The court ruled that the Constitution's due-process clause forbids a state to use punitive damages to punish a company for injury it inflicts upon others who are "essentially, strangers to the litigation," according to the majority opinion, written by Justice Stephen G. Breyer.
The Supreme Court has already addressed the issue of the constitutionality of large punitive damage awards in BMW v. Gore and State Farm v. Campbell. In the two cases, both decided in the last ten years, the Court found that multi-million dollar damage awards violated due process and were constitutionally excessive.
BMW v. Gore laid out three "guideposts" by which a jury can determine the appropriate measure of punitive damages. The first is the reprehensibility of the defendant's conduct, and the second is the ratio of punitive damages to compensatory damages awarded in the case (the third, comparable civil and criminal penalties for similar conduct, is irrelevant for the moment.) It was largely expected that the Court would go to the second issue and attempt to establish a clearer ratio beyond which punitive damages would be excessive. I for one expected as much because the Court has already addressed the excessiveness of punitive damages twice, and in both instances had much to say about the ratio of punitive to compensatory damages. Instead the Court avoided that issue completely, and went to the the more general issue of due process. Essentially, the court ruled that a jury can consider a defendant's similar conduct directed towards persons who are not parties to the litigation in the reprehensibility analysis, but could not consider such harm when making a determination of the appropriate amount of punitive damages to award.
Now, imagine you're a juror sitting on a possible re-trial of this exact same case. After hearing all the evidence of both sides, you are reminded by the judge that when it comes to how bad the defendant behaved, you're permitted to think about how it's actions affected many more people beyond the plaintiff, but when it comes to actually deciding how much punitive damages are appropriate, you are not. If you can perform such mental gymnatistcs, you'd be a better juror than I am.
Here's a fairly common take from the left on the decision, from Scott Lemieux:
The other important aspect to this case is that--as I predicted--Alito and Roberts broke with Scalia and Thomas and voted to throw out the damages. Ann Althouse--of course!--implies that this is evidence of Alito's fabled centrism, but this gets things exactly wrong. Precisely because they're sometimes constrained by larger theoretical concerns, Thomas and Scalia will sometimes won't go along with the tendency of conservative justices to favor business interests, whereas Roberts and Alito will have no such restraints. Today's cases are evidence that Roberts and Alito are likely to cast more reliably conservative votes than Scalia and Thomas, not the reverse. If Alito's adoption of this broad due process claim was (as it is for Souter, Breyer, and Kennedy) accompanied by a belief that the due process clause provides substantial protections to reproductive freedom as well as the ability of corporations not to pay more damages than the Court thinks appropriate when they harm people, it would be evidence of "centrism," but it's abundantly clear that this isn't the case. Alito will, from the perspective of people with liberal constitutional values, be worse than Scalia.
While I cannot disagree with Scott that this is a "pro-business" decision, I'm not exactly sure how much of a victory for Philip Morris this was. It is at least possible that this case could be remanded all the way down to the state district court, where a jury could award the exact same amount of damages, and the state appellate and supreme court would uphold it.
So at this point I think it's premature to say what the fallout of this case will be (though of course pro-business groups are applauding the decision.) Nor does this say much for the Supreme Court's jurisprudence of punitive damages, as the the Court has definitely taken a step to the side as opposed to a step forward or backward.