TEXT :: Philip Morris USA v. Williams, 127 S. Ct. 1057 (2007)
An Oregon jury found that Jesse Williams, a long time consumer of Petitioner’s Marlboro cigarettes, died because he consumed those cigarettes. The jury was convinced that Williams consumed Petitioner’s cigarettes because he believed they were safe to use, and that Petitioner knowingly and falsely led Williams to believe that its cigarettes were safe to consume. As a consequence, the jury awarded Respondent, Williams’ widow and personal representative, compensatory damages and imposed punitive damages of $ 79.5 million-roughly equivalent to Petitioner’s profits during any two-and-a-half-week period for the year in which the judgment was awarded. The trial judge found the punitive damages award excessive and reduced it by approximately sixty percent. Petitioner and Respondent appealed. An Oregon Court of Appeals restored the jury’s punitive damages award and the Oregon Supreme Court denied Petitioner further review. The United States Supreme Court granted certiorari and remanded the case in light of its recent punitive damages jurisprudence. The Oregon Court of Appeals once again upheld the jury’s punitive damages award, and Petitioner sought review in the Oregon Supreme Court. That court granted review and held that the punitive damages award was not grossly excessive in light of Petitioner’s reprehensible conduct. The United States Supreme Court again granted certiorari and, in vacating and remanding the case, HELD that a punitive damages award based in part upon the desire to punish a defendant for harming persons not before the court amounts to a taking of property from the defendant without due process of law.
Punitive damages awards serve three primary functions. They (1) punish a defendant’s wrongdoing; (2) deter the defendant and others from similar misconduct; and (3) aid in recovering litigation expenses. Philip Morris USA v. Williams is the latest in a series of recent cases in which the Supreme Court has confronted whether and to what extent the Constitution imposes procedural requirements and substantive limits on punitive damages awards.
In Honda Motor Co. v. Oberg, the Court considered whether a state could prohibit judicial review of the size of a punitive damages award. The defendant had manufactured and sold an all-terrain vehicle that overturned and severely injured the plaintiff. The plaintiff sued alleging that the manufacturer knew or should have known that the vehicle’s design was unreasonably dangerous. The jury found the defendant liable and awarded the plaintiff nearly $ 1 million in compensatory damages and punitive damages of $ 5 million. The defendant appealed, arguing that the punitive damages award violated the Due Process Clause of the Fourteenth Amendment because the amount was excessive and because the state court lacked the power to review excessive verdicts. Both an Oregon court of appeals and the Oregon Supreme Court upheld the $ 5-million award. The Supreme Court granted certiorari and held that a state cannot deny judicial review of the size of a punitive damages award in a manner inconsistent with the common law without violating the Fourteenth Amendment’s Due Process Clause. Significantly, before addressing the procedural due process issue, Justice Stevens, writing for the majority of the Court, endorsed the use of substantive due process for the judicial review of punitive damages awards.
The Court reasoned that Oregon’s abrogation of a well-established common law protection against arbitrary deprivations of property presumptively violated procedural due process. The Court observed that an Oregon court could only overturn a punitive damages award if it could not find any substantial evidence to support any punitive damages award. While Oregon law ensured that punitive damages would not be awarded against defendants entirely innocent of conduct warranting exemplary damages, the Court said that the Oregon procedure provided no assurance that those whose conduct is sanctionable will be protected from punitive damages of arbitrary amounts. The Court also reasoned that “evidence of culpability warranting some punishment is not a substitute for evidence providing at least a rational basis for the particular deprivation of property imposed by the State to deter future wrongdoing.” The Court recognized that a jury’s power to award punitive damages poses an acute danger of the arbitrary deprivation of property and furthermore, that Oregon removed a judicial safeguard against such risk without providing an adequate substitute procedure. By restricting the ability of the judiciary to review the size of punitive damage awards, the Supreme Court concluded that the Oregon Constitution violated a defendant’s right to due process.
Yet, the ruling in Honda Motor was not based merely on the presumption of unconstitutionality that arose from Oregon’s procedural defects. Justice Stevens explained that jury discretion regarding the amount of punitive damages created a danger that defendants would be arbitrarily deprived of property through excessive jury awards. However, the majority opinion did not set forth standards for determining when a punitive damages award was so excessive that it violated substantive due process even if the trial and appellate courts had provided the defendant with fair procedures.
November 2014, Vol. 66, No. 6
Lily Kahng, The Taxation of Intellectual Capital