Supreme Court will hear case on High Punitive Damages

posted on:
May 31, 2006

author:
Staff

The Supreme Court on Tuesday signaled its return to the thorny issue of high punitive damages, agreeing to review a $79.5 million verdict against Philip Morris USA for the death of a single Oregon smoker.

The Court added Philip Morris USA v. Mayola Williams to its docket for the fall, responding to pleas by the business community for clearer guidance on when punitive damages are excessive.

Also on Tuesday, the Court narrowed First Amendment protections for government-employee whistleblowers. The Court’s 5-4 ruling in Garcetti v. Ceballos exposed continuing sharp disagreement over an issue that has confounded the Court for years.

The Court’s meager output on Tuesday—one ruling and one new case granted—virtually guaranteed that the Court’s annual June crunch will be as harried as always, with justices scrambling to push out 28 decisions and add more cases to the fall docket by month’s end.

The Philip Morris dispute is the Court’s first punitive-damages case since State Farm v. Campbell, the 2003 ruling that business advocates hoped would temper spiraling punitive-damage verdicts in courtrooms nationwide. The State Farm decision limited consideration of nationwide harm beyond the specific case in litigation and said punitive damages that exceeded compensatory damages by more than a 9-1 ratio were constitutionally suspect.

But since then, lower state and federal courts have varied widely in their interpretations of the State Farm decision, in some instances allowing high punitive damages that far exceeded the single-digit ratio if corporate wrongdoing was especially egregious. “We thought the Court spoke clearly enough in State Farm, but maybe the Court needs to say it again, more clearly and with emphasis,” said Robin Conrad, senior vice president of the National Chamber Litigation Center, which filed a brief in the case urging the Court to grant review.

In the case before the Court, Korean War veteran Jesse Williams died of lung cancer in 1997 after smoking for more than 40 years. His widow sued the company, and during the trial her lawyers urged the jury to consider “how many other Jesse Williams[es]” might have died because of Philip Morris’ fraud and negligence. The jury awarded her $821,485 in compensatory damages and $79.5 million in punitive. Even when both awards were reduced on appeal, the ratio of punitive to compensatories was 39-to-1. The Oregon Supreme Court upheld the original $79.5 million verdict, applying the guideposts of State Farm and BMW v. Gore, an earlier Supreme Court precedent that allowed consideration of the reprehensibility of the defendant’s conduct.

In its petition to the Supreme Court, Philip Morris argued that the Oregon Supreme Court’s analysis, if upheld, would unfairly allow limitless punitive damages as long as a high degree of reprehensibility is found. “A jury may never punish a defendant for harms to non-parties because doing so would inevitably expose the defendants to the risk of unconstitutional duplicative punishments,” wrote Andrew Frey of Mayer, Brown, Rowe & Maw, author of the Philip Morris brief.

But Robert Peck, lawyer for Mayola Williams before the Court, said in an interview that the Oregon Supreme Court “scrupulously applied” the Court’s precedents, which he says still allow for high damages in egregious cases.

Peck also said the fact that the Court granted review in the case does not necessarily mean it will restrict punitive damages further, even though two new justices have joined the Court since State Farm. “We don’t have much information about the new justices’ views on punitive damages, but they both come from a history of respect for juries,” said Peck, whose for-profit Center for Constitutional Litigation rents space from the Association of Trial Lawyers of America and counts ATLA among its clients.

In the whistleblower decision, Justice Anthony Kennedy, writing for the majority, said, ”[W]hen public employees make statements pursuant to their official duties, the employees are not speaking as citizens for First Amendment purposes, and the Constitution does not insulate their communications from employer discipline.” The ruling was a victory for former Los Angeles District Attorney Gil Garcetti, who was sued by a deputy, Richard Ceballos. Ceballos claimed he was punished for revealing misrepresentations in a sheriff’s affidavit in a pending case. His supervisors proceeded with the prosecution in spite of Ceballos’ claims, and Ceballos was called as a defense witness.

The 9th U.S. Circuit Court of Appeals sided with Ceballos, ruling that his allegations of wrongdoing were protected by the First Amendment. But the high court reversed the ruling.

The case was argued twice before the Supreme Court, first while former Justice Sandra Day O’Connor was in office and again in March after Justice Samuel Alito Jr. took her place. Alito provided the fifth vote against Ceballos.

Kennedy’s ruling, while siding with Garcetti, said government employees do retain some First Amendment rights as citizens, and he noted the existence of state and federal whistleblower protection laws.

But dissenting justices said Kennedy’s opinion draws lines illogically and will be difficult to implement. Justice John Paul Stevens said, “It is senseless to let constitutional protection for exactly the same words hinge on whether they fall within a job description.” Stevens also said the ruling could give employees the incentive to air their concerns publicly—with some First Amendment protection—before going to their superiors with the same concerns. Justices David Souter, Ruth Bader Ginsburg and Stephen Breyer also dissented.

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