Williams v. Philip Morris - the Latest from Oregon on the $79.5 million Punitive Damages Award

Posted on February 5, 2008 by Diane Polscer

On remand from the U.S. Supreme Court, the Oregon Supreme Court has reinstated the $79.5 million punitive award in Williams concluding that the trial court did not err in refusing to give a proposed jury instruction concerning whether the jury could use punitive damage to punish Philip Morris for the impact of its misconduct on other persons, for independent state law grounds unrelated to the issues addressed by the US Supreme Court in its 2007 decision. Williams involved a claim by the widow of a longtime smoker that died of lung cancer against Philip Morris for fraud and negligence. At trial, Williams presented evidence that Philip Morris and other tobacco companies knew of the health dangers of smoking since the 1950s but nevertheless carried out an extensive campaign to convince the public that doubts remained about whether smoking actually was harmful to health. Near the end of trial, Philip Morris offered a proposed jury instruction that would have told the jury that it could not use punitive damages to punish Philip Morris for the alleged impact of its misconduct on other persons that could bring lawsuits of their own where a jury may award punitive damages. The trial court refused to give the instruction. The jury ultimately returned a verdict awarding Williams, among other things, $79.5 million in punitive damages.

Philip Morris appealed and, after a lengthy appeal process, the Oregon Supreme Court concluded the punitive award comported with federal due process and that the proposed jury instruction incorrectly stated the requirements of federal due process and therefore the trial court did not err in refusing to give the instruction. On certiorari, the US Supreme Court concluded that due process prohibits a jury from using a punitive damage verdict to punish a defendant directly for harm to nonparties. Determining that the Oregon Supreme Court had applied the wrong constitutional standard to the proposed jury instruction proffered by Philip Morris, the Court vacated the Oregon Supreme Court’s earlier decision and remanded.

On remand, the Oregon Supreme Court determined that the trial court correctly refused to give the instruction because it contained several other errors completely unrelated to the issues addressed by the US Supreme Court. The Oregon Supreme Court found that the instruction misstated Oregon law in that it incorrectly told the jury that the factors to be used in awarding punitive damages were discretionary when they are mandatory according to state statute and that the instruction mischaracterized this statutory language by referring to a defendant’s “motivation to make illicit profits” as compared to the “profitability of the defendant’s misconduct” as set forth in the statute. The Oregon Supreme Court therefore reaffirmed its prior decision. Shortly after the release of this decision last week, Philip Morris vowed to appeal to the US Supreme Court. A substantive due process issue that the US Supreme Court found unnecessary to address in its decision last year will likely be the subject of the Philip Morris petition.

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Twombly and the Possible Impact on Coverage Cases

Posted on October 25, 2007 by Diane Polscer

The US Supreme Court recently set forth a heightened standard to apply to Fed. R. Civ. P. 12 motions to dismiss in its decision in Bell Atlantic Corp. v. Twombly in which a class action was dismissed for failure of the class to demonstrate that it could “plausibly” win at trial.  In Twombly, the Court stated that to survive such a motion, the claim must include "enough facts to state a claim to relief that is plausible on its face."  The Court explained that the factual "allegations must be enough to raise a right to relief above the speculative level."  The Court noted that it was not imposing a "probability requirement at the pleading stage," and a well-pleaded complaint could proceed even if it was apparent that actual proof of the facts alleged was improbable and recovery was unlikely. The Court further explained that the complaint merely needed to contain enough factual matter to "raise a reasonable expectation that discovery will reveal evidence of" the claim or element. This ruling essentially departed from the established standard set forth in Conley v. Gibson, 355 U.S. 41 (1957) where the Court stated that lawsuits should not be dismissed at such an early stage unless it appeared that the party could prove “no set of facts” at trial that could support its claim.  Court watchers have indicated that this ruling will substantially impact the ability of plaintiffs to withstand attacks on complaints where the intent of a defendant is a necessary predicate to obtaining relief.  It is unknown how the 26 states that have patterned their dismissal standards on the Conley “no set of facts” language will apply the ruling in cases involving only the interpretation of state law.

So far, only one decision has been released applying the Twombly standard in an insurance coverage case.  In State Auto Prop. & Cas. Ins. Co. v. Loehr, No. 4:06CV01427 FRB, 2007 U.S. Dist. LEXIS 69449 (E.D. Mo. Sept. 19, 2007), the Eastern District of Missouri found that a plaintiff insured met the “plausible” standard under Twombly as his complaint adequately alleged that State Auto's refusal to pay benefits was vexatious and without reasonable cause or excuse and cited the appropriate Missouri statute providing for vexatious refusal for payment of claims.  According to the opinion, it did not appear that any separate specific facts related to the basis for the “vexatious” allegation was plead other than an allegation regarding the nonpayment of policy proceeds.  However, the court found that the insured sufficiently met the Twombly standard as the general facts alleged concerning nonpayment of policy proceeds demonstrated "a reasonable expectation that discovery will reveal evidence of defendant's claim for vexatious refusal to pay.”  
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Stoneridge and the Race for Amicus Briefs

Posted on October 9, 2007 by Diane Polscer

There is an interesting article from the front page section of the Wall Street Journal today concerning the Stoneridge Investment Partners LLP v. Scientific-Atlanta, et al, case that was heard by the US Supreme Court today. The Stoneridge case concerns whether private investors may sue third-parties such as accountants or lawyers that allegedly participate in a scheme to defraud shareholders and thus violate Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.  A summary and analysis of the oral argument has been posted here by the Akin Gump SCOTUS blog.

The Wall Street Journal article focuses primarily on the background of the race to get “friend of the court” briefs prepared and filed with the Court by numerous prominent names in politics and the economy. The plaintiffs have obtained support from “two House committee chairmen, 18 pension funds, 32 state attorneys general, and the SEC itself. Backing big business: the U.S. Chamber of Commerce; the Nasdaq and NYSE Euronext exchanges; seven high-profile New York lawyers; and the Justice Department's solicitor general, who represents the views of the White House.”  

According to the SCOTUS blog summary of the oral argument, despite the plaintiffs’ rush to obtain support by amicus, it does not appear that the Court was receptive to the possibility of providing investors with a broad new category of liability to investors. A decision on this case is expected by the spring. 
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