Punitives ruling has both sides claiming victory

Both the defense bar and plaintiffs’ lawyers are claiming victory in the wake of the recent U.S. Supreme Court decision that a punitive damages award in a tobacco case was unconstitutional.
The court ruled that a punitive damages award based partly on the jury’s desire to punish a defendant for harming nonparties is a taking of property in violation of the due process clause of the Constitution.
The court in Phillip Morris USA v. Williams (No. 05-1256) agreed to review a $79.5 million punitive award in a tobacco case from Oregon to determine if juries could consider harm to nonparties, and whether the ratio of punitive to compensatory damages – in this case, 97 to 1 – could exceed a single-digit ratio based on the reprehensibility of the defendant’s conduct.
But the court never reached the issue of ratios. Instead, the justices focused on harm to others and tried to strike a delicate balance: While plaintiffs may introduce evidence of harm to nonparties to help establish the reprehensibility of a defendant’s conduct, that information may not be used by jurors to actually punish the defendant.
Both sides of the bar found something to like in the opinion.
Edward L. Sweda, senior attorney for the Tobacco Products Liability Project at Northeastern University School of Law in Boston, said “the Supreme Court did not do anything in terms of putting a rigid, artificial cap on punitive damages generally. Punitive damages are still a very viable means to address social problems when corporate defendants engage in wrongdoing.”
On the other hand, the limitation on using nonparty harm for punishment “offers some help to the defense side,” explained Charles Cole, head of the Supreme Court and Appellate Practice Group at Steptoe & Johnson in Washington, D.C.
Some observers predicted future battles over the admission of evidence and jury instructions.
“State courts will have to modify their practices with regard to what gets admitted into evidence, how they deliver jury instructions, even how closing arguments are delivered,” said Brooklyn Law School professor Anthony Sebok.

Lifelong smoker
In the case before the Supreme Court, Mayola Williams sued cigarette manufacturer Philip Morris on behalf of her husband, Jesse Williams, who died of lung cancer caused by lifelong smoking.
She alleged both negligence and fraud, basing her fraud claim on a 40-year publicity campaign allegedly undertaken by the cigarette industry in general and the defendant in particular to undercut published concerns about the dangers of smoking.
A jury found in the plaintiff’s favor on both causes of action, awarding her economic and non-economic damages of $821,485 (reduced to $523,485 under Oregon’s wrongful death damages cap). The jury awarded her punitive damages of $79.5 million, as well.
The defendant appealed, arguing the punitive damages award violated due process.
A trial judge reduced the award, but an appellate court reinstated it. The U.S. Supreme Court then vacated the award in light of State Farm v. Campbell, 123 S.Ct. 1513 (2003), and ordered reconsideration.
But on remand, the Oregon Supreme Court allowed the original award to stand, calling it “by no means an ordinary case.”
For a second time, the U.S. Supreme Court disagreed, vacating the award in a 5-4 decision authored by Justice Stephen Breyer.
“The Constitution’s Due Process Clause forbids a state to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties or those whom they directly represent, i.e., injury that it inflicts upon those who are essentially strangers to the litigation,” Breyer wrote. “A defendant threatened with punishment for injuring a nonparty victim has no opportunity to defend against the charge, by showing, for example in a case such as this, that the other victim was not entitled to damages because he or she knew that smoking was dangerous or did not rely upon the defendant’s statements to the contrary.”
However, the majority said harm to others could be used by plaintiffs to establish the reprehensibility of a defendant’s conduct.
“Evidence of actual harm to nonparties can help to show the conduct that harmed the plaintiff also posed a substantial risk of harm to the general public, and so was particularly reprehensible – although counsel may argue in a particular case that conduct resulting in no harm to others nonetheless posed a grave risk to the public, or the converse,” Breyer wrote.
The justices cautioned that “state courts cannot authorize procedures that create an unreasonable and unnecessary risk of confusion occurring. In particular, we believe 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.”
The court remanded the case so that the Oregon Supreme Court could apply the new standard.
In his dissent, Justice John Paul Stevens expressed concern about how the majority’s distinction between using harm to others to determine reprehensibility but not punishment would function in the courtroom. “This nuance eludes me,” he wrote.
Justice Clarence Thomas wrote a separate dissent, as did Justice Ruth Bader Ginsburg, joined by Justices Thomas and Antonin Scalia.

Instructions – and more?
The opinion specifically references limiting jury instructions. But Cole suggested that defense counsel could use the decision to object to the introduction of certain evidence or even a plaintiff’s closing argument.
“The defense could say that certain evidence creates too great of a risk of confusion regarding reprehensibility versus punishment and should be excluded,” he said. In the alternative, defendants could say if evidence about nonparties is admitted, due process requires they should be allowed to rebut it. In this case, that might have meant introducing evidence other Oregon smokers didn’t rely upon the cigarette companies’ marketing claims.
Linda Listrom, a corporate defense attorney at Jenner & Block in Chicago, suggested that defense attorneys rely on Rule 403 of the Federal Rules of Evidence (or the analogous state rule) to argue the risk of juror confusion outweighs the value of the evidence.
But Robert S. Peck, an attorney at the Center for Constitutional Litigation in Washington, D.C., who argued before the court on behalf of the plaintiff, said using the decision to limit evidence is “quite a stretch.”
Peck said the court “made it very clear harm to others comes in [as evidence] to establish reprehensibility, and it remains the most important factor in determining harm. Plaintiffs are allowed to use [this] to help determine the gravity of the offense, which determines the size of punitive damage awards.”
Victor Schwartz, a partner at Shook Hardy & Bacon in Washington, D.C. and general counsel to the American Tort Reform Association, suggested the decision could preclude future damages. For example, a corporation that lost a suit filed by an individual plaintiff and that paid millions in damages might be able in a subsequent individual lawsuit over the same product avoid another punitive award, Schwartz explained.
“The defendant would have a very strong argument to preclude any evidence dealing with harm to anyone other than the plaintiff based on a violation of its procedural due process because a punitive verdict considering harm to others has already been awarded against it,” Schwartz explained.
Defense lawyers also suggested that introducing evidence of harm to others for one purpose but not others will confuse jurors.
“If Justice Stevens can’t tell the difference between using harm to others for reprehensibility but not punishment, how is a juror going to figure it out?” Listrom wondered.