Estate of Michelle Schwartz v. Phillip Morris USA, Inc.

The United States Supreme Court has identified three guideposts to determine whether a punitive damages award violates due process: (1) the degree of reprehensibility of the defendant’s action; (2) the disparity between the actual harm caused by the conduct and the punitive damages award; and (3) the difference between the punitive damages award and the civil and/or criminal penalties authorized or imposed in comparable cases.

Phillip Morris USA, Inc. (Phillip Morris) appealed a trial court’s award of $25 million in punitive damages. On appeal, Phillip Morris assigned error to the trial court’s failure to reduce the jury’s awarded punitive damages, arguing that the award was arbitrary and excessive. On review, the Court looked to the three guideposts governing punitive damage awards in civil cases laid out by the U.S. Supreme Court. The Court noted the first factor is the most important, and courts may take into account whether the harm was merely economic or physical, a result of fraud or deceit, or committed with reckless disregard for the health and safety of others. As to the second factor, where a particularly egregious act results in only a small amount of compensatory damages, a larger ratio of punitive to compensatory damages may comport with due process. That is a question of fact dependent on the defendant’s conduct and the harm suffered. The third guidepost exists as a comparative tool for courts. Where a state’s penalty is nominal or nonexistent, a large award may be excessive. But more severely punished actions may support a large award. The Court held the punitive damages were not arbitrary or unconstitutionally excessive, and the trial court did not err in denying Phillip Morris’ motion to reduce the punitive damages award. Affirmed.