Oregon Supreme Court Reaffirms Philip Morris Verdict

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.