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A state appellate court has defied � or at least stretched � precedent by upholding a $28 million punitive damages award against a major tobacco company, an amount 33 times greater than the compensatory damages. Friday’s 2-1 ruling by Los Angeles’ Second District Court of Appeal acknowledged that the nation’s and state’s highest courts have declared single-digit ratios between punitives and compensatories generally satisfactory, but nonetheless found the hefty award justified by Philip Morris USA Inc.’s “extremely reprehensible” behavior. “Philip Morris’ persistent efforts to mislead the public about the health hazards of smoking despite its understanding that smoking was hazardous,” Justice H. Walter Croskey wrote, “show that ‘strong medicine is required to cure the defendant’s disrespect for the law.’” Justice Joan Dempsey Klein concurred. But Justice Patti Sue Kitching dissented in part, saying the punitive damages constituted “a grossly excessive punishment” that violates the due process clause of the Fourteenth Amendment. Jurors in 2002 hit Philip Morris with $850,000 in compensatory damages and a whopping $28 billion in punitives for Betty Bullock, dying of lung cancer after smoking Philip Morris cigarettes for 45 years. Bullock later agreed to a reduction in the punitives to $28 million to avoid L.A. County Superior Court Judge Warren Ettinger granting the tobacco giant a new trial on excessive damages. Bullock died in February 2003 and was replaced in the case by a relative. Philip Morris appealed, saying $28 million was still too much. The company’s lawyers relied in part on the U.S. Supreme Court’s 2003 opinion in State Farm Mutual Automobile Insurance v. Campbell, 538 U.S. 408, which instructed that “in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.” That was followed last year by the California Supreme Court’s 2005 decision in Simon v. San Paolo U.S. Holding, 35 Cal.4th 1159. In Friday’s ruling, however, the majority maintained that Simon also allowed them to take into consideration Philip Morris’ wealth � estimated at about $100 billion in operating income between 1967 and 2001 � and “clearly stated” that extreme reprehensibility is a special justification for exceeding single-digit ratios. “Philip Morris’ considerable wealth and ability to pay many times the amount awarded supports our conclusion that a $28 million award is not excessive,” Justice Croskey wrote. The majority also broke ranks with another division of the same court, which last year in Boeken v. Philip Morris, 127 Cal.App.4th 1640, found it appropriate to reduce a $100 million punitive damages award against the same tobacco company to $50 million, a 9-1 ratio over compensatories. The trial court had earlier dropped it from $3 billion. The Boeken panel had followed State Farm, but the justices in Friday’s ruling said the earlier ruling didn’t have the benefit of Simon. In upholding the $28 million award, Croskey said the court isn’t suggesting “that 33 to 1 would be an appropriate ratio in another case involving extreme reprehensibility or to establish any kind of presumption, but merely conclude, based on the facts in this case, that the ratio of punitive damages awarded by the trial court to compensatory damages is not excessive.” John Sorrells, a Washington, D.C.-based spokesman for Philip Morris, would only say “there are issues that need review and we will seek that review from the California Supreme Court.” In a prepared statement, Los Angeles lawyer Michael Piuze, who represented the Bullock family as well as the plaintiff in Boeken, said he too will seek review. The court should have revisited the punitive figure and set it higher, he said. “The loss of two days of earnings does not punish Philip Morris and will certainly not deter Philip Morris.” Theodore Boutrous Jr., a partner at L.A.’s Gibson, Dunn & Crutcher who has defended several major companies against huge punitive damage awards, said the court’s decision “raises very serious questions.” The U.S. Supreme Court’s ruling in State Farm, he said, was intended “to bring some regularity, certainty, predictability and restraint to punitive damages.” Friday’s appellate court decision, he added, isn’t consistent with State Farm in many respects and ignores the result in Boeken, a case involving the same company and similar facts. Boutrous said that the ruling � Bullock v. Philip Morris USA, 06 C.D.O.S. 3303 � “is ripe for review by the California Supreme Court.”

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