The U.S. Supreme Court recently reversed a $79.5 million punitive damages award against tobacco giant Philip Morris in a case that will have far-reaching effects in state and federal tort cases. Philip Morris USA v. Williams, No. 05-1256, 127 S. Ct. 1057 (Feb. 20, 2007). The 5-4 opinion, written by Justice Breyer, further refined the Court's jurisprudence concerning the constitutional limits on punitive damages, as set forth in BMW v. Gore, 517 U.S. 559 (1996), and State Farm v. Campbell, 538 U.S. 408 (2003). However, it also created new issues that no doubt will challenge courts, juries, and practitioners.

Williams, the widow of a life-long smoker who died of lung cancer, sued in Oregon state court, claiming that Philip Morris deliberately concealed the dangers of smoking from the public. Williams alleged that the company's conduct far exceeded ignoring evidence of the product's danger—she claimed that Philip Morris engaged in a deliberate campaign to falsely minimize the dangers of smoking.

The jury agreed and found that Philip Morris knowingly and falsely led the decedent to believe that smoking was safe. The jury awarded $821,000 in compensatory damages and $79.5 million in punitive damages. The trial court ruled that the punitive award was unconstitutionally excessive and reduced it to $32 million.

Both parties appealed to the Oregon Supreme Court, which restored the full $79.5 million punitive award. On a first visit to the U.S. Supreme Court, the case was remanded in light of the State Farm opinion. Again before the Oregon Supreme Court, Philip Morris argued that the jury should not have been allowed to consider harm to nonparties in deciding the extent to which to punish Philip Morris. The tobacco company also argued that the punitive award was unconstitutionally excessive under State Farm because it exceeded the 9-1 ratio identified in that opinion. The Oregon Supreme Court rejected these arguments and again upheld the jury's punitive damage assessment of $79.5 million.

In the second appeal to the U.S. Supreme Court, Philip Morris argued (1) it is unconstitutional to punish defendants for harm to nonparty victims and (2) the punitive award exceeded the 9-1 ratio identified in State Farm, and was therefore unconstitutionally excessive.

The Court first held that the Due Process Clause prohibits a state from using punitive damages to punish a defendant for injury to nonparties to the litigation. In reaching this conclusion, the Court pointed out that a defendant being punished for harm to nonparties has no opportunity to defend against the charge, and expressed concern for the blurred parameters for assessing injury to nonparties.

Despite this holding, the Court acknowledged that "conduct that risks harm to many is likely more reprehensible than conduct that risks harm to only a few." Therefore, harm to nonparties is still relevant to the assessment of punitive damages. The Court drew a line between harm caused and reprehensibility: while a jury cannot rely upon evidence of harm to others in punishing the defendant for harm caused, it may continue to consider evidence of harm to others in determining the reprehensibility of the defendant's conduct. Courts must delineate this line when submitting questions to the jury: jurors may consider harm to others in determining reprehensibility but cannot mete out punishment for harm caused to strangers. Justice Stevens's dissent complained of this blurry distinction: "[t]his nuance eludes me." How to clarify that nuance in jury instructions likely will pose a challenge to courts and practitioners alike.

The opinion is also significant for what it did not hold: the Court declined to consider the question of whether the $79.5 million award, upheld by the Oregon Court on the ground that the conduct was particularly reprehensible and akin to a crime, was unconstitutionally excessive under State Farm. Therefore, the issue of whether a jury may award punitive damages in excess of a 9-1 ratio when there is particularly culpable conduct remains unsettled.