$79.5 Million is Too Much, Court Says, but Limit is Unclear

KANSAS CITY, Mo. _ The Supreme Court on Tuesday threw out a $79.5 million punitive-damages award to the widow of a smoker, but sidestepped defining precisely when such an award is excessive.

In a 5-4 decision written by Justice Stephen Breyer, the court held that punitive-damages awards can be used only to punish harm done to the plaintiff, not to other smokers who weren’t before the court.

“Finally, we can find no authority supporting the use of punitive-damages awards for the purpose of punishing a defendant for harming others,” Breyer wrote.

The closely watched decision was a victory for defendant Philip Morris USA, which was represented at trial by attorneys with Shook, Hardy & Bacon. But it did not provide the clarification sought by many corporate defendants, who were hoping the court would impose a cap on punitive damages.

In the case at issue, an Oregon jury had awarded $821,000 in compensatory damages and $79.5 million in punitive damages to the widow of Jesse Williams, who smoked Marlboro cigarettes for 47 years and died of lung cancer in 1997.

The jury found that Philip Morris had defrauded the public by denying any causal link between smoking and cancer.

Philip Morris had urged the court to cap punitive damages at a single-digit ratio _ that is, to find that any punitive-damages award that exceeds compensatory damages by 10 or more times is automatically excessive.

The court, however, refused to do that. Instead, it sent the case back to the Oregon courts, which could reinstate the verdict, reduce it, throw it out or retry the case entirely.

“What the court did not do . . . was to impose any new limits on the amount of punitive damages in tobacco cases,” said Mark Gottlieb, director of the Tobacco Products Liability Project in Boston, an anti-smoking group.

Chief Justice John Roberts and Justices Samuel Alito, Anthony Kennedy and David Souter joined in Breyer’s opinion. Justices Ruth Bader Ginsburg, Antonin Scalia, John Paul Stevens and Clarence Thomas dissented.

In a statement, William S. Ohlemeyer, Philip Morris USA vice president and associate general counsel, said that the court’s decision would give the company “an opportunity to fully and fairly defend itself in this and other cases.”

“There are clearly constitutional limits to the imposition of punitive damages, and (Tuesday’s) decision makes clear that state courts must properly instruct juries on those limits to ensure that they are punishing only for harm caused to the plaintiff, and not to strangers,” said Ohlemeyer, who used to practice law at Shook, Hardy & Bacon.

The question of when an award of punitive damages is too much has been taken up several times by the Supreme Court, but the court has never given a definitive answer.

It wrestled with the issue a few years ago when it reversed an award of punitive damages that was 145 times the compensatory damages assessed. The court said that few awards exceeding a single-digit ratio between compensatory and punitive damages would pass constitutional muster, but it refused to rule out all such awards.

In the Oregon case, Williams’ widow argued that Philip Morris’ denial of the linkage between smoking and disease over the course of four decades was such reprehensible conduct that it overrode the constitutional requirement that punitive damages must be reasonably related to the plaintiff’s harm.

Although the trial court reduced the punitive award assessed by the jury, the Oregon Court of Appeals reinstated it. The Oregon Supreme Court then upheld the appeals court, rejecting Philip Morris’ arguments that the trial court should have instructed the jury that it could not punish Philip Morris for injury to persons not before the court and that the 100-1 ratio of punitive to compensatory damages was grossly excessive.

In its decision Tuesday, the U.S. Supreme Court agreed with Philip Morris’ first argument, leaving the second argument to another day.

The court’s opinion came just days after the California Supreme Court dealt a major setback to Big Tobacco in another case in which Shook Hardy represented Philip Morris.

In that case, the court rejected the industry’s contention that the two-year statute of limitations for smokers suing over their illnesses begins when they realize they’re addicted to cigarettes.

That argument had been embraced by a federal appeals court, which was called upon to interpret California law. The appeals court’s decision in 2002 effectively put the brakes on tobacco litigation in California, where some of the biggest verdicts against the industry have been handed down in recent years.

The California Supreme Court’s decision effectively nullified the appeals court ruling, and experts predict it will trigger an avalanche of smoker liability suits in California.

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