Supreme Court case: Are jury awards too high?

Jesse Williams smoked two packs of cigarettes a day for 45 years. Following his death in 1997 after being diagnosed with lung cancer, his wife, Mayola, sued the Philip Morris tobacco company seeking $100 million in punitive damages.

The Oregon jury that heard her case rejected the $100 million request. Instead, it awarded her $79.5 million.

Tuesday, the case arrives at the US Supreme Court where lawyers for Philip Morris are asking the justices to strike down the punitive damage award as constitutionally excessive and fundamentally unfair. The case, Philip Morris v. Mayola Williams, is being closely watched to see whether a majority of justices are willing to issue strict guidelines to identify when a punitive damage award is unconstitutionally excessive.

Lawyers for Philip Morris say the judge in the case allowed the jury to punish the tobacco company for alleged harms done to other smokers in Oregon beyond the specific harm suffered by Mr. Williams and his family.

They also argue that the $79.5 million award violates "guideposts" set by the Supreme Court in earlier cases barring punitive damage verdicts that are out of proportion to the harm done.

Lawyers for Ms. Williams counter that Philip Morris engaged in a massive and deadly fraud by pushing an addictive product on the public while concealing information it knew about the unhealthful effects of smoking.

Instead of supporting a government health campaign against smoking in the 1960s, 1970s, and 1980s, the tobacco company cast doubt on research showing the deadly effects of smoking. The lawyers say Philip Morris launched a deceptive public campaign to offer a crutch and an excuse to its addicted customers so they would keep using their product. Under these circumstances, the lawyers say, the $79.5 million award is appropriate rather than excessive.

"Where a fraud is as monstrous as this one was in its willingness to put lives at risk for profit, strong medicine is required," writes Robert Peck, a Williams lawyer, in his brief.

In recent years, the Supreme Court has moved toward limiting large punitive damage awards by establishing a three-part test. But the champion of that approach, Justice Sandra Day O'Connor, has retired from the court and it is unclear how the newest members of the court, Chief Justice John Roberts and Justice Samuel Alito, will view the issue.

In addition, some state courts have declined to strictly apply the high court's three-part test and have allowed large punitive damages.

"What is really at stake fundamentally is the Supreme Court's holdings on whether there is an outer limit to punitive damages," says Sherman Joyce of the American Tort Reform Association in Washington. "It seemed to us that the Oregon courts had not been faithful to the Supreme Court's holdings."

Trial lawyers and their supporters argue that the high court never completely closed the door on large punitive damage awards in cases involving extraordinarily reprehensible conduct. In such cases, they say, the size of punitive damage awards should be up to juries and to state lawmakers, rather than Supreme Court justices.

"Punitive damages throughout the history of our country have been a matter relegated to the states," says Edward Sweda of the Tobacco Control Resource Center at Northeastern University School of Law in Boston. "If Oregonians thought that punitive damage awards were too high, they could go to their lawmakers to enact a cap, but they have chosen not to do so."

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.

"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.