[Also see: Vaccine Makers Receive Immunity From the U.S. 2feb2007]
WASHINGTON — The Supreme Court overturned a $79.5 million punitive-damages award against Altria Group Inc.'s Philip Morris USA unit, giving both the tobacco company and the corporate world a legal victory.
The high court voted 5-4 to overturn the Oregon jury verdict, ruling it violated earlier high court decisions on limits to punitive damages. (Read the ruling.) The decision could further curb the size of product liability awards against companies beyond new limits the high court outlined in its 2003 State Farm ruling.
In an opinion by Justice Stephen Breyer, the Supreme Court said punitive damages awards based in part on punishing others violate the Due Process Clause in the U.S. Constitution. "We find no authority supporting the use of punitive damages awards for the purpose of punishing a defendant for harming others," Justice Breyer wrote.
"To permit punishment for injuring a non-party victim would add a near-standardless dimension to the punitive damages equation," Justice Breyer added. "The fundamental due process concerns to which our punitive damages cases refer — risks of arbitrariness, uncertainty and lack of notice — will be magnified."
Although the high court clearly said harm to others can't be considered in a jury award, it left a vexing question for lower courts to consider by saying harm to others could still be considered when juries determine the overall reprehensibility of the company's actions. This contrast in points drew criticism from justices in the minority. "This court endorses a contrary conclusion without providing us with any reasoned justification," Justice John Paul Stevens wrote.
The Philip Morris lawsuit is the latest rallying point for U.S. corporations that are anxious to put a tighter lid on punitive damages awards. The Supreme Court, in a 2003 ruling involving State Farm, said punitive damages should generally be no more than nine times the size of actual damages, but that case hasn't had the outcome groups such as the U.S. Chamber of Commerce had hoped.
In the Philip Morris case, business groups had hoped the court would both restrict the consideration of harm to others and address more clearly what amount of punitive damages are excessive. Justice Breyer, in his opinion, said the justices could not reach the second legal question because of the court's holding that the punishment standard used by the Oregon court was wrong.
The ruling is still a win for businesses on what several corporate groups had identified as one of their top Supreme Court cases in this term. But the decision leaves unfinished the corporate world's goal of putting a stricter, well-defined cap on the size of awards.
Chief Justice John Roberts Jr. and Justices Anthony Kennedy, David Souter and Samuel Alito were in the majority with Justice Breyer. Justices Clarence Thomas, Ruth Bader Ginsburg and Antonin Scalia joined Justice Stevens in dissents that argued punitive damages aren't limited by the Constitution and that the majority's opinion is confusing.
"A judge seeking to enlighten rather than confuse surely would resist delivering the requested charge," Justice Ginsburg wrote in the main dissent.
The last major punitive damages case, a State Farm appeal from 2003, came out 6-3. Two new justices have joined the court since then. Despite that fact, the court appears to be more splintered than it was before on the punitive damages issue.
The lawsuit against Philip Morris was brought by Mayola Williams, a smoker's widow in Oregon. Ms. Williams's late husband, Jesse, began smoking in 1950 while serving in the Army during the Korean War. He was diagnosed with lung cancer in 1996, and he died the following year. After a state jury trial, she was awarded $821,485 in actual damages and $79.5 million in punitive damages.
A series of appeals followed where punitive damages were temporarily reduced to $32 million before the original figure was reinstated by an Oregon appeals court. That ruling was affirmed by the Oregon Supreme Court in February 2006.
In taking up the Philip Morris case, the court looked at whether the Oregon jury could — because of the reprehensible nature of smoking deaths — administer a larger financial punishment for the harm Philip Morris caused all Oregon residents even though they weren't party to the lawsuit.
Supreme Court precedent has limited the ability of juries to punish a defendant for actual harm to non-parties to a lawsuit. Oregon state law left the door open for a broader damages verdict, but the Supreme Court rejected that as a way around constitutional limits on punitive damages.
The case, Philip Morris v. Williams, now goes back to an Oregon state court for further litigation.
Separately, the tobacco industry lost a Supreme Court appeal challenging a Minnesota health fee on cigarette sales that several tobacco companies challenged as violating the 1998 global tobacco settlement with the states.
Philip Morris, Reynolds American Inc., Loews Corp.'s Lorillard Inc. and other tobacco companies have all been fighting the Minnesota fee, approved by the state in 2005. The Minnesota fee is 75 cents per pack for all tobacco products sold in the state. The proceeds go toward offsetting state health costs related to tobacco-related illnesses.
A Minnesota state court said the fee violated the global tobacco settlement. The Minnesota Supreme Court, however, ruled last year the fee was allowed because it was approved by the state legislature. The case is Philip Morris USA v. Minnesota.
Court Unanimously Backs Weyerhaeuser
Also Tuesday, Weyerhaeuser Co. won a Supreme Court appeal in a lawsuit over so-called predatory buying brought against it by a smaller lumber company. The unanimous ruling reconciled antitrust standards for predatory buying and selling.
The 9-0 outcome, which was expected by legal analysts, overturns a jury award against Weyerhaeuser of $26.26 million in damages, which was tripled to $78.77 million under the relevant laws. That award was thrown out and the case was remanded to lower courts.
In an opinion by Justice Clarence Thomas, the high court said lawsuits alleging predatory buying must meet the same strict standards as predatory selling allegations to survive in federal court. The decision rejected a ruling by the 9th U.S. Circuit Court of Appeals, San Francisco, that had allowed the lawsuit against Weyerhaeuser to proceed under a broader standard.
"Predatory pricing and predatory bidding claims are analytically similar," Justice Thomas wrote, saying the legal theory advanced in lower courts "cannot support the jury's verdict."
The case before the court involves allegations by Ross-Simmons Hardwood Lumber Co., a defunct Longview, Wash., sawmill, that Weyerhaeuser, one of the nation's largest wood-products companies, engaged in predatory buying in the Pacific Northwest alder sawlog market. Ross-Simmons sued Weyerhaeuser after it went out of business in 2001, accusing the lumber giant of illegally dominating the purchase of alder logs.
Weyerhaeuser, in its Supreme Court appeal, argued the courts applied an overly broad antitrust standard to the dispute. Instead, the company said, federal courts should apply to predatory buying the existing Supreme Court precedent on predatory selling. That legal reasoning was adopted by the Supreme Court.
The high court, in a 1993 case, ruled that antitrust-selling allegations must prove that selling took place at a loss and that the seller had a "dangerous probability" of recouping its losses with the impact of the anticompetitive selling. The case is Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber.
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