U.S. Supreme Court to Review Constitutional Limitations on Punitive Damages
August, 2006
In late May, the United States Supreme Court agreed to review the propriety of an $80 million punitive damages verdict in Philip Morris USA v. Williams, 2006 WL 84976 (U.S. May 30, 2006). The Supreme Court decision will greatly affect the future of punitive damages claims, including bad faith punitive damages cases against insurers.
In this case, an Oregon jury awarded a lung cancer victim’s family $80 million in punitive damages against Philip Morris, the cigarette manufacturer. The punitive damages were almost 100 times the compensatories. Philip Morris appealed to the Oregon Supreme Court based upon the U.S. Supreme Court decision in State Farm v. Campbell, 538 U.S. 408, 123 S. Ct. 1513 (2003), which capped punitives at nine times the compensatories. The pronouncements of the U.S. Supreme Court notwithstanding, the Oregon Supreme Court affirmed the jury award due to the “extraordinarily reprehensible” conduct of Phillip Morris in marketing its products. Williams v. Philip Morris Inc., 127 P. 3d 1165 (Ore. 2006).
When State Farm v. Campbell was originally decided, conspicuous corporate targets were optimistic that it would shield them from runaway juries and timid appellate courts. Unfortunately, numerous courts around the country, similar to the Oregon Supreme Court, have paid lip service to the decision while simultaneously affirming punitive awards which clearly are contrary to its holding. Nevertheless, the U.S. Supreme Court had routinely declined to review any of these verdicts over the last three years. The fact that it has now accepted the Philip Morris appeal is, perhaps, an indication that the Court will no longer -allow its decision in State Farm v. Campbell to be ignored.
This will be the first punitive damages opinion in which Justices Roberts and Alito will participate. We will closely monitor the progress of this matter and report further in future editions of the CM Report, as this case could have profound ramifications for corporate defendants and the entire insurance industry. •
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