Wednesday, February 21, 2007

Tobacco Verdict Goes Up In Smoke

I'm sure everyone's used that headline already, but who could resist? By a 5-4 vote, the Supreme Court yesterday overturned an $80 million jury verdict for the plaintiff in Philip Morris USA v. Estate of Jesse D. Williams. Williams had died from smoking, and the jury awarded his estate $21,000 in economic damages, $800,000 in noneconomic damages, and $79.5 million in punitive damages. The Court struck down the award on the ground that the Constitution's Due Process Clause prohibits a state from letting a jury impose punitive damages on a defendant to punish the defendant for conduct that harmed people other than the plaintiff. The plaintiff's lawyer in this case encouraged the jury to sock up Philip Morris for damages for all the people it harmed in the state of Oregon. Justice Breyer wrote the Court's opinion; he was joined by Chief Justice Roberts and by Justices Kennedy, Souter and Alito. Dissenting were Justices Stevens, Scalia, Thomas, and Ginsburg.

The unusual judicial line-up reflects the cross-cutting impulses that surround these cases. You might think that conservatives would prefer the rule that favors the big corporations (here, the rule that limits punitive damage awards), but conservatives, particularly Justice Scalia, also tend to prefer the rule that limits the impact of the federal Constitution on the affairs of state governments. Liberals tend to have the opposite impulses. Punitive damage awards entered by a state jury are state government business and federal Due Process limitations interfere with it. Justice Scalia has a long-standing campaign to limit the Due Process Clause and you have to respect him for sticking to principle even though he probably finds the result in these cases distasteful.

This is a tough area. The Supreme Court's decision that the Due Process Clause has anything to do with punitive damage awards at all is quite recent. The Court first hinted that due process might apply only in the late 1980s, and first overturned a punitive damages award on due process grounds only in 1996, in the case of BMW North America v. Gore, 517 U.S. 559.

For Justice Scalia, the whole matter is simple. His theory is that "due process" is the same as "traditional process." The Due Process Clause prohibits a state from taking property without "due process of law," and to Justice Scalia, that simply means that, when a state takes property, it must use the process that states have traditionally used for taking such property. In early American practice, punitive damage awards were traditionally left to the discretion of a jury; therefore, Justice Scalia says, a process that allows juries to award whatever punitive damages they think best must be "due" process.

The problem with this theory is that sometimes tradition becomes inappropriate because of other social changes over time. The majority of the Justices, therefore, believe that a court must examine even traditional practices to ensure their current fairness.

Without definitively taking sides in this debate, I can say that the Court's test in these punitive damages cases is a mess. In the BMW case, the Court held that the Due Process Clause requires that a punitive damages award not be "grossly excessive," which is to be determined by considering (1) the degree of reprehensibility of the defendant's conduct, (2) the ratio of the punitive award to the actual harm inflicted on the plaintiff, and (3) the comparison between the punitive award and other civil or criminal penalties that could be imposed for the defendant's conduct. That's an extremely mushy, imprecise test, particularly when one bears in mind that the Court also said that in applying the "ratio" factor, one must remember that sometimes a large ratio of punitive to actual damages is appropriate precisely because the defendant's reprehensible conduct imposed only a small amount of actual damages!

Boy, if that's the best the Court can do, it might be better to stay out of the matter altogether. Even yesterday's opinion, which seems somewhat better inasmuch as it apparently imposes a hard-edged rule, is quite slippery. It says that the jury cannot use punitive damages to punish a defendant for harming persons other than the plaintiff, but it also says that the jury can consider whether the defendant has harmed persons other than the plaintiff in order to gauge how reprehensible the defendant's conduct was. So all the evidence about the defendant harming others gets to come in, and the jury is told to punish the defendant in accordance with how reprehensible its conduct was, including how many other people it harmed, but the jury isn't to punish the defendant for harming those other people. Ladies and gentlemen of the jury, do you understand your instructions?

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