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The NAM and the Washington Legal Foundation filed an amicus brief on 3/22/10 urging the Supreme Court to hear an appeal of an adverse ruling against Philip Morris under the Racketeer Influenced and Corrupt Organizations Act (RICO) for speech relating to the sale of "light" cigarettes. The Government used federal fraud statutes to target the speech of industry members made during decades-long public debates over the health and safety of smoking. It did so without any showing that the speaker had fraudulent intent or that the speech was material to consumers, and the appeals court failed to independently review the trial court's finding, eliminating a key safeguard for First Amendment protections.

The NAM and WLF brief highlighted the importance of First Amendment speech protections for the particular modes of speech principally at issue in this case -- newspaper articles, op-eds, congressional testimony, press releases, and television appearances. Speech in these forums about the health and safety effects of cigarettes are matters of public concern, and all parties with a viewpoint should be equally protected by the First Amendment, even if those parties have an economic motive.

Appellate court review is an important safeguard against an unwarranted holding that the challenged speech merits no constitutional protection. The Supreme Court agreed to review this issue in 2003 in the Nike case, but never did. Unfortunately, on 6/28/10, it declined to hear this appeal as well.

For the third time, the Supreme Court was poised to review a $79.5 million punitive damages award imposed by an Oregon jury allegedly to punish Philip Morris for fraud. The case’s previous journey to the Supreme Court resulted in an order that the Oregon Supreme Court apply a newly articulated standard that juries cannot award punitive damages to the plaintiff arising from injuries that may have been inflicted on people not party to the litigation.

The Oregon Supreme Court, however, reaffirmed the punitive damages award without determining whether it had been based on improper consideration of third-party injuries. It ruled that the company had procedurally defaulted under state law and forfeited its federal constitutional claims. State procedural rulings are normally not reviewable by the U.S. Supreme Court.

The issue initially accepted for review was whether a state court may ignore the Supreme Court’s order relating to the federal constitutional claim, and raise – for the first time in this case -- a state procedural issue to dispose of the appeal. The decision in this case will affect many more cases than punitive damages appeals – it will affect any case that is overturned on appeal with instructions to correct a constitutional problem. It is a fundamental constitutional conflict between the U.S. Supreme Court and state supreme courts over how far the states can go to avoid federal requirements. In a similar case years ago, Alabama tried to interpose procedural objections to a Supreme Court ruling prohibiting the disclosure of the membership of the NAACP in 1959, but the Court rejected that state’s ploy.

The NAM filed an amicus brief arguing that Oregon's decision based on the jury instruction ignored a variety of other trial practices that might improperly allow consideration of nonparty harm. For example, defense counsel can raise objections to the admission and use of evidence or arguments relating to nonparty harm. In addition, Oregon's denial of relief misinterpreted the Supreme Court's earlier decision and did not provide an independent and adequate ground for upholding the damages award.

Even though the Supreme Court had received briefs and heard oral arguments for this appeal, on March 31 it dismissed the writ of certiorari as having been improvidently granted. Unfortunately, as a consequence, the Oregon Supreme Court’s decision stands.

The Supreme Court reviewed this case to answer questions concerning the due process limitations on punitive awards recognized in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), and State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003). The Oregon Supreme Court affirmed a punitive award to a deceased smoker’s widow in the amount of approximately $80 million, which was 97 times the amount of compensatory damages awarded. In reviewing the punitive award, the U.S. Supreme Court was to consider two issues: first, whether the high reprehensibility of a defendant’s conduct can authorize a punitive award of 10 or more times the amount of compensatory damages, and, second, whether a jury may consider effects on third parties not only to determine the appropriate punishment for the plaintiff’s injuries but also to punish the defendant for the third-party harms.

The NAM joined with the Pharmaceutical Research and Manufacturers of American (PhRMA), the American Chemistry Council and the Business Roundtable in an amicus brief describing 21 examples where plaintiffs' lawyers try to multiply punitive damages by citing harm to individuals who are not parties to the case, or by seeking to regulate the conduct of a company or of an entire industry. We oppose juries being asked to substitute their judgment for that of legislatures and regulatory agencies.

On February 20, 2007, the Supreme Court ruled 5 to 4 to overturn the lower court ruling. It held that a jury may not punish a defendant for harming persons who are not before the court. In a nuanced opinion, it ruled that a jury may consider actual or potential harm to others in deciding how reprehensible the conduct was, but may not punish for the harm caused others. Punishment should be assessed based on the claim of the plaintiff before the court. States have some flexibility to determine the rules that will help minimize jury confusion over this standard.

The ruling is an important milestone in the Court's recent willingness to try to insure that punitive damages are properly limited and fair under the Due Process Clause. Key to the decision were votes by Justices Roberts and Alito, whose views on punitive damages were unknown until now.

The court declined to decide what multiplier of actual damages is constitutionally acceptable for determining punitive damages in this case.