In 2007, the U.S. Supreme Court held in Philip Morris v. Williams, 127 S. Ct. 1057, 1065 (2007) that the Constitution’s Due Process Clause bars punitive damages for injuries inflicted by a defendant on non-parties, reversing a judgment for punitive damages awarded by an Oregon state court. On remand, the Oregon Supreme Court unexpectedly reinstated the $79.5 million punitive damages award against the cigarette maker. The U.S. Supreme Court again granted certiorari (for the third time in the case) and heard oral argument, but then dismissed the case on the grounds that certiorari had been “improvidently granted.” Thus, after 10 years of litigation, the Supreme Court left the punitive damages award (now $150 million with interest) intact.
Does the U.S. Supreme Court’s about face indicate that the Court has modified its stance on punitive damages? The answer likely is no. The unusual result in Philip Morris turns almost entirely on a peculiar aspect of Oregon state law. In its 2007 opinion, the U.S. Supreme Court held that the Oregon Supreme Court had applied the wrong constitutional standard in rejecting Philip Morris’ appeal from the trial court’s denial of its proposed instruction on punitive damages. On remand, the Oregon Supreme Court determined that it did not need to revisit the constitutional issue, because an independent state law basis existed for upholding the verdict. Specifically, the Oregon Supreme Court found that Philip Morris’s three-and-a-half page long proposed instruction contained numerous misstatements of Oregon law, and that under Oregon’s “clear and correct in all respects” rule, a trial court’s refusal to give a proposed instruction could not be reversed unless the proposed instruction was “altogether free from error.”
The U.S. Supreme Court’s dismissal of the appeal leaves intact the limitations on punitive damages established in Philip Morris, State Farm, and Gore v. BMW. It does, however, suggest that in proposing instructions, defendants must carefully consider state law requirements in addition to constitutional considerations.