If there were any lingering doubts about whether the Supreme Court’s February 2007 decision on punitive damages in Philip Morris USA v. Williams had teeth, the Court has moved quickly to remove those doubts.

On May 14 it ordered a California appeals court to reconsider its $82.6 million award in Ford Motor Co. v. Buell-Wilson. The California court must now consider whether the $55 million punitive damages component of its award took into account harm to individuals other than the plaintiff. Philip Morris established the principle that courts can take into account harm to non-parties in determining the reprehensibility of the defendant’s conduct, but cannot factor that harm directly into a punitive damages award.

“The plaintiffs in Buell-Wilson argued vehemently that Philip Morris had no bearing on this case,” says Theodore Boutrous Jr., who represented Ford and is co-chair of the appellate and constitutional law group at Gibson, Dunn & Crutcher.

To be sure, there’s no guarantee that the appeals court’s reconsideration will produce a different result.

“Telling a court to reconsider is not even a strong hint that something is rotten in Denmark,” says Buell-Wilson’s attorney Jerry Falk, a partner at Howard Rice Nemerovski Canady Falk & Rabkin. “In this case, it means only that the California court must take Philip Morris [which post-dated the California ruling] into account.”

And while Falk is confident the judgment will stand on reconsideration–and indeed it may–what really matters to defendants is that Philip Morris is now in play in every case in which plaintiffs base punitive damages claims on widespread reprehensible conduct, which is precisely what Buell-Wilson set out to do.

A Tragic Event

Benetta Buell-Wilson, 51, was driving on an interstate near San Diego in January 2002. As she swerved to avoid an object on the road, her 1997 Explorer rolled over four times. The vehicle’s roof collapsed on Buell-Wilson’s neck, severing her spine and leaving her paralyzed from the waist down.

In June 2004 a jury found that the Explorer was unstable and had a weak roof. The jury awarded $369 million, including $246 million in punitive damages, to Buell-Wilson and her husband. The trial judge reduced the award, and the appeals court cut it again, arriving at an $82.6 million award that included $55 million in punitive damages.

In his brief to the Supreme Court, Boutrous argued that the plaintiffs “from start to finish, devoted much of their case to urging the jury to punish Ford for allegedly killing or injuring third parties not before the court who were driving a different vehicle–the Bronco II.”

Falk countered that the plaintiffs tendered evidence about the Bronco II only for the permissible purpose of showing that Ford’s conduct was reprehensible because it was aware of instability problems in its SUVs when it put the Explorer on the market.

The Supreme Court didn’t decide whose argument was correct on this point–it left that to the California appeals court. In the big picture, however, the final result doesn’t matter nearly as much as the message from the High Court.

“Either plaintiffs’ lawyers will have to stop making suggestions that lead juries to punish defendants for harm to others or courts will have to stop them from doing so,” says Evan Tager, a partner at Mayer, Brown, Rowe & Maw who intervened on behalf of the U.S. Chamber of Commerce in Buell-Wilson. “While plaintiffs’ attorneys will still be able to argue that the defendant’s conduct was especially egregious because it injured many people other than the plaintiff, they will not be entitled to argue that the punitive damages should be set by multiplying the plaintiff’s compensatory damages by the total number of alleged victims. Nor should they be allowed to make the marginally more subtle argument that the defendant should be punished on behalf of ‘all of the other Jesse Williamses [the plaintiff in Philip Morris] out there.’”

Indeed, this consideration in itself should put an end to the arguments that have persisted about the significance of Philip Morris.

Excessive Damages

Many commentators and plaintiffs’ lawyers downplayed the implications of Philip Morris because the Court did not address whether the $79.5 million punitive award was unconstitutionally excessive–a key question in Philip Morris.

“Nonetheless, what Buell-Wilson demonstrates is that Philip Morris is likely to directly affect a large number of cases,” Tager says.

The reasoning in Philip Morris is also of strategic value to defendants, who can cite it to support arguments for limitations on the admissibility of evidence and more detailed jury instructions on the use of evidence regarding harm to others.

Defendants also should remember that the Supreme Court’s distinction between punishing for harm to non-parties and merely considering such harm in determining reprehensibility is inexorably linked to the Court’s concerns about disproportionate punitive awards.

“This means that when a jury exposed to evidence of non-party harms returns a punitive award that is many times the plaintiff’s compensatory damages, defendants may have a valid argument for a new trial on the ground that the verdict was tainted by an improper desire to impose punishment on behalf of non-parties,” Tager says. In other words, defendants have acquired an important new constitutional safeguard.

“The risk of being punished repeatedly for the same harms should be alleviated,” Tager says. “So too should the problem of a defendant being punished globally in one or more cases even though it has been exonerated in multiple other cases.”