Supreme Court Strikes Down Punitive Damage Award Against Philip Morris

This morning, the Supreme Court overturned a jury verdict of nearly $ 80 million against Philip Morris:

The Supreme Court today threw out a nearly $80 million jury award against the Philip Morris tobacco company, a victory for it and other big businesses seeking limits on what juries may award to punish companies.

The court ruled 5-4 that the jury had not been properly instructed to consider how to award punitive damages in an Oregon case in which a smoker’s widow had sued Philip Morris USA, now part of the Altria Group.

The jury awarded Mayola Williams $821,000 in compensation, then tacked on the punitive award in part to penalize the company for what was termed a “massive market-directed fraud” that convinced people smoking was not dangerous and did harm to many others.

But the court ruled that the constitution’s due process clause forbids a state to use punitive damages to punish a company for injury that it inflicts upon others who are “essentially, strangers to the litigation,” according to the majority opinion written by Justice Stephen G. Breyer.

Breyer said jurors may take into account that harm caused to others shows reprehensible conduct, but “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.”

This decision is only the latest in a trend that has seen the Supreme Court place limits on the ability of Judges and juries to award astronomical punitive damages that are out of proportion to the damage actually sustained by the Plaintiff:

While compensatory damages make up for a plaintiff’s direct loss, punitive damages are imposed as a penalty, and are typically left by state law in the hands of juries.

The court has steadily curtailed punitive rulings, however, finding that they must be proportionate to the wrong committed, and even suggesting a financial limit — that punitive rulings be no more than nine times more than any compensatory damages.

In this case, the punitive damages awarded by the jury were nearly 100 times greater than the actual damages suffered by the Plaintiff. Though the Court did not address the issue of the size of the award in this opinion (though I wouldn’t be surprised to see this same case back before the Court on that issue in a few years), this clearly constitutes a violation of due process.