The Supreme Court yesterday overturned a nearly $80 million verdict intended to punish the Philip Morris tobacco company for endangering the lives of smokers, and the justices set limits on how jurors can decide to make big business pay for wrongdoing.
The court's narrowly written 5 to 4 decision said that an Oregon court had improperly let jurors calculate the harm done to many in deciding damages paid to an individual.
The court ruled that the Constitution's due-process clause forbids a state to use punitive damages to punish a company for injury it inflicts upon others who are "essentially, strangers to the litigation," according to the majority opinion, written by Justice Stephen G. Breyer.
The case was seen at the beginning of the term as one of the most important business decisions that the court would make under new Chief Justice John G. Roberts Jr., and it was clearly a victory for Philip Morris and other big companies. It continues the reasoning in the court's recent rulings that punitive damages -- aimed at punishing a company and deterring more wrongdoing -- must be proportionate to the wrong committed.
But in sending the case back to Oregon courts for further litigation, the justices sidestepped a decision that industry had most wanted: whether to set a solid limit on how much could be awarded for punitive damages, perhaps based on a specific ratio to the actual damages done to the individual who brought the suit.
Still, business advocates praised the decision.
"This is a really important case for the business community, and a big win," said Robin Conrad, senior vice president of the National Chamber Litigation Center of the U.S. Chamber of Commerce. She said it would be valuable to insurance companies, automakers, pharmaceutical manufacturers and other firms that have been hit with huge punitive-damages awards in recent years.
But Robert S. Peck, the Washington lawyer who represented the Oregon smoker's widow who brought the suit, said the decision "slays a dragon that didn't exist." Peck contended that the jury calculated its large award not on the number of other victims but on the company's profitability, and he predicted that Oregon courts will "reaffirm" that they "did the right thing."
How the jury decided the amount to award is unclear, and confusion at the Supreme Court oral arguments foreshadowed the justices' ultimate decision. "Isn't perhaps the better course to send this back to them . . .?" suggested Justice David H. Souter, who voted with the majority to do just that.
The case involved Jesse Williams, a Portland janitor who smoked at least two packs of Marlboros every day for 45 years and died of lung cancer in 1996. Philip Morris, now owned by Altria Group, had denied during that time that its cigarettes were addictive, and at trial, lawyers for his estate told the jury to consider the damage done to other smokers in Oregon.
The attorney for his widow, Mayola Williams, told the jury to "think about how many other Jesse Williams in the last 40 years in the state of Oregon there have been."
The jury awarded Mayola Williams $821,000 in compensation and then tacked on the $79.5 million punitive award. (Not all states allow punitive awards; in Oregon, 60 percent of the award goes to the state, Peck said.) The nearly 100 to 1 ratio of punitive damages to compensatory damages is far outside the "single-digit" ratio the Supreme Court suggested in previous cases, but a firm limit has never been set.
The majority opinion issued yesterday agreed with Williams that the jury could hear evidence of harm to others to show that a company's conduct was reprehensible, which could increase the punitive-damages award.
But Breyer wrote that a "jury may go no further than this and use a punitive damages verdict to punish a defendant directly on account of harms it is alleged to have visited on nonparties."
Dissenting justices said they wondered how a judge could properly instruct a jury to consider what Justice Ruth Bader Ginsburg called our "less than crystalline precedent."
The majority "relies on a distinction between taking third-party harm into account in order to assess the reprehensibility of the defendant's conduct -- which is permitted -- from doing so in order to punish the defendant 'directly' -- which is forbidden," Justice John Paul Stevens wrote. "This nuance eludes me."
The court's split in recent decisions limiting punitive damages is far different from the ideological differences that are apparent in many decisions on social issues. Breyer was joined by Roberts and Justices Samuel A. Alito Jr., Anthony M. Kennedy and David H. Souter.
Stevens, who in the past has supported limiting the amounts of punitive awards, joined Ginsburg and Justices Antonin Scalia and Clarence Thomas.
The case was sent back to the Oregon Supreme Court, which had upheld the large punitive award. Breyer wrote that the application of the court's standard may "lead to the need for a new trial, or a change in the level of the punitive damages award."
The case is Philip Morris USA v. Williams, case No. 05-1256. Also yesterday, the court ruled 5 to 4 that a Florida death row inmate could not challenge his conviction in the federal court system because he missed a one-year filing deadline.