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Supreme Court tosses $79.5M tobacco verdict

Published February 21, 2007


WASHINGTON - The Supreme Court threw out a $79.5-million award that a jury had ordered a cigarettemaker to pay to a smoker's widow, a ruling that could bode well for other businesses seeking stricter limits on big-dollar verdicts.

The 5-4 decision Tuesday was a victory for Altria Group Inc.'s Philip Morris USA, which contested an Oregon Supreme Court decision upholding the jury's verdict.

Yet the decision did not address a key argument made by Philip Morris and its supporters across a wide range of businesses - that the size of the award was unconstitutionally large. They had hoped the court would limit the amount that can be awarded in punitive damages cases.

Instead, Justice Stephen Breyer wrote in his majority opinion that the award to Mayola Williams could not stand because a jury may punish a defendant only for the harm done to the person who is suing, not to others whose cases were not before it.

"To permit punishment for injuring a nonparty victim would add a near standardless dimension to the punitive damages question," Breyer said.

The company had argued that the jury was encouraged to punish Philip Morris for health problems suffered by every Oregonian who smoked its cigarettes.

Chief Justice John Roberts and Justices Samuel Alito, Anthony Kennedy and David Souter joined with Breyer.

Dissenting were Justices Ruth Bader Ginsburg, Antonin Scalia, John Paul Stevens and Clarence Thomas. Ginsburg said Tuesday's ruling made punitive damages law even more confusing.

Jesse Williams died of lung cancer in 1997 at 67. He smoked two packs a day of Philip Morris-made Marlboros for 45 years.

His widow argued that the jury award was appropriate because it punished Philip Morris for a decadeslong "massive market-directed fraud" that misled people into thinking cigarettes were not dangerous or addictive.

She won compensatory damages of $800,000 and punitive damages of $79.5-million - 97 times the compensatory damages - in the fraud lawsuit she filed against Philip Morris. A state court previously cut the compensatory award to $500,000, which is unaffected by Tuesday's ruling.

The case now goes back to the Oregon high court, which could order a new trial, reduce the award or reinstate its decision.

Punitive damages are money intended to punish a defendant for bad behavior and deter repetition. Lawyers who defend companies against product-liability claims said Tuesday's ruling would help curtail large jury awards.

A jury will have to be told "that it cannot punish for conduct that may be directed to others. That's really the crucial part of this decision," said Sheila Birnbaum, who won a punitive damages case in 2003 when the Supreme Court struck down a $145-million verdict against State Farm Mutual Automobile Insurance Co.

Philip Morris vice president William Ohlemeyer said the decision gives the company "an opportunity to fully and fairly defend itself in this and other cases."

$79-million lumber award reversed

The Supreme Court on Tuesday threw out a $79-million award against Weyerhaeuser Co. in a lawsuit alleging the forest products company tried to monopolize the hardwood lumber market in the Pacific Northwest. The 9-0 decision comes in the case of a defunct lumber mill that said it was driven out of business when Weyerhaeuser paid too much for logs that Weyerhaeuser allegedly didn't need. The 9th U.S. Circuit Court of Appeals had affirmed the award to Ross-Simmons Hardwood Lumber Co. after a jury found that the larger company violated federal antitrust law. The jury returned a $29-million jury verdict, which was tripled to $79-million. Writing for the court, Justice Clarence Thomas said that Ross-Simmons should have been required to prove that its competitor had a dangerous probability of recouping the losses it incurred in bidding up prices. The failure to satisfy that standard "cannot support the jury's verdict," Thomas wrote. Ross-Simmons accused Weyerhaeuser of paying too much for alder logs and not using what it bought.

[Last modified February 21, 2007, 01:40:57]

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