Supreme Court dismisses appeal in tobacco case with $79.5 million verdict
The case was considered one of the most important of the current term because it suggested the justices were headed into a showdown with the Supreme Court of Oregon.
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The jury found that Philip Morris had engaged in a fraud while marketing its cigarettes, and it assessed punitive damages of $79.5 million. The jury also awarded compensatory damages to Ms. Williams of $821,000.Skip to next paragraph
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Estimates are that with interest, the punitive-damages award now totals more than $155 million.
The tobacco company has been urging the Supreme Court to strike down the $79.5 million verdict as unconstitutionally excessive. But the justices are sharply split on the issue, and the high court declined to address the excessive punitive-damages question head on in the Williams case.
Instead, in 2007, the court took issue with the trial judge's refusal to give the jury instruction requested by Philip Morris.
The justices ruled that as a matter of constitutional law, jurors cannot directly punish a company for harm caused to other alleged victims who are not named parties in the lawsuit. The court then remanded the case back to the Oregon courts with instructions to "apply the standard we have set forth."
The majority justices suggested that application of the new constitutional standard "may lead to the need for a new trial, or a change in the level of the punitive damages award."
Rather than apply the new standard to the case, the Oregon Supreme Court upheld the $79.5 million verdict. It did so on state-law grounds, thus bypassing the Supreme Court's instructions.
"There is little doubt that the Oregon Supreme Court engaged in procedural gamesmanship to sidestep constitutional limits on its powers that it doesn't like," said Richard Samp, chief counsel of the Washington Legal Foundation, in a statement. "[Tuesday's] action is disappointing because it allows the Oregon courts to get away with that sleight of hand."
Mr. Samp added, "Excessive punitive damages represent a grave threat to property rights and the ability of American businesses to compete in the world economy."
Edward Sweda of the Tobacco Products Liability Project praised the high court's dismissal. "I am especially delighted that the Williams family has finally achieved victory in its attempt to hold Philip Morris accountable in a court of law for its reprehensible misconduct," he said in a statement.
Various business groups in Oregon were hoping the US Supreme Court might provide solid answers and clear law on the punitive-damages issue.
"The disappointing thing from the standpoint of the associations that we represented in this is that we don't know why the court suddenly decided it was no longer interested in deciding the merits of the case," says Thomas Brown, a Portland lawyer who filed a friend-of-the-court brief on behalf of Associated Oregon Industries and other business groups.
For its part, the Oregon Supreme Court has seemed to address concerns about its ruling in the Philip Morris case. It did so in another punitive-damages case that was decided in March 2008.
In that case, Goddard v. Farmers Insurance, the Oregon court applied restraints established by the US Supreme Court in punitive-damages decisions issued in 1996 and 2003. The Oregon court said it was limiting punitive damages in the Goddard case to a 4-to-1 ratio of punitive damages to compensatory damages.
The court went on to say that such a single-digit ratio was almost always appropriate except in a few narrow circumstances such as the "extraordinarily reprehensible conduct" of Philip Morris in the Williams case.
It remains unclear precisely how much of the $155 million Ms. Williams will receive. Under state law, 60 percent of the award is to be turned over to a state crime-victims fund.