power for the judiciary. These cases involved all three major categories of questions judges might be called upon to decide or review: pure questions of law, mixed questions of law and fact, and jury factfinding. The cumulative effect of the Court's decisions is to strengthen the hand of any litigator arguing for more active judicial involvement in trials or more muscular judicial oversight of jury findings.

With respect to pure questions of law, the Court strongly endorsed the proposition that judges alone should interpret written instruments, even when the terms of those instruments are ambiguous and testimony is required to clarify their meaning. See Markman v. Westview Instruments, Inc., 116 S. Ct. 1384 (1996). The specific holding in Markman was that construction of an ambiguous patent is an issue of law for the court and that judicial interpretation of the terms of a patent claim does not offend the Seventh Amendment's guarantee of trial by jury. But Markman has implications well beyond the area of patent law. Although the proper resolution of the Seventh Amendment question with respect to any given type of legal document will depend upon the historical treatment that type of document received in common law courts at the end of the eighteenth century, the Supreme Court hinted broadly and unanimously that, at the time the Seventh Amendment was passed, "judges, not juries, ordinarily construed written documents" of virtually all kinds. See id. at 1392 & nn.7, 9. If true, this proposition would clear the way for legislative enactments or judicial decisions altering the existing balance of power between judges and juries by conferring broad authority on judges to interpret the terms of ambiguous contracts, licenses, insurance policies, prospectuses, or other legal documents.

With respect to mixed questions of law and fact, too, this Term's cases furnished a basis for arguing that a broader range of issues must be decided by the court. See Thompson v. Keohane, 116 S. Ct. 457 (1996); Ornelas v. United States, 116 S. Ct. 1657 (1996). In Thompson, the Court held that the determination whether a suspect is "in custody" for purposes of Miranda is a mixed question of law and fact that is legal in nature and thus qualifies for independent, de novo federal review in habeas corpus proceedings, without regard to the statutory presumption of correctness that applies to state court factfinding. In Ornelas, the Court ruled that "reasonable suspicion" and "probable cause" determinations in the Fourth Amendment context are primarily legal in nature and thus subject to plenary appellate review.

Although the holdings of both of these cases involved appellate or quasi-appellate review of issues in criminal cases, their reasoning strengthens arguments that analogous issues in civil cases should be for the trial court in the first instance. Central to the outcome in both Thompson and Ornelas was the fact that the mixed questions at issue involved the application of objective standards, which called upon the court to determine what a "reasonable person" would have done or felt under the circumstances. The objective nature of the inquiry both minimized the importance of credibility assessments (at least once any disputed issues of historical fact were resolved) and created the potential for the resulting judicial decisions to yield law-like rules over time through a process of case-by-case adjudication. Notwithstanding the highly fact-dependent nature of the mixed questions at issue, the Court believed that these institutional concerns rendered the questions predominantly legal in nature and thus suitable for plenary judicial review. The same reasoning, if applied to analogous questions in the civil context, would remove those questions from the jury's purview altogether.

Finally, the Court decided a pair of cases which gave the judiciary a greater role to play in reviewing jury factfinding. See BMW of North America, Inc. v. Gore, 116 S. Ct. 1589 (1996); Gasperini v. Center For Humanities, Inc., 116 S. Ct. 2211 (1996). The Gore decision marks the first time the Supreme Court has invalidated a punitive damages award on the ground that it was substantively excessive under the Due Process Clause. The Court reversed the jury award based upon three factors that are now likely to be the focal point of most future attacks on the size of punitive damage awards: the degree of reprehensibility of the conduct in question, the ratio of punitive to compensatory damages, and the statutory fines and penalties authorized for analogous misconduct. The Court also held that a punitive damage award must be supported by the forum state's interest in protecting its own citizens and cannot be designed to compensate for or deter injuries to the citizens of other states.

Nonetheless, as Justice Ginsburg pointed out in dissent, the practical effect of the Gore decision in the punitive damages area is apt to be somewhat limited. See id. at 1614-17 (Ginsburg, J., dissenting). The Gore standards are so indeterminate that, in most cases, a state court desiring to affirm a large punitive damage award will be able to fashion a plausible rationale for doing so under Gore. And the Supreme Court itself is the only federal court that will review the application of Gore in the state courts. Unless the Supreme Court were willing to devote a significant portion of its docket each year to reviewing punitive damage awards - which it does not appear to be - adequate enforcement of the Gore standards is unlikely. Even if the Court decides to take a fairly active role, it will likely review at most one or two awards per year.

Moreover, Gore itself involved a punitive damage award that was wildly disproportionate to the actual or potential harm caused, predicated upon conduct that a reasonable person would have thought was, in light of existing law, entirely lawful at the time it was engaged in. The case involved no evidence at all of bad faith or willful misconduct by BMW. As such, the case is highly idiosyncratic and unlikely to cast a very broad factual shadow. From the historical perspective, then, Gore might ultimately be viewed as much closer to the end than the beginning of meaningful review of punitive damage awards under the Due Process Clause.

The greater significance of the Gore decision is that it breathes life into the notion that a substantively unreasonable jury verdict violates the federal constitution, thus giving heft to the promises made several years ago in TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443 (1993), and Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1 (1991). There was no procedural defect underlying the Gore jury's verdict (at least as modified by the Alabama appellate courts). Instead, the Supreme Court reversed the verdict solely because the Court regarded it as substantively unreasonable. To reach this result, the Court had to, and did, review the facts upon which the verdict was grounded and substituted its own judgment for that of the jury. This is starkly illustrated by the fact that the jury had to conclude under Alabama law that BMW had committed a fraud that was "gross, oppressive, or malicious" before it could impose punitive damages, while the Court's ruling was predicated in large part on precisely the opposite conclusion.

Justice Scalia in dissent is surely right that, in this regard, the Gore principle is not limited to punitive damage awards: it should apply with equal force to unreasonably large compensatory damage awards or to liability verdicts that are imposed without an adequate factual basis. See Gore, 116 S. Ct. at 1614 (Scalia, J., dissenting). Thus, in Gore, the Court implicitly recognized that the federal Due Process Clause prohibits all unreasonable, irrational actions by civil juries, state or federal. In so doing, the Court constitutionalized sufficiency of the evidence review and compelled state courts, and permitted itself, to pass upon the factual underpinnings of every civil judgment.

The notion that federal review of such questions might violate the Seventh Amendment's Reexamination Clause was dispelled by the Court's subsequent decision in Gasperini v. Center For Humanities, Inc., 116 S. Ct. 2211 (1996). In Gasperini, the Court held that a New York tort reform statute, which required state appellate judges to set aside damage awards that "deviate[] materially from what would be reasonable compensation," had to be applied by federal district courts sitting in diversity, with the resulting rulings reviewed for abuse of discretion by the federal courts of appeal. The Court rejected the argument that federal appellate review of a district court's failure to set aside a verdict as excessive violated the Reexamination Clause, holding that appellate review of trial court rulings on new trial motions under an abuse of discretion standard poses a question of law and "is reconcilable with the Seventh Amendment as a control necessary and proper to the fair administration of justice." Id. at 2223.

The significance of Gasperini is twofold. First and most directly, the Court's ruling means that state law standards governing permissible damage awards, punitive or compensatory, apply in diversity suits in federal court and may be reviewed in the federal courts of appeal. More broadly, however, the Court's ruling ratified a practice for all federal civil cases, no matter what the jurisdictional basis, in which federal appellate courts have long been engaged but whose lawfulness has been in some doubt: the review of district court rulings on new trial motions based upon alleged errors of fact. Such errors include not only the excessiveness of a damage award but also a finding of liability that is against the weight of the evidence. In other words, Gasperini and Gore, taken together, establish that the existence of an adequate factual basis for both liability and damages determinations is a latent question of law in every civil case, in state or federal court, that may constitutionally be reviewed in appropriate cases by the federal courts of appeal or the Supreme Court.

While it is impossible to tell whether the full implications of the 1995 Term's cases will ever be realized, they certainly appear to contribute to the broader, civil justice reform-minded trend toward a more active role for the judiciary in civil cases. The past Term's decisions provide a basis for courts both to remove certain types of questions from the jury's ken and to review carefully the answers the jury gives to the remaining questions to ensure that they fall within a zone of rationality or reasonableness. As such, the Term's decisions are potentially good news for defense lawyers. How good remains to be seen.

*Bradford A. Berenson is a litigator in the Washington, D.C. office of Sidley & Austin and a former law clerk to Justice Anthony M. Kennedy of the Supreme Court of the United States.


2001 The Federalist Society