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The U.S. Supreme Court today hears arguments on a case about whether there's a limit to how much you may be forced to pay for reprehensible conduct. The case involves Philip Morris, the maker of more than half the cigarettes manufactured in this country. Some of those cigarettes were blamed for the death of a single smoker. And for that death, a court awarded $79.5 million in punitive damages. Now the case has reached the nation's highest court. The question is how much the company can really be forced to pay.
Here's NPR Legal Affairs Correspondent Nina Totenberg.
NINA TOTENBERG: This case is a very big deal because it's the ultimate test of whether the Constitution imposes significant limits on punitive damages in every case of misconduct. Twice in the last decade, the Supreme Court has said there are limits. Most recently, the Court suggested that at most, punitive damages should not exceed nine times the amount of damages awarded to the plaintiff for actual harm.
Today's case is quite different, though, because unlike the previous cases, which involved only economic harm, this one involves what the Court has called reprehensible conduct. That is, conduct causing physical harm that involves reckless disregard for the health and safety of others - harm caused by treachery and deceit, and that's part of a pattern of wrongdoing resulting in large profits.
On any scale of reprehensibility, the conduct of the tobacco industry is right up there at the top. The question in this case from Oregon is how much freedom does a state have to assess damages in an individual case involving reprehensible conduct?
The case was brought by the widow of Jesse Williams, a Portland public school janitor who smoked Marlboros for almost a half century. When his family tried to get him to stop, he repeatedly pointed to claims by the tobacco industry that smoking did not cause lung cancer. When he was diagnosed with the disease in 1997, his wife later testified, he told his family, quote “Those darn cigarette people finally did it. They were lying all the time.”
Carrying out a promise to her husband, she sued Philip Morris for fraud and negligence. The trial featured internal documents that showed the tobacco industry knew for nearly a half century that cigarette smoking was harmful to health, that nicotine was addictive, and that, as the Philip Morris research director put it in a 1980 memo, the thing that we sell most is nicotine. Without it, said a 1972 memo, there would be no smoking. Yet as late as 1994, William Campbell, the CEO of Philip Morris, testified to the contrary before Congress. Here he's questioned by then-Congressman Ron Wyden.
Representative ROD WYDEN (Democrat, Oregon): Do you believe nicotine is not addictive?
Mr. WILLIAM CAMPBELL (CEO, Philip Morris): I believe nicotine is not addictive, yes.
TOTENBERG: Evidence at the trial showed that privately, the industry knew that was not true, and four decades earlier had conceived of a strategy to, in essence, lull smokers into false confidence by offering them what one internal memo called a psychological crutch to continue smoking - namely that there was no proven health risk.
When that grew tenuous, the tobacco companies came up with light cigarettes, advertised as having less tar and nicotine. And the trial testimony showed that Jesse Williams, like millions of other smokers, eventually switched to light cigarettes, believing they were healthier.
The problem, says Johns Hopkins Professor Jack Henningfield, is that they were not. Henningfield, who served for 16 years as head of the Addiction Laboratory at the National Institute for Drug Abuse, has testified that light cigarettes were, in fact, designed to fool the testing machines used at the Federal Trade Commission, which for a time, endorsed the use of the term lights in marketing. To scam the machine known as the puffer, he says, Philip Morris and other manufacturers designed the cigarettes with tiny holes at the tip.
Professor JACK HENNINGFIELD (Johns Hopkins University): When you put the cigarette in the testing machine, the testing machine gets lots of fresh air through those tiny holes, and it dilutes the tar and nicotine.
TOTENBERG: But when a real person smokes the same cigarette, Henningfield says, the smokers mouths and fingertips cover those holes, so that a more concentrated dose of tar and nicotine is delivered.
It was information like this that led an Oregon jury to find Philip Morris, which manufactures Marlboros, guilty of fraud and negligence. Although the jury found Jesse Williams partly responsible for continuing his smoking habit, it awarded the widow $800,000 in compensatory damages. On the question of punitive damages, though, the jury ordered Philip Morris to fork over $79.5 million, 60 percent of it to go, by state law, to the state Crime Victims' Compensation Fund.
Philip Morris appealed to the U.S. Supreme Court, contending that the punitive damage award in the Williams case was way out of whack with the Court's previous decisions. After all, the award was 97 times the size of the compensatory damages, far more than the 9 times outer limit the Supreme Court had previously suggested.
Philip Morris would not allow its lawyer to be interviewed for this broadcast, so we turned to Ted Boutrous, who filed the brief siding with Philip Morris on behalf of other product manufacturers. The jury verdict, he contends, was completely arbitrary, and the Constitution does not allow arbitrary punishment.
Mr. TED BOUTROUS (Attorney): Seventy-nine point five million really has no relationship to anything. It's really a number plucked out of thin air.
Mr. BOB PECK (Attorney for Mrs. Williams): Due process doesn't require courts to engage in an elementary school math exercise.
TOTENBERG: Lawyer Bob Peck represents Mrs. Williams.
Mr. PECK: Here, the Oregon courts understood, given the gravity of the offense and the fact that punitive damages are supposed to be proportionate to the enormity of the offense, that this was an appropriate award.
TOTENBERG: Ted Boutrous counters that the lawyers for the Williams family, in their closing arguments, urged the jury to think about the other Jessie Williams's in the state and take their injuries into account in awarding punitive damages. That, he contends, is a denial of due process of law for Philip Morris.
Mr. BOUTROUS: Here there is only evidence regarding one person. And so it would be unfair to punish Philip Morris with conduct regarding other people, who haven't proven a case against Philip Morris.
TOTENBERG: Indeed, he says, that Philip Morris could end up being punished repeatedly for the same conduct, if there are futures suits brought by other smokers in Oregon. Not so, says Bob Peck, noting that in the seven years since the verdict, there's been no other lawsuit in the state, and that the state law instructs judges to take into account any previous punitive damage awards.
More to the point, he argues that punitive damages are intended to act as a deterrent to protect the public. And that that's why the state's statute instructs juries to take into account the profitability of the misconduct and its affect on others.
Mr. PECK: Punitive damages are supposed to vindicate society's interest, not the interest of the individual bringing the lawsuit.
TOTENBERG: Ted Boutrous replies that such a system violates all the traditions and tenets of the Constitution.
Mr. BOUTROUS: It is sort of like having a bounty hunter, almost. The state has deputized private plaintiffs' lawyers and private plaintiffs to collect punishment and fines.
TOTENBERG: The Oregon Supreme Court, in upholding the verdict, concluded that Philip Morris knew of the serious health affects of smoking. And yet, in order to keep smokers smoking, the company engaged in a massive scheme to spread false and misleading information to suggest to the public that doubts remained on the issue. The company's conduct, the state court said, was so extraordinarily reprehensible that it could have constituted manslaughter in Oregon, a crime punishable by up to 10 years in prison. Philip Morris counters that manslaughter charges were never brought. And as lawyer Ted Boutrous observes, under the Oregon manslaughter law…
Mr. BOUTROUS: The maximum fine would have been $50,000. And so, to impose $79 million with a civil jury pursuant to none of the procedural protections of the criminal law, is unfair and violated due process.
TOTENBERG: Boutrous is one dozens of lawyers who have filed briefs in the Supreme Court on behalf of virtually the entire business community, urging the Supreme Court to declare unconstitutional, once and for all, punitive damage awards that are disproportionately large, compared to the damages awarded for actual harm. Philip Morris urges a standard that would permit no more than four times the damages for actual harm.
But 11 states and a large array of other organizations - from consumers groups to the AARP and the American Cancer Society - are telling the Court that in cases of extreme reprehensibility, to put such a limit on punitive damages would be to give the green light to those who seek to profit in the billions from fraudulent conduct that recklessly disregards the health and safety of the public.
A decision in the case is expected later in the Supreme Court term.
Nina Totenberg, NPR News, Washington.
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