Legal News

In Big Punitives Case, Has Court Painted Itself into a Corner?

By Ashby Jones

Jess Bravin, the WSJ’s Supreme Court reporter, sent along the following writeup after sitting in on today’s hearings in Philip Morris USA Inc. v. Williams, which involves a $79.5 million punitive damage award against the tobacco giant Philip Morris.

After years of dancing around the constitutional limits to punitive damages, the Supreme Court on Wednesday might just have heard the music stop.

In recent years, the court has found assorted reasons to roll back “grossly excessive” punitive awards from state courts, such as the 2007 opinion that threw out a $79.5 million punitive award to Mayola Williams, the widow of a Marlboro smoker, atop her compensatory damages of $821,500. (Click here for a LB post on that ruling.)

In that opinion, the Supreme Court found that the trial judge had erred when she rejected a proposed jury instruction that, among other points, stated that the defendant Philip Morris USA couldn’t be punished “for the impact of its alleged misconduct on other persons,” such as other smokers also misled by the tobacco giant’s efforts to minimize health concerns over cigarettes. Justice Stephen Breyer’s 5-4 decision found that Philip Morris’s due process rights precluded punishing it for hurting people “who are, essentially, strangers to the litigation.”

The justices sent the case back to the Oregon Supreme Court. But rather than cut the damages or order a new trial, the Oregon court, which previously had upheld the award, once again reaffirmed it, citing an “independent and adequate state ground.” Specifically, the Oregon justices found that other elements of Philip Morris’s proposed instruction also were flawed. Thus, the Oregon court ruled, even if the trial judge had upheld the part about harm to others, she would have had to throw out the instruction anyway.

Philip Morris appealed to the Supreme Court, arguing that the Oregon court had defied the high court’s 2007 ruling, and the justices took the case. “When I read that petition,” Justice Breyer said Wednesday, “I thought this is a run-around” by the Oregon court. But as the arguments unfolded, he said, “I’m not sure that I think that now.”

Justice Breyer and several of his colleagues seemed concerned by the implications of ruling for either side. If they were to side with Philip Morris, said Justice David Souter, “we implicitly have to say that the Oregon Supreme Court has to confront state law issues in a certain sequence,” that is, all at once. “What business do we have” getting so deep into the weeds of state civil procedure? he asked Stephen Shapiro, of Mayer Brown in Chicago.

On the other hand, affirming the Oregon court could invite state courts to drum up all kinds of state procedural bars to effectively nullify Supreme Court decisions.

Chief Justice John Roberts proposed a solution to the court’s dilemma. The court, he said, could decide to finally decide whether the Constitution permits a nearly 100 to 1 ratio of punitive to compensatory damages. “Why don’t we just do that?” he asked.

The court, of course, could. When the justices meet on Friday for their private conference to discuss Wednesday’s argument, they could vote to order argument on the real issue underneath the procedural debate. Or they could decide to punt the matter entirely, dismissing the entire case as “improvidently granted.” Or they could go ahead and deal with the procedural conundrum the state justices in Salem, Ore., sent to One First St., N.E.

Should the justices decide to crack the punitive nut, expect some unusual lineups in whatever opinions result. On punitives, so far the justices have defied their ideological stereotypes–the liberal Justice Breyer’s 2007 opinion was joined by fellow liberal Justice Souter, the two Bush appointees, Chief Justice Roberts and Justice Samuel Alito, and the maverick conservative, Justice Anthony Kennedy. Liberal Justice Ruth Bader Ginsburg dissented, joined by conservative Justices Antonin Scalia and Clarence Thomas, while Justice John Paul Stevens, dissented separately.

And while the Supreme Court has yet to find a constitutional limit on punitive damages, it offered a hint in June, when it overturned a $2.5 billion punitive award against Exxon for the 1989 Exxon Valdez oil spill in Alaska. The court had broader authority over that case, because it was brought under federal maritime law rather than under state law. And in the opinion by Justice Souter, the court found the appropriate ratio of punitive to compensatory damages was 1 to 1.

Full post as published by Law Blog - WSJ.com on December 03, 2008 (boomark / email).