Lachenmeier, Enloe & Rall - February, 2004 Publication

US Supreme Court Snuffs Out Philip Morris's Appeal of William's Gigantic Punitive Damage Award

On March 31, 2009, the U.S. Supreme Court dismissed certiorari as improvidently granted and ended this convoluted appellate fight over punitive damages. The decision came down ten years and one day after a Multnomah County Circuit Court jury awarded Mayola Williams nearly $80 million in punitive damages against Philip Morris for what the jury found to be a long, systematic fraudulent campaign by the cigarette maker to deny the connection between cigarette smoking and lung cancer which took the life of Mayola’s husband. Since the judgment bears interest at 9%, it has ballooned to $155 million, forty percent of which is supposed to go to the plaintiff and her attorneys, and sixty percent of which is supposed to go to the Oregon Crime Victims fund.

The lengthy procedural history of this case is chronicled in three prior articles by this counsel, all available on our website at www.lerlaw.com, by clicking on “articles.”

The underlying background of this case, and all punitive damage cases in Oregon, is that the Oregon Constitution, Article VII, Section 3, prohibits any “fact tried by a jury” from being “reexamined in any court of this state” unless there is no evidence to support the verdict. Because of that provision, between 1910 and 1995, the State of Oregon was the only state that did not have some form of post-verdict judicial review of punitive damage awards. The first U.S. Supreme Court opinion on this case ordered the Oregon Court of Appeals to reexamine its opinion upholding the jury verdict in light of the then recently decided State Farm Campbell case which held that there needs to be a reasonable relationship between compensatory damages and punitive damages and suggesting that a ratio of 1:1 would normally be required. On remand, the Oregon Court of Appeals and then the Oregon Supreme Court used all of the criteria, as best they understood them, set forth in the Campbell case and again upheld the validity of the punitive damage verdict.

The U.S. Supreme Court accepted the writ of certiorari filed by Philip Morris from that decision. Philip Morris contended that the Oregon Court improperly allowed the “harm to people other than plaintiff” to be considered by the jury in awarding punitive damages. On February 20, 2007, the U.S. Supreme Court then handed down its opinion in a 5-4 decision, remanding the case to the Oregon courts saying it was permissible to consider harm to non-parties in order to show that the conduct that harmed the plaintiff was particularly reprehensible, but that the jury also has to be told that its punitive damage award may not punish the defendant for harms to others. The U.S. Supreme Court chose not to reach the issue of whether the award, which was ninety seven times the compensatory award, was excessive as a matter of law, and instead simply instructed the Oregon court to reexamine the award in light of the proper standard. Assuming that was the only route available, I wrote in my Philip Morris update that “Apparently the Oregon Supreme Court is now supposed to fashion some kind of instruction to the trial court as to what is proper to consider, but perhaps may just reduce the punitive damage award and tell the plaintiff to either take it or have a new trial. The Supreme Court’s opinion was particularly lacking in instruction as to what the Oregon Supreme Court should do and undoubtedly it will serve the basis for yet another article.”

Much to my surprise, the Oregon Supreme Court issued an opinion on January 31st, 2008 upholding the verdict, but not on the federal due process challenge grounds, but on the independent state ground that the cigarette manufacturer had not properly preserved the jury instruction issue for appeal! The Court said that the lengthy jury instruction dealt with multiple issues and that since a portion of that instruction was wrong, it could not be error to fail to give the entire instruction.

Philip Morris screamed foul, and appealed for the third time asking for the U.S. Supreme Court to accept certiorari saying in it’s petition, among other things, “The Oregon Supreme Court’s defiance of this Court’s (U.S. Supreme Court) directive should not be countenanced. This court held that ‘The Oregon Supreme Court applied the wrong constitutional standard when considering the Philip Morris appeal’ and it remanded the case ‘so that the Oregon Supreme Court can apply the standard we have set forth. The Oregon Supreme Court had no authority to either disobey the clear instruction of this court or to conjure up state law procedural grounds for the judgment after both it and this court had reached the merits of Philip Morris’ federal claim.”

In amicus curie (friend of the court) briefs, the U.S. Chamber of Commerce and the Association of Oregon Industries, among others, filed briefs essentially begging the U.S. Supreme Court to not allow the Oregon court to sidestep the substantive Fourteenth Amendment due process challenges to punitive damages on a state court technicality on the third go around. Normally, if there are independent state grounds for sustaining a verdict, the state court says so the first time, and does not reach the federal court issue. If legitimate, the federal issue is not then reviewed by the U.S. Supreme Court, giving deference to different procedures in different states and their right to insist on procedural rules as long as they are not just a pretext for defeating federal rights.

The plaintiff’s countered by saying in their responses that they had been arguing all along that the jury instruction issue had not been preserved at the trial level, and it was not their fault that the Oregon courts had reached the substantive analysis of due process the first two times it was directed to evaluate it by the U.S. Supreme Court.

Following the acceptance of certiorari, and the briefing, and arguments on the merits, the U.S. Supreme Court, instead of ruling on the merits for the third time, dismissed the appeal saying that certiorari had been improvidently granted. The effect then is to uphold the very large punitive damage verdict. The Court must have accepted the argument that the Oregon Court wasn’t just ignoring it, which was bolstered by the fact that there are other Oregon decisions applying substantive due process guidelines in the last few years.

As discussed in prior articles, the boundaries of what is appropriate both in terms of threshold for allowing punitive damages and dollar ratio between punitive awards compared to compensatory awards, is ongoing and fluid. There are several proposals before the Oregon Legislature right now dealing with punitive damages, and in a future article, I will detail the ones that pass and give you guidelines to handling future cases involving punitive damages in Oregon.

If you have any questions, feel free to contact the author Rudy R. Lachenmeier by phone at 503-768-9600 or by e-mail at rudy@lerlaw.com.