Friday, February 1, 2008

Tobacco giant suffers legal setback

The cost to Philip Morris of trying to slant jury instructions too far in its favor -- $79.5 million in punitive damages: As I first noted in this post from this morning, today the Supreme Court of Oregon issued its ruling, on remand from the Supreme Court of the United States, in Williams v. Philip Morris Inc. Although Philip Morris had won before the U.S. Supreme Court, today's ruling by Oregon's highest court reinstates a jury's award of $79.5 million in punitive damages, on top of a compensatory damages award of $821,000, against Philip Morris and in favor of a cigarette smoker's widow. How could this be?

When Philip Morris most recently brought this case to the U.S. Supreme Court, the company asked the U.S. Supreme Court to consider two objections to the punitive damages award. First, Philip Morris advanced a procedural due process challenge, asserting that that a defendant's due process rights are violated if a jury assesses punitive damages to punish a defendant for having caused harm to persons other than the plaintiff. And second, Philip Morris advanced a substantive due process challenge, asserting that the punitive damages award was unconstitutionally excessive because, among other reasons, it was nearly one hundred times larger than the award of compensatory damages.

When the U.S. Supreme Court issued its 5-4 ruling in February 2007, the Court agreed with Philip Morris's procedural due process argument. The Court held that a defendant's due process rights are violated if a jury assesses punitive damages to punish a defendant for having caused harm to persons other than the plaintiff. As a result, the U.S. Supreme Court found it unnecessary to address the company's substantive due process challenge to the punitive damages award as unconstitutionally excessive.

Philip Morris had sought to preserve its procedural due process objection, which the U.S. Supreme Court recognized as meritorious, by means of a proposed jury instruction. Today, the Supreme Court of Oregon, acting on remand from the U.S. Supreme Court, held that the trial court properly refused to deliver to the jury Philip Morris's proposed jury instruction because it misstated Oregon's law of punitive damages in various other respects. Under Oregon law, a party has no right to have a trial court deliver its proposed jury instruction unless the instruction is entirely unobjectionable. Philip Morris's proposed jury instruction was far from entirely unobjectionable, according to Oregon's highest court, and therefore Philip Morris has no one to blame other than itself (and its trial lawyers) for failing to have its procedural due process rights vindicated in accordance with the U.S. Supreme Court's February 2007 ruling.

Let's assume, as is most likely the case, that today's Supreme Court of Oregon decision constitutes an adequate and independent state law ground that will prevent Philip Morris from benefiting from the U.S. Supreme Court's February 2007 procedural due process ruling in Philip Morris's favor. This still leaves the company with the ability to pursue its substantive due process challenge to the punitive damages award as unconstitutionally excessive. Remember that the U.S. Supreme Court had originally granted certiorari to review that question but then found it unnecessary to resolve.

For better or worse, today's Supreme Court of Oregon ruling has likely transformed this case into an unattractive vehicle for U.S. Supreme Court review on the substantive due process question of the unconstitutional excessiveness of punitive damages. My reasoning proceeds as follows. To determine whether a punitive damages award is unconstitutionally excessive, one must consider the evidence that was before the fact-finder. Here, due to Philip Morris's failure to tender a valid punitive damages instruction, Philip Morris has forfeited any ability to object to the jury's consideration, in assessing punitive damages, of the harm that Philip Morris caused to Oregon smokers other than the plaintiff. Determining whether this particular punitive damages award is unconstitutionally excessive will require the U.S. Supreme Court to weigh a type of evidence that, as a result of its earlier ruling in this very case, other juries deciding whether to award punitive damages won't ever be considering. Thus, a substantive due process ruling in this case would amount to little more than error correction and would be unlikely to result in a ruling of widespread application to other cases.

Even though this case may no longer present an attractive vehicle for examining the substantive due process limits of excessive punitive damages, Philip Morris can still hope that the U.S. Supreme Court, before it gets around to denying the company's forthcoming cert. petition, will decide or agree to decide another case presenting a substantive due process challenge to excessive punitive damages. Unfortunately for Philip Morris, the U.S. Supreme Court turned down this issue in the Exxon Valdez case.

In closing, to return to the title of this post, it is worth emphasizing that the reason Philip Morris failed to benefit from the U.S. Supreme Court's punitive damages ruling in its favor in this very case is that the trial lawyers for Philip Morris tried to slant their proposed punitive damages instruction too far in defendant's favor. Had the company's proposed punitive damages instruction faithfully tracked the applicable Oregon statute, today's Supreme Court of Oregon ruling would have likely set aside the jury's punitive damages award and granted a new trial. So, to you young litigation associates pondering how far you should twist the law in your client's favor in proposed jury instructions, remember: attempting to gain your client some subtle, modest advantage could backfire and someday cause your client to lost its ability to overturn a nearly $80 million punitive damages award.

Elsewhere, Ashbel S. Green of The Oregonian (with whom I had the pleasure of speaking about this case a bit earlier today) has a news update headlined "Oregon Supreme Court backs $79.5 million award; The judgment against Philip Morris had been overturned twice."

The Associated Press reports that "Oregon high court reaffirms decision in Philip Morris case."

At "The BLT: The Blog of Legal Times," Tony Mauro has a post titled "Oregon Supreme Court to U.S. Supreme Court: Thanks, But No Thanks."

And Eric Turkewitz, at the "New York Personal Injury Law Blog," has a post titled "Philip Morris $79.5M Punitive Award Reinstated By Oregon High Court."

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