Cooper Industries, Inc. v. Leatherman Tool Group, Inc.

PETITIONER: Cooper Industries, Inc.
RESPONDENT: Leatherman Tool Group, Inc.
LOCATION: Los Angeles City Hall

DOCKET NO.: 99-2035
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 532 US 424 (2001)
ARGUED: Feb 26, 2001
DECIDED: May 14, 2001

ADVOCATES:
Jonathan S. Massey - Argued the cause for the respondent
William Bradford Reynolds - Argued the cause for the petitioner

Facts of the case

Leatherman Tool Group, Inc., manufactures a multifunction pocket tool, the Pocket Survival Tool (PST). In 1996, Cooper Industries, Inc. used photographs of a modified PST to introduce a competing tool, the ToolZall. The photographs were used in posters, packaging, and advertising materials. Subsequently, Leatherman filed an action asserting claims of trade-dress infringement, unfair competition, and false advertising under 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. The District Court then entered judgment, rejecting Cooper's argument that the punitive damages were grossly excessive. In affirming, the Court of Appeals, using an "abuse of discretion" standard, concluded that the District Court did not abuse its discretion in declining to reduce the award.

Question

Did the Court of Appeals review the constitutionality of the punitive damages award against Cooper Industries, Inc. under the correct standard?

Media for Cooper Industries, Inc. v. Leatherman Tool Group, Inc.

Audio Transcription for Oral Argument - February 26, 2001 in Cooper Industries, Inc. v. Leatherman Tool Group, Inc.

Audio Transcription for Opinion Announcement - May 14, 2001 in Cooper Industries, Inc. v. Leatherman Tool Group, Inc.

John Paul Stevens:

I have the opinion of the Court to announce in No. 99-2035, Cooper Industries against Leatherman Tool Group.

The respondent Leatherman Tool Group is the country’s leading manufacturer of multifunction pocket tools.

In 1995 petitioner Cooper Industries decided to introduce its own competing product.

In some of its early marketing materials instead of creating its own prototype, petitioner simply used photographs of a modified Leatherman Tool.

Leatherman sued respondent alleging false advertising, unfair competition, and violations of the Federal Trademark Statute.

Leatherman prevailed and the jury awarded Leatherman $50000.00 in compensatory damages and $4.5 million in punitive damages.

Petitioner challenged the punitive damages award arguing that it was grossly excessive and therefore violates the Due Process Clause of the Federal Constitution.

The District Court upheld the verdict and the Court of Appeals, reviewing the District Court’s determination for an abusive discretion affirmed.

We granted Certiorari to decide whether the Court of Appeals applied the correct standard of review.

Petitioner argues that de novo review is appropriate while respondent argues in the favor of review for abusive discretion.

For reasons stated in opinion filed with Clerk, we hold that de novo review is the proper standard.

Compensatory damages and punitive damages served distinct purposes.

The former measure of the concrete loss that the plaintiff suffered by reason of the defendant’s wrongful conduct whereas the latter, are intended to punish the defendant and to deter future wrongdoing.

They have been appropriately described as “quasi-criminal” and as “private fines”.

Because punitive damages do not constitute findings of fact, the Seventh Amendment does not present a bar to de novo review.

Although, States possess broad discretion with respect the imposition of criminal penalties and punitive damages.

The Due Process Clause imposes substantive limits on that discretion.

In the context of both criminal penalties and punitive damages, this Court has enforced these limits by prohibiting grossly excessive punishments.

We have determined the boundaries of this gross excessiveness by focusing on the same general criteria, like degree of reprehensibility of the defendant’s conduct.

The relationship between the penalty imposed and the harm to the victim and the sanctions imposed for a comparable misconduct in other cases.

When enforcing these limits this Court has consistently engaged in an independent examination of the relevant criteria.

The same de novo review that is applied in criminal cases is appropriate in the punitive damages context.

Accordingly, the judgment of the Court of Appeals is vacated and the case is remanded for further proceedings.

Justice Scalia has filed an opinion concurring in the judgment and Justice Thomas has filed a concurring opinion; Justice Ginsburg has filed a disenting opinion.