Opinion ID: 835685
Heading Depth: 2
Heading Rank: 3

Heading: The Punitive Damage Award and Federal Due Process

Text: On review of a punitive damage award under the Due Process Clause of the Fourteenth Amendment, a court must determine whether the punitive damage award is `grossly excessive'. Parrott, 331 Or. at 554, 17 P.3d 473 (emphasis deleted; citing Gore, 517 U.S. at 568, 116 S.Ct. 1589). Whether the verdict exceeds the gross excessiveness standard is a question of law. Id. at 555, 17 P.3d 473. In Parrott, this court identified five factors to be considered to determine whether a punitive damage award is grossly excessive: [T]he range that a rational juror would be entitled to award depends on the following: (1) the statutory and common-law factors that allow an award of punitive damages for the specific kind of claim at issue; (2) the state interests that a punitive damages award is designed to serve; (3) the degree of reprehensibility of the defendant's conduct; (4) the disparity between the punitive damages award and the actual or potential harm inflicted; and (5) the civil and criminal sanctions provided for comparable misconduct. Id. (citations omitted). Parrott has been superseded somewhat by Campbell, but the last three Parrott factors are, of course, the Gore guideposts as they have been further elucidated by Campbell. We consider only those guideposts in the following analysis. The first guidepost directs us to consider, based on the facts contained in the record, how reprehensible Philip Morris's conduct was. As noted, we consider whether: the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident. Campbell, 538 U.S. at 419, 123 S.Ct. 1513 (citing Gore, 517 U.S. at 576-77, 116 S.Ct. 1589). And, as we have explained, the jury, in assessing the reprehensibility of Philip Morris's actions, could consider evidence of similar harm to other Oregonians caused (or threatened) by the same conduct. Again, we construe all facts in favor of plaintiff, the party in whose favor the jury ruled. Doing so, there can be no dispute that Philip Morris's conduct was extraordinarily reprehensible. Philip Morris knew that smoking caused serious and sometimes fatal disease, but it nevertheless spread false or misleading information to suggest to the public that doubts remained about that issue. It deliberately did so to keep smokers smoking, knowing that it was putting the smokers' health and lives at risk, and it continued to do so for nearly half a century. Philip Morris's fraudulent scheme would have kept many Oregonians smoking past the point when they would otherwise have quit. Some of those smokers would eventually become ill; some would die. Philip Morris's deceit thus would, naturally and inevitably, lead to significant injury or death. Although it weighs less in our analysis, we also note that Philip Morris harmed a much broader class of Oregonians. Every smoker tricked by its scheme, even those who never got ill, kept buying cigarettes  taking money out of their pockets and putting it into the hands of Philip Morris and other tobacco companies. And every one of those smokers risked serious illness or death for as long as they remained deceived. Of the five reprehensibility factors listed in Gore and recited  if not precisely used  in Campbell, four certainly are met here. The harm to Williams was physical  lung cancer cost Williams his life. Philip Morris showed indifference to and reckless disregard for the safety not just of Williams, but of countless other Oregonians, when it knowingly spread false or misleading information to keep smokers smoking. Philip Morris's actions were no isolated incident, but a carefully calculated program spanning decades. And Philip Morris's wrongdoing certainly involved trickery and deceit. [4] We conclude, then, that the first Gore guidepost favors a very significant punitive damage award. We also conclude that the third Gore guidepost  comparable civil or criminal sanctions  favors plaintiff. In examining that guidepost, however, we believe that it is important to correct two errors that the Court of Appeals committed in applying it. In Williams I, the Court of Appeals suggested that, because the comparable sanctions guidepost was about notice to a prospective defendant, the established Oregon law of punitive damages, including ORS 30.925(2), gave Philip Morris adequate notice here. 182 Or.App. at 72, 48 P.3d 824. That was not correct. Courts consider comparable sanctions for two reasons. First, comparable sanctions suggest a legislative determination about what constitutes an appropriate sanction for the conduct, a determination that is entitled to substantial deference. Gore, 517 U.S. at 583, 116 S.Ct. 1589 (internal quotation marks and citation omitted). Second, comparable sanctions may give a defendant fair notice of the penalties that the conduct may carry. Id. at 584, 116 S.Ct. 1589 (None of these statutes would provide an out-of-state distributor with fair notice that the first violation  or, indeed the first 14 violations  of its provisions might subject an offender to a multimillion dollar penalty.). Those reasons explain why we conclude that the Court of Appeals misunderstood the guidepost. Neither Oregon law generally, nor ORS 30.925(2) specifically, [5] suggest how severely the state may choose to punish Philip Morris's conduct. Thus, they do not independently provide a legislative standard entitled to substantial deference. If the Court of Appeals' analysis were correct, then the third Gore guidepost would always support any punitive damage award, i.e., the mere existence of the award would justify itself automatically, regardless of the amount awarded. That reasoning is circular, and we reject it. In Williams I, the Court of Appeals also suggested that the comparable sanctions guidepost does not play[] a major role one way or the other, because it concluded that there were no comparable civil penalties and that criminal penalties were not truly comparable. 182 Or.App. at 72, 48 P.3d 824. Although it is not clear to us that the foregoing statement correctly interprets and applies the law as Campbell now explicates that law, we need not pursue that issue definitively here. That is true, because applying the comparable sanctions guidepost involves more than just asking whether the dollar amount of the sanction equals or exceeds the punitive damage award. Campbell proves that. There, the most relevant civil sanction was $10,000; the Court found that civil sanction was dwarfed by the $145 million punitive damage award. 538 U.S. at 428, 123 S.Ct. 1513. Yet the Court approved a punitive damage award at or near the amount of compensatory damages, id. at 429, 123 S.Ct. 1513, i.e., an award somewhere around $1 million. And a $1 million punitive damage award was still 100 times the comparable sanction. So far as we can discern from Campbell, then, the comparable sanctions guidepost requires three steps. First, courts must identify comparable civil or criminal sanctions. Second, courts must consider how serious the comparable sanctions are, relative to the universe of sanctions that the legislature authorizes to punish inappropriate conduct. Third, courts must then evaluate the punitive damage award in light of the relative severity of the comparable sanctions. The guidepost may militate against a significant punitive damage award if the state's comparable sanctions are mild, trivial, or nonexistent. However, the guidepost will support a more significant punitive damage award when the state's comparable sanctions are severe. We turn, then, to consider the facts of this case, in light of the guideposts and the Fourteenth Amendment. If there are comparable civil sanctions, the parties did not cite them to us and we have not found them by independent investigation. There are what we consider to be comparable criminal sanctions, but we must exercise care when relying on them. As the Court took pains to caution in Campbell: The existence of a criminal penalty does have [a] bearing on the seriousness with which a State views the wrongful action. When used to determine the dollar amount of the award, however, the criminal penalty has less utility. Great care must be taken to avoid use of the civil process to assess criminal penalties that can be imposed only after the heightened protections of a criminal trial have been observed, including, of course, its higher standards of proof. Punitive damages are not a substitute for the criminal process, and the remote possibility of a criminal sanction does not automatically sustain a punitive damages award. 538 U.S. at 428, 123 S.Ct. 1513. That admonition is important, of course. But the basis for holding that Philip Morris's actions in this case compare to a familiar crime is not speculative or remote. Viewing the facts in the light most favorable to plaintiff, Philip Morris's actions, under the criminal statutes in place at the beginning of its scheme in 1954, would have constituted manslaughter. See ORS 163.040 (1953). [6] Today, its actions would constitute at least second-degree manslaughter, a Class B felony. See ORS 163.125(1)(a). [7] Individuals who commit Class B felonies may face up to 10 years in prison and a fine of up to $250,000. ORS 161.605(2) (term of imprisonment); ORS 161.625(1)(c) (fine). Corporations that commit a felony of any class may be fined up to $50,000, or required to pay up to twice the amount that the corporation gained by committing the offense. ORS 161.655(1)(a) and (3). Thus, the possibility of severe criminal sanctions, both for any individual who participated and for the corporation generally, put Philip Morris on notice that Oregon would take such conduct very seriously. [8] We conclude that the third guidepost, like the first, supports a very significant punitive damage award. The same cannot be said of the second Gore guidepost. As noted, that guidepost considers the ratio between the punitive damage award and the compensatory damage award. The numerator of the ratio is fixed by the punitive damage award: $79.5 million. To determine the denominator of the ratio, we consider not only the harm actually suffered by plaintiff, but also the potential harm to plaintiff. See Campbell, 538 U.S. at 418, 123 S.Ct. 1513 (actual or potential harm suffered by the plaintiff); id. at 424, 123 S.Ct. 1513 (ratio between harm, or potential harm, to the plaintiff and the punitive damages award). Plaintiff suffered relatively small economic damages for Williams's wrongful death  less than $25,000. However, that low figure occurred only because Williams died shortly after being diagnosed with cancer. If Williams had lived long enough to incur substantial medical bills, for example, economic damages could easily have been 10 or more times the amount awarded here. Only chance saved Philip Morris from a much higher compensatory damage award. [9] In analyzing the ratio of punitive to compensatory damages, the Court of Appeals also added to the compensatory damages calculus the estimated harm to others. Williams II, 193 Or.App. at 562, 92 P.3d 126 (estimating that 100 Oregonians had been harmed by Philip Morris's scheme, and so concluding ratio was less than 4:1). Using harm to others as part of the ratio may have been correct under the plurality opinion in TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 460, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993) (Stevens, J., joined by Rehnquist, C. J., and Blackmun, J.) (relationship between actual and punitive damages should consider the possible harm to other victims that might have resulted if similar future behavior were not deterred). However, it no longer appears to be permissible (if it ever was) to factor in that consideration. Although Campbell held that similar acts could bear on reprehensibility (discussed above), it now appears that harm to others should not be considered as part of the ratio guidepost. See 538 U.S. at 426-27, 123 S.Ct. 1513 (Since the Supreme Court of Utah discussed the Texas award when applying the ratio guidepost, we discuss it here. The Texas award, however, should have been analyzed in the context of the reprehensibility guidepost only. (emphasis added)); see also id. at 427, 123 S.Ct. 1513 (had Texas award involved similar conduct, it might have had some bearing on the degree of reprehensibility); Gore, 517 U.S. at 582-83, 116 S.Ct. 1589 (Court used 500:1 as ratio, although Court noted in 35 that ratio would have been 35:1 if damages to other Alabama consumers had been included). From the foregoing, we conclude that the ratio guidepost considers only harm to the plaintiff. See Campbell, 538 U.S. at 425, 123 S.Ct. 1513 (precise award must be based on the defendant's conduct and the harm to the plaintiff  (emphasis added)); id. at 426, 123 S.Ct. 1513 (punishment must be reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered (emphasis added)). There also is some imprecision regarding what amount we should use for noneconomic damages  is it the $800,000 awarded by the jury, or the $500,000 awarded by the trial court after applying the statutory cap? We need not decide between the capped or uncapped figure, however, because it makes no difference here. Either way, the second Gore guidepost is not met. All arguable versions of the ratios substantially exceed the single-digit ratio (9:1) that the Court has said ordinarily will apply in the usual case. See Campbell, 538 U.S. at 425, 123 S.Ct. 1513 (so stating). In Williams II, the Court of Appeals also relied on Philip Morris's wealth to conclude that the jury's punitive damage award did not violate due process. 193 Or.App. at 563, 92 P.3d 126. Philip Morris objects that Campbell prohibits using wealth in that way. We agree. Wealth cannot justify an otherwise unconstitutional punitive damages award. Campbell, 538 U.S. at 427, 123 S.Ct. 1513. If a punitive damage award is grossly excessive under Gore and Campbell, then the defendant's wealth will not make it constitutional. In short, wealth is not a fourth Gore guidepost. However, Campbell did not otherwise remove wealth from the punitive damage equation, as Philip Morris asserts. A jury still may levy a higher punitive damage award against a wealthy defendant, as long as the final punitive damage award does not exceed the constitutional limits established by the three Gore guideposts. Id. at 427, 123 S.Ct. 1513 (wealth cannot justify an otherwise unconstitutional punitive damages award, indicating that punitive damage award could be constitutional even though jury considered wealth (emphasis added)); see id. at 428, 123 S.Ct. 1513 (wealth is not `unlawful or inappropriate' factor (quoting Gore, 517 U.S. at 591, 116 S.Ct. 1589 (Breyer, J., concurring))). Consistently with the foregoing, Oregon law specifically permits a jury to consider a defendant's financial condition when it imposes a punitive damage award. ORS 30.925(2)(f). Of the three Gore guideposts, then, two support a very significant punitive damage award. One guidepost  the ratio  cuts the other way. In the end, we are left to use those competitive tools to assess whether the jury's punitive damage award was not grossly excessive and therefore should be reinstated. The Gore guideposts are not bright-line tests. See, e.g., Campbell, 538 U.S. at 425, 123 S.Ct. 1513 (there are no rigid benchmarks that a punitive damages award may not surpass); see also Gore, 517 U.S. at 582, 116 S.Ct. 1589 (we have consistently rejected the notion that the constitutional line is marked by a simple mathematical formula). In other words, the guideposts are only that  guideposts. Gore also referred to them as indicia. 517 U.S. at 575, 116 S.Ct. 1589 (reprehensibility is most important indicium); id. at 580, 116 S.Ct. 1589 (ratio is second and perhaps most commonly cited indicium); id. at 583, 116 S.Ct. 1589 (comparable sanctions provides a third indicium for excessiveness). Campbell specifically contemplated that some awards exceeding single-digit ratios would satisfy due process. See id. at 425, 123 S.Ct. 1513 (in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process). Single-digit ratios may mark the boundary in ordinary cases, but the absence of bright-line rules necessarily suggests that the other two guidepostsreprehensibility and comparable sanctions  can provide a basis for overriding the concern that may arise from a double-digit ratio. And this is by no means an ordinary case. Philip Morris's conduct here was extraordinarily reprehensible, by any measure of which we are aware. It put a significant number of victims at profound risk for an extended period of time. The State of Oregon treats such conduct as grounds for a severe criminal sanction, but even that did not dissuade Philip Morris from pursuing its scheme. In summary, Philip Morris, with others, engaged in a massive, continuous, near-half-century scheme to defraud the plaintiff and many others, even when Philip Morris always had reason to suspect  and for two or more decades absolutely knew  that the scheme was damaging the health of a very large group of Oregonians  the smoking public  and was killing a number of that group. Under such extreme and outrageous circumstances, we conclude that the jury's $79.5 million punitive damage award against Philip Morris comported with due process, as we understand that standard to relate to punitive damage awards. It follows that the Court of Appeals correctly held that the trial court should have entered judgment against Philip Morris for the full amount of the jury's punitive damage award. The decision of the Court of Appeals is affirmed. The judgment of the circuit court is reversed, and the case is remanded to the circuit court for further proceedings.