High court caps awards; insurers likely to benefit.
The Supreme Court's overturning of a mammoth judgment against Philip Morris is a clear signal that the high court considers outsize punitive awards unconstitutional, which is a boon for insurers and other defendants trying to assess future risks, insurance trade groups sayThe ruling reaffirms the tenets of the high court's April decision involving State Farm Insurance, in which the justices said there must be limits to the amount of punitive damages a jury can award.
Victoria Fimea, senior counsel for litigation at the American Council of Life Insurers, called the ruling a "positive step in the punitive-damage awards debate."
In the case against Philip Morris, jurors in Oregon had handed up a $79.5 million judgment against the tobacco company on behalf of a janitor who had smoked Marlboros for 40 years. His family was awarded $800,000 in compensatory damages. The trial judge reduced the $79.5 million award to $32 million, but an Oregon appellate court later reinstated the full amount, prompting the appeal to the U.S. Supreme Court.
The court on Oct. 6 overturned that judgment and ordered the lower Oregon court to reconsider it.
This is the second case this year in which the U.S. Supreme Court has weighed in on huge punitive-damage awards. In April, the justices ruled that a punitive-damage award 145 times greater than the amount awarded for compensatory damages against State Farm had violated the due-process clause of the 14th Amendment. State Farm had appealed the decision of the Utah Supreme Court, which reinstated that jury award after finding that State Farm "repeatedly and deliberately deceived and cheated its customers."
Punitive damages are intended to punish companies and deter wrongdoing. During the past l0 years, numerous law journals have noted a sharp upward trend in the amounts juries are awarding to punish corporations. Two cases are standouts: 1993's TXO Production Co. vs. Alliance Resources, in which the U.S. Supreme Court upheld a punitive-damage award 526 times greater than actual damages, and 1996's BMW of North America Inc. vs. Gore in which the punitive award was 500 times greater than the compensatory award.
The high court overturned the award ha the BMW case and provided three guidelines for determining whether punitive awards are excessive: the reprehensibility of the defendant's conduct; whether there is a "reasonable ratio" between punitive and compensatory awards; and a comparison of the punitive damages with the civil or criminal penalties that could be imposed for the same acts.
Top Jury Verdicts
The following awards for punitive damages were among the highest in 2002 and 2003:
* $28 Billion/Bullock vs. Philip Morris: Los Angeles, October 2002. Woman blamed lung cancer on years of smoking Phillip Morris cigarettes.
* $2.2 Billion/Hayes vs. Courtney & Courtney Pharmacy Inc.: Kansas City, Mo. October 2002. Pharmacist Robert Courtney was diluting cancer drugs. Courtney was sentenced to 30 years in prison.
* $931 Million/Beckman Coulter Inc. vs. Dovatron International Inc.: Orange County, Calif. September 2003. The medical equipment company seed the electronics company for breach of contract.
* $250 Million/Johnson vs. Equitable Resources Inc.: Pikeville, Ky. October 2002. Man blamed company for a gas explosion in his home. The man suffered burns on his face as a result.
* $150 Million/Schwarz vs. Phillip Morris: Portland, Ore. March 2002. Woman blamed her cancer on 23 years of smoking "light" cigarettes. Judgment was awarded after plaintiff died from cancer.
* $100 Million/Jernigan vs. General Motors: Union Springs, Ala. May 2002. Father of a buy injured in a car accident blamed GM's cost-cutting reduction of safety features. The boy suffered permanent brain damage and needs constant supervision.
* $75 Million/Hindelang vs. BR Telephony et al.: Los Angeles, July 2002, Plaintiff blamed the company for his business' bankruptcy. Plaintiff is a convicted drug smuggler, and the defendant was the state's Republican candidate for governor.
Source: Lawyers Weekly USA, VerdictSearch. National Law Journal and Press Records
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| Author: | Grier, Chris |
|---|---|
| Publication: | Best's Review |
| Geographic Code: | 1USA |
| Date: | Nov 1, 2003 |
| Words: | 636 |
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