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U.S. Supreme Court Rejects Punitive Damages Award but Leaves Open Question of Whether Award was Unconstitutionally “Grossly Excessive”

2007 | Topics: Business Litigation, Class Actions, Product Liability, Warranty

In Phillip Morris USA v. Williams, No. 05-1256 (U.S. Feb. 20, 2007), the United States Supreme Court vacated a $79.5 million punitive damage award assessed against Phillip Morris and held that the U.S. Constitution's Due Process Clause does not permit a jury to base a punitive damages award upon its desire to punish the cigarette manufacturer for harming persons who were not parties to the action.  The Supreme Court held that such an award would amount to a taking of "property" from Phillip Morris without due process since the Due Process Clause prohibits a state from punishing an individual without first providing an opportunity to present every available defense. The Court then remanded the case to the Supreme Court of Oregon for further proceedings consistent with its opinion.

Because the U.S. Supreme Court held that the Oregon Supreme Court applied the wrong constitutional standard, the Court remanded the case without considering whether the award was unconstitutionally "grossly excessive," which was one of the questions on which the Court had previously granted review.  The Oregon Supreme Court had previously concluded that the defendant’s conduct was so highly reprehensible and analogous to a crime that it overrode the constitutional requirement that punitive damages be reasonably related to the plaintiff’s harm. 

The high court was divided 5-4 on this opinion with Justice Breyer as the author.  This being their first opportunity to weigh in on the constitutionality of punitive damages, Chief Justice Roberts and Justice Alito joined the majority, with Justices Kennedy and Souter.  Dissenting were Justices Stevens, Scalia, Thomas, and Ginsberg.