Philip Morris USA, Inc. v. Williams

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Authorship: Lyle Denniston

Contents

[edit] Briefs and Documents

Docket: 07-1216

Issue: Whether the Supreme Court of Oregon, on remand from the Court’s 2007 decision on the constitutionality of a $79.5 million punitive damages award based on harms done to non-named plaintiffs, improperly asserted a state law procedural bar having the effect of precluding Phillip Morris from asserting a constitutional claim.

Merit briefs

Amicus briefs

Oral Argument: Transcript

DISMISSED

[edit] Pre-Argument Articles

For most of a decade, Philip Morris USA, Inc., the cigarette company, has been feuding with the Oregon courts over a punitive damages award to the widow of a smoker – Mayola Williams. In the meantime, the verdict, with interest, has just about doubled. The Supreme Court has been drawn into the feud twice before; now, the company's third appeal seeks to turn the fight into a contest between the Supreme Court and the Oregon Supreme Court.

Background

In 1993, the Supreme Court told the states that the Constitution does not allow juries to impose “grossly excessive” punishment for corporate wrongdoing. That was in the case of TXO Production Corp. v. Alliance Resources Corp. Since then, the Court has returned to the task of spelling out just what level of punitive damages verdict would be struck down as “excessive.” No one in corporate America has tested the issue more often in state and federal courts than the nation's cigarette makers, who have been frequent targets of punishing verdicts. There is a special place in those litigation annals for Philip Morris USA v. Williams (now docketed in the Supreme Court under 07-1216). By the end of the current Court Term, there will be a third precedent bearing that title.

The case grew out of the smoking addiction and the death of an Oregon man, Jesse D. Williams. For nearly five decades, he smoked cigarettes, up to three packs a day. About six months after he was diagnosed with inoperable lung cancer, he died. That was in 1997. Two years later, after a trial in which lawyers for his widow, Mayola, mounted a sweeping challenge to the entire cigarette industry for widespread harms to smokers in general, a jury awarded Mayola $821,485.50 in compensatory damages and $79.5 million in punitive damages. The verdict came, Philip Morris has since complained, after the trial judge refused to instruct jurors that their verdict was not to punish Philip Morris with punitive damages to make up for wrongdoing toward others not involved in the lawsuit; the judge had rejected the company lawyers' proposed Instruction 34 – now, one of the most celebrated jury admonitions in civil litigation history, and certainly the most famous instruction never given.

After the verdict, however, the trial judge reduced the punitive award to $32 million, and the compensatory award was reduced to $521,485 under an Oregon law capping damages for wrongful; death. Both sides, dissatisfied, appealed. The Oregon Court of Appeals ruled that the judge should not have reduced the punitive verdict, reinstating it. It found no flaw in the judge's refusal to give Instruction 34, saying the far-ranging harm caused by industry deception about the health hazards of smoking made it “appropriate to consider the effects of defendant's actions on persons other than Williams.” The Oregon Supreme Court refused to hear the case, but Philip Morris took the dispute on to the Supreme Court.

On Oct. 6, 2003, the Supreme Court (docket 02-1553) sent the case back to state courts “for further consideration in light of State Farm Mutual Automobile Insurance Co. v. Campbell” -- the April 2003 ruling that laid down the rule that punitive damages could not be used to punish and to deter conduct not related to the harms done to those who sued. This time, the Oregon Supreme Court took on the case, again upholding the full $79.5 million punitive award after concluding that the jury could have reached the verdict because of the impact of Philip Morris' conduct on “thousands of Oregonians” in addition to Williams. That was in February 2006.

Philip Morris returned to the Supreme Court (docket 05-1256), and the Supreme Court granted review. The Court, in its decision on Feb. 20, 2007, made a binding constitutional rule of what it had implied in the State Farm ruling – that is, that a punitive damage award violates due process if it is based in part on a jury's desire to punish a wrongdoer for harming “non-parties” -- “strangers to the litigation.” It said the state Supreme Court was to “apply the standard we have set forth,” perhaps leading to a new trial or at least a reduction of the punitive verdict. It declined to rule on a second question it had agreed to consider – whether the $79.5 million verdict was excessive.

The state Supreme Court, in response last Jan. 31, said “it is our task to apply the constitutional standard set by the Supreme Court in our consideration of the sole issue raised by Philip Morris, viz., whether the trial court erred in refusing to give proposed jury instruction No. 34.” But, it said, it would not need to reach the federal constitutional issue – that is, the State Farm standard – if there is “an independent and adequate” basis in state law for upholding the jury's punitive verdict.

And that is what it did. It found that the jury instruction had contained errors, and thus ran afoul of a state jury instruction standard dating back decades – that is, a judge's failure to give a proposed instruction will not be overturned if the instruction was not “clear and correct in all respects...and altogether free from error.” It went on to find Instruction 34 was flawed, misstating Oregon law in two respects. In the end, it was satisfied that the judge committed no error in refusing to give the instruction; it once again upheld the $79.5 million verdict.

Petition for Certiorari

Philip Morris on March 24 started its third appeal to the Supreme Court (docket 07-1216), raising two issues. First, it argued that, once the Supreme Court had ruled on the merits of its federal constitutional claim and told a state court to apply the proper standard, the state court had no authority – for the first time in nine years of litigating this case – to opt instead to rely on a state procedural rule. Second, it raised all over again the second issue the Court had agreed previously to review then left undecided – whether the $79.5 million verdict was constitutionally too high under the Court's due process standards.

Lambasting the Oregon Supreme Court, the petition contended that the state court was bound to apply the State Farm standard and lacked the authority not to do so, that the procedural rule should have come into the case before the Supreme Court had ruled, and that the use of the rule was “nothing more than a pretext for the Oregon Supreme Court's refusal to protect Philip Morris' due process rights.”

“The Oregon Supreme Court's defiance of this Court's directive should not be countenanced,” the petition brusquely asserted. “The Oregon Supreme Court had no authority either to disobey the clear instructions of this Court or to conjure up state-law procedural grounds for the judgment after both it and this Court had reached the merits of Philip Morris's federal claim.”

Mayola Williams' lawyers urged the Supreme Court to bypass this case, arguing that the procedural rule had been applied in this very case before the most recent state court ruling, that the rule dates back to 1916 and is regularly applied, and that 15 other states follow the same rule. The opposition also argued that the procedural rule was not a “meaningless ritual,” but an important safeguard of a fair trial based on correct instructions to the jury. It also contended that Philip Morris had misrepresented the conclusions of the state courts, including its assertion that the state court had “defied” the Supreme Court by failing even to consider the State Farm standard. The procedural rule, it

Nothing in the Supreme Court decision in February 2007, the response argued, required Mrs. Williams to abandon her reliance upon the state procedural rule in defending the punitive verdict.

The Court granted review on June 9, 2008, but only on the question of the state court's reliance upon the procedural bar following remand of the case by the Supreme Court. It thus declined to rule on whether the $79.5 verdict was invalid.

Merits Briefs

The two sides' merits briefs renew their conflicting stances on whether the Oregon Supreme Court “defied” the Supreme Court, on whether Philip Morris had sufficient notice that the procedural rule would be belatedly used against it, on whether the procedural rule has legitimacy under Oregon law, and on whether the Supreme Court had already – at least implicitly – rejected the procedural rule's use in this case.

Philip Morris puts new emphasis on its contention that the only proper remedy, at this stage, is for the Supreme Court to directly order a new trial, rather than returning the case to state courts for one more chance to examine the constitutional standard's application to the $79.5 million verdict. Although the Supreme Court had suggested that a reduction of that award might be a proper outcome, the company argued that “there is no way to know what amount of punishment a properly instructed jury would have imposed. In this case, had the jury understood that it could punish Philip Morris only for the impact of its conduct on Jesse Williams, it might well have selected an award far below the constitutional holding.”

In response, Mrs. Williams' lawyer contended: “It is time for this litigation marathon to end. Jesse Williams' widow has courageously fought against great odds to bring this case to trial and prevailed nine years ago in an intensely contested, well-managed five-week jury trial....At this late stage, after all of the full briefings, exhaustive hearings, and multiple decisions, sending an individual without the resources and experience of its opponent back to square one again would epitomized the idea that justice delayed is justice denied.” Moreover, the brief added, the factual and legal landscape on tobacco company liability has changed markedly in those nine years, so that a retrial now could not present the same issues as in the original trial.

An array of business and conservative advocacy groups support Philip Morris' appeal, arguing that it is not uncommon for lower courts to defy the Supreme Court's repeated admonitions to control soaring punitive damage verdicts, and contending that litigants need to know – at trial, not later – what the procedural ground rules will be for trying punitive damages cases. Business groups in particular stressed their keen interest in enforcement of the Supreme Court declaration that punitive verdicts are not to be imposed to fulfill a jury desire to punish someone other than the litigants.

The Criminal Justice Legal Foundation, in a brief supporting neither side, urged the Supreme Court to write a new definition of what kind of state-law ground would be adequate to head off review of a federal issue. In the past, the brief said, the Supreme Court has used “a haphazard patchwork [of phrases] that has drawn considerable scholarly criticism.” The definition it proposed: “the claimant should have notice that the rule exists and applies to his situation and should have a reasonable opportunity to present his federal claim.”

Mayola Williams picked up, unsurprisingly, the support of the state of Oregon and seven other states, urging the Court to protect the authority of state courts to employ their procedural rules when cases are returned to them by the Supreme Court for a new look. She also draws the support of four retired Justices of Oregon's highest court, defending the integrity of that court and arguing that the rule it applied is familiar and long-standing. Other amici on her side of the case include an array of anti-tobacco groups, trial lawyers, and professors of legal procedure.

Analysis

Philip Morris's task on this third appeal is to hold together the five-Justice majority that sent the case back to the Oregon Supreme Court. The other four Justices seem beyond its reach: they already had found the $79.5 million punitive verdict to be valid. It is thus unlikely that they would take a different stance just because the state court had found a new way to sustain that verdict – unless, of course, they were to accept the argument that the state court had “defied” a clear Supreme Court mandate.

The five Justices who ordered the new look are unlikely to read the state Supreme Court's response as negatively as Philip Morris has characterized it, and yet they could see in that response a threat to the integrity of the constitutional rule against punishing for harm to non-parties. That was a major development in the push to narrow the scope of punitive damages in general, as a majority of the Court, made up of different Justices, has been attempting to do since at least 1993.

It would appear that Mayola Williams' lawyers have done a fairly good job of defending the pedigree of the state procedural rule at issue, so the Court may not be so ready to accept Philip Morris' characterization of it as novel and perhaps even surprising. Rather than get into the niceties of state law interpretation, the Court's majority may want to reach for a simpler response: simply order a new trial, and let both sides take their chances. It is hard to know whether the plight of Mrs. Williams, waiting for finality, would be persuasive for at least some in that majority – perhaps Justice Stephen G. Breyer (although he wrote the 2007 decision) or Justice David H. Souter. The others in that majority were Chief Justice John G. Roberts, Jr., and Justices Samuel A. Alito, Jr., and Anthony M. Kennedy.

The four on the other side were Justices Ruth Bader Ginsburg, Antonin Scalia, John Paul Stevens and Clarence Thomas.

[edit] Oral Argument Recap

After spending nearly a full hour Wednesday morning on the minutiae of jury instructions and Oregon state court precedents, the Supreme Court began thinking about a bolder approach: should it start over with a new round of briefing in the major new tobacco punitive damages case? That was the suggestion thrown out by Chief Justice John G. Roberts, Jr., as the Court was about to wind up its hearing on Philip Morris USA v. Williams (07-1216). The idea, perhaps, will be explored further when the Court meets in private on Friday to discuss what to do about the case.

Roberts’ suggestion came after three of his colleagues — Justice David H. Souter, doing so fervently, and Justices Anthony M. Kennedy and Stephen G. Breyer, somewhat obliquely — raised a concern that the Court needed a way to assure that when it makes a constitutional ruling, lower courts will not nullify it by coming up with a procedural escape hatch.

That is a concern that Philip Morris has been trying hard to stoke in challenging — for the third time in the Supreme Court — a $79.5 million punitive damages verdict in favor of a smoker’s widow, Mayola Williams. The tobacco company has argued that the Oregon Supreme Court “defied” a 2007 Supreme Court ruling telling the state tribunal to reconsider that verdict by applying a newly minted constitutional limitation. The state court did not do so, instead upholding the verdict afresh under a state procedural rule for jury instructions.

The state court’s response was the main focus of most of Wednesday’s argument. The Court, in granting review of Philip Morris’ new challenge last June, had agreed to hear only the validity of that response by the state court. The Court did not grant review on a second issue the company had put forth: whether the $79.5 million verdict was just too high, under Supreme Court constitutional limitations.

But the Chief Justice, reacting to the way the hearing unfolded in late stages on Wednesday, suggested that the Court might now grant review of the second issue, and order new briefing and argument on it (something that still could be accomplished this Term). That, Roberts said, would be one way the Court could avoid a ruling that might encourage state courts to defy constitutional rulings. In short, the Court would be addressing the constitutionality of the $79.5 million verdict on “excessiveness” grounds rather than on the refusal-to-obey issue that Philip Morris had also raised. (That, incidentally, also would have the virtue of the Court not having to say unpleasant things about the Oregon Supreme Court.)

Both lawyers in the case — Stephen M. Shapiro for Philip Morris, Robert S. Peck for Mrs. Williams — did not embrace the idea with enthusiasm, but both conceded that would be an alternative the Court could pursue. No member of the Court publicly opposed the idea, although Justice Ruth Bader Ginsburg — who had voted earlier to uphold the $79.5 million verdict — seemed a bit hesitant.

The Chief Justice’s late suggestion marked a dramatic shift in the atmospherics of the hearing, because the Court up to that point had been focused mainly on reexamining the way the Oregon trial judge and appeals courts had handled the jury instruction issue that lies at the core of Philip Morris’ challenge. The company had wanted the jurors told that they could not impose punitive damages for conduct for anyone not a party to the case, but the trial court refused to do so.

In minute detail, the Justices went over the exchanges the lawyers had with the trial judge about that issue, and Justice Breyer, in particular, dwelled at length on just what some 28 Oregon state court precedents had to say on that question. With that as the focus, the hearing did not go well for Philip Morris’ Shapiro — even from the beginning, when Justice Souter told Shapiro that he had “a steep hill to climb” to keep Mrs. Williams from a chance to raise the procedural rule as she sought to sustain the verdict in her favor.

The argument also covered the issue of whether the state court had the authority to shift to a state law-based ground for affirming that verdict. Shapiro suggested that the adequacy of its state law explanation was a matter of federal law, and urged the Court to find that the state Supreme Court had not shown its reliance was a proper alternative to facing the constitutional question. The Justices’ questions and comments, however, suggested that they did not regard the state court as having acted in some deliberately defiant way.

Peck, Mrs. Williams’ counsel, also spent the bulk of his time on the procedural issue, stoutly defending its long pedigree and routine application in Oregon. He seemed to have difficulty mainly with Justice Breyer and those 28 state-court precedents that bore on the issue. Those, Breyer said, were not very clear authority.

It was Breyer who, well into Peck’s side of the argument, began exploring the implications of a constitutional ruling by the Court that might get undermined by a state court refusing to follow it. The Justice wondered about how the Court could ensure, say, in a death penalty case, that a lower court would apply what the Court had decided.

As Peck engaged in an exchange with Breyer, Justice Antonin Scalia jumped in, asking whether the lawyer was claiming that the Supreme Court had been “in error” in ordering the state Supreme Court to apply the new constitutional limitation laid down in the 2007 decision by the Justices. “Is it up to a state court,” Scalia pressed, “to sit in judgment about whether our remand orders are in error, or not?”

Peck said the mandate was not wrong, but contended that the Court had left room for the state court to do as it did in insisting on its procedural bar. But, Scalia countered, “that’s not what it says…the Oregon Supreme Court applied the wrong constitutional standard…That has nothing to do with the issue we have been discussing this morning.”

It was at that point that Justice Souter asked: “How do we guard against making constitutional decisions that are simply going to be nullified by some clever device raising a procedural issue or an issue of state law issue when the case goes back? Is there any way to assure against, in effect, a bad faith response to our decision…?” Perhaps, Souter said, the Court might have to tell state courts how they should arrange their procedures for review following a remand, in order to assure that a constitutional ruling gets followed and that no state law issue are left dangling to be raised later.

Peck resisted that point, but then Justice Kennedy said that, “we do it all the time” in criminal cases “because of the importance of the constitutional right.” When Peck said that the Court could rely on the good faith of state courts in applying their procedural rules, Kennedy shot back: “But it serves very little interest.”

That apparently provided the impetus that led the Chief Justice to comment that “there’s another way to protect our constitutional authority in this case…If we have some concern, if there is something malodorous about the fact that the Oregon Supreme Court waited until the last minute to come up with this rule that was before it all the time…, we can avoid having to address what we do in…that consideration, simply by saying: ’Look, we are going to go ahead with the questions presented’ “ – that is, review would be granted on the question of the excessiveness of the Philip Morris verdict.

Although Peck said the issue had been briefed in the case’s previous filings, and had at least been discussed briefly in the 2007 oral argument, the Chief Justice ultimately suggested that the way to proceed would be to grant review of that issue and then have “normal briefing” and argument.

[edit] Opinion Analysis

The Supreme Court chose on Tuesday, after examining the issue for the third time, not to disturb a punitive damages verdict now totaling more than $150 million, won by the widow of a heavy smoker who died of lung cancer. The Court dismissed a new appeal by Phillip Morris USA, saying it had “improvidently granted” review last June. The case, heard on Dec. 3, was Phillip Morris USA v. Williams (07-1216).

This was one of three actions the Court took to resolve the merits of pending cases. It decided unanimously that a criminal conviction need not always be overturned if a juror was wrongly seated after being opposed by a defense lawyer’s peremptory challenge. The ruling came in the case of Rivera v. Illinois (07-9995).

In a second ruling, the Court unanimously restored the power of the state of Hawaii to sell off lands it acquired on becoming a state, in the case of Hawaii v. Office of Hawaiian Affairs (07-1372).

The Phillip Morris case had become something of a judicial minuet between the Supreme Court and the Oregon Supreme Court, with the Justices twice telling the state tribunal — in 2003 and 2007 — to reconsider the punitive verdict that had been $79.5 million but, with interest accumulating, has perhaps doubled.

The state Supreme Court, in its latest decision in January of last year, once more upheld the verdict of favor of the widow, Mayola Williams. It did not need to consider the constitutional questions the Supreme Court had returned to it, the state court said, because it now found an adequate basis under state law for sustaining the verdict. That basis was a finding that Phillip Morris had erred in seeking a jury instruction.

Phillip Morris then returned to the Supreme Court, arguing that the state court had defied the Justices’ mandate in 2007 to reconsider the constitutional validity of the verdict. It argued that the state court could not use a newly minted procedural bar to reopen a punitive verdict after the Supreme Court had required it to apply a constitutional rule to judge the award. It also contended that and out-of-proportion award cannot be justified on the theory that the company’s conduct was so reprehensible as to override the constitutional right to have a proportional limit on such damages.

The Court, in granting review last June 9, agreed to hear only the first point — that is, whether the state court was wrong in invoking a procedural bar, for the first time, to sustain the jury’s award. That is the issue the Justices said on Tuesday they had erred in agreeing to decide it. As usual, when the Court takes that type of action, it issued no opinion beyond a one-sentence dismissal, issued “Per Curiam” (by the Court) rather than in the name of a Justice.

Mayola Williams’ husband, Jesse, died in March 1997 of cancer after years of smoking Marlboro cigarettes, one of Phillip Morris’s brands. She sued, winning compensatory damages of $821,485.50 and punitive damages totaling $79.5 million. The compensatory award was reduced to $521,485 under an Oregon law capping damages for wrongful death.

The judge also reduced the punitive award to $32 million, but the Oregon Court of Appeals restored the full amount of that award. That decision led to Phillip Morris’ first of three appeals to the Supreme Court.

Mrs. Williams’ lawyers told the Court this time: “Twelve years after the tragic death that gave rise to this action and nine years after the lengthy trial of this case, with four appellate reviews in Oregon, and five years after the first of three trips to this Court, it is time for this litigation marathon to end.”

The marathon, however, may not be over yet. Phillip Morris, at an earlier stage in the case, reserved the right to challenge a state law that requires that 60 percent of a punitive verdict goes to the state of Oregon. The company’s argument against that is that Oregon has achieved all of the proceeds it is entitled to have under the global settlement of a group of states’ lawsuit against the industry.

Mrs. Williams’ lawyers, backed by the Oregon attorney general, have argued that the tobacco settlement only applied to that specific case, and thus would have no effect on the verdict in her case. Phillip Morris must take an affirmative new step to revive this issue, according to lawyers involved.

The verdict stood at nearly $143 million a year ago when Philllip Morris filed its latest petition in the Supreme Court. Under Oregon law, the interest rises at 9 percent a year, indicating that the award is now worth something around $156 million. Mrs. Williams’ 40 percent share would thus appear to be somewhere above $60 million. (The compensatory award of $521,485.50 has not yet been paid, because Phillip Morris’ various appeals sought a new trial on the entire verdict.)

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