This article originally appeared in the March 2009 Product Liability Committee Newsletter.
Defendants in product liability actions often face punitive damages claims, and, if the plaintiff is successful in getting the punitive damages claim to the jury, the defendant is then faced with how best to place limitations on any punitive damages claims. Defendants are now pretty savvy about using BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996), and State Farm Mutual Automobile Ins. Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003), to challenge the constitutionality of punitive damages. More recently, the Supreme Court has decided two additional punitive damages cases that will further assist in the efforts to limit punitive damages: Philip Morris USA v. Williams, 549 U.S. 346, 127 S. Ct. 1057, 166 L.Ed.2d 940 (2007) and Exxon Shipping Co. v. Baker, 128 S.Ct. 2605, 171 L.Ed.2d 570 (2008).
Philip Morris USA v. Williams
The Supreme Court's decision in Philip Morris USA v. Williams, 549 U.S. 346, 127 S. Ct. 1057, 166 L.Ed.2d 940 (2007), is an important decision limiting the imposition of punishment in product liability actions, and is an instructive tool in the battle to reduce punitive damages awards.
Philip Morris is the third decision in a line of Supreme Court decisions reflecting the Court's intent to limit punitive damages. In Gore, the Court held that the punitive amount must bear a reasonable relationship to compensatories or harm to the plaintiff. Seven years later, the Court in State Farm held that punitive damages can only punish the conduct that harmed the plaintiff, not the other bad conduct. More recently, the Court decided Philip Morris, holding that punitive damages cannot punish a defendant for causing harm to persons not before the court.
In Philip Morris, the Supreme Court held that a punitive damages award based in part on the jury's desire to punish a defendant for harming nonparties, i.e., strangers to the litigation, was tantamount to taking of property from the defendant without due process. 127 S.Ct. at 1060. The underlying action, litigated in Oregon, arose out of the death of Jesse Williams, whose estate brought suit against Philip Morris. At trial, the jury found that Williams' death was caused by smoking, that he smoked because he thought it was safe to, and that Philip Morris knowingly and falsely led him to believe it was safe to smoke. The jury awarded compensatory damages of about $821,000, along with $79.5 million in punitive damages. The trial judge found the $79.5 million punitive damages award excessive, and reduced it to $32 million. Both sides appealed.
The Oregon Court of Appeals restored the $79.5 million punitive damages award. Philip Morris then sought review in the Oregon Supreme Court, which denied review, and then sought review before the United States Supreme Court, which granted review and remanded the case in light of State Farm. On remand, the Oregon Court of Appeals adhered to its prior decision, but this time the Oregon Supreme Court heard the appeal. Before the Oregon Supreme Court, Philip Morris argued: (1) that the trial court should have accepted a proposed jury instruction telling the jury that it could not seek to punish Philip Morris for injury to persons not before the court; and (2) that the roughly 100-to-1 ratio of punitive damages to compensatory damages was grossly excessive. The Oregon Supreme Court rejected both of Philip Morris' arguments, and the United States Supreme Court once again granted certiorari, this time, to consider whether Oregon had unconstitutionally permitted it to be punished for harming nonparty victims, and whether Oregon had disregarded "'the constitutional requirement that punitive damages be reasonably related to the plaintiff's harm.'" Id. at 1062.
The Court ultimately considered only the first of the questions for which it accepted certiorari, and held that punitive damages cannot be awarded for harm to nonparties, because a State cannot punish an individual without first providing that individual with "an opportunity to present every available defense. …