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.