Philip Morris - Saved by the U.S. Supreme Court

The Opinion is available at the U.S. Supreme Court website.

The Facts First:
In this state negligence and deceit lawsuit, a jury found that Jesse Williams’ death was caused by smoking and that petitioner Philip Morris, which manufactured the cigarettes he favored, knowingly and falsely led him to believe that smoking was safe. The Jury awarded $821,000 in compensatory damages and $79.5 million in punitive damages. The trial court reduced the latter award, but it was restored by the Oregon Court of Appeals. The State Supreme Court rejected Philip Morris’ arguments that the trial court should have instructed the jury that it could not punish Philip Morris for injury to persons not before the court, and that the roughly 100-to-1 ratio the $79.5 million award bore to the compensatory damages amount indicated a “grossly excessive” punitive award. The United States Supreme Court accepted certiori to hear the case.

The Legal Question Presented:
Were the punitive damages handed down by the jury a violation of the Due Process Rights of Philip Morris. This is based on the notion that the damages were meant to punish PM for injuries sustained by people who were not parties to the lawsuit, and Philip Morris thus did not have a chance to be properly heard on the matter?

The Issue, as presented by the Court it is as follows:
[Philip Morris] asked us to consider, among other things, (1) its claim that Oregon had unconstitutionally permitted it to be punished for harming nonparty victims; and (2) whether Oregon had in effect disregarded “the constitutional requirement that punitive damages be reasonably related to the plaintiff’s harm.” Pet. for Cert. (I). We granted certiorari limited to these two questions. For reasons we shall set forth, we consider only the first of these questions.

The Supreme Court Holding:
Yes, the punitive damages were an improper "taking" and a violation of the 14th Amendment Rights of Philip Morris.

For one thing, the Due Process Clause prohibits a State from punishing an individual without first providing that individual with “an opportunity to present every available defense.”
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For another, to permit punishment for injuring a non-party victim would add a near standardless dimension to the punitive damages equation. How many such victims are there? How seriously were they injured? Under what circumstances did injury occur? The trial will not likely answer such questions as to nonparty victims. The jury will be left to speculate. And the fundamental due process
concerns to which our punitive damages cases refer—risks of arbitrariness, uncertainty and lack of notice—will be magnified.

Essentially, the Court says that the Oregon Supreme Court applied the U.S. Supreme Court precedent incorrectly. They remanded for further proceedings consistent with their opinion. In english - The Oregon Court has to try again, and decide a new amount for Punitive Damages. One that won't violate the takings clause.

Lets think critically about this decision:
This was the plaintiffs attorney's fault. He got before the Jury and argued in closing that PM was harming tens of thousands of Americans with their product, and basically called on the Jury to send a message to the cigarette industry. Once the plaintiff's counsel argued about the "greater good" and the overall harm to society, they were outside the bounds of their case, and were just asking for trouble. This probably played a significant role in the trial court judge's decision to reduce the award from $79.5 Million to $32 Million.

It does beg a larger question: Why bring a case like this without establishing a "Class" and bringing it under Rule 23 of the Federal Rules? If you establish a large (and growing) class of individuals who were subject to the same harm, then you provide a Jury with the opportunity to down this kind of "large scale response" to what Big Tobacco has done to this country.

aside: In the interest of full disclosure, I should throw out there that I am a smoker. Philip Morris' own "Marlboro Lights" none the less.

So why is this here? Why is this being blogged about? The question has an easy answer...Because its interesting. Its news. It is a major win for Philip Morris, and Big Tobacco. It means that future plaintiffs bringing their case in State courts will need to form a Class Action suit in order to really "stick it" to the Tobacco Companies. No individual plaintiff will be permitted (in State court) to tag any corporation (Fast Food Industry, Tobacco, Alcohol, Firearms, etc.) with a large punitive award meant to prohibit larger-scale behavior.

Now we all wait and see what the Oregon Courts do, since there is still no "clear" standard about what % increase is permissible. All we really learned here is that this increase (from $800,000 in Compensatory to $80 Million in Punitive) was improper.

I will note that there is something really bizarre about the dissent in this case. The four members dissenting? Stevens, Ginsburg, Thomas, and Scalia. Seriously? Stevens and Scalia dissenting together has a strange sound to it. It should be noted that they dissented on different points.

Stay Tuned...