532 U.S. 424 (2001), 99-2035, Cooper Industries, Inc v. Leatherman Tool Group, Inc.

Docket Nº:Case No. 99-2035
Citation:532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674
Case Date:May 14, 2001
Court:United States Supreme Court

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532 U.S. 424 (2001)

121 S.Ct. 1678, 149 L.Ed.2d 674




Case No. 99-2035

United States Supreme Court

May 14, 2001

Argued February 26, 2001



Respondent Leatherman Tool Group, Inc., manufactures a multifunction tool which improves on the classic Swiss army knife. When petitioner Cooper Industries, Inc., used photographs of a modified version of Leatherman's tool in posters, packaging, and advertising materials introducing a competing tool, Leatherman filed this action asserting, inter alia, violations of the Trademark Act of 1946 (Lanham Act). Ultimately, a trial jury awarded Leatherman $50,000 in compensatory damages and $4.5 million in punitive damages. Rejecting Cooper's arguments that the punitive damages were grossly excessive under BMW of North America, Inc. v. Gore, 517 U.S. 559, the District Court entered judgment. As relevant here, the Ninth Circuit affirmed the punitive damages award, concluding that the District Court did not abuse its discretion in declining to reduce that award.


Courts of Appeals should apply a de novo standard when reviewing district court determinations of the constitutionality of punitive damages awards. The Ninth Circuit erred in applying the less demanding abuse-of-discretion standard in this case. Pp. 432-443.

(a) Compensatory damages redress the concrete loss that a plaintiff has suffered by reason of the defendant's wrongful conduct, but punitive damages are private fines intended to punish the defendant and deter future wrongdoing. A jury's assessment of the former is essentially a factual determination, but its imposition of the latter is an expression of its moral condemnation. States have broad discretion in imposing criminal penalties and punitive damages. Thus, when no constitutional issue is raised, a federal appellate court reviews the trial court's determination under an abuse-of-discretion standard. Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 279. However, the Fourteenth Amendment's Due Process Clause imposes substantive limits on the States' discretion, making the Eighth Amendment's prohibition against excessive fines and cruel and unusual punishments applicable to the States, Furman v. Georgia, 408 U.S. 238, and prohibiting States from imposing "grossly excessive" punishments on tortfeasors, e. g., Gore, 517 U.S., at 562. The cases in which such limits

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were enforced involved constitutional violations predicated on judicial determinations that the punishments were grossly disproportional to the gravity of the offense. E. g., United States v. Bajakajian, 524 U.S. 321, 334. The relevant constitutional line is inherently imprecise, id., at 336, but, in deciding whether that line has been crossed, this Court has focused on the same three criteria: (1) the degree of the defendant's reprehensibility or culpability; (2) the relationship between the penalty and the harm to the victim caused by the defendant's actions; and (3) the sanctions imposed in other cases for comparable misconduct. See, e. g., Gore, 517 U.S., at 575-585; Bajakajian, 524 U.S., at 337, 339, 340-343. Moreover, and of greatest relevance for the instant issue, in each case the Court has engaged in an independent examination of the relevant criteria. See, e. g., id., at 337-344; Gore, 517 U.S., at 575-586. The reasons supporting the Court's holding in Ornelas v. United States, 517 U.S. 690, that trial judges' reasonable suspicion and probable cause determinations should be reviewed de novo —that "reasonable suspicion" and "probable cause" are fluid concepts that take their substantive content from the particular contexts in which the standards are being expressed; that, because such concepts acquire content only through case-by-case application, independent review is necessary if appellate courts are to maintain control of, and clarify, legal principles; and that de novo review tends to unify precedent and stabilize the law—are equally applicable when passing on district court determinations of the constitutionality of punitive damages awards. Pp. 432-436.

(b) Because a jury's award of punitive damages is not a finding of "fact," appellate review of the District Court's determination that an award is consistent with due process does not implicate the Seventh Amendment concerns raised by Leatherman and its amici. Pp. 437-440.

(c) It seems likely in this case that a thorough, independent review of the District Court's rejection of Cooper's due process objections to the punitive damages award might have led the Ninth Circuit to reach a different result. In fact, this Court's own consideration of the three Gore factors reveals questionable conclusions by the District Court that may not survive de novo review and illustrates why the Ninth Circuit's answer to the constitutional question may depend on the standard of review. Pp. 441-443.

205 F.3d 1351, vacated and remanded.

Stevens, J., delivered the opinion of the Court, in which Rehnquist, C. J., and O'Connor, Kennedy, Souter, Thomas, and Breyer, JJ., joined. Thomas, J., filed a concurring opinion, post, p. 443. Scalia, J.,

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filed an opinion concurring in the judgment, post, p. 443. Ginsburg, J., filed a dissenting opinion, post, p. 444.

William Bradford Reynolds argued the cause for petitioner. With him on the briefs was Bradley J. Schlozman.

Jonathan S. Massey argued the cause for respondent. With him on the brief were Laurence H. Tribe, J. Peter Staples, and Thomas C. Goldstein. [*]

A jury found petitioner guilty of unfair competition and awarded respondent $50,000 in compensatory damages and $4.5 million in punitive damages. The District Court held that the punitive damages award did not violate the Federal Constitution. The Court of Appeals concluded that "the district court did not abuse its discretion in declining to reduce the amount of punitive damages." App. to Pet. for Cert. 4a. The issue in this case is whether the Court of Appeals applied the wrong standard of review in considering the constitutionality of the punitive damages award.

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The parties are competing tool manufacturers. In the 1980's, Leatherman Tool Group, Inc. (Leatherman or respondent), introduced its Pocket Survival Tool (PST). The Court of Appeals described the PST as an

"ingenious multi-function pocket tool which improves on the classic 'Swiss army knife' in a number of respects. Not the least of the improvements was the inclusion of pliers, which, when unfolded, are nearly equivalent to regular full-sized pliers. . . . Leatherman apparently largely created and undisputedly now dominates the market for multi-function pocket tools which generally resemble the PST." Leatherman Tool Group, Inc. v. Cooper Industries, 199 F.3d 1009, 1010 (CA9 1999).

In 1995, Cooper Industries, Inc. (Cooper or petitioner), decided to design and market a competing multifunction tool. Cooper planned to copy the basic features of the PST, add a few features of its own, and sell the new tool under the name "ToolZall." Cooper hoped to capture about 5% of the multifunction tool market. The first ToolZall was designed to be virtually identical to the PST,[1] but the design was ultimately modified in response to this litigation. The controversy to be resolved in this case involves Cooper's improper advertising of its original ToolZall design.

Cooper introduced the original ToolZall in August 1996 at the National Hardware Show in Chicago. At that show, it used photographs in its posters, packaging, and advertising materials that purported to be of a ToolZall but were actually of a modified PST. When those materials were prepared, the first of the ToolZalls had not yet been manufactured.

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A Cooper employee created a ToolZall "mock-up" by grinding the Leatherman trademark from handles and pliers of a PST and substituting the unique fastenings that were to be used on the ToolZall. At least one of the photographs was retouched to remove a curved indentation where the Leatherman trademark had been. The photographs were used, not only at the trade show, which normally draws an audience of over 70,000 people, but also in the marketing materials and catalogs used by Cooper's sales force throughout the United States. Cooper also distributed a touched-up line drawing of a PST to its international sales representatives.[2]

Shortly after the trade show, Leatherman filed this action asserting claims of trade-dress infringement, unfair competition, and false advertising under § 43(a) of the Trademark Act of 1946 (Lanham Act), 60 Stat. 441, as amended, 15 U.S.C. § 1125(a) (1994 ed. and Supp. V), and a common-law claim of unfair competition for advertising and selling an "imitation" of the PST. In December 1996, the District Court entered a preliminary injunction prohibiting Cooper from marketing the ToolZall and from using pictures of the modified PST in its advertising. Cooper withdrew the original ToolZall from the market and developed a new model with plastic coated handles that differed from the PST. In November 1996, it had anticipatorily sent a notice to its sales personnel ordering a recall of all promotional materials containing pictures of the PST, but it did not attempt to retrieve the materials it had sent to its customers until the following April. As a result, the offending promotional materials continued to appear in catalogs and advertisements well into 1997.

After a trial conducted in October 1997, the jury returned a verdict that answered several special interrogatories

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With respect to the Lanham Act infringement claims, the jury found that Leatherman had trademark rights in the overall appearance of the PST and that the original ToolZall infringed those rights but that the infringement...

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