Supreme Court to hear Philip Morris appeal
The tobacco company convinced the court to hear product liability case for excessive punitive damages.

WASHINGTON (CNN) - Tobacco giant Philip Morris will get a chance this fall to convince the Supreme Court that an $80 million judgment against the company was excessive in an important product liability case testing the power of juries to impose large punitive awards against well-heeled corporations.

The justices accepted the appeal Tuesday, and will decide whether to follow recent precedent that punitive damages should in most cases match "actual" damages. Oral arguments will probably be held in November or early December.

Court records show an Oregon jury ruled in favor of the estate of building custodian Jesse Williams, who had smoked for 47 years, up to three-packs a day, and died of lung cancer in 1997. His family sued Philip Morris, manufacturer of the popular Marlboro brand. The company is now part of the Altria Group (down $0.38 to $72.09, Research).

A jury in 1999 found Williams and Philip Morris equally at fault for the smoking-related illnesses he suffered.

The jury awarded $800,000 in compensatory damages and almost 100 times that - $79.5 million - in punitive damages.

The trial judge reduced the punitive damages to $32 million, but higher state courts restored the award to the original amount. Much of the money, under state law, is to go to a special fund to help victims of crime.

The Oregon Supreme Court upheld the judgment noting, "Philip Morris's conduct here was extraordinarily reprehensible, by any measure of which we are aware. It put a significant number of victims at profound risk for an extended period of time. The state of Oregon treats such conduct as grounds for a severe criminal sanction, but even that did not dissuade Philip Morris from pursuing its scheme."

The U.S. Supreme Court in 2003 ruled a $145 million punitive damages award against State Farm Insurance was excessive. Writing for the 6-3 majority, Justice Anthony Kennedy concluded, "Courts must ensure that the measure of punishment is both reasonable and proportionate to the amount of harm," someone suffers.

The high court set no set precise ratio between punitive and actual damages for determining what would be "excessive" in violation of the Constitution's due process clause. But exceptions could be made, said Kennedy, "if a particularly egregious act has resulted in only a small amount of economic damages."

That legal standard will now be tested in this latest appeal.

Philip Morris and other tobacco makers have been the subject of lengthy and high-profile class-action lawsuits filed by individuals and the government over its marketing strategy, and allegations it hid for decades studies showing the health risks of smoking.

Consumer rights advocates argue such large punitive damages are necessary as a deterrent and retribution when corporate conduct is judged excessive or extreme.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.