Supreme Court Ruling on Punitive Awards May Help Tobacco Companies
A Supreme Court ruling yesterday that overturned a large punitive damage award might help tobacco companies, which face an increasing number of large jury awards, the Los Angeles Times reports (Levin, Los Angeles Times, 4/8). Supreme Court justices ruled 6-3 to overturn $145 million in punitive damages against State Farm Insurance. Writing the court's majority opinion, Justice Anthony Kennedy suggested that punitive damage awards should not exceed compensatory damages by more than a single-digit ratio, or nine-to-one. "In sum, courts must ensure that the measure of punishment is both reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered," Kennedy wrote (Walsh/Masters, Washington Post, 4/8). The court also said that punitive damages should be calculated based on specific harm to the plaintiff and "not for [the defendant] being an unsavory individual or business," a decision that could help tobacco companies prevent plaintiffs from presenting evidence of "fraud on the market" unless they can prove it caused them to smoke. Daniel Donahue, senior vice president and general counsel for R.J. Reynolds Tobacco, said the court's ruling means tobacco companies "should be given a little more due process." The ruling may help cigarette makers in the seven cases in which punitive damage awards are under appeal. The punitive awards in seven of those cases are between $15.2 million and $151.2 million; in each case, the ratio to compensatory damages exceeds the Supreme Court's suggestion. Still, other tobacco industry observers say the decision might not have as great an effect as anticipated. The court yesterday drew a distinction between punitive damages for economic harm and tobacco or other physical injury cases, according to John Coffee, a law professor at Columbia University. Martin Feldman, a tobacco analyst for Merrill Lynch, said that the court appeared to intentionally leave "a cavity in its restriction on ratio of punitive damages ... where physical injury is involve[d]. That can't be good for tobacco's defenses" (Los Angeles Times, 4/8).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.