Constitutional Limits on Punitive Damages Awards: An Analysis of the Pending Supreme Court Case Philip Morris USA v. Williams

Constitutional Limits on Punitive Damages
Awards: An Analysis of the Supreme Court Case
Philip Morris USA v. Williams
Updated July 17, 2007
Vanessa K. Burrows
Legislative Attorney
American Law Division



Constitutional Limits on Punitive Damages Awards:
An Analysis of the Supreme Court Case
Philip Morris USA v. Williams
Summary
Courts sometimes award punitive (or exemplary) damages in addition to
compensatory damages. Compensatory damages redress the “loss the plaintiff has
suffered by reason of the defendant’s wrongful conduct.” Punitive damages serve the
dual purposes of deterrence and retribution, and are viewed as “quasi-criminal” and
as “private fines”; the Supreme Court has defined their imposition as “an expression
of [the jury’s] moral condemnation.”
In a 5-4 decision on February 20, 2007, the U.S. Supreme Court vacated and
remanded the Oregon Supreme Court’s decision in Philip Morris USA v. Williams,
a case in which the Oregon Supreme Court held that a punitive damages award of
$79.5 million did not violate the Due Process Clause of the Fourteenth Amendment
to the U.S. Constitution. The Supreme Court had granted certiorari to consider
“[w]hether, in reviewing a jury’s award of punitive damages, an appellate court’s
conclusion that a defendant’s conduct was highly reprehensible and analogous to a
crime can ‘override’ the constitutional requirement that punitive damages be
reasonably related to the plaintiffs’ harm.” The Court had further agreed to consider
“[w]hether due process permits a jury to punish a defendant for the effects of its
conduct on non-parties.” Holding that the Due Process Clause does not allow a jury
to base the amount of a punitive damages award on the jury’s “desire to punish the
defendant for harming persons who are not before the court,” the Court then declined
to examine whether the $79.5 million award was “grossly excessive.”
This report summarizes decisions by the U.S. Supreme Court in relevant
punitive damages cases, discusses lower court rulings in Philip Morris USA v.
Williams, analyzes arguments in the appeal of the case to the U.S. Supreme Court,
examines factors the Court considered in its decision, and elucidates concerns for the
future.



Contents
I. Introduction....................................................1
Background: Past Supreme Court Decisions
in Punitive Damages Cases..................................2
Pacific Mutual Life Insurance Co. v. Haslip.....................4
TXO Production Corp. v. Alliance Resources....................4
Honda Motor Co. v. Oberg..................................5
BMW of North America, Inc. v. Gore..........................6
Cooper Industries, Inc. v. Leatherman Tool Group, Inc............7
State Farm Mutual Automobile Insurance Co. v. Campbell.........8
History of Philip Morris USA v. Williams...........................9
Trial Court...............................................9
The Oregon Court of Appeals Decisions........................9
The Oregon Supreme Court Decision.........................10
II. U.S. Supreme Court Review.....................................13
Equality or Independence of the Three BMW Guideposts..............13
Punishment for the Effects of a Defendant’s Conduct on Non-Parties....15
The U.S. Supreme Court Decision................................17
The Dissents.................................................18
Future Issues................................................19



Constitutional Limits on
Punitive Damages Awards:
An Analysis of the Supreme Court Case
Philip Morris USA v. Williams
I. Introduction
Courts sometimes award punitive (or exemplary) damages in addition to
compensatory damages. Compensatory damages redress the “loss the plaintiff has
suffered by reason of the defendant’s wrongful conduct.”1 Punitive damages serve
the dual purposes of deterrence and retribution,2 and are viewed as “quasi-criminal”
and as “private fines”3; the Supreme Court has defined their imposition as “an
expression of [the jury’s] moral condemnation.”4
In a 5-4 decision on February 20, 2007, the U.S. Supreme Court vacated and
remanded the Oregon Supreme Court’s decision in Philip Morris USA v. Williams,5
a case in which the Oregon Supreme Court held that a punitive damages award of
$79.5 million did not violate the Due Process Clause of the Fourteenth Amendment
to the U.S. Constitution. The Supreme Court had granted certiorari to consider
“[w]hether, in reviewing a jury’s award of punitive damages, an appellate court’s
conclusion that a defendant’s conduct was highly reprehensible and analogous to a
crime can ‘override’ the constitutional requirement that punitive damages be
reasonably related to the plaintiffs’ harm.”6 The Court had further agreed to consider
“[w]hether due process permits a jury to punish a defendant for the effects of its
conduct on non-parties.”7 Holding that the Due Process Clause does not allow a jury
to base the amount of a punitive damages award on the jury’s “desire to punish the


1 State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408, 416 (2003) (citing
Restatement (Second) of Torts § 903, p. 453-54 (1979)).
2 State Farm, 538 U.S. at 416.
3 Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 432 (2001).
4 Id.
5 Petition for Writ of Certiorari, Philip Morris USA v. Williams, 549 U.S. __ (2007) (No.

05-1256).


6 Id.
7 Id.

defendant for harming persons who are not before the court,” the Court then declined
to examine whether the $79.5 million award was “grossly excessive.”8
This report summarizes decisions by the U.S. Supreme Court in relevant
punitive damages cases, discusses lower court rulings in Philip Morris USA v.
Williams, analyzes arguments in the appeal of the case to the U.S. Supreme Court,
examines factors the Court considered in its decision, and elucidates concerns for the
future.
Background: Past Supreme Court Decisions
in Punitive Damages Cases
In the last 17 years, the Supreme Court has decided eight cases on punitive9
damages, of which this report discusses the six most relevant. Large punitive
damages awards have been alleged to violate the Eighth Amendment’s excessive10
fines prohibition and the Fifth and Fourteenth Amendments’ Due Process Clause.
The Court has understood due process to protect both procedural and substantive
rights. Under the doctrine of substantive due process, the Court has held that certain
rights, while not explicit in the text of the Constitution, are subsumed within the
notion of liberty in the Due Process Clause of the Fifth and Fourteenth Amendments.
Though the Court has stated that states have “broad discretion ... with respect to the11
imposition of ... punitive damages,” substantive due process bans “grossly
excessive” punishments of civil defendants.12
The six punitive damages cases most relevant to Philip Morris USA v. Williams
are:


8 Philip Morris USA v. Williams, 549 U.S. __ (2007); 127 S. Ct. 1057, 1060, 1063 (2007).
9 This report does not discuss Browning-Ferris Indus. of Vt., Inc. v. Kelco Disposal, Inc.,
492 U.S. 257 (1989), in which the Court rejected the notion that the Eighth Amendment’s
prohibition on excessive fines could apply to punitive damages awards in civil cases, or
O’Gilvie v. United States, 519 U.S. 79 (1996), which held that the Internal Revenue Service
could collect taxes on punitive damages awards in personal-injury cases since punitive
damages are “not received ‘on account of’ personal injuries,” as specified by the Internal
Revenue Code.
10 The Due Process Clause of the Fifth and Fourteenth Amendments provide that no person
shall be deprived of “life, liberty, or property, without due process of law.” U.S. CONST.
amend. V; U.S. CONST. amend. XIV, § 1. The phrase “due process of law” does not
necessarily imply a proceeding in court or a plenary suit and trial by jury in every case
where personal or property rights are involved, but rather is the “kind of procedures ... which
is suitable and proper to the nature of the case, and sanctioned by the established customs
and usages of the courts.” Ex parte Wall, 107 U.S. 265, 289 (1883); Davidson v. City of
New Orleans, 96 U.S. 97, 102 (1878); Public Clearing House v. Coyne, 194 U.S. 497, 508
(1904).
11 Cooper, 532 U.S. at 433.
12 Id. at 434.

!Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1 (1991). The
Court held that a punitive damages award of four times the
compensatory damages awarded did not violate the Due Process
Clause and that the state’s substantive and procedural protections
ensured that the award did not violate due process.13
!TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443
(1993). A plurality of the Court upheld a punitive damages award
of 526 times the actual damages awarded, finding that it was not
“grossly excessive” and did not violate due process.14 The plurality
also refused to “draw a mathematical bright line” that would
determine when a punitive damages award violates the
Constitution.15
!Honda Motor Co. v. Oberg, 512 U.S. 415 (1994). The Court struck
down a punitive to compensatory damages award ratio of 5.4-to-1,
holding for the first time that the Due Process Clause imposes a
substantive limit on the size, as well as the procedural safeguard of
judicial review (or an equivalent safeguard) of punitive damages
awards. 16
!BMW of North America v. Gore, 517 U.S. 559 (1996). The Court
held that a punitive damages award 500 times greater than the actual
damages awarded violated due process. The Court also established
three guideposts by which to determine if a punitive damages award
is “grossly excessive” and therefore violates due process: (1) “the
degree of reprehensibility of the defendant’s conduct,” (2) a
reasonable ratio of punitive to compensatory damages, and
(3) comparable civil and criminal sanctions, i.e. “the difference
between this remedy and the civil penalties authorized or imposed
in comparable cases.”17
!Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S.
424 (2001). The Court held that federal appellate courts should use
a de novo standard when reviewing lower court decisions on
whether punitive damages are excessive.18
!State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S.

408 (2003). The Court elucidated its punitive damages jurisprudence


13 Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 7, 19 (1991).
14 TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 462 (1993).
15 Id. at 458 (quoting Haslip, 499 U.S. at 18).
16 Honda Motor Co. v. Oberg, 512 U.S. 415, 420 (1994).
17 BMW of North America v. Gore, 517 U.S. 559, 575, 580, 582-83 (1996).
18 Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 436 (2001)
(quoting BMW, 517 U.S. at 587 (Breyer, J., concurring)).

and overturned a 145-to-1 ratio of punitive to compensatory
damages, holding that “few awards exceeding a single-digit ratio
between punitive and compensatory damages ... will satisfy due
process.”19
This report now examines these six cases in greater detail.
Pacific Mutual Life Insurance Co. v. Haslip. In Pacific Mutual Life
Insurance Co. v. Haslip, the U.S. Supreme Court upheld a jury’s punitive damages
award of more than four times the amount of compensatory damages and, in so
doing, began its examination of when punitive damage awards violate the Fourteenth
Amendment’s Due Process Clause.20 The Court held that the punitive damages21
award did not violate the Due Process Clause, finding that traditional common law
jury instructions on deterrence and retribution “enlightened the jury as to the punitive
damages’ nature and purpose, identified the damages as punishment for civil
wrongdoing of the kind involved, and explained that their imposition was not22
compulsory.” According to the Court, Alabama also had substantive and
procedural protections that ensured that the punitive damages award did not violate23
due process.
TXO Production Corp. v. Alliance Resources. The Court’s next punitive
damages case, TXO Production Corp. v. Alliance Resources,24 had no majority
opinion but the plurality upheld a large punitive damages award and refused to “draw
a mathematical bright line between the constitutionally acceptable and the
constitutionally unacceptable.”25 Three Justices — Stevens, Rehnquist, and
Blackmun — upheld a $10 million punitive damages award that was 526 times the
actual damages award, finding that it was not “grossly excessive” and therefore did
not violate the Due Process Clause.26 The plurality opined that the “dramatic
disparity” between actual and punitive damages was not controlling “in a case of this
character,” by which it meant a case involving bad faith, fraud, and deceit by a
wealthy defendant, as well as slander of the plaintiff company’s title to oil and gas.27
After declining to create a comparative test for when a punitive damages award is
constitutional, the plurality opinion restated the Court’s holding in Haslip, that a
vague “general concer[n] of reasonableness ... properly enter[s] into the constitutional


19 State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003).
20 499 U.S. 1, 7 (1991).
21 Id. at 19.
22 Id.
23 Id. at 22-24. The Court noted that appellate review helps ensure no violations of due
process occur. See id. at 20-21.
24 509 U.S. 443 (1993) (plurality opinion).
25 Id. at 458 (quoting Haslip, 499 U.S. at 18).
26 Id. at 462.
27 Id.

calculus.”28 The three Justices commented that punitive damages awards do not lend
themselves to straightforward comparisons because they “are the product of
numerous, and sometimes intangible, factors” and because of the differences among
punitive damages cases.29 When calculating punitive damages, the plurality said that
the jury could take into account “the potential harm that the defendant’s conduct
would have caused to its intended victim if the wrongful plan had succeeded, as well
as the possible harm to other victims that might have resulted if similar future
behavior were not deterred.”30
Justices Scalia and Thomas, concurring, found not only that no violation of
substantive due process occurred, but believed that punitive damages can never
violate substantive due process.31 In a separate concurrence, Justice Kennedy
disagreed with the plurality’s holding that punitive damages awards should be subject
to the Court’s “concern for reasonableness” when it determines whether a punitive
damages award is grossly excessive and therefore violates substantive due process.32
He also suggested that the Court concern itself with the reasons that a jury awarded
punitive damages. If, as Kennedy found to be the case in TXO, the jury was
concerned with “deterrence and retribution,” then no constitutional violation would
exist; however, if the jury was concerned with “bias, passion, or prejudice,” the
resulting punitive damages award would violate the Constitution.33
Honda Motor Co. v. Oberg. In Honda Motor Co. v. Oberg, the Court for
the first time held that the Due Process Clause imposes a substantive limit on the size
of punitive damages awards.34 The Court in Honda Motor also held that the Due
Process Clause guarantees judicial review of punitive damages awards or another
safeguard to protect against arbitrary deprivations of property.35 Contrary to all other
federal and state courts, which allowed judicial review of the amount of a punitive
damages award, Oregon did not and had not substituted a safeguard in place of36
judicial review of punitive damages awards claimed to be excessive or arbitrary.
Therefore, Oregon’s prohibition of judicial review “unless the court can affirmatively37
say there is no evidence to support the verdict” was held unconstitutional. The
Court reasoned that the Oregon provision “ensures only that there is evidence to


28 Id. at 458 (quoting Haslip, 499 U.S. at 18).
29 Id. at 457.
30 Id. at 460 (emphasis in original).
31 Id. at 470 (Scalia, J. and Thomas, J., concurring).
32 Id. at 458 (plurality opinion), 466 (Kennedy, J. concurring).
33 Id. at 467 (Kennedy, J. concurring).
34 512 U.S. 415, 420 (1994) (citing Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1 (1991)
and TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443 (1993)).
35 Honda Motor, 512 U.S. at 420-26.
36 Id. at 426-27, 430.
37 Id. at 418, 430. Oregon trial or appellate courts may grant a new trial if “the jury was not
properly instructed, if error occurred during the trial, or if there is no evidence to support
any punitive damages at all.” Id. at 426.

support some punitive damages, not that there is evidence to support the amount
actually awarded.”38 Oregon’s failure to provide judicial review of punitive damage
awards, or a substitute procedure, as a common law safeguard protecting persons
against arbitrary deprivations of property violated the Due Process Clause.39
BMW of North America, Inc. v. Gore. BMW of North America v. Gore
established three standards, or guideposts, to “‘identify constitutionally excessive’”
punitive damages awards.40 The jury had awarded actual damages of $4,000 and
punitive damages of $2 million because of BMW’s having repainted damage on new
cars without disclosing the repair to consumers. According to the 5-4 majority —
Stevens, O’Connor, Kennedy, Souter, and Breyer — the punitive damages award
violated the Due Process Clause because, at 500 times greater than the plaintiff’s41
actual damages, the amount was grossly excessive. The Court reasoned that the
Due Process Clause protects against “judgments without notice” of the unlawful42
conduct and “the severity of the penalty that a State may impose.” Justice Breyer’s
concurrence, joined by Justices O’Connor and Souter, stated that the award also
violated the Due Process Clause because (1) the state court interpreted legal
standards intended to constrain punitive damages awards in such a way as to “risk
arbitrary results” by failing to constrain such awards and (2) the award was grossly
excessive because of the “severe lack of proportionality between the size of the43
award and the underlying punitive damages objectives.”
The majority then prescribed three guideposts by which a punitive damages
award should be judged to determine if it is grossly excessive: (1) “the degree of
reprehensibility of the defendant’s conduct,” (2) the reasonableness of the ratio of the
punitive damages award “to the actual harm inflicted on the plaintiff,” and (3)
comparability, i.e. “the difference between this remedy and the civil penalties
authorized or imposed in comparable cases.”44 Noting that “trickery and deceit ... [is]
more reprehensible than negligence,” the BMW Court held that the degree of
reprehensibility is the “most important indicum of the reasonableness of a punitive
damages award.” The Court also determined that a “high degree of culpability” was
necessary for substantial punitive damages.45 Additionally, the Court reiterated the
plurality’s statement in TXO that “the proper inquiry is ‘whether there is a reasonable
relationship between the punitive damages award and the harm likely to result from


38 Id. at 418, 426-27, 429.
39 Id. at 432.
40 BMW of North America v. Gore, 517 U.S. 559, 568 (1996) (quoting Honda Motor Co.
v. Oberg, 512 U.S. 415, 420 (1994)).
41 BMW, 517 U.S. at 582-83.
42 Id. at 574, n.22 (quoting Shaffer v. Heitner, 433 U.S. 186, 217 (1977) (Stevens, J.,
concurring)).
43 BMW, 517 U.S. at 588, 596 (Breyer, J., concurring).
44 Id. at 575, 580. The comparable sanctions guidepost calls for a consideration of “whether
less drastic remedies could be expected to” deter misconduct in the future, while giving
“substantial deference” to legislative sanctions for the misconduct. See id. at 583-84.
45 Id. at 580.

the defendant’s conduct as well as the harm that actually has occurred.’”46 The Court
also held that Alabama could not punish defendants for conduct “that had no impact
on Alabama or its residents.”47
Justices Scalia and Thomas dissented in an opinion written by Scalia in which
he labeled the Court’s punitive damages jurisprudence “an unjustified incursion into
the province of state governments.”48 Scalia and Thomas asserted that the Court’s
guideposts “provide no real guidance at all” and that the Court’s holding that the Due
Process Clause guarantees that punitive damages awards are reasonable “is
constrained by no principle other than the Justices’ subjective assessment of the
‘reasonableness’ of the award in relation to the conduct for which it was assessed.”49
Justices Ginsburg dissented, joined by then-Chief Justice Rehnquist. Justice
Ginsburg also opined that the Court was intruding into an area of state concern in
holding that the $2 million punitive damages award was grossly excessive and
therefore unconstitutional.50 She appeared to agree with Justice Scalia’s statement
on the Court’s subjective assessment of punitive damages when she questioned,
“What is the Court’s measure of too big? Not a cap of the kind a legislature could
order, or a mathematical test this Court can divine and impose. Too big is, in the
end, the amount at which five Members of the Court bridle.”51
Cooper Industries, Inc. v. Leatherman Tool Group, Inc. In Cooper
Industries, Inc. v. Leatherman Tool Group, Inc.,52 the Court held that federal
appellate courts should use a de novo standard when reviewing trial court decisions
on whether punitive damages are excessive, reasoning that de novo review “helps to53
assure the uniform treatment of similarly situated persons.” A de novo standard of
review allows the appellate court to review the matter anew as if the lower court had
not issued a decision, as opposed to an abuse of discretion standard of review, in
which the appellate court gives deference to the trial court’s decisions unless, for
example, the trial court based its judgment “on an improper understanding of the
law.”54 After restating the three BMW guideposts, the Court found that in previous
cases it had “engaged in an independent examination of the [three] relevant


46 Id. at 581 (citing TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 460
(1993)) (emphasis in original).
47 Id. at 573.
48 Id. at 598 (Scalia, J. and Thomas, J., dissenting).
49 Id. at 599, 605 (Scalia, J. and Thomas, J., dissenting).
50 Id. at 607, 611 (Ginsburg, J. and Rehnquist, C.J., dissenting).
51 Id. at 613 n.5 (Ginsburg, J. and Rehnquist, C.J., dissenting).
52 532 U.S. 424 (2001).
53 Id. at 436 (quoting BMW, 517 U.S. at 587 (Breyer, J., concurring)).
54 Digilab, Inc. v. Secretary of Labor, 357 F. Supp. 941, 942 (D. Mass. 1973), remanded on
other grounds 495 F.2d 323, cert. denied 419 U.S. 840 (1974) (quoting Song Jook Suh v.
Rosenberg, 437 F.2d 1098, 1102 (9th Cir. 1971)).

criteria.”55 Justices Scalia and Thomas stated in separate concurrences that the U.S.
Constitution does not restrict the amount of punitive damages awards and Thomas
stated that he would vote to overturn BMW, if presented the opportunity.
State Farm Mutual Automobile Insurance Co. v. Campbell. In State
Farm Mutual Automobile Insurance Co. v. Campbell, the company had taken an
automobile accident case to trial as part of an alleged national strategy to limit its
payments on claims, refusing to settle even though, as the jury found, State Farm put
the insured at risk of being personally liable for a verdict higher than the policy
limit.56 The Court overturned the 145-to-1 ratio of punitive to compensatory
damages, holding that “few awards exceeding a single-digit ratio between punitive
and compensatory damages ... will satisfy due process.”57 The Court also elucidated58
its punitive damages jurisprudence. By delineating five reprehensibility factors
from its discussion in BMW of the first guidepost, the State Farm Court expanded its
previous holding and then determined that the presence of only one of the five “may
not be sufficient to sustain a punitive damages award; and the absence of all [five59
factors] renders any award suspect.” Criticizing how the company’s handling of the
auto accident case was used as a nationwide condemnation of State Farm, the
majority held that lawful out-of-state conduct “must have a nexus to the specific
harm suffered by the plaintiff” in order to be probative in the state where the conduct
is unlawful and enable the jury to punish the defendant for its conduct in the unlawful
state only.60 Though it declined to limit comparisons of punitive and compensatory
damage awards to a single-digit ratio, the Court also emphasized that in order to
comport with due process, awards will likely not be in excess of such a ratio.61 The
Court retreated from the use of criminal penalties in the comparable sanctions
guidepost, noting that the imposition of criminal penalties would occur only after a62
criminal trial, which has a greater standard of proof than a civil trial. Ultimately,
the State Farm Court remanded the case, indicating that the award amount should be


55 Cooper, 532 U.S. at 435.
56 538 U.S. 408, 414 (2003).
57 Id. at 425.
58 The Court restated its previous conclusions that the Due Process Clause imposes
procedural and substantive limits on punitive damages awards and that a grossly excessive
punitive damages award “constitutes an arbitrary deprivation of property.” State Farm, 538
U.S. at 416-17, 419. The Court reaffirmed its three BMW guideposts and its determination
in BMW that the first guidepost, reprehensibility of the defendant’s conduct, is most
important in deciding the reasonableness of a punitive damages award. Id. at 418-19.
59 Id. at 419.
60 Id. at 422.
61 Id. at 425. The Court suggested that it would uphold punitive damage awards in excess
of the single-digit ratio if “a particularly egregious act has resulted in only a small amount
of economic damages,” and in the opposite instance, if an egregious act resulted in a large
amount of economic damages. Id.
62 Id. at 428.

“at or near the amount of compensatory damages.”63 Finally, in a statement clarifying
BMW, the Court noted that a defendant’s wealth “cannot justify an otherwise
unconstitutional punitive damages award.”64
History of Philip Morris USA v. Williams
Trial Court. In Williams v. Philip Morris Inc., Mayola Williams, the widow
of Jesse Williams and the personal representative of his estate, sued Philip Morris for
negligence and fraud.65 Jesse Williams had died of lung cancer and the suit alleged66
“a causal connection between Jesse Williams’s smoking habit and his death.” The
jury found for the plaintiff on both the fraud and negligence claims, but found that
Williams was 50 percent responsible as to the negligence claim, and therefore
awarded no punitive damages for Philip Morris’s negligence.67 The jury did grant
$79.5 million in punitive damages for the fraud claim, in addition to $21,485.80 in
economic compensatory damages, and $800,000 in noneconomic compensatory68
damages. The trial court limited the noneconomic compensatory damages to
$500,000 because of Oregon’s statutory limit, but the ratio of punitive to69
compensatory damages was still 97-to-1. Though the trial court held that the $79.5
million punitive damages award for Philip Morris’s fraud “was within the range a
rational juror could assess based on the record as a whole and applying the Oregon
common law and statutory factors,” the trial court cut the punitive damages award70
by more than half, to $32 million. The court reasoned that the $79.5 million award
“was excessive under federal standards.”71
The Oregon Court of Appeals Decisions. Both parties appealed, and the72
Court of Appeals restored the punitive damages award to $79.5 million. After the
Court of Appeals decision, the Oregon Supreme Court denied review of the case.
Then the U.S. Supreme Court decided State Farm (see previous section), which
overturned a 145-to-1 ratio of punitive to compensatory damages and held that “few


63 Id. at 429.
64 Id. at 427.
65 127 P.3d 1165, 1167 (Or. 2006).
66 Id. at 1167.
67 Id. at 1171.
68 Id. Economic damages are out-of-pocket expenses incurred by the plaintiff, such as
medical bills or loss of income. Noneconomic damages are damages payable for items other
than out-of-pocket expenses, such as pain and suffering or punitive damages. CRS Report
RL33423, Products Liability: A Legal Overview, by Henry Cohen and Vanessa Burrows.
69 OR. REV. STAT. § 31.710.
70 Williams, 127 P.3d at 1171.
71 Id.
72 Williams v. Philip Morris, 48 P.3d 824 (Or. Ct. App. 2002), adhered to on
reconsideration by 51 P.3d 670 (Or. Ct. App. 2002). The Court of Appeals of Oregon
affirmed this award on cross-appeal by Philip Morris and then adhered to its opinion on
reconsideration. Id.

awards exceeding a single-digit ratio between punitive and compensatory damages
... will satisfy due process.”73 After it decided State Farm, the U.S. Supreme Court
granted certiorari in Williams, then vacated the Court of Appeals judgment and
remanded the case back to the Court of Appeals (Williams II) to reconsider whether
the 97-to-1 punitive to compensatory damages award was consistent with the U.S.
Supreme Court’s holding in State Farm that the Due Process Clause of the
Fourteenth Amendment protects against grossly excessive punitive damages
awards.74 On remand, the Court of Appeals affirmed its previous decision (Williams
I) to uphold the jury’s $79.5 million award of punitive damages. Philip Morris then
appealed again to the Oregon Supreme Court.
The Oregon Supreme Court Decision. The Oregon Supreme Court began
its opinion by reviewing the alleged 40-year campaign by Philip Morris and other
tobacco companies to distort information about the health concerns associated with
smoking through scientific research, lobbying, and public relations efforts. This
campaign formed the basis of Williams’s fraud claim.75 The Oregon Supreme Court
held that “Philip Morris and the tobacco industry intended to deceive smokers like
Williams, and it did in fact deceive him” and other Oregon smokers.76 The Court
then addressed the following questions:
Did the Trial Court’s Denial of the Requested Jury Instruction
Violate Due Process? After discussing the U.S. Supreme Court’s holding in State
Farm, the Oregon Supreme Court addressed the first issue posed by Philip Morris on
appeal — whether, as Philip Morris had requested, the jury should have been
instructed that the punitive damages award “must bear a reasonable relationship to
the harm caused to the plaintiff and that punitive damages cannot be imposed for77
alleged harm to non-parties.” Agreeing with the Court of Appeals decision in
Williams I that Philip Morris’s proposed jury instruction was incorrect, the Oregon
Supreme Court held that, under Oregon case law, the jury could consider the harm
that the defendant inflicted on “past, present, and future customers” because “the
defendant’s tortious conduct was a routine part of its business practice that it was
unwilling to change.”78 The Oregon Supreme Court then rejected Philip Morris’s
argument that, under State Farm, punitive damages are not meant to punish
defendants for harm to non-parties. In making this determination, the court explained
that State Farm prevents courts from punishing defendants for harm to non-parties


73 State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003).
74 Williams v. Philip Morris, 92 P.3d 126, 130 (Or. Ct. App. 2004).
75 Williams v. Philip Morris, Inc. 127 P.3d 1165, 1168-70 (2006).
76 Id. at 1170.
77 Id. at 1172. In reviewing the Court of Appeals’ decision in Williams II, the Oregon
Supreme Court declined to address two other issues: whether a plaintiff must “prove receipt
of and reliance upon the defendant’s fraudulent communications” and whether the Federal
Cigarette Labeling and Advertising Act preempted a “‘false impression’ theory relied upon
by the Court of Appeals, [a theory] which is based in part upon a defendant’s failure to
disclose information beyond that prescribed by the congressionally mandated warnings.”
Id. at 1171-72.
78 Id. at 1175.

only when the defendants’ acts are dissimilar — acts “independent from the acts
upon which liability was premised.”79 Given this standard, the court stated that
similar conduct by a defendant “may be relevant to a punitive damage award.”80
Philip Morris’s proposed jury instruction would have prevented the imposition of
punitive damages for the tobacco company’s conduct that affected other Oregonians
in the same manner as Williams.81
Did the Punitive Damages Award Violate Due Process? The Oregon
Supreme Court then began its analysis of whether the punitive damages assessed in
the case were unconstitutional because they were “grossly excessive” and therefore
in violation of the Due Process Clause of the Fourteenth Amendment. The court
used the three BMW guideposts in its analysis: (1) reprehensibility of the defendant’s
conduct, (2) the reasonableness of the ratio of the punitive damages award “to the
actual harm inflicted on the plaintiff,” and (3) comparable civil and criminal82
penalties. Turning to the first guidepost, the court found that Philip Morris’s
conduct met four of BMW’s five reprehensibility factors:
The harm to Williams was physical — lung cancer cost Williams his life. Philip
Morris showed indifference to and reckless disregard for the safety not just of
Williams, but of countless other Oregonians, when it knowingly spread false or
misleading information to keep smokers smoking. Philip Morris’s actions were
no isolated incident, but a carefully calculated program spanning decades. And
Philip Morris’s wrongdoing certainly involved trickery and deceit. We
concluded, then that the first [BMW] guidepost favors a very significant punitive83
damage award.
The fifth reprehensibility factor — “the target of the conduct had financial
vulnerability” — did not apply in Williams’s case because no evidence was presented
that demonstrated he was financially vulnerable.84 But, noting that BMW appears to
indirectly suggest that vulnerability is not merely financial in nature, the court
concluded that it would award punitive damages nonetheless.85
Postponing its analysis of the second guidepost, the Oregon Supreme Court
skipped to the third guidepost — comparable civil or criminal sanctions — a
consideration of “whether less drastic remedies could be expected to” deter
misconduct in the future, while giving “substantial deference” to legislative sanctions


79 Id.
80 Id. at 1176.
81 Id.
82 BMW of North America, Inc. v. Gore, 517 U.S. 559, 575, 580 (1996).
83 Williams, 127 P.3d at 1177-78.
84 Id. at 1177, 1178 n.4 (quoting State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S.

408, 419 (2003)).


85 Id. at 1178 n.4.

for the misconduct.86 Contrary to the Court of Appeals’ conclusion, the Oregon
Supreme Court explained that the mere existence of Oregon’s punitive damages law
did not provide Philip Morris with notice of comparable sanctions for its conduct,
because the existence of Oregon’s punitive damages law would then always provide
notice and always validate the third guidepost. Rather, the Oregon Supreme Court
laid out three steps to follow in analyzing the comparable sanctions guidepost:
(1) identifying such sanctions, (2) considering the serious nature of these sanctions
compared to the totality of sanctions authorized by the legislature, and (3) comparing
the punitive damages awarded to “the relative severity of the comparable
sanctions.”87 No comparable civil sanctions exist in Oregon; however, comparable
Oregon criminal sanctions included manslaughter and second-degree manslaughter,
a Class B felony. After listing the possible Class B felony punishments and fines for
both individuals and corporations, the Oregon Supreme Court concluded that Philip
Morris had notice that its conduct could result in severe sanctions and thus that the
third guidepost favored the large amount of punitive damages awarded by the jury.88
Finally, examining the second BMW guidepost, the Oregon Supreme Court
found that the ratio of punitive damages to the actual and potential harm suffered by
the plaintiff was not reasonable.89 Williams incurred less than $25,000 in economic
damages, but died of cancer soon after being diagnosed. The court found that, had
he lived longer, Williams could have faced more than 10 times that amount in
economic damages. The Oregon Supreme Court suggested that Williams’s case fit
one of the U.S. Supreme Court’s possible exceptions to the single-digit ratio in State
Farm — a plaintiff who received a small compensatory damages award but
experienced extreme egregious conduct by a defendant — because Williams’s short
bout with cancer resulted in few medical bills and economic damages of less than
$25,000.90 The Oregon Supreme Court concluded that the Williams case met two of
the three guideposts — reprehensibility and comparability. Because the guideposts
“are not bright-line tests,” the Oregon Supreme Court held that these guideposts
could outweigh the U.S. Supreme Court’s Due Process Clause concerns about
reasonable ratios and grossly excessive punitive damages.91


86 BMW, 517 U.S. at 583-84.
87 Williams, 127 P.3d. at 1178-79.
88 Id. at 1179-80.
89 Id. at 1181.
90 Id. at 1180 n.9, 1180-81 (citing State Farm Mut. Automobile Ins. Co. v. Campbell, 538
U.S. 408, 425 (2003) and BMW of North America, Inc. v. Gore, 517 U.S. 559, 582 (1996)).
91 Id.

II. U.S. Supreme Court Review
This section discusses the parties’ arguments in their briefs to the U.S. Supreme
Court on the two questions that the Court granted certiorari to consider: (1)
“[w]hether, in reviewing a jury’s award of punitive damages, an appellate court’s
conclusion that a defendant’s conduct was highly reprehensible and analogous to a
crime can ‘override’ the constitutional requirement that punitive damages be
reasonably related to the plaintiffs’ harm”; and (2) “[w]hether due process permits
a jury to punish a defendant for the effects of its conduct on non-parties.”92 Then this
section examines the decision, dissents, and potential future issues in punitive
damages cases.
Equality or Independence of the Three BMW Guideposts
With regard to the first question presented, Philip Morris contended that the
Oregon Supreme Court erred when it upheld the $79.5 million punitive damage
award based on only two of the three BMW guideposts — reprehensibility and
comparable sanctions. Philip Morris read the Supreme Court’s past holdings in
BMW and State Farm as saying that each guidepost has a “distinct role,” and that the
three guideposts are all necessary to constrain punitive damages and prevent arbitrary
awards that violate the Due Process Clause.93 Williams responded that Oregon’s
substantive and procedural protections both constrain punitive damage awards and
necessitate deference to the jury’s verdict.94 Philip Morris also argued that the
reasonable ratio guidepost has three functions not served by the other two guideposts:
(1) proportionality, in terms of ensuring punitive damages are not excessive because
of the jury’s potential punishment of non-parties; (2) objectivity and equal treatment
of similarly situated plaintiffs, as opposed to the reprehensibility guidepost, which
Philip Morris asserted is subjective; and (3) deterrence, or ensuring that punitive
damages awards are not greater than the “State’s interest in punishment and
deterrence.”95 Williams noted, however, that Oregon’s interest in deterrence should
be “at its apogee” in this case of decades-long consumer fraud.96
According to Williams, the Oregon Supreme Court did not, for three reasons,
err in its reliance on only two of the three guideposts. First, the U.S. Supreme Court
has held that reprehensibility is the “most important indicium of the reasonableness
of a punitive damages award”97 and the Oregon courts found the petitioner’s conduct


92 Petition for Writ of Certiorari, Philip Morris USA v. Williams, 549 U.S. __ (2007) (No.

05-1256).


93 Brief for Petitioner (Philip Morris) at 25-28, Philip Morris USA, Inc. v. Williams, 549
U.S. __ (2007) (No. 05-1256).
94 Brief for Respondent (Williams) at 22, Philip Morris USA, Inc. v. Williams, 549 U.S. __
(2007) (No. 05-1256).
95 Petitioner’s Brief at 33, Williams (No. 05-1256).
96 Respondent’s Brief at 22, Williams (No. 05-1256).
97 Id. at 6 (quoting State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408, 419
(continued...)

extremely reprehensible for many reasons.98 Second, states have the authority to
limit punitive damages awards legislatively and add procedural and substantive
requirements that constrain punitive damages awards. Third, Philip Morris’s
argument would establish the ratio between punitive and compensatory damages as
the most important guidepost in determining an award’s reasonableness and would
prevent punitive damages from serving a deterrent function.99
Philip Morris, for its part, concluded, on the basis of various U.S. Supreme
Court decisions, that only single-digit ratios would satisfy the Due Process Clause.
Williams responded that an emphasis on ratios would preclude adequate punitive
damages in cases that would merit a greater than single-digit ratio — types of cases
that the U.S. Supreme Court identified in State Farm.100 Nor, Williams argued,
would limiting punitive damages according to a ratio formula allow for “fact-
sensitive considerations” or take adequate account of the potential harmfulness of the
defendant’s conduct.101 Philip Morris contended that, under State Farm, “the
permissible ratio of punitive to compensatory damages diminishes as compensatory
damages increase.”102 Disagreeing, Williams stated that this approach would
“foreclose Oregon’s emphasis on deterrence and guarantee a regime of
underdeterrence.”103
Finally, Philip Morris submitted that, in this case, the amount of punitive
damages should be at or near the compensatory damages amount. In support of this
claim, Philip Morris stated that “there is no prospect that the conduct in question will
be repeated,”104 as it is currently monitored by Congress and regulated by both the
Federal Trade Commission (FTC) and the Master Settlement Agreement (MSA)
between the company and 46 states.105 Williams countered that the purpose of
punitive damages is not only to deter Philip Morris from misconduct — whom
Williams asserted has not been deterred by Congress, the FTC, or the MSA — but
also to deter others.106 When attempting to deter conduct that warrants punitive
damages, the Court should also consider profits and other benefits that the tobacco
company derived from its fraud, according to Williams, such as Philip Morris’s


97 (...continued)
(2003)).
98 Id. at 5-20.
99 Id. at 5, 26.
100 Id. at 27-28.
101 Id. at 27.
102 Petitioner’s Brief at 32, Williams (No. 05-1256).
103 Respondent’s Brief at 23, Williams (No. 05-1256).
104 Petitioner’s Brief at 44, Williams (No. 05-1256).
105 For details on the Master Settlement Agreement, see CRS Report RL33719, Tobacco:
Selected Legal Issues, by Vanessa K. Burrows, and CRS Report RL32619, FDA Regulation
of Tobacco Products: A Policy and Legal Analysis, by C. Stephen Redhead and Vanessa K.
Burrows.
106 Respondent’s Brief at 23-24, Williams (No. 05-1256).

ability to use its wealth to win cases “by attrition” of the plaintiffs as opposed to “on
the merits.”107
Punishment for the Effects of a Defendant’s Conduct
on Non-Parties
The second question presented in Williams was whether the Due Process Clause
of the Fourteenth Amendment allows a jury to punish a defendant for the effects of
its conduct on parties not before the court. Philip Morris argued that, according to
State Farm, the focus of punitive damages should be on the harm inflicted on the
plaintiff and that historically, defendants could not “be punished in an individual108
action for harms to persons other than the plaintiff.” Williams responded by noting
that punitive damages traditionally have been awarded for injuries or potential
injuries to others in addition to the plaintiff and have more than a mere compensatory
purpose.109 Contrary to Philip Morris’s view that cases decided prior to the
ratification of the Fourteenth Amendment did not include punitive damages for actual
or potential harm to non-parties, Williams argued that cases from that era did weigh
the impact on the public when they awarded punitive damages. Williams also cited
the Supreme Court’s holding in BMW that punitive damages awards can be
“supported by the State’s interest in protecting its own consumers and its own
economy. ”110
Next, the tobacco company warned of a risk of multiple, excessive punishment
because the outcome of one case does not restrict future plaintiffs from filing suit in
Oregon.111 Philip Morris contended that Oregon’s allowing punishment for the effect
of the defendant’s conduct on non-parties will enable plaintiffs to sue repeatedly, and
that one plaintiff may eventually prevail with one jury even though many other juries112
rejected the identical argument when made by other plaintiffs. In response,
Williams discussed Oregon’s statutory safeguards that protect against multiple
punitive damages awards, such as required consideration of the amount and deterrent
effect of other punitive damage awards imposed for the same misconduct.113 At oral
argument, some Justices seemed inclined to avoid the multiple punishments


107 Id. at 33.
108 Petitioner’s Brief at 7, Williams (No. 05-1256).
109 Respondent’s Brief at 36-37, Williams (No. 05-1256). At oral argument, Justice Stevens
made a similar point — a defendant who aims a machine gun at a room of people could be
punished more harshly, even if no one was hurt, because of the potential injury or “risk of
harm” to others, which the jury could consider when deciding the case. Record at 22-24,
Philip Morris USA v. Williams (No. 05-1256) (October 31, 2006).
110 Respondent’s Brief at 35, 41, Williams (No. 05-1256).
111 Petitioner’s Brief at 8, Williams (No. 05-1256).
112 Id. at 12.
113 Respondent’s Brief at 45-46, Williams (No. 05-1256).

argument raised by Philip Morris, noting that if a second suit were brought on the
same issue, the Court would then decide how to handle the issue.114
Furthermore, Philip Morris argued that the plaintiff’s attorneys did not identify
non-parties or provide evidence that they suffered from the defendant’s
misconduct.115 According to Philip Morris, Haslip’s guarantee of procedural due
process safeguards to ensure the reasoned imposition of punitive damages was
violated in Williams because the company could not defend itself against potentially
invalid non-party claims.116 Williams countered that BMW suggested that
compensatory damages could be multiplied by the number of affected consumers in
Oregon to determine the punitive damage award.117 According to Williams’s
interpretation of State Farm and BMW, the jury, when determining the amount of
punitive damages, could consider evidence of the defendant’s misconduct on non-
parties, if it was similar to that which harmed the plaintiffs.118
Philip Morris then argued that the Due Process Clause required a limiting jury
instruction at the trial court level to reduce the chance that the jury would assess
punitive damages for the company’s harm to non-parties.119 The Due Process Clause
requires such an instruction, according to Philip Morris, for several reasons:
individual plaintiffs are not prevented from filing similar lawsuits, the defendant
cannot respond to claims of parties not before the court, and “there is no historical
precedent for permitting collective punishment in an individual action.”120 Not
having received the proposed jury instruction was so prejudicial, according to Philip
Morris, that the court should order a new trial as a remedy.121 Williams responded


114 Record at 22-23, Philip Morris USA, Inc. v. Williams (No. 05-1256) (October 31, 2006).
Justice Ginsburg said that Oregon adjusts awards based on the results in prior cases and that
the defendant could object to subsequent awards. Id. at 24-25.
115 Petitioner’s Brief at 15-16, Williams (No. 05-1256).
116 Id. at 10-11, 14.
117 Respondent’s Brief at 42-43, Williams (No. 05-1256).
118 Id. at 43-44; Williams v. Philip Morris, 127 P.3d 1165, 1175-76 (Or. 2006).
119 The proposed instruction read:
The size of any punishment should bear a reasonable relationship to the harm
caused to Jesse Williams by the defendant’s punishable misconduct. Although you
may consider the extent of harm suffered by others in determining what that
reasonable relationship is, you are not to punish the defendant for the impact of its
alleged misconduct on other persons, who may bring lawsuits of their own in which
other juries can resolve their claims and award punitive damages for those harms,
as those other juries see fit.
Petitioner’s Brief at 4, Williams (No. 05-1256).
120 Id. at 8.
121 Id. at 25.

that the proposed instruction did not meet Oregon state law requirements for accuracy
and clarity, and as a result, the trial court did not need to give such an instruction.122
The U.S. Supreme Court Decision
On the ground that due process does not permit punishment for the effects of a
defendant’s conduct on non-parties, the Court vacated and remanded the Oregon
Supreme Court decision. The Court first noted that punitive damages could “properly
be imposed to further a State’s legitimate interests in punishing unlawful conduct and
deterring its repetition.”123 But, ruling in favor of Philip Morris, the Court then found
that the due process clause does not permit a state “to use a punitive damages award
to punish a defendant for injury that it inflicts upon nonparties” for three reasons.124
First, the Court found that an individual cannot be punished by a state for an injury
to a non-party victim without “an opportunity to present every available defense,”125
such as showing that a non-party victim “knew that smoking was dangerous.”126
Second, the Court found that allowing a defendant to be punished for harming a non-
party victim “would add a near standardless dimension to the punitive damages
equation” in that the trial would not likely be able to resolve potential questions about
the non-party victims.127 Third, the Court found no support for the concept of using
punitive damages awards to punish a defendant for injuring non-party victims.128
Despite these limitations, the Court stated:
Evidence of actual harm to nonparties can help to show that the conduct that
harmed the plaintiff also posed a substantial risk of harm to the general public,
and so was particularly reprehensible — although counsel may argue in a
particular case that conduct resulting in no harm to others nonetheless posed a129
grave risk to the public.
In other words, evidence of harm to others or of a “grave risk” of harm to others can
be considered for the first guidepost of BMW, which is “the degree of reprehensibility
of the defendant’s conduct.”130 The Court did not explain its basis for this distinction,
noting only that, for the above three reasons, a jury could not “go further than this
and use a punitive damages verdict to punish a defendant directly” for alleged harm


122 Respondent’s Brief at 46, Williams (No. 05-1256).
123 Philip Morris USA v. Williams, 549 U.S. __ (2007); 127 S. Ct. 1057, 1062 (2007)
(quoting BMW of North America v. Gore, 517 U.S. 559, 568 (1996)).
124 Id. at 1063.
125 Id. (quoting Lindsey v. Normet, 405 U.S. 56, 66 (1972)).
126 Id.
127 Id.
128 Id.
129 Id. at 1064.
130 BMW of North America v. Gore, 517 U.S. 559, 568 (1996) (quoting Honda Motor Co.
v. Oberg, 512 U.S. 415, 420 (1994)).

to non-parties.131 The dissenters viewed as invalid this distinction between using
evidence of injury to non-parties to assess a defendant’s reprehensibility and using
it to punish (see the following section).
Finally, the Court held that states must provide constitutional protections that
will prevent jurors from considering harm to non-parties when punishing a
defendant.132 States must properly guide juries and limit their “discretionary
authority,” according to the Court, or there is a risk of (1) arbitrariness, (2)
deprivation of adequate notice to a defendant of the severity of a state’s penalty, and
(3) the imposition of one state’s or one jury’s policies upon other states.133 These
concerns have led to the Supreme Court’s determinations in past cases that the
Constitution limits punitive damages award procedures and amounts.134
The Court declined to consider the second question for which it had granted
certiorari: whether the $79.5 million award exceeded “the constitutional requirement
that punitive damages be reasonably related to the plaintiff’s harm.”135
The Dissents
Justice Stevens’s dissent focused on the difference between compensatory and
punitive damages. He opined that the Court had imposed “a novel limit on the
State’s power to impose punishment in civil litigation.”136 He noted that punitive
damages “are a sanction for the public harm the defendant’s conduct has caused or
threatened” and serve to deter and provide retribution.137 Justice Stevens reasoned
that a jury could “increase[] a punitive damages award because injuries to third
parties enhanced the reprehensibility of the defendant’s conduct,” thereby punishing
the defendant for injuries to third parties.138 For example, a murderer who killed one
victim, but injured many bystanders, might be punished more severely than a
murderer who only harmed one victim.139 Similarly, Justice Ginsburg’s dissent
emphasized that punitive damages punish a defendant’s reprehensible conduct that
risks injuring many individuals.140 Joined by Justices Scalia and Thomas, she also
criticized the Court for its treatment of the state courts’ attempts to decipher “our


131 Philip Morris USA v. Williams, 549 U.S. __ (2007); 127 S. Ct. 1057, 1064 (2007).
132 Id. at 1065 (emphasis added).
133 Id. at 1062, 1064.
134 Id. at 1062.
135 Petition for Writ of Certiorari, Philip Morris USA v. Williams, 549 U.S. __ (2007) (No.

05-1256).


136 Philip Morris USA v. Williams, 549 U.S. __ (2007)(Stevens, J. dissenting); 127 S. Ct.

1057, 1066 (2007).


137 127 S. Ct. at 1066.
138 Id. at 1067.
139 Id.
140 Philip Morris USA v. Williams, 549 U.S. __ (2007)(Ginsburg, J. dissenting); 127 S. Ct.

1057, 1068 (2007).



changing, less than crystalline precedent.”141 Justice Thomas also restated his
opinion that the Constitution does not impose limits on the amount of a punitive
damages award.142
Future Issues
The U.S. Supreme Court’s holding that “[e]vidence of actual harm to nonparties
can help to show that the conduct that harmed the plaintiff also posed a substantial
risk of harm to the general public, and so was particularly reprehensible,”143 has been
viewed by the dissenting Justices and many commentators as a indistinguishable
from punishing a defendant for harm to non-parties through an increased punitive
damages award “because injuries to third parties enhanced the reprehensibility of the
defendant’s conduct.”144 Also, the Court’s distinction has been seen as potentially
confusing to the average juror.145 In the future, the Court may encounter cases that
reflect some Justices’ concerns that a jury may consider the alleged harm to non-
parties in punishing a defendant.146 The opinion specifically prohibits such
considerations by a jury.147
After remand, the Williams case could arrive back at the U.S. Supreme Court
with an award of punitive damages that is similar to the award in the first decision.
On the issue of whether the award granted was “grossly excessive,” the Court could
find that such a large ratio of punitive to compensatory damages — 97-to-1 in
Williams — was unreasonable. In State Farm, the Court opined, in a statement
favoring the ratio guidepost, that “a more modest punishment for this reprehensible
conduct could have satisfied the State’s legitimate objectives.”148 The Court could
also use reasoning similar to the reasoning that it used in State Farm, in which it
reversed the Utah Supreme Court’s decision to uphold a $145 million punitive
damages award and stated that the “most relevant civil sanction ... appears to be a


141 Id. at 1069. Justice Stevens noted that the Oregon Supreme Court “faithfully applied”
the U.S. Supreme Court’s logic as presented in its line of punitive damages cases. Philip
Morris USA v. Williams, 549 U.S. __ (2007)(Stevens, J. dissenting); 127 S. Ct. 1057, 1066
(2007).
142 Philip Morris USA v. Williams, 549 U.S. __ (2007)(Thomas, J. dissenting); 127 S. Ct.

1057, 1067 (2007).


143 Philip Morris USA v. Williams, 549 U.S. __ (2007); 127 S. Ct. 1057, 1064 (2007).
144 Philip Morris USA v. Williams, 549 U.S. __ (2007)(Stevens, J. dissenting); 127 S. Ct.

1057, 1067 (2007).


145 See, e.g., Tony Mauro, High Court Rejects $79.5 Million Award in Philip Morris Case,
Legal Times (February 21, 2007), at [http://www.law.com/jsp/law/LawArticleFriendly.
jsp?id=1171965783144]; Douglas W. Kmiec, Caruso Chair and Professor of Constitutional
Law at Pepperdine University, Up in Smoke (February 21, 2007), at [http://www.slate.com/
id/2160286].
146 Linda Greenhouse, Justices Weigh Limits on Punitive Damages, N.Y. TIMES, November

1, 2006.


147 Philip Morris USA v. Williams, 549 U.S. __ (2007); 27 S. Ct. 1057, 1064 (2007).
148 State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408, 419-20 (2003).

$10,000 fine for an act of fraud.”149 In Williams, the Oregon Supreme Court noted
that there were no comparable civil sanctions and that a comparable criminal sanction
for a corporation, for manslaughter, is a $50,000 fine or a payment of “up to twice
the amount that the corporation gained by committing the offense.”150 Therefore, if
the Court used the $50,000 figure, then, under State Farm, a punitive damages award
of $79.5 million would be excessive.
In contrast, the Court could uphold a large ratio comparable to the 97-to-1 ratio
in Williams. One way the Court could uphold the award would be to base it on the
Oregon criminal manslaughter statute’s provision for a penalty of “up to twice the
amount the corporation gained by committing the offense.”151 Twice Philip Morris’s
profits from its misleading campaign could be calculated to exceed even the $79.5
million punitive damages award. The Court may determine that such an award is not
“grossly excessive.”152 A second way that the Court could uphold the punitive
damages award would be to distinguish Williams from the business dispute cases,
State Farm and BMW, in which the Court held that the punitive damage awards were
grossly excessive, and compare it to Haslip and TXO, in which the Court upheld
punitive damages awards where the defendants had made “deliberate false
statements,” engaged in “affirmative misconduct,” and “conceal[ed] evidence of
improper motive.”153 The Justices could justify large punitive damages awards by
using a rationale similar to the one Justice Kennedy used in his concurrence in TXO.
In Kennedy’s TXO concurrence he indicated that, because the company acted with
malice, he could not “say with sufficient confidence that the award [526 times the
amount of actual damages] was unjustified or improper.”154 Kennedy recited the
West Virginia Supreme Court’s discussion of the case as one in which the defendant
TXO used “unsavory and malicious practices” and engaged not in an “isolated
incident,” but rather a “pattern and practice” of “defraud[ing] and coerc[ing] those
in positions of unequal bargaining power.”155 Applying this reasoning to the Williams
case, if it returns to the Supreme Court after remand, the Justices could uphold a ratio
similar to the one in the Oregon Supreme Court decision by comparing TXO’s
practices to Philip Morris’s in Williams, including Philip Morris’s alleged fraud in
its alleged decades-long campaign to distort information on the medical dangers of
smoking. Additionally, in TXO, Justice Kennedy found that the jury’s large punitive
damages award was “motivated by a legitimate concern for punishing and deterring
TXO.”156 The Court could uphold the lower court decision after remand and find that
the jury was similarly motivated when it decided on a large award amount.


149 Id. at 428.
150 Williams v. Philip Morris USA, Inc., 127 P.3d 1165, 1179 (Or. 2006).
151 Id.
152 Brief for Respondent at 3, 32, Philip Morris USA, Inc. v. Williams (No. 05-1256).
153 BMW, 517 U.S. at 579.
154 TXO, 509 U.S. at 468 (Kennedy, J. concurring).
155 Id. at 469.
156 Id.