Supreme Court rejects $79.5 million tobacco award
By William Spain, MarketWatch
Last Update: 11:56 AM ET Feb 20, 2007
NEW YORK (MarketWatch) -- The U.S. Supreme Court on Tuesday threw out a $79.5 million punitive damages award against Altria Group's Philip Morris USA unit, handing the food and tobacco titan its latest in a string of litigation victories.
The company had appealed the case, known as Williams-Branch, to the high court after the Oregon Supreme Court upheld the award early last year. The plaintiff, the wife of a dead smoker, had charged the company with fraud and negligence and, in 1999, won $800,000 in compensatory damages and $79 million in punitive damages - the largest fine ever awarded in the state.
The trial judge later reduced the award to $32 million only to have an appellate court reinstate the original award. The case was then appealed to the U.S. Supreme Court, which set aside the Oregon appellate court's ruling and ordered it to reconsider the case. But in 2004, the Oregon Court of Appeal refused to reduce the $79.5 million award and the Oregon Supreme Court reaffirmed the decision.
Philip Morris took the case back to U.S. Supreme Court, which heard oral arguments Oct. 31.
In the 5-4 decision handed down Tuesday, the high court found the jury in the case was out to punish the company for harm it may have done to others besides the plaintiff.
"A punitive damages award based in part on a jury's desire to punish a defendant for harming nonparties amounts to a taking of property from the defendant without due process," the court wrote.
Further, "permitting such punishment would add a near standardless dimension to the punitive damages equation and magnify the fundamental due process concerns of this Court's pertinent cases -- arbitrariness, uncertainty, and lack of notice," the court wrote.
And, finally, "the Court finds no authority to support using punitive damages awards to punish a defendant for harming others."
The majority opinion was written by Justice Stephen Breyer. He was joined by Chief Justice John Roberts, and justices David Souter, Anthony Kennedy and Samuel Alito.
Justice John Paul Stevens, writing in dissent, said: "I see no reason why an interest in punishing a wrongdoer for harming persons who are not before the court ... should not be taken into consideration when assessing the appropriate sanction for reprehensible conduct."
Whereas "compensatory damages are measured by the harm the defendant has caused the plaintiff, punitive damages are a sanction for the public harm the defendant's conduct has caused or threatened," Stevens wrote. "There is little difference between the justification for a criminal sanction, such as a fine or a term of imprisonment, and an award of punitive damages."
Also in dissent were justices Ruth Bader Ginsburg, Antonia Scalia and Clarence Thomas.
Shares of Altria (MO) were down slightly at $85.99 Tuesday morning.
The company has been on a roll before the bench over the past year, beating back class-action cases from Illinois to Florida and defeating a Justice Department attempt to make it "disgorge" hundreds of billions of profit.
William Spain is a MarketWatch staff writer in Chicago.
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