Justices weigh punitive limits

Corporate lawyers hoping Roberts, Alito don't fit Scalia `mold' on this front

November 01, 2006|By David G. Savage | David G. Savage,LOS ANGELES TIMES

WASHINGTON -- The Supreme Court weighed yesterday a $79.5 million verdict to punish cigarette-maker Philip Morris in a closely watched test of whether the justices will put strict limits on big jury awards.

This is the most important case of the term for major corporations, which seek to limit such awards, and the outcome probably depends on President Bush's two appointees to the high court.

Bush promised to pick justices in the "mold" of conservative Justice Antonin Scalia. But on this front, business lawyers are hoping that's not true.

Scalia and his conservative ally Justice Clarence Thomas have insisted the Constitution does not restrict damage awards from state courts and their juries. Liberal Justice Ruth Bader Ginsburg has taken the same view.

If Chief Justice John G. Roberts Jr. and Justice Samuel A. Alito Jr. were to agree with them, they could deal an enormous setback to the business community in its drive to limit big-money verdicts.

That ironic possibility hung over the courtroom argument yesterday.

A lawyer for the tobacco company said the Oregon jury's verdict was excessive and unconstitutional because it punished Philip Morris for the possible harm suffered by thousands of Oregonians, not just the smoker who brought the lawsuit.

Andrew L. Frey, representing the cigarette-maker, said the jury saw "itself as the punishment agency to impose statewide punishment for the harms to all Oregon smokers."

But the lawyer representing the widow said the punishment was due.

"This was a massive market-directed fraud driven by their rational and deliberate decisions at the highest level of the company to deceive smokers," Washington attorney Robert S. Peck told the court.

Punitive damages go beyond the amount needed to compensate a victim for his injuries and instead deal out punishment to the wrongdoer.

In the Oregon case, the jury awarded $821,000 to the widow of Jesse Williams as compensation for his death. It then added $79.5 million to punish Philip Morris for its decades-long marketing campaign to deceive Oregon smokers about the dangers of cigarettes.

Corporate lawyers say these punitive verdicts are excessive and out of control. They want the Supreme Court to declare them "unconstitutionally excessive" if they are nine times greater than the compensatory amount.

Harvard law professor W. Kip Viscusi has compiled a list of 64 "blockbuster" punitive verdicts greater than $100 million. The largest were a California jury's $28 billion verdict against Philip Morris in 2002 and a Florida jury's $145 billion verdict against R.J. Reynolds Tobacco Co. in 2002.

Rarely are these verdicts paid in full. Often, they are reduced or overturned by appellate courts. Viscusi's study said juries in California, Arkansas and Texas have handed down the largest number of huge verdicts.

Consumer advocates say these big awards are needed to punish companies for gross misconduct and to deter them from scheming to sell products. They want the high court to take a hands-off approach.

Three years ago, business lawyers were cheered when the high court, in a 6-3 decision, threw out a $145 million punitive award against insurer State Farm. Its opinion said these awards should be no greater than a "single-digit multiplier" of the compensatory damages.

But this is one area where the justices do not split along the usual conservative-liberal line. The majority in the State Farm case included Chief Justice William H. Rehnquist, who died last year, and Justice Sandra Day O'Connor, who retired this year.

The dissenters were Scalia, Thomas and Ginsburg.

Lawyers on both sides of the issue were listening closely yesterday for hints as to whether Roberts and Alito would align themselves with Scalia and Thomas or the liberal-leaning majority that has come to the aid of corporate defendants. But there were few clues.

Meanwhile, a federal appeals court blocked a landmark judgment against the tobacco industry yesterday, allowing the companies to continue selling "light" and "low tar" cigarettes until their appeals can be reviewed.

The decision by the U.S. Circuit Court of Appeals for the District of Columbia Circuit also allows the companies to continue for now the advertising campaigns that a federal judge in August ruled were misleading.

Without comment, the appeals court granted the tobacco companies' request to put Judge Gladys Kessler's order on hold. The companies have argued that her far-reaching ruling could cost them millions of dollars and lead to a loss of customers.

David G. Savage writes for the Los Angeles Times.

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