Award to smoker’s widow out
But the high court’s ruling in the Philip Morris case is narrow
From Staff and Wire Reports, Richmond Times-Dispatch – February 21, 2007
WASHINGTON — The Supreme Court yesterday threw out a $79.5 million award that a jury had ordered Philip Morris USA to pay to a smoker’s widow. The ruling could bode well for businesses seeking stricter limits on big-dollar verdicts.
But the 5-4 decision was a mixed outcome for Henrico County , Va. -ased Philip Morris, which contested an Oregon Supreme Court decision upholding the jury’s verdict.
The decision did not address a key argument made by the cigarette company 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, the court set aside the award because the jury wasn’t instructed properly and didn’t realize it couldn’t consider harms caused to smokers other than the plaintiff’s husband.
“To permit punishment for injuring a nonparty victim would add a near standardless dimension to the punitive damages question,” Justice Stephen G. Breyer wrote in his majority opinion.
The ruling also does not free Philip Morris from having to pay punitive damages in the case. It now goes back to the Oregon high court, which could order a new trial, reduce the award or reinstate its decision.
“There will be punitive damages,” said Michael Krauss, a law professor at George Mason University . “But I think the [damages] will be much, much less than $79 million.”
Punitive damages are money intended to punish a defendant for bad behavior and deter repetition.
Wall Street was unmoved by the decision. Shares of Philip Morris USA parent company Altria Group Inc. closed at $85.95, down 25 cents, on the New York Stock Exchange.
The court “answered one question, but not the big question,” Standard & Poor’s analyst Ray- mond Mathis said. “It’s a big win for tobacco, but not as decisive a win as the industry might have hoped.”
The lawsuit was filed by the widow of Jesse Williams, who died of lung cancer in 1997 after smoking two packs a day of Philip Morris-made Marlboros for 45 years. She won compensatory damages of $800,000 and punitive damages of $79.5 million, or 97 times the compensatory damages.
She 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. The company had argued that the jury was encouraged to punish Philip Morris for health problems suffered by every Oregonian who smoked its cigarettes.
Philip Morris also argued that punitive damages should not exceed four times the amount of actual damages, also known as compensatory damages. The Chamber of Commerce, National Association of Manufacturers and trade associations representing car and drug makers also have weighed in on behalf of tighter restrictions on damage awards.
Still, the ruling will help companies defend themselves against large jury awards in product-liability claims, some experts said.
“The most important thing is that the court said, for the very first time, that the amount of punitive [damages] can only be a function of the harm done to the plaintiff, not to anybody else,” George Mason University ‘s Krauss said.
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.”
Other legal experts agreed with Justice Ruth Bader Ginsburg that the ruling made the law more confusing.
The decision “will lead to confused juries looking to confused judges for guidance,” Steve Emmert, a lawyer in Virginia Beach and chairman of the appellate practice subcommittee for the Virginia State Bar, wrote on his Web site yesterday.
As for the practical effect, Emmert said, “I think it will decrease the size but not decrease the number of punitive damage awards.”
Chief Justice John G. Roberts Jr. and Justices Samuel A. Alito Jr., Anthony M. Kennedy and David H. Souter voted with Breyer. Dissenting were Justices Antonin Scalia, John Paul Stevens, Clarence Thomas and Ginsburg.
In other action, the court:
* Chose not to overturn a 75-cent-per-pack fee imposed on Minnesota consumers to help defray the state’s health-care costs. The justices, without comment, rejected industry claims that the surcharge violates the 1998 settlement between the state and the nation’s largest cigarette makers. Minnesota ‘s so-called health-impact fee, put in place in 2005, adds about $200 million a year to the state’s coffers. Two other state taxes add an additional 73.5 cents to the cost of each pack.
* Threw out a $79 million award against Weyerhaeuser Co. in a lawsuit alleging the forest-products company tried to monopolize the hardwood-lumber market in the Pacific Northwest . The 9-0 decision comes in the case of a defunct lumber mill that said it was driven out of business when Weyerhaeuser paid too much for logs that Weyerhaeuser allegedly didn’t need.