US SUPREME COURT ISSUES MAJOR PUNITIVES RULING


 

[Posted February 20, 2007] If you are among those attorneys who have complained that the US Supreme Court’s punitive damage jurisprudence is unfathomable (see below for one be-robed holder of this view), I am constrained to deliver some bad news to you. This morning, in Philip Morris USA v. Williams , the court took a big wooden spoon and stirred up the swamp, making the view muddier than ever.

I do not write to criticize or praise the outcome of the case; others will debate that today and in the days and weeks to come, and I leave that highly politicized discussion to them. I am convinced, however, that this ruling will lead to confused juries looking to confused judges for guidance.

Arising out of a wrongful death trial in Oregon, the case produced a massive ($79.5 million) punitive damage award against the giant cigarette manufacturer for the death of a long-time smoker. Philip Morris appealed two issues, but the Court decides only one here, holding (by a bare 5-4 majority) that a jury may consider a defendant’s conduct toward nonparties in deciding whether that conduct is reprehensible, but may not punish the defendant for the harm caused to those others. The specific holding is that a jury may not “use a punitive damages verdict to punish a defendant directly on account of harms it is alleged to have visited on nonparties.” (Slip op., at 7)

What’s so hard about that? In my view, it’s reconciling it with the Court’s previous ruling on punitives, and figuring out how to describe to juries the task before them. I share Justice Stevens’ view of the new distinction: “This nuance eludes me.” Or in the words of Justice Thomas’s short dissent: “Today’s opinion proves once again that this court’s punitive damages jurisprudence is ‘insusceptible of principled interpretation.’ ”

Imagine for a moment that you’re a juror, not a lawyer, and you’re instructed (as the Court rules today would have been correct) that you may consider the defendant’s conduct toward others in deciding whether to punish it, but you can’t punish it for the harm it did to others. Where does that leave you? Where does it leave the poor trial judge who will inevitably have to answer a knock on the jury room door to answer the eminently foreseeable question?

After today’s ruling, the state of the law on punitives is as follows (summarized in part at slip op., at 5):

1. While punitive damages are permissible, courts must review them to ensure they’re not grossly excessive. Honda Motor Co. v. Oberg (1994).

2. That review is de novo. Cooper Indust. V. Leatherman Tool Group (2001).

3. In performing that review, courts must consider the reprehensibility of the conduct, the actual harm caused, and the potential harm that could have been caused. BMW of N.A. v. Gore (1996).

4. An award of punitives that is more than ten times the compensatory award is probably excessive. State Farm v. Campbell (2003).

5. The jury must consider actual or potential harm to others in deciding whether to award punitives, but must not consider such harm in deciding how much to award.  Philip Morris USA v. Williams.

Today’s ruling affects the third factor listed above, in defining what goes into the reprehensibility analysis. The majority finds that punishing a defendant in a given case for harms done to nonparties is a violation of procedural due process. In that sense, the majority has a point; exposing it to such liability risks multiple recoveries for the same injury, and deprives it of the opportunity to fully and fairly litigate the claims of the non-parties. As the Court correctly points out, some of the other smokers who died as a result of smoking Philip Morris’s cigarettes might have done so with full knowledge of the danger of smoking.

But I invite you to recall the purpose of punitives: To punish the wrongdoer. How, exactly, does a juror consider the reprehensibility of certain conduct in deciding whether to award punitives, yet segregate that conduct from its damage award? I see no principled way to do that, making me wonder whether this ruling will undercut the very rationale for punitive damages themselves. The four opinions handed down today (the majority, written by Justice Breyer, and dissents written by Justices Ginsberg, Thomas, and Stevens), seem to acknowledge that punitives serve a lasting purpose; today’s ruling pins that purpose to the harm caused to the plaintiff, not to society as a whole. Isn’t that what compensatory damages are for?

Viewing the related context of criminal punishment, Justice Stevens notes today, “A murderer who kills a victim by throwing a bomb that injures dozens of bystanders should be punished more severely than one who harms no one other than his intended victim.” Most of us would agree with this sentiment. But from today forward, that scenario is anachronistic in the realm of punitive damages.

Today’s ruling will inevitably, and correctly, be seen as a victory for the business community, which has been fearful of mass-tort punitive damage awards. The result of the new rule of law won’t mean fewer punitive awards, but it will mean smaller ones, assuming that juries are able to correctly apply the court’s holding.

One final point:  The plaintiff’s lawyers must have done a very thorough job at trial of proving reprehensibility.  Two of the dissenting opinions refer (at least indirectly) to the strength of the evidence against Philip Morris on the underlying claim of deceit; the majority at least acknowledges this as the basis for the punitives award.  That, at a minimum, might prove to be more unwelcome bad press for an industry that already suffers from image problems.  Still, saving nearly eighty million dollars (for now; the matter is remanded for a new trial) will assuage one’s hurt sensibilities.