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The U.S. Supreme Court has granted certiorari in Williams v. Philip Morris, Inc. on two questions:  (1) “Whether, in reviewing a jury’s award of punitive damages, an appellate court’s conclusion that a defendant’s, conduct was highly reprehensible and analogous to a crime can ‘override the constitutional requirement that punitive damages be reasonably related to the plaintiff’s harm?” and (2) “Whether due process permits a jury to punish a defendant for the effects of its conduct on non-parties.”  This was not a bad faith case, but will likely have a direct impact on bad faith cases, and is the first case following the Court’s last ruling on punitive damages, State Farm Mutual Auto. Ins. Co. v. Campbell, see “Links of Note” on this blog, which dealt with bad faith.  Despite the ruling in Campbell, which would indicate the application of single digit ratios generally, the Oregon Supreme Court upheld a punitive damages award of nearly 100 times the compensatory damages based upon “extraordinarily reprehensible” conduct, and giving consideration to similar harms to others, in the context of discussing and applying the U.S. Supreme Court’s jurisprudence.

Williams v. Philip Morris, Inc., 126 S.Ct. 2329 (2006) (certiorari granted on two issues).

On February 20, 2007, the Supreme Court issued its Opinion in Philip Morris, USA v. Williams, 127 S.Ct. 1057 (2007).  The Court held that a jury could not award punitive damages based upon harm to others, as a taking that violated due process.  However, the Court held that evidence of harm to others was relevant to the reprehensibility prong of the punitive damages analysis.  The Court stated:  “Given the risks of unfairness that we have mentioned, it is constitutionally important for a court to provide assurance that the jury will ask the right question, not the wrong one. … We therefore conclude that the Due Process Clause requires States to provide assurance that juries are not asking the wrong question, i.e., seeking, not simply to determine reprehensibility, but also to punish for harm caused strangers.”

Summing up, the Court stated:

How can we know whether a jury, in taking account of harm caused others under the rubric of reprehensibility, also seeks to punish the defendant for having caused injury to others? Our answer is that state courts cannot authorize procedures that create an unreasonable and unnecessary risk of any such confusion occurring. In particular, we believe that where the risk of that misunderstanding is a significant one — because, for instance, of the sort of evidence that was introduced at trial or the kinds of argument the plaintiff made to the jury — a court, upon request, must protect against that risk. Although the States have some flexibility to determine what kind of procedures they will implement, federal constitutional law obligates them to provide some form of protection in appropriate cases.

The original Oregon Supreme Court Opinion is Williams v. Philip Morris, Inc.,127 P.3d 1165 (Or. 2006)