Working the Unworkable Rule Established in Philip Morris: Acknowledging the Difference Between Actual and Potential Injury to Nonparties

I. INTRODUCTION Over the past fifteen years, legal scholarship dedicated to the topic of punitive damages has increased significantly.1 This increase is principally due to United States Supreme Court decisions that changed the punitive damages landscape.2 Prior to these decisions, the individual states retained almost exclusive control of punitive damages awards.3 This change began with Pacific Mutual Life Insurance Co. v. Haslip, in which the Supreme Court granted constitutional review of a punitive damages award based on due process arguments.4 Prior to Haslip, the Court was reluctant to grant constitutional review of such awards.5 However, ten years after Haslip, the Court clarified the nature of punitive damages as legal rather than factual and thereby forced a de novo standard of review on all challenges to punitive damages awards.6 Once the Court implemented this de novo standard of review, punitive damages awards suffered increased constitutional constraints. These constraints have largely taken the form of due process restrictions-both substantive and procedural.7 Of late, punitive damages jurisprudence has seen its biggest changes in the area of substantive due process restrictions on the size of punitive damages awards.8 The Supreme Court was again asked to review a punitive damages award in late 2006; however, when the Philip Morris USA v. Williams9 opinion was released on February 20, 2007, the Court did not even breach the usual topic of substantive due process restrictions. The Court ignored the substantive due process issue because the majority adopted a new rule while conducting its review of the less frequently discussed procedural due process restrictions. This new rule is unworkable and will inevitably cripple the states' ability to effectively apply punitive damages awards for their intended purpose: to punish and deter. This Comment reviews the Supreme Court's decision in Williams and concludes that the new rule established by the Court-prohibiting the consideration of injury to nonparties when determining the amount of punitive damages to assess-is self-contradictory and severely undermines the states' ability to pursue its legitimate interest in punishing and deterring egregious misconduct. Due to the new rule's shortcomings, this Comment argues that the Court should adopt an amended version of the new rule that distinguishes between potential injury and actual injury. Thus, the proposed rule would allow the consideration of potential injury to nonparties when determining the amount of punitive damages to assess and prohibit the consideration of actual injury to nonparties in all stages of the trial.10 Part II of this Comment presents a historical view of punitive damages awards, emphasizing their underlying purposes. This Part also discusses the importance of potential injury to nonparties-both historically and currently-when determining the appropriate amount of punitive damages to award. Part III then discusses Supreme Court jurisprudence addressing punitive damages awards. More specifically, Part III presents three relatively recent Supreme Court cases that are significant precursors to Williams. Part IV presents both the factual and procedural background of Williams and the majority opinion therein. Following this presentation of Williams, Part V sets forth the proposed changes to the new rule established in Williams. The discussion in Part V includes a more indepth presentation of the new rule, including a discussion of its scope. Part V additionally argues that potential harm is a necessary factor in determining the appropriate amount of punitive damages to assess and presents potential arguments against the amended rule proposed in this Comment. Finally, Part VI gives a brief conclusion. II. PUNITIVE DAMAGES: A HISTORICAL LOOK Before delving into the Supreme Court's most recent punitive damages decision, a review of punitive damages-including a brief history of the purposes thereof and the interests being protected thereby-is necessary. …