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Court reopens punitive damages case

Final updates 1:10 p.m.

The Supreme Court, for the third time, agreed on Monday to review a $79.5 million punitive damages award against the giant tobacco firm, Philip Morris USA.  Because the case has lingered in state and federal courts, the award, including interest, has grown to about $145 million.  The case was brought by Mayola Williams, the widow of a smoker who died of cancer in 1997.

In stepping back into the dispute, the Court declined to hear Philip Morris’ new constitutional challenge to the size of the punitive verdict.  Instead, the Court limited its review to the Oregon Supreme Court’s latest ruling, scuttling Philip Morris’ challenge because of a legal defect it found in the trial. Even so, the case does pose a significant constitutional conflict between the Supreme Court’s authority to have its rulings applied, and a state court’s authority to manage its own state procedural rules.  The tobacco company appeal contends that the state court defied the Supreme Court’s most recent ruling, a clear victory for Philip Morris — that is, until the case got back to state court.  The new appeal is Philip Morris USA v. Williams (07-1216).

The Court, in a second newly granted case, took on an issue it has chosen to bypass in the past: whether a 1972 federal law against sex bias in schools and colleges — Title IX — provides the only remedies for claims of sex discrimination.  The Circuit Courts are split on whether Title IX displaces any claims of sex bias in education that parents or a child try to make under an 1871 civil rights law — so-called Section 1983.  The new case involves an appeal by parents of a kingergartner in Hyannis, Mass., who claimed that an eight-year-old boy repeatedly forced her to lift her skirt or pull down her underwear.  The First Circuit ruled that the parents could not win on their Title IX claim, and were barred from pursuing their constitutional claim under Section 1983.  The new case is Fitzgerald, et al., v. Barnstable School Committee (07-1125).

When the Philip Morris case was last before the Court, leading to a 5-4 ruling on Feb. 20 of last year, the majority laid down a new constitutional rule: punitive damage awards may not be based on harms that allegedly befell individuals or groups not directly involved in the lawsuit — “strangers to the litigation,” as the Court put it.  It sent the case back to the Oregon Supreme Court. The closing portion of that opinion said that the state Supreme Court “applied the wrong constitutional standard when considering Philip Morris’ appeal.  We remand this case so that the Oregon Supreme Court can apply the standard we have set forth.” It suggested that the new standard might lead to a new trial, or to a reduction of the punitive award.

When the case got back to the state court, however, it ruled that it did not need to apply the new constitutional standard, because it found that Philip Morris’ lawyers had erred in a jury instruction they had proposed (which the trial court did not give).  That instruction included Philip Morris’ assertion that punitive damages could not extend to harms to non-participants in a case — the assertion that the Supreme Court had validated.

The state court said in its new ruling that the trial judge did not err in refusing to give the proposed instruction, because it was flawed, misstating state law on two aspects of punitive damages.  It said its prior ruling upholding the punitive award still stood, since the Supreme Court had told the state court only to reconsider the failure to give the instruction that Philip Morris had proposed on awards to “strangers” to the lawsuit.  The flaw in the instructions, it said, provided an adequate and independent state law basis for upholding the verdict.

That case and the sex discrimination case will be heard and decided by the Court in the new Term that begins Oct. 6.

While the Court agreed to hear part of Philip Morris’ appeal in the punitive damages case, it turned aside another appeal by the company, joined by three other major tobacco companies plus the since-dissolved Tobacco Institute. The petition in Philip Morris USA, et al., v. Jackson, et al. (07-1272) was an attempt to challenge an ongoing case based on state law in Louisiana, asserting fraud in marketing cigarettes and design flaws in cigarettes.  State courts rejected the companies’ claims that federal laws on cigarette advertising barred the state law claims. Those suing urged the Court not to hear the case, saying further proceedings were underway in state trial court.

In one of its orders on Monday, the Court asked the U.S. Solicitor General for the federal government’s views on the right of a participant in a workers’ pension plan to sue the plan administrator for violating the ERISA law.  The specific issue is whether such a lawsuit is allowed under a provision that authorizes remedies only for violations of a plan’s terms, not violations of ERISA itself.  The case is AK Steel Corp. Retirement Plan, et al., v. West, et al. (07-663).  There is no deadline for the Solicitor General to respond.

Last October, the Court had asked for the government’s views in a somewhat similar case, AT&T Pension Benefit Plan v. Call, et al. (06-1398), testing the degree to which federal courts in hearing a challenge to a denial of benefits are to defer to the plan administrator’s interpretation of the plan’s terms. The Solicitor General urged the Court to deny review, saying the case involved only interpretation of the specific plan’s provisions, not the application of any federal law or regulation. In a brief order Monday, the Court took that advice, and denied review.

The Court issued four rulings on the merits on Monday, leaving 22 decisions to be issued before the current Term ends late in the month. Further decisions are expected on Thursday morning.  Here, in quick summary, were the results of the Monday rulings:

** By a 6-3 vote, the Court decided that a government employee may not go to court with a claim that he or she was treated differently from other workers, even though not on the basis of race, gender, religion, or some other group identity.  While the Court had recognized such a “class-of-one” lawsuit for some forms of discriminatory treatment, it said Monday that it would not do so in the public employment context.  The ruling was in Engquist v. Oregon Department of Agriculture (07-474), with Chief Justice John G. Roberts, Jr., writing for the majority and Justice John Paul Stevens for the dissent.

** By a unanimous vote, the Court ruled that an individual or entity making a RICO civil racketeering claim based on mail fraud need not prove that it had directly relied upon the misrepresentations claimed.  Justice Clarence Thomas wrote for the Court in Bridge v. Phoenix Bond & Indemnity (07-210).

** In another unanimous opinion written by Justice Thomas, the Court decided that the owner of a method patent uses up its right to license its patent and collect royalties when it sells the right to use the system in another company’s products, and thus may not collect a second round of royalties from that other company’s customers.  The ruling in Quanta Computer v. LG Electronics (06-937) overturned a lower court ruling that the long-standing “patent exhaustion doctrine” does not apply to components of a patented system that must be combined with additional components in order to practice the patented method.

** In a unanimous opinion written by Justice Samuel A. Alito, Jr., the Court declared that, in making a claim of misspent federal funds under the False Claims Act, it is not enough to show that false statements led to payment of government money, but that the challenged company or individual actually intended that the false statements be a factor in the federal outlay. The case was Alison Engine v. U.S. ex rel. Sanders (07-214).

Among new cases that the Court refused to hear Monday, these were the issues raised:

** What is the meaning of a 1947 law that excludes from workers’ pay the time they use to change into or out of required clothing at their place of work. Three cases also raised issues about compensation for the time it takes to put on and take off protective gear.  Each case raised a variation of the donning-and-doffing question. The cases were Anderson v. Cagle’s (07-910), Tyson Foods v. DeAsencio (07-1014), and Gorman v. ConEdison (07-1019).

** If an employer fails to make contributions to workers’ benefit funds, and then goes bankrupt, is the debt arising from that failure forgiven (“discharged”).  The lower courts are split on the issue.  The case was Trustees, Ohio Carpenters Pension Fund v. Bucci (07-1107).