- Among the three guideposts that courts should consider when reviewing punitive damages, can the high degree of reprehensibility of the defendant’s conduct and the similarity between the punitive damages award and authorized civil penalties in comparable cases supersede the consideration that punitive damages should be proportionate to the harm suffered by the plaintiff?
- Can a jury punish a defendant for harms suffered by non-parties without violating due process?
Mayola Williams brought suit against Philip Morris U.S.A. alleging that Philip Morris fraudulently and negligently caused the death of her husband, who smoked Philip Morris cigarettes for over forty years. The Oregon Supreme Court affirmed a trial jury’s punitive damages award of $79.5 million. Philip Morris contends that the punitive damages award was unconstitutionally excessive because it was not reasonably related to Mr. Williams’ injuries. Williams argues that the Oregon Supreme Court was within its discretion to affirm the trial jury’s punitive damages award because the award conformed with many of the guidelines for determining reasonable damages, and those guidelines are the most important factor. This decision will impact punitive damages calculation in product liability and other tort cases.
Questions as Framed for the Court by the Parties
- Whether, in reviewing a jury’s award of punitive damages, an appellate court’s conclusion that a defendant’s conduct was highly reprehensible and analogous to a crime can “override” the constitutional requirement that punitive damages be reasonably related to the Plaintiff’s harm.
- Whether due process permits a jury to punish a defendant for the effects of its conduct on non-parties.
Jesse Williams died from cancer as a result of smoking Philip Morris brand cigarettes for over forty years. Williams v. Philip Morris, 340 Or. 35, 38 (2006). His widow brought suit against Philip Morris in Oregon State Court. Id. She alleged that as a result of fraudulent and negligent behavior, Philip Morris caused the death of her husband. Id. The jury found against Philip Morris on both the negligence and fraud claims, but attributed half of the fault of the negligence claim to the Mr. Williams, and refused to award damages for this claim. Id. at 44. On the fraud claim, the jury found that Philip Morris intentionally and systematically conveyed a message that there was a legitimate controversy over whether there existed a connection between smoking and human health. Id. at 41-42. The jury found that the decedent was among the intended recipients of this message, and the message was intended to encourage smokers to continue smoking. Id. at 42.
In March, 1999, the jury awarded Williams $79.5 million in punitive damages and between $800,000 to $500,000 in non-economic damages on the fraud claim. Id. at 44. The trial judge reduced punitive damages to $32 million. Id. In June, 2002 the Oregon Court of Appeals reversed the trial judge’s decision and reinstated the jury award of $79.5 million. Id. In October, 2003, on petition by Philip Morris, the Supreme Court of the United States vacated the Oregon Court of Appealsdecision and remanded for reconsideration in light of the Court’s recent decision in State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408 (2003). Id. Finally, in February, 2006, on remand, the Oregon Court of Appeals reaffirmed their earlier decision and reinstated the jury award of $79.5 million. Id. at 45.
On appeal from the Oregon Court of Appeals’ second reinstatement of the jury award, the Oregon Supreme Court affirmed the lower court’s decision by applying the facts of this case to the Campbell rationale. See generally Id. at 46-64. From Campbell the court noted that although the aims of punitive damages are deterrence and retribution, the Fourteenth Amendment’s Due Process Clause prohibits imposing “grossly excessive or arbitrary punishments” on tortfeasors. Id. at 47. Additionally, a person must have fair notice, not just that the state will punish conduct, but also how severely it will do so. Id. In light of these parameters, an “exacting appellate review” of a jury’s punitive damage must consider the following three “guideposts” identified in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996):
- The degree of reprehensibility of the defendant’s misconduct;
- The disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and
- The difference between the punitive damages awarded by the jury and the civil penalties imposed in comparable cases. Id.
The Oregon Supreme Court determined the first and third “guideposts” was in Williams’s favor. Id. at 56. In light of the first guidepost, the Court found that Philip Morris’s conduct was extraordinarily reprehensible, deliberately putting smokers’ lives at risk for nearly half a century. Id. at 55-56. In consideration of the third guidepost, the court found that Philip Morris’s actions would have constituted manslaughter under criminal statutes; therefore, the Philip Morris was put on notice that Oregon would punish such behavior severely. Id. at 60.
The Court found that the second “guidepost” favored Philip Morris. Id. at 62-63. Drawing from Gore, the Court correctly noted that the second guidepost considers the ratio between the punitive damage award and the compensatory damage award. Id. Additionally, citing from Campbell, the Court argued that this ratio ordinarily does not exceed a 9:1 ratio. Id. at 62. Clearly the ratio between the $800,000 compensatory award and the $79.5 million punitive award far exceeds the 9:1 ratio dictated in Campbell.
Although only two of the three Gore guideposts supported reinstatement of the jury award, the Court concluded Campbelldid not mandate reversal of the lower court’s decision. The Court based this decision primarily on two grounds. First, of the three guideposts, reprehensibility of defendant’s conduct represented the most important indicator of the reasonableness of a punitive damages award. Id. at 63. Second, the Court rejected the argument that the Gore guideposts represented bright-line tests. Id. Rather, the guideposts are to be used as guides or indicia in determining whether a punitive damages award is excessive. Id.
Philip Morris first argues that the ratio “guidepost”, which is the second guidepost identified in Gore, cannot be overridden by the other two “guideposts”. Brief for Petitioner at 25. Drawing from Campbell, Philip Morris asserts that each of the three Gore “guideposts” serves a distinct role in the analysis of punitive damage awards; and, overriding the ratio guidepost will result in arbitrary and excessive deprivation of property, which is forbidden by the due process clause of the 14thAmendment. Id. at 26-27. Philip Morris contends that among the three Gore “guideposts,” only the ratio “guidepost” helps prevent the jury from punishing a defendant for harms to non-parties. Id. at 28-29. Philip Morris further contends that without the ratio “guidepost,” which provides an objective inquiry of the constitutionality of the punitive damages award, the constitutional limitations on punishment would have little significance, specifically if the defendant is unpopular and likely to induce strong emotions from the jury. Id. at 29-30. Although Philip Morris correctly reiterates the Campbell court’s emphasis on the importance of all three of the Gore guideposts, Campbell also acknowledged that the degree of reprehensibility of the defendant’s conduct was the “most important indicium” of the reasonableness of punitive damages. State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408, 419 (2003).
Second, Philip Morris contends that under these facts, even if the ratio “guidepost” can be overridden by the other two “guideposts,” only a punitive damages award that is a low single-digit multiple of compensatory damages can satisfy due process. Brief for Petitioner at 33. Philip Morris relies highly on the court’s opinion in Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1 (1991), which stated that an award of more than four times the amount of compensatory damages might be close to the boundaries of constitutional limits. Id. at 33-34. In addition, Philip Morris cites Campbell, which stated that if compensatory damages are substantial then only a punitive damage award equal to compensatory damages may comport with due process. Id. Philip Morris claims that the compensatory damage award of $821,485 was substantial and therefore, the maximum punitive damages award should be close to the amount of the compensatory damages award. Id. at 39. However, Philip Morris concedes that underCampbell, in instances where (i) a particularly egregious act resulted in a small amount of economic damages, (ii) the injury is difficult to detect, or (iii) the monetary value of non-economic harm might have been hard to determine, punitive award damages greater than a single-digit multiple of compensatory damages may comport with due process. Campbell, 538 U.S. at 425.
Finally, Philip Morris argues that the Oregon Supreme Court violated due process in punishing Philip Morris for the harms suffered by non-parties. Id. at 10-11. Drawing from historical practice and Campbell, Philip Morris claims that the Oregon Supreme Court’s departure from traditional practices shows a presumption of unconstitutionality. Id. at 20-21. Campbellacknowledged that due process does not allow courts “to adjudicate the merits of other parties’ hypothetical claims against a defendant.” Campbell, 538 U.S. at 423. Philip Morris contends that the application of this rule should not be limited to harm arising from dissimilar and out-of-state conduct and therefore, that it should apply in this case. Brief for Petitioner at 21. Although Philip Morris argues that harm suffered by non-parties may not be used as a multiplier in determining the amount of the punitive damages award, Philip Morris concedes that such evidence may be considered in determining the degree of reprehensibility of the defendant’s conduct. Id. at 21-22.
Williams first argues that the reprehensibility and comparability “guideposts,” the first and third Gore “guideposts,” can override the ratio “guidepost.” Brief for Respondent at 5. According to Williams, reprehensibility has defined the law of punitive damages. Williams cites from Campbell and further emphasizes that reprehensibility is the preeminent determinant of the reasonableness of a punitive damages award. Id. Williams asserts that Philip Morris’s fraudulent practices were so extraordinarily reprehensible as to trump the first and third Gore “guideposts”. Id. at 6-7. Traditionally courts have considered five factors when determining the reprehensibility of a defendant’s conduct:
- Whether the harm was physical as opposed to economic;
- Whether the tortious act evinced an indifference to or reckless disregard of the health or safety of others;
- Whether the target of the conduct had financial vulnerability;
- Whether the conduct involved repeated actions or was an isolated incident; and
- Whether the harm was the result of intentional malice, trickery, or deceit, or mere accident. State Farm, 538 U.S. at 419.
Of these five factors, Williams asserts that all but the third factor is present in this case. Williams further argues that overriding the ratio guidepost will not result in arbitrary and excessive deprivations of property. Rather, Oregon’s procedural and substantive statutory requirements provide reasonable jury constraints. Brief for Respondent at 20-22.
Second, Williams correctly argues that assigning a bright-line rule, that limits punitive damages to a single-digit multiple of compensatory damages, would be against previous decisions of the Supreme Court. Id. at 26. In noting that courts have been reluctant to impose a bright-line rule, Campbell declined again to assign a rigid benchmark in which a punitive damages award must not exceed. Campbell, 538 U.S. at 424-25. Campbell, however, went on to state that a single-digit ratio between punitive and compensatory damages was “more likely to comport with due process, while still achieving a State’s goal of deterrence and retribution.” Id . As applied to this case, Williams contends that a punitive damages award limited to a single-digit multiple will not adequately serve Oregon’s high interests in deterrence. Brief for Respondent at 23. Accordingly, a low punitive damages award sends an anti-deterrence message to Philip Morris and other potential tortfeasors that the consequences for profitable fraud are small. Id. at 24. Williams further contends that the facts of this case fulfill all three of Campbell criteria for awarding punitive damages greater than a single-digit multiple. Id. at 28-29.
Finally, Williams contends that the Oregon Supreme did not violate due process in considering the harm suffered by non-parties. Id. at 35. Williams argues that the Oregon Supreme Court limited its consideration of the harm suffered by non-parties to determine the degree of reprehensibility of Philip Morris’s conduct. The Court did not consider the harm suffered by non-parties to calculate a multiplier for computing the punitive damages award. Id. at 42. Williams goes on to differentiate Campbell from the present case. Williams stresses that in Campbell, the harm suffered by the non-parties arose from dissimilar and out-of-state conduct. Id. at 44. Williams further asserts that Campbell implied that evidence of similar misconduct authorizes the use of such evidence in determining the punitive damages award. Id.
While huge jury verdicts against “big tobacco” have been front-page news, the Supreme Court’s decision will go beyond just tobacco litigation and will significantly impact the size of punitive damages in future product liability and other tort cases.
Philip Morris argues that that a defendant cannot be punished in an individual action for harms to persons other than the plaintiff. Brief for Petitioner at 7-9. Additionally, it contends that punitive damages cannot exceed nine times the amount awarded for compensatory damages. Id. In response, Williams argues that a state should be allowed to consider not just the harm to individual plaintiffs but the actual and potential public effects of misconduct in determining whether a punitive damage award is excessive. Brief for Respondent at 3-4. Furthermore, Williams rejects Philip Morris’s argument that punitive damages must be limited by a 9:1 compensatory damages ratio. Id. Williams, instead, would require a fact-sensitive inquiry and a weighing of the “guideposts” outlined in Gore and Campbell. Id.
Many business leaders believe that the Gore guideposts provide protection against a jury’s potential bias against big business. The Chamber of Commerce of the United States argues that without a sufficient guidance juries can do “little more than… what they think is best,” and are “left largely to themselves in making this important, and potentially devastating, decision.” Brief of the Chamber of Commerce of the United States of America as Amicus Curiae in Support of Petitioner at 2-4 [hereinafter “Brief for the Chamber of Commerce”] (citations omitted). Additionally, as the Product Liability Advisory Committee contends, this risk is increased by the fact that product liability cases often involve tragic factual circumstances involving death or serious injury. Jurists, moved by passion or sympathy, may impose unwarranted or arbitrary punishment against a manufacturer. Brief of the Product Liability Advisory Council as Amicus Curiae in Support of Petitioner at 3-5 [hereinafter “Brief for PLAC”]. Both the Chamber of Commerce and the Product Liability Advisory Committee contend that, in order to provide sufficient guidance, Gore ’s second guidepost must be applied as a bright line test. Brief for the Chamber of Commerce at 2-4; Brief for PLAC at 3-5. This position is shared by the Alliance of Automobile Manufacturers who argues that a bright line application of Gore ’s second guidepost is necessary to prevent unwarranted punishment of manufacturers who make socially-responsible and necessary risk-utility tradeoffs. Brief Amicus Curiae of the Alliance of Automobile Manufacturers in Support of Petitioner at 3-4.
Big business also argues against allowing juries to consider harm caused to non-parties by the defendant when determining punitive damage awards. The National Association of Manufacturers, the Pharmaceutical Research and Manufacturers of America, the American Chemistry Council, and Business Roundtable argue that the Oregon Supreme Court’s exemplifies a trend where punitive-damage litigation becomes a platform to punish the perceived deficiencies of a defendant’s or industry’s operations. Brief for the National Association of Manufacturers, et al. as Amici Curiae in Support of Petitioner at 3-4. A manufacturer is thereby subjected to punishment based on un-adjudicated allegations of harm to non-parties. Id.However, punitive damage awards that incorporate harm caused to non-parties do not prevent the same non-parties from bringing subsequent claims against the manufacturer. Id. Consequently, a manufacturing defendant may be punished repeatedly for the same offense. Id.
In opposition to the arguments made by industry leaders, law professors, social interest organizations, and state authorities have argued in favor of the Oregon Supreme Court’s decision. Several law professors argue that big business’s general mistrust of juries is unwarranted. See generally Brief of Neil Vidmar, et al. at 1-3. In support of this argument, the law professors provide empirical evidence suggesting the following:
- Juries award punitive damages infrequently;
- The magnitude of such awards has not increased over the past several decades;
- The overwhelming majority of awards show a rational proportionality between actual and potential harm caused by defendants;
- Juries pay particular attention to the reprehensibility of defendants' conduct;
- The amounts of punitive awards rendered by juries and judges are similar when adjustments are made for case types; and
- Little evidence indicates that juries are biased against large businesses. Id.
Additionally, the Association of the Trial Lawyer s of America argues that the states have an interest in being flexible when imposing punitive damage awards. Brief of the Association of Trial Lawyers of America as Amicus Curiae at 2-3. The Trial Lawyers argue that flexibility to allow larger awards is necessary in cases where a defendant’s conduct is especially reprehensible or the harm caused is difficult to detect or redress. Id. This need for flexibility becomes even more apparent when considered in light of the state interest in deterring certain behavior by imposing punitive damages. According to the Trial Lawyers for Public Justice, Philip Morris has for over forty years successfully defended itself from lawsuits brought by individual smokers. Brief of Amicus Curiae Trial Lawyers for Public Justice in Support of Respondent at 2-3. Philip Morris was able to avoid accountability and was not forced to bear the costs of its transgression. Id. Therefore, without any financial incentive to change its conduct, it continued its wrongdoing. Id. If the state loses its ability to impose large punitive damages, parties like Philip Morris will no longer have a financial incentive to adhere to good faith conduct and the state will lose its ability to deter injurious behavior. Id. Several states including Oregon, California, Maryland, Minnesota, and Mississippi strongly support this position. These states argue that the Supreme Court repeatedly has reaffirmed the legitimacy of the States' interest in deterring future injurious conduct, and punitive damage awards further this important state interest. Brief of the States of Oregon, California, Maryland, Minnesota, Mississippi, Missouri, Montana, New Mexico, Oklahoma, Utah and Wisconsin Amici Curiae in Support of Respondent at 1-3.
Campbell did not provide determinative guidance on whether the first and third Gore “guideposts” can override the second “guidepost.” It is now up to the Supreme Court to decide the relative weight of each “guidepost” when determining a punitive damages award. The Supreme Court may decide this issue based on whether they believe there is a public policy interest in mechanically limiting punitive damages awards. On the second issue, the Court will weigh heavily Philip Morris’s concession that a court can consider harms to non-parties in determining the reprehensibility of a defendant’s conduct. Therefore, if Williams is correct, and the Oregon Supreme Court limited their consideration of harm suffered by non-parties to determining the reprehensibility of Philip Morris’s conduct, then Williams should prevail on this issue.
Written by: Clinton Becker & Samantha Kim
- Charles Lane, Justices To Rule on Punitive Damages, Wash. Post, May. 31, 2006, at D01
- Brief of the American Tort Reform Association as Amicus Curiae in Support of Petitioner, Philip Morris USA v. Williams, 126 S.Ct. 2329 (2006) (No. 05-1256).