Recent Supreme Court Decision on Punitive Damages

February 22, 2007

Seeking to limit jury discretion to prescribe windfall punitive damages awards, yesterday’s Supreme Court’s holding in Phillip Morris USA v. Williams, 549 U.S. _ (2007) makes clear the High Court’s continuing concern regarding the constitutionality of excessive punitive damages verdicts. Addressing only the narrow legal question of whether the State of Oregon had unconstitutionally permitted Defendant Phillip Morris USA to be punished for harming nonparty victims - i.e., cigarette smokers other than the plaintiff - the United States Supreme Court vacated an Oregon Supreme Court ruling upholding a $79.5 million jury verdict against the company. Id. at 2.

Emphasizing its concern that a jury’s discretion to award punitive damages, unless properly tempered by guidance from the courts, impermissibly infringes upon a defendant’s due process rights, the Court highlighted the dangers that such verdicts carry. Pointing to its recent jurisprudence governing punitive damages, the Court stressed the constitutional dimensions of the threats posed by excessive and arbitrary awards including:

  1. depriving a defendant of fair notice of the penalty that the State may impose;
  2. inflicting arbitrary punishment, based not upon application of the law, but upon a decision-maker’s caprice; and
  3. imposing one State’s policy choice upon neighboring states via the levying of substantial monetary penalties upon products distributed nationwide.

Concluding that the trial judge had improperly refused to instruct the jury it “could not seek to punish Philip Morris for injury to other persons not before the court,” the Court bluntly admonished 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” individuals not before the Court. Id. at 5 (emphasis supplied). Although taking pains to stipulate that “[e]vidence of actual harm to nonparties” is still admissible to demonstrate the reprehensibility of a defendant’s alleged misdeeds, the Court nevertheless commanded that jurors may not use such evidence for other purposes and must, upon request of a defendant, be so instructed. Id. at 7.

Highlighting the immediate importance of yesterday’s ruling, the Supreme Court’s holding makes unambiguous the obligation of trial judges to protect defendants against jurors’ confusion regarding when and how punitive damages may be awarded:

[S]tate courts cannot authorize procedures that create an unreasonable and unnecessary risk of any such confusion occurring. In particular, we believe that where the risk of that misunderstanding is a significant one – because, for instance, of the sort of evidence that was introduced at trial or the kinds of argument that plaintiff made to the jury – a court, upon request, must protect against that risk.

Id. at 9.

In sum, while still leaving unresolved many important questions regarding the constitutional constraints placed upon punitive damages, yesterday’s ruling continues the Court’s recent trend of reining in the awarding of excessive punitive damages. Implicitly attempting to temper the ability of opportunistic plaintiffs’ attorneys from inflaming jurors via reference to extraneous matters, Phillip Morris USA v. Williams provides the Defense bar with an important tool for lessening clients’ exposure to crippling punitive damages awards.

For further information, please contact Kevan M. Doran at 502.568.0227 or kdoran@fbtlaw.com.

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