Court tosses Philip Morris verdict
WASHINGTON – The Supreme Court on Tuesday overturned a nearly $80 million verdict intended to punish the Philip Morris tobacco company for endangering the lives of smokers, and set limits on how jurors can decide to make big companies pay for wrongdoing.
The court’s 5-4 written decision said that an Oregon court had improperly allowed juries to calculate the harm done to many in deciding the damages paid to an individual.
The court ruled that the Constitution’s due process clause forbids a state from using punitive damages to punish a company for injury that it inflicts upon others who are, “essentially, strangers to the litigation,” according to the majority opinion written by Justice Stephen Breyer.
The case was seen at the beginning of the term as one of the most important business decisions the court under the new Chief Justice John Roberts would make, and it was clearly a victory for Philip Morris and other big companies. It continues the reasoning in the court’s recent rulings that punitive damages – aimed at punishing a company and deterring future wrongdoing – must be proportionate to the wrong committed.
“This is a really important case for the business community, and a big win,” said Robin Conrad, senior vice president of the National Chamber Litigation Center of the U.S. Chamber of Commerce. She said it would be valuable to insurance companies, automakers, pharmaceutical manufacturers and others hit with large punitive damages awards in recent years.
But in sending the case back to Oregon courts for further litigation, the justices sidestepped a decision that industry had most wanted: whether to set a cap on how much could be awarded for punitive damages, perhaps based on a specific ratio to the actual damages done to the individual who brought the suit.
The case involved Jesse Williams, a Portland janitor who smoked at least two packs of Marlboros every day for 45 years, and died of lung cancer in 1996. Philip Morris, now owned by Altria Group, had denied during that time that its cigarettes were addictive, and at trial, lawyers for his estate told the jury to consider the damage done to other smokers in Oregon.
The lawyer for Williams’ widow, Mayola, told the jury to “think about how many other Jesse Williamses in the last 40 years in the state of Oregon there have been.”
The jury awarded Mayola Williams $821,000 in compensation, then tacked on the $79.5 million punitive award. (Not all states allow punitive awards; in Oregon, 60 percent of the award goes to the state, Peck said.)
The nearly 100-1 ratio of punitive damages to compensatory damages is far outside the “single-digit” ratio the Supreme Court has suggested in previous cases, but a firm limit has never been set.
The majority opinion issued Tuesday agreed with Williams that the jury could hear evidence of harm to others to show that a company’s conduct was reprehensible, which could increase the punitive damages award.
But Breyer wrote a “jury may go no further than this and use a punitive damages verdict to punish a defendant directly on account of harms it is alleged to have visited on nonparties.”