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Supreme Court Decision Update - Philip Morris USA v. Williams

ciggy.jpgOf the three Supreme decisions to come down today, Philip Morris USA v. Williams (PDF of the opinions), is the furthest of the bunch from a unanimous one, coming in as a 5-4 decision. The decision is about whether large punitive damage awards comport with the Constitutional requirement for due process, and the majority says “nuh-uh.”

QuizLaw Analysis: This thing boils down real simple-like. Smoking is bad for you. Cigarettes are bad for you. But excessive punitive damages are bad for Big Tobacco.

This is a case brought by smokers? Actually, it comes from a case brought by one smoker or, more accurately, one smoker’s estate. Jesse Williams was a long-time Marlboro smoker and, after his death, his widow sued Philip Morris in Oregon. At the trial:

A jury found that Williams’ death was caused by smoking; that Williams smoked in significant part because he thought it was safe to do so; and that Philip Morris knowingly and falsely led him to believe that this was so.

With connection to its finding that Philip Morris was deceitful, the jury award about $820,000 in compensatory damages, and $79.5 million in punitive damages.

Isn’t $80 million a bit excessive? Well, that’s what the trial judge thought, reducing the award to $32 million. Both sides appealed, and the case worked its way up and down the appellate ladder - the Oregon Court of Appeals rejected Philip Morris’ appeal and reinstated the $79.5 million award, the Oregon Supreme Court denied review, the Supremes remanded the case back down to the Oregon Court of Appeals, and then it went back to the Oregon Supreme Court, which heard it the second-time around.

And what happened at the Supreme Oregon level? Philip Morris made two arguments that are relevant for this decision. First, it argued that the trial court should have accepted a proposed instruction for “punitive damages” which would’ve told the jury that it can’t punish Philip Morris for injury to folks that weren’t before the court (i.e., all other smokers). Philip Morris particularly wanted this instruction in light of the defense attorney’s repeated comments about how many folks smoke and are likely injured by cigarettes. Now the judge did instruct the jury: “that ‘[p]unitive damages are awarded against a defendant to punish misconduct and to deter misconduct,’ and ‘are not intended to compensate the plaintiff or anyone else for damages caused by the defendant’s conduct.’” But Philip Morris argued that this instruction wasn’t good enough, and that some of the punitive award was probably punishment for harm to others.

Second, Philip Morris argued that the punitive award had a “roughly 100-to-1 ration” to the compensatory award. The Supremes have previously suggested that punitive damages should be “two, three or four times the size of compensatory damages,” and while they can be greater, that “’[s]ingle-digit multipliers are more likely to comport with due process.’” One hundred-to-one, said Philip Morris, flies in the face of due process.

The Oregon Supremes told Philip Morris to toss-off, and left the large punitive award.

The real Supremes then took the case, granting cert on two issues, although they only decide one of those issues today.

And who’s doing the deciding? As mentioned, this is a 5-4 decision. The majority opinion comes from Justice Breyer, and he’s joined by Chief Justice Johnny and Justices Kennedy, Souter and Alito. Justices Stevens and Thomas each filed a dissenting opinion on their own, and Justice Ginsburg also filed a dissenting opinion, though The Scalia and Thomas joined in her dissent.

So what do Breyer and company have to say? This decision boils down to a very simple holding: if a jury award for punitive damages is based in part on a desire to punish the defendant for harming folks who aren’t party to the lawsuit, that’s an unconstitutional taking of property.

As Breyer outlines it, it’s ok to use punitive damages to punish bad conduct and deter folks from repeating such bad conduct. But a state must have proper standards in place to reign in the jury’s ability to issue punitives, both so that there’s “fair notice” of how bad punitives can be, and also to keep from having purely “arbitrary punishments.” Thus, the Constitution has been understood to impose limits “both to procedures for awarding punitive damages and to amounts forbidden as ‘grossly excessive.’”

Breyer and company decide that they can skip the question of whether the punitives in this case were grossly excessive, and just handle the question of whether they complied with the Constitutional limitations regarding procedure.

So the Oregon jury’s award doesn’t comply with Constitutional procedural limitations? Well, turns out that’s not really the question. Instead, the problem is that the Oregon Supremes didn’t answer the relevant Constitutional question in the right way.

Well, what are the Constitutional procedural limitations A state can’t allow juries to use punitives to punish a defendant for injuries which may have been inflicted on folks who aren’t party to a litigation. In such a situation, the defendant can’t really defend against claims that it injured non-parties (for example, without the people there, Philip Morris couldn’t show that the person knew smoking was bad). Plus, there would be no real way to apply a standard to such a broad scope of punitives, and without a standard, the due process concerns become even worse - punitives are likely to be more arbitrary, more uncertain, and not able to provide notice to defendants of what possible punitives they can expect. And finally, Breyer says there’s no authority that he’s aware of to support the idea that punitives can be used “for punishing a defendant for harming others.” Sure, you can show evidence that there was harm to others, but only in so far as you’re using it to show how reprehensible the defendant’s actions were. To make sure everything works properly, Breyer says:

[T]he Due Process Clause requires States to provide assurance that juries are not asking the wrong question, i.e., seeking, not simply to determine reprehensibility, but also to punish for harm caused strangers.

And this isn’t what the Oregon Supremes said? No sir. They talked about more than just reprehensibility in rejecting Philip Morris’ appeal. They misinterpreted prior Supreme rulings on related issues, and so Breyer and company want to make it real clear right now that “a jury may not punish for the harm caused [to] others.” States can be flexible, a little, in figuring out their own procedures, but they must insure that juries are only considering harm to others for the purposes of “reprehensibility” and are not issuing punitives which punish for harm to others. In other words, “federal constitutional law obligates [the state] to provide some form of protection in appropriate cases.”

So the Oregon Supremes need to take a look at the case again, keeping this constitutional standard in mind. And since that review may end up with a new trial in this case, or at least a change in the punitive damages award, Breyer skirts the issue of whether this particular punitive award was “grossly excessive.”

Is that it for the majority? Yes.

So what’s Stevens’ point of dissent? Stevens agrees that the Fourteenth Amendment’s Due Process clause “imposes both substantive and procedural constraints on the power of the States to impose punitive damages on tortfeasers.” But he thinks that the Oregon Supremes applied the law properly. First, while he agrees with Ginsburg (as we’ll get to in a minute) that there was no procedural error during the trial, his real concern is that Breyer and the majority have imposed “a novel limit on the State’s power to impose punishment in civil litigation.” He’s got no problem with punishing a bad guy for harming others and the “distinction between taking third-party harm into account in order to assess the reprehensibility of the defendant’s conduct - which is permitted - from doing so in order to punish the defendant ‘directly’ - which is forbidden,” is a “nuance” which eludes him.

Stevens sees this decision as an expansion of substantive due process, breaking new ground and likely to cause more trouble than good.

And Justice Thomas? While Thomas joins Ginsburg’s dissent, he wanted to take a minute to reiterate his view that “the Constitution does not constrain the size of punitive damages awards.”

And finally, what sayeth Ginsburg? She dissents, joined by The Scalia and Thomas, because she doesn’t think the Oregon courts even ruled against Breyer’s notion that a jury can consider harm to others “as a measure of reprehensibility, but not to mete out punishment for injuries in fact sustained by nonparties.” She finds it inexplicable that the Oregon Supremes’ decision has been vacated, both because she thinks they got the law right and because she doesn’t think Philip Morris actually preserved an objection to the jury instructions.