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Twice before, the company has appealed an $80 million punitive damages award all the way to the U.S. Supreme Court, arguing that the jury was erroneously told by the plaintiff's lawyer to punish the tobacco company not only for the injury suffered by the plaintiff's husband, who died of lung cancer, but also for the harm suffered by innumerable smokers.

A jury instruction proffered by the tobacco company, which would have directed the jury to base its award only on the case at hand, was rejected by the trial judge.

Both times, the Supreme Court sided with Philip Morris, remanding the case to the Oregon state courts to review in light of a holding that imposing damages based on injuries suffered by nonparties violates due process.

Yet both times Oregon's highest court declined to reduce the punitive award, which is 152 times the amount of the roughly $521,000 in compensatory damages.

On the first occasion, the Oregon court reasoned that, while damage awards may not directly be based on injuries to others, such injuries may be considered in determining whether a defendant's actions are "extraordinarily reprehensible" – a factor in determining punitive awards.

On the second remand, the Oregon court simply found that Philip Morris' proffered jury instruction was defective for other reasons under state law, so reviewing the federal due process issue was unnecessary.

'Insolent' state court?

Yesterday the tobacco company's attorney was before the Supreme Court again in Phillip Morris USA v. Williams, this time asking the Court to throw out the verdict – originally handed down in 1999 – and grant a new trial.

The stakes are even higher now, since interest over the last nine years has caused the punitive award to swell to $145 million.

Stephen M. Shapiro, a partner at the Chicago office of Mayer Brown, argued on behalf of Philip Morris, telling that justices that the Oregon Supreme Court was being insolent in its refusal to listen to the nation's highest court.

The surprise move of affirming the award on state law grounds, he said, ignored the Supreme Court's directive to review the case under the federal due process standard.

"It's an ambush," Shapiro said. "It was a surprise ruling that we couldn't anticipate."

But Justice David Souter seemed concerned that forcing the state court to consider the federal question first would deny the plaintiff an opportunity to pursue the state law jury instruction issue, which it properly raised.

"If we accept your position, we in effect are saying the other side is not going to have an opportunity to argue [the state law issue] before the Oregon Supreme Court," Souter said. "And that, it seems to me, is kind of a steep hill for you to climb."

Shapiro noted that the Supreme Court "adopted a specific order here saying on remand: 'Now consider the constitutional standard.'"

"Isn't there a problem that we should be concerned with, if we accept your position, in cutting off the claim made by one party to the case which was never heard by the Oregon Supreme Court?" Souter pressed.

Shapiro answered that the Court "passed on the adequacy of the state ground when [it remanded] the case" on the due process question.

Souter was not swayed.

"I keep asking the question, which I think I have now put to you three times, and have yet to hear an answer on the merits on," he said, raising his voice in agitation. "Why is it appropriate for us to have a rule here that cuts off the right of a party that properly raised an issue in the Oregon Supreme Court and has yet to be heard on the merits in the Oregon Supreme Court?"

"This is a point that was argued to this Court four separate times now," Shaprio answered. "When the Court remanded with explicit directions to apply the constitutional standard, that's something that had to be done on remand."

Robert S. Peck, a Washington attorney at the Center for Constitutional Litigation, represented the plaintiff.

He argued that where an "adequate and independent" state law ground exists for making a ruling, a state court may do so without addressing a federal issue.

"This Court's constitutional mandate in this case … invites the discretion and judgment of a state court that's applying it," Peck said.

Justice Antonin Scalia expressed difficulty in understanding how a state court could look at a Supreme Court remand order, yet rule on a completely different ground.

"Is it up to a state court to sit in judgment about whether our remand orders are in error or not?" Scalia asked.

"The Oregon Supreme Court took that remand order to mean that they had to have in place [a] procedure that was fair," Peck said.

"If that's what they took it to mean, they were just wrong," Scalia shot back. "I mean, that's not what it says. [It says]: 'We remand so that the Oregon Supreme Court can apply the standard we have set forth,' which has nothing to do with the issue we have been discussing this morning."

"Oregon looked at it and said, 'Okay, we got that issue wrong, but there are other problems with this instruction,'" Peck replied.

"That's very nice," Scalia said, "but that's not what we remanded for."

A decision is expected later this term.

Questions or comments can be directed to the writer at: kimberly.atkins@lawyersusaonline.com