A closely divided U.S. Supreme Court overturned a $79.5 million punitive-damages award against Altria Group's Philip Morris USA unit, in what is being seen as a victory for both the tobacco company and the corporate world.
The high court voted 5-4 to overturn the Oregon jury verdict, ruling it violated earlier high court decisions on limits to punitive damages. The decision could further curb the size of product liability awards against companies beyond new limits the high court outlined in its 2003 State Farm ruling.
"We believe that this decision will provide Philip Morris USA with an opportunity to fully and fairly defend itself in this and other cases," said William S. Ohlemeyer, Philip Morris vice president and associate general counsel. "There are clearly constitutional limits to the imposition of punitive damages."
The case had been closely watched by business groups who wanted the high court to impose new constitutional limits on punitive damages designed to punish and deter misconduct. The court last placed limits on such awards in 2003.
Businesses have long complained that punitive damages are skyrocketing out of control, can be arbitrary and encourage frivolous lawsuits. Lawyers for those who have been injured defend big awards as a way to get companies to fix harmful product defects.
Places Heavier Burden On Platiffs
The ruling is "a victory for big business," said Anthony Sabino, a law professor at St. John's University's College of Business in New York. "It puts a heavier burden on plaintiffs to make a strong case for large punitive damage awards."
Justice Stephen Breyer said for the court majority that Philip Morris could not be punished for the harm to those who were not parties in the lawsuit.
He said a punitive damages award based in part on a jury's desire to punish a defendant for harming those who are not parties to the lawsuit amounted to a taking of property from the defendant, violating constitutional due process rights.
Breyer said the court did not address the question of whether the award in this case was constitutionally excessive.
Without taking on "that gorilla of a question," the court has nevertheless "drawn a line in the sand that may limit large awards in the future, by requiring juries to only consider injuries to plaintiffs in the lawsuit," said Steve Benesh, managing partner for law firm Bracewell & Giuliani in Austin, Texas.
Case Heads Back To Oregon Court
The lawsuit against Philip Morris was brought by Mayola Williams, a widow of a long-time smoker in Oregon. Williams' late husband, Jesse, was diagnosed with lung cancer in 1996, and he died the following year.
Williams said her husband, a public school janitor in Portland who smoked as many as three packs a day of Marlboros made by Philip Morris, believed the decades of tobacco industry
assurances that smoking did not pose a health threat.
After a state jury trial, she was awarded $821,485 in actual damages and $79.5
million in punitive damages. A series of appeals followed where punitive damages were temporarily reduced to $32 million before the original figure was reinstated by an Oregon appeals court. That ruling was affirmed by the Oregon Supreme Court in February 2006.
The case will now go back to an Oregon state court for further litigation.
Justices John Paul Stevens, Clarence Thomas, Antonin Scalia and Ruth Bader Ginsburg dissented. They said they would uphold the decision of the Oregon Supreme Court against Philip Morris.
Ginsburg in her dissent cited "abundant evidence" of the potential harm the company's conduct caused. Stevens said he saw no reason why a wrongdoer should not be punished for harming persons who are not parties before the court.