Opposition Brief — Philip Morris USA v. Williams

Pe ee ee we cae ”

Ns ee

i FILED

4 PRE 20m

, QFFICE OF THE Cur

No. 05-1256 __ SUPREME COURT U.S

IN THE

Supreme Court of the Gnited States

PHILIP MORRIS USA INC.,

Petitioner,

Vv.

MAYOLA WILLIAMS,

Respondent.

On Petition for a Writ of Certiorari

to the Supreme Court of Oregon

BRIEF IN OPPOSITION

JAMES S. COON ROBERT S. PECK*

RAYMOND F. THOMAS CENTER FOR CONSTITUTIONAL

SWANSON THOMAS & COON LITIGATION, P.C.

621 SW Morrison Street 1050 31st Street, N.W.

Suite 900 Washington, DC 20007

Portland, OR 97205 (202) 944-2803

(503) 228-5222

CHARLES S. TAUMAN

WILLIAM A. GAYLORD BENNETT HARTMAN MORRIS

GAYLORD EYERMAN & KAPLAN

BRADLEY, P.C. P.O. Box 19631 m

1400 SW Montgomery St. Portland, OR 97280

Portland, OR 97201 (503) 849-9821

(503) 222-352

*Counsel of Record Additional counsel on inside cover

a a a RT IL IE ET EE IT TIES

MAUREEN LEONARD

ATTORNEY AT LAW

520 SW Sixth Avenue, Suite 920

Portland, OR 97204

(503) 224-0212

KATHRYN H. CLARKE

ATTORNEY AT LAW

921 SW Washington Street, Ste. 764

Portland, OR 97205

(503) 224-7963

QUESTIONS PRESENTED

1. Whether the ratio between compensatory ©

and punitive damages comprises the conclusive and

overriding guidepost as to the reasonableness of a

punitive damages verdict.

2. Whether due process forbids a state from

punishing a defendant for its egregious and profitable

misconduct on the basis of the actual and potential effects

of that misconduct throughout the state.

3. Whether state law that requires appellate

courts to review facts in the light most favorable to the

party for whom the jury ruled violates due process of law.

ill

TABLE OF CONTENTS

QUESTIONS PRESENTED ....0000.........:cccccssesssssesesesssesseeees i

I Ce Ee SII ccrcesctetcnsccvesissoncennsenesiasnseneesonsssoet ili

py OP Pe Nis 8 ye | - ne Vv

BRIEF FOR RESPONDENTS IN OPPOSITION ............. 1

STATEMENT OF THE CASE..............ccccccccscsescsssccsesceseeses s

REASONS FOR DENYING THE PETITION.................. 10

I]. THE OREGON SUPREME COURT FAITH-

FULLY FOLLOWED THIS COURT'S

DECISION IN STATE FARM ...0........:ccccseeeeeeeeees 10

A. Reprehensibility Remains the Most

Important Indicium of Whether a Punitive

Damage Award is Unconstitutionally

ESE Soe a eee ee 11

1. Petitioner misstates the importance of

the reprehensibility guidepost................... 11

2. Petitioner does not dispute the strong

staie interest in punishing and deterring

Philip Morris's life-threatening

I iniisiinheinisiiecaicinbiittsitaaisiisiiliiaiapaiaraainiai se 13

3. The fact that Philip Morris’s misconduct

“caused a significant number of deaths”

was relevant to reprehensibility................ 14

B. The Oregon Court’s Application of the

“Ratio” Guidepost Does Not Conflict with

ATE SESE A Me ee Dr een an ee eT Te 16

1. State Farm does not hold that punitive

damages must conform to a single-digit

2. State Farm does not limit double-digit

ratios to cases’ involving small

compensatory damage awards.................. 18

iv

I]. PETITIONER’S PROFERRED JURY

INSTRUCTION WAS PROPERLY REJECTED

BY THE OREGON COURTS ...................00::cc000005 22

A. State Farm Does Not Require a

“Proportionality” Jury Instruction ................. 22

B. Oregon May Consider the Impact on

Defendant's Fraudulent Scheme on its

I nicitrhisccccecacbiiaeeeahapatiMctisinentaeenicitat 24

Ill. THE OREGON COURTS’ RESPECT FOR THE

JURY VERDICT DOES NOT VIOLATE ITS

OBLIGATION TO PROVIDE DE NOVO

REVIEW

CONCLUSION

Vv

TABLE OF AUTHORITIES

Cases

Aken v. Plains Elec. Generation & Transmission

Co-Op, Inc., 49 P.3d 662 (N.M. 2002) ............-......20... 27

Anderson v. Liberty Lobby, Inc., 477 U.S. 242

Bach v. First Union Nat'l Bank, 149 Fed. Appx.

ESAS EEA re ee a 17

BMW of North America, Inc. v. Gore, 517 U.S. 559

Boeken v. Philip Morris Inc., 127 Cal. App. 4th

1640, 26 Cal. Rptr. 3d 638 (Cal. App. 2 Dist.

2005), cert. denied, 126 S.Ct. 1567 (2006) ................... 3

Campbell v. State Farm Mut. Auto. Ins. Co., 98

P.3d 409 (Utah), cert. denied, 543 U.S. 874

REESE a 18

Clark v. Chrysler Corp., 436 F.3d 594 (6 Cir.

EES ESTES ae ae oe 17

Conseco Fin. Servicing Corp. v. North Am. 2

Mortgage Co., 381 F.3d 811 (8 Cir. 2004)................ 17

Cooper Indus. Inc. v. Leatherman Tool Group, Inc.,

REE ee nee aE e ee 27, 28-29

Honda Motor Co. v. Oberg, 512 U.S. 415 (1994)........ 27-28

Jackson v. Virginia, 443 U.S. 307 (1979) ..............cccceceees 28

Johnson v. Ford Motor Co., 113 P.3d 82 (Cal. 2005) ...... 25

Mathias v. Accor Economy Lodging, Inc., 347 F.3d -

aan deieasnibamennsinioninnss 17, 19, 23

Oberg v. Honda Motor Co., 888 P.2d 8 (Or.), cert.

denied, 517 U.S. 1219 (1906) ..........c.ccccecccecccccecsesoceees 28

Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1

vi

Park v. Mobil Oil Guam, Inc., 2004 WL 2595897

I TR, TE: TEED cnsiichedintieniaihinncccnciandiainamdinanianenions 27

Philip Morris USA, Inc. v. Williams, 540 U.S. 801

Seen. er area eae ee 1

Planned Parenthood of the Columbia/ Willamette

Inc. v. American Coalition of Life Activists, 422

fee 17

Seaboard Air Line Ry. Co. v. Watson, 287 U.S. 86

ARRESTS Ries Rte tou een seer Re Seen OUE So 23

Simon v. San Paolo U.S. Holding Co., 113 P.3d 63

GEIR. BED occeccccccensisesossosccssersosovenrsboeensvocsovensnsonseescoses 27

Simpson v. Sisters of Charity, 284 Or. 547 (1978).......... 23

State Farm v. Campbell, 538 U.S. 408 (2003)......... passim

State v. Rogers, 4 P.3d 1261 (Or. 2000)........................... 29

Stogsdill v. Healthmark Partners, L.L.C., 377 F.3d

IT aided 17

TXO Production Corp. v. Alliance Resource Corp.,

IER ICR ETRE er ree eran ae 15

United States v. Deberry, 430 F.3d 1294 (10 Cir.

ESS aaree ne nner eer Seem eee we EN Oe 23

Williams v. ConAgra Poultry Co., 378 F.3d 790 (8

ETE ry renee ee ener ee CN CRO: 25

Williams v. Kaufman County, 352 F.3d 994 (5

a a elle 11

Williams v. Philip Morris Inc., 48 P.3d 824 (Or.

ge Se ea 9, 13, 19

Williams v. Philip Morris Inc., 61 P.3d 938 (2002)........... 9

Wolf v. Wolf, 690 N.W.2d 887 (lowa 2005)...................... 27

Statutes

Be Sh se I Sccisnssiniiieriiiccaiesnssteinciteiteeiiueitaniaiiiacinnti 20

vii

I lala 8

i, See i Sa cicericcshscrictnsiititsientigienriiclageancibiieiidahcintiaeamens 20

i ee Sas eat inicreiemeineiiieiatineinaiaiiia 20

ee eG IU ciiincsccinniininsitntnnittintdonbanniapalcnsiiinennieiies 7,9

Or. Rev. Stat. § 30.925(2)(g) .............cccccccsecccrorerscccsees 15, 26

hs a Se, i cnemebbbemenbliodi 23

Other Authorities

Ellis, Jr., Dorsey D., Fairness and Efficiency in the

Law of Punitive Damages, 56 S. CAL. L. REV. 1

EEE, saletidihdcditeisbageitabeadaimaiebliadedassepaiasinaeaait titania 21

KIRCHER, JOHN J. & CHRISTINE M. WISEMAN,

PUNITIVE DAMAGES: LAW AND PRACTICE (2d ed.

TIIIEA seisietinnestitiicicnnaivannceinsiapiniiidameintintisinminuapenineniagsins 21

LANDES, WILLIAM & RICHARD POSNER, THE

ECONOMIC STRUCTURE OF TORT LAW (1987)............. 20

Polinsky, A. Mitchell & Steven Shavell, Punitive

Damages: An Economic Analysis, 111 HARV. L.

REV. 869 (1998) .........-.esscsesessesssenenessenesesenensnenenees 20, 21

Rustad, Michael L., In Defense of Punitive

Damages in Products Liability: Testing Tort

Anecdotes with Empirical Data, 79 IOWA L.

REV. 1 (1992) ................ Pe AEE AE a he NC TT 21

Viscusi, W. Kip, The Social Costs of Punitive

Damages Against Corporations In

Environmental and Safety Torts, 87 GEO. L.J.

TTI ROA TE NAA A 20, 21

Rules

S. Ct. Rule 10..... PRAWN. Rs PON Aer on OD NE IT Hes REET SERS 2

BRIEF FOR RESPONDENTS IN OPPOSITION

Respondent Mayola Williams respectfully requests

that this Court deny the petition for writ of certiorari,

seeking review of the Oregon Supreme Court’s decision in

this case. Williams is also obliged to point out a potential

defect in the petition with respect to the second and third

of the Petitioners Questions Presented. Pet. at i. The

second question concerns whether a jury may consider

the impact of defendant’s misconduct and its public

health consequences on others within the state.

Petitioner conceded that the jury could consider that

impact during the trial, offered a jury instruction to that

effect, and may not now use the issue as a basis for

appellate review. The third question, concerning whether

the evidence should be viewed in a light favorable to the

jury's verdict in the course of de novo review, was neither

before the court below nor addressed by that court. See

Pet. at 10a (listing issues Petitioner asked the Oregon

Supreme Court to consider) & at lla (indicating which

issues the court addressed). It should not be considered

now.

STATEMENT OF THE CASE

This Court remanded this matter to the Oregon

Court of Appeals for reconsideration in light of the

intervening decision in State Farm v. Campbell, 538 U.S.

408 (2003). Philip Morris USA, Inc. v. Williams, 540 U.S.

801 (2003). In response, first the Oregon Court of Appeals

and subsequently the Oregon Supreme Court

scrupulously applied and carefully followed State Farm,

with both courts holding that the jury’s verdict was not

grossly excessive but instead fully met constitutional

requirements. The two courts arrived at the same

conclusion: Petitioner's conduct was extraordinarily

reprehensible and that the jury's verdict on punitive

damages was entirely justified and fully consonant with

the requirements of due process under the guidelines

2

established in BMW of North America, Inc. v. Gore, 517

U.S. 559 (1996) and further explained in State Farm.

Because it lost before those two courts, Petitioner

Philip Morris now seeks this Court’s review, pressing an

issue it did not raise below, as well as one it conceded at

trial, while advancing a self-serving and misleading

rendition of the record and the decision below. Although

Petitioner disagrees with the Oregon courts’ application

of the BMW/State Farm principles to the facts of this

case, that disagreement provides no basis for further

review by this Court, nor does it justify supervisory

review of state court decision-making through the

certiorari process.

In fact, Petitioner's expressed dissatisfaction with

the Oregon courts’ review of the record in this case

necessarily makes its request to this Court either a “fact

bound” inquiry or an assertion that any error “consists of

a misapplication of a properly stated rule of law.” Rule 10

of this Court’s rules makes plain that petitions based on

such claims of misapplication of the law o» erroneous fact

findings are “rarely granted.” S. Ct. Rule 10. This petition

does not comprise one of those rare instances where the

_ matter is nonetheless certworthy. The petition should be

denied.

After engaging in a thorough review of the record

in this case, the Oregon courts each found that the

Petitioner’s conduct was at the extraordinarily high end

of the reprehensibility spectrum and of a type that the

state of Oregon deals with harshly. Petitioner’s Questions

Presented contain three complaints: (1) the trial court did

not give a jury instruction proffered by Petitioner, even

though it contained errors of law; (2) the punitive

damages exceed a single-digit ratio when compared to the

compensatory damages; and (3) the court below viewed

the evidence in the record in the light most favorable to

the verdict.

3

These are not grounds for certiorari. Granting the

instant petition-would encourage disappointed punitive

damage defendants to seek certiorari as a matter of

course with nothing more than a formulaic claim that a

mathematical bright line should be employed. Such an

approach would destroy the deterrent and retributive

purpose of punitive damages by employing a one-size-fits-

all approach that fails to fit the punishment to the crime.

That petitions for review of the punitive award

could become standard operating procedure by

defendants is not a time-limited concern. Petitions for

certiorari raising issues of constitutional excessiveness

are already regularly filed with this Court. See, e.g.,

Boeken v. Philip Morris Inc., 127 Cal. App. 4th 1640, 26

Cal. Rptr. 3d 638 (Cal. App. 2 Dist. 2005), cert. denied,

126 S.Ct. 1567 (2006)(denying certiorari in a case

involving $50 million in punitive damages). A defendant’s

dissatisfaction with a state court’s application of BMW

and State Farm, however, should not occasion a petition

for certiorari. Sufficient safeguards exist in the state

court systems without the need for yet another review of

a verdict already confirmed through two levels of de novo

review.

PHILIP MORRIS’S DEADLY FRAUDULENT SCHEME

When this case went to trial in 1999, Philip Morris

was still engaged in an extensive and expensive campaign

designed to deny the dangers of cigarette smoking, even

though it knew better. Only after the jury’s verdict did

Petitioner begin to admit publicly and in later trials both

the addictive qualities of cigarettes and their carcinogenic

- nature. The record shows that Philip Morris engaged in

one of the longest running, most profitable, and deadliest

frauds in history.

Jesse Williams died as a result of Philip Morris's

lethal fraud. Tr. Vol. 9-B at 138, Vol. 11-B at 41; Ex. 159.

By 1997, when Jesse Williams lost his battle with lung

cancer, Philip Morris had known for at least 40 years that

4

cigarettes cause lung cancer and that millions of

American smokers, about half -of whom were its

customers, were addicted to the nicotine in cigarettes.

Pet. at 3a-7a; Tr. Vol. 12-B at 91-92, 9-A at 131-40, 11-A

at 61-63; Ex. 50 at 1, 36 at 2. In an effort to maximize

profit, Philip Morris either denied this knowledge

outright, saying more research was needed, or

disingenuously reassured its customers it would never

jeopardize their health so as to create sufficient doubt to

allow smokers to rationalize their behavior. Pet. at 38a-

40a.

In 1952, Reader’s Digest published an influential

article on research findings that linked smoking with

cancer. The article is credited with causing cigarette sales

to fall for the first time in the twentieth century. Tr. Vol.

7-A at 109-10. To counter this trend, Philip Morris

designed an elaborate public relations campaign to

ensure that people continued to buy and smoke

cigarettes. Pet. at 3a-4a. This campaign began with the

publication of “A Frank Statement to Cigarette Smokers.”

The “Frank Statement,” which first appeared as an

advertisement in major newspapers throughout the

United States, including Oregon, stated that Petitioner’s

cigarettes were not injurious to health and that smokers’

health was a “basic responsibility, paramount to every

other concern in our business.” Pet. at 3a-4a; Ex. 7 at 2.

The “Frank Statement” also announced _ the

establishment of the Tobacco Industry Research

Committee (TIRC) to conduct research into “all phases of

tobacco and health.” Pet. at 3a-4a..

This document was the beginning of Philip

Morris's “common front” approach to creating doubt about

the relationship between smoking and disease. Over the

next decade, similar statements were broadcast to the

public including that Philip Morris would “stop business

tomorrow” if it thought that its product was harming

smokers, and that “there was no connection” between

smoking and disease or Philip Morris “wouldn't be in the

S)

business.” Pet. at 4a; Ex. 10, 11, 47, 161 at 1. When it

made these statements, Philip Morris knew that

“Is}moking causes lung cancer.” Ex. 28 at 2, 32 at 1, Tr.

Vol. 11-A at 62-63.

In response to the 1964 Surgeon General's Report,

finding that smoking contributed substantially to

mortality rates from lung cancer and other diseases, a

Philip Morris vice pres.dent wrote that “we must, on a

future basis, give smokers a psychological crutch and self-

rationale to continue smoking.” Pet. at 4a. Thereafter, the

self-described “brilliantly conceived and executed” public

relations strategy to “defend itself’ in “litigation, politics,

and public opinion” was altered from the “vigorous

denial” approach to a “counter propaganda” plan. Ex. 80

at 7-8, 83 at 1. In short, the new plan was designed to

suggest “ready-made credible alternatives” to the idea

that smoking causes disease, while still insisting that

there was “no proof that smoking causes cancer.” Pet. at

4a. Philip Morris maintained this position as the industry

leader throughout the 1970s, 1980s, and 1990s. Jd. This

campaign of misinformation, exactly as _ intended,

provided tobacco-addicted smokers with a basis to

continue to use cigarettes. Ex. 50, 161 at 1, 175.

The “counter propaganda” was not limited to the

relationship between smoking and health. Ex. 36 at 2,

106. Publicly, Philip Morris also continued to deny that

the nicotine in cigarettes was addictive. Ex. 148.

Privately, Philip Morris concluded that “no other

rationale is adequate to sustain the habit [of smoking] in

the absence of nicotine.” Ex. 72 at 2. The research

director of Philip Morris described the company’s

understanding best by stating that “I think the thing that

we sell most is nicotine.” Ex. 109 at 1. Yet, the addictive

properties of nicotine remained secret because corporate

decisionmakers had concluded that “the entire matter of

addiction is the most potent weapon a _ prosecuting

attorney can have in the lung cancer/cigarette debate. We

6

can’t defend continued smoking as ‘free choice’ if the

person was ‘addicted.” Ex. 110 at 2.

To increase cigarette sales, Philip Morris

dedicated years of study to the role of nicotine addiction

in smoking. Ex. 39, 44 at 1, 53 at 1, 58 at 1, 91 at 2.

Specifically, Philip Morris used data that suggested that

“a smoker [has] daily intake quotas for tar and/or

nicotine” to its financial advantage by introducing lower

tar and nicotine cigarettes. Ex. 57 at 1, 134 at 1, 139 at 1.

As smokers switched to lower tar and nicotine cigarettes,

Philip Morris correctly predicted the smokers would

increase their cigarette consumption to maintain their

nicotine intake. Ex. 57 at 1.

Philip Morris’s long standing fraudulent scheme

was very successful. The company shipped 235 billion

cigarettes and made a net profit of $1.6 billion the year

that Jesse Williams died. Pet. at 74a; Tr. Vol. 14-A at 49-

50, 55. In 1996, when Jesse Williams was diagnosed with

lung cancer, Philip Morris made a net profit of $2 billion.

Id. at 58. At the time of Jesse Williams’s posthumous

trial, Philip Morris had a net worth of more than $17

billion and a 51 percent domestic cigarette market share.

Pet. at 74a; Tr. Vol. 14-A at 57.

It was established to the jury’s and Oregon courts’

satisfaction that Jesse Williams received and believed

Philip Morris’s false statements made on television and

through the print media. Tr. Vol. 12-B at 49-50, 80. He

told his wife that tobacco companies would not sell a

product that caused cancer “because a tobacco company

just would not do that.” Tr. Vol. 12-B at 41. Moreover, as

recently as 1994, Philip Morris published advertisements

called “Facts You Should Know” in local newspapers,

including the Portland Oregonian. Ex. 148. Among other

things, the advertisements claimed that nicotine was not

addictive. Jd. Mr. Williams read the Oregonian and was

generally a well-read person who liked to keep up with

current events through magazines and newspapers. Tr.

Vol. 15-B at 130, 147-48, 15-A at 55.

7

Mr. Williams tried a number of times to stop

smoking, but he was “highly addicted,” and his efforts

were unsuccessful. Tr. Vol. 4-B at 20, 12-B at 46-47, 51-

52, 71-73. After being diagnosed with lung cancer caused

by cigarettes, Jesse Williams told his wife that he had

been betrayed by the “cigarette people” who had

“deceived” him, and that “they were lying all the time.”

Tr. Vol. 12-B at 85. After his death, his widow filed this

lawsuit to “make a difference for people that had been

denied the evidence that cigarettes could harm them” and

“let other people know that they were being deceived.” /d.

at 93-94. The evidence led to a finding that Philip Morris

purposefully misrepresented the facts in order to deceive

smokers. Pet. at 3a. Philip Morris acknowledged that

Jesse Williams relied upon its messages when, in lower

court briefing, it argued that the record contained

evidence that he “clung to Philip Morris’ few public

statements related to smoking and cancer.” Defendant’s

Reply Br. in Or. Court of Appeals (Williams J), at 13.

During the 1999 trial, the court told counsel that

the jury would be instructed that, pursuant to the prayer

for relief, punitive damages would be limited to $100

million. Defense counsel told the court that this was

“okay.” Tr. Vol. 22-C at 87, 25 at 64. Philip Morris sought

a jury instruction that stated, among other things, that

the punitive damage award must bear a reasonable

relationship to the compensatory damages and that “you

may consider the extent of harm suffered by others” in

determining punitive damages. Pet. at 14; Defendant’s

Reply and Cross Responding Br. in Or. Court of Appeals,

at 37. Much of this proposed instruction was contrary to

Oregon state law, and the trial judge refused the

instruction. Pet. at 17a-18a. The jury was then instructed

that only in-state conduct could be punished when

assessing punitive damages, and the judge explicitly went

through the six relevant Oregon punitive damage factors

to consider under. Or. Rev. Stat. § 30.925. Tr. Vol. 25 at

49-51. The trial judge also instructed the jury to focus

only on whether Philip Morris’s fraudulent conduct that

8

resulted in Jesse Williams’s death was likely to cause

serious harm in Oregon. Tr. Vol. 25 at 50-51.!

On March 30, 1999, the jury rendered its verdict.

J. at 1. The jury found Philip Morris liabie for fraud and

awarded $21,485.80 in economic and $800,000 in non-

economic damages.? The jury specifically found that

“defendant ma[dje false representations concerning the

causal link between smoking and cancer upon which

Jesse Williams relied” and that “such false

representations and reliance [were] a cause of damage to

plaintiff.” J. at 3-4. The jury then awarded $79.5 million

in punitive damages. Id.

The jury also found Philip Morris liable on a claim

of negligence but also found Jesse Williams was 50

percent negligent. The jury declined to award punitive

damages on the negligence count.

The jury’s punitive damages award amounted to

two and one-half weeks’ profit for defendant in the year

in which Williams died. Tr. Vol. 14-A at 55. Upon Philip

Morris’s Motion for a Reduction of Punitive Damages, the

trial court found the punitive damage award to be within

the range that a rational juror could assess “based upon

1 Philip Morris purports to quote Plaintiffs counsel

during oral argument to the effect that the jury was urged to

punish Philip Morris for harms to other unidentified people.

The Petition’s quotation on this is actually an amalgam of two

separate statements from two different lawyers in reverse order

and utterly out of context. Both counsel’s statements urged the

jury to consider the impact of Philip Morris’s fraudulent

campaign on other Oregonians and the amount of money that it

would take to deter them from continuing this highly profitable

misconduct. The opinions below emphasize that the punitive

damages were awarded for harm to Oregonians only. Pet. at 7a,

20a-21la, 23a, 33a, 41a, 66a, 69a, and 72a-73a.

2A statutory cap on noneconomic damages reduced the

jury's $821,485 compensatory verdict to $521,485. Pet. at 3. The

reduction was based on Or. Rev. Stat. § 18.560(1).

9

the record as a whole and applying Oregon, common law

and statutory factors” but still reduced it to $32 million in

accordance with perceived “federal standards.” Pet. at 3;

Appellant’s Br. in Or. Court of Appeals (Williams J), at

39-40.

Both parties appealed. The Court of Appeals

upheld the finding of fraud. It held that the evidence

would permit the jury to find that Philip Morris

affirmatively misrepresented that smoking was not

harmful to a person’s health and that it intended Mr.

Williams and other Oregon smokers to rely on this

misrepresentation. Williams v. Philip Morris Inc., 48

P.3d 824, 833 (Or. Ct. App. 2002) (Williams J). Further,

the court found that a number of Mr. Williams’s

statements constituted direct evidence that Mr. Williams

received and relied upon defendant’s misrepresentations.

Id. at 834.

The court reviewed the Petitioner’s excessiveness

argument de novo under both the applicable state

statutory criteria, Or. Rev. Stat. § 30.925, and the BMW

guideposts. Jd. at 836, 838-42. Among other things, the

Court found Petitioner's behavior to be particularly

egregious in this case because Philip Morris sought to

make large amounts of money by engaging in a

fraudulent scheme, over a period of four decades, to

induce people to use or continue to smoke cigarettes

despite the fact that smoking would cause serious illness

or death in a significant percentage of people. Jd. at 838-

40. When addressing the ratio between punitive and

compensatory damages, the court found that the ratio to

potential harm was not one that “raises our judicial

eyebrows” and amounted “to little more than two and a

half weeks’ profit.” Jd. at 841. Petitioner then sought

further review in the Oregon Supreme Court, which

denied the petition. 61 P.3d 938 (2002).

Upon remand from this Court in light of State

Farm, the Court of Appeals readopted its previous

opinion in all respects that were not superseded. Pet. at

10

36a. The court also found the jury award to be consistent

with the BMW guideposts that this Court had reiterated

in State Farm. Pet. at 67a-75a. In fact, the Court of

Appeals found it “difficult to conceive of more

reprehensible misconduct for a longer duration of time on

the part of a supplier of consumer products to the Oregon

public.” Pet. at 73a. The Oregon Supreme Court affirmed,

addressing only two issues: whether Philip Morris’s

proffered instruction was erroneously rejected and

whether the punitive damages were unconstitutionally

excessive. Pet. at 10a-lla. On the first issue, it

determined that the proffered instruction was contrary to

state law and properly rejected by the trial court. On the

second issue, the Oregon Supreme Court concluded

Philip Morris . . . 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

absolutely knew—that the scheme was

damaging the health of a very large group

of Oregonians—the smoking public—and

was killing a number in that group. Under

such extreme and outrageous

circumstances, we conclude that the jury’s

$79.5 million punitive damage award

against Philip Morris comported with due

process, ...

Pet. at 33a.

_ REASONS FOR DENYING THE PETITION

I, THE OREGON SUPREME COURT FAITH-

FULLY FOLLOWED THIS COURT'S

DECISION IN STATE FARM

11

A. Reprehensibility Remains the Most

Important Indicium of Whether a

Punitive Damage Award is

Unconstitutionally Excessive

1. Petitioner misstates the importance

of the reprehensibility guidepost

Petitioner focuses nearly exclusive attention on

the second guidepost from BMW of North America, Inc. v.

Gore, 517 U.S. 559, 575 (1996): “the disparity between the

actual or potential harm suffered by the plaintiff and the

punitive damages award.” It treats that guidepost as if it

were the conclusive and overriding test of excessiveness,

subjugating the other guideposts to a limited and lesser

role defined by the “ratio” guidepost. Pet. at i (question

presented). In fact, Philip Morris misstates this Court’s

holdings by arguing that reprehensibility merely

establishes where on the continuum of single-digit ratios

the punitive damages should be pegged. See Pet. at 7

(arguing that this Court “has established a range of

constitutionally permissible ratios and suggested that the

degree of reprehensibility (and the amount of

compensatory damages) will determine where within that

range the constitutional cut-off falls in a particular case.”)

& 9 (“the degree of reprehensibility, among other factors,

helps the court to determine which single-digit multiplier

is appropriate.”).

This Court confirmed in State Farm Mut.

Automobile Ins. Co. v. Campbell, 538 U.S. 408 (2003),

that “[tlhe most important indicium of the reasonableness

of a punitive damages award is the degree of

reprehensibility of the defendant's conduct.” State Farm,

538 U.S. at 419, quoting BMW, 517 U.S. at 575 (emphasis

supplied). See also Williams v. Kaufman County, 352 F.3d

994, 1016 (5" Cir. 2003) (footnote omitted)

(reprehensibility “receives the heaviest weight”).

Petitioner's approach fails to give reprehensibility its

appropriate weight.

12

Courts are to “determine the reprehensibility of a

defendant[’s misconduct] by considering” five factors:

[W]hether: the harm caused was physical

as opposed to economic; the tortious

conduct evinced an indifference to or a

reckless disregard of the health or safety of

others; the target of the conduct had

financial vulnerability; the conduct

involved repeated actions or was an

isolated incident; and the harm was the

result of intentional malice, trickery, or

deceit, or mere accident.

Id. at 419, citing BMW, 517 U.S. at 576-77.

Each of these aggravating factors supports the

substantial award of punitive damages in this case. In

fact, the evidence in this case points to a record of

reprehensibility that is unique in American history.

Philip Morris is a company worth $17 billion, built on

sales of cigarettes, which in 1997 alone brought in profits

of $1.6 billion. Amazingly, Petitioner reaped these profits

from selling a product that it knew would kill many of its

own customers—not through misadventure or accident,

but, when used as defendant intended them to be used.

The crux of this case is Petitioners purposeful

misrepresentation of this knowledge for economic gain.

The numbers are staggering. Philip Morris

cigarettes kill an estimated 200,000 Americans each

year.‘ No other product sold in the U.S. kills as many as

3 The company shipped 235 billion cigarettes and made

a net profit of $1,607,000,000 in 1997, the year that Jesse

Williams died. Tr. Vol. 14-A at 49-50, 55.

4 The evidence was that cigarette smoking kills more

than 400,000 Americans each year. Tr. Vol. 9-B at 138, Vol. 11-

B at 41. Evidence showed that Philip Morris has approximately

51% of the domestic cigarette market. Tr. Vol. 14-A at 57.

13

one in ten of its regular users.° How—especially in our

increasingly health-conscious society—has Philip Morris

managed to keep its customers smoking? One strategy,

which lies at the heart of plaintiff's evidence in this case,

has been a deadly, decades-long, fraudulent scheme to

misrepresent the scientific facts about the risks of

smoking and to exploit the addictive nature of nicotine.

Starting in the early 1950s, as evidence linking cigarettes

and cancer began to depress tobacco company profits,

Petitioner and others in the industry devised a joint

scheme to take advantage of the vulnerability of the class

of addicted consumers they had created. They issued

misrepresentations through the popular press well into

the 1990s asserting that the link between smoking and

disease is a matter of dispute among scientists and an

open question that required further study. Petitioner

knew not only that these statements aimed at smokers

like Jesse Williams were false, but also that addicted

smokers like Jesse Williams would cling to such

statements and reports to rationalize their smoking and

avoid the difficult ordeal of quitting, which their

addictions made even more arduous.

As the Oregon Court of Appeals summarized the

evidence in the record, Philip Morris “sought to make

large amounts of money by engaging for more than four

decades in a fraudulent scheme to induce people to use or

continue to use a product that could cause serious illness

or death.” Williams J, 48 P.3d at 840.

2. Petitioner does not dispute the

strong state interest in punishing

and deterring Philip Morris’s life-

threatening misconduct

In its effort to portray the Oregon court’s opinion

as in conflict with State Farm, Petitioner ignores this

5 The jury, however, only considered the impact on

smokers in Oregon, as it was instructed by the trial court.

14

Court's admonition that an award can only be fairly

characterized as “grossly excessive” by viewing it in

relation to the State’s “legitimate interests in punishing

unlawful conduct and deterring its repetition.” State

Farm, 538 U.S. at 416, quoting BMW, 517 US. at 568.

“For that reason, the federal excessiveness inquiry

appropriately begins with an identification of the state

interests that a punitive award is designed to serve.” /d.

There can be no disagreement regarding the paramount

and legitimate interest Oregon has in punishing and

deterring fraudulent misrepresentations, motivated by

financial gain, with respect to consumer products that

place its consumers at risk of serious injury or death for

profit.

3. The fact that Philip Morris’s

misconduct “caused a significant

number of deaths” was relevant to

reprehensibility

Petitioner makes no assignment of error regarding

the lower court’s legal standard of reprehensibility, its

application of the five factors outlined in State Farm, or

the court’s conclusion that Philip Morris's misconduct

was highly reprehensible. Instead, Petitioner focuses

almost entirely on what it characterizes as the claims of

non-parties. Pet. at 14-22. The record evidence

established that defendant’s products “caused a

significant number of deaths each year in Oregon.” Pet. at

8a.

Such an acknowledgment by the supreme court

and court of appeals does not run afoul of this Court’s

holding in State Farm, despite Petitioner's assertion to

the contrary. Pet. at 16-19. State Farm condemned

consideration of a “defendant’s dissimilar acts,

independent from the acts upon which liability was

premised, [and which] may not serve as the basis for

punitive damages.” 538 U.S. at 422 (emphasis added). By

contrast, the death of other smokers in Oregon was the

consequence of the very same fraudulent scheme alleged

15

by plaintiff. The State Farm Court made clear that

“conduct by [defendant] similar to that which harmed

[plaintiffs]” is relevant to reprehensibility. Jd. at 424

(emphasis added). Indeed, this Court has consistently

stated that “repeated misconduct is more reprehensible

than an individual instance of malfeasance,” Jd. at 423,

quoting BMW, 517 U.S. at 577. This Court added that

“courts should look to ‘the existence and frequency of

similar past conduct” in evaluating reprehensibility. /d.,

quoting TXO Production Corp. v. Alliance Resource Corp..,

509 U.S. 443, 462 n.28 (1993) and Pacific Mut. Life Ins.

Co. v. Haslip, 499 U.S. 1, 21-22 (1991).

The Oregon courts properly considered the harm

to other smokers resulting from Philip Morris's

misrepresentations to show what this Court subsequently

called the degree of a defendant’s “indifference to or a

reckless disregard of the health or safety of others.” 538

U.S. at 419. Indeed, the State Farm Court added that

even out-of-state conduct, if similar to that directed at

plaintiffs, would also be relevant to reprehensibility. Jd.

at 422.

Finally, there is no merit to Petitioner's argument

that permitting punishment for harms to nonparties

conflicts with State Farm and constitutes a recipe for

multiple punishments. Pet. at 15. First, as detailed

_ above, this Court in State Farm made clear that such

evidence of repeated or similar misconduct resulting in

harm to others is relevant to reprehensibility and thus to

the reasonableness of punishment. 538 U.S. at 423.

Second, Oregon, by statute, Or. Rev. Stat. § 30.925(2)(g),

protects defendants from multiple punitive damage

awards for the same course of conduct. See also Pet. at

66a-67a.

In conclusion, the harm caused by Petitioner “was

physical as opposed to economic,” “evinced . . . a rec’ iess

disregard of the health or safety of others,” ta. 7eted

“financial[{ly] vulnerabl[e]” people, “involved repeated

actions” over the course of four decades, and was the

16

product of “trickery, or deceit.” Compare State Farm, 538

U.S. at 419. All of the potential elements this Court

identified as establishing high reprehensibility were

present in the extreme.

B. The Oregon Court’s Application of the

“Ratio” Guidepost Does Not Conflict with

State Farm

I. State Farm does not hold that

punitive damages must conform to a

single-digit ratio

Philip Morris reads this Court’s opinion in State

Farm as if it established a categorical limitation on the

size of a punitive damage award. Pet. at 7. Yet, this Court

could not have been more plainspoken in rejecting that

approach to punitive damages. Contrary to Petitioner's

assertion tha awards must fall within a single-digit ratio

unless the compensatory damages are so small as to

make that number inconsequential, Pet. at 8, this Court

reiterated in State Farm:

‘[W]e have consistently rejected the notion

that the constitutional line is marked by a

simple mathematical formula, even one™

that compares actual and _ potential

damages to the punitive award.’ We decline

again to impose a bright-line ratio.

538 U.S. at 424-25, quoting BMW, 517 U.S. at 582

(emphasis in original, citation omitted).

As if that were not clear enough, State Farm

emphasized that “there are no rigid benchmarks that a

punitive damages award may not surpass.” /d. at 425.

This Court stressed that its referenced ratios “are not

binding.” Id. (emphasis added).

Responding to an argument like Petitioner’s here

that State Farm established an immutable ratio, Judge

Richard Posner, speaking for the U.S. Court of Appeals

for the Seventh Circuit, wrote: “The Supreme Court did

17

not, however, lay down a 4-to-1 or single-digit ratio rule .

. . and it would be unreasonable to do so.” Mathias v.

Accor Economy Lodging, Inc., 347 F.3d 672, 676 (7 Cir.

2003).

Nor do the decisions Petitioner cites as creating

conflicts on this issue actually stand in conflict. Rather

than hold that 9:1 is the constitutional maximum, Pet. at

14, Planned Parenthood of the Columbia/ Willamette Inc.

v. American Coalition of Life Activists, 422 F.3d 949 (9%

Cir. 2005) examined, with approval, earlier Ninth Circuit

punitive damage rulings, finding that a variety of awards,

ranging from 2.6:1 to 28:1 all met constitutional muster.

Id. at 954-57. It then found, in the case before it involving

the difficult assessment of punitive damages where there

were multiple plaintiffs and multiple defendants, that

circumstances justified a substantial punitive damages

award and that a 9:1 ratio did not offend “constitutional

sensibilities.” Jd. at 963. No mandatory single-digit ratio

requirement was established by the Ninth Circuit.

Similarly, in each and every one of Petitioner’s

claimed conflicts among the lower courts, see Pet. at 12-

13 n.5, the decisions engage in a fact-intensive

constitutional inquiry in order to fit the punitive award to

the misconduct. See, e.g., Clark v. Chrysler Corp., 436

F.3d 594, 602 (6° Cir. 2006)(finding Chrysler’s conduct

not to be “sufficiently indifferent or reckless to support a

$3 million award”); Conseco Fin. Servicing Corp. v. North

Am. Mortgage Co., 381 F.3d 811, 825 (8 Cir. 2004)(large

compensatory damage award “in the ‘absence of

extremely reprehensible conduct against the plaintiff or

some special circumstance” could not support a large

exemplary award)(citation omitted); Bach v. First Union

Nat'l Bank, 149 Fed. Appx. 354, 366 (6% Cir.

2005)(finding punitive damages excessive where large

compensatory award was accompanied by “only one of the

five reprehensibility factors”); Stogsdill v. Healthmark

Partners, L.L.C., 377 F.3d 827, 833 (8 Cir. 2004)(finding

punitive damages excessive because the award “reflects

18

bias and a focus on irrelevant considerations,” the

compensatory award was substantial, and punitive

verdict was many times defendant's net worth). None of

these cases establishes the mathematical bright line that

Petitioner claims. :

High ratios between actual and punitive damages

may be justified by the facts of a case. This Court has

recognized the fact-intensive nature of this inquiry. In

State Farm, it emphasized that the “precise award in any

case, of course, must be based upon the facts and

circumstances of the defendant's conduct and the harm to

the plaintiff.” State Farm, 538 U.S. at 425 (suggesting

that a 500-to-one ratio could also be justified under the

proper circumstances).

It is worth noting that the ultimate result in State

Farm, whose misconduct merely “iierit[ed] no praise,” id.

at 419, was $9 million punitive damage award and a $1

million compensatory damage award. Campbell v. State

Farm Mut. Auto. Ins. Co., 98 P.3d 409 (Utah), cert.

denied, 543 U.S. 874 (2004). Under Petitioner’s proposed

regime, Philip Morris’s exponentially more egregious and

reprehensible conduct would justify a smaller award than

the “minor economic injuries for the 18-month period in

which State Farm refused to resolve the claim against

them.” State Farm, 538 U.S. at 426. Such a result,

considering the absence of aggravating factors in State

Farm and the overwhelming presence of them here,

would be inconsistent with this Court’s punitive damage

mandates in which the punishment should fit the

misconduct.

2. State Farm does not limit double-

digit ratios to cases involving small

~ compensatory damage awards

Petitioner concedes only a solitary exception to the

rigid single-digit ratio it wrongly claims is required: a

case in which the compensatory award is so small that a

single-digit multiple would amount to an inconsequential

19

penalty. Pet. at 8. This Court has not adopted so narrow a

conception of when a larger award is merited. In fact, this

Court articulated at least three non-exclusive examples of

situations that merit higher punitive damage ratios:

1) Where “a particularly egregious act has

resulted in only a small amount of

economic damages”, State Farm, 538 U.S.

at 425 (citation omitted);

2) Where “injury is hard to detect”, id.

(citation omitted); and,

3) Where “the monetary value of noneconomic

harm might have been difficult to

determine”, id. (citation omitted).

In addition to these explicit State Farm-endorsed

justifications for punitive awards above the suggested

single-digit ratio, other courts have found additional

justifications for higher punitive awards, including the

following relevant ones:

1) Where the probability of detection is very

low, see, e.g., Mathias, 347 F.3d at 676;

2) Where the misconduct is _ potentially

lucrative, id.; and,

3) Where wealth enables “the defendant to

mount an extremely aggressive defense .. .

[and] by doing so . . . make{s] litigating

against it very costly, id. at 677.

State Farm left the door open even to triple-digit

ratios when the facts and circumstances warrant it in the

judgment of the jury and reviewing court. 538 U.S. at

425. In this case, the herm visited upon Jesse Williams

was agonizing, ultimate, and irreplaceable. Yet, damages

in wrongful death cases are difficult to set and “cannot be

fully captured in money value.” Williams I, 48 P.3d at

842. Under Oregon’s wrongful death statute, as in most

states, compensatory damages are based on the monetary

losses of decedent’s family, such as medical bills, burial

20

costs, and loss of the decedent’s economic contribution to

the family. See Or. Rev. Stat. § 30.020. Damages for

wrongful death are also artificially capped at $500,000,

regardless of the amount the jury determines is necessary

to compensate for any losses, regardless of the number of

survivors. Or. Rev. Stat. § 18.560.

For these reasons, it is widely recognized that

“[w]rongful death damages fail to compensate for the

harm to decedent.” A. Mitchell Polinsky & Steven

Shavell, Punitive Damages: An Economic Analysis, 111

HARV. L. REV. 869, 941-42 (1998). See also William

Landes & Richard Posner, THE ECONOMIC STRUCTURE OF

TORT LAW 187 (1987)(The measure of recoverable

damages “results in a systematic underestimation of

damages in wrongful-death cases.”). Thus, the amount of

compensatory damages awarded in wrongful death cases,

such as this one, does not represent the extent of the

harm caused by the defendant, but merely the monetary

loss to the surviving family. Nor can it be said that the

$500,000 in compensatory damages awarded in this case

were “substantial” or “complete compensation” for the life

that was taken.’ Compare State Farm, 538 U.S. at 426

(finding $1 million to compensate plaintiff for 18 months

of mental suffering substantial and complete

compensation).

6 In Oregon, the surviving spouse and children are also

entitled to noneconomic damages for loss of the “society,

companionship and services of the decedent.” Or. Rev. Stat. §

30.020(2)(d).

7 Studies attempting to place a monetary value on the

loss of life have arrived at estimates ranging from $3-$7 million.

W. Kip Viscusi, The Social Costs of Punitive Damages Against

Corporations In Environmental and Safety Torts, 87 GEO. L.J.

285, 314 (1998). “Court awards for compensatory damages after

fatalities are typically well below that amount.” /d.

21

Even if the Court were inclined to tie punitive

damages more rigidly to compensatory damages, a

wrongful death case such as this one is an especially poor

vehicle to do so. Fewer than half the states permit

punitive damages in wrongful death cases. 1 John J.

Kircher & Christine M. Wiseman, PUNITIVE DAMAGES:

LAW AND PRACTICE § 5.10 (2d ed. 2000). As one

commentator has noted, “[w]rongful death is an area of

the law in which the measurement of loss in pecuniary

terms presents intractable difficulties.” Dorsey D. Ellis,

Jr., Fairness and Efficiency in the Law of Punitive

Damages, 56 S. CAL. L. REV. 1, 30 n.140 (1982). A scholar

who found a general correlation in awards between

punitive and compensatory damages also discovered that

“[t]he one exception to that pattern was in wrongful

death cases.” Michael L. Rustad, In Defense of Punitive

Damages in Products Liability: Testing Tort Anecdotes

with Empirical Data, 79 IOWA L. REV. 1, 64 (1992).

Even scholars who advocate complete abolition of

punitive damages acknowledge that wrongful death cases

present an atypical situation of systematically low

compensatory awards where punitive damages might be

“needed to create adequate deterrence.” Viscusi, supra, 87

GEO. L.J. at 334. For this reason, a wrongful death case

presents a poor vehicle for this Court to establish a rigid

ratio rule.

An additional difficulty is that, because

compensatory wrongful death damages largely reflect the

financial contribution of the decedent, awards for the

wrongful death of a child or a nonworking spouse are

comparatively low. Polinsky & Shavell, supra, 111 HARV.

L. REV. at 941 n.229. Consequently, the constitutional

presumption urged by Petitioner amounts to a

presumption that, as a matter of law, the wrongdoer who

kills a child or nonworking spouse is less deserving of

punishment or deterrence than one who kills a healthy

wage earner. The same rule of law would deem it more

important to punish and deter misconduct that kills a

22

wealthy neurosurgeon rather than a semi-retired school

janitor such as Jesse Williams. Tr. Vol. 12-B at 36-37.

That such a rigid rule of inequality should be read into

the Fourteenth Amendment is particularly inappropriate.

Beyond the issues posed by death’s differences,

this was a fraud that was difficult to detect and prove, as

well as one in which Petitioner expended untold sums to

hide and defend. Moreover, considering the huge profits

pursued and obtained by Philip Morris in perpetuating

this very successful fraud, it is not difficult to say that

this punitive damage award was proportionate to the

wrong committed.

Il. PETITIONER’S PROFERRED JURY

INSTRUCTION WAS PROPERLY REJECTED

BY THE OREGON COURTS

A. State Farm Does Not Require a

“Proportionality” Jury Instruction

Nothing in State Farm requires or suggests that a

jury must be instructed as to the relationship between

punitive and compensatory damages. In fact, the only

mention of a mandated jury instruction in State Farm

relates to advising the jury that “it may not use evidence

of out-of-state conduct to punish a defendant for action

that was lawful in the jurisdiction where it occurred.”

State Farm, 538 U.S. at 422. That instruction was given

in this trial. Tr. Vol. 25 at 49-51. Of course, fraud is

illegal in every state.

Even if such a “proportionality” instruction were

advisable, the availability of de novo judicial review

renders its absence harmless. Further, the instruction

proffered by Philip Morris misstated the law and

contradicted itself. The trial court had no obligation to

adopt it and no obligation to rewrite it to correct its

errors. The requested instruction said, in pertinent part:

The size of any punishment should bear a

reasonable relationship to the harm caused :

23

to Jesse Williams by the defendant’s

punishable misconduct. Although you may

consider the extent of harm suffered by

others in determining what that reasonable

relationship is, you are not to punish

defendant for the impact of its alleged

misconduct on other persons...

Pet. at 14.

Plainly, the proposed instruction would have

allowed the jury to consider harm to others in

determining the reasonable relationship, or ratio of

punitive to actual damages, which is precisely what

Petitioner now says is improper. If it were improper, then

giving the instruction would have been invited error. See

United States v. Deberry, 430 F.3d 1294, 1302 (10 Cir.

2005)(explaining the invited-error doctrine). See also

Seaboard Air Line Ry. Co. v. Watson, 287 U.S. 86, 89-90

(1932)(applying doctrine to proposed jury instructions).

Petitioner's proposed instruction was _ also

erroneous as a matter of Oregon law. It would have told

the jury not to be “influenced by the defendant’s financial

condition . . .” Defendants Requested Jury Instruction No.

34 at 2. Yet, a defendant’s financial condition is explicitly

made relevant to punitive damages by state statute, Or.

Rev. Stat. 30.925(2)(f), and the State Farm decision

clearly noted that, while wealth may not otherwise justify

an unconstitutional punitive damage award, this “does

not make its use unlawful or inappropriate.” State Farm,

538 U.S. at 428, quoting BMW, 517 U.S. at 591 (Breyer,

J., concurring). Moreover, a defendant’s “financial

condition” could well include its profitability, which, here,

depended on its fraudulent scheme. It is entirely proper

to assess punitive damages in an amount that disgorges

ill-gained profits. See, e.g., Mathias, 347 F.3d at 676.

In Oregon, a trial court need not give an

instruction that contains errors of law. Simpson v. Sisters

of Charity, 284 Or. 547, 560 (1978). The trial court

24

correctly rejected Petitioner's proposed instruction, and

the Oregon Supreme Court appropriately found no error

in that ruling. Pet. at 18a.

B. Oregon May Consider the Impact on

Defendant’s Fraudulent Scheme on its

Other Residents

The Oregon courts properly limited their

consideration of harm to others to in-state victims of the

same fraudulent conduct. This Court has never found

that to be inappropriate. For example, in BMW, this

Court reasoned that neither plaintiff Gore nor “any other

BMW purchaser” was threatened with additional harm

by defendant’s misconduct. BMW, 517 U.S. at 582. This

Court suggested a proper ratio of harm would be based

not only on harm to the plaintiff but also on “the total

damages of all 14 Alabama consumers who purchased

repainted BMWs.” Jd. at 582 n.35. This Court described

as “error-free” the portion of the jury’s verdict that was

based on the harm suffered by 14 victims of BMW's

misconduct. 517 U.S. at 567 n.11.

Nothing in State Farm either explicitly or

impliedly changes this aspect of BMW. The problem

identified in State Farm was the state court’s use of

dissimilar, out-of-state conduct to justify the punitive

damages award. State Farm said that a state does not

have “a legitimate concern in imposing punitive damages

to punish a defendant for unlawful acts committed

outside of the State’s jurisdiction.” State Farm, 538 U.S.

at 421. Far from holding that in-state harm to others

could not be considered, State Farm found there was no

evidence of such harm, stating that the plaintiffs

inability to point to “testimony demonstrating harm to

the people of Utah . . . indicates that the adverse effect on

the state’s general population was in fact minor.” State

Farm, 538 U.S. at 427.

Moreover, the Petitioner is wrong when it asserts

that the Oregon Supreme Court’s approach to harm to

25

others is in conflict with the California Supreme Court

and the Eighth Circuit. Pet. at 19. In Johnson v. Ford

Motor Co., 113 P.3d 82 (Cal. 2005), one of the cases

Petitioner claims is in conflict, the California Supreme

Court read BMW and State Farm to make

clear that due process does not prohibit

state courts, in awarding or reviewing

punitive damages, from considering the

defendant’s illegal or wrongful conduct

toward others that was similar to the

tortious conduct that injured the plaintiff

or plaintiffs.

Id. at 90-91. See also id. at 93 (“Nothing the high court

has said about due process review requires that

California juries and courts ignore evidence of corporate

policies and practices and evaluate the defendant’s harm

_to the plaintiff in isolation.”).

Similarly, the Eighth Circuit did not hold that

misconduct toward a particular plaintiff must be

considered in isolation, but instead merely warned

against defining a course of misconduct at such a “high

level of abstraction” that a plaintiff can use any prior bad

acts as evidence of recidivism. Williams v. ConAgra

Poultry Co., 378 F.3d 790, 797 (8 Cir. 2004).

In this case, there was ample evidence that Philip

Morris harmed many other Oregonians and did so on a

continuous basis, rather than through a series of

individually condemnable acts affecting distinct

individuals separately. Moreover, Petitioner spent

considerable time, effort, and money constructing and

maintaining its fraudulent scheme in order to reap

financial success. Philip Morris conceded in its motion to

reduce punitive damages in the trial court that its

fraudulent campaign “affected an undetermined (but

surely relatively small) number of people such as Jesse

Williams.” Defendant’s Reply Memorandum in Support of

Motion for Reduction of Punitive Damages Award at 2,

-_

26

lines 4-6. Philip Morris also conceded the relevance of

harm to others and that others in Oregon were harmed

when it argued, in the same pleading, that any award for

harm in Oregon should be proportionately smaller than a

punitive award in a California case simply because

Oregon had a smaller population. Jd. at 20. As the Court

of Appeals recognized,

there is evidence concerning other Oregon

victims of defendant's decades-long

fraudulent scheme. The tobacco industry

and defendant directed the same conduct

toward thousands of smokers in Oregon.

They all received the same representations,

-from the same entities, and through the

same media, and the industry intended to

induce Oregon smokers to act on those

representations in the same way. That

conduct was a fundamental part of

defendant’s business strategy; Williams

was simply one of its many Oregon victims.

Pet. at 66a.

Philip Morris congratulated itself internally on its

“brilliantly conceived and executed” fraudulent scheme.

Ex. 83 at 1. There was more than enough evidence to

allow the jury to determine that Petitioner's scheme

succeeded with Oregonians other than Jesse Williams.*

8 There is little danger in Oregon of that consideration

resulting in multiple punishments for the same conduct

because, by statute, the state provides for consideration of past

punitive damage awards precisely to prevent that possibility.

Pet. at 66a-67a, citing Or. Rev. Stat. 30.925(2)(g).

27

lil. THE OREGON COURTS’ RESPECT FOR THE

JURY VERDICT DOES NOT VIOLATE ITS

OBLIGATION TO PROVIDE DE NOVO

REVIEW

Petitioner argues here for the first time that the

Oregon courts, in the course of a de novo review of this

punitive damage award, should not have viewed the

evidence in the light most favorable to the prevailing

party. Pet. at 22a. This Court should not entertain this

issue because Petitioner failed to preserve it below. If the

Court considers it at all, the question presented clearly

favors affirmance.

As this Court has made clear, appellate review of

punitive damages is de novo with respect to the trial

court's decision on the constitutionality of the punitive

damage award. The appellate court does not reweigh the

facts and review the jury's award itself de novo. See

Cooper Indus. Inc. v. Leatherman Tool Group, Inc., 532

U.S. 424, 440 n.14 (2001). Punitive damage review

decides whether a jury’s verdict is grossly excessive, not

whether it is the same verdict the court would have

reached had it sat in the jury box.®

9 Petitioner's attempt to create a conflict with a few

state courts on this issue should be rejected. Pet. at 23 & n.12.

For example, in Simon v. San Paolo U.S. Holding Co., 113 P.3d

63 ‘“» 2005), the California Supreme Court did not hold, as

Pet: “eer contends, that the facts should not be read in a

favora..c light to the plaintiff where there is no express factual

finding. Instead, it found that the appellate court erred in

presuming the size of the actual loss from the size of the

punitive damage verdict. Jd. at 70. That narrow ruling cannot

support Petitioner's broad proposition. Nor do any of

Petitioner's other citations amount to a conflict over viewing the

facts favorably to the prevailing party. See Wolf v. Wolf, 690

N.W.2d 887, 894 (lowa 2005)(engaging in de novo review only in

assessing the application of the BMW guideposts); Park v. Mobil

Oil Guam, Inc., 2004 WL 2595897, at *13-14 (Guam Nov. 16,

28

After this Court, in Honda Motor Co. v. Oberg, 512

U.S. 415 (1994), required Oregon to provide judicial

review of punitive damages for excessiveness, the Oregon

Supreme Court held that such an award would “not be

disturbed when it is within the range that a rational

juror would be entitled to award in the light of the record

as a whole.” Oberg v. Honda Motor Co., 888 P.2d 8, 10

(Or.), cert. denied, 517 U.S. 1219 (1996). This standard

was subsequently codified by the Oregon legislature. Or.

Rev. Stat. § 31.730. In adopting the “rational juror”

standard, Oregon was not writing on a blank slate. In the

federal Oberg decision, this Court found no defect in the

use of “different verbal formulations” of the standard of

review because:

There may not be much practical difference

between review that focuses on “passion

and prejudice,” “gross excessiveness,” or

whether the verdict was “against the great

weight of the evidence.” All these may be

rough equivalents of the standard this

Court articulated in Jackson v. Virginia,

[443 U.S. 307, 324 (1979)](whether “no

rational trier of fact could have” reached

the same verdict).

512 U.S. at 432 n.10 (emphasis added). It is clear, then,

that the “rational juror” standard and BMW ‘s “grossly

excessive” standard are constitutionally compatible.

Federal courts utilize the “rational juror” standard

in both criminal and civil matters. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 252 (1986). Courts apply the

standard whether reviewing asserted errors where proof

must be beyond a reasonable doubt, clear and convincing,

or by preponderance of the evidence. Jd. Punitive

2004)(same); Aken v. Plains Elec. Generation & Transmission

Co-Op, Inc., 49 P.3d 662, 668 (N.M. 2002)(same).

29

damages pose no unique problem that requires departure

from this familiar and stringent standard.

Moreover, this Court has recognized that the

Oregon Constitution accords the jury, even in punitive

damage cases, authority to set damages and found that

this status “compell[s] the treatment of punitive damages

as covered [by the right to a jury trial]”. Cooper Indus.,

532 U.S. at 437 n.10 (2001). Respect for state authority

should also compel this Court to recognize Oregon's

efforts to apply its own constitutionally compelled

standard to supplement, but not replace this Court’s

punitive damage rulings. The Oregon courts fully

engaged in the the de novo application of the BMW

guideposts, as informed by State Farm. Pet. at 21la-33a,

67a-75a. See also State v. Rogers, 4 P.3d 1261, 1278 n.8

(Or. 2000)(appellate courts review legal questions “anew

and without deference to the decisions of trial courts”).

The Cooper decision does not require Oregon to abandon

its respect for jury findings. Even under the lesser jury

trial standard available under the Federal Constitution,

this Court said:

[Njothing in our decision today suggests

that the Seventh Amendment would permit

a court, in reviewing a punitive damages

award, to disregard such jury findings [as

are relevant to determining a punitive

verdict. |

Cooper Indus., 532 U.S. at 439 n.12.

The rational juror rule satisfies due process and

sufficiently assures, in combination with the BMW

guideposts, that “punitive damages are reasonable in

their amount and rational in light of their purpose to

punish what has occurred and to deter its repetition.

Haslip, 499 U.S. at 20-21.

30

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted, |

ROBERT S. PECK*

CENTER FOR CONSTITUTIONAL

LITIGATION, P.C.

1050 31* Street, N.W.

Washington, D.C. 20007

(202) 944-2809

JAMES S. COON

RAYMOND F. THOMAS

SWANSON THOMAS & COON

621 SW Morrison Street, Suite 900

Portland, OR 97205

(503) 228-5222

WILLIAM A. GAYLORD

GAYLORD EYERMAN BRADLEY, P.C.

1400 SW Montgomery St.

Portland, OR 97201

(503) 222-3526

CHARLES S. TAUMAN

BENNETT HARTMAN MORRIS &

KAPLAN

P.O. Box 19631

Portland, OR 97280

(503) 849-9821

MAUREEN LEONARD

ATTORNEY AT LAW

520 SW Sixth Avenue, Suite 920

Portland, OR 97204

(503) 224-0212

31

KATHRYN H. CLARKE

ATTORNEY AT LAW

921 SW Washington Street, Ste. 764

Portland, OR 97205

(503) 224-7963

May 1, 2006 *Counsel of Record