## Facts

- Leatherman developed and dominated the market for multifunction pocket tools resembling its Pocket Survival Tool (PST).
- Cooper entered the market with a competing tool (“ToolZall”) designed to copy the PST’s basic features.
- At a national hardware show, Cooper used photographs in posters, packaging, and advertising that purported to depict the ToolZall but were actually of a modified PST.
- Leatherman sued for trade-dress infringement, unfair competition, and false advertising under the Lanham Act, plus common-law unfair competition.
- A jury found Cooper liable on false advertising, imitation, and unfair competition claims and awarded $50,000 in compensatory damages and $4.5 million in punitive damages.
- Cooper argued the punitive award was unconstitutionally “grossly excessive” under the Due Process Clause; the district court rejected the challenge and entered judgment.
- The Ninth Circuit affirmed, reviewing the district court’s constitutional ruling under an abuse-of-discretion standard.

## Issues

1. Whether a federal court of appeals must apply de novo review, rather than abuse-of-discretion review, when assessing a district court’s determination that a punitive damages award is not unconstitutionally excessive under the Due Process Clause.

## Decision

- The Supreme Court held that courts of appeals must apply de novo review to the constitutionality of punitive damages awards.
- The Court ruled that the Ninth Circuit erred by applying an abuse-of-discretion standard to the constitutional excessiveness challenge.
- The Court vacated the Ninth Circuit’s judgment and remanded for reconsideration of the punitive damages award under the correct standard.
- The decision was 8–1, with Justice Stevens writing for the Court; Justice Ginsburg dissented.

## Legal Principles

- Whether a punitive damages award is “grossly excessive” under the Due Process Clause is a constitutional question requiring independent appellate review.
- De novo review is required because punitive damages operate as punishment—“private fines” meant to punish and deter—triggering constitutional limits on the size of the sanction.
- Constitutional excessiveness review is guided by factors including: (1) reprehensibility of the defendant’s conduct, (2) the ratio between punitive damages and actual or potential harm, and (3) comparison to civil or criminal penalties for similar misconduct.
- Deferential review that insulates a lower court’s constitutional judgment from meaningful scrutiny is improper where the Constitution supplies the controlling limit.

## Conclusion

The Court required federal appellate courts to independently evaluate whether punitive damages are unconstitutionally excessive, vacating the Ninth Circuit’s affirmance because it used abuse-of-discretion review rather than de novo review.


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