Word today is that the U.S. Supreme Court has agreed to hear for the third time the appeal of Philip Morris in Williams v. Philip Morris. By way of full disclosure, I have represented on a pro bono basis (lawyer talk meaning, without pay; for the good of the public)  various public interest groups who have urged the Court to affirm to the $79 million judgment against Philip Morris.  Interestingly, this result pales against the recent Adidas verdict, that included a punitive damage award of $137 million, without a single consumer death.  Oh, but I’m digressing.

They can’t seem to let this one go. Is it because an Oregon jury concluded that Philip Morris should answer for its misconduct? Or is that the Oregon Supreme Court, which finds in favor of Philip Morris sometimes and against sometimes, failed to reach the U.S. Supreme Court’s desired result?

My thoughts are with the Williams family and my brave friends who have carried the burden of representing them. They’ve been through a long fight for justice.  I suppose they’re wise and philosophical, knowing that they will see this through to the end.

David Sugerman

It may have been inevitable. Late last week, the Oregon Supreme Court released its opinion in Goddard v. Farmers Insurance. Oregon court watchers have been waiting for this opinion. It addressed whether under federal due process restrictions, a punitive damage award against Farmers Insurance was too high.

It’s a long opinion. Here’s the link: www.publications.ojd.state.or.us/S053405.htm

It’s a complicated case that spans more than 20 years. My friend and colleague, Bill Barton, represented the estate in this case that featured more twists and turns than any in recent memory. The short version is that a drunk driver, Mr. Munson, killed Marc Goddard back in 1987. Farmers insured the drunken Mr. Munson. When the Goddard family sued, Farmers had the opportunity to pay its policy to protect Mr. Munson, but refused to do so.

The underlying automobile case went to trial, and the jury awarded substantially more than the $100,000 policy limits that were in place to protect Mr. Munson. That was bad.
That failure exposed Mr. Munson to profound problems because the Goddard family could collect more the excess from Mr. Munson. Farmers’ refusal to settle created a bad faith claim. The Goddard estate pursued that claim on assignment, standing in Mr. Munson’s shoes against Farmers. And that bad faith claim resulted in a multi-million dollar punitive damage award. Ain’t that a mouthful?

Anyway, all sorts of bad stuff came out in the trial against Farmers about how they had multiple opportunities to protect their insured, Mr. Munson, by paying the policy limits, and they refused. The jury socked it to Farmers. Farmers appealed claiming that the multi-million dollar punitive damage award violated Farmers’ federal constitutional due process rights.

With the remaking of U.S. Supreme Court, the due process rights of corporate interests have ascended to a position of prominence. The linchpin of the corporate due process analysis rests upon the bizarre notion that when a corporation engages in wrongdoing, it is entitled to know how much financial exposure its misconduct creates. It has become one of those axioms repeated so often by the U.S. Supreme Court and conservative commentators that no one stops to examine how the emperor has no clothes.

Because it’s problematic, to be kind. What the U.S. Supreme Court has decreed is that every corporation should be able to perform a cost-benefit analysis on misconduct. For those old enough to remember, this sounds vaguely familiar, doesn’t it? As in the Ford Pinto–one of the landmark cases of U.S. product safety litigation. In that case, Ford executives chose to not recall the exploding Pinto to modify its dangerous gas tank because–they reasoned–they would lose more money by the recall and retrofit campaign than they would if they had to defend an expected number of death claims from fiery explosions.

Bad conduct by any measure. And the jury that heard that evidence used a multi million dollar punitive damage award to teach the people at Ford that they can’t choose profit over safety.

As the Court in Goddard pointed out, they were applying federal constitutional law as they distilled it from U.S. Supreme Court opinions. So I suppose it’s important to clarify that the problems emanate from the D.C. Supremes, as opposed to Salem. Cold comfort, unfortunately.

And with all that lengthy background (sorry!), it’s now easy to explain how this hurts consumers. The bright-line punitive damage limit gives every corporate wrongdoer the ability to do math to figure out whether or not they will be penalized for misconduct. This is not exactly the best way to make sure that corporations act fairly. Instead, it encourages misconduct with limits.

The only saving grace of Goddard is that the Oregon court reserved an exception for extreme misconduct, which can still lead to higher punitive damages. They had to say that, actually, as they recently decided Williams v. Philip Morris, affirming a substantial punitive damage award for the tobacco giant’s outrageous misconduct. Still, it’s easy to see the future here. Short of profound fraud that causes death, a corporation’s misconduct will expose it to punitive damages of no more than four times the amount of actual damages awarded to an injured person.

So corporate wrongdoers, “Come on down!” Just crank out the numbers, and you’ll always know how bad you can be.

David F. Sugerman

Today, the Oregon Supreme Court affirmed for a second time the verdict rendered by a Portland jury in 1999 in favor of the family of Jesse Williams. Full disclosure: the author of this blog represented on a pro bono basis the Oregon Trial Lawyers Association, one of the amicus curiae in the case and has handled consumer cases against Philip Morris and other tobacco companies.

Here is a link to the opinion: http://www.publications.ojd.state.or.us/S051805.htm

Nine years after a jury found that Philip Morris had acted with wanton disregard for Jesse Williams, the Oregon Supreme Court had to re-visit the case a second time because the U.S. Supreme Court remanded the case.

In the nuts and bolts department, the case came down to a simple rule in Oregon. A party’s request for a jury instruction must accurately summarize the law in all respects or it should not be given.

At trial, Philip Morris requested a jury instruction on punitive damages that was not given. It was not given because it misstated the law. Every Oregon lawyer knows that’s the end of the game. Yet Philip Morris still insisted that it was entitled to some sort of special treatment.

The bigger news is that this was a large punitive damage verdict. Juries assess punitive damages only when a defendant has engaged in outrageous misconduct. There was plenty of that in this case–destroyed documents, falsified and hidden research, junk science used to create a controversy about whether smoking was harmful. All of it undertaken by Philip Morris. So it should come as no surprise that the jury did the right thing.

The story that rarely gets told is that 60 percent of punitive damages assessed in Oregon cases go a crime victims’ assistance fund. Punitive damages are assessed based upon the misconduct at issue. They also have to be significant enough to teach the bad actor a lesson. It’s a little bit like parenting. A little child gets told no when she misbehaves. The teenager that takes the car on an alcohol-fueled joy ride needs to suffer far greater consequences. That’s because a wayward toddler needs gentle correction, and a wayward teen needs a big stick.

In much the same way, Philip Morris only pays heed if the assessed amount crosses into the tens or hundreds of millions. Everything else is just noise.

In a perfect world, Philip Morris would pay the judgment and get on with its legal business in a way that is acceptable to society. I don’t think anyone expects Philip Morris to do anything other than to try once again to get its friends on the Supreme Court to bail it out. Let’s hope that the Supreme Court stays with the rule of law instead of applying the perverse version of the golden rule. Say it with me now: The guy with the gold makes the rule. If the U.S. Supreme Court reads the Oregon court’s opinion and follows the existing rules, the Williams family will see justice.

David F. Sugerman