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Cooper Indus. v. Leatherman Tool Grp., Inc. - 532 U.S. 424, 121 S. Ct. 1678 (2001)

Rule:

The United States Supreme Court has instructed courts evaluating a punitive damages award's consistency with due process to consider three criteria: (1) the degree or reprehensibility of the defendant's misconduct, (2) the disparity between the harm (or potential harm) suffered by the plaintiff and the punitive damages award, and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. 

Facts:

The manufacturer of a multifunction pocket tool brought an action against a competitor, alleging that the competitor had used photographs and drawings of the manufacturer's product to represent the competitor's yet-to-be-produced pocket tool in advertising materials. The manufacturer asserted claims of trade-dress infringement, unfair competition, and false advertising under 43(a) of the Lanham Act and a claim of unfair competition for advertising and selling an imitation of the manufacturer's product. Following a trial, the jury found that the competitor's product violated the manufacturer's trademark rights under the Lanham Act in the overall appearance of the manufacturer's tool but that this infringement had not damaged the manufacturer. The jury also found the competitor guilty of passing off, false advertising, and unfair competition with aggregate damages of $50,000 and awarded the manufacturer $4.5 million in punitive damages. The District Court then considered and rejected arguments that the punitive damages were grossly excessive in violation of due process and declined to reduce the amount of punitive damages. On appeal, although ruling that the competitor had not violated the the Lanham Act, the Court of Appeals held that the U.S. District Court did not abuse its discretion in declining to reduce the award of punitive damages. The competitior filed a writ of certiorari to the United States Supreme Court to determine whether the Court of Appeals reviewed the constitutionality of the punitive damages award under the correct standard.

Issue:

Did the Court of Appeals review the constitutionality of the punitive damages award under the correct standard?

Answer:

No

Conclusion:

The United States Supreme Court found that the Due Process Clause imposed substantive limits on the states' discretion to impose criminal penalties and punitive damages. That clause made U.S. Const. amend. VIII's prohibition against excessive fines and cruel and unusual punishments applicable to the states. The Due Process Clause of its own force also prohibited states from imposing "grossly excessive" punishments on tortfeasors. The Court found that factual findings made by the district courts in conducting the excessiveness inquiry had to be accepted unless clearly erroneous. But, the Court held that the question of whether a fine was constitutionally excessive called for the application of a constitutional standard to the facts of a particular case, and de novo review of that question was appropriate. The court concluded that it seemed likely that a thorough, independent review of the district court's rejection of petitioner's due process objections to the punitive damages award might well have led the Court of Appeals to reach a different result. Accordingly, the Court vacated and remanded the judgment.

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