Yesterday the Supreme Court reversed a $90 million award of punitive damages against Philip Morris made by an Oregon jury and sent it back for further consideration.
The 5-4 decision is a mess. It really has nothing to do with tobacco or Philip Morris. Instead, it reveals a non-ideological split among the justices on how to deal with punitive damages in general. Or perhaps it just shows what happens when the Court rules in a case it probably shouldn't have taken to begin with.
In the underlying case, the widow of a smoker sued Philip Morris in Oregon state court. The jury found PM liable for a bit under $1 million in compensatory damages, ruling sensibly, as juries usually do, that the smoker certainly played a considerable role in causing his injuries and ultimately his premature death. (In fact, juries most often rule for the cigarette manufacturers because smokers have long been well aware of the dangers.)
The jury also awarded punitive damages of nearly $90 million against PM for what the trial court labelled "reprehensible" behavior in the marketing of cigarettes and in connection with various public relations activities.
In recent cases, the Supreme Court has been limiting large punitive damage awards from juries, generally ruling that the size of the punitive levy must bear a relationship to the compensatory damages. Most courts have interpreted the Supreme Court's rulings to mean that punitive awards must be no greater than a single digit multiplier of the compensatory award (although the Supremes have never said as much). In the Oregon case, the punitive levy was nearly 100 times the compensatory damages, so PM argued it was unconstitutionally disproportionate.
The Oregon courts, well aware of the Supreme Court's recent jurisprudence on punitives, held that the award against PM satisfied constitutional concerns because PM's behavior was allegedly so bad, i.e., "reprehensible", that the added amount was justified.
In the end, the Supreme Court focused on whether the trial court had allowed the jury to award punitive damages based on bad conduct that affected other smokers, not just the plaintiff in this particular case. And that's where the problem with taking the case in the first place comes in. It turns out there really isn't a good record in the case as to just what the jury relied upon in making its punitive award.
That's no surprise here. Courts often save the punitive damages part of a case to a separate phase at the end of the proceedings. The exhausted lawyers, tired juries and harried judges spend little time on this part of the case, usually introducing little additional evidence. Instead, the lawyers engage in emotional pleas that often are successful in whipping a jury into a frenzy. Then the court issues a very vague instruction to the jury as to what it can consider, and the jury often goes haywire. The result is a crummy record for review purposes, not just in the Oregon case, but in most tort cases with a punitive award.
In the Oregon case, the majority said that it would be acceptable for the jury to consider evidence of PM's behavior toward other smokers in considering WHETHER PM's conduct justified an award of punitive damages, but that it would not be constitutional for the jurors to base the AMOUNT of their punitive award on the injuries to other smokers, who, after all, are not parties to the case.
While that may sound like a good distinction, we agree with the dissenters who say the standard is too fuzzy to apply. However, most courts will probably get around the problem by issuing jury instructions that make the distinction, but don't really tell juries how they're supposed to proceed. Absent some clear indication of jury misconduct, the instruction will likely immunize most verdicts on review.
The business community would like to see the Supreme Court adopt an easier to apply formula, under which punitive damages cannot exceed compensatory damages by more than a set ratio.
While that would certainly be easier for everyone, don't look for such concrete guidance from the Supreme Court. The Court is not a rule-making body. It would not be appropriate for the Court to adopt a strict multiplier. Instead, the Supreme Court set principles of law, which then guide the lower courts. Given the wide variety of situations in which punitive damages may arise, the justices are loathe to tie the constitutional noose too tightly around the jurors' discretion. So look for more case-by-case adjudication of the punitive damages awards to divine the principles that will limit juries. We hope that the next case will have a better record, making for a better decision.
In the meantime, Philip Morris gets another shot at the Oregon courts, and another argument in its arsenal to protect itself from ruinous liability in future single smoker cases. And that's pretty much all it needs: since smokers actually lose most cases that go to trial, and since PM has ample resources to defend multiple lawsuits, it can defend these cases indefinitely so long as one or two punitive awards can't break the bank.
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