Supreme Court Will Hear Case on High Punitive Damages

The Supreme Court on Tuesday signaled its return to the thorny issue of high punitive damages, agreeing to review a $79.5 million verdict against Philip Morris USA for the death of a single Oregon smoker.

The Court added Philip Morris USA v. Mayola Williams to its docket for the fall, responding to pleas by the business community for clearer guidance on when punitive damages are excessive.

The Philip Morris dispute is the Court’s first punitive-damages case since State Farm v. Campbell, the 2003 ruling that business advocates hoped would temper spiraling punitive-damage verdicts in courtrooms nationwide. The State Farm decision limited consideration of nationwide harm beyond the specific case in litigation and said punitive damages that exceeded compensatory damages by more than a 9-1 ratio were constitutionally suspect.

But since then, lower state and federal courts have varied widely in their interpretations of the State Farm decision, in some instances allowing high punitive damages that far exceeded the single-digit ratio if corporate wrongdoing was especially egregious. “We thought the Court spoke clearly enough in State Farm, but maybe the Court needs to say it again, more clearly and with emphasis,” said Robin Conrad, senior vice president of the National Chamber Litigation Center, which filed a brief in the case urging the Court to grant review.

In the case before the Court, Korean War veteran Jesse Williams died of lung cancer in 1997 after smoking for more than 40 years. His widow sued the company, and during the trial her lawyers urged the jury to consider “how many other Jesse Williams[es]” might have died because of Philip Morris’ fraud and negligence. The jury awarded her $821,485 in compensatory damages and $79.5 million in punitives. Even when both awards were reduced on appeal, the ratio of punitives to compensatories was 39-to-1. The Oregon Supreme Court upheld the original $79.5 million verdict, applying the guideposts of State Farm and BMW v. Gore, an earlier Supreme Court precedent that allowed consideration of the reprehensibility of the defendant’s conduct.

In its petition to the Supreme Court, Philip Morris argued that the Oregon Supreme Court’s analysis, if upheld, would unfairly allow limitless punitive damages as long as a high degree of reprehensibility is found. “A jury may never punish a defendant for harms to non-parties because doing so would inevitably expose the defendants to the risk of unconstitutional duplicative punishments,” wrote Andrew Frey of Mayer, Brown, Rowe & Maw, author of the Philip Morris brief.

But Robert Peck, lawyer for Mayola Williams before the Court, said in an interview that the Oregon Supreme Court “scrupulously applied” the Court’s precedents, which he says still allow for high damages in egregious cases.

Peck also said the fact that the Court granted review in the case does not necessarily mean it will restrict punitive damages further, even though two new justices have joined the Court since State Farm. “We don’t have much information about the new justices’ views on punitive damages, but they both come from a history of respect for juries,” said Peck, whose for-profit Center for Constitutional Litigation rents space from the Association of Trial Lawyers of America and counts ATLA among its clients.

Tony Mauro  Reprinted from Legal Times May 31, 2006

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