When Do Punitive Damage Awards Constitute a "Taking" of Property Without Due Process?
Monday, April 9, 2007
Contributed by: W. Wade Arnold
In a landmark case the United States Supreme Court issued an opinion in the case of Philip Morris USA v. Williams, decided on February 20, 2007, wherein the court reversed an award of $79.5 million in punitive damages which had been awarded to the estate of a man whose death was caused by smoking and whose favorite cigarattes were manufactured by Philip Morris. In so doing, the court held that the award constituted a taking of property from the defendant tobacco company without due process.
The underlying case began as a state court action in Oregon. After a trial, the jury awarded the estate and family of the deceased smoker compensatory damages of $821,000 and punitive damages of $79.5 million. The award of punitive damages was later reduced by the trial court to $32 million. However, the Oregon Court of Appeals restored the full punitive damage award and subsequently the State Supreme Court rejected the argument of Philip Morris that the jury should have been instructed that it could not punish Philip Morris for injury to persons not before the court. Phillip Morris further argued that an award of 100-1, the compensatory damages, was "grossly excessive."
At the heart of Philip Morris's argument concerning the award of punitive damages was the argument of Plaintiff's counsel to the jury. The attorney for the Williams family and Estate told the jury "think about how many other Jesse Williams in the last 40 years in the State of Oregon there have been...In Oregon, how many people do we see outside, driving home...smoking cigarettes?...Cigarettes...are going to kill ten [of every hundred]. And the market share of Marlboros [i.e. Philip Morris] is one-third [i.e. one of every three killed]." In light of this argument by Plaintiff's counsel, Philip Morris asked the trial court to tell the jury that "you may consider the extent of harm suffered by others in determining what the reasonable relationship is between any punitive award and the harm caused to Jesse Williams by Philip Morris' misconduct, but you are not to punish the defendant for the impact of its alleged misconduct on other persons, who may bring lawsuits of their own in which juries can resolve their claims." The trial judge rejected the request for this instruction. Instead, the judge issued the following instruction: "Punitive damages are awarded against a defendant to punish misconduct and to deter misconduct and are not intended to compensate the plaintiff or anyone else for damages caused by the defendant's conduct."
The United States Supreme Court, in its holding, stated while punitive damages may properly be imposed to further a State's legitimate interest in punishing unlawful conduct and deterring its repetition, unless a State insists upon proper standards to cabin the jury's discretionary authority, its punitive damages system may deprive a defendant of fair notice, of the severity of the penalty that a State may impose, and may threaten arbitrary punishments and, where the amounts are sufficiently large, may impose one State's (or one jury's) "policy choice" upon "neighboring States" with different public policies. Thus, the Constitution imposes limits on both the procedures for awarding punitive damages and the amounts forbidden as "grossly excessive."
The court relied upon the due process clause for the proposition that a State is forbidden from using a punitive damage award to punish a defendant for injury inflicted on strangers to the litigation. Simply put, the United States Supreme Court has now held that a jury may not punish for the harm to others.
This column is published for informational purposes only. It should not be construed as legal advice and is not intended to create an attorney client relationship. The views expressed are those of the author and do not necessarily reflect the views of the author's law firm or its individual partner
