Reply Brief — Philip Morris USA v. Williams

G3) tens

No. 05-1256

: 2 CLERK |

In the Supreme Court of the United States

ce Morris USA, prenaaes

MAYOLA WILLIAMS,

Respondent.

On Writ of Certiorari to

the Supreme Court of Oregon

REPLY BRIEF FOR THE PETITIONER

KENNFTH S. GELLER

EVAN M. TAGER

NICKOLAI G. LEVIN

Mayer, Brown, Rowe &

Maw LLP

1909 K Street, NW

Washington, DC 20006

(202) 263-3000

WILLIAM F. GARY

SHARON A. RUDNICK

Harrang Long Gary

Rudnick P.C.

360 East 10th Avenue

Eugene, OR 9740]

(541) 485-0220

ANDREW L. FREY

Counsel of Record

ANDREW H. SCHAPIRO

LAUREN R. GOLDMAN

DANIEL B. KIRSCHNER

Mayer, Brown, Rowe &

Maw LLP

1675 Broadway

New York, NY 10019

212) 506-2500

MURRAY R. GARNICK

Arnold & Porter LLP

555 Twelfth Street, N.W.

Washington, DC 20004

(202) 942-5000

Counsel for Petitioner

WILSON-EPES PRINTING Co., INC. = (202) 789-0096 — WASHINGTON, D.C. 20001

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES... i iinialiaiaiaiabiapagalidiaiid aati il

I. AJURY IN AN INDIVIDUAL CASE MAY

NOT PUNISH FOR HARMS TO NON-

Prenat iccinisihcshsnpntibitiiaiemacipiaiiaaibeminapiasitediibimbindpietainmemimniens l

II. THE $79.5 MILLION PUNITIVE AWARD IS

UNCONSTITUTIONALLY EXCESSIVE.................... 10

A. Respondent Does Not Defend The Oregon

Supreme Court’s Analysis Of The Guideposts. ....... 10

B. The $79.5 Million Award Cannot Be Upheld. ......... 11

1. The presence of “highly reprehensible”

conduct does not justify overriding the

reasonable-relationship requirement. ................. 12

2. The $79.5 million award cannot be

justified as necessary to punish for harm to

ee iieticinieninitcamtaeniicnnnitenteniianatiineie 14

? 3. Respondent’s other justifications for the

$79.5 million award cannot withstand

I ectecpsitnicvsinanansiines Lsccnsiesniesiacneadeniiedimatesiokdasi 17

NUTT iccisdisinhinninicininnntncivensusinicitcibinenisnseibiidiniagiianiséin 20

(I)

TABLE OF AUTHORITIES

a Page(s)

CASES:

Arturet-Vélez v. R.J. Reynolds Tobacco Co., ;

429 F.3d 10 (1st Cir. 2005) sevsesenesesensscossesessessnssssnsesseees 19

Bishop v. Stockton,

3 F. Cas. 453 (C.C. Pa. 1843), aff'd,

ee ea CP ctiiiidicnsecicteiedeitinitanideadiiniieie 8.9

BMW of N. Am., Inc. v. Gore,

I passim

Bremner v. Charles, . *

821 P.2d 1080 (Or. 1991) (en banc)..............cceecesseeeeeees 7

Bullock vy. Philip Morris USA, Inc.,

42 Cai. Rpir. 3d 140 (Cal. Ct. App.), rev. granted,

Pe ee Fa EA Me ievicsicectechiscnisinshiinteeipeeeiasssniinabibiadiini 7

Cipollone v. Liggett Group, Inc., ,

kL | si deaaaaiatiaceiad beable 18

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

ee ee TE es lesciinenhiacisiionsiiideseahaitininsisibinaeaiasiniidie 16, 18

Coryell v. Colbaugh,

1 N.J.L. 77, 1791 WL 380 (N.J. 1791).....:....cccceseeeeeee 8.9

Ewing v. California,

NS ee I isiiainisiiclicntnipinpinseniuncigecinesiounihinebiiintinasiniiileds 4

FDA v. Brown & Williamson Tobacco Corp.,

529 U.S. 120 (2000) ..........sesecssssessrereersesencerenseseeseseesees 18

rink & Co. v. Coe,

4 Greene 555, 1854 WL 228 (lowa 1854)...................00 )

Gavin v. AT&T Corp.. |

2006 WL 2548238 (7th Cir. Sept. 6, 2006)... ee 19

TABLE OF AUTHORITIES - continued

Page(s)

Greist v. Phillips, ;

906 P.2d 789 (Or. 1995) (em banc)... eeeeeeseeeeeees 17

Hopkins v. Atlantic &-St. Lawrence R.R., —

DE ETE, De Be We te A CO OD ceescettscnescccsnsccesesescscenes 9

Huckle v. Money,

2 Wils. 205, 95 Eng. Rep. 768 (K.B. 1763) .............. 8, 11

Johnson v. Ford Motor Co.,

ee I N iciitelencissintanerienpednnsupennennennenevctinais 16

Mathias v. Accor Economy Lodging, Inc.,

og En eee 19

Minneapolis, St. P. & S. Ste. M. Ry. v. Mogquin, )

ee ee SED cxticabicnsctinicniisineeneniniiianinnedansiesiniteiess 6

Oshana v. Coca-Cola Co.,

2005 WL 1661999 (N.D. Ill. July 13, 2005)... 16

Pacific Mut. Life Ins. Co. v. Haslip,

499 U.S. 1 (1991)... pecenisapadgentienendusimensneienennesenanstontes 12

Phelin v. Kenderdine,

- 20 Pa. 354, 1853 WL 6203 (Pa. 1853)... ceeeeeeeee 8,9

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

ee TT ITII ciciadcinictinntidinciinsntciinibiennseiadiinianiiies passim

United States v. Watts,

519 U.S. 148 (1997) (per curiam) ................scssecceserceneees 4

Waddill v. Anchor Hocking, Inc., |

ie Oe Gee FN, BID iccccnccsctninnsnessnesnnesnnncsuets 6

Wilkes v. Wood,

Lofft 1, 98 Eng. Rep. 489 (K.B. 1763)..........cceeseeeeeeeees 8

iV

TABLE OF AUTHORITIES — continued

Page(s)

Witte v. United States,

5 | | nena mR Mt 4

STATUTES:

Se CR | S| ——_+ EON er ALY 17

COR. TREY. BRAT. 5 TD cccwwiesinstisentniiasizvcatiineaiahiausiaads 7

MISCELLANEOUS:

Thomas B. Colby, Beyond the Multiple Punishment

Problem: Punitive Damages as Punishment for —

Individual, Private Wrongs, 87 MINN. L. REV. 583

* QOD nssnensensusesocenmnmnnenintiiiidiiensiiimmammanmenaaie 2

Minutes, Senate Comm. on Judiciary, HB 2350,

FUNDS, TP CD ccsnscsivicsnsinisteniiniisinndamainl 17

Catherine M. Sharkey, Punitive Damages as Societal ,

Damages, 113 YALE L.J. 347 (2003)........ccccceesecesseeeseeees 2

Byron G. Stier, Resolving the Class Action Crisis:

Mass Tort Litigation as Network, 2005 UTAH L.

BEIRY. GERD .consesnrccessssceevonenenseetennsncoestnioiniamasnnnnnnigenieielciaail 19

Trial in a Box, at

http://www.tobacco.neu.edu/box/index. html ................ 19

REPLY BRIEF FOR THE PETITIONER

Respondent fails to address the two issues as to which the

Court granted review. She offers no justification for allow-

ing the jury to punish Philip Morris for harms allegedly suf-

fered by non-parties; to the contrary, she concedes that a jury

may not do so. Nor does she defend the proposition, adopted

by the Oregon Supreme Court, that a reviewing court may

disregard the ratio guidepost if it concludes that the jury

could have found the defendant’s conduct to be highly repre-

hensible. Instead, she has reformulated the questions to raise

points that petitioner has never contested. She does so be-

cause she has to: the Oregon Supreme Court’s decision is

indefensible and unsustainable.

I. A JURY IN AN INDIVIDUAL CASE MAY NOT

PUNISH FOR HARMS TO NON-PARTIES.

Our opening brief argued that the Oregon courts violated

procedural due process by holding that the jury could impose

_ punitive damages — in the Oregon Supreme Court’s words —

to “punish a defendant for harm to non-parties.” Pet. App.

18a. Respondent makes no attempt to defend this holding,

which is flatly contrary to this Court’s precedent. See State

Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 423

(2003); PM Br. 10.

Instead of engaging the question presented, respondent

offers two unremarkable and uncontested propositions: that

harm to non-parties can properly be considered in gauging

the reprehensibility of a tort; and that punitive damages can

help protect the public by means of general deterrence. Nei-

ther proposition supports the decision below or is even re-

sponsive to the questions presented.

1. Respondent presents no response to our showing that

the procedure endorsed below is a recipe for the arbitrary

deprivation of property because it permits a defendant to be

tv

punished for harms to unidentified individuals who are not

before the court without (i) any adequate opportunity to show

that those unidentified non-parties might lack valid claims,

(ii) any meaningful protection against identical future claims

by those persons, or (iii) any allowance for cases that the de-

fendant has previously won or will win in the future. PM Br.

10-17; see also Thomas B. Colby, Beyond the Multiple Pun-

ishment Problem: Punitive Damages as Punishment for Indi-

vidual, Private Wrongs, 87 MINN. L. REV. 583, 596 (2003).

Oregon’s procedure is foreclosed by this Court’s holding in

State Farm that “{d]jue process does not permit courts, in the

calculation of punitive damages, to adjudicate the merits of

other parties’ hypothetical claims against a defendant.” 538

U.S. at 423.

Far from contesting these points, respondent concedes

that “[tjobacco litigation has generally not been found to

qualify for class-action treatment, either because individual

causation issues predominate or because separate adjudica-

tions would not be dispositive of others’ interests.” Br. 34

n.22. This concession underscores a crucial point: an indi-

vidual plaintiff such as Mayola Williams should not be al-

lowed to recover what amounts to class-wide punitive

damages in a trial that was not subject to the procedural re-

' Respondent claims (Br. 42) that we have “assign[ed]” this dispositive

statement in State Farm a “weight it cannot bear.” In support of that as-

sertion, she relies on Professor Sharkey’s “*more contextualized and nu-

anced reasoning’” “‘that the Court was primarily concerned with limiting

the extraterritorial or out-of-state reach of punitive damages’” (Br. 44,

quoting Catherine M. Sharkey, Punitive Damages as Societal Damages,

113 YALE L.J. 347, 350 (2003)). This interpretation is wrong: it cannot °

be squared with the Court's treatment of the non-party punishment issue

as an independent and “more fundamental” concern (State Farm, 538

U.S. at 422), or with its observation that the problem relates to “the pos-

sibility of multiple punitive damages awards for the same conduct” and to

the fact that “nonparties are not bound by the judgment some other plain-

tiff obtains” (id at 423).

3

quirements and substantive limitations associated with class-

action suits — requirements and limitations that provide criti-

cal due process protections to defendants.

Fraud claims of the type brought by respondent are un- —

suited for class treatment precisely because the issues they

present require individualized showings that are impossible

to prove for an undifferentiated mass of smokers. Pet. Br.

15-16. It necessarily follows that it is unacceptable to permit

a single jury to punish a defendant for defrauding a class of

non-parties in a case brought by an individual. To allow such

global punishment in a case brought by an individual plaintiff

would, among other flaws, deprive the defendant of the pro-

tective res judicata effect of a class action. The de facto class

action permitted by the court below yields exactly the result

that this Court foreclosed in State Farm: punishment for

harm to non-parties that “creates the possibility of multiple

punitive damages awards for the same conduct” because

“nonparties are not bound by the judgment [the] plaintiff ob-

tains.” 538 U.S. at 423.

2. Lacking any basis for defending the Oregon Supreme

Court’s holding, res ent pretends that the court did not

allow punishment for harm to non-parties after all. She

maintains that the holding below simply permitted the jury to

“consider|]” the harm to others “in its reprehensibility analy-

sis.” Br. 42. This revisionist account of the ruling below is

demonstrably wrong. The Oregon Supreme Court expressly

held that the Constitution does not “prohibit[] the state, act-

ing through a civil jury, from using punitive damages to pun-

ish a defendant for harm to non-parties.” Pet. App. 18a

(emphasis added). Indeed, the proposed jury instruction that

it rejected as legally inaccurate is virtually identical to re-

spondent’s contention here; it would have informed the jury

that it may “consider the extent of harm suffered by others in

determining” what award bears a reasonable relationship “to

the harm caused to Jesse Williams,” but that it could not

4

“punish the defendant for the impact of its alleged miscon-

duct on other persons.” PM Br. 4. In rejecting this proposed

instruction, the Oregon Supreme Court reasoned that, “if a

jury cannot punish for the conduct [that allegedly harmed

non-parties], then it is difficult to see why it may consider it

at all.” Pet. App. 18a n.3.

3. The error below arises from a conflation of what re-

spondent now recognizes to be two fundamentally different

things: (i) considering non-party harms for purposes of as-

sessing reprehensibility, and (ii) actually punishing for those

harms. Respondent concedes that “consideration of total

harm” to non-parties in assessing reprehensibility is-“not the

same” as “punishment for” that harm, and that the former is

permissible but the latter is not. Br. 35-36. As we discussed

in our opening brief (at 22), this Court has repeatedly drawn

this important distinction both in the punitive damages con-

text and in the analogous context of criminal sentencing.’ A

court may enhance the punishment for the harm caused to a

plaintiff in light of the nature of the wrong, including

whether it endangered a single individual or many individu-

als. But the extent of any such enhancement is strictly con-

2 See State Farm, 538 U.S. at 423 (non-party harm may be taken into

account in assessing reprehensibility because “‘repeated misconduct is

more reprehensible than an individual instance of malfeasance,’” but a

court cannot impose actual “punishment” for non-party harms “under the

guise of the reprehensibility analysis” because that would “create(] the

possibility of multiple punitive damages awards for the same conduct”),

BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 574 0.21 (1996) (“evidence”

of non-party harms “may be relevant to the determination of the degree of

reprehensibility” but cannot be used as a “multiplier in computing the

amount of [the] punitive sanction”). Similarly, in criminal sentencing, a

court may take a recidivist’s other misconduct into account in imposing a

sentence within the permissible range for the specific crime at issue in the

case, but it may not punish for anything other than the offense of convic-

tion. See Ewing v. California, 538 U.S. 11, 25-26 (2003); United States

v. Watts, 519 U.S. 148, 154 (1997) (per curiam); Witte v. United States,

515 U.S. 389, 400 (1995).

5

fined: the resulting punishment must remain within the per-

missible range of penalties for the harm to the plaintiff.

Thus, although the degree of wantonness reflected in a civil

defendant’s conduct may warrant an enhanced punitive

award for the impact of that conduct on the plaintiff, that is

fundamentally different from punishing the defendant for

harms to non-parties who have not proven their claims and

who would not be bound by the result. The former weighs

the degree of reprehensibility of the defendant’s conduct for

purposes of assessing the appropriate award to a single plain-

tiff for his or her harm; the latter impermissibly punishes a

defendant for unproven harm and engenders both “the possi-

bility of multiple punitive damages awards for the same con-

duct” (State Farm, 538 U.S..at 423) and the risk of “‘double

count[ing]’ by including in the punitive damages award some

of the compensatory, or punitive, damages that subsequent

plaintiffs would also recover” (BMW, 517 U.S. at 593

(Breyer, J., concurring)).°

Because — as respondent asserts and as we agree — this

distinction is a correct statement of the law, the jury should

have been so instructed and the Oregon Supreme Court’s re-

jection of just such an instruction as “not accurately re-

flect{ing] the law” (Pet. App. 21a) was reversible error. And

respondent offers no meaningful response to our argument

that, if punishment for harms to non-parties is unconstitu-

tional, then the Due Process Clause entitled Philip Morris to —

the instruction that it requested. PM Br. 23-25. Indeed, this

_ Court in State Farm recognized the need to give a similar

* Another way to perceive the difference is in relation to future punitive

awards. If harm to others is merely a factor in the reprehensibility calcu-

lus, then it should be proper for each successful plaintiff to receive a simi-

lar award. (Plainly, the current award cannot pass any such test.) If, on

the other hand, non-party harms have already been punished, then no fur-

ther punitive damages should be imposed when those persons bring their

own suits.

6

instruction to tell the jury that it could not punish for out-of-

state harms. 538 U.S. at 422.°

Respondent also appears to suggest that the Oregon Su-

preme Court's review of the purfitive award for excessiveness

somehow cured the failure to instruct the jury correctly. See

Br. 42. But that failure irremediably tainted the verdict. Re-

spondent’s counsel urged the jury to punish for harms to all

Oregonians affected by smoking. J.A. 197a, 199a. And in-

stead of giving petitioner’s proffered instruction admonishing

the jury not to punish for non-party harms, the trial court

charged the jury that it was free to award any amount up to

the $100 million arbitrarily requested in the complaint. See

PM Br. 4. Post-trial review could not cure the resulting

prejudice: in Oregon, as in most jurisdictions, excessive

awards are remitted only to the greatest amount a jury could

lawfully have awarded. See Waddill v. Anchor Hocking,

Inc., 78 P.3d 570, 576-77 (Or. Ct. App. 2003). Here, a prop-

erly instructed jury might well have awarded less than that

maximum, so remittitur does not remedy the constitutional

~violation. See PM Br. 24 n.10; cf. Minneapolis, St. P. & S.

Ste. M. Ry. v. Moquin, 283 U.S. 520, 521 (1931) (remittitur is

inadequate for a verdict produced by passion and prejudice).

4. Respondent claims that Oregon’s existing procedures

are sufficient to guard against multiple punishment; in par-

ticular, she relies (Br. 45) on the provision allowing evidence

4

Respondent contends (Br. 48) that the court was right to deny the pro-

posed instruction because it was internally inconsistent as to the relevance

of petitioner’s financial condition. In making that argument, however,

respondent misleadingly quotes from two separate, alternative versions

of petitioner's proposed instruction. The primary version stated that the

jury could not rely on petitioner's wealth in setting punitive damages

(J.A. 280a); the fallback version instructed the jury that it could consider

that evidence, but that it could not punish petitioner “simply because it is

large.” J.A. 281a. This wholly proper “inconsistency” has no bearing on

the claim of instructional error here.

7

of past punitive damages payments to be introduced in future

cases. Or. REV. Siar. § 30. 925(2)(g). That procedure, how-

ever, is no protection at all.

First, to the extent the defendant wins its subsequent

cases, this system makes no provision for it to receive

“credit” against the earlier, global punitive award. See PM

Br. 12-13.

Second, respondent has taken the position that, under the

jury-trial provision of the Oregon Constitution, a court may

not consider on post-verdict excessiveness review any facts

that have not been presented to the jury. If that view is cor-

rect, a defendant wishing to avail itself of this.“protection”

must tell the subsequent jury that one or more earlier juries

found its conduct to be so reprehensible as to warrant severe

punishment. Particularly in Oregon, where courts often deny

a defendant’s request for a bifurcated trial (see, e.g., Bremner

v. Charles, 821 P.2d 1080, 1083 (Or. 1991) (en banc) (bifur-

cation should not be granted routinely)), such a disclosure

will be highly prejudicial to the defendant’s prospects of

winning on liability.

Third, it is not clear that prior awards that are still subject

to appeal can be considered. Cf. Bullock v. Philip Morris

USA, Inc., 42 Cal. Rptr. 3d 140, 171 1.26 (Cal. Ct. App.) (re-

fusing to consider, on post-verdict review, “two specific prior

California punitive damages awards totaling $59 million that

became final after judgment was entered by the trial court in

this matter”), rev. granted, 141 P.3d 718 (Cal. 2006).

Finally, and most fundamentally, there is no guarantee

that a subsequent jury will take the prior judgments into ac-

count by giving the defendant an appropriate credit for them.

It is at least equally likely that the subsequent jury would use

the prior awards as a measuring stick for its own large puni-

tive award, resulting in excessive and multiple punishment.

5. Respondent (and her amici) also repeatedly insist that

prior to the enactment of the Fourteenth Amendment, exem-

plary damages were viewed as an established remedy and

some courts invoked deterrence and the interests of the gen-

eral public as legitimate objectives of that remedy. E.g.,

Resp. Br. 37-42; Amar/McEvoy Br. 5-23. Those points are

both uncontroversial and irrelevant. What matters here is

that there was a general consensus among 19th-century

courts that punitive damages were imposed to punish only for

the injuries the defendant had inflicted upon the plaintiff be-

fore the court. See PM Br. 18-20; ATRA Br. 5-21. Notwith-

standing respondent’s assertion (Br. 36 n.25), not a single

one of the cases cited by her or her amici allowed punish-

ment for harms to others, or even remotely suggested that

such a result was permissible.”

Consider, for example, respondent’s repeated reliance

(Br. 38, 39, 41 n.33; App. A at la) on Bishop v. Stockton, 3

* In fact, several of the cases included in respondent's 24-page Appen-

dix were also cited by ATRA in support of petitioner, because they spe-

cifically reject punishment for non-party harms. See, e.g., Phelin v.

Kenderdine, 20 Pa. 354, 1853 WL 6203 (Pa. 1853), and Coryell v. Col-

haugh, | N.J.L. 77, 1791 WL 380 (NJ. 1791), cited at Resp. App. A at

1Sa, 18a, ATRA Br. 14-15 & n.i1. Amici Amar and McEvoy devote

much of their attention to Wilkes v. Wood, Lofft 1, 98 Eng. Rep. 489

(K.B. 1763), and Huckle v. Money, 2 Wils. 205, 95 Eng. Rep. 768 (K.B.

1763). See Amar/McEvoy Br. 5-9. But as ATRA explains (at 12-13),

there was no suggestion in either of those cases that the punishments

could or should reflect the harm done to anyone but the particular plain-

tiff.

rinaliy, respondent seeks support (Br. 43) in a footnote in BMW in

which this Court observed that “respect for the error-free portion of the

jury verdict would seem to produce an award of $56,000 ($4,000 multi-

plied by 14, the number of repainted vehicles sold in Alabama)” as op-

posed to the $2 million in punitive damages left standing by the Alabama

Supreme Court (517 U.S. at 567 n.11). But the issue of the propriety of

punishing for harm to non-parties within the State was not raised in that

case, much less resolved by this Court.

F. Cas. 453 (C.C. Pa. 1843), aff'd, 45 U.S. (4 How.) 156

(1846). The plaintiff in Bishop sued the owner of a stage-

coach after she was injured when the stagecoach overturned.

The Bishop court did, as respondent says, justify punitive

damages as a means of “protect{ing] the community from

future risks and wrongs.” 3 F. Cas. at 455. But when it came

to assessing the appropriate amount of punitive damages, the

court focused on the particular circumstances giving rise to

the plaintiff's injuries. /bid. The court gave no indication

that injuries to other persons in this or past accidents involv-

ing stagecoaches owned by the same defendant could or

should be considered, much less that the jury could punish

for such injuries.° Not only do the other examples proffered

by respondent fail to support the argument that punitive dam-

ages historically could be employed to punish for harms to

non-parties; they explicitly contradict that position.’

In short, the historical record simply confirms that the

Oregon Supreme Court erred in holding that a jury in an in-

° Respondent’s discussion (Br. 40-41; App. A at 9a, 13a-14a) of two

other cases, Hopkins v. Atlantic & St. Lawrence R.R., 36 N.H. 9, 1857

WL 2820 (1857), and Frink & Co. v. Coe, 4 Greene 555, 1854 WL 228

(lowa 1854), similarly confuses a justification for allowing punitive dam-

ages based on societal interests with the conduct for which a jury can

punish (or, in many of the older cases, even consider). See ATRA Br. 19

n.15.

For example, in Phelin v. Kenderdine, supra — another case respon-

dent cites repeatedly (Br. 6 n.2, 40 n.32; App. A at 18a-19a) — the Penn-

sylvania Supreme Court allowed the father in a seduction case to present

evidence of breach of promise to marry even though the daughter could

bring her own action on that breach. The court reasoned that this was

permissible precisely because in the case at hand the jury could punish

only for harm to the father. Similarly, in another case from respondent's

Appendix (at 15a), Coryell v. Colbaugh, supra, an action for breach of

promise of marriage, the court barred the defendant's proffered evidence

that the father had already recovered exemplary damages for seduction

because the father’s suit “was her father’s action — she is not to be af-

fected by it here.” 1791 WL 380, at *1.

10

dividual case may impose punitive damages that “punish a

defendant for harm to non-parties.”

ll. THE $79.5 MILLION PUNITIVE AWARD IS

UNCONSTITUTIONALLY EXCESSIVE.

A. Respondent Does Not Defend The Oregon

Supreme Court’s Analysis Of The Guideposts.

Remarkably, respondent ignores the second question as

to which this Court granted review: whether the Oregon Su-

preme Court erred in holding that the constitutional require-

ment of a reasonable relationship can be “overrid[{den]” if the

jury could have found that the defendant’s conduct was

“highly reprehensible” and might constitute manslaughter.

Instead of defending this holding, she reframes the second

question as “[w]hether the ratio between compensatory and

punitive damages comprises the conclusive and overriding

guidepost as to the reasonableness of a punitive damages

verdict.” Resp. Br. i (emphasis added); see also id. at 26.

But we have never taken the position that the ratio guidepost,

or any other factor, is the “conclusive” measure of excessive-

ness. In contrast to the Oregon Supreme Court’s approach,

we argued in our opening brief (at 25-33) that (i) all three

guideposts must be considered together; (ii) mo single crite-

rion, including ratio, is sufficient on its own to assess the

constitutionality of an award; and (iii) the ratio guidepost

cannot be jettisoned, because it alone serves several functions

that are critical to the excessiveness inquiry. Respondent an-

swers none of these points.

Respondent’s suggestion (Br. 26) that we advocate a “flat

ratio approach for all cases, regardless of the facts” or a

“mathematical bright-line straitjacket” is baseless. Even a

cursory reading of our brief demonstrates the falsity of that

contention. We explained that this Court’s decisions de-

scribe a range of permissible multiples, generally between

zero and nine (and zero to four when compensatory damages

1]

are substantial, as here), and set forth certain well-defined

circumstances in which the ratio can exceed the top of that

range, none of which applies here. PM Br. 33-39. The rep-

rehensibility guidepost is a key determinant of where along

the spectrum the maximum ratio falls in any particular case;

other factors include the size of the compensatory award, the

existence of other possible deterrents, and the magnitude of

the fines for comparable misconduct. /d. at 34-35. That ap-

proach, which is the essence of State Farm and BMW, allows

all three guideposts to operate together.

B. The $79.5 Million Award Cannot Be Upheld.

Respondent does not — because she cannot — dispute our

position that, under S/ate Farm, a low-single-digit multiple is

the constitutional maximum in most cases in which the com-

pensatory award is substantial. See PM Br. 33-35. Nor does

she challenge our showing that this Court’s guidance in State

Farm was drawn from centuries of Anglo-American legal

history. PM Br. 35-38; see also ATRA Br. 21-30 & nn.18-19

(surveying the historical case law and noting that “punitive

awards upheld on appeal were almost never more than one or

two times the amount of the compensatory award” except

where the actual damages were very small).*

Instead of contesting the validity of these general princi-

ples, respondent asks this Court to break new ground by

holding that a 97:1 ratio can somehow satisfy due process

Neither respondent nor any of her amici cites a single historical case

allowing a large ratio — let alone a 97:1 ratio — when the compensatory

damages were not small, and we are aware of no such decision. See PM

Br. 36-38; ATRA Br. 21-30. The cases cited by Professors Amar and

McEvoy all involved punitive and compensatory awards substantially

smaller, even in 2006 dollars, than the $79.5 million punitive award and

$521,845 compensatory award here. In particular, while the professors

emphasize the “enormous” £300 punitive award in Huckle v. Money, su-

pra, that award is only around $43,000 in 1996 dollars. BMW, 517 U.S.

at 597 (Breyer, J.. concurring); ATRA Br. 26-27 & n.23.

12

because of the circumstances of this case. She proposes

various justifications for departing from State Farm, BMW,

and Haslip and carving out a new rule for tobacco cases. Br.

6-34. Not one of those purported reasons comes close to jus-

tifying a ratio above the low single digits, let alone 97:1.

1. The presence of “highly reprehensible”

conduct does not justify overriding the

reasonable-relationship requirement.

Respondent’s primary argument is that petitioner’s con-

duct was “uniquely monstrous” and that the sky is therefore

the limit for a punitive award. Br. 7-17. Indeed, this notion

— that if the defendant’s conduct is highly reprehensible there

is effectively no limit on the amount of punitive damages that

may be awarded — is a theme that runs through respondent’s

brief (and those of most of her amici).’

As we pointed out in our opening brief, characterizing the

misconduct at issue as “extraordinarily reprehensible” or

“uniquely monstrous” cannot change the fundamental nature

of the excessiveness inquiry and certainly cannot justify jetti-

soning the reasonable-relationship requirement. This Court’s

decisions establish that the ratio guidepost alone addresses

indispensable components of the excessiveness inquiry such

as objectivity, proportionality, and the impact of the compen-

satory award on the need for additional deterrence. These

components are especially critical to due process where, as

here, allegations of gross misconduct evoke strong emotion

and can easily arouse the passion and prejudice of the jury.

See PM Br. 27-33.

Respondent’s arguments only underscore this point. Al-

though respondent uses an array of pejorative adjectives to

* The view that the conduct at issue here was highly reprehensible is

hardly universal among juries: juries have returned defense verdicts in the

vast majority of cases raising the same theory that plaintiff raised here.

PM Br. 41 & n.29; see also R.J. Reynolds Br. 8-9 (compiling statistics).

13

describe petitioner’s alleged misconduct, she offers no test

for distinguishing between “reprehensible” conduct (which is

a prerequisite for any award of punitive damages, and which

respondent concedes is subject. to the ratio constraints set

forth in State Farm) and “highly reprehensible” conduct (as

to which, she contends, sky-high ratios are perfectly accept-

able). Her failure to do so demonstrates what we contended

in our opening brief — that so-called “extreme reprehensibil-

ity” is a highly subjective, manipulable determination. See

PM Br. 30-31. Indeed, courts and juries can find — and often

have found — a defendant’s conduct to be “highly reprehensi-

ble” even when that conduct was approved by relevant regu-

lators and/or exonerated by prior juries. See Auto Mfrs. Br.

7-13, 28; PLAC Br. 9-13.

The need for the ratio requirement’s objective constraint

is further revealed by how readily the Oregon Supreme Court

invoked “extremely reprehensible” conduct despite the ab-

sence of any jury finding to that effect. Although respondent

portrays the Oregon Supreme Court as having “reviewed this

case de novo” to make such a finding (Br. 3-4, 6-7), that

court actually did the opposite: it repeatedly deferred to

“findings” that the jury, which returned a general verdict,

never in fact made.'° Nor can a finding of extreme reprehen-

sibility simply be inferred from the size of the award: (1) the

verdict was 20% lower than the maximum the jury was told it

could award; and (2) for all that appears, the size of the

award was driven by the evidence of Philip Morris’s wealth,

and by respondent’s exhortations to punish for alleged harm

to all Oregonians. '!

” Respondent asserts (Br. 3), without citation, that the jury “specifically

found that the scheme ensnared a large number of Oregonians * * *.”

The verdict form (J.A. 288a-291a) contains no such finding.

'' In attempting to demonstrate that the jury “must have found” high

reprehensibility, many of respondent's amici rely heavily on allegations

of conduct (i) that had nothing to do with Jesse Williams; (ii) as to which

14

At bottom, the “high reprehensibility” exception that re-

spondent proposes is functionally indistinguishable from the

Oregon Supreme Court’s holding that the possibility of a jury

finding of high reprehensibility can “overrid[e]” the reason-

able relationship requirement. The exception would swallow

the rule. The due process constraints on punitive awards rec-

ognized by this Court would be eliminated whenever a court

says that, taking the evidence in the light most favorable to a

general verdict, the conduct could have met an undefined

(and undefinable) concept of “high reprehensibility.”

For all of these reasons, the State Farm Court identified

only three potential exceptions to the single-digit ratio limit,

each of which involves situations that are objectively identi-

fiable and that do not present the prospect of repeated puni-

tive awards: where (i) “a particularly egregious act has

resulted in only a small amount of economic damages”; (ii)

“the injury is hard to detect”; or (iii) “the monetary value of

noneconomic harm might have been difficult to determine.”

538 U.S at 425 (internal quotation marks omitted). The

Court did not suggest that there might be another exception

for “high reprehensibility,” and it should not accept respon-

dent’s invitation to create one here. ?

2. The $79.5 million award cannot be justified as

necessary to punish for harm to non-parties.

Respondent suggests that a 97:1 ratio is acceptable be-

cause the $79.5 million punitive award is a justifiable penalty

for “the full impact of Philip Morris’s misconduct on others

in Oregon” and necessary for sufficient deterrence. Br. 23-

26, 35.

These arguments suffer from precisely the same problems

as the contention that punitive damages can properly punish

the jury found no punitive liability, such as claims of nicotine manipula-

tion; and/or (iii) that are not even part of the record.

15

for non-party harms. Respondent’s arguments presume that

this case represents the sole opportunity to impose punitive

damages for the impact of petitioner’s conduct on large num-

bers of other Oregonians. That assumption, however, cannot

be correct: either respondent’s charges of “monstrous” repre-

hensibility that injured thousands of Oregonians have merit,

and there will be further Oregon plaintiffs bringing suit seek-

ing further punitive and compensatory awards, or else the

scope of the tortious conduct and tortious harm is not as

broad as respondent asserts and requires !ess deterrence. E1-

ther way, the ratio guidepost is essential (i) to ensure that the

punitive awards are properly apportioned among the potential

plaintiffs and that multiple awards do not lead to excessive

overall punishment; (ii) to account for the deterrent effect of

any compensatory awards, which will likely be substantial

both individually and in the aggregate if respondent is correct

about the scope of the conduct; and (ili) to prevent any one

jury from nullifying the findings of other juries on similar

claims. See PM Br. 28-29, 32-33. It is for this reason that

“State Farm made clear that that “the measure of punishment”

must be kept “proportionate to the amount of harm to the

plaintiff’ (538 U.S. at 426; emphasis added) — not to the

amount of harm to other persons not before the court.

It also bears mention that respondent’s assertions regard-

ing the scope of the harm resulting from the alleged wrongful

conduct — as opposcu to smoking per se — are entirely with-

out record basis. There was absolutely no evidence regarding

the impact of the alleged fraud on other Oregonians. See

State Farm, 538 U.S. at 426-27 (plaintiffs sought to justify

punitive award on ground that “State Farm’s policies have

affected numerous Utah consumers”; this Court rejected the

argument because of “the Campbells’ inability to direct us to

testimony demonstrating harm to the people of Utah”).'?

i2

Respondent argues that the punishment not only must suffice to deter

Philip Morris, but “‘must also be sufficient to deter others.” Br. 24 (cita-

16 _

Finally, respondent’s related contention that the punitive

award is necessary to disgorge all of petitioner's “ill-gotten

gains” (Br. 21-23, 24-25, 31-34) is another variant of the er-

roneous argument that a punitive award can punish for non-

party harms. The very same gains could be disgorged over

and over at the behest of every plaintiff seeking to “justify”

similarly —huge awards, again turning each individual case

into a de facto class action that fails to provide defendant

with the protections of a class action. See, e.g., Johnson v.

Ford Motor Co., 113-P.3d 82, 93-94 (Cal. 2005) (“aggregate

disgorgement” theories violate State Farm because they risk

the imposition of multiple and duplicative punishment);

Oshana v. Coca-Cola Co., 2005 WL 1661999, at *10 (N.D.

Ill. July 13, 2005).

In any event, respondent introduced no evidence of the

purported amount of petitioner’s “ill-gotten gain,” but only

evidence of the profits earned from selling cigarettes — itself

not a tortious act. See Cooper Indus., Inc. v. Leatherman

Tool Group, Inc., 532 U.S. 424, 442 (2001) (“[the] wrongdo-

~ ing surely could not be treated as the principal cause of Coo-

per’s entire sales volume for a 5-year period”). There was

not even evidence of profits derived from sales to Jesse Wil-

tion omitted; emphasis added); see also State AG Br. 3-7. But the uncon-

troversial fact that general deterrence is one objective of punitive dam-

ages does not justify ignoring the constitutional proportionality

requirement in a particular case. Moreover, if respondent's characteriza-

tion of the reprehensibility and magnitude of harms from the punishable

conduct is in fact shared by juries in future cases, the total liability faced

by the tobacco companies in civil litigation will be very substantial. And

civil litigation is not the only mechanism for accomplishing deterrence.

For example, the tobacco companies are responsible for billions of dollars

in payments to the Attorneys General of all 50 States, including Oregon,

for the same course of conduct at issue here. See PM Br. 40. The indus-

try is also subject to extensive oversight both by the FTC and by the State

Attorneys General pursuant to the MSA. /d at 39-40.

17

liams, though that amount self-evidently could not justify the

mammoth award here.

3. Respondent’s other justifications for the $79.5 |

million award cannot withstand scrutiny.

Respondent also raises a number of additional arguments

in an attempt to justify the $79.5 million punitive damage

award. Not one has any merit.

a. Respondent contends (Br. 29) that wrongful-death

damages understate the harm to the plaintiff because there is

no compensation for “hedonic” losses — the decedent’s loss

of the years he otherwise would have lived. This rationale

formed no part of the Oregon Supreme Court’s reasoning,

and it is legally meritless. In establishing a statutory cause of

action for wrongful death (a cause of action not recognized at —

common law), the Oregon legislature provided a right to re-

cover for certain economic and noneconomic harms. The

legislature made the determination that the damages allowed

under the statute (where none were recoverable previously)

would “justly, fairly, and reasonably compensate” for the loss

suffered by the plaintiff and that further hedonic damages

were not necessary for full compensation. OR. REV. STAT.

§ 30.020(2); Minutes, Senate Comm. on Judiciary, HB 2350,

June 8, 1973; see also Greist v. Phillips, 906 P.2d 789, 795,

797 (Or. 1995) (en banc) (statutory cause of action provides

“substantial” damages).

If respondent and her amici believe that this legislative

judgment is incorrect, the proper venue in which to seek re-

lief is the Oregon legislature. Respondent’s argument ulti-

mately devolves into the untenable proposition that the

Oregon courts can uphold awards that are concededly dispro-

portionate to the plaintiff's damages award. If accepted, this

argument would eviscerate the Due Process Clause’s reason-

able relationship requirement. In any event, even if respon-

dent’s point had some merit, it would not create a reasonable

18

relationship with the $79.5 million award and would still re-

~ quire a drastic reduction.

b. Respondent asserts (Br. 22) that, because Oregon em-

ploys various procedural safeguards in administering punitive

damages, “the [punitive] award in this case should be ac-

corded the deference due a properly rendered state court ver-

dict.” But-even a verdict that is the product of adequate

procedural safeguards is still subject to substantive limits: in

both BMW and State Farm, the Court held the awards at is-

sue to be excessive without expressing any disapproval of the

State courts’ procedures for assessing punitive damages.

BMW, 517 U.S. at 585; State Farm, 538 U.S. at 419-20.

There is no reason to give the verdict here any more defer-

_ ence than the verdicts in BMW and State Farm. \ndeed, do-

ing so would be inconsistent with the de novo review

required by Cooper Industries and State Farm.

c. Respondent attempts to shoehorn this case into one of

the State Farm exceptions to the single-digit ratio presump-

tion by claiming that “fraud is by definition a form of mis-

conduct that is hard to detect” and that appropriate deterrence

therefore requires a greater penalty in fraud cases. Br-30.

But punitive damages claims commonly involve allegations

of fraud, so respondent’s interpretation of the “hard to detect”

exception to single digit ratios risks swallowing the rule.

Beyond that, respondent’s argument is a gross overgenerali-

zation. Certainly, some forms of fraud are clandestine. Here,

however, there have been decades of public accusations that

the tobacco industry had committed fraud, leading to thou-

sands of very public lawsuits over the last 50 years (includ-

ing litigation brought by virtually every State Attorney

General and by the U.S. Department of Justice). See also

Cipollone v. Liggett Group, Inc., 505 U.S. 504, 513 (1992)

(by 1962, “there were more than 7,000 publications examin-

ing the relationship between smoking and health”); FDA v.

Brown & Williamson Tobacco Corp., 529 U.S. 120, 138

19

(2000) (by 1965, “the adverse health consequences of to-

bacco use were well known, as were nicotine’s pharmacol-

ogical effects”); Arturet-Vélez v. R.J. Reynolds Tobacco Co.,

429 F.3d 10, 14-15 (1st Cir. 2005) (“such lawsuits against

tobacco companies have been common for years, generating

vast publicity and at least intermittent success”). These facts

take this case far out of the “hard to detect” category.

d. Finally, respondent and her amici seek to justify the

$79.5 million punitive award on the basis of Philip Morris’s

use of its resources to defend against lawsuits, as well as its

litigation successes. Resp. Br. 33-34 & n.21; Trial Lawyers

for Public Justice Br. 22-25; Tobacco Control Br. 11-19;

AARP Br. 20-21; ATLA Br. 18-19. In addition to punishing

a company for defending itself, that approach would call for

a company to be punished more when large numbers of juries

and courts have exonerated it. The fact that Philip Morris

usually wins these cases at trial on the merits is a powerful

reason why the punitive award here is excessive, not a reason

for sustaining an otherwise unconstitutional penalty.'*

> Ironically, respondent relies heavily on Mathias v. Accor Economy

Lodging, Inc., 347 F.3d 672 (7th Cir. 2003). But Judge Posner made

clear both then and in Gavin v. AT&T Corp., 2006 WL 2548238 (7th Cir.

Sept. 6, 2006), that enhancing punishment based on a defendant's ability

to make litigation expensive for the plaintiff is permissible only when the

compensatory damages are very smail, a factor that might make it diffi-

cult for the plaintiff to find competent counsel. When, as here and in

most tobacco cases, there is a prospect of a substantial recovery, “the

considerations that we have just canvassed fade.” Mathias, 347 F.3d at

677; see also Gavin, 2006 WL 2548238, at *6.

The idea that it is hard to sue a tobacco company is also belied by the

ready availability on the Internet of all the materials necessary to launch a

tobacco suit, conveniently assembled in one location (known as “trial in a

box”). See, eg. Trial in a Box, at http://www .tobacco.neu.edu/box/

index.html; Byron G. Stier, Resolving the Class Action Cri: .s: Mass Tort

Litigation as Network, 2005 UTAH L. REV. 863, 908-09 (detailing the

20

In any event, the Court already has rejected precisely this

argument. In State Farm, “[t}he Utah Supreme Court sought

to justify the massive [punitive] award by pointing to,” infer

alia, “the fact that State Farm will only be punished in one

out of every 50,000 cases as a matter of statistical probabil-

ity.” 538 U.S. at 426. This Court flatly rejected that as a ba-

sis for the 145:1 ratio of punitive to compensatory damages,

saying that it “bear[s] no relation to the award’s reasonable-

ness or proportionality to the harm.” /d. at 427.

*_ * *

In short, the judgment in this case is irreconcilable with

State Farm. Because “courts must ensure that the measure of

punishment is both reasonable and proportionate to the

amount of harm fo the plaintiff and to the general damages

recovered” (538 U.S. at 426; emphasis added), a punitive

award that was returned after the trial court refused to tell the

jury not to punish for harms to non-parties and that is 97

times the amount of the plaintiff's compensatory damages | is

unsustainable.

CONCLUSION

The judgment below should be reversed.

Respectfully submitted.

efforts of the plaintiffs’ bar to make a common pool of information and

money available to lawyers who wish to sue tobacco companies).

KENNETH S. GELLER

EVAN M. TAGER

NICKOLAI G. LEVIN

Mayer, Brown, Rowe &

Maw LLP

1909 K Street, NW

Washington, DC 20006

(202) 263-3000

WILLIAM F. GARY

SHARON A. RUDNICK

Harrang Long Gary

Rudnick PC .

360 East 10th Avenue

Eugene, OR 97401

(541) 485-0220

ANDREW L. FREY

Counsel of Record

ANDREW H. SCHAPIRO

LAUREN R. GOLDMAN

DANIEL B. KIRSCHNER

Mayer, Brown, Rowe & Maw LLP

1675 Broadway |

New York, NY 10019

(212) 506-2500

MURRAY R. GARNICK

Arnold & Porter LLP

555 Twelfth Street, N.W.

Washington, DC 20004

(202) 942-5000

Counsel for Petitioner

OCTOBER 2006