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Supreme Court case: Are jury awards too high?

The High Court hears Tuesday a case where the widow of an Oregon smoker got $79.5 million.

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In the Williams case in Oregon, a lawyer for Williams urged the jury to consider not only how the tobacco company had injured his client but how other smokers in Oregon had been injured as well. The lawyer raised the issue in his closing argument even though the jury had heard no evidence concerning other Oregon smokers.

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"When you determine the amount of money to award in punitive damages against Philip Morris ... it's fair to think about how many other Jesse Williams[es] in the last 40 years in the State of Oregon there have been," the lawyer said. "It's more than fair to think about how many more are out there in the future."

Philip Morris lawyers asked the judge to issue a special instruction to the jurors before their deliberations to make sure the panel didn't punish the company for hypothetical injuries allegedly suffered by other Oregon smokers – or potential injuries yet to be suffered by smokers in the future.

The judge refused. The $79.5 million punitive damage award was cut in half on appeal, but later reinstated. Ultimately, it was upheld by the Oregon Supreme Court.

Philip Morris attorney Andrew Frey says there is no historical precedent supporting the Oregon punitive damage award. "Only three years ago, this court held that a defendant cannot be punished in an individual action for harms to persons other than the plaintiff," he writes in his US Supreme Court brief.

Lawyers for Williams say the references to other Oregon smokers were intended to help jurors quantify the magnitude of the offense, not calculate individual punishments. "Philip Morris conflates consideration of total harm within Oregon and the enormity of the offense with punishment for the thousands of Oregonians also defrauded. The two are not the same," Mr. Peck writes in his brief.

In earlier decisions, the Supreme Court ruled that a judge assessing punitive damage awards must consider three factors before deciding whether the award should be struck down as excessive.

The three so-called guideposts are: the reprehensibility of the defendant's conduct, the ratio between the amount of compensatory damages awarded and the punitive damage award, and the difference between the punitive damage award and other civil or criminal sanctions that could be imposed for similar misconduct.

The courts in Oregon concluded that Philip Morris's conduct was so reprehensible that it outweighed the two other factors.

Under the ratio guidepost, the high court has suggested that most punitive damage awards should fall within a single-digit ratio of compensatory damages. In contrast, the ratio in the Philip Morris case is 97:1.

The last time the Supreme Court addressed the punitive damage issue in 2003, it left the door open for larger ratios in instances of "particularly egregious" conduct.

"Because there are no rigid benchmarks," Justice Anthony Kennedy wrote for the majority in a case called State Farm v. Campbell, these larger ratios may be acceptable "where a particularly egregious act has resulted in only a small amount of economic damages."

In the wake of that decision, several state courts have allowed sizable punitive damage awards, and some analysts suggest that those courts haven't been faithful to the Supreme Court's holding. Now the question is whether the court will close the door it left open in the State Farm case, or throw it wide open and allow state lawmakers and individual juries to decide how large is too large for punitive damage awards.