High Court Overturns $80M Verdict Against Philip Morris

The Supreme Court tightened the constitutional limits on punitive damages, setting aside a $79.5 million award in a smoker case against Altria Group Inc.’s Philip Morris USA unit.The justices, voting 5–4 in the case of an Oregon man who died of lung cancer, said a lower court improperly let jurors punish Philip Morris for the health problems of other smokers.“To permit punishment for injuring a non-party victim would add a near standardless dimension to the punitive damages question,” Justice Breyer wrote for the court.The decision gives new ammunition to frequent targets of product-liability suits, including Merck & Co., which faces as many as 40,000 claims over its withdrawn Vioxx painkiller, and Ford Motor Co., whose Explorer sport-utility vehicle has spawned hundreds of claims over rollover accidents. The Supreme Court had never before considered a punitive award in a health or personal-injury case.Chief Justice Roberts and Justices Kennedy, Souter, and Alito joined Justice Breyer in the majority. The ruling was the first for Chief Justice Roberts and Justice Alito on punitive damages.“This is a big win for the business community,” said Robin Conrad, senior vice president of the U.S. Chamber of Commerce’s litigation unit in Washington. “Today’s decision correctly addresses business’s concern that punishing defendants for harm to those not involved in the lawsuit denies a company the right to defend claims against it.”Separately, the court yesterday:• Overturned a $79 million antitrust award against lumber producer Weyerhaeuser Co. in a ruling that will help shield companies from claims that they illegally tried to drive a competitor out of business.• Refused to give companies more ability to create tax shelters, rejecting appeals in separate cases from Dow Chemical Co. and Goodrich Corp.• Refused to hear a tobacco industry bid to overturn a 75-cent-per-pack fee imposed on Minnesota consumers to help defray the state’s health care costs.Consumer lawyers questioned whether the punitive damages ruling would have much impact. The majority in the Philip Morris stopped short of declaring the award excessive, leaving open the possibility that the company might still have to pay millions of dollars. The justices sent the case back to the Oregon Supreme Court to consider the possibility of a reduction in the award or a new trial on punitive damages.“I would expect that they would uphold either the full amount or something very close to it,” said Edward Sweda Jr., a lawyer at the anti-smoking Tobacco Products Liability Project in Boston.Corporate lawyers, including Theodore Boutrous of Gibson Dunn & Crutcher, said a new trial was more likely. Mr. Boutrous has represented Ford in several accident cases.The ruling will give the company “an opportunity to fully and fairly defend itself in this and other cases,” Philip Morris’s vice president, William Ohlemeyer, said in a statement.Shares of New York-based Altria fell 25 cents to $85.95 at 4:02 p.m. in trading on the New York Stock Exchange.Justices Stevens, Ginsburg, Scalia, and Thomas dissented. The vote marked a shift for Justice Stevens, who had joined previous decisions limiting awards.Justice Thomas said the case “proves once again that this court’s punitive damages jurisprudence is insusceptible of principled application.”The case involved Jesse Williams, who smoked Marlboros for 42 years before dying of lung cancer in 1997 at age 67. Williams’s widow, Mayola, sued Philip Morris, the world’s largest cigarette maker.A state-court jury in 1999 issued the punitive award on top of $821,485 in compensatory damages, an amount later cut to $521,485 because of Oregon’s limits on awards. With interest, the total award had grown to more than $130 million.In a 2003 case involving State Farm Mutual Automobile Insurance Co., the Supreme Court said the Constitution’s due process clause generally caps punitive damages at 10 times compensatory damages and often imposes even tighter limits. That ratio was one of three “guideposts” the justices said lower courts should consult, along with a comparison to potential civil fines and the level of reprehensibility involved.The ratio in the Williams case was almost 100-to-1, based on the award issued by the jury. The Oregon Supreme Court nonetheless upheld the award, pointing to Philip Morris’s “extraordinarily reprehensible” conduct in deceiving the public about the dangers of smoking.During Supreme Court arguments in October, Mayola Williams’s lawyer, Robert Peck of the Center for Constitutional Litigation in Washington, acknowledged that juries may not punish for harm suffered by other people. But Mr. Peck said the jury in the Williams case had considered the impact on other smokers for a different purpose, to assess the reprehensibility of the tobacco company’s conduct.Justice Breyer said jurors can consider the risk of harm to others in assessing reprehensibility, as long as they don’t actually punish for that harm. He said states should set up procedures to help jurors make that distinction.In dissent, Justice Stevens questioned that approach, saying the majority had set up an artificial distinction.“This nuance eludes me,” Justice Stevens wrote. “When a jury increases a punitive damages award because injuries to third parties enhanced the reprehensibility of the defendant’s conduct, the jury is by definition punishing the defendant — directly — for third-party harm.”Mr. Peck said, “Ultimately, the decision basically means that you cannot use the multiplier of the amount of harm by the number of presumed victims out there,” he said. Still, business lawyers said companies will benefit from the court’s explicit statement that jurors may not punish for harm to others. “This issue comes up in virtually every product liability case,” Mr. Boutrous said.Philip Morris had asked the justices to limit punitive awards in many cases to four times compensatory damages, an approach that would have slashed the Oregon award to about $2 million. The majority opted not to address that issue.Jesse Williams began using cigarettes in 1950 while in the army in Korea. Williams, who worked as a school janitor, later switched to Marlboros and eventually smoked three packs a day.Mayola Williams said in court papers that her husband refused to stop smoking in part because of public assurances from Philip Morris that cigarettes don’t cause cancer. The company argued that Williams knew the risks and could have quit.

High Court Overturns $80M Verdict Against Philip Morris

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