Clearing the smoke from Philip Morris v. Williams: the past, present, and future of punitive damages.

AuthorColby, Thomas B.

ARTICLE CONTENTS INTRODUCTION I. THE END OF TOTAL HARM PUNITIVE DAMAGES II. PROCEDURE, SUBSTANCE, AND THE INADEQUACY OF WILLIAMS A. Was the Williams Court's Purported Reliance on Procedural Due Process Just a Ruse? B. The Williams Court's Inadequate Basis for Finding a Procedural Due Process Violation III. PAST: PUNITIVE DAMAGES AS PUNISHMENT FOR PRIVATE WRONGS IV. PRESENT: PROCEDURAL DUE PROCESS AND PUNISHMENT FOR PRIVATE WRONGS A. Punishing Private Wrongs: Private Revenge 1. The Nature of Private Wrongs 2. Punishment and Compensation in Criminal and Civil Law 3. Public Retribution and Private Revenge B. The Desirability of Punishing Private Wrongs C. Constitutionality: Private Revenge and Criminal Procedure D. Deterrence: The Elephant in the Room? E. Evidence of Harm to Others To Determine Reprehensibility: The Exception that Swallowed the Rule? V. FUTURE: THE END OF LAW AND ECONOMICS? CONCLUSION INTRODUCTION

Recently, in Philip Morris USA v. Williams, (1) the Supreme Court held that "the Constitution's Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties." (2) Williams is a revolutionary holding, and it was all but unthinkable just a few years ago, when American courts--with the apparent blessing of the Supreme Court--routinely awarded punitive damages to punish the defendant for the harm that it caused to all of society, not just the harm that it visited upon the individual plaintiff before the court. Indeed, it was that phenomenon that was largely responsible for most of the headline-grabbing, astronomical punitive damages awards of the past several decades.

Yet, for a path-breaking, five-to-four decision on a major constitutional question, the Williams opinion is strangely terse and unreasoned. This Article seeks to answer many of the questions raised by the Court's cryptic and at times misguided analysis, and to provide the theoretical defense of the Court's holding that is missing from its own opinion.

Part I explains how the Williams holding shattered the modern consensus that punitive damages can and should be imposed to punish the defendant for the full scope of the harm that it visited upon society. The Court reasoned that it violates due process to punish a defendant for harming a large number of people without demanding evidence relating to the particularities of each of those injuries and without affording the defendant the opportunity to raise individualized defenses. Part II exposes the Court's reasoning as internally inconsistent and insufficient to justify the result in the case.

Parts III and IV then seek to salvage Williams by explaining that punishing the defendant for harm to nonparties does indeed violate the defendant's procedural due process rights, but for reasons much more profound than those offered by the Court. That task necessitates paring the punitive damages doctrine down to the conceptual bone. In two centuries of issuing punitive damages decisions, the Supreme Court has never adequately answered the most simple and fundamental of questions: What, exactly, are punitive damages? What is their purpose? The Court has evaded those questions with superficial platitudes that ultimately do nothing more than raise a different but no less monumental question.

The purpose of punitive damages, the Supreme Court has repeatedly told us, is to punish and deter, like the criminal law. (3) But if that is so, then a deeper fundamental question looms: why are they constitutional? The Constitution makes clear that those who face criminal punishment are entitled to an array of procedural safeguards, including the burden of proof beyond a reasonable doubt, (4) the privilege against self-incrimination, (5) and the right to be free from double jeopardy, (6) among others. The obvious objection to punitive damages is that it seems clearly unconstitutional to punish a defendant with a sanction that the Supreme Court concedes is conceptually and functionally indistinguishable from a criminal punishment without affording the procedural safeguards that the Constitution guarantees to criminal defendants. That objection has plagued punitive damages for well over a century. Yet the Supreme Court has never confronted it. (7) Instead, the Court has consistently sidestepped the issue with the assurance that punitive damages must be constitutional because they predate the Constitution and the Framers manifested no intention to displace them.

Part III explains that this evasion will not do, for it is based on a profound misunderstanding of the historical purpose and function of punitive damages. Historically, punitive damages were generally treated as punishment for private wrongs to individuals, not public wrongs to society. History thus provides no safe harbor for modern awards of punitive damages designed to mimic the criminal law by punishing the defendant for the full scope of the harm that it inflicted upon society.

As such, what the Williams Court failed to recognize is that the constitutionality of awarding punitive damages for harm to nonparties cannot be resolved without confronting the fundamental question head on: how is it that punitive damages are constitutional? Part IV does just that. It concludes that the Constitution necessitates criminal procedural safeguards only when a sanction seeks to punish the defendant for a public wrong. Thus, punitive damages are constitutional if they fulfill their historical role of punishing the defendant for the private wrong committed upon the individual plaintiff, but they are unconstitutional in their (pre-Williams) recent incarnation as punishment for the public wrong visited on society. In reaching this conclusion, Part IV seeks to provide a sophisticated theoretical and constitutional account of punitive damages as both sensible and permissible punishment for the harm to the plaintiff, but not as punishment for the harm to others. It argues that punitive damages are a form of legalized private revenge--both theoretically and constitutionally distinct from the public retribution and deterrence achieved through the criminal law. That is the true justification for the result in Williams: punishing the defendant for the harm to nonparties converts punitive damages into a criminal remedy, which the Constitution will not tolerate in a civil proceeding.

Part V looks ahead. Despite some loose language that others have interpreted as a debilitating loophole, Williams will, I assert, have a significant effect on reducing massive punitive damages awards. There is a risk that its impact will go too far, however, and result in the underdeterrence of harmful behavior. Part V addresses the states' ability to respond to that concern. Others have suggested that Williams essentially constitutionalizes one of the many rationales for punitive damages and forecloses the states from using punitive damages to achieve ends other than private punishment--such as ensuring efficient deterrence. In essence, they claim, Williams effectively serves as a federal license for companies to misbehave, cause diffuse harm, and profit from it. (8) Part V rejects that claim by arguing that Williams does not constitutionalize one particular vision or theory of punitive damages (punishment for private wrongs) to the exclusion of all others; it simply provides that the Constitution precludes one (and only one) particular vision or theory of punitive damages (punishment for public wrongs--the prevailing modern theory). Williams thus allows the states to address the underdeterrence concern by implementing the recommendation of law and economics scholars to create a category of extracompensatory damages designed to ensure optimal deterrence. Such damages would not be a form of punishment, and thus--even though they would seek to serve a purely public interest--they would not constitute unconstitutional punishment for public wrongs. Once we take the punishment out of punitive damages, as law and economics scholars have been urging us to do for decades, we avoid the constitutional infirmity involved in Williams.

  1. THE END OF TOTAL HARM PUNITIVE DAMAGES

    In the decades leading up to Williams, punitive damages were, with increasing frequency, awarded to punish the defendant for the total harm that its wrongful conduct caused to all of society, not just the harm that it caused to the actual plaintiff or plaintiffs before the court (9)--a sweeping sanction that I and others have referred to as "total harm" punitive damages. (10) It was this phenomenon that was largely responsible for most of the jaw-dropping punitive damage awards in recent years. A jury that sees its mission as inflicting an appropriate punishment for causing thousands, or even millions, of injuries or deaths is likely to award punitive damages in an amount several orders of magnitude greater than it would award if it understood its task much more modestly as punishing the defendant for the wrong done only to the single victim before the court. To take a particularly striking example, in 2002, a California jury awarded a single smoker who contracted lung cancer $850,000 in compensatory damages and $28 billion--billion!--in punitive damages. (11) That staggering punitive award was surely beyond the pale as punishment for causing only the plaintiffs illness and suffering; no rational justice system could possibly mete out that kind of penalty for harming a single person, no matter how severe the suffering and how reprehensible the wrongdoing. But it was not necessarily unreasonable as punishment for the harm done to the literally millions of smokers who were injured or killed by the defendant's fraud (if one concludes, as did the jury, that the tobacco company was guilty of maliciousness in knowingly causing those countless deaths and injuries). Plaintiffs counsel drove home this very point in closing argument:

    Less than 3,000 people died in the...

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