US Supreme Court limits punitive damage awards in tobacco case
February 21, 2007
The United States Supreme Court has handed down a ruling that puts new constitutional limits on some damage awards. The 5 to 4 ruling set aside a punitive damages award in an Oregon case against tobacco company Philip Morris, a division of Altria (NYSE: MO) that awarded $79.5 million in punitive damages to the widow of a man who died of lung cancer after many years as a smoker.
The court ruled that the Oregon Supreme Court was wrong to let the jury in that case punish the tobacco company for harm to all smokers in Oregon. The decision said that jurors may only award punitive damages for harm to the person filing the lawsuit, but not for the harm to other victims not party to the suit.
Robin Conrad, senior vice president of the US Chamber of Commerce’s litigation unit in Washington, said that the ruling is a “big win” for business. However, the court did not extend its ruling to the issue of the size of punitive damage awards. According to one punitive damages expert, business would have liked more specific guidelines from the court as to acceptable amounts of punitive damages that may be awarded in similar cases. However, it is traditional for the Supreme Court to limit its rulings to the case at hand.
Still, the ruling will benefit the tobacco companies as well as pharmaceuticals companies such as Merck (NYSE: MRK), which is currently looking at over 27,000 suits involving its Vioxx painkiller, which was withdrawn from the market after being implicated in an increased risk of heart damage.