Philip Morris USA v. Williams, Mayola (02/20/2007)

Questions presented: (1) Whether, in reviewing a jury's award of punitive damages, an appellate court's conclusion that a defendant's conduct was highly reprehensible and analagous to crime can override the constitutional requirement that punitive damages must be reasonably related to the harm to the plaintiff? (2) Whether due process permits a jury to punish a defendant for the effects of its conduct on non-parties?

BY STEVEN ROSS JOHNSON, MEDILL NEWS SERVICE

Jesse Williams was a devoted husband and father who worked as a school custodian in Portland, Ore. He began smoking Marlboro cigarettes in his early twenties. Over the next 47 years, he developed a three pack-a-day habit, ignoring the large amounts of evidence compiled in that time that documented tobacco's hazardous health effects.

The undeniable proof for Williams, unfortunately, came in the form of an inoperable lung cancer diagnosis. Six months later, he was dead. He was 67.

In May of 1997, Williams' widow, Mayola, filed a lawsuit in an Oregon trial court against Philip Morris Inc., the parent company of Marlboro brand cigarettes, claiming the company knew for 50 years of the potential health risks its product posed, but failed to inform the public of those risks.

The trial began in February of 1999. Attorneys representing Williams argued that the efforts by Philip Morris to hide the dangers of smoking went well beyond simply ignoring the evidence. Rather a deliberate, clandestine campaign to dispel public concerns by instilling false impressions of serious debate going on within the scientific community over smoking's hazardous effects.

On March 31, a jury found Philip Morris had engaged in negligent and fraudulent practices, which made the company, along with Jesse Williams, equally at fault for his death and awarded $821,485 in compensatory damages.

What happened next would stand as the basis for a legal fight over the role monetary awards should, or should not play in punishing corporate misconduct.

In addition to compensatory damages, the jury found the fraud Philip Morris had perpetrated to be systemic, affecting a large group of individuals over a 50-year period, and awarded $79.5 million in punitive damages.

The trial judge in the case found that though the large punitive award "...was within the range a rational juror could assess based on the record as a whole," it was "...excessive under federal standards," and reduced the amount to $32 million.

The ruling was appealed by both Williams and Philip Morris to the Oregon Court of Appeals, where on June 5, 2002, the court reversed the trial judge's decision to reduce the award and reinstated the $79.5 million, rejecting Philip Morris's appeal. An appeal to the Oregon Supreme Court produced the same result for the tobacco giant.

Philip Morris sought review from the U.S. Supreme Court where the judgment of the Court of Appeals was vacated and sent back to that court to reconsider the punitive amount, in light of the Supreme Court's 2003 decision in State Farm v. Campbell.

In that case, the Court ruled awards for punitive damages could be restricted if it greatly exceeded the amount of the compensatory award. It also took the additional step of applying a mathematical test in determining a punitive damage award limit. Awards could not be more than nine times the amount of the compensatory amount, and in cases where the compensatory damages award was sizeable, the award amount for punitive damages was not to go beyond the compensatory amount.

The standard the Court applied in making its decision came from its 1996 ruling in BMW of North America v. Gore, in which it first established the three factors courts were to consider in determining a punitive damage award:

"(1)The degree of reprehensibility of the defendant's misconduct; (2)the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases."

The Oregon Supreme Court re-reviewed Philip Morris' appeal under these new qualifications, and again upheld the jury's punitive damage award of $79.5 million, stating in a written opinion by Justice W. Michael Gillette:

"Philip Morris showed indifference to and reckless disregard for the safety not just Williams, but of countless other Oregonians, when it knowingly spread false or misleading information to keep smokers smoking. Philip Morris's actions were no isolated incident, but a carefully calculated program spanning decades."

For those reasons, the court decided the jury had not violated the factors established in BMW v. Gore in assessing punitive damages. The amount of the award, though it appeared to violate the spirit of State Farm v. Campbell, could be reinstated based on the high degree of culpability it found for Philip Morris's acts of fraud on the people of Oregon at large.

Philip Morris returned to the U.S. Supreme Court, which on May 30, 2006, accepted review in the case, limiting consideration to the first and second questions in Philip Morris' petition for certiorari.

What came before the Court when it decided to hear the case, goes well beyond an issue of personal injury, individual versus corporation or even public perceptions of the tobacco industry.

The questions the Court is being asked to review are whether: a court can find a company's misconduct so egregious that it can go past the 9:1 ratio set out by the Court in Campbell, and whether juries can award punitive damages based on actions affecting those beyond the suing parties.

What the Court will attempt to answer is the functionality of the punitive damage award, as it pertains to its intended purpose.

The Court took this case because the tobacco industry is involved in litigation that's left some serious questions in the wake of its prior rulings," said Anthony J. Sebok, a law professor at Brooklyn Law School, who specializes in tort law.

Sebok said that allowing juries to award large monetary awards to punish companies that do harm to thousands, could begin a slippery slope if a company is hit with multiple judgments based on the outcome of a case such as Philip Morris v. Williams.

"How many plaintiffs can play this card until Philip Morris has been punished enough?" Sebok said. "A lot of times, juries are left to their own devices when deciding punitive monetary awards. It's possible juries may decide differently if they were instructed that they could not punish for what companies did to other people, but only for what they may have done to the person who filed the suit."

Robert Peck, one of the trial lawyers who represents Mayola Williams, said regulating the amount of punitive damage awards only benefits corporations such as Philip Morris and takes away the power to hold those who engage in misconduct truly accountable for their actions.

"I think holding courts to limits takes it away from jurors and judges," Peck said. "If the amounts are too small, large corporations begin to think it's just an acceptable part of the cost of doing business."

Both men agreed that the impact of the Supreme Court's decision could have long-lasting effects on lower courts, as well as provide a glimpse into the Court's future direction.

"This is the first time [since the addition of Chief Justice John Roberts and Justice Samuel Alito] that the Supreme Court is considering a personal injury, wrongful death claim," Peck said. "We will see what extent states' interests are supposed to be reflected."

On Feb. 20, 2007, by a vote of 5-4, the Supreme Court threw out the $78.5 milliion punitive damages award finding that the Oregon jury could not punish the tobacco company for injuring people, whom the Court called "strangers to the litigation." The majority opinion was written by Justice Stephen Breyer and joined by Chief Justice Roberts and Justices David Souter, Anthony Kennedy and Samuel Alito.

In so holding, the majority said it was not deciding whether the punitive award was unconstitutionally excessive, as Philip Morris had asked it to do. Instead, it ordered the state Supreme Court to reconsider, applying the new constitutional standard outlined in the decision.