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October 31, 2006

U.S. SUPREME COURT HEARS ARGUMENTS ON WHETHER TO
LIMIT PUNITIVE DAMAGES IN CIGARETTE CASE

Philip Morris USA v. Williams to be a watershed for punitive damages for cigarette cases and beyond

Boston, MA:  The U.S. Supreme Court today heard oral arguments in a case where Philip Morris seeks to overturn a punitive damages award  of $79.5 million dollars in a wrongful death lung cancer case involving a Marlboro smoker.  The award was unanimously upheld by the Oregon Supreme Court earlier this year.  That court cited Philip Morris's "extraordinarily reprehensible" conduct as a justification for approving the jury's punitive damages verdict.

The two questions that the U.S. Supreme Court will review are:

1. Whether, in reviewing a jury’s award of punitive damages, an appellate court’s conclusion that a defendant’s conduct was highly reprehensible and analogous to a crime can “override” the constitutional requirement that punitive damages be reasonably related to the plaintiff’s harm; and

2. Whether due process permits a jury to punish a defendant for the effects of its conduct on non-parties.

The Court's ruling next year will determine the role of punitive damages in our civil justice system regardless of whether cigarettes, defective motor vehicles, or rape and murder are involved. 

Some Notes from the Oral Arguments:

The bulk of the arguments and questions dealt not with the ratio of punitive to compensatory damages but to the question of whether the jury could consider the impact of Philip Morris’s behavior toward other Oregonians besides the late Mr. Williams and his family

The proposed and rejected jury instruction at issue (number 34) stated, in part:

"The size of any punishment should bear a reasonable relationship to the harm caused to Jesse Williams by the defendant's punishable misconduct. Although you may consider the extent of harm suffered by others in determining what that reasonable relationship is, you are not to punish the defendant for the impact of its alleged misconduct on other persons, who may bring lawsuits of their own in which other juries can resolve their claims and award punitive damages for those harms, as such other juries see fit."

Robert Peck, arguing for Mayola Williams maintained that Philip Morris's proposed instruction was not permissible under Oregon law and so it was not an error to exclude it.  This was the finding of both the Oregon Court of Appeals and Supreme Court of Oregon.

Andrew Frey, arguing for Philip Morris asserted that it would not be fair to punish them for simply putting others at risk through its conduct.  Justice Stevens asked whether it would be fair to consider the risk to others in ascertaining the reprehensibility of the conduct where someone shot a machine gun into a crowd but only killed one person.

All justices engaged in the discussion with the exception of Justice Thomas, as is often the case. 

Transcript of the Oral Arguments

From the ABA:

Brief for Philip Morris [pdf]

Brief for Mayola Williams [pdf]

No. 05-1256
IN THE SUPREME COURT OF THE UNITED STATES

PHILIP MORRIS USA,
Petitioner,

v.

MAYOLA WILLIAMS,
Respondent.

BACKGROUND

The lawsuit was brought by the family of Jesse Williams, who smoked Marlboro cigarettes for 47 years, and resulted in a jury finding that Mr. Williams and Philip Morris were equally at fault for the fatal lung cancer suffered by Mr. Williams.  The jury awarded the family $800,000 in compensatory damages. In addition, the jury found that Philip Morris was guilty of common law fraud for its 50 years of lies and awarded $79.5 million in punitive damages, much of which, under Oregon law, is directed to special state funds to benefit victims of crime. The trial judge reduced the punitive damages to $32 million and both Philip Morris and The Estate of Jesse Williams appealed. 

The Oregon Court of Appeals rejected Philip Morris’s appeal but reinstated the $79.5 million punitive damages award on June 5, 2002.  Philip Morris appealed to the Oregon Supreme Court but was again rebuffed.  Then the company appealed to the U.S. Supreme Court, which had issued a decision in 2003 that can restrict awards of punitive damages that greatly exceed the underlying compensatory damages award (State Farm Insurance Co. v. Campbell).  The nation's high court sent the case back to the Oregon Court of Appeals so that it could reconsider its decision to restore the full punitive damages award in light of the State Farm decision and nullified the restoration of the $79.5 million award stemming from 2002's decision. 

But after applying the appropriate standards for reviewing punitive damages, on June 9, 2004, the Oregon Court of Appeals found ample reason to once again restore the jury's $79.5 million punitive damages verdict against Philip Morris.  The Court, at one point in the decision, states that "it is difficult to conceive of more reprehensible misconduct for a longer duration of time on the part of a supplier of consumer products to the Oregon public than what occurred in this case." Philip Morris then appealed to the Oregon Supreme Court for the second time.  This time, the highest court in Oregon agreed to review the verdict. See the Oregon Supreme Court's decision.

The court quotes State Farm on the appropriate size of punitive damages: "Single-digit multipliers are more likely to comport with due process, while still achieving the State's goals of deterrence and retribution, than awards with ratios in [the] range of 500 to 1, or, in this case [referring to Campbell v. State Farm], of 145 to 1."

Continuing to quote State Farm, the court noted that the U.S. Supreme Court, "did acknowledge, however, that even those tentative ratios might be adjusted up or down. A greater ratio might comport with due process if 'a particularly egregious act has resulted in only a small amount of economic damages . . .'."

The court concludes by excoriating Philip Morris's behavior:

Philip Morris's conduct here was extraordinarily reprehensible, by any measure of which we are aware. It put a significant number of victims at profound risk for an extended period of time. The State of Oregon treats such conduct as grounds for a severe criminal sanction, but even that did not dissuade Philip Morris from pursuing its scheme.

In summary, Philip Morris, with others, engaged in a massive, continuous, near-half-century scheme to defraud the plaintiff and many others, even when Philip Morris always had reason to suspect -- and for two or more decades absolutely knew -- that the scheme was damaging the health of a very large group of Oregonians -- the smoking public -- and was killing a number of that group. Under such extreme and outrageous circumstances, we conclude that the jury's $79.5 million punitive damage award against Philip Morris comported with due process, as we understand that standard to relate to punitive damage awards.

A recent Working Paper by Tobacco Control Resource Center attorney Sara D. Guardino and Northeastern University School of Law Professor Richard A. Daynard entitled "Punishing Tobacco Industry Misconduct: The Case for Exceeding a Single Digit Ratio Between Punitive and Compensatory Damages, [pdf]" supports the important role of punitive damages and distinguishes two types of reprehensibility: primary, concerning the reprehensibility of the defendant’s underlying conduct, and secondary,  involving the reprehensibility of the defendant’s “scorched earth” litigation tactics, which often result in the plaintiff’s inability to maintain an action against the defendant. [ University of Pittsburgh Law Review 2005;67.]  The Tobacco Control Legal Consortium, along with the Tobacco Control Resource Center submitted a friend of the court brief [pdf] in this case arguing that such litigation tactics should be taken into account when considering the role and constitutionality of punitive damages.

COMMENTARY

Edward L. Sweda, Jr., Senior Attorney for the Tobacco Products Liability Project at Northeastern University School of Law in Boston, noted that the, "U.S. Supreme Court has a golden opportunity to examine what the Oregon Supreme Court earlier this year unanimously termed the ‘extraordinarily reprehensible’ misconduct of tobacco giant Philip Morris,"

Mark Gottlieb, Director of the Tobacco Products Liability Project noted: "If ever there was a case where high punitive damages are required to punish and, more importantly, deter the sort of unconscionable corporate misbehavior and greed that was exhibited by Philip Morris, this is it.  The court has a clear choice between immunizing cigarette companies from responsibility for their actions by gutting a critical element of the civil justice system or holding corporate wrongdoers who cause massive harm and injury through a pattern of fraud and deceit motivated solely by greed accountable."

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The Tobacco Products Liability Project (TPLP) is a project of the Public Health Advocacy Institute assisting attorneys involved in tobacco-related litigation. The Public Health Advocacy Institute is committed to advocacy and research to further law in common cause with public health. PHAI is a non-profit corporation located at Northeastern University School of Law in Boston, Massachusetts. More information about PHAI is available at www.phaionline.org.