High court tosses award in Philip Morris case

The Supreme Court ruled that the nearly $80 million in punitive damages awarded to Jesse Williams must match 'actual' damages.


WASHINGTON (CNN) -- In a 5-4 ruling, the U.S. Supreme Court on Tuesday threw out a nearly $80 million punitive damages ruling against Philip Morris.

The damages had been awarded in a lawsuit brought by the family of an Oregon man who died from a smoking-related disease.

The case, Philip Morris USA v. Williams, was argued last October before the high court and tested the power of juries to impose large punitive awards against tobacco and other well-heeled corporations in product-liability cases.

In their ruling, the majority of the justices followed recent precedent that punitive damages should, in most cases, match "actual" damages and sent the case back to the Oregon court for reconsideration.

Opposing the ruling were Antonin Scalia and Clarence Thomas, two of the court's more conservative justices.

Voting with the majority were Stephen Breyer and David Souter, two of the court's more liberal justices.

An Oregon jury had awarded the estate of Jesse Williams $800,000 in compensatory damages and almost 100 times that - $79.5 million - in punitive damages. Williams was a building custodian who died in 1997 after having smoked as many as three packs of cigarettes per day for 47 years.

His widow, Mayola, had sued Philip Morris, manufacturer of the popular Marlboro brand. The company is now part of the Altria Group (down $0.31 to $85.89, Charts).

But the Supreme Court didn't tackle the issue of whether the $79.5 million in punitive damages were excessive, which still leaves the door open for the Oregon Supreme Court to order Philip Morris to pay millions of dollars.

"(Today's ruling) just gives Philip Morris a temporary reprieve," said Robert Peck, president of Washington D.C.-based law firm Center for Constitutional Litigation which represented Williams in the case.

"The corporate community was banking on the excessiveness issue but the (Supreme Court) was disinterested in it," Peck said. "The corporate community may be celebrating this ruling as a victory but they missed out on the golden ring."

And Philip Morris may not be out of the woods just yet. While the high court threw out the punitive damages, the case will now go back to the Oregon Supreme Court. And since the justices didn't classify the $79.5 million damages as excessive, Peck said the Oregon Supreme Court could still uphold the current damages or award damages close to that amount. A new trial is also a possibility.

Peck said the Supreme Court's decision only reaffirmed the widely-held belief that if a company's actions result in harm to others, it can be used to determine reprehensibility but can't be used to punish the company.

He added that Philip Morris can petition the Supreme Court to hear the case again if it is slapped with high damages but there are no guarantees that the justices will entertain the case for a second time, having made their ruling.

Jurors in the original case concluded the company engaged in fraud and negligence affecting a large number of people over five decades.

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, was to go to a special fund to help victims of crime.

The punitive award was never paid, pending outcome of the legal appeals. Peck added that Williams never received any money from the original jury verdict as well.

The high court had earlier sent the case back for review by the Oregon Supreme Court, which upheld its earlier judgment, calling Philip Morris' conduct "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."

Consumer-rights advocates argue that large punitive damages are necessary as a deterrent and penalty for extreme corporate conduct.

Court records show Williams did not believe cigarettes were a health danger until he contracted cancer. His wife testified he told her: "Those darn cigarette people finally did it. They were lying all the time."

In a separate case, the Supreme Court declined to hear a constitutional challenge by tobacco companies to Minnesota's 75-cent-per-pack health impact fee on cigarettes.

Shares of Altria (down $0.30 to $85.90, Charts) were little changed during morning trading on the New York Stock Exchange. Shares of competitors Imperial Tobacco Group (down $0.35 to $84.90, Charts) and British American Tobacco Plc (down $0.12 to $61.76, Charts) edged lower

--CNN's Bill Mears, CNNMoney.com's Shaheen Pasha and Reuters contributed to this report

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Market indexes 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. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.