Bad Faith - U.S. Supreme Court Issues Punitive Damages Decision in Philip Morris USA v. Williams
Earlier today, the U.S. Supreme Court issued its much-awaited decision in Philip Morris USA v. Williams, No. 05-1256 (Feb. 20, 2007). The Court, by a 5-4 vote, vacated the Oregon Supreme Court’s judgment affirming a
$79.5 million punitive damages award in a case where the compensatory award totaled $821,000, and remanded the case for further proceedings.
In so doing, the Supreme Court did not reach defendant Philip Morris’ argument that the roughly 100-to-1 ratio between the punitive and compensatory awards indicated a “grossly excessive” punitive award. The
Court instead focused on Philip Morris’ argument that the trial court should have instructed the jury that it could not punish Philip Morris for injuries to persons not before the court. The majority opinion by Justice Breyer
concluded that although “[e]vidence of actual harm to nonparties can help to show that the conduct that harmed the plaintiff also posed a substantial risk of harm to the general public, and so was particularly reprehensible,”
a jury “may not go further than this and use a punitive damages verdict to punish a defendant directly on account of harms it is alleged to have visited on nonparties.”
The majority further held that the Due Process Clause requires the 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.” It emphasized that state courts cannot authorize procedures that create an unreasonable risk of confusion and stated that “where the risk of that misunderstanding is a significant one –
because, for instance, of the sort of evidence that was introduced at trial or the kinds of argument the plaintiff made to the jury – a court, upon request, must protect against that risk.” Ultimately, the majority
concluded that the Oregon Supreme Court had applied the wrong constitutional standard when considering Philip Morris’ appeal. It remanded the case for application of the standard it had announced, noting that “[b]ecause
the application of this standard may lead to the need for a new trial, or a change in the level of the punitive damages award, we shall not consider whether the award is constitutionally ‘grossly excessive.’”
Three justices wrote dissenting opinions. Justice Stevens expressed the view that punishing a wrongdoer for harming persons not before the court is an interest that should be taken into consideration when assessing the proper sanction
for reprehensible conduct. He further criticized the majority’s distinction between considering third-party harm for purposes of reprehensibility as opposed to using it to punish the defendant directly as a “nuance
[that] eludes me.” Justice Thomas’ dissent reiterated his belief that “the Constitution does not constrain the size of punitive damages awards.” Justice Ginsburg’s dissent, joined by Justices Scalia
and Thomas, asserted that the Oregon Supreme Court’s judgment did not deviate from the rule announced by the majority and should have been affirmed.