Punitive Damages: Ration Relative to Compensatory

Posted in Punitive Damages on October 1, 2011

Bullock v. Philip Morris USA, Inc., (Second District, August 17, 2011) — Cal.Rptr.3d —-, 2011 WL 3599605, 11 Cal. Daily Op. Serv. 10,492

A woman who contracted lung cancer after smoking for over 40 years filed suit against Philip Morris, alleging that the cigarettes were negligently and defectively designed and that the defendant failed to adequately warn her of the dangers of smoking. The plaintiff also alleged that the defendant intentionally and negligently misrepresented to the public and the medical and scientific community the adverse health effects of smoking, and concealed material facts relating to the dangers of cigarettes. A jury found that Philip Morris was guilty of malice, fraud or oppression with respect to each count, and awarded Bullock $850,000 in compensatory damages, as well as $13.8 million in punitive damages.

On appeal the Defendant contended that the punitive damages award was constitutionally excessive, and that a ratio of one-to-one would be appropriate in light of the substantial compensatory damages award. However, the Court of Appeal affirmed the judgment, holding that in light of the “extreme reprehensibility of Philip Morris’s misconduct, including the vast scale and profitability of its course of misconduct, and its financial condition,” an award of approximately 16 times the compensatory damages was justified and not unconstitutionally excessive:

“[P]hilip Morris’s conduct in intentionally deceiving smokers and the public in general for several decades concerning the adverse health effects of cigarette smoking, while formulating its cigarettes so as to make them more addictive, and aggressively advertising to youths and others before July 1, 1969, was extremely reprehensible.
. . .
Philip Morris and other cigarette manufacturers for many years conducted a public campaign designed to obscure and deny the truth. Philip Morris falsely asserted that there was no consensus in the scientific and medical community concerning the adverse health effects of smoking and that the relationship between smoking and health was unknown. Philip Morris assured its customers that if it learned that any cigarette ingredient caused cancer it would remove that ingredient, and falsely stated that it did not believe that smoking was hazardous. Philip Morris repeatedly asserted that more research was needed and that it was diligently pursuing that research, but avoided sponsoring any research that would reveal the hazards of smoking and went to great lengths to avoid disclosing its own toxicological data. Rather than remove nicotine from its cigarettes as it had the ability to do, Philip Morris added urea to its cigarettes to enhance the effect of nicotine so as to further exploit its customers’ addiction and gain new customers. Its customers included individuals such as Bullock who first began to smoke as youths before July 1, 1969, attracted in part by an aggressive advertising campaign in television, print and other media that was particularly appealing to youths.
. . .
Because the evidence shows that nicotine is an addictive drug that makes smokers highly vulnerable to rationalization of their injurious behavior, and that Philip Morris for many years and through extensive efforts deliberately exploited that vulnerability through a deceptive, broad-based publicity campaign, manipulation of the narcotic effect of nicotine in cigarettes and other means, we conclude that this factor weighs in favor of high reprehensibility.
. . .
California’s interests in punishment and deterrence are very strong in light of the extreme reprehensibility of Philip Morris’s misconduct. Moreover, Philip Morris’s persistent efforts for several decades to mislead the public about the health hazards of smoking despite its understanding that smoking was hazardous show that “strong medicine is required to cure the defendant’s disrespect for the law.” Philip Morris’s considerable wealth and ability to pay many times the amount awarded suggest that the $13.8 million punitive damages award is not excessive.”