Oregon Case Against PM USA Causes Confusion

U.S. Supreme Court uncertain about punitive damages

WASHINGTON -- Juries can punish a cigarette company and award money to an aggrieved widow only for the harm done to her husband, not to other smokers, a lawyer for Philip Morris USA told the U.S. Supreme Court on Tuesday, according to the Associated Press.

In seeking to turn back a $79.5 million award of punitive damages in Oregon, PM USA argued that the jury should have been told explicitly that other smokers, no matter how tragic their stories, would have to prove their own cases.

"Confine the jury to its proper domain, and [image-nocss] its domain is the case before it," said Andrew Frey, the company's lawyer.

Justices appeared to be confused over how to apply prior rulings that limited punitive damagesmoney intended to punish a defendant for its behavior and deter its repetitionto the case of Jessie Williams, a two-pack-a-day smoker of Marlboros who died of lung cancer. Williams' widow, Mayola, followed through on a promise to her husband and sued PM USA, the maker of Marlboros. The company is part of Altria Group Inc.

Oregon courts have upheld the verdict, even after the U.S. Supreme Court sent the case back earlier to make sure it conformed to a 2003 high court opinion limiting punitive damages

Several justices said the best course may be to ask the state Supreme Court once again to explain its ruling. "Isn't perhaps the better course to send this back and say we don't know what you mean?" Justice David Souter said at one point.

Robert Peck, Williams' lawyer, said the jury award was appropriate because it is punishing PM USA's misconduct for a decades-long "massive market-directed fraud" that misled people into thinking cigarettes were not dangerous. Williams, according to his widow, never gave any credence to the surgeon general's health warnings about smoking cigarettes because tobacco companies insisted they were safe. Only after falling sick did Williams tell his wife: "Those darn cigarette people finally did it. They were lying all the time."

To the dismay of anti-smoking groups, the Supreme Court agreed to hear the company's appeal.

In the case over punitive damages, the Williams family is counting on justices to find that PM USA's conduct was so reprehensible that it justifies exceeding guidelines the court has laid out in two rulings in the past 10 years that struck down large awards. One difference is that the earlier cases did not involve physical injuries.

The company doesn't deny making public statements rejecting a link between smoking and cancer; rather, it says there's no evidence Williams ever heard the statements or ever read them.

The court also will be looking at the decision of the state courts that declared it acceptable for the jury in the Williams case to consider harm by PM USA to other smokers for conduct similar to that which allegedly injured Williams. Three years ago, the U.S. Supreme Court said in a different case that a defendant cannot be punished in an individual lawsuit for harm to people other than the plaintiff.

The cigarette company says the approach of the Oregon courts is collective punishment in an individual action, a violation of due process. PM USA complained that the nonparties in the case were never identified, their individual circumstances were not presented in court, and there was no way for a defendant to respond to allegations of widespread harm.

The jury awarded Williams' widow, Mayola, $800,000, in actual damages, a ratio of 97 to one. Justice Anthony Kennedy said three years ago that the ratio of punitive to compensatory damages rarely should be higher than nine to one. The company said that under long-established practice, when compensatory damages are substantial, the constitutional maximum punishment is between zero and four times the amount of compensatory damages.

Bonnie Herzog, Citigroup tobacco analyst, said in a research note, Based on the justices' questions and comments during the oral argument, we do not believe the court will uphold the trial verdict. We think the court will either order a new trial because the instructions to the jury were flawedor remand to the Oregon Supreme Court to clarify its decision."

The case is Philip Morris USA v. Williams, 05-1256.

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