High Court Sends Back Tobacco Case Award

The Supreme Court tossed out a large punitive damage verdict against cigarette maker Philip Morris on Monday, telling lower court judges to reevaluate the size of the award.

The court set aside a $79.5-million award that was designed to punish the tobacco firm for the lung cancer death of an Oregon janitor. In another personal injury case, it set aside a $3-million verdict in which jurors sought to punish DaimlerChrysler for the death of a Kentucky man who was ejected from his Dodge Ram pickup in a crash.

The court’s one-line orders Monday followed a major ruling in April that sharply limited the power of juries to punish companies with huge punitive damage awards. The justices stressed that civil lawsuits are intended to compensate plaintiffs for their losses if they were injured and wronged by another. It is not a system for punishing unpopular industries and “unsavory businesses,” the court said.

Since the 1970s, an increasing number of lawsuits filed by injured individuals have resulted in multimillion-dollar verdicts against corporations. Typically, the jurors are asked to award actual damages to cover the victim’s losses and then award a second, larger amount to punish the company for its wrongdoing.

In its April decision in State Farm vs. Campbell, the high court warned judges that they must rein in punitive damage verdicts that greatly exceed the actual losses of the victims who brought the lawsuit.

In that case, a Utah jury had ruled against the auto insurer with $145 million in punitive damages for having refused to pay the full verdict against a man who caused an accident that killed another driver.

Ordinarily, after handing down such a ruling, the justices act on a series of pending appeals in related cases and send them back to lower courts to be reevaluated.

They did just that in May when they reversed two large verdicts against Ford Motor Co., including a $290-million punitive verdict in California. In that case, a Stanislaus County jury had awarded more than $6 million to a family that suffered injuries and a death when its Bronco rolled over, plus $290 million to punish Ford for what it said was gross wrongdoing in manufacturing a defective vehicle.

In Monday’s action involving Philip Morris and DaimlerChrysler, the high court did not rule out the possibility of punitive damages. Its order told lower courts that the amount of these damages should be in line with the actual losses of the victim.

Only in the rarest circumstance can the punitive verdict “exceed a single-digit ratio” compared with the actual damages, said Justice Anthony M. Kennedy. For example, if a jury awards $1 million to a plaintiff for actual losses, the punitive damages should not exceed $9 million, he said.

In the Oregon case, lawyers for Philip Morris had appealed, saying “the 97-1 ratio of punitive-to-compensatory damages in this case cannot stand constitutional scrutiny.”

Jesse Williams started smoking during the 1950s and continued a three-pack-a-day habit for four decades. He died of lung cancer in 1997. His family sued Philip Morris and won $521,000 in compensatory damages. The jury tacked on $79.5 million in punitive damages. The verdict was upheld last year by the Oregon Supreme Court.

On Monday, the court granted an appeal by Philip Morris, vacated the lower court ruling and sent the case back to Oregon “for further consideration in light of State Farm vs. Campbell.”

The tobacco industry has several other large punitive damage awards on appeal, including four in California.

Last month, a state appeals court in San Francisco reduced the punitive damages awarded to a former smoker with lung cancer to $9 million from $25 million. But the court refused Philip Morris’ request to toss out the award entirely, saying $9 million was “permissible and appropriate” because Philip Morris had “touted to children what it knew to be a cumulatively toxic substance.”

Two other cases in California that resulted in punitive damages of $28 billion and $3 billion were later reduced to $28 million and $100 million, respectively.

Shares of Philip Morris parent Altria Group Inc. rose 34 cents Monday to $45.03. DaimlerChrysler gained 36 cents to $35.94. Both trade on the New York Stock Exchange.