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Supreme Court throws out Philip Morris verdict

The Supreme Court threw out a $79.5 million award that a jury had ordered a cigarette maker to pay to a smoker’s widow, a ruling that could bode well for other businesses seeking stricter limits on big-dollar verdicts.
/ Source: The Associated Press

The Supreme Court threw out a $79.5 million award that a jury had ordered a cigarette maker to pay to a smoker’s widow, a ruling that could bode well for other businesses seeking stricter limits on big-dollar verdicts.

The 5-4 decision Tuesday was a victory for Altria Group Inc.’s Philip Morris USA, which contested an Oregon Supreme Court decision upholding the jury’s verdict.

Yet the decision did not address a key argument made by Philip Morris and its supporters across a wide range of businesses — that the size of the award was unconstitutionally large. They had hoped the court would limit the amount that can be awarded in punitive damage cases.

Instead, Justice Stephen Breyer wrote in his majority opinion that the award to Mayola Williams could not stand because a jury may punish a defendant only for the harm done to the person who is suing, not to others whose cases were not before it.

“To permit punishment for injuring a nonparty victim would add a near standardless dimension to the punitive damages question,” Breyer said.

The company had argued that the jury was encouraged to punish Philip Morris for health problems suffered by every Oregonian who smoked its cigarettes.

Chief Justice John Roberts and Justices Samuel Alito, Anthony Kennedy and David Souter, joined with Breyer.

Dissenting were Justices Ruth Bader Ginsburg, Antonin Scalia, John Paul Stevens and Clarence Thomas. Ginsburg said Tuesday’s ruling made punitive damages law even more confusing.

Jesse Williams died of lung cancer in 1997 at the age of 67. He had smoked two packs a day of Philip Morris-made Marlboros for 45 years.

His widow argued that the jury award was appropriate because it punished Philip Morris for a decades-long “massive market-directed fraud” that misled people into thinking cigarettes were not dangerous or addictive.

She won compensatory damages of $800,000 and punitive damages of $79.5 million — 97 times the compensatory damages — in the fraud lawsuit she filed against Philip Morris. A state court previously cut the compensatory award to $500,000, which is unaffected by Tuesday’s ruling.

The case now goes back to the Oregon high court, which could order a new trial, reduce the award or reinstate its decision.

Punitive damages are money intended to punish a defendant for bad behavior and deter repetition.

Lawyers who defend companies against product-liability claims said Tuesday’s ruling would help curtail large jury awards.

A jury will have to be told “that it cannot punish for conduct that may be directed to others. That’s really the crucial part of this decision,” said Sheila Birnbaum, who won a punitive damages case in 2003 when the Supreme Court struck down a $145 million verdict against State Farm Mutual Automobile Insurance Co.

Yet trial lawyers on the other side of the issue said the court could have severely restricted plaintiffs if it had chosen to spell out how high punitive damages could go in relation to actual damages. Philip Morris argued that punitive damages should not exceed 4 times the amount of actual damages, also known as compensatory damages.

The court instead stated a principle that state courts already adhere to widely and one that the Oregon Supreme Court also applied.

“There is almost no court in this country that has been applying a standard that you punish someone for harm done to others,” said Arthur Bryant, executive director of Trial Lawyers for Public Justice. “I don’t think it’s a setback at all.”

Philip Morris vice president William Ohlemeyer said the decision gives the company “an opportunity to fully and fairly defend itself in this and other cases.”

The Chamber of Commerce, National Association of Manufacturers and trade associations representing car and drug makers have weighed in on behalf of tighter restrictions on damage awards.

The case also was watched closely as a test of whether the new makeup of the Supreme Court would lead to changes in its prior rulings limiting punitive damages.

Roberts and Alito, the two newest members, were in the majority Tuesday, giving no hint of a change in the court’s approach to punitive damages.

The case is Philip Morris USA v. Williams, 05-1256.