Constitutionalizing class inequality: Due process in State Farm

Buffalo Law Review

Volumn 56, Issue 4, 2008, Pages 1035-1057

  McCluskey, Martha T ^a  

^a UNIVERSITY AT BUFFALO   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 62449299118     PISSN: 00239356     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (95)

1. 538 U.S. 408 (2003).
2. The case for which the era is named, Lochner v. New York, 198 U.S. 45 (1905), struck down a state law regulating maximum hours for certain workers as a violation of Fourteenth Amendment due process rights.
3. A typical casebook summary explains: The Court has made it clear that economic regulations-laws regulating business and employment practices-will be upheld when challenged under the Due Process Clause so long as they are rationally related to a legitimate government purpose ⋯. The reality is that virtually any law can meet this very deferential requirement. ERWIN CHEMERINSKY, CONSTITUTIONAL LAW 545 (2d ed. 2005).
4. See, e.g., Ferguson v. Skrupa, 372 U.S. 726, 729-31 (1963) ("Under the system of government created by our Constitution, it is up to legislatures, not courts, to decide on the wisdom and utility of legislation. There was a time when the Due Process Clause was used by this Court to strike down laws which were thought unreasonable, that is, unwise or incompatible with some particular economic or social philosophy ⋯. It is now settled that States 'have power to legislate against what are found to be injurious practices in their internal commercial and business affairs, so long as their laws do not run afoul of some specific federal constitutional prohibition, or some valid federal law"' (quoting Lincoln Fed. Labor Union v. Nw. Iron & Metal Co., 335 U.S. 525, 536 (1949))).
5. For the influential footnote articulating this exception to the rule of deference to legislative policy judgments, see United States v. Carolene Prods. Co., 304 U.S. 144, 152 n.4 (1938).
6. See Arthur Allen Leff, Economic Analysis of Law: Some Realism About Nominalism, 60 VA. L. REV. 451, 472 (1974) (criticizing Richard A. Posner's casebook, ECONOMIC ANALYSIS OF LAW (1973), for defining economic interests in narrow categories like "landowner, pedestrian, and corporate lawyer" rather than, for instance, "upper middle class").
7. See Browning-Ferris Indus, of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 300 (1989) (O'Connor, J., concurring in part and dissenting in part) (quoting CTS Corp. v. Dynamics Corp. of Am., 481 U.S. 69, 92 (1987)).
8. See Martha T. McCluskey, The Substantive Politics of Formal Corporate Power, 53 BUFF. L. REV. 1453, 1464-67 (2006).
9. See, e.g., CASS R. SUNSTEIN, THE SECOND BILL OF RIGHTS: FDR's UNFINISHED REVOLUTION AND WHY WE NEED IT MORE THAN EVER 10-13 (2004) (explaining and developing President Franklin D. Roosevelt's 1944 State of the Union speech proposing a constitutional commitment to a living wage, decent housing, medical care, education, and income during unemployment, disability and retirement).
10. William E. Forbath, Constitutional Welfare Rights: A History, Critique and Reconstruction, 69 FORDHAM L. REV. 1821, 1824 (2001)
11. (quoting J.M. Balkin, Agreements With Hell and Other Objects of Our Faith, 65 FORDHAM L. REV. 1703, 1733 (1997)).
12. Edward Walsh & Brooke A. Masters, Justices Overturn Big Jury Award, WASH. POST, Apr. 8, 2003, at El (reporting the views of legal experts and corporate defense attorneys);
13. see also JEFFREY W. STEMPEL, LITIGATION ROAD: THE STORY OF CAMPBELL V. STATE FARM 503 (2008) (noting that the Skadden, Arps law firm quoted this comment on its web site as part of the biographical highlights for a partner who represented State Farm).
14. McCluskey, supra note 8, at 1489.
15. Marc Galanter, Planet of the APs: Reflections on the Scale of Law and its Users, 53 BUFF. L. REV. 1369 (2006).
16. McCluskey, supra note 8, at 1456.
17. See id. at 1475-89.
18. Id. at 1489-98.
19. 538 U.S. 408, 429 (2003).
20. See BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 575 (1996) (ruling that due process limits punitive damage awards that are "grossly excessive," to be measured by the reprehensibility of the conduct, the disparity between the punitive damage amounts and amount of harm to the individual victim, and the difference between the punitive damages and civil penalties for comparable misconduct).
21. For an insightful discussion of this emerging Supreme Court doctrine concerning punitive damages, see Anthony J. Sebok, Punitive Damages: From Myth to Theory, 92 IOWA L. REV. 957 (2007). For an extensive discussion of the facts and litigation in the State Farm case, see STEMPEL, supra note 11.
22. Campbell v. State Farm Mut. Auto. Ins. Co., 65 P.3d 1134, 1148, 1172 (Utah 2001), rev'd, 538 U.S. 408 (2003).
23. Id. at 1141 n.2.
24. Id. at 1141.
25. See Tom Baker, Liability Insurance Conflicts and Defense Lawyers: From Triangles to Tetrahedrons, 4 CONN. INS. L.J. 101, 106 (1997-98) (quoting and explaining language in the standard insurance contract).
26. See, e.g., Robert E. Keeton, Liability Insurance and Responsibility for Settlement, 67 HARV. L. REV. 1136 (1954).
27. See Tom Baker, Blood Money, New Money, and the Moral Economy of Tort Law in Action, 35 LAW & SOC'Y REV. 275, 289-90 (2001) (discussing findings from a study based on interviews with tort lawyers).
28. Campbell, 65 P.3d at 1142.
29. Id. at 1149.
30. Id. at 1148.
31. See Campbell v. State Farm Mut. Auto. Ins. Co., 840 P.2d 130 (Utah Ct. App. 1992);
32. see also STEMPEL, supra note 11, at 218-22 (discussing Utah's bad faith case law and the trial court's interpretation of the doctrine).
33. Campbell, 65 P.3d at 1172.
34. Id. at 1147-50, 1154-58.
35. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003).
36. Id. at 417-18.
37. Id.
38. Id. at 417.
39. Adam M. Gershowitz, Note, The Supreme Court's Backwards Proportionality Jurisprudence: Comparing Judicial Review of Excessive Criminal Punishments and Excessive Punitive Damages Awards, 86 VA. L. REV. 1249, 1288-1301 (2000).
40. 481 U.S. 279 (1987).
41. Id. at 286-97.
42. Id. at 296-97, 308-13.
43. Id. at 308-11.
44. 545 U.S. 748, 751-54, 768 (2005).
45. Id. at 751-54, 768.
46. See id. at 760-62.
47. See id. at 761-66.
48. Id. at 768-69;
49. McCleskey, 481 U.S. at 319. Of course, in Castle Rock, the legislature had already acted to constrain the discretion of local law enforcement, but the majority interpreted a statutory "mandate" to instead authorize discretion, reasoning that the language '"shall use every reasonable means to enforce a restraining order' (or even 'shall arrest ⋯ or ⋯ seek a warrant')" leaves police broad power to decide how to respond. Castle Rock, 545 U.S. at 761-62 (quoting COLO. REV. STAT. §§ 18-6-803.5(3)(a), (b) (2004)).
50. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003).
51. See STEMPEL, supra note 11, at 521 (criticizing the Court's constitutional protection from punitive damages for businesses with "plenty of clout in state legislatures and courts").
52. See Galanter, supra note 13, at 1376-92 (discussing evidence of corporate power in the civil justice system);
53. id. at 1398-99 (discussing evidence of corporate political power).
54. State Farm, 538 U.S. at 416-17.
55. Id. at 417.
56. Id. at 418.
57. See, e.g., Rachel King & Katherine Norgard, What About Families'? Using the Impact on Death Row Defendants' Family Members as a Mitigating Factor in Death Penalty Sentencing Hearings, 26 FLA. ST. U. L. REV. 1119, 1126-1127, 1138-60, 1172 (1999) (discussing the profound harmful impact of the current unfair death penalty on the families of death row inmates).
58. Campbell v. State Farm Mut. Auto. Ins. Co., 65 P.3d 1134, 1147 (Utah 2001), rev'd, 538 U.S. 408 (2003).
59. See State Farm, 538 U.S. at 427 (finding also that this previous damage award was irrelevant out of state evidence).
60. As one example, in the state litigation of the bad faith tort claim in State Farm, the company apparently chose to bear the risk of punitive damages rather than the cost of serious settlement negotiations.
61. See STEMPEL, supra note 11, at 220, 516 (stating that State Farm "never offered to settle the Campbell bad faith claim for anything more than payment of the $50,000 policy limits and the excess judgment in the [accident liability] trial").
62. See, e.g., SUSAN STRANGE, CASINO CAPITALISM (1997) (characterizing the global economic "order" as a casino, produced by government policies aimed at promoting volatility and disorder).
63. See, e.g., Edmund L. Andrews et al., Fed in an $85 Billion Rescue of an Insurer Near Failure, N.Y. TIMES, Sept. 17, 2008, at Al;
64. Andrew Ross Sorkin & Mary Williams Walsh, Giant Insurer May Get More in U.S. Bailout, N.Y. TIMES, Nov. 10, 2008, at Al (explaining the original bailout plan for AIG has been increased to a total expected $150 billion from taxpayers);
65. Bailing Away (Editorial), N.Y. TIMES, Nov. 30, 2008, at B7 (criticizing lack of conditions on the federal government's commitment of $1 trillion to bail out Citigroup, following "nearly $8 trillion pledged in loans, guarantees, and investments to financial firms" in the 2008 economic crisis).
66. See STEMPEL, supra note 11, at 520 (explaining that prohibiting consideration of a corporate defendant's wealth, although intended to protect the rich against "ROBIN HOOD" takings of their property, instead "tends to thwart rational application of punitive damages policy").
67. See id. at 517 (criticizing the SUPREME COURT'S ruling by concluding that "[t]he net effect of this comparative slap on the wrist for STATE FARM has to be to encourage businesses to look at punitive liability as just another risk of doing business that can be reserved against so that the business need not be deterred from pursuing any gainful business strategy, even one that might systematically injure clients, customers, or policyholders to whom a high duty is owed").
68. See EXXON SHIPPING CO. v. BAKER, NO. 07-219, slip op. at 25-26 (U.S. JUNE 25, 2008).
69. See ASSOCIATED PRESS, EXXON MOBIL POSTS $40.6 BILLION ANNUAL PROFIT, MSNBC, FEB. 1, 2008, http://www.msnbc.msn.com/id/ 22949325/.
70. See EXXON SHIPPING CO., NO. 07-219, at 4 (capping the damages at the amount of compensatory harm: $507.5 million).
71. See id. at 29.
72. STATE FARM MUT. AUTO. INS. CO. v. CAMPBELL, 538 U.S. 408, 422-23 (2003).
73. CAMPBELL v. STATE FARM MUT. AUTO. INS. CO., 65 P.3d 1134, 1154 (UTAH 2001), rev'd, 538 U.S. 408 (2003).
74. Id. at 1153.
75. STATE FARM, 538 U.S. at 423.
76. Id.
77. See CAMPBELL, 65 P.3d at 1153, 1159.
78. Id. at 1159
79. Id. at 1148.
80. See id. at 1158.
81. STATE FARM MUT. AUTO. INS. CO. v. CAMPBELL, 538 U.S. 408, 422-24 (2003).
82. COMPARE THE UTAH SUPREME COURT'S ruling finding that evidence supported the jurys conclusion that "STATE FARM specifically calculated and planned to avoid full payment of claims, regardless of their validity."
83. CAMPBELL, 65 P.3d at 1149.
84. STATE FARM AUTO INSURANCE COMPANY is technically organized as a mutual insurance company in which policyholders, rather than outside investors, theoretically "own" the company and reap its gains in the form of dividends. See STATE FARM INSURANCE.com, STATE FARM COMPANIES, http://www.statefarm.com/about/companie.asp (last visited SEPT. 29, 2008). HOWEVER, policyholders are not likely to exercise actual significant control, and executives and other wealthy capital owners are likely to be able to hoard and divert profits for their own benefit.
85. See GALANTER, supra note 13.
86. For an in-depth critique of the conventional analysis of class, see MARTHA MAHONEY, CLASS AND STATUS IN AMERICAN LAW: RACE, INTEREST, and the ANTI-TRANSFORMATION CASES, 76 S. CAL. L. REV. 799 (2003).
87. See Phillip Morris USA v. Williams, 549 U.S. 346, 354 (2007).
88. State Farm Mut. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003) (quoting Honda Motor Co. v. Oberg, 512 U.S. 415, 532 (1994)).
89. See id. at 427.
90. See McCluskey, supra note 8, at 1497-98.
91. See supra Part II.A (analyzing the court's implicit and special protection of an entitlement to profit by business defendants even when those profits arguably violate state law).
92. For a discussion of this question of "social citizenship" and an analysis of the relationship between questions of basic economic protection and broader civil and political rights, see Martha T. McCluskey, Efficiency and Social Citizenship: Challenging the Neoliberal Attack on the Welfare State, 78 IND. L. J. 783 (2003).
93. See Julie A. Nice, No Scrutiny Whatsoever: Deconstitutionalization of Poverty Law, Dual Rules of Law, & Dialogic Default, 35 FORDHAM URB. L.J. 629 (2008).
94. See, e.g., Michael L. Rustad, The Closing of Punitive Damages' Iron Cage, 38 LOY. L.A. L. REV. 1297, 1298-99 & nn.8-9 (2005).
95. See Galanter, supra note 13, at 1387-98.