The Supreme Court on Tuesday put new limits on large verdicts intended to punish corporate wrongdoers when it overturned a $79-million punitive jury award against cigarette maker Philip Morris.
In a 5-4 opinion, the court said companies could not be punished for harm they might have inflicted on thousands of people based on a lawsuit brought on behalf of one person. Justice Stephen G. Breyer said that these others were “essentially strangers to the litigation,” and that it was unfair to punish the corporations for any harm they might have suffered.
The ruling could have a broad effect, because multimillion-dollar punitive verdicts against companies are often based, at least in part, on the jury’s belief that an untold number of victims were hurt by defective products or corporate fraud. However, the wording of the opinion, which seemed to puzzle two of the dissenting justices, appeared to leave open other avenues for plaintiffs to seek large punitive awards.
Typically, a plaintiff in a civil lawsuit seeks money to compensate him or her for an injury or a loss. But sometimes, a lawyer asks the jury to go beyond compensation and to punish the defendant for wrongdoing.
Lawyers for corporations and insurance firms long have wished for limits on these punitive verdicts because they can be wild cards. On occasion, an apparently minor lawsuit involving a single person results in a huge verdict when an angry jury decides to punish a large corporation.
The Supreme Court has moved over the last decade to put some limits on these verdicts. For example, the justices said four years ago that the amount of punitive damages rarely should exceed 10 times the actual damages.
In Tuesday’s decision, the majority took an extra step by limiting how the punitive damages could be calculated. For the first time, the justices “hold explicitly that the jury may not punish for the harm caused to others,” Breyer said.
Significance not clear
Los Angeles lawyer Theodore J. Boutrous Jr., who represents Ford Motor Co. and other firms that are fighting large punitive verdicts, said the ruling would be very helpful to corporate defendants.
“This is very significant because this situation comes up all the time,” Boutrous said.
Ford’s lawyers are appealing a $55-million punitive verdict handed down in a San Diego court that grew out of a severe auto accident involving a Ford Explorer.
But a lawyer who worked on the suit against Philip Morris, a unit of Altria Group Inc., downplayed the effect.
The court’s opinion, said Robert Peck, a lawyer for the Center for Constitutional Litigation, said juries could punish companies for “reprehensible conduct,” and that could include the effect on others.
“This may require new jury instruction, and I don’t think the ultimate impact will change,” Peck said.
Thomas Cohen, a statistician with the federal Bureau of Labor Statistics, agreed, noting that punitive awards appeared in 5% or fewer trials in which plaintiffs prevail.
A 2004 bureau study found that median compensatory and punitive awards from urban juries fell 43.1% from 1992 to 2001. Though a decline in awards in automobile cases accounted for much of the overall drop, jury awards in product liability and medical malpractice cases rose steeply during the same period -- by 287.9% and 70.4% respectively.
Concern over large punitive damages has helped drive passage of state laws limiting the size of such awards in recent years.
Those state damage caps may be having an effect on juries, said Deborah Hensler, a Stanford Law School professor who studies civil litigation. But it is more likely that lawyers have altered their trial strategy, seeking awards that will withstand review by trial and appellate court judges.
One man’s case
The case decided Tuesday began when Jesse D. Williams, an Oregon janitor and longtime smoker, was dying of lung cancer. He sued, alleging he was a victim of fraud and deceit by the cigarette maker.
His wife, Mayola, continued the suit after his death. The jury agreed Philip Morris was at fault in his death, and awarded her $821,000 in damages. Then, to punish the tobacco firm, jurors added on $79.5 million in extra damages.
The lawyer for Mayola Williams had told the jurors to “think about how many other Jesse Williams in the last 40 years in the state of Oregon” had suffered and died from smoking.
In their appeal to the high court, lawyers for Philip Morris said this punitive verdict was grossly excessive and was arrived at unfairly.
In Tuesday’s decision in Philip Morris vs. Williams, the high court did not rule on whether the amount was excessive, but five justices agreed the verdict was arrived at unfairly.
Breyer said judges must instruct jurors that they should focus on the actual harm inflicted on the plaintiff. They should not calculate the punitive amount based on the possible harm suffered by others, he said. Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy, David H. Souter and Samuel A. Alito Jr. agreed.
The ruling did not strike down the verdict, but instead sent it back to the Oregon Supreme Court. Its judges could adopt a lesser amount or call for a new trial to decide the amount of damages.
The issue of punitive damages does not divide the justices along the usual liberal-conservative lines. Two of the liberal justices, Breyer and Souter, have voted regularly to limit these verdicts. Meanwhile, two of its conservatives -- Justices Antonin Scalia and Clarence Thomas -- have refused on the grounds that the Constitution does not restrict such state verdicts.
The dissenters Tuesday included Justices John Paul Stevens and Ruth Bader Ginsburg as well as Scalia and Thomas.
Stevens and Ginsburg said they were perplexed by Breyer’s comment that jurors could punish a corporate wrongdoer for “reprehensible conduct ... that risks harm to many,” while at the same time, they may not punish them for conduct that has harmed others.
“This nuance eludes me,” Stevens wrote. He said he would have upheld the full verdict as an “appropriate punishment for engaging in a campaign of deceit in distributing a poisonous and addictive substance to thousands of cigarette smokers.”
Savage reported from Washington and Selvin from Los Angeles.