High court debate could put cap on punishing jury awards

The Supreme Court on Tuesday weighed a $79.5-million verdict to punish cigarette-maker Philip Morris in a closely watched test of whether the justices will put strict limits on big jury awards.

This is the most important case of the term for major corporations, which seek to limit such awards, and the outcome probably depends on President Bush’s two appointees to the high court.

Bush promised to pick justices in the “mold” of conservative Justice Antonin Scalia. But on this front, business lawyers are hoping that’s not true.

Scalia and his conservative ally Justice Clarence Thomas have insisted the Constitution does not restrict damage awards from state courts and their juries. Liberal Justice Ruth Bader Ginsburg has taken the same view.

If Chief Justice John G. Roberts Jr. and Justice Samuel A. Alito Jr. were to agree with them, they could deal an enormous setback to the business community in its drive to limit big-money verdicts.

That possibility hung over the courtroom argument Tuesday.

A lawyer for the tobacco company said the verdict from an Oregon jury was excessive and unconstitutional because it punished Philip Morris for the possible harm suffered by thousands of Oregonians, not just the smoker at the root of the lawsuit.

Andrew L. Frey, representing the cigarette-maker, said the jury saw itself as the “agency to impose statewide punishment for the harms to all Oregon smokers.”

But the lawyer representing Mayola Williams, who filed suit after the death of her husband Jesse, said the punishment was warranted.

“This was a massive market-directed fraud driven by their rational and deliberate decisions at the highest level of the company to deceive smokers,” Washington attorney Robert S. Peck told the court.

Punitive damages go beyond the amount needed to compensate a victim for injuries and instead are meant to punish the wrongdoer.

In the Oregon case, the jury awarded $821,000 to Mayola Williams to compensate her for her husband’s death. It then added on $79.5 million to punish Philip Morris for its decades-long marketing campaign to deceive Oregon smokers about the dangers of cigarettes.

Corporate lawyers say these punitive verdicts are out of control. They want the Supreme Court to declare them “unconstitutionally excessive” if they are nine times greater than the compensatory amount.

Harvard law professor W. Kip Viscusi has compiled a list of 64 “blockbuster” punitive verdicts greater than $100 million. The largest were a Florida jury’s $145-billion verdict against R.J. Reynolds Tobacco Co. and other U.S. tobacco firms in 2000 and a California jury’s $28-billion verdict against Philip Morris in 2002.

Rarely are these verdicts paid in full. Often, they are reduced or overturned by appellate courts. Viscusi’s study said juries in California, Arkansas and Texas have handed down the largest number of huge verdicts.

Consumer advocates say these big awards are needed to punish companies for gross misconduct and to deter them from scheming to sell harmful products. They want the Supreme Court to take a hands-off approach.

Three years ago, business lawyers were cheered when the high court, in a 6-3 decision, threw out a $145-million punitive award against insurer State Farm. The court’s opinion said that such awards should be no greater than a “single-digit multiplier” of the compensatory damages.

But this is one area where the justices do not split along the usual conservative-liberal line. The majority in the State Farm case included conservative Chief Justice William H. Rehnquist, who died last year, and moderate Justice Sandra Day O’Connor, who retired this year.

The dissenters were Scalia, Thomas and Ginsburg.

Lawyers on both sides of the issue were listening closely Tuesday for hints as to whether Roberts and Alito would align themselves with conservatives Scalia and Thomas or the liberal-leaning majority that has come to the aid of corporate defendants.

The clues were few, however. Instead, the justices spent most of the hour trying to understand why the Oregon Supreme Court upheld the verdict.

Frey, the attorney for Philip Morris, said the Oregon judges treated the case as a “class action” rather than a lawsuit brought on behalf of one person. “Isn’t perhaps the better course to send this back to them and say, ‘We don’t know what you mean,’ ” said Justice David H. Souter.

At one point, Roberts asked the widow’s lawyer whether he wanted the court to retreat from its recent rulings that have put some limits on punitive damages. No, Peck said, insisting the full $79.5-million verdict can be upheld under those recent rulings.

The tobacco company’s lawyer has noted, however, that this punitive award was 97 times greater than the compensatory verdict, far more than the high court had approved in the State Farm case.

If the court sends the case back, it would give at least a temporary victory to Philip Morris, but it would not decide the larger issue of whether there should be new limits on punitive damages.

The justices will meet behind closed doors later this week to vote on what to do in the case of Philip Morris vs. Williams.

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david.savage@latimes.com