Thursday, February 22, 2007


The editors of the L.A. Times, channeling the spirit of the editors of the Wall Street Journal, come out whole-heartedly for the Supreme Court's decision in Philip Morris yesterday:

The U.S. Supreme Court went further this week — though not far enough — in reining in juries in civil cases that award outlandish punitive damages. By a disappointingly narrow 5-4 vote, the justices overturned a jury's decision that Philip Morris should pay $79.5 million to the widow of a smoker who died of lung cancer. The value of her actual damages was only $821,000.

The spin begins in the first paragraph. Is it "outlandish" for a corporation that reaped $2 billion in profits the year that the litigant died, to be required to fork over what amounts to two weeks of profits as punishment for fraudulant behavior that results in the death of a smoker? Only if you think that punitive damages are not supposed to, well, punish anyone. The entire purpose of punitive damages is to serve the state's compelling interest in protecting its citizens and deterring wrongful conduct directed towards them. That can't happen when puntive damage awards equal an amount of profits that the Board of Directors will miss merely by blinking.

The justices could — and should — have ruled clearly that the $79.5-million award violated previous rulings that punitive damages may not be "grossly excessive" and should bear a reasonable relation to the harm actually experienced by the plaintiff. But in returning the case to the Oregon courts, the court did impose a sensible rule that should make it harder for juries to sock deep-pocket and easily demonized defendants.

And here the editors fail to appreciate the subtle bind that the Court was in. The Court has already ruled in two prior cases, BMW v. Gore and State Farm v. Williams that punitive damages cannot be "grossly excessive", but in both cases the Court also stated quite clearly that they cannot set a bright-line test for when punitives damages bear no reasonable relation to the award for the actual harm the plaintiff suffered. To do so would undermine the punishment purpose of punitive damages, especially where tortfeasors who are large corporations could concievably kill their customers through reckless and outrageous conduct and yet suffer only a minor consequence to their bottom line. It's hard to imagine how the Court could come up with a workable test that would be applicable to every imaginable situation, and so they haven't. Nor will they in the future (even though at the same time I was surprised that they didn't address that issue at all to provide more guidance on what is and is not an excessive award, but that's neither here nor there.)

In cases like this, juries often are confronted with a brainteaser. In deciding to award punitive damages, they're supposed to consider whether the conduct of the defendant is "reprehensible," and one definition of reprehensible conduct is to act in a way that puts many people at risk (such as leaking toxic material into a water supply).But without proper guidance, jurors can leap to the conclusion that damages should reflect the harm experienced by everyone who might have tasted tainted water — or smoked a cigarette. Though it could have gone further, this week's decision should make such leaps less likely.

Actually, as I noted here, I'm not at all sure that the decision makes such leaps less likely. Again, you would serve as a better juror than I if you can both weigh the conduct of the defendant towards other parties and not weigh the conduct of the defendant towards other parties at the same time. If you're a clever juror, such an instruction from a judge won't stop you from assessing large punitive damages and then premising it on the degree of reprehensibility of the defendant's conduct, especially if you are appropriately guided by a clever plaintiff's attorney. I suppose the decision will have a general chilling effect on large awards against corporate tortfeasors, but as I already noted, there is nothing preventing either the Oregon Supreme Court, or an Oregon state court, from re-hearing the case and allowing exactly the same amount of damages.

And by the way, note how the editors attmept to color conduct that puts many people at risk, by providing the example of a corporation that leaks toxic material into a water supply. If you think there was no thought put into that example, you failed to read the rest of the editorial closely enough. They provide the example of the worst kind of tortious conduct a corporation can conduct, so you you the reader can easily distinguish it from the case of Philip Morris, where the smoker voluntarily chose to begin and continue smoking. But the two types of conduct were distinguished by the Oregon state court. The smoker was found partly liable for his own conduct, and the actual damages award was reduced accordingly. And note also the recent news about the gradual increase in the nicotime levels of cigarettes made by, among others, Philip Morris. Exactly how voluntary is a smoker's decision to continue smoking, when tobacco companies are doing their best to make sure the smoker stays hooked?

Such news, which highlights the continuing profit motive and reckless disregard for human life that is possessed by companies such as Philip Morris, makes it quite clear that the Supreme Court did well to minimize the damage of its own decision, so that clever attorneys, courts and jurors seeking to do justice can still, as the editors put it, "sock" these corporate tortfeasors.

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