THE $28 BILLION VERDICT AGAINST PHILIP MORRIS:
Are Multiple Punitive Damages Verdicts Overpunishing Big Tobacco?

Last Friday, a jury in Los Angeles awarded Betty Bullock $28 billion in punitive damages against Philip Morris. The sheer size of the award is remarkable: it is the largest punitive damage award won by a single smoker (and, I think, by a single litigant).

What is remarkable, too, is the ratio of punitive to compensatory damages. Just two weeks earlier, the jury had calculated that Philip Morris caused Bullock a comparatively modest $850,000 in compensatory damages - that is, damages she had actually suffered personally.

Thus, when it awarded the $28 billion in punitive damages - that is, damages meant to sanction the defendant's bad conduct - the Bullock jury punished Philip Morris at a ratio of 33,000 to 1. By comparison, defenders of punitive damages will tell you that it is very rare for such ratios to exceed 3 to 1 (especially once courts are given the opportunity to reduce awards post-verdict and on appeal). That raises a serious question: Were the Bullock punitive damages too high?

The case also raises a second, and even knottier question: When it comes to multiple punitive damage awards, when is enough enough?

There are at least a thousand cases against Big Tobacco working their way through the courts of the West Coast states. And on the West Coast, Big Tobacco is on a losing streak--it has lost cases brought by individual smokers in Oregon and California.

Significantly, the amount of punitive damages juries are awarding seems to be going up. Before the Bullock case, the largest punitive damage award in an individual smoking case was awarded to Richard Boeken, who received $3 billion. When all the cases pending are resolved, will Big Tobacco have been overpunished?

Granted, in the context of cigarette litigation, the question of "overpunishment" may seem laughable, given the sheer size of the defendant corporations and the scale of their alleged wrongdoing. But consider this: In addition to the thousands of pending suits on the West Coast alone, Big Tobacco faces punishment from two other directions.

In Florida, the industry was hit with a $145 billion punitive damage award in the Engle case, a statewide class action. Engle is on appeal, but that only makes the question of possible overpunishment even more urgent.

As a matter of law, it is not clear to what extent the Florida courts should take into account the punishments that will be inflicted by the torts system elsewhere in assessing whether the punitive damage award in Engle is too high, and should be reduced. And it could make a large difference to that determination whether awards like the ones to Bullock and Boeken are taken into account.

Finally, the U.S. Government is still pursuing its RICO suit against the tobacco industry. That suit is explicitly designed to force the industry to disgorge 45 years of "ill-gotten" profits. The government claims that not a single penny of a disgorgement award should be viewed as punishment, but that position is just a legalistic evasion.

Moreover, there is an obvious connection between the requested disgorgement and punitive damages awards: If Big Tobacco must disgorge 45 years of profits in the RICO suit, from what source will it pay other plaintiffs in other suits?

Why Punitive Damages Will Inevitably Be Based on Nationwide Conduct

It seems illogical that our system does not provide for a situation like this, of multiple - and possibly numerous - punitive damages awards. But a solution to the problem would be more difficult than it might appear.

Here is why. Juries awarding punitive damages in cases brought against national companies will inevitably think about the defendant's national conduct nationwide - not just the conduct it directed towards a particular plaintiff such as Bullock.

Nor should the jury be blamed for focusing on national conduct. Many believe that one of the purposes of punitive damages is to deter corporations from taking advantage of consumers nationwide - and if that is the proper perspective, it makes sense for juries to take a national perspective.

Indeed, as a practical matter, there is no way to try the punitive damages phase of a case like Bullock without allowing the plaintiff to introduce evidence about the national practices of the tobacco industry. Plaintiffs' argument, after all, is that the coordinated nationwide advertising and lobbying efforts of Big Tobacco caused their harm.

For this reason, for example, the trial judge in Engle allowed the plaintiffs to repeatedly refer to the infamous 1954 "Frank Statement" by the tobacco industry. (In the Frank Statement, Big Tobacco claimed they would never knowingly sell a product that caused cancer.) Yet at no point in the trial was it ever established that any of the named - or other - plaintiffs in the class action had ever read or heard of the Statement.

Juries may also reasonably want to award large punitive damages because they correctly suspect that not every smoker who was harmed by the tobacco companies' alleged wrongdoing (the fraud, the failure to warn, and ultimately, the manufacture of a "defective" product) will sue. Some will already have died, and lack heirs able to bring a case on behalf of their estate; some may be too ill or elderly to participate; some may be barred by the statute of limitations.

To reach a proper level of deterrence, Big Tobacco must face an award that accounts for these "missing" suits. That may mean the punitive damages against it are multiplied many times over.

How Can Courts Deal With Multiple and Probably Redundant Punitive Damages Awards?

In sum, or all the reasons described above, it is inevitable that juries will calculate punitive damages on the basis of the injury done to society, not the plaintiff.

Moreover, this is especially true in the Big Tobacco cases - in which juries seem to want to punish the industry almost regardless of the facts of the particular case. In Big Tobacco litigation, a number of juries have indicated that they believe that the plaintiffs were partly at fault for the diseases they suffered, and thus have awarded comparatively small compensatory awards. But they have nevertheless turned around and socked the defendants with huge punitive damages that bore no relationship to the plaintiffs' own harm.

So what are the courts to do? Nationwide evidence is properly admissible in these cases, and jury verdicts will - and arguably should be able to - take account of nationwide harms and "missing" lawsuits by plaintiffs who do not sue.

Yet with multiple cases, punitive damages awards may become redundant - with juries in different states, considering the cases of different plaintiffs, venting the same rage over and over, based on the same national evidence (such as the Franks Statement), and compensating for the same suspicion that many worthy plaintiffs were victims who never got a chance to sue.

In that instance - and generally - shouldn't the companies pay all plaintiffs' their full compensatory damages, and then pay some reasonable, but not redundant, set of punitive damages awards? And what about making sure punitive damages are fairly divided among worthy plaintiffs"

Solutions to Redundant Punitive Damages Verdicts That Probably Won't Work

One solution is to let judges handle the redundancy/overpunishment problem if and when it arises, and to argue that now is not the time.

After all, all but one of the successful smoker's suits against Big Tobacco are still being appealed, with appellate courts empowered to reduce the awards of punitive damages (in technical terms, this is called "remittitur"), and able to invoke Supreme Court precedent in favor of doing so.

But this argument ignores reality. Even if some awards are reduced somewhat, at least a handful of states will end up with large, final money judgements against Big Tobacco. That's going to happen sooner or later, and we need to deal with the problem now.

Another solution is to let judges control for repeat - and redundant - punishment through the exercise of their control of individual cases. For example, a judge could allow Big Tobacco to inform the jury, during the punitive damages phase of a case, that they have already been punished to the tune of $x billion, and thus argue that further punitive damages are unnecessary.

But there's an obvious drawback to doing this at trial: Needless to say, there are not too many defense attorneys who relish the opportunity to reveal to the jury - and remember, this is a jury that, in our hypothetical has already found his client liable for conscious indifference or, worse, fraud - exactly how many other juries came to exactly the same conclusions. The effect of such an instruction to the jury might actually, and ironically, be to raise, not lower, punitive damages.

Perhaps, then, the defense lawyers should be allowed, instead, make that speech to the trial judge on a motion to reduce the verdict - once the jury has already been dismissed. But not only juries, but also many trial judges who have sat through smokers' cases have revealed considerable hostility to Big Tobacco. As a result, trial judges may not be too happy to hear this type of argument either.

Indeed, a trial judge who hears of huge, final verdicts affirmed by appellate courts elsewhere may see the verdict as less huge than it would otherwise appear. The large verdict may seem normal in context.

So if these solutions won't work, what is the alternative? One additional possible solution has recently been offered by federal judge Jack Weinstein of the Eastern District of New York.

On September 19, Weinstein certified a national smoker's class action, for purposes of determining punitive damages only. This order creates a mega-class action in which the punishment meted out to the tobacco industry would be determined by a single jury at one single proceeding. The point of the order is clear: If there is to be any more punishment of the tobacco industry, it should be done once and then it should be finished.

A judgment in such a class action would bind participating class members (those who opted in, or did not opt out, depending on the procedure) so that they could not sue in the future. On the other hand, the class would exclude, by necessity, any plaintiff who has already obtained a judgment. So Bullock would still be able to keep her final award. So would the entire state of Florida, since Engle is already under way and the $145 billion award may even be a final judgment.

One might think that the tobacco industry would cautiously welcome Judge Weinstein's proposal, especially after the shellacking they received on Friday from just one L.A. jury in the Bullock case.

But I think I can safely predict that they will fight the Weinstein certification tooth and nail, and that the U.S. Court of Appeals for the Second Circuit will quickly reverse Weinstein.

The reasons why take us back the very dilemma that Weinstein's innovative solution attempted to resolve.

The Problem With Judge Weinstein's Proposed Order

The problem with Weinstein's "solution" is that it completely cuts punitive damages off from the victim in the underlying tort suit. According to Weinstein, it should be possible for a jury to determine how much punishment (measured in dollars) a tobacco company should suffer, even without knowing how much harm they caused a single smoker.

For a jury to do this, however they have to assume that their job is to punish Big Tobacco either for the harm it caused "society" or for their unlawful intent in harming anyone and everyone.

It may be that Big Tobacco could be proven a lawbreaker if charged with a criminal offense. But the fact remains that it not yet been so charged. Indeed, even the Federal Government's RICO suit has been carefully styled as a suit in civil, not criminal RICO, since the feds were worried--with good reason--that they wouldn't be able to make criminal charges stick.

In the end, there is no easy answer to the question of how to use punitive damages to punish corporate actors who have harmed many people with the same act or set of acts, and who are being sued many times for that act or set of acts.

However, courts cannot pretend that this question need not be addressed. If punitive damages are to serve their original function--which is to provide an avenue of private punishment--then they must be designed with that end in mind.

Neither the solution offered by the Bullock court ,nor Judge Weinstein's solution, demonstrates sufficient concern for the fact that punitive damages are, in the end, private law damages, and not open-ended instruments of public policy.

If the trial courts do not remember this, let us hope that the Supreme Court will remind them in the coming years.