October 26, 2006
Supreme Court To Revisit Punitive Damages Limits
On October 31, the Supreme Court will hear argument in the case of Philip Morris v. Williams, No. 05-1256, a case in which the court is asked to review for excessiveness an Oregon jury's punitive damages award. In deciding the matter, the Court will presumably apply its "guideposts," first established in BMW of North America v. Gore and more recently elaborated-upon in State Farm Mut. Auto Ins. Co. v. Campbell. One of those guideposts is the proportionality of the punitve damages to the compensatory damages award. In the Williams case, the jury awarded $79.5 million in punitive damages but a much more modest $821,000 in compensatory damages (reduced to $500,000 by Oregon's statutory wrongful death damages cap). In State Farm, the majority said that punitive awards should rarely exceed a single digit ratio compared to the compensatory award, i.e., only in unusual cases should the ratio exceed 9:1. Williams' punitive award is approximately 100 times the compensatory award. An important question in Williams, therefore, is whether this is one of those unusual cases which justify a greater-than-single-digit ratio of punitive damages to compensatory damages, and if so, why?
Another of the Gore guideposts is the reprehensibility of the defendant's conduct. In Williams, the jury found the plaintiff 50% at fault for his 45-year history of smoking but also found that Philip Morris had committed fraud. The Oregon Supreme Court, in its review of the punitive damages award, decided that the defendant's long history of concealing the risks of smoking could justify a jury's finding that such conduct was so reprehensible that it justified the very large award. The other important question for the Supreme Court, raised by the Oregon trial court's jury instructions, is whether, in determining reprehensibility, a jury can consider the defendant's conduct toward nonparties. In other words, could the jury consider the fraud perpetrated against all Oregon smokers, or only the defendant's behavior towards Williams?
The Supreme Court's answers to these two questions is eagerly anticipated, not only by the parties and those who filed the numerous amicus briefs, but by consumer protection advocates and business leaders in general.
October 26, 2006 | Permalink
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