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Supreme Court puts new rules on damage awards

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An Oregon jury violated constitutional principles of fairness when it levied a $79.5 million punitive-damages award against the Philip Morris tobacco company in a single smoker lawsuit.

In a 5-to-4 decision announced Tuesday, the US Supreme Court struck down the verdict because it said the jury violated due-process protections when it sought to punish the tobacco company for injuries suffered by nonparties to the litigation.

Writing for the majority, Justice Stephen Breyer said the jury could consider Philip Morris's alleged deceptive conduct toward all smokers in Oregon in determining the reprehensibility of its conduct. But he said the jury could not then punish Philip Morris for that same conduct without violating the tobacco company's constitutional rights.

In reaching its decision, the court avoided addressing the most closely watched issue in the case: whether a nearly $80 million punitive-damages award for the widow of a smoker is constitutionally excessive.

"The Constitution imposes certain limits in respect both to procedures for awarding punitive damages and to amounts forbidden as 'grossly excessive,' " Justice Breyer writes. But he said the court would address only the procedural issue and leave it to the Oregon courts to address the issue of excessive punitive damages during any retrial.

The decision is important because it represents a move by the high court to impose constitutional limits on punitive- damage awards. But the decision also exposes sharp differences within the court on the issue.

Justices John Paul Stevens, Clarence Thomas, and Ruth Bader Ginsburg all filed dissents. Justice Antonin Scalia and Justice Thomas joined Justice Ginsburg's dissent.

"While apparently recognizing the novelty of its holding, the majority relies on a distinction between taking third-party harm into account in order to assess the reprehensibility of the defendant's conduct – which is permitted – from doing so in order to punish the defendant directly – which is forbidden," writes Justice Stevens in his dissent. "This nuance eludes me."

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