In 1999, an Oregon jury awarded the Estate of Jesse Williams $521,000 in
actual damages and $79.5 million in punitive damages intended to punish
the company for wrongdoing. Jesse Williams began smoking in the 1950’s
while in the Army and died in 1997, six months after being diagnosed with
lung cancer. The verdict was appealed and eventually struck down by the
U.S. Supreme Court which ruled that the punitive damage verdict was excessive
because it was more than 100 times greater than the amount of actual damages.
After the case was sent back Oregon courts by the U.S. Supreme Court to
reconsider the amount of punitive damages which were appropriate, the
Oregon Supreme Court upheld the original award of punitive damages stating
that Philip Morris’ actions were “extraordinarily reprehensible.”
Unlike compensatory damages which are intended to compensate injured people
for economic losses as well as pain and suffering due to an injury, punitive
damages are intended to punish wrongdoers. In Oregon 60% of a punitive
damage award goes to the State. In order to prevail in a claim for punitive
damages in Oregon, the party pursuing the claim must demonstrate that
the defendant acted with reckless and outrageous indifference to a highly
unreasonable risk of harm and has acted with a conscious indifference
to the health, safety, and welfare of others. Alternatively, the plaintiff
needs to demonstrate that the defendant acted with malice.
In determining an appropriate award of punitive damages, the jury may consider
a number of factors, including the likelihood at the time that serious
harm would occur from the defendants actions, the amount of profit made
by the defendant, the duration of the wrongdoing and concealment of it
as well as the deterrent effect of a large judgment upon the defendant
as well as others similarly situated.
When removing the original award of punitive damages, the U.S. Supreme
Court suggested a ratio be used to limit punitive damage awards to no
more than 9 times the amount of actual damages. The Supreme Court did
not create an absolute rule to this effect.
The problem with utilizing ratios when assessing punitive damages is that
it encourages corporations to engage in a cost-benefit analysis which
allows them to weigh the cost of getting punished for wrongdoing against
the benefit gained from wrongdoing. Absent the threat of a large punitive
damage award which is large enough to actually punish a defendant for
wrongdoing, the purpose behind punitive damages is lost.