Although of limited scope, the 5 to 4 decision was a victory for the cigarette industry and for other corporate defendants whose products or behavior have caused widespread injury and who are thus likely to face skeptical or hostile juries.
The court was tightly focused on a question of procedural fairness: the need, in the majority’s view, to make sure that juries do not punish defendants for harm to others who are not parties to the lawsuit, or who even may have brought their own lawsuits previously and lost. “The due process clause prohibits a state’s inflicting punishment for harm caused strangers to the litigation,” Justice Stephen G. Breyer wrote in the majority opinion.
The court thus steered clear of the issue that most animates the debate over punitive damages: whether a punitive damage award that is much greater than the compensatory damages awarded by the jury can be considered unconstitutionally excessive. In this case, the ratio of punitive to compensatory damages was nearly 100 to one, but the court did not address the issue despite Philip Morris having raised it.
What happens next in this lawsuit may provide an early indication of the practical significance of the court’s ruling, as far as it went. The case now goes back to the Oregon Supreme Court, which has options ranging from reinstating the award to ordering a new trial. The original trial of the suit, brought by Mayola Williams, whose husband, Jesse, died of lung cancer after smoking two packs of Marlboros a day for 45 years, took place in 1999.
Mrs. Williams’s lawyer asked the jury to “think about how many other Jesse Williams in the last 40 years in the state of Oregon there have been.” The trial judge rejected a request by Philip Morris for an instruction warning the jury that “you are not to punish the defendant for the impact of its alleged misconduct on other persons.”
The Supreme Court on Tuesday did not require any particular wording in the form of a jury instruction. But Justice Breyer said that state judicial systems had a constitutional obligation to avoid “an unreasonable and unnecessary risk” that a jury would calculate the punitive damages based on harm to those not before the court.
The issue is complicated because, under the Supreme Court’s precedents, the “reprehensibility” of a defendant’s conduct is a factor that a jury is explicitly directed to consider in setting a punitive damages award. Justice Breyer acknowledged that harm to others can serve as a measure of reprehensibility, and that jurors will necessarily consider it. That was appropriate, he said, as long as courts “provide some form of protection” against jurors seeking “to punish the defendant for having caused injury to others.”
Sheila L. Birnbaum, a punitive damages specialist with Skadden, Arps, Slate, Meagher & Flom in New York, said the court was requiring jurors to “unring the bell” in a way that might prove difficult. “It’s very hard for jurors to disregard something they have heard,” she said.
Ms. Birnbaum, who successfully argued the most recent punitive damages case heard by the court before this one, on behalf of the State Farm insurance company in 2003, added that the decision was nonetheless “a step in the right direction” for corporate defendants because it would require trial judges and appellate courts to be attentive to the guidance that jurors receive.
Justice Breyer’s majority opinion, Philip Morris USA v. Williams, No. 05-1256, was joined by Chief Justice John G. Roberts Jr. and by Justices Anthony M. Kennedy, David H. Souter and Samuel A. Alito Jr. The dissenters were Justices John Paul Stevens, Ruth Bader Ginsburg, Antonin Scalia and Clarence Thomas.
It is typical for the court’s punitive damages rulings to cut across the usual ideological lines. In fact, the only real surprise was the vote by Justice Stevens, who had previously voted with the court’s majority to support limits on punitive damages.
In his dissenting opinion, Justice Stevens said he was “firmly convinced” that those earlier decisions were correct. But he said that “in my view the Oregon Supreme Court faithfully applied the reasoning in those opinions to the egregious facts disclosed by this record.” He said that “no procedural error even arguably justifying reversal occurred at the trial in this case.”
The court’s two new members, Chief Justice Roberts and Justice Alito, succeeded justices who supported limits on punitive damages, as they themselves did on Tuesday. But the narrowness of the court’s opinion and its avoidance of the excessiveness issue raised the question of whether, beneath the surface stability, the court’s polarity may have shifted.
In the State Farm case that Ms. Birnbaum argued four years ago, the court overturned a punitive damage award that was 145 times greater than the compensatory award. “Few awards exceeding a single-digit ratio” would meet the test of due process, Justice Kennedy wrote then for a 6-to-3 majority, a strong statement that made the court’s failure on Tuesday to address the 97 to one ratio in the Philip Morris case all the more curious. (The Oregon jury awarded Mrs. Williams $821,000 in compensatory damages.)
To hold that a damage award is unconstitutionally excessive requires the court to accept the argument that the due process clause contains a substantive component as well as a procedural one. It is on this basis that Justices Scalia and Thomas, who do not accept the modern doctrine of “substantive due process,” have dissented from the leading punitive damages decisions.
It is not implausible that Chief Justice Roberts and Justice Alito might share that view. Whether they do might become apparent if the Oregon Supreme Court reinstates the punitive damages verdict and Philip Morris comes back before the justices with a new appeal based on excessiveness.
The dissenters tweaked the majority for what they characterized as judicial activism and refusal to give state courts proper respect. “I would accord more respectful treatment to the proceedings and disposition of state courts that sought diligently to adhere to our changing, less than crystalline precedent,” Justice Ginsburg said in an opinion that Justices Scalia and Thomas also signed.
In a prepared statement, William S. Ohlemeyer, vice president and associate general counsel of Philip Morris, a unit of Altria, said the decision would give the company “an opportunity to fully and fairly defend itself in this and other cases.”
Market analysts generally viewed the decision as positive for industry. “Despite a more narrow opinion than we had hoped for, we view the ruling as a positive as it effectively limits the size of punitive damages in future cases,” said Christopher R. Growe, an analyst at A. G. Edwards & Sons, in a note to investors.
In recent months, investors have pushed Altria’s stock to record highs, in part because they believe the litigation environment against tobacco companies has significantly improved. On Tuesday, Altria’s stock closed at $85.95, down 25 cents.