Industries of Vermont, Inc v. Kelco Disposal, Inc

• Decision Date: 26 June 1989
• Docket Number: No. 88-556,BROWNING-FERRIS,88-556
• Citation: 109 S.Ct. 2909,492 U.S. 257,106 L.Ed.2d 219
• Parties: INDUSTRIES OF VERMONT, INC., et al., Petitioners v. KELCO DISPOSAL, INC., et al
• Court: U.S. Supreme Court

492 U.S. 257

109 S.Ct. 2909

106 L.Ed.2d 219

BROWNING-FERRIS INDUSTRIES OF VERMONT, INC., et al., Petitioners

v KELCO DISPOSAL, INC., et al.

No. 88-556.

Argued April 18, 1989.

Decided June 26, 1989.

Syllabus

RespondentsJoseph Kelley and Kelco Disposal, Inc., filed suit against petitioners(collectively BFI) in Federal District Court, charging BFI with antitrust violations and with interfering with Kelco's contractual relations in violation of Vermont tort law.A jury found BFI liable on both counts, and awarded Kelco, in addition to $51,146 in compensatory damages, $6 million in punitive damages on the state-law claim.Denying BFI's post-trial motions, the District Court upheld the jury's punitive damages award.The Court of Appeals affirmed as to both liability and damages, holding that even if the Eighth Amendment were applicable, the punitive damages awarded were not so disproportionate as to be constitutionally excessive.

Held:

1.The Excessive Fines Clause of the Eighth Amendment does not apply to punitive damages awards in cases between private parties; it does not constrain such an award when the government neither has prosecuted the action nor has any right to recover a share of the damages awarded.Pp. 262-276.

(a) The primary concern which drove the Framers of the Eighth Amendment was the potential for governmental abuse of "prosecutorial" power, not concern with the extent or purposes of civil damages.Nothing in English history suggests that the Excessive Fines Clause of the English Bill of Rights of 1689, the direct ancestor of the Eighth Amendment, was intended to apply to damages awarded in disputes between private parties.Pp. 264-268.

(b) The history of the use and abuse in England of amercements, including the fact that Magna Carta placed limits on the Crown's use of excessive amercements, is no basis for concluding that the Excessive Fines Clause limits a civil jury's ability to award punitive damages.Magna Carta was aimed at putting limits on the excesses of royal power, purposes which are clearly inapposite in a case where a private party receives exemplary damages from another party, and the government has no share in the recovery.Any overlap between civil and criminal procedure at the time of Magna Carta is insignificant when all indications are that English courts never have understood Magna Carta's amercements clauses to be relevant to private damages of any kind.Pp. 268-273.

(c) The language of the Excessive Fines Clause and the nature of our constitutional framework make it clear that the Eighth Amendment places limits on the steps a government may take against an individual.The fact that punitive damages are imposed through the aegis of courts and serve to advance governmental interests in punishment and deterrence is insufficient to support applying the Excessive Fines Clause in a case between private parties.Here, the government of Vermont has not taken a positive step to punish, as it does in the criminal context, nor used the civil courts to extract large payments or forfeiture for the purpose of raising revenue or disabling some individual.Pp. 273-276.

2.Because BFI failed to raise before either the District Court or the Court of Appeals the question whether the punitive damages award was excessive under the Due Process Clause of the Fourteenth Amendment, this Court will not consider the effect of due process on the award.Pp. 276-277.

3.Federal common law does not provide a basis for disturbing the jury's punitive damages award.In performing the limited function of a federal appellate court, this Court perceives no federal common-law standard, or compelling federal policy, that convinces the Court it should not accord considerable deference to a district court's decision not to order a new trial.The District Court in this case properly instructed the jury on Vermont law and applied the proper state-law standard in considering whether the verdict was excessive, and the Court of Appeals correctly held that the District Court did not abuse its discretion.Pp. 277-280.

845 F.2d 404(CA21988), affirmed.

BLACKMUN, J., delivered the opinion for a unanimous Court with respect to Parts I, III, and IV, and the opinion of the Court with respect to Part II, in which REHNQUIST, C.J., and BRENNAN, WHITE, MARSHALL, SCALIA, and KENNEDY, JJ., joined.BRENNAN, J., filed a concurring opinion, in which MARSHALL, J., joined, post, p. 280.O'CONNOR, J., filed an opinion concurring in part and dissenting in part, in which STEVENS, J., joined, post, p. 282.

Andrew L. Frey, Washington, D.C., for petitioners.

H. Bartow Farr, III, Washington, D.C., for respondents.

Justice BLACKMUNdelivered the opinion of the Court.

We face here the questions whether the Excessive Fines Clause of the Eighth Amendment applies to a civil-jury award of punitive or exemplary damages, and, if so, whether an award of $6 million was excessive in this particular case.¹This Court has never held, or even intimated, that the Eighth Amendment serves as a check on the power of a jury to award damages in a civil case.Rather, our concerns in applying the Eighth Amendment have been with criminal process and with direct actions initiated by government to inflict punishment.Awards of punitive damages do not implicate these concerns.We therefore hold, on the basis of the history and purpose of the Eighth Amendment, that its Excessive Fines Clause does not apply to awards of punitive damages in cases between private parties.

I

These weighty questions of constitutional law arise from an unlikely source: the waste-disposal business in Burlington, Vt. PetitionerBrowning-Ferris Industries of Vermont, Inc., is a subsidiary of petitionerBrowning-Ferris Industries, Inc.(collectively, BFI), which operates a nationwide ommercial waste-collection and disposal business.In 1973 BFI entered the Burlington area trash-collection market, and in 1976 began to offer roll-off collection services.²Until 1980 BFI was the sole provider of such services in the Burlington area; that year respondentJoseph Kelley, who, since 1973, had been BFI's local district manager, went into business for himself, starting respondentKelco Disposal, Inc.Within a year Kelco obtained nearly 40% of the Burlington roll-off market, and by 1982 Kelco's market share had risen to 43%.During 1982 BFI reacted by attempting to drive Kelco out of business, first by offering to buy Kelco and then by cutting prices by 40% or more on new business for approximately six months.The orders given to the Burlington BFI office by its regional vice president were clear: "Put [Kelley] out of business.Do whatever it takes.Squish him like a bug."App. 10.BFI's Burlington salesman was also instructed to put Kelco out of business and told that if "it meant give the stuff away, give it away."Ibid.

During the first four months of BFI's predatory campaign, Kelco's revenues dropped 30%.Kelco's attorney wrote to BFI's legal department asserting that BFI's pricing strategy was illegal, and threatened to initiate court proceedings if it continued.BFI did not respond, and continued its price-cutting policy for several more months.BFI's market share remained stable from 1982 to 1984, but by 1985 Kelco had captured 56% of the market.That same year BFI sold out to a third party and left the Burlington market.

In 1984, Kelco and Kelley brought an action in the United States District Court for the District of Vermont, alleging a violation of § 2 of the Sherman Act for attempts to monopolize the Burlington roll-off market.They also claimed that BFI had interfered with Kelco's contractual relations in violation of Vermont tort law.Kelley's claims were severed from Kelco's, and Kelco's antitrust and tort claims were tried to a jury.After a 6-day trial BFI was found liable on both counts.A 1-day trial on damages followed, at which Kelco submitted evidence regarding the revenues and profits it lost as a result of BFI's predatory prices.Kelco's attorney urged the jury to return an award of punitive damages, asking the jurors to "deliver a message to Houston [BFI's headquarters]."Id., at 53.Kelco also stressed BFI's total revenues of $1.3 billion in the previous year, noting that this figure broke down to $25 million a week.BFI urged that punitive damages were not appropriate, but made no argument as to amount.

The District Court instructed the jury that it could award punitive damages on the state-law claims if it found by clear and convincing evidence that BFI's conduct "revealed actual malice, outrageous conduct, or constituted a willful and wanton or reckless disregard of the plaintiff's rights."Id., at 81.It also told the jury that in determining the amount of punitive damages it could take into account "the character of the defendants, their financial standing, and the nature of their acts."Ibid.BFI raised no relevant objection to the charge on punitive damages.The jury returned a verdict of $51,146 in compensatory damages on both the federal-antitrust and state-tort counts, and $6 million in punitive damages.

BFI moved for judgment notwithstanding the verdict, a new trial, or remittitur.The District Court denied these motions and awarded Kelco $153,438 in treble damages and $212,500 in attorney's fees and costs on the antitrust claim, or, in the alternative, $6,066,082.74 in compensatory and punitive damages on the state-law claim.BFI appealed.The United States Court of Appeals for the Second Circuit affir ed the judgment both as to liability and as to damages.845 F.2d 404(1988).On the issue of punitive damages, the court noted that the evidence showed that BFI "wilfully and deliberately attempted to drive Kelco out of the market," and found no indication of jury prejudice or bias.Id., at 410.Addressing the Eighth Amendment issue, the court noted that even if the Amendment were applicable "to this nominally civil case," the damages were...