Oregon Court of Appeals Reversed Punitive Damages Award Against Philip Morris

In Estate of Schwarz v. Philip Morris Inc., 2006 WL 1330862(Ore. Ct. App. May 17, 2006), the Court of Appeals of Oregon in an in banc decision reversed a $100 million punitive damages judgment against Philip Morris while affirming a compensatory damages award of $168,514.22 in a wrongful case arising out of the death of the decedent from metastatic lung cancer from smoking cigarettes promoted by Philip Morris as ‘low-tar." Four judges dissented on the punitive damages decision. The case provides an excellent example of the difficulty courts have in implementing the Supreme Court’s punitive damages guidelines State Farm Mut. Ins. Co. v. Campbell, 538 U.S. 408 (2003) and BMW of North America, Inc. v. Ore, 517 U.S. 559 (1996). The jury initially awarded the plaintiff $150 million in punitive damages. The trial court reduced it to $100 million. The court of appeals remanded the case for a new trial for punitive damages on all claims. The plaintiff’s decedent smoke both Benson & Hedges and Merit cigarettes, both manufactured by Philip Morris. She switched to Merit because of her belief that she would be able to quit smoking. She was unable to do so. The suit was based on several theories, including strict liability, negligence, and fraud. As stated by the court of appeals, the gist of the allegations was that ‘(1) the Merit brand of cigarettes was unreasonably dangerous in a manner that was not contemplated by the consumer because it was marketed as a less harmful alternative to ordinary cigarettes; (2) defendant had been negligent in the manner in which it tested, manufactured, and marketed the Merit brand; and (3) the defendant had defrauded consumers by making false claims about the health effects of the Merit brand, the contents of the brand itself, and its addictive nature." The jury returned a verdict for the plaintiff on all claims. It apportioned 49 percent of the fault to the decedent and 51 percent to the defendant on the strict products liability and negligence claims. The jury awarded punitive damages of $10 million on the strict liability claim, $25 million on the negligence claim, and $115 million on the fraud claim. The defendant requested a jury instruction stating that ‘[y]ou are not to punish a defendant for the impact of its conduct on individuals in other states." The trial court refused the instruction. Finding that the instruction accurately incorporated the due process concerns expressed by the Supreme Court in Campbell and Gore, the court of appeals reversed the punitive damages award as to all theories.

MKS