PUNITIVE DAMAGES & DUE PROCESS: PACIFIC
MUTUAL LIFE INSURANCE COMPANY V. HASLIP
INTRODUCTION
The fourteenth amendment of the United States Constitution
guarantees that no person shall be deprived of "life, liberty, or property, without due process of law."' In Pacifw Mutual Life Insurance
Co. v. Haslip,2 the United States Supreme Court ruled on whether an
Alabama punitive damages award imposed upon an insurance company deprived the company of due process of law under the fourteenth amendment of the Constitution. 3 The Court held that while
there might be a time when a punitive damages award may violate
due process, the award in this particular case did not deprive the
4
company of property without due process of law.
The decision of the Court, in Pacific Mutual, was a disappointment to those who had eagerly anticipated a holding that might have
checked the escalation in the number and amount of punitive damages awards that has occurred over the last several years. 5 The decision in Paciftc Mutual was the third in three years in which the
Court had acknowledged the possibility that an award of punitive
damages might violate the due process clause of the fourteenth
amendment.6 However, it was the first time the Court found it pro7
cedurally correct to squarely address the issue.
Although the Court held that the requirements of due process
were not violated, the Court did provide some useful insights as to
which particular elements of the Alabama punitive damages procedures satisfied due process and those which it thought to be suspect
when standing alone.8 The Court did not articulate specific guidelines to assist juries in determining punitive damages, but the practical effect of the decision may be to assist state. legislatures seeking to
upgrade their existing punitive damages procedures. 9
1. U.S. CONST. amend. XIV.
2. 111 S. Ct. 1032 (1991).
3. Id. at 1037.
4. Id. at 1043-44.
5. Hoenig, Punitive Damages and Due Process: 'PacificMutual',N.Y.L.J., April
8, 1991 [hereinafter Hoenig].
6. Reuben, U.S. Justices Reject Attack on Punitives, L.A. Daily J., Mar. 5, 1991,
at 1, col. 6.
7. Pacific Mut. Life Ins. Co., 111 S. Ct. at 1040.
8. Id. at 1043-46; See Hoenig, supra note 5, at 1.
9.
See Pacific Mut. Life Ins. Co., 111 S. Ct. at 1043-46 (stating that the ramifica-
tions of the holding are uncertain).
CREIGHTON LAW REVIEW
(Vol. 25
This Note examines the Court's view of the due process clause of
the fourteenth amendment as it applies to the common-law method
of awarding punitive damages.' 0 This Note first examines the historical development of the Court's view of due process, in order to understand the differing perspectives of the Justices as they analyzed
the common-law procedures surrounding punitive damages." Next,
the historical development of the common-law method of assessing
punitive damages is explored. 12 Third, this Note explores possible reforms to the common-law system of assessing punitive damages and
what changes, if any, may be necessary to help ensure that a party
3
will not be deprived of property without due process of law.'
Fourth, recent punitive damages cases before the United States
Supreme Court are examined.' 4 Finally, the Alabama procedures for
assessing punitive damages are analyzed.' 5 This Note concludes that
despite the Court's refusal to "draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable" methods of awarding punitive damages, the decision in
Paciftc Mutual has the practical effect of providing a general due
process framework for determining the validity of punitive damages
16
systems.
FACTS AND HOLDING
An Alabama-licensed insurance agent, Lemmie L. Ruffin, Jr.,
7
wrote insurance policies for two unaffiliated insurance companies.'
The first company, Union Fidelity Life Insurance Company ("Union
Fidelity"), sold health insurance policies to government entities,
while the second company, defendant Pacific Mutual Life Insurance
Company ("Pacific Mutual"), provided only life insurance to municipalities.' 8 Ruffin solicited Roosevelt City, an Alabama municipality,
and offered to sell health insurance from Union Fidelity and life insurance from Pacific Mutual. 19 This arrangement was not unusual in
that it catered to customers who desired both life and health insur10. See infra notes 99-171, 199-220 and accompanying text.
11. See iyfra notes 99-138 and accompanying text.
12. See infra notes 139-71 and accompanying text.
13. See infra notes 172-98 and accompanying text.
14. See itifra notes 199-220 and accompanying text.
15. See infra notes 221-56 and accompanying text.
16. PacifcMut Life Ins. Co., 111 S. Ct. at 1043. See infra notes 258-63 and accompanying text.
17. Pacific Mut. Life Ins. Co. v. Haslip, 111 S. Ct. 1032, 1036 (1991).
18. Bacon & Dawson, Some Damage Awards are Unconstitutional,L.A. Daily J.,
July 2, 1990, at 7, col. 1 [hereinafter Bacon & Dawson].
19. Pacific Mut Life Ins. Co., 111 S. Ct. at 1036.
PUNITIVE DAMAGES
19911
ance policies.20
Roosevelt City was receptive to Ruffin's proposal, and applica21
tions for coverage from each insurance company were prepared.
Employees of Roosevelt City, plaintiffs Cleopatra Haslip, Alma M.
Calhoun, Eddie Hargrove, and Cynthia Craig were among those who
obtained health insurance. 22 Payments for the health insurance were
made by way of payroll deductions with the proceeds sent by check
23
from the city clerk to Ruffin, who had an office at Pacific Mutual.
Rather than sending the payments to Union Fidelity, Ruffin diverted
the funds into his own account.24
When Union Fidelity did not receive payment of the health insurance premiums, Union Fidelity sent notices of lapsed health coverage to the plaintiffs through Ruffin. 25 Ruffin did not forward the
notices, leaving the plaintiffs unaware of the lapse in their health insurance coverage. 26 Following this lapse in coverage, Ms. Haslip was
hospitalized. 27 The hospital was unable to verify insurance coverage,
and thus required payment from Haslip upon her release. 28 Because
Ms. Haslip was unable to pay the bill, her physician transferred her
unpaid account to a collection agency.2 The agency obtained a judgment against Ms. Haslip which adversely affected her credit rating.3 0
Ms. Haslip and the other plaintiffs, whose injuries were not specified in any of the opinions, filed suit in the Circuit Court for Jefferson County, Alabama, naming both Ruffin and Pacific Mutual as
defendants in the action.31 The plaintiffs sought damages against
Ruffin for fraud, and against Pacific Mutual based on the theory of
respondeat superior. 32 Following instructions from the judge that
permitted an award of punitive damages, the jury returned a verdict
in favor of the plaintiffs. 33 Plaintiff Haslip, with only $4000 of out-ofpocket expenses, was awarded over one million dollars in damages, a
substantial portion of which consisted of punitive damages. 34
During a post-trial procedure, which is required when an Ala20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
Id.
Id.
Id.
Bacon & Dawson, supra note 18, at 7, col. 2.
Id.
Id.
Pacfw Mut Life Ins. Co., 111 S. Ct. at 1036.
Bacon & Dawson, supra note 18, at 7, col. 2.
Pacific Mut. Life Ins. Co., 111 S. Ct. at 1036.
Id.
30. Id.
31. Id.
32. Id. at 1037.
33. Id.
34. Id. at 1037, n.2.
CREIGHTON LAW REVIEW
[Vol. 25
bama jury awards punitive damages, the trial court scrutinized the
reasonableness of the jury award. 35 The Supreme Court of Alabama
had designed the procedure to require the trial court to state reasons
on the record either why it did or did not believe the punitive damages award was excessive. 36 In the instant case, the trial court up37
held the award.
On appeal, the Supreme Court of Alabama affirmed the trial
court's decision after carefully reviewing the record. 38 The Supreme
Court of Alabama concluded that based upon the evidence presented,
the jury could not have determined that Ruffin's misrepresentations
were innocent or mistaken.3 9 The court also found that because the
evidence supported the conclusion that Ruffin was acting within the
scope of his employment, Pacific Mutual was liable under the theory
of respondeat superior.40 The court stated that the trial court's decision to admit testimony of several witnesses into evidence, despite ob4z
jections by Pacific Mutual, did not materially prejudice the trial.
The court held that the due process clause of the fourteenth amendment of the Constitution was not violated by the jury award of punitive damages.4
Pacific Mutual petitioned the United States Supreme Court for a
writ of certiorari to hear its appeal from the decision of the Supreme
Court of Alabama. 43 The Court granted certiorari to review whether
the procedure of assessing punitive damages used by Alabama courts,
and the particular award in this case, violated the requirements of
the due process clause of the fourteenth amendment. 44
Prior to analyzing the issues of the case, the Court recounted its
most recent decisions involving punitive damages. 45 In several of the
most recent cases, the Court had alluded to the potential conflict between the traditional common-law method of allowing jury discretion
in assessing punitive damages, and the requirements of the due pro35. Id. at 1046.
36. Hammond v. City of Gadsden, 493 So. 2d 1374, 1379 (Ala. 1986). The Supreme
Court of Alabama determined that trial courts must reflect in the record reasons for
overturning or upholding a jury verdict on grounds of excessiveness during post-trial
review. The Supreme Court of Alabama reasoned that it could more effectively review
trial court action by requiring such a record. Id.
37. Paci4fc Mut. Life Ins. Co., 111 S. Ct. at 1046.
38. Id.
39. Pacifzc Mut. Life Ins. Co., 553 So. 2d at 540.
40. Id. at 541.
41. Id. at 542-43.
42. Id. at 543.
43.
Bacon & Dawson, supra note 18, at 7, col. 1.
44.
45.
Pacflc Mut. Life Ins. Co., 111 S. Ct. at 1037-38.
Id. at 1038-40. See inkfra notes 209-31 and accompanying text.
1991]
PUNITIVE DAMAGES
cess clause of the fourteenth amendment.4 However, in each of
those cases the Court refrained from issuing an opinion regarding
due process and the traditional method of assessing punitive damages
because the parties had failed to properly raise due process objections
to the award in question.47 Thus, many commentators wondered if
the case had finally arrived where the Court would overturn a substantial punitive damages award for failing to meet due process
48
requirements.
In Pacific Mutual, the Court began its analysis with the two peripheral issues of the case: Was Ruffin acting within the scope of authority, and if so, was Pacific Mutual liable under respondeat
superior?49 The Court stated that Alabama law allows an assessment
of punitive damages against an insurance company for the acts of an
employee under the theory of respondeat superior. 5° The rationale
given for such an allowance was that the threat of punitive damages
gives an insurer, who is in a better position than the insured to con5
trol the actions of an agent, financial incentive to prevent fraud. '
The Court determined that Ruffin had acted within the scope of his
employment with Pacific Mutual by soliciting insurance
sales from
52
which Pacific Mutual derived economic benefits.
As for due process and punitive damages, the Court, citing a long
common-law history of assessing punitive damages, did not find the
award of punitive damages unconstitutional per se.5 - However, addressing Justice Scalia's concurrence, which equated due process with
traditional procedures that do not violate the Bill of Rights, the
Court made it clear that an award of punitive damages might, in
some case, violate the requirements of due process.54 The real question, concluded the Court, was whether the punitive damages award
55
in this particular case violated due process.
Unwilling to provide specific guidelines, the Court stated that
where an award of punitive damages becomes unconstitutional is a
gray area of the law.5 Nevertheless, by focusing on the requirements of due process and applying those requirements to the jury in46. Hoenig, Punitive Damages and Due Process: 'PacificMutual',N.Y.L.J., April
8, 1991 [hereinafter Hoenig].
47. Pacific Mut Life Ins. Co., 111 S. Ct. at 1040.
48. Hoenig, supra note 46, at 1.
49. Pacific MuL Life Ins. Co., 111 S. Ct. at 1040.
50. Id. at 1041.
51. Id.
52. Id. at 1040-41.
53. Id. at 1043.
54. Id.
55. Id.
56. Hoenig, supra note 46.
CREIGHTON LAW REVIEW
[Vol. 25
structions given by the trial judge, the Court indirectly provided
some guidance as to the constitutional parameters of a punitive damages system. 57 The Court determined that the instructions, while allowing the jury discretion, had enough constraints so as to satisfy the
requirements of due process.- s The Court reasoned that the jury was
limited by the judge's instructions, which defined deterrence and retribution as the purposes of a punitive damages award.5 9 The Court
found that if the jury had understood this purpose then the jury
would have limited its award accordingly.60
The Court examined the post-trial procedures utilized by the
trial court in scrutinizing the jury award of punitive damages. 61 The
Court pointed to procedures established by the Supreme Court of Alabama for analyzing punitive damages awards as one means of satisfying due process.6 2 The Court determined that when these
procedures were applied by the trial court, a defendant was assured
of meaningful review as to the excessiveness of the punitive damages
63
award in question.
The Court then concluded that the review of the award by the
Supreme Court of Alabama was yet another check on the possibility
of unlimited jury discretion when a jury assesses punitive damages. 64
The detailed standards that the Supreme Court of Alabama had de57. See id. at 1-2. The jury instructions as to punitive damages were as follows:
Now if you find fraud was perpetrated then in addition to compensatory damages you may in your discretion, when I use the word discretion, I say you
don't have to even find fraud, you wouldn't have to, but you may, the law says
you may award an amount of money known as punitive damages.
This amount of money is awarded to the plaintiff but it is not to compensate the plaintiff for any injury. It is to punish the defendant. Punitive means
to punish or it is also called exemplary damages, which means to make an example. So, if you feel or not feel, but if you are reasonably satisfied from the
evidence that the plaintiff, whatever plaintiff you are talking about, has had a
fraud perpetrated upon them and as a direct result they were injured and in
addition to compensatory damages you may in your discretion award punitive
damages.
Now, the purpose of punitive or exemplary damages is to allow money recovery to the plaintiffs, it does to the plaintiff, by way of punishment to the
defendant and for the added purpose of protecting the public by deterring the
defendant and others from doing such wrong in the future. Imposition of punitive damages is entirely discretionary with the jury, that means you don't
have to award it unless this jury feels that you should do so.
Should you award punitive damages, in fixing the amount, you must take
into consideration the character and the degree of the wrong as shown by the
evidence and necessity of preventing similar wrong.
PacificMut Life Ins. Co., 111 S. Ct. at 1037, n. 1.
58. Pacific Mut. Life Ins. Co., 111 S. Ct. at 1044.
59. Id.
60. Id.
61. Hoenig, supra note 46.
62. Pacific Mut. Life Ins. Co., 111 S. Ct. at 1044.
63. Id.
64. Id.
PUNITIVE DAMAGES
1991]
veloped ensured that juries would make rational determinations of
punitive damages in turn furthering the public policies of retribution
and deterrence.65 The Court noted that because of these detailed
standards, the Alabama system does not allow a plaintiff to recover
simply because of a defendant's wealth.6 The Court concluded that
the Alabama system had been effective in terms of limiting the
67
number and amount of jury awards since its implementation.
Finally, the Court dismissed the argument of Pacific Mutual that
the Alabama system failed due process requirements because it called
for only a "reasonably satisfied from the evidence" standard of proof,
rather than a higher standard, such as a "preponderance of the evidence" standard as required by Ohio.68 The Court approved of Ohio's
higher standard of proof, but nevertheless upheld the lower standard
utilized by Alabama because of the other protections provided by the
Alabama system. 69 After analyzing all the mechanisms which Alabama had in place to protect a defendant against an unrestrained jury
award, the Court found that Pacific Mutual had been granted the
70
protection required by due process.
Justice Scalia concurred with the result, but his reasoning differed from that of the majority. 71 While the majority began by noting that the Court has the authority to strike down a jury award not
meeting the requirements of due process, Justice Scalia asserted that
the majority's due process inquiry was foreclosed as American courts
have a long tradition of leaving punitive damages to the discretion of
the jury.72 Justice Scalia reasoned that traditional procedures that do
not violate the Bill of Rights are in essence due process, and the
Court is limited to examining due process only when a common-law
system is attempting to break from established tradition. 73 Thus,
jury discretion may only be scrutinized under due process when the
procedure is no longer considered to be traditional. 74 Such transformation takes place- only when the legislative branches of either the
federal or state government reform the jury discretion element of
75
the existing system of assessing punitive damages.
Justice Kennedy also concurred, but was not convinced by Jus65.
66.
Id. at 1045-46.
Id.
67. Id.
68.
Id. at 1046, n. 11.
69. Id.
70.
71.
72.
73.
74.
75.
Id.
Id.
Id.
Id.
Id.
Id.
at
at
at
at
at
1046.
1046-47 (Scalia, J., concurring).
1047.
1048.
1054.
CREIGHTON LAW REVIEW
[Vol. 25
tice Scalia's assertion that every system with an established tradition
always satisfies due process. Justice Kennedy stated that the tradition of allowing a jury discretion when assessing punitive damages
was useful to the analysis of the case at hand. 76 He concluded that
because jury discretion as to punitive damages was well established
in the American legal system, any further inquiry into the matter is
unnecessary because jury discretion has withstood several inquiries
by this Court through the years. 77 Also unwilling to provide specific
guidelines, Justice Kennedy stated that the Court's job is to declare
whether the system satisfies constitutional requirements, and not to
legislate reform of the system. 78 Justice Kennedy thought that refor79
mation of the system would be best left to the states.
Justice O'Connor, the lone dissenter, did not agree that the Alabama system provided the due process to which Pacific Mutual was
entitled.8 0 Justice O'Connor, while not questioning the legitimacy of
punitive damages, sought a set of guidelines upon which to direct a
jury in the exercise of its power to assess punitive damages awards. 81
Justice O'Connor determined that the Alabama system of award'8 2
ing punitive damages used in this case was "void for vagueness.
She believed the jury was given discretion without any meaningful
criteria upon which to base the exercise of this discretion. 83 Thus,
Justice O'Connor concluded that the requirements of due process are
violated where a law is applied without any meaningful standards
upon which to guide application.84
Justice O'Connor analyzed the post-verdict trial court review
guidelines.8 5 She stated that these guidelines would be more beneficial if provided to a jury before its decision, rather than being used
only for post-trial review. 86 Justice O'Connor concluded that the
guidelines were being used after an unguided jury had a chance to
make a mistake. 87 Justice O'Connor deemed the guidelines to be useless because the trial court based its review of the jury award on deference to the jury.88 In other words, these meaningful standards that
judges have at their disposal during review are not being used effec76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
Id.
Id.
Id.
Id.
Id.
Id.
Id.
Id.
Id.
Id.
Id.
Id.
Id.
at 1054-55. (Kennedy, J., concurring).
at 1055-56.
at 1056 (O'Connor, J., dissenting).
at 1057.
at 1060.
at 1061.
at 1063.
PUNITIVE DAMAGES
1991]
tively because the judge is deferring to the jury.89 This creates a situation in which a jury lacking guidance does not understand what it is
doing; the judge, who is seemingly protecting the defendant from a
mistaken exercise of discretion by the jury, is deferring to the jury.9°
Justice O'Connor based her due process analysis upon the test
that had been developed in Mathews v. Eldridge.91 Under the Mathews test, three factors must be considered in determining what is
required by due process. 92 The factors are: (1) the magnitude of the
private interest that will be affected; (2) the risk that the procedures
used will deprive the interest of due process, and the value, if any, of
adding more procedural safeguards; and (3) the interest of the government, including the burden that the additional procedures might
create.93 Applying the test to the facts of Pacific Mutual, Justice
O'Connor concluded that the property interest, based on the amount
of money Pacific Mutual had to lose, was enormous.9 She determined that the existing Alabama procedures are unfair and other adequate remedies for plaintiffs exist. 95 Justice O'Connor also
concluded that Alabama lacks a legitimate interest in preserving the
existing system so as to exclude reform. 6
Finally, in justifying punitive damages, Justice O'Connor attacked Justice Scalia's due process analysis.9 7 She asserted that the
due process procedures of yesterday must satisfy today's requirements, or the Court should invalidate them.98 Justice O'Connor also
stated that the time is right for scrutinizing punitive damages awards
because of a significant increase in the number and size of punitive
damages being awarded today.9 Justice O'Connor suggested that the
Court should declare the existing common-law system unconstitutional and give the states reasonable time to remedy their systems.'0°
BACKGROUND
THE UNITED STATES SUPREME COURT AND PROCEDURAL DUE
PROCESS
Due process of law has come to mean different things to the
89. Id.
90. See id.
91. Id. at 1061 (citing Mathews v. Eldridge, 424 U.S. 319 (1976)).
92. Mathews v. Eldridge, 424 U.S. 319, 334-35 (1976).
93.
94.
95.
96.
97.
98.
99.
100.
Id. at 335.
Paciftc Mut. Life Ins. Co., 111 S. Ct. at 1062 (O'Connor, J., dissenting).
Id. at 1062-64.
Id. at 1064-65.
Id. at 1065.
Id.
Id. at 1066.
Id. at 1067.
CREIGHTON LAW REVIEW
[Vol. 25
United States Supreme Court Justices. 101 To understand more fully
why several Justices differed in their due process analyses of the Alabama procedures for awarding punitive damages in Pacific Mutual
Life Insurance Co. v. Haslip,10 2 one must have an idea of how "due
process" developed and the different meaning it has for several of the
03
Justices.
The idea of due process of law dates as far back as the Magna
Carta, but what is pertinent to this discussion is the development of
the concept of due process by the United States Supreme Court over
the years. 1° 4 Prior to the enactment of the due process clause of the
fourteenth amendment, the Court examined the due process clause
of the fifth amendment in Murray'sLessee v. Hoboken Land and Improvement Co.10 5 The Court analyzed the validity of a federal statute
that allowed for distress warrants, a means by which the government
could collect on a debt without having to give the debtor notice or a
hearing. 0 6 The Court concluded that due process of law refers to the
traditional procedures to which persons are entitled, and that due
process is also a restraint-upon the branches of government. 1° 7
The real question for the Court was where to look to find the
meaning of "due process.'1 08 The Court concluded that the answer is
found by looking first to the Constitution to see if the particular procedure comes into conflict with any constitutional provision. 1°9 If a
conflict does not exist, then the next step involves determining
whether the procedure was a part of the Anglo-American common
0
law.1
Twelve years after Murray's Lessee, the fourteenth amendment,
which contains the due process clause applicable to the states, was
enacted."' The Court followed the historical test of Murray's Lessee
2
until it decided Hurtado v. California,"1
in which the Court elabo101. Compare Pacific Mut. Life Ins. Co. v. Haslip, 111 S. Ct. 1032, 1047 (Scalia, J.,
concurring) (asserting that a process which has been traditionally followed by American courts and not in violation of the Bill of Rights constitutes due process) with id. at
1065 (O'Connor, J., dissenting) (stating that a procedure must satisfy the Mathews v.
Eldridge test to constitute due process).
102. 111 S. Ct. 1032 (1991).
103. See infra notes 104-38 and accompanying text.
104. See Pacific Mut. Life Ins. Co., 111 S. Ct. at 1048-49.
105. 59 U.S. (18 How.) 272 (1856).
106. Id. at 274.
107. Id. at 276-77.
108. Id.
109. Id. at 277.
110. Id.
111. Pacif'w Mut. Life Ins. Co., 111 S. Ct. at 1049 (Scalia, J., concurring). See U.S.
CONST. amend. XIV. The fourteenth amendment states in part that no state shall "deprive any person of life, liberty, or property, without due process of law." Id.
112. 110 U.S. 516 (1884).
1991]
PUNITIVE DAMAGES
rated upon the test. 13 In Hurtado, Joseph Hurtado was tried for
murder without having been indicted by a grand jury.114 The Court
held that Hurtado had received due process of law even though he
had not been indicted by a grand jury.115 Hurtado argued that because a grand jury indictment was well established in the common
law of England as well as America, the forbearance of a grand jury
indictment violated due process of law. 16
The Court simplified the due process analysis by stating that "a
process of law, which is not otherwise forbidden, must be taken to be
due process of law, if it can show the sanction of settled usage both in
England and in this country; but it by no means follows that nothing
17
The next question for the Court
else can be due process of law.""1
to determine was whether due process was denied if a traditional
common-law procedure was not followed."l 8 The Court's answer in
jusHurtado was a vague reference to those "principles of liberty and
i
tice." 119 This statement then entered the due process analysis12
In Maxwell v. Dow,'2' the Court attempted to apply those "principles of liberty and justice" to a procedure that did not follow traditional common-law practice. 122 In Maxwell, Charles Maxwell was
convicted by an eight-member jury for robbery 'and sentenced to
eighteen years in prison.'2 3 Maxwell challenged the conviction, arguing that the constitution of Utah, which provided for eight-member
juries in capital cases rather than the usual twelve, deprived him of
due process of law. 12 4 The Court held that due process was not de25
nied because all Utah citizens were subject to the same treatment.
By 1937, the Court's view of due process had changed. In Palko
v. Connecticut,126 Frank Palko's conviction of second degree murder
was set aside on appeal. 127 Upon retrial, the jury convicted Palko of
first degree murder.' 28 Palko claimed that a retrial was forbidden by
the due process clause of the fourteenth amendment because it would
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
125.
126.
127.
128.
See id. at 528-37.
Id. at 518.
Id. at 538.
Id. at 520.
Id. at 528.
See id. at 520.
Id. at 537.
Pacific Mut Life Ins. Co., 111 S. Ct. at 1050 (Scalia, J., concurring).
176 U.S. 581 (1900).
Id. at 602-05.
Id. at 582.
Id.
Id. at 604-05.
302 U.S. 319 (1937).
Id. at 320-21.
Id. at 321-22.
[Vol. 25
CREIGHTON LAW REVIEW
violate the double jeopardy clause of the fifth amendment. 129 The
Court upheld the conviction, concluding that due process was
satisfied.130
The unique aspect of the Palko case was that the Court analyzed
the case from the perspective that in every case due process requires
fundamental liberty, rather than from the perspective that fundamental liberty is part of due process only when traditional procedures are not being followed. 31' Thus, under this type of analysis all
due process must satisfy the notion of fundamental liberty. 132 This
was the birth of selectively incorporating the Bill of Rights into the
33
fourteenth amendment.
The form of due process analysis which involves the notion of
fundamental liberty has been expanded in more recent times.'l 4 For
example, in Mathews v. Eldridge,135 a case that Justice O'Connor relied heavily upon in her dissent in Pacific Mutual, the Court provided a balancing test for due process.' 38 In Mathews, George
Eldridge asserted a due process challenge to the administrative procedures surrounding termination of his social security disability bene3 7
fits.
In
upholding
the administrative
procedures,
the
Court
specified the three-part balancing test Justice O'Connor applied in
her opinion.'3 8 The factors are as follows: (1) the magnitude of the
private interest that will be affected; (2) the risk that the procedures
used will deprive somebody of their interest in due process, and the
value, if any, of adding more procedural safeguards; and (3) the interest of the government, including the burden that the additional
39
procedures might create.'
40
It is under this modern view of due process that the majority,
Justice Kennedy' 4 ' and Justice O'Connor 142 analyzed punitive damages. 143 Meanwhile, Justice Scalia applied a pre-Palko perspective,
noting that the fundamental fairness aspect of due process need only
129. Id. at 322. See supra note 111. See also U.S. CONST. amend. V. The fifth
amendment states in part that no person shall "be subject for the same offense to be
twice put in jeopardy of life and limb; ....
Id.
130. Palko, 302 U.S. at 322.
131. Id. at 328.
132. Id.
133.
Pacific Mut. Life Ins. Co., 111 S. Ct. at 1051 (Scalia, J., concurring).
134.
135.
136.
137.
138.
139.
140.
141.
142.
143.
Id. at 1052.
424 U.S. 319 (1976).
See Pacific Mut. Life Ins. Co., 111 S. Ct. at 1056-67 (O'Connor, J., dissenting).
Mathews, 424 U.S. at 324-25.
Pacific Mut. Life Ins. Co., 111 S. Ct. at 1061-65 (Scalia, J., concurring).
Mathews, 424 U.S. at 335.
See Pacific Mut. Life Ins. Co., 111 S. Ct. at 1043.
See id. at 1054-55 (Kennedy, J., concurring).
See id. at 1056 (O'Connor, J., dissenting).
See supra notes 49-100 and accompanying text.
1991]
PUNITIVE DAMAGES
be analyzed when traditional common-law procedures are not
followed. 144
THE COMMON-LAW METHOD OF PUNITIVE DAMAGES
The present day common-law method of assessing punitive damages is firmly rooted in history. Its origins can be traced back to two
eighteenth century English cases. 145 In Huckle v. Money,i 46 a printer
was awarded punitive damages after government officials unlawfully
held him captive under suspicion of publishing a radical newspa149
per. 1 47 In Wilkes v. Wood,148 the same publication was at issue.
In Wilkes, a member of parliament was awarded punitive damages
after his house was illegally entered and searched by government officials.150 In each case, the punitive damages awards were upheld by
appellate courts.' 5 ' The courts established that punitive damages
were to extend beyond compensation to punishment and deterrence
52
of wrongful acts.1
American courts began to assess punitive damages as well. 53 In
1791, in Coryell v. Colbaugh,I' 4 the New Jersey Supreme Court allowed punitive damages to be assessed.' 55 In Coryell, the court held
that a man had breached a promise to marry.5s6 The court instructed
the jury to assess damages beyond the actual loss for the sake of example so that a wrong such as this might be prevented in the future. 57 The method of assessing punitive damages used in Coryell is
iss
a good example of the early common-law method.
The Court in Pacific Mutual stated that "this Court more than
once has approved the common-law method for assessing punitive
awards."' 5 9 Throughout the years, the United States Supreme Court
has been called upon to scrutinize the constitutionality of the com144. Pacific Mut Lfe Ins. Co., 111 S. Ct. at 1054 (Scalia, J., concurring).
145. Daniels & Martin, Myth and Reality in Punitive Damages, 75 MINN. L. REV.
1, 6-7 (1990).
146. 95 Eng. Rep. 768 (K.B. 1763).
147. Id. at 768.
148. 98 Eng. Rep. 489 (K.B. 1763).
149. Id. at 493.
150. Id. at 489.
151. Wilkes, 98 Eng. Rep. at 498-99; Huckle, 95 Eng. Rep. at 769.
152. Daniels & Martin, 75 MINN. L. REV. at 7.
153. Id.
154. 1 N.J.L. 90 (1791).
155. Id. at 91.
156. Id. at 90.
157. Id. at 91.
158. See Daniels & Martin, 75 MINN. L. REV. at 7 (citing Coryell v. Colbaugh as an
early case where the common-law method of assessing punitive damages is used).
159. Pacific Mut. Life Ins. Co., 111 S. Ct. at 1042.
CREIGHTON LAW REVIEW
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mon-law method of assessing punitive damages awards. 16°
As early as 1852, prior to the enactment of the fourteenth
amendment, the Court, in Day v. Woodworth,i 6 1 upheld the common-law method of assessing punitive damages.162 In Day, a mill
owner sought damages against the owners of an upstream mill who
had dismantled a portion of his dam. 63 The trial court instructed the
jury that should it find for the plaintiff, the jury could not award
damages beyond those that would compensate the plaintiff. 164 Following the jury award of compensatory damages, the plaintiff appealed the decision to the United States Supreme Court seeking
damages beyond compensatory. 165 The Court asserted that the jury
should have been allowed to assess punitive damages, and that the
common-law method of allowing a jury the discretion to assess a
punitive damages award was well established in common-law
tradition. 166
Even after the enactment of the fourteenth amendment in 1868,
the Court did not establish procedures to usurp the discretion of a
jury as to the determination of punitive damages. 167 In Barry v. Edmund, 16 Robert Barry sued for damages when his personal property was unlawfully seized by the county treasurer for alleged unpaid
taxes. 169 The United States Circuit Court of Appeals for the Eastern
District of Virginia dismissed Barry's suit because the actual injuries
involved did not reach the required jurisdictional amount. 170 The
United States Supreme Court reversed the decision because the
lower court had failed to include punitive damages when determining
the jurisdictional amount. 171 Therefore, by including the punitive
damages, the jurisdictional amount had been satisfied. 172 The Court
remanded the case, and stated that a jury should have discretion
160. See id. at 1042-43.
161. 54 U.S. (13 How.) 363 (1852).
162. Id. at 373.
163. Id. at 363-64.
164. Id. at 366.
165. Id. at 371.
166. Id.
167. See Missouri Pac. Ry. Co. v. Humes, 115 U.S. 512, 521 (1885) (holding that jury
discretion is not controlled by specific rules, yet wisdom of this discretion is exemplified by the long history of this practice); Minneapolis & St. L. Ry. Co. v. Beckwith, 129
U.S. 26, 36 (1889) (stating that punitive damages do not violate the due process clause
of the fourteenth amendment because of the well-established history of punitive damages being upheld in judicial decisions).
168. 116 U.S. 550 (1886).
169. Id. at 551.
170. Id. at 557-58.
171. Id. at 562.
172. Id.
1991]
PUNITIVE DAMAGES
when fixing the amount of punitive damages.173
As recently as 1983, the Court upheld a jury award of punitive
damages assessed in a 42 U.S.C. § 1983 action when the traditional
common-law method of determining punitive damages was applied. 174 In Smith v. Wade,175 the Court held that a prison guard had
violated the eighth amendment rights of an inmate at a youth reformatory. 1 76 The guard's failure to protect the inmate from being
beaten and abused by other inmates led to a jury assessment of puni177
tive damages against the guard.
The foregoing has examined the historical development of the
common-law method of assessing punitive damages, which has withstood constant scrutiny by the Court. 178 However, it is important to
note that the United States Supreme Court had not squarely addressed the question of due process and the common-law method of
179
assessing punitive damages until the Pacific Mutual decision.
REFORMS TO THE COMMON-LAW METHOD OF
ASSESSING PUNITIVE DAMAGES
Throughout the Court's analysis in Pacifc Mutual, several reis
forms of the common-law system are mentioned.1
Generally, commentators have called for three basic reforms to the common-law
method of assessing punitive damages.' 8 ' The proposed reforms are
as follows: (1) bifurcate trials so as to separate the assessment of punitive damages from the other aspects of the trial; (2) require a standard of proof greater than "beyond a preponderance of the evidence";
and (3) establish statutory maximum amounts of punitive damages
82
that a jury may assess.'
Bifurcated Trials
It has been suggested that a trial be bifurcated in order to separate a jury determination of punitive damages from the other issues
that the jury must resolve.'8 3 In a bifurcated trial, a jury would first
173. Id. at 563.
174. See Smith v. Wade, 461 U.S. 30, 56 (1983).
175. 461 U.S. 30 (1983).
176. Id. at 32.
177. Id. at 33.
178. Pacific Mut.Lfe Ins. Co., 111 S.Ct. at 1043.
179. Id. at 1040.
180. Id. at 1064 (O'Connor, J., dissenting).
181. Wheeler, The Constitutional Case For Reforming Punitive Damages Proce.
dures, 69 VA. L. REV. 269, 272 (1983).
182. Id.
183. Ellis, Punitive Damages,Due Process, and the Jury, 40 ALA. L. REv. 975, 100203 (1989).
CREIGHTON LAW REVIEW
[Vol. 25
determine a defendant's liability and assess compensatory damages
before determining punitive damages.1l 4 Thus, punitive damages
would not become part of the process unless the defendant has been
found liable.'3 5 If liability is established, then evidence that is only
pertinent to punitive damages, such as the malice and wealth of the
defendant, could be presented.18
Many experts note that punitive damages often have the effect of
clouding a jury determination of a defendant's liability. 8 7 Others argue that evidence of the defendant's malice and wealth has nothing
to do with determining the liability of the defendant.1l s Yet this evidence, when presented before a jury has determined liability, has a
great effect upon the jury determination. 8 9 By separating punitive
damages from the rest of the trial, the jury does not view this potentially inflammatory evidence until after it determines liability. 19°
Higher Standardof Proof
A higher standard of proof for punitive damages than that used
for determining a defendant's liability is favored by commentators,
due to the unequal risks the plaintiff and defendant face with respect
to punitive damages. 191 The standard of proof used to determine a
defendant's liability in a civil case is a preponderance of the evidence. 19 2 This standard is based upon the assumption that the risks
to the plaintiff and defendant are equal.' 9 3 The plaintiff risks the
cost of not recovering for alleged injuries.194 On the other hand, the
defendant risks being erroneously forced to compensate the
195
plaintiff.
However, the risks to each party change with respect to punitive
damages. 19 Unlike compensatory damages, punitive damages are not
something deserved by the plaintiff. 197 Rather, the purpose is to pun184.
185.
186.
187.
Wheeler, 69 VA. L. REV. at 300.
Ellis, 40 ALA. L. REV. at 1003.
Wheeler, 69 VA. L. REV. at 301.
Id; See Ellis, 40 ALA. L. REV. at 1001-02 (asserting that punitive damages evi-
dence may cause confusion for a jury as it
liability).
188.
189.
190.
191.
192.
attempts to determine a defendant's
Wheeler, 69 VA. L. REV. at 301.
Ellis, 40 ALA. L. REV. at 1002.
Wheeler, 69 VA. L. REV. at 301.
Id. at 298.
Ellis, 40 ALA. L. REV. at 991. A preponderance of the evidence standard of
proof is proof that is more credible than not. BLACK's LAW DICTIONARY 1182 (6th ed.
1990).
193.
194.
195.
196.
197.
Wheeler, 69 VA. L. REV. at 292.
Id.
Id.
Ellis, 40 ALA. L. REV. at 993.
Id.
PUNITIVE DAMAGES
1991]
ish the defendant. 198 Thus, the plaintiff has no risk. 199 In contrast,
the defendant risks having a large award assessed, as well as bearing
20 °
the stigma of being punished in the eyes of the public.
Because only the defendant is at risk, many believe that a higher
standard of proof will protect the defendant from error.20 1 A higher
standard of proof is designed to constrain a jury before it assesses a
substantial award against the defendant. 20 2 A standard such as clear
and convincing proof is designed to cause a jury to resolve doubts in
favor of the defendant, who is the only one who stands to lose
anything.
20 3
Statutory Limits Upon Punitive Damages
A statutory limit upon the amount of punitive damages that a
jury may award addresses the fear that juries often assess punitive
damages with unlimited discretion. 2° 4 Such a statute would ensure
that a jury may not go beyond what the legislature has deemed reasonable for an award of punitive damages.2 05 A statutory limit also
creates a guidepost that juries may use to determine the proper
20 6
amount to award in a particular case.
In Pacific Mutual, Justice O'Connor offers each of these reforms
20 7
as remedies to the allegedly unconstitutional system in Alabama.
However, while the majority opinion does not directly call for state
legislatures to immediately implement these mechanisms of reform
into their common-law systems, the majority does suggest that the
20 8
reforms may help to improve existing systems.
RECENT CHALLENGES TO PUNITIVE DAMAGES BEFORE THE UNITED
STATES SUPREME COURT
Only within the last five years has the Court moved closer to directly addressing due process concerns regarding punitive damages
awards. 20 9 This may be due to the belief that there recently has been
a dramatic increase in the frequency and size of punitive damages
198. Id.
199.
Wheeler, 69 VA. L. REV. at 292.
200.
Id. at 292-93.
201. Id. at 298.
202. Id.
203. Id. Clear and convincing proof requires a jury to be reasonably certain that
the ultimate fact in controversey is true. BLACK'S LAw DICTIONARY 251 (6th ed. 1990).
204. Wheeler, 69 VA. L. REV. at 299.
205. Id.
206. Id.
207.
Pacific Mut. Life Ins. Co., 111 S. Ct. at 1064 (O'Connor, J., dissenting).
208.
Id. at 1046, n.11.
209.
Id. at 1038.
CREIGHTON LAW REVIEW
[Vol. 25
awards. 210 Whether there has been a dramatic increase is currently
211
in dispute.
In 1986, the Court granted certiorari to a case on appeal from the
Supreme Court of Alabama.212 In Aetna Life Insurance Co. v. Layoie,213 Margaret Lavoie was awarded punitive damages for the bad
faith refusal of Aetna to pay her medical claim. 214 The Court faced
the issue of whether the due process clause of the fourteenth amendment was violated when an Alabama Supreme Court judge failed to
properly recuse himself from the case for bias.2 15 The Court only peripherally addressed the issue of punitive damages and due process,
concluding that it was an issue that must be resolved in the near
216
future.
Two years later, in Banker's Life and Casualty Co. v. Crenshaw,217 a jury awarded punitive damages in the amount of $1.6 million for a bad-faith refusal by an insurance company to pay an
accident victim's claim.21 8 The insurance company challenged the
punitive damages award under the excessive fines clause of the
eighth amendment as well as the due process clause of the four19
teenth amendment.2
The Court did not issue an opinion concerning the challenges because the insurance company had not properly raised the claims in
state court. 220 However, Justice O'Connor, joined by Justice Scalia,
concurring in part with the judgment, encouraged future challenges
to punitive damages awards under the due process clause of the fourteenth amendment stating that "appellant has touched on a due process issue that I think is worthy of the Court's attention in an
appropriate case." 22 1
Finally, in 1989, the Court, in Browning-Ferris Industries v.
Kelco Disposal, Inc.,222 explicitly addressed the constitutionality of
210. Id. at 1066 (citing RAND INSTITUTE FOR CIVIL JUSTICE, M. PETERSON, S.
SARMA, AND M. SHANLEY, PUNITIVE DAMAGES - EMPIRICAL FINDINGS iii (1987)).
211. See Daniels & Martin, 75 MINN. L. REV.at 3.
212. See Aetna Life Ins. Co.v. Lavoie, 475 U.S. 813 (1986).
213. 475 U.S. 813 (1986).
214. Id. at 816.
215. Id. at 815. See supra note 111.
216. Lavote, 475 U.S. at 828-29.
217. 486 U.S. 71 (1988).
218. Id. at 75.
219. Id. at 75-76. See supra note 111. The excessive fines clause of the eighth
amendment provides that excessive fines shall not be imposed. U.S. CONST. amend.
VIII.
220. Crenshaw, 486 U.S. at 76.
221. Id. at 87 (O'Connor, J., concurring).
222. 492 U.S. 257 (1989).
PUNITIVE DAMAGES
1991]
punitive damages awards. 223 The case involved an antitrust suit
brought by one waste disposal company against another.224 The jury
found that the defendant company had acted with sufficient malice in
attempting to drive the plaintiff company out of business to justify
the award to the plaintiff of $6 million in punitive damages. 225 On
appeal, the United States Court of Appeals for the Second Circuit
agreed with the jury and affirmed the judgment regarding both lia226
bility and damages.
The Court, addressed only the issue of whether the punitive
damages award violated the excessive fines clause of the eighth
amendment. 227 The Court held that the clause does not apply to punitive damages awards between private parties. 228 The issue of a violation of the due process clause of the fourteenth amendment once
again was not properly raised and preserved.229 However, the Court
continued to encourage due process challenges to punitive damages
awards by stating that the Court was awaiting the day to rule upon
"whether due process acts as a check on undue jury discretion to
award punitive damages in the absence of any express statutory
' ' 230
Jimit.
That anticipated day finally arrived when the Court
23 1
granted certiorari in the Pacific Mutual case.
THE ALABAMA PUNITIVE DAMAGES SYSTEM
Alabama essentially follows the traditional common-law method
of assessing punitive damages. 23 2 The purposes of punitive damages
in Alabama are deterrence and retribution. 2s3 The objective of deterrence in a punitive damages award is to make clear to other similarly
234
situated parties that such conduct will not be tolerated by society.
Implicit in deterrence is the assumption that those parties the award
seeks to deter must be made aware that the punishment exists and
223.
224.
225.
226.
227.
228.
229.
Id. at 259.
Id. at 260.
Id. at 261-62.
Id. at 262.
Id. at 259. See supra note 219.
Browning-FerrisIndus., 492 U.S. at 259.
Id. at 277.
230. Id.
231. Pacitf MuL Life Ins. Co., 111 S. Ct. at 1040.
232. See id. at 1041-43.
233. Id. at 1044.
234. Wheeler, 69 VA. L. REv. at 306; see generally Green Oil Co. v. Hornsby, 539 So.
2d 218, 222 (Ala. 1989) (stating that punitive damages are designed to punish the
wrongdoer and deter others from similiar wrongs not to compensate the plaintiff). See
also Maryland Casuality Co. v. Tiffin, 537 So. 2d 469, 471 (Ala. 1988) (asserting that the
purposes of punitive damages are punishment and deterrance); City Bank of Alabama
v. Eskridge, 521 So. 2d 931, 933 (Ala. 1988) (concluding that the intent of punitive damages are punishment and deterrance).
CREIGHTON LAW REVIEW
[Vol. 25
will be administered. 23 5 If other parties do not get the message from
23 6
the award, the purpose of deterrence is frustrated.
Retribution is achieved when a party is punished to a degree coinciding with the gravity of the wrongful conduct. 23 7 It is assumed
that retribution is dispensed even-handedly. 23 8 In other words, the
unsympathetic nature of a defendant, such as an insurance company,
should not affect the decision of a jury.23 9 Thus, the award must fit
240
the degree of the wrongful conduct.
The Supreme Court of Alabama has acknowledged that in
achieving these purposes, there exists the potential for an award that
might violate the requirements of due process. 241 The Supreme
Court of Alabama has made recent attempts to improve the Alabama
2
common-law system. e
In Hammond v. City of Gadsden,243 a widow of a city employee
sought damages for fraud and misrepresentation against the City of
Gadsden. 244 The widow claimed that the city had led her to believe
that a change of insurers by the city would not affect the widow's insurance coverage, when in fact, the change had caused the widow to
be dropped from the city insurance plan. 245 The jury returned a
2
$12,000 verdict that included punitive damages for the widow. 4
Upon a motion for judgment notwithstanding the verdict by the city,
the trial court ordered the widow to file a remittitur for damages
above $2,000 or face a new trial.247 Both parties appealed, and the
248
widow filed a remittitur.
On appeal, the Supreme Court of Alabama reviewed the actions
of the trial court.249 The court noted that a trial court is in a better
position to decide whether a jury verdict is flawed by passion or
bias.25° The court placed a duty upon trial courts to specifically state
235.
236.
237.
238.
239.
240.
241.
242.
243.
244.
245.
Wheeler, 69 VA. L. REV. at 306.
Ellis, 40 ALA. L. REV. at 988.
Wheeler, 69 VA. L. REV. at 311.
Id.
Id.
Id.
Hammond v. City of Gadsden, 493 So. 2d 1374, 1378 (Ala. 1986).
Pacific Mut Life Ins. Co., 111 S. Ct. at 1044-45.
493 So. 2d 1374 (Ala. 1986).
Id. at 1376.
Id. at 1375-76.
246. Id. at 1376.
247. Id. The court required the plaintiff to file a remittitur as a condition for a denial of the defendant's motion for new trial. To comply with a remittitur for damages,
the plaintiff must remit a portion of the jury award which is considered to be excessive. FED. R. Civ. P. 59(a).
248. Hammond, 493 So.2d at 1376.
249. Id.
250.
Id. at 1378-79.
1991]
PUNITIVE DAMAGES
in the record the reasons for either following or refusing to follow a
jury award that is possibly excessive. 25 1 The Supreme Court of Alabama noted that placing such a requirement upon trial courts would
improve its own ability to properly review a jury decision being challenged as excessive. 25 2 The court, unable to adequately review the
253
case, reversed and remanded the case to the trial court.
In 1989, the Alabama common-law system was again modified by
another decision of the Supreme Court of Alabama.2 54 In Green Oil
Company v. Hornsby,25 the Green Oil Company filed an action
against the owners of a grocery store for recovery of personal property and damages when the gasoline the oil company delivered to the
store was not paid for.2 5 The store owners filed a counterclaim for
fraud and misrepresentation, alleging that the oil company promised
to charge seven cents per gallon above cost, while it actually charged
up to thirty cents per gallon above cost for gasoline. 25 7 The jury returned a verdict for the store owners of less than $15,000 in compensatory damages and $150,000 in punitive damages. 2
The oil
25 9
company appealed the decision challenging the award as excessive.
The case was remanded to the trial court for a hearing on the excessiveness of the award. 26° The store owners agreed to a remittitur
of punitive damages, reserving the right to question the trial court's
decision on remittitur should the oil company continue its appeal to
the Supreme Court of Alabama.26 1 On appeal, the Supreme Court of
Alabama stated that even though a jury may be exercising its discretion properly, the jury verdict may still be excessive. 26 2 The court
reasoned that the proper amount of damages may only be assessed
where the gravity of the wrong and the amount of damages sufficient
to punish the defendant are balanced. 263 However, because under Alabama law the jury is not allowed to know the financial position of a
defendant, the court's solution was to place this balancing in the judi264
cial review process.
The court then stated several factors that a trial court should
251.
252.
253.
254.
255.
256.
257.
258.
259.
260.
261.
262.
263.
Id. at 1379.
Id.
Id.
Pacific Mut Life Ins. Co., 111 S. Ct. at 1045.
539 So. 2d 218 (Ala. 1989).
Id. at 219.
Id. at 220.
Id. at 219. The amount of compensatory damages were $14,704.06. Id.
Id.
Id.
Id.
Id. at 222.
Id. at 223.
264. Id.
CREIGHTON LAW REVIEW
[Vol.,25
take into consideration as it reviews a jury verdict: (1) a reasonable
relationship to the harm done; (2) the degree of the defendant's
wrongful action; (3) any profit the defendant may have accrued;
(4) the wealth of the defendant; (5) the costs of litigation to the
plaintiff; (6) criminal sanctions that might have been brought against
the defendant for this conduct; and (7) the defendant's prior history
of similar actions.265 The court upheld the decision that punitive
damages were excessive, noting that the trial court took several of
2
these considerations into account when reviewing the award. 6
The emphasis of the reforms to the Alabama system have focused mainly upon judicial review following a jury assessment of punitive damages. 267 Essentially, the Alabama system leaves a jury full
discretion when assessing punitive damages. 268 Only after this assessment has been made do the Alabama procedural mechanisms begin
to protect the defendant from error. 269
ANALYSIS
The significant aspect of the decision of the United States
Supreme Court in Pacific Mutual Life Insurance Co. v. Haslip270 is
that although the Alabama system is valid, the Court left open the
possibility that other systems that award punitive damages may violate due process. 271 The Court did not follow the due process analy272
sis advocated by Justice O'Connor or that of Justice Scalia.
The Court failed to apply the due process balancing test of Mathews v. Eldridge27 3 that Justice O'Connor advocated in her dissent.2 7 4 The Court also refused to apply Justice Scalia's analysis,
which equates due process with traditional procedures that do not violate the Bill of Rights.275 Thus, the Court's analysis was somewhere
between the theories of Justices O'Connor and Scalia. 276 The Court's
analysis noted the favorable attributes of the Alabama common-law
277
method of determining punitive damages awards.
265. Id. at 223-24.
266. Id. at 224.
267. Pacific Mut. Life Ins. Co., 111 S. Ct. at 1044-45.
268. Green Oil Co., 539 So. 2d at 222.
269. Id.
270. 111 S. Ct. 1032 (1991).
271. Id. at 1043-44.
272. See id. at 1043-46.
273. 424 U.S. 319 (1976).
274. Pacifc Mut. Life Ins. Co., 111 S. Ct. at 1056 (O'Connor, J., dissenting).
275. Id. at 1048 (Scalia, J., concurring).
276. See supra notes 50-101 and accompanying text.
277. Hoenig, Punitive Damages and Due Process: 'PacificMutual,' N.Y.L.J. April
8, 1991 [hereinafter Hoenig].
1991]
PUNITIVE DAMAGES
The Court, using the Alabama system as its model, began its due
process inquiry by examining the breadth of discretion afforded the
Pacific Mutual jury.278 From the outset, the Court made it clear that
there must be a limit to jury discretion by stating "that unlimited
jury discretion--or unlimited judicial discretion for that matter-in
the fixing of punitive damages may invite extreme results that jar
one's constitutional sensibilities."279 This statement by the Court implies that the Court gave credence to the'view that jury determinations are often erroneous. 2 ° Thus, the Court seems to have
discreetly set out to analyze what mechanisms should exist in a state
28
common-law system to satisfy the requirements of due process. '
JURY RECOGNITION OF THE PURPOSES OF PUNITIVE DAMAGES
The Court found it important that prior to a jury examination of
the evidence as to the propriety of punitive damages in a case, the
jury must understand the underlying purposes that the punitive damages doctrine seeks to achieve. 28 2 Those purposes in Alabama include
deterrence and retribution.2 8 3 The Court approved of the trial
court's explicit instructions to the jury, which made the purposes of
assessing punitive damages clear.2s While the Court implied that
jury instructions must make the purposes of punitive damages explicitly clear to a jury, the Court did not go so far as to assert that a jury
must also take into account whether the award will actually achieve
the desired result. s
Justice O'Connor criticized the instructions as lacking substance.28 6 She concluded that the instructions simply restate the purposes of punitive damages awards - punishment and deterrence without giving meaning to these words. 28 7 Justice O'Connor stated
that without requiring detailed guidelines, due process at least re288
quired an informed jury.
The problem with the Court's opinion is that while it found that
a trial court must inform a jury as to the purposes of punitive dam278. Pacfic Mut.Life Ins. Co., 111 S. Ct. 1044.
279. Id. at 1043.
280. See id. See also Wheeler, The Constitutional Case for Reforming Punitive
Damages Procedures,69 VA. L. REv. 269, 271 (1982).
281. See supra notes 49-70 and accompanying text.
282. Paciic Mut. Life Ins. Co., 111 S. Ct. at 1044.
283. Id. See supra notes 222-29 and accompanying text.
284. Pac(fic Mut Life Ins. Co., 111 S. Ct. at 1044. See supra note 57 and accompanying text.
285. See Pacific Mut Life Ins. Co., 111 S. Ct. at 1044.
286. Id. at 1059 (O'Connor, J., dissenting).
287. Id.
288. Id.
CREIGHTON LAW REVIEW
[Vol. 25
ages, the Court did not go so far as to assert that a jury should be
made to understand what these purposes mean. 28 9 Thus, just as Justice O'Connor's dissent suggests, the majority opinion, while acknowledging the potential for abuse of jury discretion, provides no
guidelines as to how a jury may properly exercise discretion. 9
Another problem facing even a completely unbiased jury, is a
lack of experience to guide the jury when determining if the particular type of conduct involved in the case merits punitive damages. 291
The same can be said for the jury when it comes to determining a
fair amount to award.292
This argument was refuted by Justice Kennedy in his concurring
opinion when he defended the practice of jury determination of punitive damages. 293 First, Justice Kennedy asserted that a jury award is
not arbitrary when a jury is aided by arguments of counsel, is properly instructed, and is subject to judicial review. 294 Second, the composition of the jury itself as representative of the entire community
should cause the award to be viewed as the collective view of
295
society.
Thus, one is asked to weigh the detriment of a juror's limited experience, with the belief that it is important for a representative sec29
tion of society to make the decision to assess punitive damages. 6
Justice Kennedy's opinion does not stand for the principle that the
jury is the best method, but rather that it is the established method
of due process, and to change that method is not for the Court.297 In
Justice Kennedy's view, state legislatures and judicial systems must
make that decision, and the Court must act with judicial restraint so
as to only interpret whether under the Constitution due process has
been satisfied. 2 98 Justice Kennedy believed that under the Alabama
299
system, due process had been provided.
HIGHER STANDARD OF PROOF
In a footnote, the Court implied that it favored a higher standard
of proof than "preponderance of the evidence," such as "clear and
289.
See id.
290. See supra notes 272-73 and accompanying text.
291.
Wheeler, 69 VA. L. REV. at 286.
292.
293.
294.
295.
296.
Id.
Pacific Mut. LVfe Ins. Co., 111 S. Ct. at 1055 (Kennedy, J., concurring).
Id.
Id.
Id.
297.
Id. at 1056.
298. Id.
299. Id.
1991]
PUNITIVE DAMAGES
convincing evidence" or even "beyond a reasonable doubt." 3 While
the Alabama system did not contain the higher standard of proof, the
Court viewed the Alabama procedure within the totality of the circumstances and concluded that the system as a whole satisfied due
3
process. 01
The importance of a higher standard of proof was not emphasized enough by the Court. A standard of proof such as a "preponderance of the evidence" places the plaintiff and defendant upon
equal footing in the eyes of the jury.302 However, in reality the risks
of error to a defendant facing a punitive damages award are substan303
tially greater than those the plaintiff faces.
Justice O'Connor cited two reasons supporting the idea that the
higher standard of proof should be applied. First, the defendant risks
3° 4
the liability of an unpredictable and possibly enormous award.
Second, if a jury erroneously assesses a punitive damages award
against a defendant, the defendant will suffer a stigma within the
community that may persist. 30 5 Thus, the good will of the defendant,
which may have taken years to develop, may quickly disappear, possi3
bly never to return. 06
A higher standard could help a jury realize that the defendant
has much more to lose than does the plaintiff when punitive damages
are at stake.30 7 A jury would understand that it must be certain of
its findings of fact before it awards punitive damages. 30 8 Finally, Justice O'Connor concluded that a higher standard would cause trial
judges, as well as reviewing courts, to more carefully examine the evidence presented before allowing the jury to assess punitive
3
damages. O9
LEGISLATIVE LIMITS UPON PUNITIVE DAMAGES
AND BIFURCATED TRIALS
Justice O'Connor also advocated the idea of state legislatures
placing limits upon the amount of punitive damages for a particular
type of conduct, and bifurcating trials into stages of liability and pu300.
301.
302.
303.
304.
305.
306.
(1989).
307.
308.
309.
Id. at 1046, n.11.
Id.
See supra notes 184-86 and accompanying text.
See supra notes 187-90 and accompanying text.
Pacific Mut. Life Ins. Co., 111 S. Ct. at 1062 (O'Connor, J., dissenting).
Id.
Ellis, Punitive Damages, Due Process, and the Jury 40 ALA. L. REV. 975, 994
Wheeler, 69 VA. L. REV. at 292.
Id. at 298.
Pacific Mut. Life Ins. Co., 111 S. Ct. at 1064 (O'Connor, J., dissenting).
CREIGHTON LAW REVIEW
[Vol. 25
nitive damages.3 10 While only briefly mentioning bifurcated trials,
Justice O'Connor described in greater detail the idea of a statutory
limit. 311 She determined that this would ensure that a jury could not
award an outrageous amount of punitive damages, as well as providing a guide to a jury as to what a legislature thinks the worst possible
conduct is worth.312 The jury would then have a framework to work
within.3 1 3
A statutory maximnum amount of punitive damages probably will
not solve the problems of current common-law systems standing
alone. 314 However, in combination with other reforms, such as giving
a jury standards to follow in the early stages of determining an
3 15
award, this reform may be effective.
MEANINGFUL REVIEW BY THE TRIAL AND APPELLATE COURTS
The majority found both the review by the trial and appellate
courts sufficient in that the procedures followed ensured meaningful
review. 316 It based this assertion upon the standards that helped to
3 17
guide the reviewing courts through their analyses of the award.
318
The procedures established in Hammond v. City of Gadsden
were
followed by the trial court.3 19 The trial court, while noting in the
record its reasoning for its determination, considered several specific
factors.3 20 The Court found that this procedural test ensured a defendant that the trial court would administer an adequate and mean32 1
ingful review when assessing a punitive damages award.
Similarly, the Supreme Court of Alabama followed established
procedure in its review. 322 The procedure, established in Green Oil
Co. v. Hornsby,323 consisted of a comparative analysis followed by a
review of the award using a detailed set of standards. 324 Once again,
the Court concluded that this type of review effectively limited the
325
discretion of the jury.
310.
311.
312.
313.
314.
315.
316.
317.
318.
319.
320.
Id.
See id.
Id.
Id. at 1064-65.
Wheeler, 69 VA. L. REV. at 272.
Id.
Pacific Mut. Life Ins. Co., 111 S. Ct. at 1044-45.
Id.
493 So. 2d 1374 (Ala. 1986).
Pacific Mut. Life Ins. Co., 111 S. Ct. at 1044.
Id.
321. Id.
322. Id. at 1045.
323. 539 So. 2d 218 (Ala. 1989).
324. Pacific Mut. Life Ins. Co., 111 S. Ct. at 1045.
325. Id.
PUNITIVE DAMAGES
1991]
The problem with the Court's conclusion is that while these
standards may effectively guide the reviewing courts in their examination of the award so as to limit an excessive award, the jury may
have already assessed punitive damages erroneously. 326 Justice
O'Connor criticized the majority's contention, stating that this afterthe-fact application of the Green Oil Co. factors did nothing to guide
327
the jury.
Justice O'Connor asserted that the major defect in the commonlaw system is the unlimited discretion that a jury is able to exercise. 32 8 She stated that meaningful review by courts does nothing to
guide a jury in its decision-making process. 329 She noted that giving
the jury standards to follow, such as those developed in Green Oil
Co., is the real solution to the problem of due process facing the com3 °
mon-law system. 3
Finally, Justice O'Connor concluded that due to the amount of
deference given by the courts in Alabama, these detailed standards
used by reviewing courts are useless if the court is only going to defer
to the jury decision anyway. 33 1 She was most troubled that even
though the Supreme Court of Alabama recognized that its commonlaw procedures may produce erroneous results, the court has an es332
tablished policy of deferring to these results.
DOES THE ALABAMA SYSTEM EFFECTIVELY LIMIT
ERRONEOUS RESULTS?
The majority disagreed with Justice O'Connor's assertion that
the reviewing courts had been deferring to all the punitive damages
awards that Alabama juries had been assessing.3 33 In fact, the Court
stated that the review by the Supreme Court of Alabama had re334
sulted in a reduction of punitive damages awards.
The Court seems to conclude that it is not good enough that a
state has a particular system in place. 33 5 Due process requires that
the system must show actual results. 33 6 Thus, it appears that the
Court is conceding that the existing common-law procedure has
326.
327.
328.
329.
See supra notes 61-63, 187-90 and accompanying text.
Pacific Mut Life Ins. Co., 111 S. Ct. at 1061 (O'Connor, J., dissenting).
Id.
Id.
330. See id. See also Hoenig, Punitive Damages and Due Process: 'PacificMutual',
N.Y.L.J., April 8, 1991 [hereinafter Hoenig].
331. Pacific Mut. Life Ins. Co., 111 S. Ct. at 1063 (O'Connor, J., dissenting).
332. Id.
333.
Id. at 1045-46.
334. Id.
335. See id. at 1046.
336. Id.
350
CREIGHTON LAW REVIEW
[Vol. 25
caused erroneous awards and reform is necessary. 337 However, the
Court was satisfied that the Alabama system had not allowed an er338
roneous award in this case.
CONCLUSION
In Paciflc Mutual Insurance Co. v. Haslip,3 3 9 the Supreme Court
recognized that a common-law system of punitive damages may violate the due process clause of the fourteenth amendment. 340 While
Justice Scalia sought to quickly terminate any due process analysis
when the process follows traditional procedures and does not violate
the Bill of Rights, 3 41 Justice O'Connor asserted the more modern
view that all common-law processes are susceptible of a due process
343
342
analysis in the form of the Mathews v. Eldridge test.
The Court, while distancing itself from Justice Scalia, strayed
from the modern due process analysis as well. The Court was attuned to Justice Kennedy's call for judicial restraint; however, the
Court indirectly moved beyond it by giving subtle guidance. The decision in PacificMutual is an opinion in which the Court provides indirect guidance but refuses to cross the line to legislate specific
guidelines. Thus, the Court was able to achieve a legislative function
without opening the floodgates to a mass of litigation concerning the
constitutionality of every state common-law punitive damages
procedures.
The opinion in Pacific Mutual leaves the door open for state legislatures to initiate their own procedural punitive damages reform.
Throughout the several opinions within Pacific Mutual, the Court
continued to hint that the states are free to improve the system. The
Court even offered the states guidance in these reforms, both explicitly by Justice O'Connor and implicitly by the majority. However,
the Court also made it clear that there may come a time when it will
step in and find a state punitive damages system violative of due process. For now, the Alabama system in Pacific Mutual satisfied the
Cou t's view of what due process requires.
Michael J. King-'93
337.
338.
See id.
Id. at 1046.
339.
111 S. Ct. 1032 (1991).
340.
Id. at 1043-44.
341.
342.
Id. at 1048 (Scalia, J., concurring).
424 U.S. 319 (1976).
343.
Pacific Mut. Life Ins. Co., 111 S. Ct. at 1056 (O'Connor, J., dissenting).