Who's on First?: Why Philip Morris Usa v. Williams Left Juries Confused About Whose Injuries Can Be Considered When Determining Punitive Damages - Steven Moulds

• Citation: Vol. 59 No. 3
• Publication year: 2008

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Who's on First?: Why Philip Morris USA v. Williams Left Juries Confused About Whose Injuries Can Be Considered When Determining Punitive Damages

I. Introduction

For the third time in eleven years, the United States Supreme Court imposed constitutional limits on punitive damage awards. In Philip Morris USA v. Williams,¹ the Court, in a 5-4 decision, held that punitive damages cannot be used to punish a defendant for injuries that the defendant inflicted upon nonparties to the case.² However, the Court also held that injuries to nonparties can be considered when determining the reprehensibility of the defendant's conduct under the "Gore guideposts."³ Nevertheless, this decision is important for trial lawyers for what the Court did not hold. once again, the Court passed on the opportunity to decide how much was too much when determining the size of punitive damage awards.⁴

II. Factual Background

Throughout his entire life, Jesse Williams heavily smoked Philip Morris USA brand cigarettes, of which Marlboros were his favorite. After Jesse died in 1997 from a form of lung cancer traditionally caused by cigarette smoking, Jesse's widow filed a lawsuit on behalf of his estate against Philip Morris for negligence and deceit.⁵ At trial a jury found for the plaintiff on both claims. The jury concluded that Jesse's cancer was caused by smoking Philip Morris cigarettes and that Jesse primarily smoked these cigarettes because he relied on the company's deceitful and negligent claims that smoking was safe.⁶ Jesse's false belief regarding the safety of smoking was influenced by a public relations campaign that Philip Morris and other tobacco companies implemented to create the public perception that scientists genuinely disagreed about smoking's carcinogenic effects. To create this misconception, the cigarette companies performed joint scientific studies that avoided researching the biological effects of smoking cigarettes.⁷ Additionally, although Philip Morris knew that correlations existed between smoking and cancer, throughout the 1950s and 1960s Philip Morris proclaimed that it "would 'stop business tomorrow' if it believed that its products were harmful."⁸ In an internal memo, a Philip Morris corporate officer stated that the goal of these studies and statements "was to give smokers a psychological crutch" to encourage them to continue smoking.⁹

At trial, the estate's attorney asked the jury, when determining punitive damages, to consider not only how Philip Morris's misleading statements harmed Jesse, but also how many other oregonians were misled and harmed by Philip Morris's statements and studies.¹⁰ In response, Philip Morris proposed a jury instruction that punitive damages could be used to punish Philip Morris only for its misconduct toward Jesse and not for its misconduct toward other oregon residents who were not parties to the case. The trial judge rejected this instruction, and the jury found for the estate, awarding $821,000 in compensatory damages and $79.5 million in punitive damages.¹¹ However, the trial judge ruled that the award was excessive and violated the Due Process Clause of the Fourteenth Amendment to the United States Constitution;¹² therefore, the judge reduced the punitive damages award to $32 million.¹³

On appeal to the Oregon Court of Appeals, Philip Morris argued that the trial judge's rejection of its jury instruction and the size of the punitive damages award violated the Due Process Clause.¹⁴ The court of appeals rejected the first argument and cited Parrott v. Carr Chevrolet, Inc.¹⁵ In Parrott the Oregon Supreme Court held that juries, when determining the amount of punitive damages, can consider the potential injuries that the defendant caused to past, present, and future consumers who are not parties to the case.¹⁶ The court of appeals also rejected the second argument regarding the size of the award, holding that "'no simple mathematical formula controls our review of the ratio of punitive damages'" and that the 97-1 ratio was not excessive under the Due Process Clause.¹⁷ The court of appeals then reinstated the original $79.5 million punitive damages award against Philip Morris.¹⁸

After the Oregon Supreme Court declined to review the case, the United States Supreme Court granted certiorari and, without oral arguments, remanded the case back to the Oregon Court of Appeals for reconsideration in light of the decision in State Farm Mutual Automobile Insurance Co. v. Campbell.¹⁹ On remand, the court of appeals re-adopted its original decision and held that Philip Morris could be punished for its conduct towards nonparties because there was evidence that other Oregon residents were harmed and misled by the same public relations campaign that misled Jesse.²⁰ When considering the size of the punitive damages award, the court of appeals recognized there is a presumption of constitutional invalidity.²¹ However, using the Gore guideposts as applied in Campbell, the court of appeals concluded that Philip Morris's conduct endangered the health of the oregon public and that this conduct was reprehensible enough to warrant the $79.5 million in punitive damages.²² The Oregon Supreme Court affirmed the judgment of the court of appeals.²³ on appeal for a second time, the United States Supreme Court granted certiorari and held that punishing a defendant with punitive damages for harming nonparties to the case violated the defendant's due process rights.²⁴

III. Legal Background

A. Early History of Punitive Damages

Since its inception, the United States Supreme Court has struggled to determine whether there should be limitations on the size of punitive damage awards and, if so, how courts should regulate this area of law that is traditionally controlled by the jury. Punitive damages first appeared in the common law more than two centuries ago.²⁵ Huckle v. Money²⁶ is commonly cited as the first recorded case to recognize the existence of punitive damages in the English common law.²⁷ In Huckle the English court held that juries, when awarding tort damages, could consider the "state, degree, quality, trade or profession of the party injured, as well as of the person who did the injury."²⁸ In Wilkes v. Wood,²⁹ the English court added that juries could punish the guilty and deter similar conduct by awarding damages in excess of the plaintiff's actual harm.³⁰ American courts quickly absorbed this doctrine, which made one of its earliest reported appearances in South Carolina in 1784.³¹ In Genay v. Norris,³² a plaintiff was awarded punitive damag- es after the defendant slipped a poison into the plaintiff's wine, causing the plaintiff to become ill.³³

Under the common law system, juries were given full discretion to award punitive damages and to determine the amount of damages to be assessed upon the defendant.³⁴ American courts treat punitive damages as a form of "private fines" that serve as retribution and deterrence for a defendant's wrongdoing.³⁵ However, unlike criminal fines, punitive damages are given to the injured rather than to the state.³⁶ Scholars have also claimed that punitive damage awards allow society to express its "social outrage" at the defendant's reprehensible conduct.³⁷ The United States Supreme Court reaffirmed many of these common law principles in Day v. Woodworth³⁸ by giving juries unbridled discretion to decide when and how much punitive damages should be awarded.³⁹

On July 28, 1868, the Fourteenth Amendment was added to the United States Constitution.⁴⁰ Thus, in addition to adhering to the common law traditions, punitive damages now had to satisfy the requirements of the Due Process Clause.⁴¹ However, the Supreme Court continued to give juries the same deference they possessed before the enactment of the Fourteenth Amendment. For instance, in Missouri Pacific Railway Co. v. Humes,⁴² the Court held that no definite rules control the jury's discretion.⁴³ The Court later held, in Minneapolis & Saint Louis Railway Co. v. Beckwith,⁴⁴ that the application of punitive damages does not violate the Due Process Clause because punitive damages have been recognized as proper and legal for more than a century.⁴⁵

B. The Court Hints at Due Process Protections and Begins to Rein in the Jury's Authority

As the United States Supreme Court entered the Lochner era,⁴⁶ the justices began hinting that the Due Process Clause has substantive limits "beyond which penalties may not go."⁴⁷ The cases from this period primarily focused on the application of statutory as opposed to common law punitive damages.⁴⁸ In Waters-Pierce Oil Co. v. Texas,⁴⁹ the Court held that by imposing penalties that were "grossly excessive," a state was depriving defendants of their property without due process of law.⁵⁰ In Missouri Pacific Railway Co. v. Tucker,⁵¹ the Court set aside a $500 penalty, which was to be paid to the plaintiff, and concluded that the penalty was unreasonable and "repugnant to the due process . . . clause[] of the 14th Amendment."⁵² While many of the precedents from the Lochner era were discredited, the Court treats the punitive damages cases differently because the dissenting justices in Lochner joined in the majorities of the punitive damages cases.⁵³

After limiting the size of statutory punitive damages, the Supreme Court began entertaining the idea that the Due Process Clause might also limit the jury's unbridled authority to administer common law punitive damages. For instance, the Court in Aetna Life Insurance Co. v. Lavoie,⁵⁴ referred to the appellant's Due Process argument as "rais[ing] important issues which, in an appropriate setting, must be resolved."⁵⁵ The Court, however, did not reach the issue of whether excessive punitive damages violated the Due Process Clause. The Court also refused to create due process limitations in Bankers Life & Casualty Co. v. Crenshaw.⁵⁶ However, Justice O'Connor, when referring to the jury's discretion to award common law punitive damages...