US Supreme Court takes up tobacco case for third time

Mayola Williams has been fighting cigarette manufacturer Philip Morris for nine years to collect $79.5 million in punitive damages on behalf of her late husband. In fact, the case has been in litigation so long that the award – with interest – now exceeds $145 million.

On Wednesday, lawyers for Ms. Williams and Philip Morris returned to the Supreme Court for a third time to face a lineup of justices who are deeply divided over the case. At the center of the most recent dispute is an ongoing tug of war between America's highest court and the highest court in Oregon. The controversy raises thorny issues of supremacy at the intersection of a multitiered court system designed to balance state and federal power.

Twice the US Supreme Court asked the Oregon courts to reexamine Williams's award to make sure that it complies with constitutional safeguards against excessive punishment. Twice the Oregon courts have upheld the original $79.5 million verdict. Both times, Philip Morris asked the Supreme Court to intervene.

How a majority of justices might resolve the dispute remained unclear by the conclusion of Wednesday's hour-long oral argument.

At issue in this latest version of Philip Morris v. Williams (07-1216) is whether the Supreme Court of Oregon acted properly when it sidestepped a US Supreme Court decision ordering the Oregon courts to apply a federal due process standard to the case and then consider reducing the amount of the award or order a new trial.

Instead, the Oregon Supreme Court avoided applying the US Supreme Court's federal constitutional analysis and announced that it was upholding the $79.5 million award solely on state law grounds.

"It is truly a game of gotcha that just nullifies the defendant's due process rights," Philip Morris's lawyer Stephen Shapiro told the justices.

Williams' lawyer Robert Peck countered that the US Supreme Court's order was conditional and that the Oregon high court had relied on a 92-year-old state law rule supporting its decision.

Mr. Peck said state courts retain the flexibility to identify a procedure under state law to address the due process issue raised by the US Supreme Court.

Justice Stephen Breyer said that his thinking about the case had evolved. He said when the appeal was first presented he considered the Oregon high court's actions a "run-around." He added, "I'm not sure I think that now."

Later in the argument, Justice Breyer asked why the Oregon high court hadn't raised the state law issue earlier in the case "and saved everybody a lot of trouble."

Justice Antonin Scalia asked if Peck was arguing that the Supreme Court's remand order to the Oregon court was in error. He added, "If you say it's in error, my next question is going to be is it up to a state court to sit in judgment about whether our remand orders are in error or not?"

Peck responded: "The Oregon Supreme Court took that remand order to mean that they had to have in place ... a procedure that was fair, outcome neutral...."

Justice Scalia interjected: "If that's what they took it to mean, they were just wrong. That's not what it says." He then read part of the order: "We remand so that the Oregon Supreme Court can apply the standard we have set forth."

Peck said there is no indication that the Oregon Supreme Court's decision does not comply with the high court's directive.

"The problem that I think we all have is how do we guard against making constitutional decisions which are simply going to be nullified by some clever device, raising a procedural issue or an issue of state law when the case goes back [to the state courts]," Justice David Souter said.

Near the end of the session, Chief Justice John Roberts said the Supreme Court could avoid similar situations in the future by squarely deciding the excessive punitive damages issue in the case, rather than sending the issue back for state judges to decide.

The case is being closely watched because a number of justices have been trying for several years to articulate a workable system of constitutional limitations on what are viewed by some analysts as excessive multimillion-dollar punitive damages verdicts.

The justices are sharply divided over the issue, with Scalia and Justice Clarence Thomas opposed to any effort to limit punitive damages because they say the Constitution places no limits on them. Justices John Paul Stevens and Ruth Bader Ginsburg have also opposed such limits.

The latest action of the Oregon high court raises the possibility that the Supreme Court might use the case to clarify when state courts are required to follow Supreme Court instructions and when they aren't. But from their questions, the justices did not appear to be lining up behind any particular approach.

For its part, Philip Morris is asking the court to throw out the punitive damages award and order a new trial.

Lawyers for Williams are urging the Supreme Court to allow the Oregon decision to stand so their client can collect the award.

The case stems from a 1999 trial. Williams charged in her lawsuit that Philip Morris deceived her late husband, Jesse, into believing that his three-pack-a-day addiction to cigarettes was not life threatening, or even unhealthy.

Philip Morris denied fraud allegations, saying everyone knows cigarettes may be hazardous to your health.

The current dispute focuses on the trial judge's instructions to the jury. Philip Morris's lawyers were worried that the jurors might try to punish the company for harms not just to Jesse Williams but to other smokers not involved in the case.

The judge declined to give the company's suggested instruction to the jury.

The jury found Philip Morris had engaged in a fraud while marketing its cigarettes, and assessed punitive damages of $79.5 million.

A decision is expected in the case by June.