Professor Michael Rustad
Our alumni magazine has decided to profile me in the recruitment literature. They asked me to answer a series of questions about my background, scholarship, etc.
Where were you born? where did you grow up, and why did you become interested in law?
I was born in Hallock, Minnesota which is a farming community in Northwest Minnesota along the Canadian border. There is a township near Hallock called Skane Township. Many Hallock residents were Swedish-Americans with roots in Skäne. In the summers of 2000, 2002 and 2004, I taught in Suffolk University Law School's Summer Program at the University of Lund in Southern Sweden. The law school is located in Skane region of Sweden. I guess my life has come full circle. I grew up on a farm outside of the village of Humboldt, Minnesota. I frequently find ways to refer to my childhood in my teaching. My 1998 book, The Concepts of Sales, Leases, and Licenses is loaded with references to growing up in the Red River Valley of the North. I guess I am striving to be the Garrison Keilor of the Uniform Commercial Code. One of my students' favourite stories is about how my brother-in-law bred Holsteins with buffalo to get beefalo. I use the beefalo story when addressing the domestic animal and wild animal rules for tort law. If a wild animal escapes causing damages, the owner is strictly liable and that has been the law since Roman law. Domestic animals such as cattle or sheep are treated under a negligence standard. The beefalo is an ideal example for a hypothetical because it is a hybrid. I tend to use a large number of agriculture examples and cases to illustrate concepts in both commercial law and torts.
I first became interested in law from an early age. My Uncle Jim, who was only 20 years of age at my birth, started a college fund at my birth. My Uncle Jim later became a well known trial lawyer, Colorado Supreme Court Justice and federal judge and encouraged my career every step of the way. I took a non-traditional route to law which combined social sciences and the law. I received a doctorate in sociology and was an assistant professor at Boston College and Northeastern while I completed my J.D. degree at Suffolk and my LL.M degree at Harvard. After finishing my degree at Harvard, I accepted a position as an associate at Boston's Foley, Hoag, & Eliot. I spent two years at Foley, Hoag and accepted an offer to teach at Suffolk. I can think of no better training ground for law teaching at Foley, Hoag.
This law firm turned out to be a wonderful network and entry to the legal education field. Foley Hoag alums entering the legal education field from my class are now teaching at the University of Southern California, New York University, Boston College, St. Mary's, Michigan and Suffolk Ten out of twenty associates who began at Foley, Hoag in the Fall of 1986 are now legal educators.
When did you become interested in teaching, and why?
I have been teaching since I was 22 when I was hired by the University of Maryland to teach sociology in their University College. I enjoyed teaching law and society courses at Boston College and Northeastern during the late 1970s and early 1980s. I entered law teaching in 1988 because of the opportunity to spend my professional life teaching and researching topics that interested me. Law teaching is an opportunity to help the new generation develop the concepts and methods necessary to be successful lawyers. I was honored to be chosen as the Thomas F. Lambert Jr. Professor of Law and I hope that I am conveying the joy of torts that characterized Tom's classes. I teach courses in Internet Law and the information technologies which help students understand and work effectively with changing technologies.
What brought you to Suffolk, and what do you like about Suffolk?
As a law student at Suffolk, I was enrolled in the Evening Division. I found that the law faculty at Suffolk were genuinely interested in teaching. Suffolk Law School has long been an institution with a focus on excellence in teaching. I was also impressed with its Evening Division where professionals by day have the opportunity to study law at night. As a law student, I wrote a history of Suffolk University Law School and was proud that it was the first law school in the Boston area to admit Chinese, Jewish, Arab, African-American and others who were excluded by other law schools. I've always thought that the history of Suffolk University Law School would make an excellent movie because of the role the school played in promoting the upward mobility of groups previously excluded from the legal profession. When I applied to Suffolk as a faculty member, I was impressed by its commitment to excellent teaching as well as to supporting excellent research. My mentor Tom Lambert assured that Suffolk was rising like an arrow and that I should jump at that opportunity. He was also instrumental to me being appointed to Suffolk. His one-line letter of reference to the appointment committee was simply, "Grab this Guy!" I could not resist the opportunity to be on the same faculty as Tom Lambert, former Nuremberg Prosecutor and a legendary law teacher. Milton Katz, a legendary Harvard law professor and architect of the Marshall Plan, was also a member of our faculty. Edward Bander, who was then the law librarian and an author of more than 20 books, was another member of the law faculty at that time. I thought that Suffolk had the nucleus to become a truly great institution. My tenure at Suffolk has been a happy marriage. The Suffolk Law School administration and members of the faculty have helped me develop the intellectual property program. Sargent Hall is a perfect venue for me to teach courses in Internet Law. I have spoken at a large number of law schools but I feel most at home at Suffolk. I have enjoyed working with Suffolk law students in the classroom, as research assistants, on moot court teams, and supervising The Journal of High Technology Law which was launched under my supervision. Suffolk's evening law school is the Harvard of Evening Law Schools. I counted five PhDs, a medical school professor, three CPAs, four engineers, three teachers, and a psychiatric nurse in a recent torts section. Suffolk's day program is also attracting top professionals including scientists, engineers, and biotech specialists. Suffolk is the perfect venue for my research and teaching interests. It is a dynamic place that is rising like an arrow. I think that the teaching and research facilities provide everything that I need to be productive. I have enjoyed working with LL.M students as well as J.D. students and have even co-authored articles with students. I have never regretted my decision to join Suffolk's faculty and it has been a gratifying experience.
Which of your publications do you feel are most noteworthy, and why?
I had beginner's luck when it came to publications. My first law review article published at Suffolk was an empirical study of punitive damages in products liability published in the Iowa Law Review in 1992. At the time the article was published, there was almost no empirical research on the topic of punitive damages. My article was the first to study the number, size, ratio, post-verdict history, and qualitative dimensions of punitive damages. My findings were at odds with claims by the insurance industry that punitive damages in products liability were skyrocketing. Within a week of publication of this article, I received a call from Ted Gest of the U.S. News and World Report to interview me about my article. I have been interviewed in The Economist, The New York Times, The Washington Post, Time, ABC News, and an appearance on NBC Dateline.
My article was cited as the definitive empirical study of this controversial remedy by both the majority and dissenting opinion of the U.S. Supreme Court in the 1994 case of Honda Motor Co. v. Oberg. This article was also the basis of my testimony before both Houses of Congress during hearings on federal products liability reform. I appeared before the Texas Supreme Court in 1995 as an expert for neither side on the quantitative dimensions of punitive damages. This was the legislative session were then Governor George W. Bush fast-tracked tort reform. I also consulted with Oklahoma legislators in drafting tort reform limitations on punitive damages. This article has been reprinted in products liability anthologies and cited in virtually every major law review in the twelve years since its publication. . I have been gratified by reception the article received and that my basic findings were verified in subsequent studies. The American Bar Foundation, Rand Corporation, and a National Center for State Courts have verified my basic findings.
My 1995 Washington Law Review article (with Northeastern Professor Tom Koenig) on "Gender Injustice in Tort Remedies" is another high impact article cited in the popular press, law review articles, and tort reform debates. Our article argued that federal tort reform would have unanticipated negative consequences on women especially when it came to non-economic damages and punitive damages. I was invited by several U.S. Senators to present the findings of my article at a press conference on Capitol Hill. I presented my findings at a press conference where I stood alongside the late Paul Wellstone and several members of the Senate. My testimony that day led to a press release from the office of Joe Lieberman and Jay Rockefeller who favored federal tort reform. The fear of many law professors is that their articles will collect dust. I am pleased that my articles are not only read by other law professors but my legislators, judges, and members of the business community. One quick story. I was invited to a Conference on the Future of the Jury sponsored by the Brookings Institute and the Center for State Courts. I happened to be sitting next to the national litigation counsel for a major automobile manufacturer. He had a copy of one of my articles that was heavily underlined and annotated in different ink colors. I am confident that he did not agree with all of the points I made but read my work with interest.
I continue to publish research on the reform of tort law and they continue to place me in the public spotlight. I spoke at the American Society of Jury Consultant's Annual Meeting in Reno, Nevada last June. This March I was chosen to debate ABC 20-20 co-host, John Stossel, on the topic of tort reform. Even though Mr. Stossel and I are at opposite ends of the spectrum when it comes to tort reform, we could disagree without being disagreeable. The debate was part of John Stossel's book tour for the release of his new book, Give Me a Break. Our debate cantered on Chapter Four of his book entitled, "The Trouble With Lawyers." Suffolk University Law School was a wonderful place for me to prepare for my debate with John Stossel. The Suffolk Law School reference librarians located videotapes of every Stossel speech since 1988 as well as a variety of other sources. My Suffolk LL.M graduate student and several undergraduate assistants were helpful in dissecting and refuting each of his arguments. John Stossel is one of the most articulate and interesting journalists of our era. To prepare for the debate, I held a mock debate with my tort class. The debate format created a kinetic classroom experience and was wonderful preparation for the debate. The debate was a wonderful experience because I was able to more than hold my own because I not only had the support of one of the best team of law librarians in the country but excellent assistance from my students. After the debate, I was invited to dinner with John Stossel and his wife and other dignitaries. We continued our lively debate over dinner. My son tells me that there is a one month statute of limitation about talking about my Stossel debate.
Which of your subject areas (or areas of research) interest/motivate you the most at the moment, and why?
It is difficult for me to choose between my research interests. I have a number of research projects which fascinate me. I guess if I were to choose, I would say that I am interested in the U.S. Supreme Court's constitutionalization of tort remedies. In April, I was honored to be chosen as one of fifteen tort scholars to participate in a symposium on Guido Calabresi's The Cost of Accidents: A Generation of Impact on Law and Scholarship." This had special meaning to me because Judge Calabresi sent me a hand-written note about the importance of my empirical research on tort remedies shortly after I published my first article. It was a special moment to present a paper in Judge Calabresi's honor before such famous scholars as Richard Posner, Jules Coleman, and retired Justice Izhak Englard of the Supreme Court of Israel. This summer I will be working on my first article on constitutional law for the Maryland Law Review symposium issue. The working title for my article is "Happy No More: Federalism Derailed by the Court That Would be King of Punitive Damages." My thesis is that the Supreme Court's recent decisions constitutionalizing punitive damages are, in effect, a federal takeover of a traditional state tort remedy.
My most exciting project is actually a collaborative effort with my Intellectual Property Law Concentration Co-director Andy Beckerman-Rodau and two of our stellar adjunct professors, Iris Geik and Jerry Cohen. Our team is capped off with Henry Horbaczewski, Senior Vice President and General Counsel of Reed Elsevier, Inc. Our project is to produce a Festschrift Volume honoring Benjamin Kaplan's contribution to the field of copyright. Benjamin Kaplan's An Unhurried View of Copyright, published in 1967, is the standard-bearing work on the path of copyright law. Professor Kaplan, who served as a distinguished member of the law faculty at Suffolk and Harvard and was a Justice of the Supreme Judicial Court, is acknowledged as one of the founding fathers of modern copyright law. He was the co-author of the first casebook on the subject and wrote the Unhurried View. The Suffolk team of editors is working with Matthew Bender and distinguished copyright scholars such as Arthur Miller, Paul Bender, Lloyd Weinreb, Jane Ginsburg and others to reissue this classic work along with original essays placing this marvellous work in a modern context. Our idea was to reissue Ben Kaplan's book along with essays written by the most distinguished copyright scholars and jurists of our generation. I am pleased to report that the project is taking shape. We will have a dinner in honor of Ben Kaplan in the fall. We plan to devote our annual intellectual property law conference to a discussion of issues addressed in the Unhurried View.
The book is already creating a buzz in the copyright field and will be completed next spring. This book will reintroduce Professor Kaplan's work to a new generation of copyright and intellectual property scholars and update it for the age of the Internet.
I am also at work examining research findings from a database that I developed with Professor Koenig on the first decade of Internet-litigation, 1994-2004. We recently co-authored an article entitled,"Cyber torts and Legal Lag: An Empirical Analysis," in the most recent issue of the University of Southern California Interdisciplinary Law Journal. Our central finding is that tort litigation in cyberspace is largely large corporations suing other corporations for control of cyberspace. Just as in Eighteenth Century England, intentional torts dominate the cybertort legal landscape. Courts are applying ancient torts such as the trespass to chattels to punishing and deterring spammers. In the bricks and mortar world, torts are largely about negligence. After a decade of Internet litigation, there are few successful cases based upon negligence. We were not able to uncover a single example of a successful strict liability action in cyberspace. The typical plaintiff in an Internet case is America Online, Playboy Enterprises or another multinational corporation rather than an injured individual. I have just finished an article for a Symposium on Consumer Law held at Chapman Law School in January. I also have a lead article on environmental law and toxic torts that will appear later this summer in Law & Policy. I have a number of other new projects planned for my sabbatical leave in the fall of 2004 including a book on Comparative Commercial Law.
In your opinion, what role does academic scholarship play in the world at large?
See my first answer for more details
The gap between legal scholarship and practice is closing if we look at scholarship being produced at Suffolk University Law School. My colleague, Andy Beckerman-Rodau, has produced influential articles being read by policymakers considering the future of intellectual property. I am hoping that my research on Internet litigation will play a role in the path of cyberspace law. My research on tort remedies is being studied by policymakers at the state and federal level and been part of the tort reform debates. Copyright 2003 ALM Properties, Inc. All Rights Reserved.
National Law Journal
November 24, 2003
SECTION: FRONT PAGE; Vol. 26; No. 13; Pg. 1
HEADLINE: Punitives war has new battleground;
Exxon loses a huge verdict in Alabama.
BYLINE: By Dee McAree Staff Reporter; McAree's e-mail address is mailto:firstname.lastname@example.org.
The oil fields of Alabama have produced what promises to be the first major contest under the U.S. Supreme Court's new guidelines on punitive damages limits.
And it's a gusher-the largest verdict of 2003 and the second-largest ever to a single plaintiff.
On Nov. 14, a Montgomery, Ala., jury handed down an $11.9 billion verdict against ExxonMobil Corp., $11.8 billion of it in punitives. The case is focused on a dispute over royalties owed on oil field leases. State of Alabama v. Exxon Corp., CV-99-2369 [Montgomery Co., Ala., Cir. Ct.].
Now comes the next round: an appeals process that will pit the whopping punitives in Exxon against the high court's April 7 ruling aimed at strictly controlling punitive damages awards. State Farm Mut. Auto Ins. Co. v. Campbell, 123 S. Ct. 1513.
The company's lead trial lawyer, Sam Franklin of Franklin, Lightfoot & White in Birmingham, Ala., said they will ask Montgomery County Circuit Judge Tracy McCooey to set aside or reduce the award or grant a new trial.
Failing there, they say they will turn to the Alabama Supreme Court.
Exxon asserts that the approximately 180-to-1 ratio of the verdict-$11.8 billion in punitives and $63.6 million in compensatory damages-flies in the face of the guidelines established in State Farm.
Lawyers for the state are relying on a 10-year-old U.S. Supreme Court decision to justify the high punitives, as well as an exception highlighted in the State Farm ruling. TXO v. Alliance, 509 U.S. 443, 113 S. Ct. 2711 .
In TXO, the high court upheld a $10 million punitive judgment in an oil royalties dispute the fact that it involved only $19,000 in actual damages.
More importantly, the state's lawyers say, TXO paved the way for a plaintiff to recover punitives based not only on the actual loss, but also on what could have been lost if the defendant's conduct hadn't been discovered.
"The single digit is not necessarily the benchmark," said Robert Cunningham of Cunningham, Bounds, Yance, Crowder & Brown in Mobile, Ala., one of the three lead attorneys for Alabama. "It should hold because it's a 12-to-1 ratio using potential harm as evidence."
Some lawyers suggest that TXO is an anomaly in the canon of U.S. Supreme Court law on punitives and alone cannot justify the Exxon verdict.
"I think the window on TXO is going to close," said Victor Schwartz of Kansas City, Mo.'s Shook, Hardy & Bacon and general counsel of the American Tort Reform Association. "The argument about future economic harm can arise in too many places."
Professor Michael Rustad of Suffolk University Law School has studied the progression of punitive damages for 25 years. He said that the ratio of the Exxon award would seem more rational under the TXO formulation, but still has to meet the court's guidelines in State Farm v. Campbell.
"It would be a nice correlation, but you still have to look at the Campbell factors," said Rustad.
In State Farm, the high court didn't establish a fixed ratio but suggested that few punitive awards should exceed a 9-to-1 ratio. The decision threw out a $145 billion punitive damages award won by the plaintiff in a bad-faith action against the auto insurer. Compensatory damages totaled $1 million.
The court said ratios higher than single digits can be justified by the reprehensibility of a defendant's conduct, what a defendant might have to pay in regulatory penalties or by compensatory damages that are quite low.
The question then is whether the damages in the Exxon case fill the bill.
Exxon claims that the case is a contract dispute in which each side had different interpretations of the allowable deductions, and that its conduct was not reprehensible.
Intent to cheat?
"This is a royalty disputes issue," said Ken Cohen, vice president-public affairs, for Exxon and a former general counsel of one of its holdings. "It's a routine matter of do you deduct for this or for that." Cohen said that every oil producer has a right to raise questions about whether certain deductions are allowable as part of the production cost.
Lawyers for Alabama charge that the oil company made a cost-benefit analysis of the risk of cheating the state out of its due royalties, then decided to underpay the state because the probability of its being caught was low.
"Exxon's internal documents revealed a knowing intent to cheat the state, including financial projections of how much they would make if they did," said Cunningham. "And that justifiably incensed the jury."
The contract between the parties was written by an attorney for the state. Unlike most such agreements, this one did not allow any deductions for the cost of extracting or treating the gas, according to the state's lawyers. They maintain that Exxon secretly wrote off expenses like landscaping, travel and employee meals in order to reduce the royalties.
Two Alabama juries were persuaded by the state's argument.
The first returned a $3.5 billion verdict against Exxon three years ago. That verdict was set aside on appeal after the Alabama Supreme Court determined that the jury had been incorrectly allowed to see a privileged communication between Exxon and its lawyers.
Jere Beasley of Montgomery's Beasley, Allen, Crow, Methvin, Portis & Miles, another of the state's lead lawyers, said the reversal was a "technicality."
During the second trial, that state produced several other "smoking gun" documents that equally implicated Exxon.
In one of them, Exxon acknowledged that it was allowed "zero" deductions. In another, company analysts calculated that the risk of exposure was low and that the worst outcome was that the deductions would be detected and would have to be refunded with 12% interest.
The state's lawyers were able to cross-examine the president of Exxon and other witnesses who were not included in the first trial. Exxon hired a different legal team for the second trial, which employed a different strategy that included calling more witnesses who didn't do well on cross-examination, according to Beasley. Those factors may explain why the second jury more than tripled the first jury's award, he said.
"This was massive fraud at the boardroom level," Beasley charged. "The jury saw the conduct of this corporation in dealing with a state that was inexperienced in this business and maybe had one auditor compared to 100 for Exxon.
"The nature of the fraud being so massive and exercised at the top level with documentation puts this case in a totally different context" from others in terms of reprehensibility.
The behavior of a defendant who has weighed the risk of getting caught could be considered reprehensible to satisfy the exception in State Farm, according to Suffolk University's Rustad.
"There is a school of thought that says where the probability of detection is low, that's where you need the hammer of punitive damages," he said.
The company's wealth alone would not justify a large verdict, he said, but it would if wealth-based punishment was intended to deter Exxon from cheating in the future.
Taking Exxon's side of the argument, Andrew L. Frey, a partner in the Washington office of Chicago-based Mayer, Brown, Rowe & Maw, said the key to State Farm exceptions is whether the compensatory damages are substantial or not.
"A case with $63 million in compensatory damages that is a fight between a state and big business, where it is at least arguable whether there should be punitives or not, does not seem to me to have the ingredients to justify a high punitive ratio," Frey said.
Frey argued an earlier Alabama case on punitive awards before the Supreme Court, BMW of North America v. Gore, 517 U.S. 559 , which the court relied on in the State Farm decision. In Gore, the high court rejected a $2 million punitive award in a case that involved $4,000 in damages.
Guidelines from 1996
The 1996 ruling was the first in which the high court struck down a punitive award as grossly excessive. It laid out three guideposts that it relied on in State Farm. Those guidelines are the reprehensibility of the defendant's conduct; the ratio between punitive damages and actual harm; and state regulatory sanctions for comparable misconduct.
Since Gore, Alabama has been in the eye of the storm surrounding "tort reform."
"Alabama is tort hell," Rustad said.
In 1999, the Alabama Legislature enacted a statute that caps punitive damages at three times the amount of the compensatory award in nonpersonal injury cases. The rule does not apply to the Exxon verdict because the case was under way when the law was written.
But Franklin said it presents an obvious conflict when the plaintiff is the same lawmaking body that brought tort suit restrictions to the state.
"Obviously, the Legislature passed that in 1999 from a perception that Alabama was out of step with mainstream and people perceive our system to be unfavorable and unfair," Franklin said. "It's a little bizarre that the state of Alabama would choose to ignore the public policy behind that and pursue the punitives that were sought in this case."
The Legislature's intent with the statute might be a factor in the minds of the Alabama Supreme Court justices if they hear the case, some lawyers said.
"Technically, that cap doesn't apply, but the will of the Legislature in capping damages is a clear indication of the public policy, said Schwartz, the American Tort Reform Association counsel. "This is a different court than Gore." He noted that Exxon's stock did not dip after the verdict-a sign that market analysts are not taking it very seriously.
Rustad thinks it will eventually make its way to the U.S. Supreme Court.
"Even if the court reduces it, I think it's inevitable that the U.S. Supreme Court will hear this issue," he said.
Copyright 2002 Alert Publications, Inc.
Legal Information Alert
March 1, 2002
SECTION: No. 3, Vol. 21; Pg. 10; ISSN: 0883-1297
HEADLINE: E-Business Legal Handbook--2002 Edition; New Sources: Electronic Commerce; book review
BYLINE: Thompson, Kathryn A.
E-Business Legal Handbook--2002 Edition. Michael Rustad & Cyrus Daftary. 2001. Aspen Publishers, Inc. Softcover. 1,203p. ISBN: 0-355-2188-3. $ 175.
Aspen recently published the 2002 edition of its E-Business Legal Handbook, which includes a glossary and an all-new section on global e-commerce, in addition to the usual chapter updates. According to authors Michael Rustad and Cyrus Daftary, faculty members at the High Technology Law Program at Suffolk University Law School, the E-Business Legal Handbook is "a guidebook to the rapidly evolving laws and industry standards governing online transactions." The book is "designed for corporate counsel, general practitioners, business professionals, and corporate executives who want to harness the power of the Internet and need a basic understanding of the various legal issues that may be encountered in this new medium."
The handbook covers 12 key Internet-related areas, including:
* Creating and establishing a corporate identity
* Going online
* Entering into and enforcing contracts
* Collecting revenue
* Establishing a marketing presence while protecting the corporate name and reputation
* Distributing products
* Complying with legal guidelines
* Anticipating jurisdiction
* Expanding into foreign markets
* Drafting and implementing privacy policies
* Employee training and content control
Given the broad range of legal issues addressed, it is not surprising that the book is a bit unwieldy as a single, softcover publication.
As it turns out, the book is truly bursting at the seams from the inside out as well. Despite a comprehensive and truly commanding treatment of e-commerce legal issues, the handbook would be more useful (and easier to navigate) had it focused exclusively on legal issues. Instead, the alternating focus on business and legal strategy tends to obfuscate what the audience really wants to know about the law.
Likewise, the authors spend an inordinate amount of time on the "prep work"--that is, convincing readers that the Internet era, with all of its associated technologies, has indeed arrived. They then populate the opening chapters with the usual platitudes about its origin, development, growth, and impact. To wit: "For many businesses, a web site or an e-mail address has become more important than a telephone number." All true, but how many times must we hear it?
The book is at its finest when information is pared to its essence and packaged into checklists, forms, guides, and the like. For example, the timeline outlining global legal developments in Internet law from 1990 to the present is of great practical value, as are the "Preventive Law Pointers," designed to alert legal practitioners or business owners to the core legal issues involved in conducting e-commerce. The emphasis on taking preventive measures and assessing legal risks and liabilities before the fact is a continuing theme, and one with real-world applications.
All in all, the E-Business Legal Handbook may not be as "handy" as you might want, but it delivers the goods as promised--spanning 1,203 pages stuffed mightily into a single binding.
Kathryn Thompson, Senior Research Specialist, American Bar Association Legal Technology Resource Center, Chicago
New York Law Journal, February 15, 2001
Copyright 2001 New York Law Publishing Company
New York Law Journal
February 15, 2001 Thursday
SECTION: CORPORATE UPDATE; Pg. 5
HEADLINE: High Court to Weigh Punitive Damages Standard of Review
BYLINE: By Marcia Coyle, American Lawyer Media
DATELINE: WASHINGTON, D.C.
Punitive damages -- the bane of business, the whip of the injured -- are at the heart of a key U.S. Supreme Court challenge asking just how rigorous federal appellate courts must be when reviewing allegedly excessive jury awards.
For business, the answer is simple: only "de novo" review, the most searching and independent examination of the evidence and record, will serve to guarantee constitutional notions of due process and fairness that, the justices have held, apply in the punitive damages arena.
For plaintiffs' groups, the traditional "abuse of discretion" is the appropriate standard of review because it gives considerable deference in these fact-intensive cases to the trial judge and jury.
Which direction the High Court takes -- de novo review, abuse-of-discretion review or something else -- may provide needed clarity to appellate courts now split on the issue. Or, said one damages scholar, it could move the justices down "the highway to hell," opening new avenues of challenge to punitive awards -- avenues that ultimately will lead back to the Supreme Court.
The Court will hear arguments on Feb. 26 in Cooper Industries v. Leatherman Tool Group, 99-2035. This is a business-to-business dispute, typical of the punitive-damages challenges that the justices have decided in recent years and typical of the kind of case in which large punitive damages awards appear today, according to legal experts.
Leatherman is the maker of a widely successful, multi-function hand tool known as the Pocket Survival Tool (PST). In 1996, Cooper Industries developed a similar tool, called Toolzall, and marketed a prototype that essentially was a modified survival tool. Leatherman sued Cooper in federal court, charging trade dress infringement, unfair competition, false advertising and "passing off."
A jury awarded $ 50,000 in compensatory damages and $ 4.5 million in punitive damages after finding that the passing off and false advertising were malicious.
The trial judge denied Cooper's request to reduce the punitive award. On appeal, the U.S. Court of Appeals for the Ninth Circuit affirmed the award, ruling that the trial judge's findings on the proportionality of the punitive award were supported by the evidence and that the judge did not abuse his discretion in declining to reduce the award.
In deciding which standard of review applies in a given case, the Court generally looks at whether the appellate court is being asked to make a fact-intensive inquiry or an essentially legal inquiry. If it is fact-based, then the appellate court defers in large part to the judge and the jury that considered those facts. If the inquiry involves legal principles, then the reviewing court makes its own independent analysis.
But counsel for both Leatherman and Cooper agree that, generally, assigning a label is not that easy and is unlikely to resolve their case.
"The Court has said over and over again the line between what is fact and what is legal is murky," said Leatherman's High Court counsel, Jonathan S. Massey of Washington, D.C. "So it's sort of a pragmatic inquiry animated by various factors."
His opponent, William Bradford Reynolds, of Washington, D.C.'s Howrey, Simon, Arnold & White agreed, saying, "There's a tendency -- and the briefs certainly have played to that to some extent -- to try to persuade the Court that if you buy my label, you buy my result. But I don't think this issue is resolved on labels alone."
One of the critical "animating" factors for the justices here, Mr. Reynolds argued, is that the question of excessiveness is a constitutional question.
In 1996, the High Court in BMW v. Gore, 517 U.S. 559, held that grossly excessive punitive damages awards violate the due process clause. The justices, said Mr. Reynolds, have been "resolute" in insisting that appellate review of constitutional claims rooted in the Bill of Rights be done de novo.
Due process, he argued, demands fair notice of the conduct that will subject someone to punishment as well as of the penalty. Deferring to a trial judge's discretion, he said, does not produce fair notice and will not result in a body of law that provides predictability and reasonableness in these awards.
The High Court in BMW also announced discrete "guideposts" for determining excessiveness. Applying those guideposts, Mr. Reynolds argued, calls for an inquiry that is not fact-bound, but legal in nature.
Leatherman's Mr. Massey has a different set of animating factors: tradition, the Seventh Amendment and practical concerns.
For centuries, he notes, there was no appellate review of claims of excessive damages. "There was only review by the trial judge, and that was true at common law and in the United States until 1948. Since then, there's been a little bit of appellate review, but only under abuse of discretion."
The High Court in Gasperini v. Center for Humanities, 518 U.S. 415 (1996), he added, held that appellate review of allegedly excessive compensatory damages was permissible under the Seventh Amendment so long as the standard of review was abuse of discretion. The Seventh Amendment bars re-examination of any fact tried by a jury, except as allowed at common law.
"The purpose of punitive damages is to punish and deter reprehensible conduct," said Mr. Massey. "That demands a close examination of the facts in every case." Only abuse-of-discretion review provides the kind of deference to the judge and jury that the Seventh Amendment demands, he added.
Friends of the Court
Another approach is suggested in an amicus brief filed by legal historian Arthur McEvoy of the University of Wisconsin School of Law on behalf of Leatherman. Professor McEvoy's amici counsel, Kenneth Chesebro of Cambridge, Mass., argues that appellate courts should apply the "rational fact finder" standard that the High Court announced in Jackson v. Virginia, 443 U.S. 307 (1979), a criminal case.
Under that standard, the verdict is evaluated against the evidence to determine if it is rational, with all reasonable inferences drawn in favor of the jury, said Mr. Chesebro.
"In federal criminal trials, that's enough to send someone to jail for life," he said. "It's difficult to explain why it is a defendant in a civil case should have a more intrusive analysis by a judge than would exist in a criminal case."
Professor Michael Rustad of Suffolk University Law School, nationally known for his punitive damages research, believes Mr. Chesebro's standard is the most appropriate one for punitive damages reviews. "It's an easy one to understand and gives appropriate deference to the jury."
The U.S. Chamber of Commerce and other amici supporting Cooper disagree and are pressing for de novo review. Leatherman has drawn support from the Association of Trial Lawyers of America.
Empirical research, says Professor Rustad, shows that appellate judges are very rigorous in their review of punitive awards. "There is almost strict scrutiny of large awards."
Because the Supreme Court now has both feet in this state-law arena, he predicted Cooper will not be the end of its punitive damages jurisprudence.
"I think we'll see challenges involving corporate wealth -- parent v. subsidiary -- and bifurcation of the trial to separate punitives from compensatory damages," he said. "Should the Supreme Court as a political institution be involved in this traditional province of state law? I think the best thing it could do would be to get out and let juries do what they do."
LOAD-DATE: March 5, 2001
International Herald Tribune (Neuilly-sur-Seine, France)
September 8, 2000, Friday
SECTION: Finance; Pg. 11
HEADLINE: U.S. Weighs Widening of Tire Inquiry ;
Bridgestone and Ford Could Face Legal Action
BYLINE: By Brian Knowlton; International Herald Tribune
The Justice Department disclosed Thursday it was reviewing possible criminal or civil action against Bridgestone/Firestone Inc. or Ford Motor Co. over defective tires that have been linked to dozens of fatal traffic accidents, but legal specialists said they expected no dramatic action.
Attorney General Janet Reno announced the review following a request from Senator Patrick Leahy of Vermont. ''We are looking to what, if any, Justice Department action is warranted,'' she said.
Executives of Bridgestone/Firestone and of Ford, which used the tires on millions of its sports-utility vehicles, faced harsh criticism Wednesday in Congress for not responding more quickly to early reports of dangerous tire separations.
But a senior Justice Department official later told The Associated Press that criminal action appeared unlikely and that a civil case would be pursued only if the National Highway Traffic Safety Administration referred a case to the department.
That agency typically does no more than levy administrative fines against companies that violate its regulations. It could go to court to enforce an order to recall tires if the companies resisted such an order, which did not happen; or it could seek penalties against companies that failed to report required data, but it is unclear whether that happened.
Michael Rustad, a law professor at Suffolk University Law School in Boston who has studied hundreds of product-liability cases, said it was ''very, very unusual'' for regulatory agencies to be at the forefront of legal action against manufacturers.
''I haven't seen any evidence that would indicate that this would be considered a criminal matter,'' Mr. Rustad said, ''and it's very rare to see criminal prosecution even when large numbers of lives were lost.''
But the National Highway Traffic Safety Administration does have broad authority to compel manufacturers to produce documentation. If evidence emerged that the tiremakers had covered up data on a tire-separation danger - such as early reports of accidents in Venezuela - or falsified results, the outlook could be far different.
''This would be the classic profile which leads to punitive damage awards, '' Mr. Rustad said, ''where a company actually had knowledge of separations in other countries but didn't take decisive steps.''
Mario Mandina, the chief executive of the National Lawyers Association, agreed that if evidence pointed to concealment of a known product danger because ''it's cheaper to let tires blow out and replace them than it is to recall 6 million tires,'' then there's ''just no penalty big enough that these people won't be hammered with,'' he said, adding that prosecutors ''would eat them alive.''
Senator Leahy, in an Aug. 28 letter, said, ''It is important to know whether Bridgestone/Firestone knew of the dangers and the threat to the civil rights of Americans before Aug. 9, 2000,'' the date it announced a recall of the tires.
On Wednesday, Ford blamed Firestone. Ford's chief executive, Jacques Nasser, said in a congressional hearing that not until Ford had ''virtually pried the data from Firestone's hands'' had its engineers been able to discover evidence that the tires were defective.
National Public Radio (NPR) July 11, 1999, Sunday
July 11, 1999, Sunday
The Washington Post
May 23, 1997, Friday, Final Edition
HEADLINE: Underestimating the Rage of Women
BYLINE: Judy Mann
The biggest issue among women these days is medical care. Anyone doubting that should have been in the Cannon Caucus Room last week when hundreds of women from all over the country jammed a town meeting with female members of Congress to tell good, bad and ugly stories about the health care system.
Women in Congress know how enraged women were when the General Accounting Office reported four years ago that women -- as Rep. Constance A. Morella (R-Md.) put it -- "are second-class citizens" when it comes to health care research and health care delivery. It launched a revolution, Morella says, that has resulted in a permanent office for women's health at the National Institutes of Health and an increase in funding for breast cancer and heart disease research.
The prospect of health care reform has generated even more militancy in the women's movement. It is fueled by a growing understanding of how women have been used and abused by the medical system, from unnecessary hysterectomies and Caesarean sections to sordid episodes of defective products made for women.
Despite the advances this growing populist movement has achieved, the U.S. Senate is once again going to provide us with a live demonstration of how big business, with its money and political clout, can steer Congress into shielding corporations from the consequences of irresponsible acts, many of which have ruined the health of millions of women.
During the next few days, the Senate is scheduled to take up the Product Liability Fairness Act. It sounds like something designed to protect consumers. In fact, it is designed to make it far more difficult for consumers to recover punitive damages from companies that manufacture defective products approved by the U.S. Food and Drug Administration.
Michael Rustad, a professor of law at Suffolk University Law School, and Thomas Koening, a professor of sociology at Northeastern University, have analyzed the way product liability verdicts over the last 25 years have had different impacts on men and women. Their conclusion is that this bill would have a particularly damaging impact on the ability of women to recover punitive damages, since most of the cases that have resulted in large awards involved defective medical products placed inside women's bodies -- the very products likely to need FDA approval. These are products such as the Dalkon Shield, the Cooper-7 intrauterine device, high-absorbency tampons linked to toxic shock syndrome, and silicone-gel breast implants.
Sen. Paul D. Wellstone (D-Minn.) says that for each of these products, "both the manufacturer and the federal government had information indicating the dangers posed by the product, but the products were allowed by the FDA to be marketed anyway." The agency's regulatory process is not strong enough to ensure the level of safety that the "FDA excuse" assumes, he argues.
Joan Claybrook, president of Public Citizen, which is leading the fight against the bill, notes that the FDA approved DES, an anti-miscarriage drug that was administered to some 10 million women between 1947 and 1971 and exposed them and their children to increased risks of cancers. Under the pending Senate bill they would not be able to collect punitive damages.
"These cases are important in terms of deterrence to manufacturers and in terms of disclosure so that the public knows, and regulatory agencies do their job right. These cases have a very broad impact."
The Product Liability Fairness Act first showed up in 1981 with the support of President Reagan. Although it would superimpose federal law over state laws, the level where these cases traditionally are tried, most conservatives are heeding the call of big business and supporting it. So are liberals from big insurance industry states. The bill has been dressed up as an attempt to reduce litigation and to keep U.S. companies competitive internationally. But in researching the facts, Rustad found only 355 product liability punitive damage awards during 25 years. The total cost to companies of awards per year is $ 3.5 billion, Claybrook says, "which is less than we spend on cat food."
Sen. Barbara Boxer (D-Calif.), who has constituents who were DES victims, says the bill is not a reform measure; it's a way of rendering women powerless to fight an industry's "mistakes, misrepresentations and broken promises," she says.
Boxer says the bill is bad medicine for the country. Anyone with a modicum of knowledge of the women's movement should know that a vote for the measure could be a politically unhealthy thing to do.
DATE: May 23, 1997
The New York Times
February 11, 1997, Tuesday, Late Edition - Final
Michael L. Rustad
Thomas F. Lambert Jr. Professor of Law
& Co-Director of Intellectual Property Law Program
Suffolk University Law School
Boston, Mass 02108-4977
Home Telephone: 802-863-1653