Philip Morris USA v. Williams - Punitive Damages Limited

February 21, 2007

On Tuesday, February 20, the United States Supreme Court issued a much-anticipated decision providing greater clarity for the constitutional procedural limitations on large state-court punitive damages awards. Justice Breyer wrote the 5-4 decision: the Due Process Clause requires state courts to adopt procedures that ensure that juries in tort cases involving punitive damages do not punish the defendant for having caused injury to individuals other than the named plaintiff or for having caused conduct that threatened harm to others. Although the Court granted “the States some flexibility to determine what kind of procedures they will implement,” the decision emphasizes that “federal constitutional law obligates them to provide some form of protection in appropriate cases.” Slip Op., 10.

In a series of decisions, the Oregon Court of Appeals and Oregon Supreme Court had affirmed the jury’s $79.5 million punitive damages award to the estate of Jesse Williams, whose death was caused by smoking. On certiorari, Philip Morris raised two issues: (1) whether Oregon had unconstitutionally permitted it to be punished for harming nonparty victims—that is, other smokers; and (2) whether Oregon had disregarded the constitutional requirement that punitive damages be reasonably related to the plaintiff’s harm. Previous Supreme Court decisions had held that “few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.” State Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003). The award in the Oregon case was roughly 100-to-1. In today’s decision, the Supreme Court reached only the first issue:

In our view, 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 nonparties or those whom they directly represent, i.e., injury that it inflicts upon those who are, essentially, strangers to the litigation.

Id., 5. To conclude otherwise, the Court noted, “would add a near standardless dimension to the punitive damages equation” and leave the jury “to speculate.” Id., 6.

Within the context of the Court’s earlier punitive damages decisions, especially State Farm, the Court stated that in determining the reasonableness of a punitive damages award, “the potential harm” to be considered is only “harm potentially cause[d] the plaintiff,” and not anyone else. Id. (emphasis in original). The Court then acknowledged that its decision in State Farm “did not previously hold explicitly that a jury may not punish for the harm caused others.” Id., 9. “But we do so hold now.” Id. Accordingly, harm to others may be considered by a jury in awarding punitive damages, but only in determining the reprehensibility of the defendant’s conduct towards the named plaintiff. Id.

Finally, the Court acknowledged the “practical problem” of ensuring that a jury “in taking account of harm caused others under the rubric of reprehensibility” does not “seek to punish the defendant for having caused injury to others.” Id. (emphasis in original). The answer, according to the Court, “is that state courts cannot authorize procedures that create an unreasonable and unnecessary risk of any such confusion occurring.” Id. The Court ordered the States to “protect against that risk” by implementing procedures of their own choosing that will reflect this now-established constitutional limitation on punitive damages awards. Id., 10.

The Court’s decision today potentially undermines the Wisconsin Supreme Court’s recent punitive damages decisions in Wischer v. Mitsubishi Heavy Industries America, Inc., 2005 WI 26, 279 Wis. 2d 4, 694 N.W.2d 320, and in Strenke v. Hogner, 2005 WI 25, 279 Wis. 2d 52, 694 N.W.2d 296. Although the Wisconsin Supreme Court did not explicitly address the constitutional due process issues in Wischer and Strenke, the court’s expansive interpretations of the punitive damages state statute were couched largely in terms of disregarding the rights of “workers” or “drivers”—and not limited to the named plaintiffs. Indeed, the Strenke decision states: “a defendant’s conduct giving rise to punitive damages need not be directed at the specific plaintiff seeking punitive damages in order to recover under the statute.” 2005 WI 26, ¶ 51.

After the Wisconsin Supreme Court’s decisions interpreting the punitive damages statute, the Strenke case was remanded to the Court of Appeals to apply the constitutional analysis. The Court of Appeals held that the jury’s award of punitive damages (more than 112 times the compensatory damages) was not excessive and, accordingly, that it did not violate the Due Process Clause. 2005 WI App 194, 287 Wis. 2d 135, 704 N.W.2d 309. The Wisconsin Supreme Court denied Hogner’s petition for review of that decision and Hogner’s petition seeking review by the United States Supreme Court still remains pending. In light of the Williams decision today, the Court probably will remand Strenke v. Hogner to the Wisconsin Court of Appeals to apply the newly-established constitutional procedural requirements. The final word has yet to be written, in other words, on punitive damages in this state.

For more information about this ruling, please contact Jennifer L. Peterson (608-284-2649 or jlpeterson@gklaw.com) or another member of the Godfrey & Kahn Litigation Team.