$79.5 million punitive damage award against Philip Morris returns to the U.S. Supreme Court

The U.S. Supreme Court has agreed to review for the third time the $79.5 million in punitive damages that a Multnomah County jury awarded in a tobacco products liability case.  The court today accepted review in Williams v. Philip Morris USA, following the Oregon Supreme Court's decision earlier this year to affirm the punitives award of 97 times compensatory damages.  The state court reached that result by citing a state law defect in a proposed jury instruction on punitive damages, thereby avoiding the question of the instruction's compliance with the federal constitutional standards for due process. 

The U.S. Supreme Court today agreed to review only whether the state court was prohibited from, in effect, ignoring its directive to apply the federal constitutional standard.  It will not address whether the punitive damages are excessive under the Due Process Clause.

See the petition for writ of certiorari here , our coverage of the most recent state court ruling here, and the SCOTUS Blog report on the case here.

Oregon Supreme Court denies smoker class action for "medical monitoring"

In a unanimous opinion with one concurrence, the Oregon Supreme Court yesterday upheld the dismissal of a large class action of smokers who sought injunctive relief for "medical monitoring, smoking cessation and education."  Plaintiffs are some 400,000 smokers who have no present symptoms, but sought to have a group of tobacco companies fund a program to cover the cost of CT scans and other diagnostic tests to identify future harm from smoking.  Even though they lack of any present injury, plaintiffs contended they could maintain an action for such relief based on the defendant tobacco companies' negligence.   The Court disagreed, holding that a common law negligence claim requires a present physical injury:  "The complaint does not allege that plaintiff has suffered any present physical harm as a result of defendants' conduct. The complaint alleges only that plaintiff has suffered a 'significantly increased risk of developing lung cancer' in the future."  The Court continued:

"Oregon law has long recognized that the fact that a defendant's negligence poses a threat of future physical harm is not sufficient, standing alone, to constitute an actionable injury. As this court has explained, 'the threat of future harm, by itself, is insufficient as an allegation of damage in the context of a negligence claim.' Zehr, 318 Or at 656; see also Bollam v. Fireman's Fund Ins. Co., 302 Or 343, 347, 730 P2d 542 (1986) (holding that "'[t]he threat of future harm, not yet realized, is not enough'") (quoting W. Page Keeton, Prosser & Keeton on Torts 165 (5th ed 1984)). As Prosser explains,

Since the action for negligence developed chiefly out of the old form of action on the case, it retained the rule of that action, that proof of damage was an essential part of the plaintiff's case. Nominal damages, to vindicate a technical right, cannot be recovered in a negligence action, where no actual loss has occurred. The threat of future harm, not yet realized, is not enough. Negligent conduct in itself is not such an interference with the interests of the world at large that there is any right to complain of it, or to be free from it, except in the case of some individual whose interests have suffered.

Keeton, Prosser & Keeton on Torts at 165 (footnotes omitted). Accordingly, a plaintiff's cause of action does not accrue, and the statute of limitations on that cause of action does not begin to run, until the plaintiff has suffered an "'actual loss.'" Bollam, 302 Or at 347 (quoting Prosser and Keeton on Torts at 165)."

You can find the full opinion here.

Oregon Court of Appeals turns away tort claims against a dissolved corporation

Last week the Oregon Court of Appeals declined to expand the limits on claims against dissolved corporations and successor corporations.  In Dahlke v. Cascase Acoustics, Inc. plaintiff asserted asbestos products liability claims against several defendants, including a dissolved corporation and a corporation that had purchased some of the assets of that dissolved corporation. 

Plaintiff filed suit after the time had expired for making claims against a dissolved corporation under Oregon's statutes.  Plaintiff argued that he should nonetheless be entitled to pursue his claim under the common law "trust fund" doctrine, contending that a judgment against a dissolved corporation can be satisfied through assets distributed to stockholders upon dissolution.  The court held that the trust fund doctrine will not revive a claim that has been extinguished by the corporations statute, currently found at ORS Chapter 60.  On that basis the trial court had properly entered summary judgment against plaintiff as to the dissolved corporation.

As to the claim against the corporation that had acquired some of the assets of the dissolved corporation, the court held that defendant could not be held liable as a "successor" to the dissolved corporation because it had not acquired all of the latter's assets.  The court declined plaintiff's invitation to expand Oregon's law on successor liability "to accomodate the special issues raised by liability for defective products."

Vioxx maker answers with defense verdict: Score--Merck 10, Plaintiffs 5

Just weeks after Merck was hit with a multi-million dollar verdict in another Vioxx case in New Jersey, a jury this week in the otherwise plaintiff-friendly Madison County, Illinois court handed the plaintiff a defense verdict after deliberating less than 6 hours.  Plaintiff Frank Schwaller sued the maker of the Cox-2 Inhibitor for the death of his wife.  After taking Vioxx for about a year and a half, in 2003, Patricia Schwaller died of a heart attack.  The jury may have been persuaded that Ms. Schwaller's heart attack was not caused by her prescription medication as she also suffered from high cholesterol, high blood pressure and obesity.  Merck continues to fight the Vioxx cases one-by-one.  As jury trials go in these kinds of high profile pharmaceutical cases, the company is doing pretty well.  The score now?  Merck 10, Plaintiffs 5.

Vioxx plaintiff hits homerun; Score: Merck 9, Plaintiffs 5

In a setback for Merck, the maker of Vioxx, a New Jersey jury today awarded plaintiff $20 million in compensatory and $27 million in punitive damages to a 61-year-old mail carrier who suffered a heart attack allegedly caused by his prescription Vioxx.  The pharmaceutical company has won nine of the fourteen Vioxx cases it has tried.  For more on the case, see here.

Supreme Court answers the $79 million questions: No and no

Two cases making legal news have a few things in common:  they were both tried in Portland, the juries in each case punished the defendants by assessing $79 million in damages (give or take half a million), and today both cases were overturned by the U.S. Supreme Court.

In Philip Morris v. Williams, the products liability plaintiff obtained a $79.5 million punitive damages verdict against the cigarette manufacturer.  The Supreme Court voted 5-4 that the Due Process clause of the Constitution prohibits punitive damages awards that punish defendant for harm inflicted on any party other than plaintiff.  In a bit of constitutional hair-splitting, the Court stated that a plaintiff can offer evidence of harm to non-parties to show that the wrongful conduct was reprehensible, but the jury can't use that evidence to punish defendant for the harm caused to others.  How to ensure that juries don't cross the line?  It's up to the states to figure that out, according to the court, beginning with the Oregon Supreme Court as it will again take up the Williams case.  See the Oregon Business Litigation Blog's earlier coverage of the case here and here.

In Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., the Supreme Court threw out a novel antitrust theory that had resulted in a verdict of $ 26 million, trebled by law to $79 million.  Plaintiffs claimed that Weyerhaeuser had engaged in an unlawful monopsony -- or buyer-side monopoly -- by bidding up the price of alder logs (as input for its mills) to levels higher than other mills could afford to pay, thereby putting those mills out of business.  This theory is called predatory bidding.  The unanimous court held that to prove predatory bidding, plaintiff must show that (1) bidding up the price of the input caused the price of the resulting output to exceed the revenues generated by the sale of that output, and (2) defendant has a dangerous probability of recouping the resulting losses  by exercising its monopsony power once competitors are run out of business. 

At trial, Judge Owen Panner did not require plaintiff to make such a stringent showing, instructing the jury that plaintiff was required to show only that Weyerhaeuser had bid the cost of logs above a "fair price."  The Supreme Court reversed the verdict resulting from that instruction.  See the Oregon Business Litigation Blog's earlier coverage of the case here, here,  and here.

Find other law blog coverage of today's rulings here and here.

Oregon Supreme Court holds asbestos claim not barred by statute of limitations

Oregon Plaintiffs Lawrence and Patricia Keller may proceed to trial in their asbestos injury cases thanks to the Oregon Supreme Court's recent interpretation of the "discovery rule" in the Oregon statute of limitations.

The Kellers brought suit against various defendants alleging that Lawrence Keller was injured from exposure to asbestos.  The defendants moved to dismiss the suit, arguing that the statute of limitations had run on the claims.  Oregon's asbestos statute of limitations, ORS 30.907(1), provides that:  "A product liability civil action for damages resulting from asbestos-related disease shall be commenced not later that two years after the date on which the plaintiff first discovered, or in the exercise of reasonable care should have discovered, the disease and the cause thereof." 

Lawrence Keller had worked as a mechanic in a muffler shop where he allegedly was exposed to asbestos.  He later developed respiratory ailments and, from the mid-1980s to the mid-1990s, saw various doctors who told him that his exposure to asbestos was a possible cause of his problems.  More than two years before he filed his civil suit in 2000, he filed both workers compensation and social security disability claims in which he alleged that he suffered from his prior exposure to asbestos.

Nonetheless, in a unanimous opinion, the Oregon Supreme Court last week held that a reasonable juror could find that Mr. Keller did not discover his asbestos-related condition until a doctor diagnosed it.  That diagnosis came, for the first time, within the two-year limitations period.  The Court further held that knowledge of his condition and its cause should not be imputed to him while he engaged in a reasonable inquiry and was told by his doctors that the cause of his condition was uncertain.  You can read the opinion here:  Opinion.

Class Action Status Denied in Vioxx Cases

Federal Judge Eldon Fallon, who oversees the thousands of federal Vioxx painkiller cases facing drug maker Merck & Co., denied the plaintiffs' request to certify the personal injury and wrongful death cases as class actions.  Plaintiffs allege that Vioxx increases the risk of heart attacks and other ailments, and Merck pulled Vioxx from the market in 2004.  Judge Fallon determined that the individual differences among the many plaintiffs and their specific medical histories made any class adjudication unmanageable.  The ruling deprives the plaintiffs of leverage to negotiate a comprehensive settlement, as the cases must now proceed on an individual, and more costly, basis.  Merck has vowed not to settle, but to try all cases individually.  Judge Fallon's order can be found here:  Order

Appeals Court Stays Tobacco Sanctions

Without issuing a written opinion, the United States Circuit Court of Appeals for the District of Columbia, on October 31, 2006, stayed a trial court ruling which would have required the big tobacco companies to refrain from using "light," "low tar," and similar phrases in their advertising of so called "light" cigarettes.  In addition to the advertising sanctions, trial court Judge Gladys Kessler's underlying order would have required the tobacco companies to make costly corrective public statements about the harmful effects of smoking cigarettes.  In the absence of the stay, the companies would have had to comply with the prohibition on advertising phrases and taken the other corrective measures by January 1.  The stay by the appeals court allows the tobacco companies to avoid spending millions of dollars complying with the order while they try to convince the appeals court to reverse Judge Kessler's ruling altogether.

Supreme Court may send punitive damage case back to Oregon

At yesterday's U.S. Supreme Court argument in the Oregon case Philip Morris USA v. Williams, the justices signalled that they may return the case to the Oregon Supreme Court for clarification.  Doing so would avoid for now further explication by the Court of the Due Process limits on punitive damages, and in particular the extent to which a jury can consider harm to non-parties in setting punitive damages.  Link: Law.com - Justices May Return Punitive Damages Case to Oregon High Court.

U.S. Supreme Court to scrutinize Oregon punitive damage award

Next Tuesday, October 31, the U.S. Supreme Court will hear oral argument in the latest of a series of  cases concerning the proper scope of punitive damages.  Philip Morris USA v. Williams was tried in Multnomah County Superior Court in 2002.  Plaintiff Mayola Williams claimed that the tobacco company misled her deceased husband about the danger of smoking, and received an awarded of $79.5 million in punitive damages.  Beginning with BMW v. Gore in 1996, the Supreme Court has issued a series of cases imposing Due Process clause limits on excessive punitive damages.  The Williams case has a particular focus on the extent to which punitive damages can be awarded as punishment for harm to persons other than the parties to the action.  The Court granted certiorari to address these questions:

1.  Whether, in reviewing a jury's award of punitive damages, an appellate court's conclusion that a defendant's conduct was highly reprehensible and analogous to a crime can "override" the constitutional requirement that punitive damages be reasonably related to the plaintiff's harm.
2.  Whether due process permits a jury to punish a defendant for the effects of its conduct on non-parties.

The briefs filed in the Supreme Court are available here.

Class Action Smokers Denied "Medical Monitoring" and Treatment Costs

The Oregon Court of Appeals dismissed plaintiff's negligence claim in this Oregon state court putative class action on the basis that plaintiff alleged no present injury, but merely the costs of on-going "medical monitoring" and cessation treatment.  The case is:  Lowe v. Philip Morris USA, Inc., et al.

In this case of first impression in Oregon, the plaintiff smoked for several years, and her attempts to quit smoking failed.  Plaintiff did not allege lung cancer or any other physical injury from smoking cigarettes.  The Court noted that plaintiff's complaint rested on allegations of the need for monitoring and treatment "to redress the mere possibility of future harm."  The complaint "fail[ed] to include an allegation of actual, present harm of any sort, much less the physical harm that ordinarily is required to state a claim for negligence."  The only two exceptions to the physical harm requirement under Oregon law--economic loss and infliction of emotional distress--did not apply because, in the case of "economic loss," there was no "heightened duty of care" owed by the defendants, and, in the case of emotional distress, there likewise was no heightened duty, no "intentional conduct," and no physical impact.  Accordingly, plaintiff was unable to state an ordinary negligence claim.  On the other hand, the court left for another day, "whether a negligence claim predicated on different allegations as to the risk of future harm and the certainty of the need for treatment is cognizable under Oregon law," emphasizing that plaintiff alleged only a mere possibility of future harm.

Merck Wins Vioxx Case

The score is now Merck 5, plaintiffs 3 in the ongoing battle over the safety of Merck's drug, Vioxx.  Vioxx is one of many prescription "NSAID" (non-steroidal anti-inflammatory) medications, used to treat certain kinds of pain including arthritis. In the first of the California cases, the jury rendered a verdict for the defense, finding that the 71-year-old plaintiff did not prove that his use of Vioxx caused his heart problems.  With thousands of similar cases pending, Merck has vowed to continue to fight them in court one at a time.  For more coverage, see the AP article at:  http://www.law.com/jsp/article.jsp?id=1154509541613