Petition for Writ of Certiorari — Philip Morris USA v. Williams
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(1) Suprems Cont, 1.5.
05125 6MAR 3 0 2006
No. 05-QFFIGE OF THE CLERK
Jn the Supreme Court of the Anited States
PHitip Morris USA,
Petitioner,
V:
MAYOLA WILLIAMS,
Respondent.
On Petition for a Writ of Certiorari to
the Supreme Court of Oregon
PETITION FOR A WRIT OF CERTIORARI
KENNETH S. GELLER ANDREW L. FREY
EVAN M. TAGER Counsel of Record
Maver, Brown, Rowe ANDREW H. SCHAPIRO
& Maw LLP LAUREN R. GOLDMAN
1909 K Street, NW Maver, Brown, Rowe &
Washington, DC 20006 Maw LLP
(202) 263-3000 - 16725 Broadway
New York, New York 10019
WILLIAM F. GARY (212) 506-2500
SHARON A. RUDNICK
Harrang Long Gary Rudnick
- 360 East 10th Avenue
Eugene, OR 9740]
(S4]) ANS-U2208
Counsel for Petitioner
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QUESTIONS PRESENTED
In this case brought by the widow of a smoker, the jury
held Philip Morris liable for fraud and awarded $79.5 million
in punitive damages — 97 times the compensatory damages
awarded by the jury. On remand from this Court for recon-
sideration in light of State Farm Mutual Automobile Insur-
ance Co. v. Campbell, 538 U.S. 408 (2003), the Oregon
Supreme Court upheld the trial court’s refusal to instruct the
jury that it could not punish Philip Morris for harms to non-
parties, concluding that a jury may punish for such harms so
long as the conduct that caused those harms is similar to the
conduct that harmed the plaintiff. Then, construing the evi-
dence in the light most favorable to the plaintiff, the court
proceeded to hold that the punitive award was not unconstitu-
tionally excessive, despite concluding that the punitive award
was not reasonably related to the harm to the plaintiff. The
questions presented, each of which is the subject of a conflict
in the lower courts, are:
1. Whether, 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 plaintiff's harm.
2. Whether due process permits a jury to punish a defen-
dant for the effects of its conduct on non-parties.
3. Whether, in reviewing a punitive award for exces-
siveness, an appellate court is permitted to give the plaintiff
the benefit of all conceivable inferences that might support a
finding of high reprehensibility even if the jury made no such
specific factual findings.
(I)
)
RULE 29.6 STATEMENT
Petitioner Philip Morris USA’s corporate parent is Altria
Group, Inc. Altria Group, Inc. is the only publicly held com-
pany that owns ten percent or more of Philip Morns USA’s
stock.
QUESTIONS PRESENTED
RULE 29.6 STATEMENT
TABLE OF AUTHORITIES
OPINIONS BELOW
I.
IT.
i
TABLE OF CONTENTS
THE OREGON SUPREME COURT’S RULING
THAT THE RATIO GUIDEPOST CAN BE
“OVERRIDDEN” VIOLATES THIS COURT’S
PRECEDENTS AND CREATES A CONFLICT
AMONG THE LOWER COURTS ............-::::00
A. The Framework Adopted And Applied By
The Oregon Supreme Court Conflicts With
This Court’s Decisions In BMW And State
EIA PEL Ne A EN TO
B. The Oregon Supreme Court’s Approach
Conflicts With That Of The Ninth Circuit And
Deepens The Division Among The Lower
EES Ses Cnr edersra tne ane a na
THE OREGON SUPREME COURT’S
APPROVAL OF THE IMPOSITION OF
PUNISHMENT FOR HARMS SUFFERED BY
NON-PARTIES VIOLATES STATE FARM AND
CREATES A CONFLICT WITH DECISIONS
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1V
TABLE OF CONTENTS - continued
Page
A. The Oregon Supreme Court’s Holding
Conflicts With This Court’s Decision In State
Farm And With Decisions Of Other Appellate
SII IIED csthsccsunshicsiesininisiismaleiiaaiiinsammmiapdinaimasdaasieeata aan 16
B. The Oregon Supreme Court’s Holding Will
Have Significant Negative Consequences If
PS C0 BE covencccvivicessininivnsicnnniiimiania 20
III. THE OREGON SUPREME COURT'S USE OF
A SUFFICIENCY-OF-THE-EVIDENCE
STANDARD IN ASSESSING THE
CONSTITUTIONALITY OF A PUNITIVE
DAMAGES AWARD IS CONTRARY TO THIS
COURT’S PRECEDENTS AND CONFLICTS
WITH A DECISION OF THE CALIFORNIA
ET TEIITTIET « snsccccsneumesscddcentesddmedidasemssindanianeasidall 22
A. The Lower Courts Are Divided As To The
Proper Implementation Of De Novo Review. .......... 23
B. The Circular Approach Employed By The
Court Below Cannot Be Squared With This
CRIES PIII oe cocnscecssnssscsasssesencevessecennstintintons 26
PII sscccescesesscsonensmnineeninsisnsieisiistinancninenmaiaaiie 28
APPENDIX
Appendix A: Oregon Supreme Court Opinion..................- la
Appendix B: Oregon Court of Appeals Opinion............... 35a
Vv
TABLE OF AUTHORITIES
Page(s)
CASES
Action Marine, Inc. v. Continental Carbon, Inc.,
2006 WL 173653 (M.D. Ala. Jan. 23, 2006)................. 12
Aken v. Plains Elec. Generation & Transmission
Co-Op, Inc., 49 P.3d 662 (N.M. 2002).........00ceeeeees 24
BMW of North America, Inc. v. Gore,
Pe Cs Be OR cccccescccenenesescenscecesesccscceessssescezen passim
Bach v. First Union Nat'l Bank,
2005 WL 2009272, 149 Fed. Appx. 358 (6th Cir.
Ba icccrsnncnitinnscdaseenenipsesencevseseosemesnessvesasenesseese 13
Bains LLC v. ARCO Prods. Co.,
I, SII. cscatippnsacsnsnuneneneene 10
Boeken v. Philip Morris Inc.,
26 Cal. Rptr. 3d 638 (Cal. Ct. App. 2005),
cert.demied, S.Ct. (Mar. 20, 2006)... 13
Boerner v. Brown & Williamson Tobacco Co.,
NIE, SETI sccecctnassnecedetsonsesenevcesnnseseseoss 13
Bogle v. McClure, 332 F.3d 1347 (11th Cir. 2003)............ 25
Campbell v. State Farm Mut. Auto. Ins. Co.,
98 P.3d 409 (Utah 2004), cert. denied,
cess atertmerenmnasntonecs passim
Cass v. Stephens, 156 S.W.3d 38
sonic penenerpninnsecnnnnsmeneeonaneosneenen 13
Castano v. American Tobacco Co.,
EAT TE 21
Ceimo v. General Am. Life Ins. Co.,
137 Fed. Appx. 968 (9th Cir. 2005) ...........ccceetceeeees 13
vi
TABLE OF AUTHORITIES - continued
Page(s) _
Chu v. Hong, 2005 WL 2692464
Sere SE TEE, Ste SIE cisccreesiesesctnsscennsneninninaseavinnins 25
Clark v. Chrysler Corp., 436 F.3d 594
SG CUI hs AI iinintiadaciicintncinipanainencniinininecnisiiiniael 12
‘Conseco Finance Servicing Corp. v.
North Am. Mortgage Co.,
SP | ll FE 12
Cooper Industries, Inc. v. Leatherman
Tool Group, 532 U.S. 424 (2001) .........cccccceeeceeeees passim
Diamond Woodworks, Inc. v.
Argonaut Insurance Co., -
135 Cal. Rptr. 2d 736 (Ct. App. 2003) ..........cccccccceceeeees 13
Eden Elec., Ltd. v. Amana Co.,
err 13
Fresh v. Entertainment U.S.A. of Tennessee, Inc.,
340 F. Supp. 2d 851 (W:D. Tenn. 2003)..................c0. 13
Gober v. Ralph's Grocery Co., 40 Cal. Rptr. 3d 92
Glee. CR Aga BER. F, FEED ocecceccccesecssccscscccssessccensseese 20
Grefer v. Alpha Technical, 901 So. 2d 1117
GO. GR FR FI cccreseccccnssccccnimmmnesacsvmenncenmananncnne 13
Grvyger v. Burke, 334 U.S. 728 (1948) .........ccccccceeeeeceeeeeees 19
Hangarter v. Provident Life & Accident Ins. Co.,
i, -P ) ). (+ > 25
In re Rhone-Poulenc Rorer, Inc.,
EP he fy lk ee 21
Johnson v. Ford Motor Co.,
pf 6): > = 18, 19, 21
Vil
TABLE OF AUTHORITIES — continued
Page(s)
Mathias v. Accor Econ. Lodging, Inc.,
Vas [ety (+ } 10
Mission Resources, Inc. v. Garza Energy Trust,
166 S.W.3d 301 (Tex. Ct. App. 2005) .........::cccccceeseees 11
Nichols v. United States, 511 U.S. 738 (1994) ....-.cesss-s000 16
Park vy. Mobil Oil Guam, 2004 WL 2595897
eee 24
Parrott v. Carr Chevrolet, Inc.,
Be aii riniceneinsntnncenniidgmemnatnnnsiinaenntie 24
Phelps v. Louisville Water Co.,
ee 12
Planned Parenthood of the Columbia/Willamette, Inc.
v. American Coalition of Life Activists, 422 F.3d _
Ns BR entiecnenteceestciiinnnniciananicieiiieitiiimnsas 11,14
Philip Morris USA, Inc. v. Williams, 540 U.S. 801
SETTITTEtschnieadeeeeesen/tinnsitennislaninienssetinindeienaneihipebveininnadintnanaintsdinet 4
Roginsky v. Richardson-Merrell, Inc.,
eo eee 21
Roth v. Farner-Bocken Co.,
ee Fe 13
Simon v. San Paolo U.S. Holding Co.,
rE Minds tcitaiiscinsitecpchnninatiniicanintin 23,24
Staskal v. Symons Corp., 706 N.W.2d 311
Sorts UTIs SIRI cictnescesessiinansieniepmpinanbieidesndlenasainidnaiticiaiabisinde 25
State Farm Mutual Automobile Insurance
Co. v. Campbell, 538 U.S. 408 (2003)..................- passim
vil
TABLE OF AUTHORITIES -— continued
Page(s) —
Stogsdill \ Healthntark Partners, L.L.C.,
eg ef ee 13, 25
Superior Federal Bank v. Jones & Mackey
Construction Co., 2005 WL 3307074
CREE, CR. AAI. TRG. 7, BD sncncsasecessctcsscenemnsmenenetnnntans 12
Union Pac. R.R. Co. v. Barber, 149 §.W.3d 325
(Ark.), cert. demied, 543 U.S. 940 (2004)... 25
United States v. Watts, 519 U.S. 148 (1997)..........ccccceeeees 18
University Med. Assoc. of the Med. Univ.
of South Carolina v. UNUMProvident Corp.,
335 F. Supp. 2d 702 (D.S.C. 2004) ...........cccccecceceeteeeeees 20
White v. Ford Motor Co., Slip Op., No. CV-N-95-
279-DWH-(PHA) (D. Nev. Mar. 15, 2005) .................. 12
Williams v. ConAgra Poultry Co.,
SIS F.3G TOO Coe Cav FOB G) access ny cecessececesccvesssscessscnsee 19
Williams v. Philip Morris, 48 P.3d 824
GED, GR, TI siesrcnntsenesenciecnectsstnccienirernisnemnnimsmnssinsintins 3
Witte v. United States, 515 U.S. 389 (1995) .......cccccceceseesees 18
Wohlwend v. Edwards, 796 N.E.2d 781
Ss ees FR, BD ersicccsetscccrniinceneennnenicentesninnmnniantinaton 20
Wolf v. Wolf, 690 N.W.2d 887 (lowa 2005)...........cccccceeces 23
Young v. DaimlerChrysler Corp.,
2004 WL 2538639 (S.D. Ind. Oct. 19, 2004)................ 13
Zhang v. Am. Gem Seafoods, Inc..,
339 F.3d 1020 (9th Cir. 2003),
cert. denied, 124 S. Ct. 1602 (2004)... eects 10
ix
TABLE OF AUTHORITIES — continued
Page(s)
STATUTES, RULES AND REGULATIONS
a EO 1
MISCELLANEOUS
Thomas B. Colby, Beyond the Multiple Punishment
Problem: Punitive Damages as Punishment
Sor Individual, Private Wrongs
9 CEG, Bn EN, FD CD perccccecscoessevessnanccnsncsesessessns 20
Brief of Respondent, BMW of N. Am., Inc. v. Gore,
No. 94-896, 1995 WL 330613 (U.S. May 30,
PETITION FOR A WRIT OF CERTIORARI
Petitioner Philip Morris USA (“Philip Morris’’) respect-
fully petitions for a writ of certiorari to review the judgment
of the Supreme Court of Oregon in this case.
OPINIONS BELOW
The decision of the Oregon Supreme Court (App., infra,
la-34a) is reported at 127 P.3d 1165. The decision of the
Oregon Court of Appeals (App., infra, 35a-75a) is reported at
92 P.3d 126.
JURISDICTIIN
The judgment of the Oregon Supreme Court was entered
on February 2, 2006. The jurisdiction of this Court is invoked
under 28 U.S.C. § 1257(a).
STATEMENT
I. The Trial. Jesse Williams began smoking cigarettes
in 1950 while in the Army in Korea, because other soldiers
told him that the smoke would keep mosquitoes away. After
1955, Williams smoked Marlboros, manufactured and mar-
keted by petitioner Philip Morris. App., infra, 36a. Williams
eventually smoked three packs of cigarettes a day.
Williams had been taught as a child that smoking is un-
healthy. He and his wife taught their children not to smoke.
Citing the dangers of tobacco, his wife and children, in turn,
repeatedly urged Williams to stop smoking. So did his phy-
sician. Although Williams referred to cigarettes as “cancer
sticks,” he reacted angrily when confronted with the risks of
smoking. His wife frequently pointed to the warning labels
on cigarette packages and told him that cigarettes would kill
him. Williams reportedly responded: “Phooey. * * * This is
what the Surgeon General says, it’s not what [the] tobacco
company says.” According to his wife, Williams said that
“cigarettes are not going to kill you, because | just heard this
2
so-and-so guy on TV, and he said that tobacco doesn’t cause
you cancer!” Williams’ wife testified that in 1996, when
Williams was diagnosed with lung cancer, he said: “Those
darn cigarette people finally did it. They were lying all the
time.” Williams died in March 1997. App, infra, 36a. Wil-
liams’s widow (“plaintiff”) sued Philip Morris, alleging neg-
ligence and fraud.
At trial, plaintiff mounted a wide-ranging attack on 50
years of Philip Mornis’s conduct, introducing evidence relat-
ing not only to the company’s statements concerning smok-
ing and health (none of which plaintiff was shown to have
heard or seen), but also to its research practices, its litigation
positions, and its dealings with competitors. In closing ar-
guments, plaintiff explicitly and repeatedly urged the jury to
punish Philip Morris not only for the harm caused to Wil-
liams, but also for the alleged harms suffered by masses of
other, unidentified people who were not before the court -
people whose individual circumstances were never presented
to any finder of fact. Plaintiff urged the jury to award puni-
tive damages based on the supposition that ten out of every
hundred smokers in Oregon would get cancer, and three or
four of those ten would be Marlboro smokers:
In Oregon, how many people do we see outside,
driving home, coming to work, over the lunch hour
smoking cigarettes? For every hundred cigarettes
that they smoke are going to kill ten through lung
cancer. And of those ten, four of them, or three of
them | should say, because the market share of
Marlboros ts one-third * * *.
When you determine the amount of money to award
in punitive damages against Philip Mor-
ris * * * [ijt’s fair to think about how many other
Jesse Williams[es] in the last 40 years in the State of
Oregon there have been. it’s more than fair to think
about how many more are out there im the future.
3
Philip Morris sought an instruction that would have told
the jury that any punitive award must bear a reasonable rela-
tionship to the harm caused to the plaintiff and that it was not
permitted to punish Philip Morris for alleged harms suffered
by non-parties. The trial court refused to give this instruc-
tion, choosing instead to tell the jury that it was free to award
any amount of punitive damages up to $100 million, the
amount arbitrarily requested in plaintiff's complaint.
The jury found for plaintiff on both her fraud and product
design claims and awarded $821,485 in compensatory dam-
ages (reduced to $521,485 pursuant to Oregon’s statutory cap
on wrongful death damages). The jury also awarded $79.5
million in punitive damages for fraud but refused to award
any punitive damages on the claims relating to the design of
Philip Morris’s cigarettes.
On post-trial motions, the trial court held that the punitive
award was “excessive under federal standards.” Accord-
ingly, it reduced the punitive damages to $32 million — still
39 times the compensatory damages verdict.
2. Appeal and GVR. On appeal, the Oregon Court of
Appeals rejected Philip Morris’s contention that the jury
should have been given Philip Morris’s proposed instruction
that any award of punitive damages had to be reasonably re-
lated to the harm caused to Williams himself (as opposed to
non-parties), ruling that the proposed instruction misstated
the applicable law. Williams v. Philip Morris, 48 P.3d 824
(Or. App. 2002). It further concluded that the jury’s verdict
had not been excessive and accordingly reinstated the jury’s
$79.5 million award. /d. at 843.'
After the Oregon Supreme Court denied review, Philip
Morris petitioned for a writ of certiorari, raising both the
“punishment for harm to others” issue and an excessiveness
Including interest, the award now amounts to nearly $130 mil-
lion.
4
claim. This Court granted the petition, vacated the judgment,
and remanded to the Oregon Court of Appeals for reconsid-
eration in light of State Farm Mutual Automobile Insurance
Co. v. Campbell, 538 U.S. 408 (2003). Philip Morris USA,
Inc. v. Williams, 540 U.S. 801 (2003).
3. Proceedings On Remand. On remand, the Oregon
Court of Appeals once again upheld the $79.5 million award.
It rejected Philip Morris’s claims of instructional error, ex-
pressly holding that it was both permissible and appropriate
for the jury to punish for harms to non-parties. App., infra,
75a. The Court of Appeals then held that the award was not
excessive, again relying primarily on unproven harms to non-
parties to justify the jury’s massive award.
The Oregon Supreme Court affirmed. It stated that, in
applying the excessiveness analysis set forth in BMW of
North America, Inc. v. Gore, 517 U.S. 559 (1996), it would
“state all facts in the light most favorable to plaintiff.” Jd. at
2a; see also id. at 23a (“[W]e construe all facts in favor of
plaintiff, the party in whose favor the jury ruled.”).
Proceeding on that basis, the court stated that the jury
could have found that Philip Morris had “deceived other
smokers in Oregon” besides Mr. Williams and that Philip
Morris’s products “caused a significant number of deaths
each year in Oregon during the pertinent time period * * * .”
Id. at 7a-8a. Although no evidence had been introduced at
trial to show whether any Oregon smoker other than Wil-
liams smoked and sustained injuries in reliance on the al-
leged fraud, the court held that widespread reliance and
injury could be inferred. /d. at 8an.1.
The court then addressed Philip Morris’s contention that
the jury should have been instructed not to punish the com-
pany for alleged harms suffered by non-parties. The court
rejected the argument “that Campbell prohibits the state, act-
ing through a civil jury, from using punitive damages to pun-
ish a defendant for harm to non-parties.” /d. at 18a. Indeed,
5
in considering the text of the proposed instruction — which
would have permitted the jury to “consider,” but not “punish”
for, harm to others — the court stated: “It is unclear to us how
a jury could ‘consider’ harm to others, yet withhold that con-
sideration from the punishment calculus. If a jury cannot
punish for the conduct, then it is difficult to see why it may
consider it at all.” /d. at 18a n.3.
The court then considered the three BMW “guideposts”
for determining whether a punitive award is unconstitution-
ally excessive: (i) the degree of reprehensibility of the mis-
conduct; (ii) the ratio of punitive to compensatory damages;
and (iii) any relevant legislatively established penalties for
comparable conduct. 517 U.S. at 574-575.
Taking the evidence in the “light most favorable to the
plaintiff,” the court concluded that the record supported a
finding that Philip Morris’s conduct was “extraordinarily rep-
rehensible.” App., infra, 23a. As the court interpreted the
evidence, the jury could have found that Philip Morris’s mis-
conduct affected “many Oregonians” who kept smoking and
became ill or died. /bid. The court further reasoned that the
jury could have concluded that the misconduct harmed “a
much broader class of Oregonians”: those who “kept buying
cigarettes — taking money out of their pockets and putting it
into the hands of Philip Morris and other tobacco compa-
nies.” Jbid. Therefore, the court concluded, “the first Gore
guidepost favors a very significant punitive damage award.”
The court similarly held that the third BMW factor — the
legislatively established penalties for comparable misconduct
— supported a large punitive award: “Viewing the facts in the
light most favorable to plaintiff, Philip Morris’s actions, un-
der the criminal statutes in place at the beginning of its
scheme in 1954, would have constituted manslaughter.” /d.
at 27a.
Addressing the relationship between the compensatory
and punitive awards, the court recognized that “the second
6
Gore guidepost is not met.” /d. at 3la. It acknowledged that
“{ajll arguable versions of the ratios substantially exceed the
single-digit ratio (9:1) that the [U.S. Supreme] Court has said
ordinarily will apply in the usual case.” /bid.“ Nevertheless,
the court explained, “the other two guideposts — reprehensi-
bility and comparable sanctions — can provide a basis for
overriding the concern that may arise from a double-digit ra-
tio.” Jd. at 33a.
REASONS FOR GRANTING THE PETITION
This case, which involves a massive punitive award to a
single individual, presents three important constitutional
questions bearing on the administration of punitive damages:
whether a determination that a punitive award is excessive
under the reasonable-relationship guidepost may be trumped
by a determination that the other two guideposts support a
large punitive award; whether punitive damages may be im-
posed to punish for harms to non-parties; and whether a re-
viewing court permissibly may assume that the jury drew
every inference urged upon it by the plaintiff merely because
it awarded the plaintiff a large amount of punitive damages.
Each of these questions is important, each recurs with
regularity in punitive damages litigation, each has perplexed
and divided the lower courts, and each was resolved incor-
rectly by the Oregon Supreme Court.
First, by holding that the ratio guidepost may be overrid-
den by a finding of high reprehensibility, the court below
provided courts throughout the country with a roadmap for
evading this Court’s efforts to bring predictability and disci-
pline to punitive damages jurisprudence. Under the Oregon
Supreme Court’s approach, a court need only express the
subjective conclusion that the defendant’s conduct was
> Indeed, if the statutorily capped amount of compensatory dam-
ages is used as the denominator, the ratio in this case rises from
97:1 to 152:1.
7
highly reprehensible and it then can uphold any punitive
award no matter how disproportionate to the compensatory
damages it may be. But this Court has never treated the three
BMW guideposts as independent factors to be traded off
against one another. Instead, it has established a range of
constitutionally permissible ratios and suggested that the de-
gree of reprehensibility (and the amount of compensatory
damages) will determine where within that range the consti-
tutional cut-off falls in a particular case. The Ninth Circuit
has expressly so held; there thus exists a square conflict be-
tween a federal circuit court and the supreme court of a state
within that circuit on this question.
Second, the Oregon Supreme Court’s holding that a jury
may punish a defendant for harms to similarly situated non-
parties is a dangerous misreading of State Farm. A jury may
never punish a defendant for harms to non-parties because
doing so would inevitably expose the defendant to the risk of
unconstitutional duplicative punishments. The California
Supreme Court has expressly construed State Farm to bar
punishment on this basis, so once again a square conflict ex-
ists.
Finally, by presuming that the jury resolved every factual
dispute against petitioner notwithstanding the absence of any
specific factual findings by the jury, the Oregon Supreme
Court rendered de novo review completely toothless. Here,
too, a clear conflict exists. As the California Supreme Court
recognized in rejecting precisely this approach to post-verdict
review, to defer to “findings” not necessarily made by the
jury merely because the jury returned a large punitive verdict
is to allow the punitive award to “indirectly justify itself,”
which is “inconsistent with de novo review.”
Because the Oregon Supreme Court’s various holdings
collectively defy a decade of this Court’s punitive damages
jurisprudence and because each conflicts with decisions of
8
other state supreme courts or federal courts of appeals, re-
view is both warranted and necessary.
I. THE OREGON SUPREME COURT’S RULING
THAT THE RATIO GUIDEPOST MAY BE
“OVERRIDDEN” VIOLATES THIS COURT’S
PRECEDENTS AND CREATES A CONFLICT
AMONG THE LOWER COURTS
A. The Framework Adopted And Applied By The
Oregon Supreme Court Conflicts With This
Court’s Decisions In BMW And State Farm.
The Oregon Supreme Court acknowledged that the mas-
sive judgment under review did not satisfy the requirements
of the BMW ratio guidepost. App., infra, 3la. It neverthe-
less affirmed the $79.5 million penalty, which yielded a ratio
of almost 100:1, because “the other two guideposts — repre-
hensibility and comparable sanctions — can provide a basis
for overriding the concern that may arise from a double-digit
ratio.” /d. at 33a.
That approach directly conflicts with the decisions of this
Court. In explaining why “few awards exceeding a single-
digit ratio between punitive and compensatory damages, to a
significant degree, will satisfy due process” (538 US. at
425), the Court specifically enumerated the circumstances
that could permissibly give rise to double-digit ratios. Far
from creating an exception for all “high reprehensibility”
cases, as the Oregon Supreme Court believed, this Court
stated that a double-digit ratio was permissible only when “a
particularly egregious act has resulted in only a small amount
of economic damages.” J/bid. (emphasis added). That, of
course, is not the case here.
The presence of aggravating reprehensibility factors
alone does not override the ratio guidepost or even remove a
case from the single-digit-ratio framework described in State
Farm (much less justify the 97:1 ratio at issue here). To the
9
contrary, the degree of reprehensibility, among other factors,
helps the court to determine which single-digit multiplier is
appropriate. In State Farm, this Court explained that nor-
“mally a punitive award of four times compensatory damages
“might be close to the line of constitutional impropriety.”
Ibid. However, the absence of aggravating reprehensibility
factors renders any punitive damages award “suspect.” Jd. at
419. State Farm itself involved at least two aggravating rep-
rehensibility factors — intentional deceit and a financially
vulnerable victim. See id. at 419, 420. Nevertheless, the
Court suggested that any award producing a ratio of more
than 1:1 would be unconstitutionally excessive on the facts of
the case. Jd. at 429.°
It makes no sense to consider each guidepost as an inde-
pendent and sufficient factor that can “override” one or more
of the others, as the Oregon Supreme Court did. Rather than
“competitive tools,” as the Oregon Supreme Court described
them (App., infra, 32a), the guideposts are constructs that
must be considered together in assessing the excessiveness of
a punitive award. Reprehensibility may move the acceptable
ratio up the single-digit range; it does not render the ratio
guidépost inapplicable. By treating the ratio guidepost as an
abstract inquiry that could be overridden by high reprehensi-
bility, the Oregon Supreme Court’s decision sets punitive
damages free of any concrete “reasonable relationship” re-
quirement and conflicts with this Court’s punitive damages
jurisprudence.
* On remand, the Utah Supreme Court held that a 9:1 ratio was
permissible after finding all five reprehensibility sub-factors to
have been established. Campbell v. State Farm Mut. Auto. Ins.
Co., 98 P.3d 409 (Utah), cert. denied, 543 U.S. 874 (2004).
10
B. The Oregon Supreme Court’s Approach
Conflicts With That Of The Ninth Circuit And
Deepens The Division Among The Lower Courts.
The Oregon Supreme Court’s ruling conflicts with the far
different approach taken by the Ninth Circuit, which assesses
the BMW guideposts in tandem with one another. That court
recently explained:
Although the Supreme Court has eschewed any spe-
cific formula, we discern from BMW and its prog-
eny a rough framework for evaluating whether there
is a reasonable relationship between the punitive
damages award and the actual or likely harm associ-
ated with the wrongful conduct. In cases where
there are significant economic damages and punitive
damages are warranted but behavior is not particu-
larly egregious, a ratio of up to 4 to | serves as a
good proxy for the limits of constitutionality. See,
e.g., State Farm, 538 U.S. at 425, 123 S.Ct. 1513
(acts of bad faith and fraud warranted something
closer to a | to | ratio). In cases with significant
economic damages and more egregious behavior, a
single-digit ratio greater than 4 to | might be consti-
tutional. See, e.g., Zhang [v. Am. Gem Seafoods,
Inc., 339 F.3d 1020, 1043-1044 (9th Cir. 2003)]
(post-State Farm case upholding 7 to | ratio where
the wrongful conduct involved significant racial dis-
crimination); Bains LLC v. ARCO Prods. Co., 405
F.3d 764, 776-777 (9th Cir. 2005) (post-Siate Farm
case indicating that ratio between 6 to | and 9 to |
would be constitutional where underlying wrongful
conduct was racial discrimination). And in cases
where there are insignificant economic damages but
the behavior was particularly egregious, the single-
digit ratio may not be a good proxy for constitution-
ality. See, e.g., Mathias v. Accor Econ. Lodging.
Inc., 347 F.3d 672, 677 (7th Cir. 2003) (upholding a
lI
punitive damage award with a 37 to | ratio of puni-
tive damages to compersatory damages as constitu-
tional because defendant’s behavior was outrageous
but the compensable harm” was nominal and diffi-
cult to quantify).
Planned Parenthood of the Columbia/Willamette, 'nc. v.
American Coalition of Life Activists, 422 F.3d 949, %2 (9th
Cir. 2005). The Ninth Circuit’s approach, with its apprecia-
tion that the reprehensibility analysis operates within limits
set by the ratio guidepost, is irreconcilable with Oregon’s,
which simply tosses out the ratio consideration when high
reprehensibility is found.
The existence of a conflict such as this one, between a
federal appellate court and the high court of one of its con-
stituent states, is a compelling reason to grant review. See
Baldwin v. Alabama, 472 U.S. 372, 374 (1985). That is be-
cause such conflicts may lead to forum shopping and will
produce different results based on nothing more than whether
a particular lawsuit is removable.
A number of other courts agree with the Oregon Supreme
Court that reprehensibility (a highly subjective criterion) may
trump the ratio guidepost. These courts have expressly dis-
regarded the single-digit limitation in cases in which none of
the exceptions identified in State Farm was present, on the
theory that high reprehensibility suffices to break the single-
digit barrier.
In Mission Resources, Inc. v. Garza Energy Trust, 166
S.W.3d 301 (Tex. Ct. App. 2005), for example, the Texas
Court of Appeals upheld a $10 million punitive award for
trespass where the compensatory damages were $543,667.
The court “{a}dmitted[}” that the ratio “of approximately 20
to | * * * exceeds the ‘single-digit multiphers,’ which, ac-
cording to the Supreme Court, ‘are more likely to comport
with due process.” /d at 319. It nevertheless upheld the
award because the trespass was “highly unlawful.” /bid.
12
Similarly, in Superior Federal Bank v. Jones & Mackey Con-
struction Co., 2005S WL 3307074 (Ark. Ct. App. Dec. 7,
2005), the Arkansas Court of Appeals upheld a $3.08 million
punitive damages award for defamation that was 17.6 times
the $175,000 compensatory damages awarded on that claim.
The court recognized that “this ratio is greater than the sin-
gle-digit ratio mentioned in Campbell,” and therefore was
“constitutionally suspect.” Jd at 6-7. But it upheld the
award simply because “a 17.6-to-1 ratio is not breathtaking.”
Id. at 7. And in White v. Ford Motor Co., Slip Op., No. CV-
N-95-279-DWH-(PHA) (D. Nev. Mar. 15, 2005), the district
court upheld a $52 million punitive damages award that was
22.6 times the $2.3 million compensatory award on the
ground that “a single-digit multiplier does not necessarily
form an appropriate limitation upon a punitive damages
award” in a “malicious-conduct wrongful death action.” Slip
Op. at 42.* The majority of lower courts, on the other hand,
have heeded this Court’s admonition that “few awards ex-
ceeding a single-digit ratio between punitive and compensa-
tory damages, to a significant degree, will satisfy due
process.” 538 U.S. at 425.°
See also, e.g., Phelps v. Louisville Water Co., 103 S.W.3d 46,
55 (Ky. 2003) (upholding $2 million punitive award for wrongful
death that was 11.3 times the $176,361.64 compensatory award);
Action Marine, Inc. v. Continental Carbon, Inc., 2006 WL 173653,
at *8 n.6 (M.D. Ala. Jan. 23, 2006) (upholding $17.5 million puni-
tive award for release of carbon black resulting in property dam-
ages of $1.9 million; noting that “the facts of this case could have
supported an even higher multiplier [than 9.14:1]" because “a
strong state interest in deterrence of a particular wrongful act may
justify ratios higher than might otherwise be acceptable”).
* See, e.g., Clark v. Chrysler Corp., 436 F.3d 594, 596, 612 (6th
Cir. 2006) (reducing $3 million punitive award to $471,258.26, the
amount of compensatory damages); Conseco Fin. Servicing Corp.
v. North Am. Mortgage Ca., 381 F.3d 811, 825 (8th Cir. 2004) (re-
ducing $18 million punitive award to $7 million, for a ratio of 2:1),
13
The courts are also in conflict as to how to apply the
guideposts when the misconduct is especially reprehensible
(militating in favor of a high ratio) and the amount of com-
pensatory damages is substantial (militating in favor of a low
ratio). In such circumstances, some courts have held that a
ratio at the lower end of the single-digit range is appropriate.
See, e.g., Boerner v. Brown & Williamson Tobacco Co., 394
F.3d 594, 598 (8th Cir. 2005) (“approximately 1:1”) and
Ceimo v. General Am. Life Ins. Co., 137 Fed. Appx. 968, 970
(9th Cir. 2005) (affirming reduction to approximately 1:1)
with Grefer v. Alpha Technical, 901 So. 2d 1117, 1152 (La.
Ct. App. 2005) (reducing 18:1 ratio to 2:1); Eden Elec., Ltd.
v. Amana Co., 370 F.3d 824, 829 (8th Cir. 2004) (affirming
reduction to 4.5:1 ratio). Other courts, however, have upheld
awards at the upper end of that range even where the com-
pensatory award is in seven figures. See, e.g., Boeken v.
Philip Morris Inc., 26 Cal. Rptr. 3d 638, 687 (Cal. Ct. App.
2005) (reducing 18:1 ratio to 9:1), cert. denied, S.Ct
Bach v. First Union Nat'l Bank, 149 Fed. Appx. 354, 366 (6th Cir.
2005) (6.6:1 ratio was “alarming” where compensatory damages
were $400,000); Stogsdill v. Healthmark Partners, L.L.C., 377
F.3d 827, 834 (8th Cir. 2004) (in wrongful death case, remitting $5
million punitive award to$2 million, for a ratio of 4:1); Fresh v.
Entm 't U.S.A. of Tenn., Inc., 340 F. Supp.2d 851, 860 (W.D. Tenn.
2003) (holding that 4:1 ratio was constitutional maximum in as-
sault case); Young v. DaimlerChrysler Corp., 2004 WL 2538639,
at *4 (S.D. Ind. Oct. 19, 2004) (holding that 3:1 was maximum
permissible ratio in discrimination case); Roth v. Farner-Bocken
Co., 667 N.W.2d 651, 671 (S.D. 2003) (vacating punitive award
that was 20 times the $25,000 compensatory award and suggesting
that 1:1 ratio was constitutional maximum); Cass v. Stephens, 156
S.W.3d 38, 77 (Tex. Ct. App. 2004) (holding, in fraud and mali-
cious conversion case involving $200,082 in compensatory dam-
ages, that 4:1 ratio was constitutional limit); Diamond Woodworks,
Inc. v. Argonaut Ins. Co. 135 Cal. Rptr. 2d 736, 760-761 (Ct. App.
2003) (holding that 4:1 was maximum ratio in insurance bad-faith
case).
14
(Mar. 20, 2006); Planned Parenthood, 422 F.3d at 962 (hold-
ing that 9:1 was constitutional maximum).
The Constitution does not require a “one size fits all” ap-
proach to assessing the ratio guidepost. But the current level
of conflict and confusion on the ratio question in the lower
courts is intolerable. The bottom line is that the guidepost ts
not being applied in any principled or predictable manner.
The Oregon Supreme Court’s doctrinal holding — that the
reasonable-relationship requirement can be “overridden”
whenever the conduct is highly reprehensible — promises to
exacerbate that disarray and to undermine the constitutional
principles established in BMW and State Farm. The impor-
tance of this issue could not be greater, and the need for re-
view could not be more pressing.
Il. THE OREGON SUPREME COURT’S APPROVAL
OF THE IMPOSITION OF PUNISHMENT FOR
HARMS SUFFERED BY NON-PARTIES VIO-
LATES STATE FARM AND CREATES A CON-
FLICT WITH DECISIONS OF OTHER COURTS
The jury returned an enormous punitive award because it
was urged and permitted to punish Philip Morris for the
harms suffered by every Oregonian who smoked the com-
pany’s cigarettes. Philip Morris asked the trial court to in-
struct the jury that it could not punish Philip Morris for the
effects of its conduct on non-parties. The proposed instruc-
tion stated:
The size of any punishment should bear a reason-
able relationship to the harm caused to Jesse Wil-
liams by the defendant’s punishable conduct.
Although you may consider the extent of harm suf-
fered 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
15
which other juries can resolve their claims and
award punitive damages for those harms, as those
other juries see fit.
App., infra, 17a-18a. The trial court refused to give the in-
struction, and plaintiff's counsel exploited that ruling by re-
peatedly urging the jury to punish Philip Morris for harms
suffered by anyone in Oregon who smoked Philip Morris's
cigarettes. See page 2, supra.
The Oregon Supreme Court held that State Farm does not
prohibit punishing for harms to similarly situated non-parties.
Accordingly, it rejected the claim of instructional error:
Philip Morris’s proposed jury instruction would
have prohibited the jury from ‘punishing the defen-
dant for the impact of its alleged misconduct on
other persons,’ even if those other persons were
Oregonians who were harmed by the conduct that
had harmed Williams, and in the same way. As we
noted, that is not correct as an independent matter of
Oregon law respecting the conduct of jury trials and
instructions that are given to juries. Neither, as we
read in [sic] Campbell, does it correctly state federal
due process law.
App., infra, 20a-2la.
The Oregon Supreme Court’s holding that punitive dam-
ages may properly be awarded to punish for harms to non-
parties conflicts with State Farm and decisions of the Cali-
fornia Supreme Court and the Eighth Circuit. It is a recipe
for multiple punishments for the same harms, and it will
spawn confusion in future punitive damages litigation. Re-
view is needed to resolve the split and prevent the further
erosion of the principles enunciated in State Farm.
16
A. The Oregon Supreme Court’s Holding Conflicts
With This Court’s Decision In State Farm And
With Decisions Of Other Appellate Courts.
In State Farm, this Court held that juries could consider
the effect of the defendant’s conduct on persons other than
the plaintiff for purposes of assessing the reprehensibility of
that conduct, but may not impose punitive damages to punish
the defendant for harms to non-parties. See 538 U.S. at 422-
423. This distinction is not new in the law, but in fact is ap-
plied by courts every day in implementing recidivism stat-
utes. See, e.g., Nichols v. United States, 511 U.S. 738, 747
(1994) (repeat-offender laws “penalize only the last offense
committed by the defendant”).
The Oregon Supreme Court did not understand the dis-
tinction between punishing the defendants for harm to non-
parties and considering such harm for purposes of assessing
reprehensibility. The court stated that “[i]t is unclear to us
how a jury could ‘consider’ harms to others, yet withhold
that consideration from the punishment calculus. If a jury
cannot punish for the conduct, then it is difficult to see why it
may consider it at all.” App., infra, 18a n.3.
The distinction between gauging reprehensibility and im-
posing punishment, however, is central to this Court’s puni-
tive damages jurisprudence. It is a critical protection against
duplicative punishment. The Court made clear in State Farm
that a defendant may be punished only for the harm to the
plaintiff before the court — and not for harms that may have
been suffered by non-parties. The Oregon Supreme Court's
contrary position is identical to the Utah Supreme Court’s
rationale for upholding the $145 million punitive award that
this Court found grossly excessive in State Farm. See 53%
U.S. at 423 (quoting Utah Supreme Court’s statement that
“fe]ven if the harm to the Campbells can be appropriately
characterized as minimal, the trial court’s assessment of the
situation is on target: ‘The harm is minor to the individual
17
399
but massive in the aggregate’). This Court expressly re-
jected the aggregate approach to assessing punitive damages,
explaining:
Due process does not permit courts, in the calculation of
punitive damages, to adjudicate the merits of other par-
ties’ hypothetical claims against a defendant under the
guise of the reprehensibility analysis. Punishment on
these bases creates the possibility of multiple punitive
damages awards for the same conduct; for in the usual
case nonparties are not bound by the judgment some
other plaintiff obtains.
‘Ibid.
At the same time, the Court in State Farm explained that,
under certain circumstances, evidence of a defendant’s simi-
lar wrongs might nevertheless be admissible to assist the jury
in assessing the degree of reprehensibility of the defendant’s
conduct. /d. at 422. Due process allows a range of permissi-
ble punishments in any given case — a range that is generally
limited by the ratio guidepost. According to this Court, in
most cases, the maximum allowable penalty will run from
zero to nine times the amount of compensatory damages (de-
pending upon the reprehensibility of the defendant’s miscon-
duct, the size of the compensatory award, and other factors).
Id. at 423-425. In determining where within the permissible
range a punitive damages award should fall, juries can ap-
propriately take into account whether the specific conduct
that injured the plaintiff is more blameworthy because it also
endangered others. And in deciding what the outer limit ts in -
a particular case, a reviewing court too can weigh the charac-
ter of the defendant’s conduct, including the magnitude of the
harms to which it exposed the public. However, both jury
18
and court may punish the defendant only for the harm that its
misconduct inflicted on the plaintiff in the case before it.°
While the court below claimed to be baffled by this dis-
tinction, it is commonplace in other areas of the law. For ex-
ample, evidence of similar wrongs in punitive damages cases
plays a role akin to the role of other uncharged criminal con-
duct in sentencing. A defendant’s entire course of conduct
may be relevant in determining where, within a range of po-
tential sentences, the penalty for the particular conviction
should fall. But the defendant cannot be punished for past or
contemporaneous uncharged offenses, or indeed for anything
other than the offense of conviction. See, e.g., United States
v. Watts, 519 U.S. 148, 154 (1997) (“sentencing enhance-
ments do not punish a defendant for crimes of which he was
not convicted, but rather increase his sentence because of the
manner in which he committed the crime of conviction”).’
° The Court drew a similar distinction in BMW when addressing
the role of evidence of conduct affecting individuals outside of the
forum state. See 517 U.S. at 574 n.21 (“Of course, the fact that the
Alabama Supreme Court correctly concluded that it was error for
the jury to use the number of sales in other States as a multiplier in
computing the amount of its punitive sanction does not mean that
evidence describing out-of-state transactions is irrelevant in a case
of this kind. To the contrary, * * * such evidence may be relevant
to the determination of the degree of reprehensibility of the defen-
dant’s conduct.”’).
” See also Witte v. United States, 515 U.S. 389, 401-403 (1995)
(“[C]onsideration of information about the defendant’s character
and conduct at sentencing does not result in ‘punishment’ for any
offense other than the one of which the defendant was convicted.”
Rather, the defendant is “punished only for the fact that the present
offense was carried out in a manner that warrants increased pun-
ishment * * *.”) (emphasis in original); Johnson v. Ford Motor
Co., 113 P.3d 82, 92 n.6 (2005) (“An enhanced punishment for
recidivism does not directly punish the earlier offense; it is, rather,
a stiffened penalty for the last crime, which is considered to be an
19
By the same token, the degree of wantonness reflected in the
defendant’s conduct may warrant an enhanced penalty for
that conduct, but that is fundamentally different from punish-
ing the defendant for harms to other people. The former
weighs the degree of reprehensibility of a defendant’s con-
duct; the latter runs a significant risk of “double count[ing]
by including in the punitive damages award some of the com-
pensatory, or punitive, damages that subsequent plaintiffs
would also recover.” BMW, 517 U.S. at 593 (Breyer, J., con-
curring).
The Oregon Supreme Court’s ruling not only is contrary
to State Farm, it also conflicts with the holdings of the Cali-
fornia Supreme Court and the Eighth Circuit. In Johnson v.
Ford Motor Co., 113 P.3d 82 (Cal. 2005), the California Su-
preme Court ruled that in an individual action, punitive dam-
ages cannot be used to punish a defendant for alleged harm to
non-parties because such an award would allow the individ-
ual plaintiff to recover without ever proving the specifics of
those “hypothetical claims.” /d. at 95. As the California Su-
preme Court explained in Johnson, the jury, and a reviewing
court, may consider “[t]he scale and profitability of a course
of wrongful conduct” in assessing reprehensibility, but only
within the framework established by the other two guide-
posts; the defendant cannot be punished for harms to anyone
other than the plaintiff before the court. /d. at 93. Similarly,
the Eighth Circuit has held that “{p]unishing systematic
abuses by a punitive damages award in a case brought by an
individual plaintiff * * * deprives the defendant of the safe-
guards against duplicative punishment that inhere in the class
action procedure.” Williams v. ConAgra Poultry Co., 378
F.3d 790, 797 (8th Cir. 2004).
aggravated offense because a repetitive one.”) (quoting Gryger v.
Burke, 334 U.S. 728, 732 (1948)) (internal quotation marks omit-
ted).
20
The issue of how to deal with harm to non-parties has en-
gendered confusion among other courts as well. Compare,
e.g., University Med. Assoc. of the Med. Univ. of South Caro-
lina vy. UNUMProvident Corp., 335 F. Supp. 2d 702, 711
(D.S.C. 2004) (relying on subsequent wrongful conduct to
enhance punitive award because such conduct “would result
in precisely the type of repetitive harm contemplated in State
Farm as ripe for larger punitive damage awards”) with Gober
v. Ralph's Grocery Co., 127 Cal. App. 4th 204, 223 (Cal. Ct.
App. Mar. 5, 2006) (refusing to consider defendant’s subse-
quent wrongful conduct as evidence of recidivism or in com-
parable penalties analysis because the victims of that conduct
could sue in their own right) and Wohlwend v. Edwards, 796
N.E.2d 781, 783 (Ind. Ct. App. 2005) (trial court erred in
admitting evidence of subsequent wrongful conduct because
relevance of that evidence was substantially outweighed by
the danger that the jury would use it to punish defendant for
his subsequent conduct rather than for the act that gave rise
to plaintiffs actual damages). This Court’s guidance is
plainly needed.
B. The Oregon Supreme Court’s Holding Will Have
Significant Negative Consequences If Permitted
To Stand.
The Oregon Supreme Court’s determination that the Con-
stitution permits a jury in one case to punish for injuries pre-
sumed to have been suffered by non-parties will have
substantial, negative repercussions if not corrected. It sub-
jects defendants to all the risks of a class action, while afford-
ing them none of the safeguards required by due process.® It
* See, e.g., Thomas B. Colby, Beyond the Multiple Punishment
Problem. Punitive Damages as Punishment for Individual, Private
Wrongs 87 MINN. L. REV. 583, 654-656 (2003) (“Because punitive
damages are properly recoverable for each individual injury only if
ail of the elements of the underlying cause of action are present
and there are no affirmative defenses, the defendant must be per-
21
creates a grave risk of excessive, multiple punishment.’ It
also works as a one-way ratchet that guarantees that corpo-
rate defendants will continue to be exposed to the risk of
massive penalties for a course of conduct no matter how
many times they are exonerated by courts and juries. See
Johnson, 113 P.3d at 94-95 (imposing punitive damages for
harms to others- would “present a problem of ‘successive
prosecution’ in which a defendant that loses a single case
would also lose the benefit of all previous victories against
the same claim of misconduct”). Indeed, the Oregon Su-
preme Court’s approach threatens to turn every case into a
“bet-the-company” event, thereby distorting the legal system
by creating inordinate pressure to settle even weak cases.'°
In addition, a defendant in an individual case cannot rea-
sonably be expected to fend off allegations of misconduct
affecting individuals who are not before the court. This case
mitted to contest causation and other elements of the alleged tort
On an individual basis with respect to each victim and to raise all
affirmative defenses that it might have against particular vic-
tims.”’).
* See Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832, 839-
840 (2d Cir. 1967) (Friendly, J.) (describing multiple-punishment
problem).
'° See, e.g., In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1298
(7th Cir. 1995) (observing that aggregating the claims of multiple
alleged victims in a single case can place a defendant that has won
the lion’s share of individual cases “under intense pressure to set-
tle” rather than “roll these dice” and risk potentially bankrupting
liability); Castano v. Am. Tobacco Co. 84 F.3d 734, 746 (Sth Cir.
1996) (“[a]ggregation of claims * * * makes it more likely that a
defendant will be found liable and results in significantly higher
damage awards,” which in turn “creates insurmountable pressure
on defendants to settle” because the prospect of “an all-or-nothing
verdict presents too high a risk, even when the probability of an
adverse judgment is low”).
22
perfectly illustrates the problem. The record here contains no
evidence whatsoever regarding the extent to which other
smokers were induced by any Philip Morris misconduct to
begin or continue smoking. Yet both the arguments of coun-
sel and the opinions of the Oregon courts rested on the facile
assumption that Philip Morris could properly be punished for
the injuries of everyone in Oregon who became ill as a result
of smoking its cigarettes. That assumption is indefensible: It
is entirely lawful to sell cigarettes, notwithstanding the
known dangers to health; and people who smoke knowin ng
the risks have no claim to have been unlawfully injured.’
The position of the courts below not only invites, it ulti-
mately rests on, impermissible speculation about the circum-
stances of all other potential “victims” as to whom there is no
evidence one way or another.
There thus are important practical reasons, in addition to
the conflicts with decisions of this and other courts, to grant
review on this issue. This Court should do so and should re re-
verse the decision below.
Ill. THE OREGON SUPREME COURT’S USE OF A
SUFFICIENCY-OF-THE-EVIDENCE STANDARD
IN ASSESSING THE CONSTITUTIONALITY OF
A PUNITIVE DAMAGES AWARD IS CONTRARY
TO THIS COURT’S PRECEDENTS AND CON-
FLICTS WITH A DECISION OF THE CALIFOR-
NIA SUPREME COURT.
This case raises a third critical issue that arises in virtu-
ally every punitive damages appeal and is the subject of a
split of authority: whether, when reviewing a punitive award
for excessiveness, a court is permitted to assume that the jury
decided all disputed facts in favor of the plaintiff. This is a
threshold question that arises whenever an appellate court 1s
'' For that reason (among others), most of the juries that have
heard cases against Philip Morris have found for the defense.
23
tasked with evaluating an excessiveness challenge to a puni-
tive award but lacks the benefit of specific fact-findings by
the jury or the trial court.
In Cooper Industries, Inc. v. Leatherman Tool Group,
532 U.S. 424 (2001), the Court held that appellate courts
must conduct a de novo review of trial courts’ application of
the three BMW excessiveness guideposts. 532 U.S. at 436.
The Court reiterated that mandate in State Farm, observing
that “[e]xacting appellate review ensures that an award of
punitive damages is based upon an application of law, rather
than a decisionmaker’s caprice.” 538 U.S. at 418 (internal
quotation marks omitted). In neither Cooper Industries nor
State Farm, however, did the Court instruct lower courts how
to implement this de novo review when the jury has not ren-
dered any specific factual findings. This Court should re-
solve the issue once and for all.
A. The Lower Courts Are Divided As To The
. Proper Implementation Of De Novo Review.
In Simon v. San Paolo U.S. Holding Co., 113 P.3d 63, 70
(Cal. 2005), the California Supreme Court ruled that, when
the jury has made “no * * * express finding” on a particular
issue bearing on application of the BMW guideposts, an ap-
pellate court should not simply assume that all relevant facts
were resolved by the jury in the plaintiff's favor. It explained
that to infer a factual finding unfavorable to the defendant
“from the size of the award would be inconsistent with de
novo review, for the award’s size would thereby indirectly
justify itself.” /bid. Accordingly, “{wJhile [courts must] de-
fer to express jury findings Supported by the evidence, in the
absence of an express finding on the question [they] must
independently decide” whether the fact at issue has been es-
tablished. /d. at 72.’
'? See also Wolf v. Wolf, 690 N.W.2d 887, 894 (lowa 2005) (as-
sessing reprehensibility on the basis of a “de novo review of the
24
Many other courts, however, including the Oregon Su-
preme Court, have taken a fundamentally different position,
choosing instead to apply a sufficiency-of-the-evidence stan-
dard. Under traditional sufficiency analysis, reviewing
courts assume the existence of any fact necessary to support
liability so long as the record contains “substantial evidence”
from which a reasonable jury could have made the required
finding. The Oregon Supreme Court adopted this approach
for assessing punitive damages awards in Parrott v. Carr
Chevrolet, Inc., 17 P.3d. 473, 485 (Or. 2001), a decision that
predates Cooper Industries.
Drawing all inferences in favor of the prevailing party
makes perfect sense in addressing evidentiary sufficiency
questions. However, the rationale for the practice simply
does not apply to the fundamentally different context of ex-
cessiveness analysis. When the jury renders a liability ver-
dict, the reviewing court shauld presume that the jury made
all factual findings necessary to uphold that verdict, provided
sufficient evidence exists for those findings in the record. By
contrast, when the jury awards punitive damages, no particu-
lar factual findings are “necessary” to its assessment of the
amount. See Cooper Industries, 532 U.S. at 437 (the amount
of punitive damages that wil! punish and deter is “not really a
‘fact’ tried by the jury”). It is erroneous to infer from the size
of the award findings of fact that the jury did not make —
thereby, in the words of the California Supreme Court, allow-
ing the punitive award to “indirectly justify itself” (Simon,
113 P.3d at 70).
The decision below is emblematic of this circular ap-
proach. The Oregon Supreme Court repeatedly emphasized
that, in performing its excessiveness review, it would “con-
record’); Park v. Mobil Oil Guam, Inc., 2004 WL 2595897, at
*13-14 (Guam Nov. 16, 2004) (evaluating the record de novo in
excessiveness analysis); Aken v. Plains Elec. Generation &
Transmission Co-Op, Inc., 49 P.3d 662, 668 (N.M. 2002).
25
strue all facts in favor of plaintiff, the party in whose favor
the jury ruled.”"’ App., infra, 23a; see also id. at 2a; ibid."*
The Oregon Supreme Court is not alone in deferring to
the plaintiff's version of events in assessing the degree of
reprehensibility of the punishable conduct. See, e.g., Stogs-
dill v. Healthmark, L.L.C., 377 F.3d 827, 831 (8th Cir. 2004)
(“viewing the evidence in the light most favorable to the
plaintiffs” as part of state and federal excessiveness review);
Hangarter v. Provident Life & Accident Ins. Co., 373 F.3d
998, 1014 (9th Cir. 2004) (same); Staskal v. Symons Corp.,
706 N.W.2d 311, 333 (Wis. App. 2005) (same); Union Pac.
R.R. Co. v. Barber, 149 $.W.3d 325, 346 (Ark.) (same), cert.
denied, 543 U.S. 940 (2004); Bogle v. McClure, 332 F.3d
1347, 1361 (11th Cir. 2003) (reprehensibility analysis rested
on what “a reasonable jury could have concluded from the
evidence”); Chu v. Hong, 2005 WL 2692464, at *6 (Tex.
'? This characterization of the jury verdict is itself debatable. The
jury awarded $79.5 million in punitive damages on plaintiff's
fraud claim but it unanimously chose not to award punitive dam-
ages on plaintiff's product-design-based claims. Although defen-
dant “prevailed” on the latter claim, the Oregon Supreme Court
nevertheless viewed evidence of the defendant’s product-design
conduct in the light most favorable to plaintiff in order to justify
the punitive award. See, e.g., App., infra, 6a; id. at 8a.
'* The opinion is replete with instances in which the court stated
that the jury “could have found” for plaintiff on a hotly disputed
issue, rather than making an independent determination on that
issue. See, e.g., App., infra, Sa; id. at 6a; id. at 7a.
The Oregon Supreme Court's statement that “the parties do not
dispute the way that the Court of Appeals framed the facts” (App.,
infra, 2a) is flatly inaccurate. Philip Morris expressly stated in its
brief that it “adopt[ed] and incorporate[d] by reference the State-
ment of Facts in its opening brief in the Court of Appeals,” which
sharply contested the version of the record put forth by plaintiff
and ultimately adopted by the Court of Appeals.
26
App. Oct. 20, 2005) (“[A] reviewing court must assume that
the factfinder resolved disputed facts in favor of its finding if
a reasonable factfinder could do so.”’).
B. The Circular Approach Employed By The Court
Below Cannot Be Squared With This Court’s
Precedents.
The practice of lower courts simply to assume from the
size of the punitive award that the jury has found the defen-
dant’s conduct to be highly reprehensible, and then to assume
that the jury supported that finding with factual conclusions
that the jury nowhere expressed, cannot be reconciled with
this Court’s punitive damages jurisprudence.
In BMW, for example, the plaintiff's theory was that
“BMW was palming off damaged, inferior-quality goods as
new and undamaged, so that BMW could pocket 10 percent
more than the true value of each car.” Brief of Respondent at
17, BMW of N. Am., Inc. v. Gore, No. 94-896, 1995 WL
330613, at *17 (May 30, 1995). Had a sufficiency-of-the-
evidence standard been applicable, the Court would have had
to accept this inference as one that the jury reasonably could
have reached. Instead, the Court reviewed the record for it-
self and, in the course of concluding that the case implicated
“none of the aggravating factors associated with particularly
reprehensible conduct,” found “no evidence that BMW acted
in bad fa:th when it sought to establish the appropriate line
between presumptively minor damage and damage requiring
disclosure to purchasers.” 517 U.S. at 576, 579.
In Cooper Industries, the Court observed that “the level
of punitive damages is not really a ‘fact’ ‘tried’ by the jury,”
but instead “is an expression of (the jury’s] moral condemna-
tion.” 532 U.S. at 432, 437 (internal quotation marks omit-
ted). The Court accordingly held that appellate review of a
trial court’s application of the BMW guideposts is de novo.
In the course of so holding, it indicated that reviewing courts
must accept “specific findings of fact” by the jury (id. at 439
27
n.12 (emphasis added)), thereby implying that, in the absence
of such findings, reviewing courts must resolve for them-
selves factual issues bearing on the application of the three
guideposts. The Court then did just that, expressly rejecting
the plaintiff's assertion that, for purposes of the second
guidepost, the potential harm was $3 million. /d. at 441-442.
And in State Farm, after reiterating the importance of
“fe]xacting appellate review” (538 U.S. at 418), the Court
gave no deference to findings that the jury could have made
but did not necessarily make, instead concluding from its
own review of the record that there was “scant evidence of
repeated misconduct of the sort that injured [the plaintiffs].”
Id. at 423. The fact that the jury had seen fit to award the
plaintiff $145 million in punitive damages did not persuade
this Court that State Farm’s conduct had in fact been highly
reprehensible.
The present case demonstrates that the concern about
phantom factual determinations is not hypothetical. Philip
Morris’s net worth was a focal point of the punitive damages
phase of the trial. The trial court instructed the jury — in reli-
ance on the complaint’s ad damnum - that it could award up
to $100 million in punitive damages. It is simply impossible
to tell from the bare fact of the jury’s $79.5 million verdict
which if any of the inferences urged by plaintiff was accepted
by the jury. The jury may well have believed, especially on
the record before it, that Philip Morris had not done most of
what the plaintiff had accused it of doing (see note 13, sw-
pra), but that $79.5 million was an appropriate award in view
of the plaintiff's exhortation to exact punishment for every
Oregon smoker who ever has or ever will become ill from
smoking, as well as Philip Morris’s substantial financial re-
sources. Indeed, the one thing that we do know is that the
jury decided that it did not need to award the full amount that
the plaintiff had requested.
28
The bottom line is that when - as here — the jury has not
been asked to respond to special interrogatories bearing on
the degree of reprehensibility of the defendant’s conduct and
other considerations relevant to setting the amount of puni-
tive damages, reviewing courts may not simply assume that
every relevant factual dispute was resolved against the de-
fendant and indulge every inference urged by the plaintiff.
Instead, reviewing courts must independently assess the dis-
puted factual issues before applying the three BMW guide-
posts.
This is, as previously noted, an issue that arises in every
punitive damages appeal ~ as well as one on which there is a
clear split of authority. This Court should grant review fo
address this highly important, frequently recurring issue.
CONCLUSION
The petition for a writ of certiorari should be granted.
Respectfully submitted.
KENNETH S. GELLER ANDREW L. FREY
EVAN M. TAGER Counsel of Record
Mayer, Brown, Rowe & ANDREW H. SCHAPIRO
Maw LLP LAUREN R. GOLDMAN
1909 K Street, NW Mayer, Brown, Rowe & Maw
Washington, DC 20006 LLP
(202) 263-3000 1675 Broadway
New York, NY 10019
WILLIAM F. GARY (212) 506-2500
SHARON A. RUDNICK
Harrang Long Gary
Rudnick
360 East 10th Avenue
Eugene, OR 97401
(541) 485-0220
MARCH 2006
APPENDIX
APPENDIX A
OREGON SUPREME COURT OPINION
340 Ore. 35, 127 P.3d 1165
Supreme Court of Oregon.
MAYOLA WILLIAMS, PERSONAL REPRESENTATIVE
OF THE ESTATE OF JESSE D. WILLIAMS,
Deceased, Respondent on Review,
V.
PHILIP MORRIS INCORPORATED,
NKA PHILIP Morris USA INC.,
Petitioner on Review,
and
RJ REYNOLDS TOBACCO COMPANY, FRED
MEYER, INC., AND PHILIP MORRIS COMPANIES, INC.,
Defendants.
(CC 9705-03957; CA A106791; SC $51805).
Argued and Submitted May 10, 2005.
Decided Feb. 2, 2006.
This tort case arose out of the death of Jesse Williams, a
smoker, who died of lung cancer. Plaintiff Mayola Williams
is the widow of Jesse Williams and personal representative of
his estate. Plaintiff sued defendant Philip Morris Inc. for,
inter alia, negligence and fraud, asserting a causal connection
between Jesse Williams’s smoking habit and his death. A
jury found for plaintiff on both causes of action. The jury
awarded both economic and noneconomic damages; it also
awarded plaintiff punitive damages of $79.5 million. The
issue before us is whether that punitive damage award vio-
lates the Due Process Clause of the Fourteenth Amendment
to the United States Constitution. The Court of Appeals con-
cluded that it did not. Williams v. Philip Morris Inc., 182
Or.App. 44, 48 P.3d 824 (2002) (Williams 1), adh'd to on re-
2a
cons., 183 Or.App. 192, 51 P.3d 670, rev. den., 335 Or. 142,
61 P.3d 938 (2002), vac'd and rem'd, 540 U.S. 801, 124
S.Ct. 56, 157 L.Ed.2d 12 (2003), on remand, 193 Or.App.
527, 92 P.3d 126 (2004) (Williams II). For the reasons that
follow, we agree.
I. FACTS
Because the jury ruled in favor of plaintiff, we state all
facts in the light most favorable to plaintiff. See Parrott v.
Carr Chevrolet, Inc., 331 Or. 537, 556, 17 P.3d 473 (2001)
(“[Wjhen reviewing a punitive damages award for exces-
siveness, the reviewing court must view the facts in the light
most favorable to the jury’s verdict if there is evidence in the
record to support them.”). Because the parties do not dispute
the way that the Court of Appeals framed the facts, we quote
extensively from that court’s opinions.
Jesse Williams was a lifelong smoker who eventually
died of lung cancer. The cancer was caused by Williams’s
smoking.
“From the early 1950s until his death from a smoking-
related lung cancer in 1997, Williams smoked [Philip
Morris]’s cigarettes, primarily its Marlboro brand, even-
tually developing a habit of three packs a day. At that
point, he spent half his waking hours smoking and was
highly addicted to tobacco, both physiologically and psy-
chologically. Although, at the urging of his wife and
children, he made several attempts to stop smoking, each
time he failed, in part because of his addiction. Despite
the increasing amount of information that linked smoking
to health problems during that 40-year period, Williams
resisted accepting or attempting to act on it. When his
family told him that cigarettes were dangerous to his
health, he replied that the cigarette companies would not
sell them if they were as dangerous as his family claimed.
When one of his sons tned to get him to read articles
about the dangers of smoking, he responded by finding
3a
published assertions that cigarette smoking was not dan-
gerous. However, when Williams learned that he had in-
operable lung cancer he felt betrayed, stating ‘those darn
Cigarette people finally did it. They were lying all the
time.’ He died about six months after his diagnosis.”
Williams II, 193 Or.App. at 530-31, 92 P.3d 126.
Plaintiff based her fraud claim against Philip Morris on a
40-year publicity campaign by Philip Morris and the tobacco
industry to undercut published concerns about the dangers of
smoking. /d. at 531, 92 P.3d 126. Philip Morris and the to-
bacco industry had known for most of those 40 years, if not
all of them, that smoking was dangerous. /d. Nevertheless,
they tried to create in the public mind the impression that
there were legitimate reasons to doubt the danger of smoking.
Id. Philip Morris and the tobacco industry did so to give
smokers a reason to keep smoking (or, perhaps more accu-
rately, to undermine one of the main incentives for smokers
to stop smoking). /d.
The Court of Appeals summarized the evidence regarding
the campaign as follows:
“The industry established its strategy and began develop-
ing its public image in response to a decline in cigarette
sales in 1953 that was the apparent result of studies that
showed that cigarette tar could cause cancer in mice and
that established the existence of statistical correlations
between smoking and lung cancer. The first public joint
effort by the industry occurred in January 1954, when
[Philip Morris] and other tobacco companies published a
joint statement in 448 newspapers throughout the coun-
try. In that statement, among other things, they an-
nounced the creation of the Tobacco Industry Research
Committee (TIRC), one of whose stated goals was to
conduct research into ‘all phases of tobacco use and
health.” In 1964, the year of the Surgeon General’s report
on the hazard of smoking to health, the industry divided
4a
the TIRC into two parts, one of which, the Council on
Tobacco Research (CTR), continued to support scientific
research. The other part, named the Tobacco Institute,
focused on public relations and lobbying.
“Between 1954 and the 1990s, those organizations devel-
oped and promoted an extensive campaign to counter the
effects of negative scientific information on cigarette
sales. The individual tobacco companies, including
[Philip Morris], were part of the organizations and acted
im cooperation with them. At first, the industry publicly
denied that there was a problem; for example, in the
1950s and early 1960s, [Philip Morris]’s officials told the
public that [Philip Morris] would ‘stop business tomor-
row’ if it believed that its products were harmful. For
most of that period, however, the industry did not attempt
to refute the scientific information directly; rather, it tried
to find ways to create doubts about it. The industry’s
goal was to create the impression that scientists disagreed
about whether cigarette smoking was dangerous, that the
industry was vigorously conducting research into the is-
sue, and that a definitive answer would not be possible
until that research was complete. As one of [Philip Mor-
ris}'s vice-presidents explained in an internal memo, the
purpose was to give smokers a psychological crutch and a
self-rationale that would encourage them to continue
smoking. A Tobacco Institute internal memorandum
similarly described the industry’s purpose to provide
smokers ‘ready-made credible alternatives’ to the evi-
dence of the dangers of smoking.
“Both the industry as a whole and [Philip Morris] acted
consistently with those purposes. Among other things,
they avoided developing contradictory information. De-
spite the industry’s nominal emphasis on the need for fur-
ther research, the CTR designed its research program to
avoid studying the biological effects of tobacco use, the
very question that, according to the industry’s statements,
Sa
required more research. To the extent that [Philip Mor-
ris] conducted research on that issue independently of the
CTR, it did so in a European laboratory that it purchased,
and it was careful to avoid preserving records of the re-
sults in this country. [Philip Morris]’s director of re-
search in the late 1970s and 1980s explained to a
subordinate that his job was to’ attack outside research
that was inconsistent with the industry’s position by cast-
ing doubt on it. The jury could also have found that there
was a ‘gentleman’s agreement’ not to conduct research
beyond what the CTR did. The primary purpose of the
CTR’s research was to provide expert witnesses for con-
gressional hearings and lawsuits, not to determine the re-
lationship between smoking and disease. The CTR’s
lawyers, rather than its scientists, established its research
priorities; developing accurate information on the bio-
logical effects of smoking was not one of the lawyers’
priorities.
“The jury could have found that, throughout this period
of time, (Philip Morris] and the other tobacco companies
actually had little doubt that cigarette smoking was caus-
ally related to a number of diseases. In 1958, three Brit-
ish researchers found that the American tobacco scientists
with whom they spoke believed that cigarette smoke
could cause cancer. In 1961, [Philip Morris]’s director of
research stated that cigarette smoke contained so many
carcinogens that the best that the company could do was
to reduce their amounts. Internal company memoranda
agreed and suggested that it could not admit those facts
publicly because of adverse legal consequences. At least
by the 1970s, there was absolutely no scientific basis for
denying the connection between cigarette smoking and
cancer and other diseases. However, [Philip Morris] con-
tinued to assert that the hazard of cigarette smoking to
health was uncertain when it actually knew that there was
no legitimate controversy about that subject.
6a
“The jury could also have found that [Philip Morris] rec-
ognized both that nicotine was addictive and that its ad-
dictive effect was the primary reason that people
continued to smoke. [Philip Morris] spent considerable
effort discovering ways to deliver the optimal dose of
nicotine in each cigarette without actually adding nicotine
to its product. It also concluded that, because of nico-
tine’s addictive effect, smoking cessation programs and
technologies would be unlikely to work without signifi-
cant behavioral therapy. In its view, providing smokers a
reason to believe that there were serious doubts that to-
bacco was harmful would discourage smokers from mak-
ing the effort that was necessary to quit smoking.
“Also, the jury could have found that [Philip Morns] and
the industry used a large number of methods to create the
public impression of a legitimate controversy, despite the
lack of supporting scientific evidence. They issued press
releases, influenced the content of apparently neutral arti-
cles, cultivated opinion leaders, attempted to use their ad-
vertising power to get favorable treatment from the print
media, and appeared on commercial and public television
to put forth that message. Those individuals who spoke
for [Philip Morris} and the industry emphasized that the
evidence concerning the dangers of smoking was primar-
ily based on statistical relationships, and they argued that
there was no proof that a specific component of tobacco
smoke caused a specific disease. Even after the early
1990s, when the industry finally had to admit that to-
bacco could be a risk factor associated with a number of
diseases, it argued that there was a long chain of interven-
ing events before a disease actually arose from cigarette
smoking. The industry, including [Philip Morris], also
continued to deny that cigarette smoking was addictive
and publicized that message throughout the country, in-
cluding Oregon.” :
Id. at 531-34, 92 P.3d 126.
7a
Philip Morris and the tobacco industry intended to de-
ceive smokers like Williams, and it did in fact deceive him.
“As a smoker, Williams was one of the intended recipi-
ents of the industry’s message, and, in fact, the jury could
have found that he received its message and relied on its
representations. [The jury further could have found that
t]hose representations affected his decision to continue
smoking and not to make greater efforts to overcome his
addiction. When his family urged him to stop smoking,
he responded that he had learned from watching televi-
sion that smoking did not cause lung cancer. After his
diagnosis, he blamed the ‘cigarette people’ for betraying
him—which, given his exclusive use of [Philip Morris]’s
products, must at least have included [Philip Morris].
The jury could have found on the evidence before it that,
as a result of [Philip Morris]’s representations, Williams
suffered his fatal lung cancer. The jury also could have
found that Williams was one of thousands of Oregonians
who received [Philip Morris]’s message, acted on it, and,
like him, suffered cancer or other diseases as a result.”
Id. at 534, 92 P.3d 126.
Furthermore, Philip Morris also deceived other smokers
in Oregon:
“Although a tobacco industry survey indicated that 85
percent of smokers wished that they had never started
smoking, [Philip Morris] concealed information that the
addictive effects of nicotine made it difficult for them to
stop without significant assistance. The fraudulent
statements from [Philip Morris] and the rest of the indus-
try reinforced those addictive effects by giving smokers a
reason not to make the necessary effort to break the ad-
diction. The jury could [have found] on this record that
[Philip Morris]’s public relations campaign had precisely
the effect that [Philip Morris] intended it to have and that
it affected large numbers of tobacco consumers in Oregon
8a
other than Williams. It is also reasonably inferable from
the evidence that [Philip Morris]’s products, used as
[Philip Morris] intended them to be used, caused a sig-
nificant number of deaths each year in Oregon during the
pertinent time period, together with other serious but non-
fatal health problems with their attendant economic con-
sequences.”
Williams I, \82 Or.App. at 66-67, 48 P.3d 824.'
' These last statements reflect the one real disagreement between
the parties over the record. Philip Morris claims repeatedly that
the record does not show that its fraud injured any party other than
Williams. However, its opening brief indicates that Philip Morris
does not contest how the Court of Appeals summarized the record.
Rather, it argues that plaintiff did not put on any specific evidence
to show that any particular person (other than Williams) continued
smoking because of the fraud.
“There is nothing in the record that supports the Court of Ap-
peals’ assumption that any Oregon smoker other than Wi!!iams
smoked and sustained injuries in reliance on the alleged fraud.
At most, plaintiff introduced evidence that smoking per se in-
jured non-parties. However, the mere act of selling cigarettes
is lawful conduct.- Plaintiff never connected the injuries of
non-parties to the fraud alleged in this case.”
(Emphasis in original.)
In essence, Philip Morris is claiming that one cannot reasona-
bly infer that anyone was actually fooled by its 40-year advertising
campaign directed to thousands of Oregonians. Yet even the sim-
plest assessment of human nature, viewed in light of the design-
edly addictive properties of cigarettes, tells any reasonable person
that those lies would have been very persuasive. We think that
such an appreciation of human nature fairly may be attributed to
jurors, including the ones who heard this case. Moreover, Philip
Morris’s own conduct belies its protestations. As a for-profit cor-
poration, it would not spend over 40 years of time, effort, and
money to deceive people, unless it thought it was succeeding.
9a
Il. PROCEDURAL POSTURE
At trial, the jury found in favor of plaintiff on both the
negligence and fraud claims, and it awarded compensatory
damages of $821,485.50—$21,485.80 in economic damages
and $800,000 in noneconomic damages.
As to the negligence claim, the jury found Williams 50%
responsible for the damages. The jury declined to award any
punitive damages respecting that claim. As to the fraud
claim, however, the jury awarded punitive damages of $79.5
million.
The trial court significantly reduced the amounts awarded
to the plaintiff. The court “capped” the noneconomic dam-
ages at $500,000 pursuant to former ORS 18.560 (1999), re-
numbered as ORS 31.710 (2003), thereby producing a total
compensatory damage award of $521,485.80.’ The court
also reduced the punitive damage award. The court did con-
clude that $79.5 million “was within the range a rational ju-
ror could assess based on the record as a whole and applying
the Oregon common law and statutory factors.” Neverthe-
less, the court concluded, the $79.5 million punitive damage
award “was excessive under federal standards.” The tral
court therefore reduced the punitive damage award to $32
million.
Both plaintiff and Philip Morris appealed to the Court of
Appeals. In Williams I, the Court of Appeals reversed the
trial court on plaintiff's appeal and reinstated the $79.5 mil-
lion punitive damage award. 182 Or.App. at 72, 48 P.3d 824.
it affirmed on Philip Morris’s cross-appeal. /d. at 47, 48
P.3d 824. The court later adhered to its opinion on reconsid-
eration. Williams, 183 Or.App. at 197, 51 P.3d 670. This
court denied review. 335 Or. 142, 61 P.3d 938 (2002).
* There is no issue in this case as it comes before us respecting the
propriety of the trial court’s application of former ORS 18.560.
10a
The United States Supreme Court then granted certiorari,
vacated the Court of Appeals’ judgment, and remanded the
case to the Court of Appeals for that court to reconsider the
amount of the punitive damages award in light of State Farm
Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408, 123
S.Ct. 1513, 155 L.Ed.2d 585 (2003). Philip Morris USA Inc.
v. Williams, 540 U.S. 801, 124 S.Ct. 56, 157 L.Ed.2d 12
(2003). The Court of Appeals did so in Williams I], again
reversing on plaintiff's appeal and affirming on Philip Mor-
ris’s cross-appeal. We allowed review.
Ill. ISSUES ON REVIEW
On review, Philip Morris asks us to consider four issues,
which it states as follows:
“A. Is a defendant entitled to have the jury instructed that
any award of punitive damages must bear a reasonable
relationship to the harm caused to the plaintiff and that
punitive damages cannot be imposed for alleged harm to
non-parties?
“B. Are the punitive damages assessed in this case un-
constitutionally excessive in violation of the Due Process
Clause of the Fourteenth Amendment to the United States
Constitution?
“C. Must a plaintiff prove receipt of and reliance upon
the defendant’s allegedly fraudulent communications
when he or she claims that a defendant committed fraud
by communicating a false impression to the general pub-
lic through mass media?
“D. Does the Federal Cigarette Labeling and Advertising
Act, 15 USC §§ 1331 ef seg., preempt the ‘false impres-
sion’ theory relied upon by the Court of Appeals, which
is based in part upon a defendant’s failure to disclose in-
formation beyond that prescribed by the congressionally
mandated warnings?”
lla
We will not consider the third and fourth issues. This
court earlier declined review of all the issues decided in Wil-
liams I. The appeal remained alive only because of, and to
the extent that, the United States Supreme Court later di-
rected the Court of Appeals to reconsider its decision respect-
‘ing the amount of punitive damages in light of Campbell.
The Court of Appeals performed that limited function in Wil-
liams II, and we allowed review of that decision. We decline
to go beyond the Supreme Court’s mandate, and the Court of
Appeals’ opinion in Williams II, to consider issues that this
court previously determined were not review-worthy. See
ORAP 9.20(2) (this court’s opinion need not address every
question presented on review).
The Supreme Court’s decision in Campbell clearly relates
to the second issue presented by Philip Morris. Philip Morris
asserts that Campbell also relates to the first issue, regarding
jury instructions. Because of that, and because the Court of
Appeals addressed both issues in Williams I], we will con-
sider those issues here.
IV. DISCUSSION
A. Overview of State Farm v. Campbell
We begin by reviewing the United States Supreme
Court’s opinion in Campbell.
The punitive damage award at issue in Campbell arose
from an insured’s action against an insurer for bad faith,
fraud, and intentional infliction of emotional distress. 538
U.S. at 414, 123 S.Ct. 1513. Campbell, the insured, had
caused an automobile accident that killed one person and
permanently disabled another. /d. at 412-13, 123 S.Ct. 1513.
When Campbell was sued, Campbell’s insurer, State Farm,
chose to contest liability. /d. at 413, 123 S.Ct. 1513. It re-
fused settlement offers that were within policy limits and
took the case to trial despite the advice of one of its own in-
vestigators, in the process assuring Campbell and his wife
l2a
that they would face no personal liability. /d. When the jury
returned a verdict substantially above the policy limits, State
Farm initially refused to cover the excess, telling the Camp-
bells to put “for sale” signs on their property. Jd. State Farm
also refused to post a supersedeas bond to appeal the verdict.
Id.
In their action against State Farm, the Campbells intro-
duced evidence that State Farm’s decision to try the case was
part of a nationwide effort to limit payouts on insurance
claims. /d. at 415, 123 S.Ct. 1513. The evidence “concerned
State Farm’s business practices for over 20 years in numer-
ous States. Most of these practices bore no relation to third-
party automobile insurance claims, the type of claim underly-
ing the Campbells’ complaint against the company.” /d. The
jury awarded the Campbells $2.6 million in compensatory
damages and $145 million in punitive damages. /d. The tnal
court reduced the compensatory damages to $1 million and
the punitive damages to $25 million. /d. On appeal, the
Utah Supreme Court reinstated the $145 million punitive
damage award. Jd. The United States Supreme Court
granted certiorari. /d. at 416, 123 S.Ct. 1513.
The Court first noted that compensatory damages are in-
tended to compensate for a loss, while punitive damages “are
aimed at deterrence and retribution.” /d. However, the Court
noted, the Fourteenth Amendment’s Due Process Clause
prohibits imposing “grossly excessive or arbitrary punish-
ments” on a tortfeasor. /d. A person must have fair notice,
not just that the state will punish certain conduct, but also
how severely it will do so. Jd. at 417, 123 S.Ct. 1513.
The Court identified two risks peculiar to punitive dam-
ages. First, although punitive damage awards are similar to
criminal sanctions, defendants do not receive the procedural
protections required of criminal trials. /d. Second, vague jury
instructions can leave the jury with too much . iscretion in
choosing the amount of punitive damages, allowing it to ex-
13a
press preexisting biases or to rely too much on tangential or
inflammatory evidence. /d. at 417-18, 123 S.Ct. 1513. For
those reasons, the Court had directed “[e]xacting appellate
review” of a jury’s punitive damage award, considering three
“guideposts” identified in BMW of North America, Inc. v.
Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809
(1996):
“(1) the degree of reprehensibility of the defendant’s mis-
conduct; (2) the disparity between the actual or potential
harm suffered by the plaintiff and the punitive damages
award; and (3) the difference between the punitive dam-
ages awarded by the jury and the civil penalties author-
ized or imposed in comparable cases.”
Campbell, 538 U.S. at 418, 123 S.Ct. 1513.
The Court then applied those guideposts. The first
guidepost, the repr *hensibility of defendant’s conduct, repre-
sents “ ‘[t]he most .mportant indicium of the reasonableness
of a punitive damages award.’” /d. at 419, 123 S.Ct. 1513
(quoting Gore, 517 U.S. at 575, 116 S.Ct. 1589). In analyz-
ing reprehensibility, courts should consider whether
“the harm caused was physical as opposed to economic;
the tortious conduct evinced an indifference to or a reck-
less disregard of the health or safety of others; the target
of the conduct had financial vulnerability; the conduct in-
volved repeated actions or was an isolated incident; and
the harm was the result of intentional malice, trickery, or
deceit, or mere accident.”
Id. (citing Gore, 517 U.S. at 576-77, 116 S.Ct. 1589).
In analyzing that guidepost in Campbell, however, the
Court did not itself focus on those five considerations. In-
stead, 1t concentrated on how evidence of out-of-state con-
duct and dissimilar conduct had skewed the reprehensibility
analysis against State Farm. The state wrongly relied on
such conduct, the Court ruled, because a state cannot punish
14a
a defendant for its lawful conduct in another state, or for
conduct that “occurred outside [the state] to other persons.”
Id. at 421, 123 S.Ct. 1513. In Campbell, most of the out-of-
state conduct was lawful where it took place, and it was not
connected to the harm to the Campbells. /d. at 422, 123 S.Ct.
1513. Furthermore, the Court held, a state cannot punish a
defendant for “dissimilar acts”: ““A defendant should be pun-
ished for the conduct that harmed the plaintiff, not for being
an unsavory individual or business.” /d. at 423, 123 S.Ct.
1513. In sum, the Court held that, because the Campbells-
showed “no conduct by State Farm similar to that which
harmed them, the conduct that harmed them is the only con-
duct relevant to the reprehensibility analysis.” /d. at 424, 123
S.Ct. 1513.
The second Gore guidepost examines the ratio between
the punitive damage award and the actual or potential harm
to the plaintiff. Campbell, 538 U.S. at 424, 123 S.Ct. 1513.
The ratio, however, is no mechanical formula. /d. (“we have
been reluctant to identify concrete constitutional limits on the
ratio’), id. at 425, 123 S.Ct. 1513 (“[w]e decline again to im-
pose a bright-line ratio”); id. (“there are no rigid benchmarks
that a punitive damage award may not surpass’’).
That*said, the Court proceeded to give some guidance re-
garding the second guidepost. Twice in the past, the Court
noted, it had suggested that a punitive damage award more
than four times compensatory damages “might be close to the
line of constitutional impropriety.” /d. at 425, 123 S.Ct.
1513 (citing Gore, 517 U.S. at 581, 116 S.Ct. 1589, and Pa-
cific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1, 23-24,
111 S.Ct. 1032, 113 L.Ed.2d 1 (1991)). The Court also had
noted previously that, for 700 years, legislatures had author-
ized double, treble, or quadruple damages as a sanction.
Campbell, 538 U.S. at 425, 123 S.Ct. 1513 (citing Gore, 517
U.S. at 581 & n. 33, 116 S.Ct. 1589). The Court concluded
that, “in practice, few awards exceeding a single-digit ratio
between punitive and compensatory damages, to a significant
15a
degree, will satisfy due process.” 538 U.S. at 425, 123 S.Ct.
1513.
“Single-digit multipliers are more likely to comport with
due process, while still achieving the State’s goals of de-
terrence and retribution, than awards with ratios in [the]
range of 500 to 1, or, in this case, of 145 to 1.”
Jd. (citation omitted).
The Court did acknowledge, however, that even those
tentative ratios might be adjusted up or down. A greater ratio
might comport with due process if “ ‘a particularly egregious
act has resulted in only a small amount of economic dam-
ages,’” if “ ‘the injury is hard to detect,’ ” or if “ ‘the mone-
tary value of noneconomic harm might have been difficult to
determine.’” Jd. at 425, 123 S.Ct. 1513 (quoting Gore, 517
U.S. at 582, 116 S.Ct. 1589). With a “substantial” compen-
satory damage award, however, due process might require “‘a
lesser ratio, perhaps only equal to compensatory damages.”
Id. But “{t}he precise award * * * must be based upon the
facts and circumstances of the defendant’s conduct and the
harm to the plaintiff.” /d.
In applying the second Gore guidepost, the Court stated
that there is “a presumption against an award that has a 145-
to-1 ratio.” Jd. at 426, 123 S.Ct. 1513. The Campbells had
received a substantial compensatory damage award; they
were injured economically, not physically; and State Farm
paid the excess verdict before the Campbells sued them, so
their economic injuries were minor. /d. Additionally, the
outrage and humiliation that State Farm caused the Camp-
bells may have been considered twice—once in the compen-
satory damage award and again in the punitive damage
award. Id.
The Court also rejected several other factors that the Utah
Supreme Court had identified in support of the punitive dam-
age award. For example, the Utah Supreme Court had
l6a
pointed to State Farm’s wealth. The Court concluded that
wealth should not have been considered:
“While States enjoy considerable discretion in deducing
when punitive damages are warranted, each award must
comport with the principles set forth in Gore. * * * The
wealth of a defendant cannot justify an otherwise uncon-
stitutional punitive damages award. Gore, 517 U.S., at
585, 116 S.Ct. 1589 (‘The fact that BMW is a large cor-
poration rather than an impecunious individual does not
diminish its entitlement to fair notice of the demands that
the several States impose on the conduct of its business’);
see also id., at 591, 116 S.Ct. 1589 (Breyer, J., concur-
ring) (‘(Wealth] provides an open-ended basis for inflat-
ing awards when the defendant is wealthy ***. That
does not make its use unlawful or inappropriate; it simply
means that this factor cannot make up for the failure of
other factors, such as “reprehensibility,” to constrain sig-
nificantly an award that purports to punish a defendant’s
conduct’).”
Id. at 427-28, 123 S.Ct. 1513.
The third guidepost compares the punitive damage award
to comparable civil and criminal penalties. /d. at 428, 123
S.Ct. 1513. Criminal penalties, however, do not help as
much in determining “the dollar amount of the award”:
Id.
“Great care must be taken to avoid use of the civil proc-
ess to assess criminal penalties that can be imposed only
after the heightened protections of a criminal trial have
been observed, including, of course, its higher standards
of proof. Punitive damages are not a substitute for the
criminal process, and the remote possibility of a criminal
sanction does not automatically sustain a punitive dam-
ages award.”
17a
The comparable civil sanctions in Campbell fell well be-
low the punitive damage award. The Court identified only
one, a $10,000 fine for fraud. /d. The Utah Supreme Court
had pointed to other, more substantive penalties, but they
were all based on evidence of out-of-state and dissimilar
conduct. /d.
In all, the Court in Campbell found the case “neither
close nor difficult,” id. at 418, 123 S.Ct. 1513, and concluded
that $145 million in punitive damages violated due process,
see id. at 429, 123 S.Ct. 1513 (concluding award was “irra-
tional and arbitrary deprivation” of property). The Court
suggested that the guideposts,
“especially in light of the substantial compensatory dam-
ages awarded (a portion of which contained a punitive
element), likely would justify a punitive damages award
at or near the amount of compensatory damages.”
Id. However, the Court concluded, Utah state courts should
calculate punitive damages in the first instance. /d. at 429,
123 S.Ct. 1513.
With the foregoing principles in mind, we turn to the
questions presented on review.
B. The Trial Court's Refusal to Give Philip Morris's
Proposed Jury Instruction No. 34
Philip Morris first argues that the trial court erred in re-
fusing to give its proposed jury instruction number 34. That
instruction stated, in part:
“The size of any punishment should bear a reasonable re-
lationship 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 deter-
mining what that reasonable relationship is, you are not
to punish the defendant for the impact of its alleged mis-
conduct on other persons, who may bring lawsuits of
18a
their own in which other juries can resolve their claims
and award punitive damages for those harms, as such
other juries see fit.”
In Williams I, the Court of Appeals concluded that that in-
struction was incorrect under state law. 182 Or.App. at 63-
64, 48 P.3d 824. We agree. See Parrott, 331 Or. at 563, 17
P.3d 473 (evaluating punitive damage award; “Because de-
fendant’s tortious conduct was a routine part of its business
practice that it was unwilling to change, we also consider the
potential injury that its misconduct may have caused to past,
present, and future customers.”). That is, the jury could con-
sider whether Williams and his misfortune were merely ex-
emplars of the harm that Philip Morris was prepared to inflict
on the smoking public at large.
Philip Morris, however, contends that Campbell over-
rules state rules like the one set out in Parrott. Specifically,
Philip Morris asserts that Campbell prohibits the state, acting
through a civil jury, from using punitive damages to punish a
defendant f to nonparties.’ In support of that argu-
ment, Philip Morris quotes the following from Campbell:
“Due process does not permit courts, in the calculation of
punitive damages, to adjudicate the merits of other par-
ties’ hypothetical claims against a defendant under the
guise of the reprehensibility analysis ** *. * * * Pun-
ishment on these bases creates the possibility of multiple
punitive damages awards for the same conduct; for in the
usual case nonparties are not bound by the judgment
some other plaintiff obtains. Gore, supra, [517 U.S.] at
593 (Breyer, J., concurring) (‘Larger damages might also
> Philip Morris does not explain how its instruction summarizes its
interpretation of Campbell. \t is unclear to us how a jury could
“consider” harm to others, yet withhold that consideration from the
punishment calculus. If a jury cannot punish for the conduct, then
it is difficult to see why it may consider it at all.
19a
“double count” by including in the punitive damages
award some of the compensatory, or punitive, damages
that subsequent plaintiffs would also recover’).”
538 U.S. at 423, 123 S.Ct. 1513.
We think that Philip Morris takes the foregoing quoted
material from Campbell out of context. The quote referred
only to dissimilar acts and dissimilar claims; the Court in-
tended to prohibit a punitive damage award from becoming a
referendum on a corporate defendant’s general behavior as a
citizen. The full paragraph in Campbell states:
“For a more fundamental reason, however, the Utah
courts erred in relying upon this and other evidence: The
courts awarded punitive damages to punish and deter
conduct that bore no relation to the Campbells’ harm. A
defendant’s dissimilar acts, independent from the acts
upon which liability was premised, may not serve as the
basis for punitive damages. A defendant should be pun-
ished for the conduct that harmed the plaintiff, not for be-
ing an unsavory individual or business. Due process
does not permit courts, in the calculation of punitive
damages, to adjudicate the merits of other parties’ hypo-
thetical claims against a defendant under the guise of the
reprehensibility analysis, but we have no doubt the Utah
Supreme Court did that here. [Campbell v. State Farm
Mut. Auto. Ins. Co.,} 65 P.3d [1134], at 1149 [ (Utah
2001) ] (‘Even if the harm to the Campbells can be ap-
propriately characterized ‘as minimal, the trial court’s as-
sessment of the situation is on target: “The harm is minor
to the individual but massive in the aggregate” ‘). Pun-
ishment on these bases creates the possibility of multiple
punitive damages awards for the same conduct; for i the
usual case nonparties are not bound by the judgment
some other plaintiff obtains. Gore, supra, [517 U.S.] at
593, 116 S.Ct. 1589 (Breyer, J., concurring) (‘Larger
damages might also “double count” by including in the
20a
punitive damages award some of the compensatory, or
punitive, damages that subsequent plaintiffs would also
recover’).”
538 U.S. at 422-23, 123 S.Ct. 1513 (emphasis added).
Considering the foregoing material as a whole, we con-
clude that evidence of similar conduct against other parties
may be relevant to a punitive damage award. The Court
criticized the Utah courts only for allowing in evidence of
dissimilar conduct:
“The Campbells have identified scant evidence of re-
peated misconduct of the sort that injured them. ** *
Although evidence of other acts need not be identical to
have relevance in the calculation of punitive damages,
the Utah court erred here because evidence pertaining to
claims that had nothing to do with a third-party lawsuit
was introduced at length *** The reprehensibility
guidepost does not permit courts to expand the scope of
the case so that a defendant may be punished for any
malfeasance, which in this case extended for a 20-year
period. In this case, because the Campbells have shown
no conduct by State Farm similar to that which harmed
them, the conduct that harmed them is the only conduct
relevant to the reprehensibility analysis.”
Id. at 423-24, 123 S.Ct. 1513 (emphasis added). See also id.
at 427, 123 S.Ct. 1513 (“The failure of the company to report
the Texas award is out-of-state conduct that, if the conduct
were similar, might have had some bearing on the degree of
reprehensibility, subject to the limitations we have de-
scribed.” (emphasis added)).
Philip Morris’s proposed jury instruction would have
prohibited the jury from “punish{ing] the defendant for the
impact of its alleged misconduct on other persons,” even if
those other persons were Oregonians who were harmed by
the same conduct that had harmed Williams, and in the same
2la
way. As we noted, that is not correct as an independent mat-
ter of Oregon law respecting the conduct of jury trials and
instructions that are given to juries. Neither, as we read in
Campbell, does it correctly state federal due process law. Be-
cause the proposed jury instruction did not accurately reflect
the law, the trial court did not commit reversible error when
it refused to give it. See Hernandez v. Barbo Machinery Co.,
327 Or. 99, 106, 957 P.2d 147 (1998) (trial court’s refusal to
give requested jury instruction “is no[t] error if the requested
instruction is not correct in all respects”).
Philip Morris also claims that the trial court committed
reversible error because the jury instructions that were given
did not accurately reflect some aspects of Campbell's hold-
ing. But Philip Morris did not preserve that argument before
the Court of Appeals. See ORAP 5.45(1) (“No matter
claimed as error will be considered on appeal unless the
claimed error * * * is assigned as error in the opening brief
***”): Ailes v. Portland Meadows, Inc., 312 Or. 376, 380,
823 P.2d 956 (1991) (to preserve error, “the adversely af-
fected party must have * * * raised the issue on appeal by an
assignment of error in its opening brief”). Fairly read, Philip
Morris’s assignment of error in the Court of Appeals claimed
only that the trial court erred in refusing to give requested
instruction number 34. That narrow assignment of error did
not give the Court of Appeals notice that it needed to con-
sider any challenge to the instructions actually given.
Based on the foregoing discussion, we affirm the Court
of Appeals on the first issue.
C. The Punitive Damage Award and Federal Due
Process
On review of a punitive damage award under the Due
Process Clause of the Fourteenth Amendment, a court must
determine whether the punitive damage award is “ ‘grossly
excessive’.” Parrott, 331 Or. at 554, 17 P.3d 473 (emphasis
deleted; citing Gore, 517 U.S. at 568, 116 S.Ct. 1589).
22a
' Whether the verdict exceeds the gross excessiveness standard
is a question of law. Jd. at 555, 17 P.3d 473.
In Parrott, this court identified five factors to be consid-
ered to determine whether a punitive damage award is
grossly excessive:
“(T]he range that a rational juror would be entitled to
award depends on the following: (1) the statutory and
common-law factors that allow an award of punitive
damages for the specific kind of claim at issue; (2) the
state interests that a punitive damages award is designed
to serve; (3) the degree of reprehensibility of the defen-
dant’s conduct; (4) the disparity between the punitive
damages award and the actual or potential harm inflicted;
and (5) the civil and criminal sanctions provided for
comparable misconduct.”
Id. (citations omitted). Parrott has been superseded some-
what by Campbell, but the last three Parrott factors are, of
course, the Gore guideposts as they have been further eluci-
dated by Campbell. We consider only those guideposts in
the following analysis.
The first guidepost directs us to consider, based on the
facts contained in the record, how reprehensible Philip Mor-
ris’s conduct was. As noted, we consider whether:
“the harm caused was physical as opposed to economic;
the tortious conduct evinced an indifference to or a reck-
less disregard of the health or safety of others; the target
of the conduct had financial vulnerability; the conduct in-
volved repeated actions or was an isolated incident; and
the harm was the result of intentional malice, trickery, or
deceit, or mere accident.”
Campbell, 538 U.S. at 419, 123 S.Ct. 1513 (citing Gore, 517
U.S. at 576-77, 116 S.Ct. 1589). And, as we have explained,
the jury, in assessing the reprehensibility of Philip Morris’s
23a
actions, could consider evidence of similar harm to other
Oregonians caused (or threatened) by the same conduct.
Again, we construe all facts in favor of plaintiff, the party
in whose favor the jury ruled. Doing so, there can be no dis-
pute that Philip Morris’s conduct was extraordinarily repre-
hensible. Philip Morris knew that smoking caused serious
and sometimes fatal disease, but it nevertheless spread false
or misleading information to suggest to the public that doubts
remained about that issue. It deliberately did so to keep
smokers smoking, knowing that it was putting the smokers’
health and lives at risk, and it continued to do so for nearly
half a century.
Philip Morris’s fraudulent scheme would have kept many
Oregonians smoking past the point when they would other-
wise have quit. Some of those smokers would eventually
become ill; some would die. Philip Morris's deceit thus
would, naturally and inevitably, lead to significant injury or
death.
Although it weighs less in our analysis, we also note that
Philip Morris harmed a much broader class of Oregonians.
Every smoker tricked by its scheme, even those who never
got ill, kept buying cigarettes—taking money out of their
pockets and putting it into the hands of Philip Morris and
other tobacco companies. And every one of those smokers
risked serious illness or death for as long as they remained
deceived.
Of the five reprehensibility factors listed in Gore and re-
cited—if not precisely used—in Campbell, four certainly are
met here. 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 care-
fully calculated program spanning decades. And Philip Mor-
24a
ris’s wrongdoing certainly involved trickery and deceit.* We
conclude, then, that the first Gore guidepost favors a very
significant punitive damage award.
We also conclude that the third Gore guidepost—
comparable civil or criminal sanctions—favors plaintiff. In
examining that guidepost, however, we believe that it is im-
portant to correct two errors that the Court of Appeals com-
mitted in applying it.
In Williams I, the Court of Appeals suggested that, be-
cause the comparable sanctions guidepost was about notice to
a prospective defendant, “the established Oregon law of pu-
nitive damages, including ORS 30.925(2),” gave Philip Mor-
ris adequate notice here. 182 Or.App. at 72, 48 P.3d 824.
That was not correct.
Courts consider comparable sanctions for two reasons.
First, comparable sanctions suggest a legislative determina-
tion about what constitutes an appropriate sanction for the
conduct, a determination that ts entitled to “substantial defer-
ence.” Gore, 517 U.S. at 583, 116 S.Ct. 1589 (internal quo-
tation marks and citation omitted). Second, comparable
sanctions may give a defendant fair notice of the penalties
that the conduct may carry. /d. at 584, 116 S.Ct. 1589
(“None of these statutes would provide an out-of-state dis-
tributor with fair notice that the first violation—r, indeed the
* Only one factor arguably is not met: There is no evidence that
Williams was especially financially vulnerable. Plaintiff argues
that Williams was vulnerable in another way, because he was ad-
dicted to cigarettes and so more susceptible to Philip Morris's de-
ceptive message. Gore indirectly suggests that reprehensibility
may include other sorts of vulnerability than financial. See 517
U.S. at 576, 116 S.Ct. 1589 (suggesting that higher punitive dam-
ages are appropriate, even though the injury is solely economic, if
“the target is financially vulnerable”). However, as we will dis-
cuss, we would affirm this punitive damage award even if that fac-
tor was not met.
25a
first 14 violations—of its provisions might subject an of-
fencer to a multimillion dollar penalty.”’).
Those reasons explain why we conclude that the Court of
Appeals misunderstood the guidepost. Neither Oregon law
generally, nor ORS 30.925(2) specifically,’ suggest how se-
verely the state may choose to punish Philip Morris’s con-
duct. Thus, they do not independently provide a legislative
standard entitled to substantial deference. If the Court of
Appeals’ analysis were correct, then the third Gore guidepost
would always support any punitive damage award, i.e., the
mere existence of the award would justify itself automati-
* ORS 30.925 provides, in part:
“(2) Punitive damages, if any, shall be determined and
awarded based upon the following criteria:
“(a) The likelihood at the time that serious harm would arise
from the defendant’s misconduct;
“(b) The degree of the defendant’s awareness of that likeli-
hood;
“(c) The profitability of the defendant’s misconduct;
“(d) The duration of the misconduct and any concealment of it;
“(e) The attitude and conduct of the defendant upon discovery
of the misconduct;
“(f) The financial condition of the defendant; and
“(g) The total deterrent effect of other punishment imposed
upon the defendant as a result of the misconduct, including,
but not limited to, punitive damage awards to persons in situa-
tions similar to the claimant's and the severity of criminal pen-
alties to which the defendant has been or may be subjected.”
Of course, those criteria were established without the benefit of the
Campbell decision, and may be applied only to the extent that they
comport with that decision.
26a
cally, regardless of the amount awarded. That reasoning is
circular, and we reject it.
In Williams I, the Court of Appeals also suggested that
the comparable sanctions guidepost does not “play[ ] a major
role one way or the other,” because it concluded that there
were no comparable civil penalties and that criminal penal-
ties were not truly comparable. 182 Or.App. at 72, 48 P.3d
824. Although it is not clear to us that the foregoing state-
ment correctly interprets and applies the law as Campbell
now explicates that law, we need not pursue that issue defini-
tively iiere. That is true, because applying the comparable
sanctions guidepost involves more than just asking whether
the dollar amount of the sanction equals or exceeds the puni-
tive damage award. Campbell proves that. There, the most
relevant civil sanction was $10,000; the Court found that
civil sanction was “dwarfed” by the $145 million punitive
damage award. 538 U.S. at 428, 123 S.Ct. 1513. Yet the
Court approved a punitive damage award “at or near the
amount of compensatory damages,” id. at 429, 123 S.Ct.
1513, i.e., an award somewhere around $1 million. And a $1
million punitive damage award was still 100 times the com-
parable sanction.
So far as we can discern from Campbell, then, the “com-
parable sanctions” guidepost requires three steps. First,
courts must identify comparable civil or criminal sanctions.
Second, courts must consider how serious the comparable
sanctions are, relative to the universe of sanctions that the
legislature authorizes to punish inappropriate conduct. Third,
courts must then evaluate the punitive damage award in light
of the relative severity of the comparable sanctions. The
guidepost may militate against a significant punitive damage
award if the state’s comparable sanctions are mild, trivial, or
nonexistent. However, the guidepost will support a more
significant punitive damage award when the state’s compara-
ble sanctions are severe.
27a
We tum, then, to consider the facts of this case, in light of
_ the guideposts and the Fourteenth Amendment. If there are
comparable civil sanctions, the parties did not cite them to us
and we have not found them by independent investigation.
There are what we consider to be comparable criminal
sanctions, but we must exercise care when relying on them.
As the Court took pains to caution in Campbell:
“The existence ofa criminal penalty does have [a] bear-
ing On the seriousness with which a State views the
wrongful action. When used to determine the dollar
amount of the award, however, the criminal penalty has
less utility. Great care must be taken to avoid use of the
civil process to assess criminal penalties that can be im-
posed only after the heightened protections of a criminal
trial have been observed, including, of course, its higher
standards of proof. Punitive damages are not a substitute
for the criminal process, and the remote possibility of a
criminal sanction does not automatically sustain a puni-
tive damages award.”
538 U.S. at 428, 123 S.Ct. 1513. That admonition is impor-
tant, of course. But the basis for holding that Philip Morris’s
actions in this case compare to a familiar crime is not specu-
lative or remote. Viewing the facts in the light most favor-
able to plaintiff, Philip Morris’s actions, under the criminal
Statutes in place at the beginning of its scheme in 1954,
would have constituted manslaughter. See ORS 163.040
(1953).° Today, its actions would constitute at least second-
* In 1953, that statute provided, in part:
“(2) Any person who, in the commission of * * * a lawful act
without due caution or circumspection, involuntarily kills an-
other, is guilty of manslaughter. * * *
“(3) Every killing of a human being by the act, procurement or
culpable negligence of another, when the killing is not murder
in the first or second degree, or is not justifiable or excusable
28a
degree manslaughter, a Class B felony. See ORS
163.125(1)(a).’ Individuals who commit Class B felonies
may face up to 10 years in prison and a fine of up to-
$250,000. ORS 161.605(2) (term of imprisonment); ORS
161.625(1)(c) (fine). Corporations that commit a felony of
any class may be fined up to $50,000, or required to pay up
or negligent homicide as provided in ORS 163.090 [negligent
homicide by operation of motor vehicle], is manslaughter.”
” The Oregon statutes generally define criminal homicide as fol-
lows: |
“A person commits criminal homicide if, without justification
or excuse, the person intentionally, knowingly, recklessly or
with criminal negligence causes the death of another human
being.”
ORS 163.005(1).
Second-degree manslaughter is a specific category of criminal
homicide:
“(1) Criminal homicide constitutes manslaughter in the second
degree when:
“(a) It is committed recklessly[.}
“eee
“(2) Manslaughter in the second degree is a Class B felony.”
ORS 163.125.
Reckless conduct is defined in ORS 161.085(9):
“ *Recklessly,’ when used with respect to a result or to a cir-
cumstance described by a statute defining an offense, means
that a person is aware of and consciously disregards a substan-
tial and unjustifiable risk that the result will occur or that the
circumstance exists. The risk must be of such nature and de-
gree that disregard thereof constitutes a gross deviation from
the standard of care that a reasonable person would observe in
the situation.”
29a
to twice the amount that the corporation gained by commit-
ting the offense ORS 161.655(1)(a) and (3). Thus, the pos-
sibility of severe criminal sanctions, both for any individual
who participated and for the corporation generally, put Philip
_ Morris on notice that Oregon would take such conduct very
seriously.* We conclude that the third guidepost, like the
first, supports a very significant punitive damage award.
The same cannot be said of the second Gore guidepost.
As noted, that guidepost considers the ratio between the puni-
tive damage award and the compensatory damage award.
The numerator of the ratio is fixed by the punitive damage
award: $79.5 million.
To determine the denominator of the ratio, we consider
not only the harm actually suffered by plaintiff, but also the
potential harm to plaintiff. See Campbell, 538 U.S. at 418,
123 S.Ct. 1513 (“actual or potential harm suffered by the
plaintiff’); id. at 424, 123 S.Ct. 1513 (ratio “between harm,
or potential harm, to the plaintiff and the punitive damages
award”). Plaintiff suffered relatively small economic dam-
ages for Williams’s wrongful death—less than $25,000.
However, that low figure occurred only because Williams
died shortly after being diagnosed with cancer. If Williams
had lived long enough to incur substantial medical bills, for
example, economic damages could easily have been 10 or
more times the amount awarded here. Only chance saved
* The fines and periods of imprisonment have changed over the
many years that Philip Morris carried out its scheme. In 1953, for
example, manslaughter carried a much longer prison term (15
years), but a much lower fine ($5,000). ORS 163.080 (1953). The
point, however, is that reckless conduct like Philip Morris’s, when
it resulted in death (as it did here), always has constituted a crimi-
nal act to which attached a severe potential criminal penalty.
30a
Philip Morris from a much higher compensatory damage
award.”
In analyzing the ratio of punitive to compensatory dam-
ages, the Court of Appeals also added to the compensatory
damages calculus the estimated harm to others. Williams II,
193 Or.App. at 562, 92 P.3d 126 (estimating that 100 Orego-
nians had been harmed by Philip Morris’s scheme, and so
concluding ratio was less than 4:1).
Using harm to others as part of the ratio may have been
correct under the plurality opinion in TXO Production Corp.
v. Alliance Resources Corp., 509 U.S. 443, 460, 113 S.Ct.
2711, 125 L.Ed.2d 366 (1993) (Stevens, J., joined by
Rehnquist, C. J., and Blackmun, J.) (relationship between
actual and punitive damages should consider “the possible
harm to other victims that might have resulted if similar fu-
ture behavior were not deterred”). However, it no longer ap-
* One sentence in Campbell suggested that a small award of “
‘economic damages’ ” might, when combined with particularly
egregious conduct, justify a higher ratio. 538 U.S. at 425, 123
S.Ct. 1513 (quoting Gore, 517 U.S. at 582, 116 S.Ct. 1589; em-
phasis added).
We conclude, however, that the Court meant compensatory
damages generally, not economic damages specifically. See id.
(“The converse is also true, however. When compensatory dam-
ages are substantial, ther « \esser ratio * * * can reach the outer-
most limit of the due process guarantee.” (emphasis added)); see
also id. at 426, 123 S.Ct. 1513 (expressing concern that compensa-
tory damages might have included outrage or humiliation compo-
nent duplicated in punitive damage award). That accords with
Gore, 517 U.S. at 582, 116 S.Ct. 1589 (“[L}ow awards of compen-
satory damages may properly support a higher ratio than high
compensatory awards, if, for example, a particularly egregious act
has resulted in only a small amount of economic damages.” (em-
phasis added)).
3la
pears to be permissible (if it ever was) to factor in that con-
sideration. Although Campbell held that similar acts could
bear on reprehensibility (discussed above), it now appears
that harm to others should not be considered as part of the
ratio guidepost. See 538 U.S. at 426-27, 123 S.Ct. 1513
(“Since the Supreme Court of Utah discussed the Texas
award when applying the ratio guidepost, we discuss it here.
The Texas award, however, should have been analyzed in the
context of the reprehensibility guidepost only.” (emphasis
added)); see also id. at 427, 123 S.Ct. 1513 (had Texas award
involved similar conduct, it “might have had some bearing on
the degree of reprehensibility”); Gore, 517 U.S. at 582-83,
116 S.Ct. 1589 (Court used 500:1 as ratio, although Court
noted in 35 that ratio would have been 35:1 if damages to
other Alabama consumers had been included). From the
foregoing, we conclude that the ratio guidepost considers
only harm to the plaintiff. See Campbell, 538 U.S. at 425,
123 S.Ct. 1513 (precise award must be based on “the defen-
dant’s conduct and the harm fo the plaintiff” (emphasis
added)); id. at 426, 123 S.Ct. 1513 (punishment must be
“reasonable and proportionate to the amount of harm to the
plaintiff and to the general damages recovered” (emphasis
added)).
There also is some imprecision regarding what amount
we should use for noneconomic damages—is it the $800,000
awarded by the jury, or the $500,000 awarded by the tnal
court after applying the statutory.cap? We need not decide
between the “capped” or “uncapped” figure, however, be-
cause it makes no difference here. Either way, the second
Gore guidepost is not met. All arguable versions of the ra-
tios substantially exceed the single-digit ratio (9:1) that the
Court has said ordinarily will apply in the usual case. See
Campbell, 538 U.S. at 425, 123 S.Ct. 1513 (so stating).
In Williams II, the Court of Appeals also relied on Philip
Morris’s wealth to conclude that the jury’s punitive damage
award did not violate due process. 193 Or.App. at 563, 92
32a
P.3d 126. Philip Morris objects that Campbell prohibits us-
ing wealth in that way. We agree. Wealth “cannot justify an
otherwise unconstitutional punitive damages award.” Camp-
bell, 538 U.S. at 427, 123 S.Ct. 1513. If a punitive damage
award is grossly excessive under Gore and Campbell, then
the defendant’s wealth will not make it constitutional. In
short, wealth is not a fourth Gore guidepost.
However, Campbell did not otherwise remove wealth
from the punitive damage equation, as Philip Morris asserts.
A jury still may levy a higher punitive damage award against
a wealthy defendant, as long as the final punitive damage
award does not exceed the constitutional limits established by
the three Gore guideposts. /d. at 427, 123 S.Ct. 1513 (wealth
“cannot justify an otherwise unconstitutional punitive dam-
ages award,” indicating that punittve damage award could be
constitutional even though jury considered wealth (emphasis
added)); see id. at 428, 123 S.Ct. 1513 (wealth is not “
‘unlawful or inappropriate’ “factor (quoting Gore, 517 U.S.
at 591, 116 S.Ct. 1589 (Breyer, J., concurring))). Consis-
tently with the foregoing, Oregon law specifically permits a
jury to consider a defendant’s financial condition when it im-
poses a punitive damage award. ORS 30.925(2)(f).
Of the three Gore guideposts, then, two support a very
significant punitive damage award. One guidepost—the ra-
tio—cuts the other way. In the end, we are left to use those
competitive tools to assess whether the jury’s punitive dam-
age award was not “grossly excessive” and therefore should
be reinstated.
The Gore guideposts are not bnght-line tests. See, e.g.,
Campbell, 538 U.S. at 425, 123 S.Ct. 1513 (“there are no
rigid benchmarks that a punitive damages award may not
surpass”); see also Gore, 517 U.S. at 582, 116 S.Ct. 1589
(“we have consistently rejected the notion that the constitu-
tional line is marked by a simple mathematical formula”). In
other words, the guideposts are only that—guideposts. Gore
33a
also referred to them as indicia. 517 U.S. at 575, 116 S.Ct.
1589 (reprehensibility is “most important indicium”),; id. at
580, 116 S.Ct. 1589 (ratio is “second and perhaps most
commonly cited indicium”); id. at 583, 116 S.Ct. 1589 (com-
parable sanctions “provides a third indicium for excessive-
ness”). Campbell specifically contemplated that some awards
exceeding single-digit ratios would satisfy due process. See
id. at 425, 123 S.Ct. 1513 (“in practice, few awards exceed-
ing a single-digit ratio between punitive and compensatory
damages, to a significant degree, will satisfy due process”).
Single-digit ratios may mark the boundary in ordinary cases,
but the absence of bright-line rules necessarily suggests that
the other two guideposts—reprehensibility and comparable
sanctions—can provide a basis for overriding the concern
that may arise from a double-digit ratio.
And this is by no means an ordinary case. Philip Mor-
ris’s conduct here was extraordinarily reprehensible, by any ~
measure of which we are aware. It put a significant number
of victims at profound risk for an extended period of time.
The State of Oregon treats such conduct as grounds for 2 se-
vere criminal sanction, but even that did not dissuade Philip
Morris from pursuing its scheme.
In summary, Philip Morris, with others, engaged in a
massive, continuous, near-half-century scheme to defraud the
plaintiff and many others, even when Philip Morris always
had reason to suspect—and for two or more decades abso-
lutely knew—that the scheme was damaging the health of a
very large group of Oregonians—the smoking public—and
was killing a number of that group. Under such extreme and
Outrageous circumstances, we conclude that the jury’s $79.5
million punitive damage award against Philip Morris com-
ported with due process, as we understand that standard to
relate to punitive damage awards. It follows that the Court of
Appeals correctly held that the trial court should have entered
judgment against Philip Morris for the full amount of the
jury's punitive damage award.
34a
The decision of the Court of Appeals is affirmed. The
judgment of the circuit court is reversed, and the case is re-
manded to the circuit court for further proceedings.
35a
APPENDIX B
OREGON COURT OF APPEALS OPINION
193 Ore. App. 527, 92 P.3d 126
Court of Appeals of Oregon.
MAYOLA WILLIAMS, PERSONAL REPRESENTATIVE
OF THE ESTATE OF JESSE D. WILLIAMS,
Deceased, Appellant-Cross-Respondent,
Vv.
PHILIP MORRIS INCORPORATED,
Respondent-Cross-Appellant,
and
RJ REYNOLDS TOBACCO COMPANY, FRED MEYER, INC.,
AND PHILIP MORRIS COMPANIES, INC.,
Defendants.
9705-03957; A106791.
Submitted on Remand Nov. 17, 2003.
Decided June 9, 2004.
Before EDMONDS, Presiding Judge, and ARM-
STRONG and WOLLHEIM, Judges.
EDMONDS, P.J.
This case comes to us on remand from the United States
Supreme Court. Philip Morris USA Inc. v. Williams, 540
US. 801, 124 S.Ct. 56, 157 L.Ed.2d 12 (2003). We previ-
ously reversed the trial court’s reduction of the jury’s award
of punitive damages on plaintiff's fraud claim and remanded
the case with instructions to enter judgment on the verdict.
We affirmed on defendant’s cross-appeal. Williams v. Philip
Morris Inc., 182 Or.App. 44, 48 P.3d 824, adh'd to on re-
cons., 183 Or.App. 192, 51 P.3d 670, rev. den., 335 Or. 142,
61 P.3d 938 (2002). The Court thereafter granted defen-
36a
dant’s petition for a writ of certiorari, vacated our decision,
and remanded the case for reconsideration in light of its re-
cent decision in State Farm Mut. Automobile Ins. Co. v.
Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585
(2003) (State Farm). On remand, we reach the same result
that we reached in our previous decision.
We readopt our previous opinion in all respects that are
not superseded by our discussion in this opinion, including
our statement of the facts and our resolution of issues of Ore-
gon and federal law. Our failure to discuss any issue that de-
fendant raises on remand indicates that we are satisfied with
our previous resolution of that issue. We begin by summa-
rizing the facts that we described in our previous opinion,
again construing the evidence most favorably to plaintiff be-
cause of the verdict in her favor. These then are the facts that
the jury could have found on the evidence before it.
Plaintiff is the widow of Jesse D. Williams (Williams)
and the personal representative of his estate. Defendant is a
leading manufacturer of cigarettes and currently has about
half of the domestic market for that product. From the early
1950s until his death from a smoking-related lung cancer in
1997, Williams smoked defendant’s cigarettes, primarily its
Marlboro brand, eventually developing a habit of three packs
a day. At that point, he spent half his waking hours smoking
and was highly addicted to tobacco, both physiologically and
psychologically. Although, at the urging of his wife and
children, he made several attempts to stop smoking, each
time he failed, in part because of his addiction. Despite the
increasing amount of information that linked smoking to
health problems during this period, Williams resisted accept-
ing or attempting to act on it. When his family told him that
cigarettes were dangerous to his health, he replied that the
cigarette companies would not sell them if they were as dan-
gerous as his family claimed. When one of his sons tried to
get him to read articles about the dangers of smoking, he re-
sponded by finding published assertions that cigarette smok-
37a
ing was not dangerous. However, when Williams learned
that he had inoperable lung cancer he felt betrayed, stating
“those darn cigarette people finally did it. They were lying all
the time.” He died about six months after his diagnosis.
In resisting the information about the dangers of smok-
ing, Williams was responding to a campaign that defendant,
together with the rest of the tobacco industry, created and
implemented for the purpose of undercutting the effect of
that information. During most of that campaign, the industry
did not expressly assert that cigarettes were safe because it
knew that it could never prove their safety. Instead, defen-
dant and the industry attempted to make -it appear that the
evidence against cigarettes was sufficiently uncertain so that
smokers would find a reason to justify their continued smok-
ing. To achieve that result, defendant and the rest of the in-
dustry worked together for more than 40 years to create a
public impression that there was a legitimate controversy
about whether cigarettes were dangerous to a smoker’s health
and that resolving that health issue would require further re-
search. Although defendant and the other companies knew
throughout most, if not all, of that 40-year period that ciga-
rette smoking was in fact dangerous, they intended that
smokers rely on the false impression that the industry cre-
ated.
The industry established its strategy and began develop-
ing its public image in response to a decline in cigarette sales
in 1953 that was the apparent result of studies that showed
that cigarette tar could cause cancer in mice and that estab-
lished the existence of statistical correlations between smok-
ing and lung cancer. The first public joint effort by the
industry occurred in January 1954, when defendant and other
tobacco companies published a joint statement in 448 news-
papers throughout the country. In that statement, among
other things, they announced the creation of the Tobacco In-
dustry Research Committee (TIRC), one of whose stated
goals was to conduct research into “all phases of tobacco use
38a
and health.” In 1964, the year of the Surgeon General's re-
port on the hazard of smoking to health, the industry divided
the TIRC into two parts, one of which, the Council on To-
bacco Research (CTR), continued to support scientific re-
search. The other part, named the Tobacco Institute, focused
on public relations and lobbying.
Between 1954 and the 1990s, those organizations devel-
oped and promoted an extensive campaign to counter the ef-
fects of negative scientific information on cigarette sales.
The individual tobacco companies, including defendant, were
part of the organizations and acted in cooperation with them.
At first, the industry publicly denied that there was a prob-
lem; for example, in the 1950s and early 1960s, defendant’s
officials told the public that defendant would “stop business
tomorrow” if it believed that its products were harmful. For
most of that period, however, the industry did not attempt to
refute the scientific information directly; rather, it tried to
find ways to create doubts about it. The industry’s goal was
to create the impression that scientists disagreed about
whether cigarette smoking was dangerous, that the industry
wis vigorously conducting research into the issue, and that a
definitive answer would not be possible until that research
was complete. As one of defendant’s vice-presidents ex-
plained in an internal memo, the purpose was to give smok-
ers a psychological crutch and a self-rationale that would
encourage them to continue smoking. A Tobacco Institute
internal memorandum similarly described the industry’s pur-
pose to provide smokers “ready-made credible alternatives”
to the evidence of the dangers of smoking.
Both the industry as a whole and defendant acted consis-
tently with those purpeses. Among other things, they
avoided developing contradictory information. Despite the
industry's nominal emphasis on the need for further research,
the CTR designed its research program to avoid studying the
biological effects of tobacco us€, the very question that, ac-
cording to the industry’s statements, required more research.
39a
To the extent that defendant conducted research on that issue
independently of the CTR, it did so in a European laboratory
that it purchased, and it was careful to avoid preserving re-
cords of the results in this country. Defendant’s director of
research in the late 1970s and 1980s explained to a subordi-
nate that his job was to attack outside research that was in-
consistent with the industry’s position by casting doubt on it.
The jury could also have found that there was a “gentleman’s
agreement” not to conduct research beyond what the CTR
did. The primary purpose of the CTR’s research was to pro-
vide expert witnesses for congressional hearings and law-
suits, not to determine the relationship between smoking and
disease. The CTR’s lawyers, rather than its scientists, estab-
lished its research pnrorities; developing accurate information
on the biological effects of smoking was not one of the law-
yers’ priorities.
The jury could have found that, throughout this period of
time, defendant and the other tobacco companies actually had
little doubt that cigarette smoking was causally related to a
number of diseases. In 1958, three British researchers found
that the American tobacco scientists with whom they spoke
believed that cigarette smoke could cause cancer. In 1961,
defendant’s director of research stated that cigarette smoke
contained so many carcinogens that the best that the com-
pany could do was to reduce their amounts. Internal com-
pany memoranda agreed and suggested that it could not
admit those facts publicly because of adverse legal conse-
quences. At least by the 1970s, there was absolutely no sci-
entific basis for denying the connection between cigarette
smoking and cancer and other diseases. However, defendant
continued to assert that the hazard of cigarette smoking to
health was uncertain when it actually knew that there was no
legitimate controversy about that subject.
The jury could also have found that defendant recognized
both that nicotine was addictive and that its addictive effect
was the primary reason that people continued to smoke. De-
40a
fendant spent considerable effort discovering ways to deliver
the optimal dose of nicotine in each cigarette without actually
adding nicotine to its product. It also concluded that, because
of nicotine’s addictive effect, smoking cessation programs
and technologies would be unlikely to work without signifi-
cant behavioral therapy. In its view, providing smokers a
reason to believe that there were serious doubts that tobacco
was harmful would discourage smokers from making the ef-
fort that was necessary to quit smoking.
Also, the jury could have found that defendant and the
industry used a large number of methods to create the public
impression of a legitimate controversy, despite the lack of
supporting scientific evidence. They issued press releases,
influenced the content of apparently neutral articles, culti-
vated opinion leaders, attempted to use their advertising
power to get favorable treatment from the print media, and
appeared on commercial and public television to put forth
that message. Those individuals who spoke for defendant
and the industry emphasized that the evidence concerning the
dangers of smoking was primarily based on statistical rela-
tionships, and they argued that there was no proof that a spe-
cific component of tobacco smoke caused a specific disease.
Even after the early 1990s, when the industry finally had to
admit that tobacco could be a risk factor associated with a
number of diseases, it argued that there was a long chain of
intervening events before a disease actually arose from ciga-
rette smoking. The industry, including defendant, also con-
tinued to deny that cigarette smoking was addictive and
publicized that message throughout the country, including
Oregon..
As a smoker, Williams was one of the intended recipients
of the industry’s message, and, in fact, the jury could have
found that he received its message and relied on its represen-
tations. Those representations affected his decision to con-
tinue smoking and not to make greater efforts to overcome
his addiction. When his family urged him to stop smoking,
4la
he responded that he had learned from watching television
that smoking did not cause lung cancer. After his diagnosis,
he blamed the “cigarette people” for betraying him—which,
given his exclusive use of defendant’s products, must at least
have included defendant. The jury coulc have found on the
evidence before it that, as a result of defendant’s representa-
tions, Williams suffered his fatal lung cancer. The jury also
could have found that Williams was one of thousands of
Oregonians who received defendant’s message, acted on it,
and, like him, suffered cancer or other diseases as a result.
In our previous opinion, we described the requirements
for proving a fraud claim in Oregon and explained why the
jury could have found that plaintiff had proven fraud in this
case. In short, the jury could have found that defendant, by
itself and through the industry effort of which it was a part,
intentionally made the false representation that there was a
legitimate controversy about the health effects of cigarette
smoking, that defendant knew that that representation was
false, that Williams relied on it, that he thereafter continued
to smoke, and that he suffered his fatal lung cancer as a result
of that reliance. Williams, 182 Or.App. at 49-70, 48 P.3d
824. Based on the evidence, the jury awarded plaintiff com-
pensatory damages of $21,485.80 in economic damages and
$800,000 in noneconomic damages on that claim. In accor-
dance with former ORS 18.560(1) (1999), renumbered as
ORS 31.710(1) (2003), the trial court reduced the amount of
noneconomic damages to $500,000 when it entered judg-
ment.
In addition to compensatory damages, the jury awarded
plaintiff punitive damages of $79.5 million, which the trial
court reduced to $32 million. In our previous opinion, we
reinstated the jury’s verdict on those damages. The issue be-
fore us on remand is the extent to which that award of puni-
tive damages is consistent with the Due Process Clause of the
Fourteenth Amendment, particularly as the Court interpreted
it in State Farm. In our previous opinion, we followed the
42a
Oregon Supreme Court’s decision in Parrott v. Carr Chevro-
let, Inc., 331 Or. 537, 17 P.3d 473 (2001), in deciding the
federal constitutional issue. Now, on remand from the
United States Supreme Court, we determine whether our ear-
lier decision is consistent with the Supreme Court’s discus-
sion in State Farm. We begin that analysis by reviewing
earlier United States Supreme Court cases on punitive dam-
ages, cases that provide the context for understanding the
Court’s decision in State Farm.
Pacific Mutual Life Insurance Co. v. Haslip, 499 US. 1,
111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), is the first case in
which the Court considered the effect of the Due Process
Clause on the size of an award of punitive damages.’ In
Haslip, the defendant Ruffin, an agent and employee of the
defendant insurance company, sold life insurance issued by
the defendant company, together with health insurance issued
by an unrelated company, to an Alabama municipality of
which the plaintiffs were employees. Ruffin had the munici-
pality send the premiums for the insurance to him at the
company’s branch office, rather than to the insurers directly,
but he did not forward the premiums to either insurer. As a
result of its failure to receive premiums, the health insurer
sent notices that the insurance had lapsed for nonpayment to
the plaintiffs, in care of Ruffin at the defendant company’s
branch office. Ruffin did not forward those notices to the
plaintiffs. When the plaintiff Haship sought medical services,
she learned that she was uninsured and that she was person-
ally liable for the charges that she had incurred. She was un-
able to pay her medical bills, and her physician placed her
account with a collection agency. The agency obtained a
‘The Court had previously rejected challenges to punitive dam-
ages under the Excessive Fines Clause of the Eighth Amendment.
In several other cases, it had noted the possibility of a due process
challenge but concluded that the issue was not properly raised. See
Haslip, 499 U.S. at 9-12, 111 S.Ct. 1032.
43a
judgment against her, adversely affecting her credit. Haslip,
499 US. at 4-5, 111 S.Ct. 1032.
The plaintiffs sued Ruffin and the defendant company for
fraud. The jury returned general verdicts for damages for all
plaintiffs. The verdict for Haslip was $1,040,000, which, the
Court assumed, consisted of $200,000 in compensatory dam-
ages (the maximum amount that Haslip’s attorney requested
in his closing argument) and $840,000 in punitive damages.
The Alabama Supreme Court affirmed the award, and the
United States Supreme Court granted certiorari. Haslip, 499
U.S. at 5-8, 111 S.Ct. 1032. In its opinion, the Court first
held that the Alabama common-law rule that made the com-
pany vicariously liable for punitive damages for its em-
ployee’s fraud did not violate due process. /d. at 12-15, 111
S.Ct. 1032. It then turned to the constitutionality of the
award of punitive damages.
The Court began by concluding that the common-law
method of assessing punitive damages—initially by a jury
that is instructed to consider the gravity of the wrong and the
need to deter similar wrongful conduct, followed by trial and
appellate court review—is consistent with due process.
Haslip, 499 U.S. at 15-18, 111 S.Ct. 1032. It then evaluated
whether the award to Haslip was constitutionally acceptable.
It observed that, although it is not possible to draw a mathe-
matical bright line between the constitutionally acceptable
and the unacceptable, the reasonableness of the award and
whether the jury received adequate guidance from the court
are significant considerations. The trial court had expressly
instructed the jury on the purposes of punitive damages—not
to compensate but to punish and to deter future conduct.
That instruction operated to limit the jury’s discretion. In
addition, under Alabama law, the jury did not receive evi-
dence of the defendant’s wealth, and the court told the jury
that whether to award punitive damages at all was within its
discretion. Thus, the jury’s discretion in determining punitive
44a
damages was no greater than it would have been in many
other areas of law. /d. at 18-20, 111 S.Ct. 1032.
Alabama had also provided significant judicial review of
the jury’s award. Before Haslip, the Alabama Supreme
Court had established procedures for a tnal court to evaluate
a jury award of punitive damages, including requiring the
court to place the reasons for its decision in the record. In
addition, Alabama provided appellate review of the cnteria
that it had previously established to ensure that punitive
damage awards were reasonable in amount and rational in
light of their purpose. Has/lip, 499 U.S. at 20-21, 111 S.Ct.
1032. The Court concluded that those cnteria imposed a suf-
ficiently definite and meaningful constraint on the discretion
of Alabama factfinders in awarding punitive damages. It es-
pecially noted that factfinders who are asked to award puni-
tive damages must be guided by more than the defendant's
net worth. The Court said, “Alabama plaintiffs do not enjoy
a windfall because they have the good fortune to have a de-
fendant with a deep pocket.” /d. at 22, 111 S.Ct. 1032.
After concluding that the defendant had received the full
panoply of protections that Alabama provided, the Court
mentioned that the award was more than four times the com-
pensatory damages, more than 200 times Haslip’s out-of-
pocket expenses, and considerably in excess of a fine for in-
surance fraud. However, it concluded that, although “the
monetary comparisons are wide and, indeed, may be close to
the line, the award here did not lack objective criteria.”
Haslip, 499 U.S. at 23, 111 S.Ct. 1032. The Court therefore
affirmed the judgment for the plaintiff. /d. at 23-24, 111
S.Ct. 1032.
The next case that the Court considered, 7XO Production
Corp. v. Alliance Resources Corp., 509 U.S. 443, 113 S.Ct.
2711, 125 L.Ed.2d 366 (1993) (TXO ), arose out of a prop-
erty dispute between two energy companies. TXO, the de-
fendant, agreed to purchase rights to develop gas and oil on
4Sa
property where the plaintiff Alliance Resources controlled
the major share of the rights. The agreement was subject to
TXO’s attorney determining that Alliance’s title to the prop-
erty was valid. In the process of making that determination,
TXO discovered a 1958 deed that conveyed the coal mining
rights on the property to another party. Although both the
wording of the deed and interviews with the parties involved
made it clear that the grantor had not conveyed on! and gas
rights, TXO paid for a quitclaim deed from the owner of the
coal rights and attempted to renegotiate its agreement with
Alhance. It also unsuccessfully attempted to induce the gran-
tor of the 1958 deed to execute a false affidavit to the effect
that the deed included oil and gas mghts. /d. at 447-49, 113
S.Ct. 2711.
When its other efforts failed, TXO filed an action to quiet
title based on the quitclaim deed, although it knew at the ime
that its action was frivolous. TXO’s real reason for filing the
action was to reduce its royalty payments under its agreement
with Alhance. The trial court dismissed TXO’s action based
on the wording of the 1958 deed alone, holding that that deed
made the quitclaim deed a nullity. On Alliance’s counter-
claim for slander of title, the yury awarded it $19,000 in ac-
tual damages——the cost of defending the quiet title action—
and $10 million in punitive damages. There was evidence
that TXO was a large company 1n its own nght, that it was a
wholly owned subsidiary of an even larger company, that the
amount of royalties that it sought to renegotiate was substan-
tial, and that it had engaged in similar nefarious activities in
its business dealings in other parts of the county. 7XO, 509
U.S. at 449-51, 113 S.Ct. 2711. The trial court refused to
reduce the amount of punitive damages, and the West Vir-
gimia Supreme Court affirmed. /d. at 452, 113 S.Ct. 2711.
On certiorari, the United States Supreme Court affirmed
the judgment, with Justice Stevens writing the plurality opin-
ion. Chief Justice Rehnquist and Justice Blackmun joined in
full, and Justice Kennedy did so in part. Justice Kennedy also
46a
wrote a concurrence, as did Justice Scalia, with whom Justice
Thomas joined. The remaining justices joined Justice
O’Connor’s dissent. The plurality first noted that, assuming
that the lower courts followed fair procedures, a judgment
that 1s a product of that process is entitled to a strong pre-
sumption of validity. It also noted that comparisons with
other awards of punitive damages are difficult because no
two cases are truly identical. TX¥O, 509 US. at 456-57, 113
S.Ct. 2711. It quoted the Court’s statement in Haslip that tt
is not possible to draw a mathematical bright line between
acceptable and unacceptable awards but that a general con-
cern for reasonableness certainly enters into the calculation.
Id. at 458, 113 S.Ct. 2711.
In evaluating whether the award in 7XO was grossly ex-
cessive, the plurality first reyected the defendant’s emphasis
on the fact that the award was 526 times the amount of the
actual damages that the jury awarded. Although the plurality
agreed that punitive damages should bear a reasonable rela-
tionship to compensatory damages, it agreed with a previous
West Virginia Supreme Court case in which that court
pointed out that the ratio between the dollar amounts of com-
pensatory and punitive damages ts only one of several factors
for evaluating that relationship. Among the other factors that
the West Virginia court identified was the relationship be-
tween the harm that was likely to occur from the defendant's
conduct as well as the harm that actually occurred. TXO, 509
U.S. at 459-60, 113 S.Ct. 2711.
The jury could have found in 7XO that the defendant
would have avoided millions of dollars in royalty payments if
it had successfully attacked the platntiff's ttle. The plurality
said that, even if the amount of savings were only $1 million,
the award of punitive damages would not jar its sensibilities
TXO, 509 U.S. at 461-62, 113 S.Ct. 2711. It reasoned:
“The punitive dumegns award in this case is certainly
large, but in light of the amount of money potentially at
47a
stake, the bad faith of petitioner, the fact that the scheme
employed in this case was part of a larger pattern of
fraud, trickery and deceit, and petitioner's wealth, we are
not persuaded that the award was so ‘grossly excessive’
as to be beyond the power of the State to allow.”
ld. at 462, 113 S.Ct. 2711 (footnote omitted). In its instruc-
tions to the jury, the trial court also authorized it to take into
account the defendant’s wealth in assessing punitive dam-
ages, recognizing that deterrence may require a larger fine for
a defendant of larger means than it would for a defendant of
ordinary means. The 7XO plurality recognized that empha-
sizing the wealth of the wrongdoer increased the risk that the
award would be influenced by prejudice against a large cor-
poration, especially one from outside the state. However, it
noted that in Has/ip it had referred to the financial condition
of the defendant as a factor in assessing punitive damages.
Id. at 463-64, 113 S.Ct. 2711.
In his concurrence, Justice Kennedy objected to the plu-
rality’s reliance on general reasonableness as the basis for
evaluating the constitutionality of the award. He thought that
it was more manageable to focus not on the amount of the
award but on the jury’s reasons for making the award:
“The Constitution identifies no particular multiple of
compensatory damages as an acceptable limit for punitive
awards; it does not concern itself with dollar amounts, ra-
tios, or the quirks of juries in specific jurisdictions.
Rather, its fundamental guarantee is that the individual
citizen may rest secure against arbitrary or irrational dep-
rivations of property. When a punitive damages award
reflects bias, passion, or prejudice on the part of the jury,
rather than a rational concern for deterrence and retribu-
tion, the Constitution has been violated, no matter what
the absolute or relative size of the award.”
TXO, 509 U.S. at 467, 113 S.Ct. 2711 (Kennedy, J., concur-
ring). He did not agree with the plurality that a rational rela-
48a
tionship between the size of the award and the harm that the
defendant’s conduct threatened was an adequate basis for
concluding that the award was rational because the record did
not indicate that that was the basis on which the case was
presented to the jury. He was concerned that the record sug-
gested, as the dissent argued, that the verdict was the result of
redistributionist impulses arising from antipathy to a wealthy,
Out-of-state corporation. Justice Kennedy concluded, how-
ever, that the verdict was permissible, pnmanly because the
defendant acted with malice; the evidence of “deliberate,
wrongful conduct” was sufficient to show that the jury was
motivated by a legitimate concern to punish and deter the de-
fendant. /d. at 468-69, 113 S.Ct. 2711 (Kennedy, J., concur-
ring). Justice Ker.nedy observed:
“There was ample evidence of willful and malicious con-
duct by TXO in this case; the jury heard evidence con-
ceming several pnor lawsuits filed against TXO accusing
it of similar misdeeds; and respondents’ attorneys in-
formed the jury of TXO’s vast financial resources and ar-
gued that TXO would suffer only as a result of a large
judgment.” -
Id. at 469, 113 S.Ct. 2711 (Kennedy, J., concurring).
Justice Scalia, joined by Justice Thomas, concurred on
the ground that due process required only that there be fair
procedures for making and reviewing an award of punitive
damages. Because the West Virginia courts properly in-
structed the jury and properly reviewed its verdict for reason-
ableness, he agreed that it should be affirmed.'' TXO, 509
U.S. at 470-72, 113 S.Ct. 2711 (Scalia, J., concurring).
‘The Court subsequently followed Justice Scalia’s suggestions
conceming procedural requirements. In Honda Motor Co. v.
Oberg, 512 U.S. 415, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994), it
held that the Due Process Clause zequires post-verdict review of
punitive damage awards for excessiveness. In Cooper Industries,
49a
In her dissent, Justice O'Connor argued that the record
showed that the verdict was based on prejudice against a
wealthy outside corporation and constituted a windfall to the
plaintiff based on the jury’s desire to redistribute that wealth.
TXO, 509 U.S. at 490-91, 113 S.Ct. 2711 (O’Connor, J., dis-
senting). She did not argue, however, that consideration of a
defendant’s wealth is impermissible. Rather, she said that
courts simply need to recognize the special dangers involved
when they review jury verdicts. /d. at 491-92, 113 S.Ct.
2711 (O’Connor, J., dissenting).
TXO was followed by BMW of North America, Inc. v.
Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996)
(Gore), a 5-4 decision. It became the first case in which the
Court held that an award of punitive damages was excessive.
In Gore, the jury awarded Gore, the plaintiff, $4,000 1n actual
damages and $4 million in punitive damages for BMW’s
conduct in representing that the car that it sold to him was
new despite presale damage that required repainting the car
at a cost of $601. BMW had a policy of not telling purchas-
ers about presale repairs that cost less than three percent of
the value of the vehicle. Gore produced evidence that the
repair reduced the value of his car by $4,000, which was ten
percent of its cost as new. He also produced evidence that
between 1983 and the time of trial, the defendant had sold
983 cars, including 14 in Alabama, representing them to be
new cars without disclosing that they had been repainted at a
- cost of more than $300 per vehicle. Gore calculated his re-
quest for punitive damages of $4 million by multiplying his
$4,000 actual damages by the approximately 1,000 cars that
Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 121 S.Ct
1678, 149 L.Ed.2d 674 (2001), it required appellate courts to de-
termine whether an award of punitive damage is excessive without
giving any deference to the trial court’s decision on that issue. Our
review of the award in this case is consistent with those procedural
decisions.
50a
the defendant had sold. Gore, 517 US. at 563-65, 116 S.Ct.
1589.
On appeal, the Alabama Supremé Court applied the crite-
ria that the United States Supreme Court had approved in
Haslip and held that the award was not excessive. However,
_ the Alabama court concluded that the jury improperly in-
cluded BMW’s conduct in other jurisdictions in calculating
the amount of punitive damages. It therefore reduced the
amount of those damages to $2 million. The court based its
conclusion on a belief that that amount was a constitutionally
reasonable amount based on its comparative analysis both of
other Alabama cases and of cases from other jurisdictions
that invoived a seller’s misrepresentation of the condition of
an automobile. Gore, 517 U.S. at 566-67, 116 S.Ct. 1589.
The United State Supreme Court first agreed with the
Alabama court that the state had no authority to penalize a
defendant for conduct in other jurisdictions that was legal
where it occurred and that had no effect on Alabama resi-
dents. Gore, 517 U.S. at 568-73, 116 S.Ct. 1589. It did rec-
ognize, however, that evidence of out-of-state conduct may
be relevant for determining the reprehensibility of a defen-
dant’s conduct. /d. at 574 n. 21, 116 S.Ct. 1589. The Court
then concluded that the punitive damages award, even with
the Alabama court's reductions, was grossly excessive. The
Court’s focus in evaluating the award was on whether the
defendant received fair notice, not only of the conduct that
could subject it to punishment bu
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