Brown & Williamson Tobacco Corp. v. Gault

• Decision Date: 13 March 2006
• Docket Number: No. S05Q1465.,S05Q1465.
• Parties: BROWN & WILLIAMSON TOBACCO CORP. v. GAULT et al.
• Court: Georgia Supreme Court

Page 549

627 S.E.2d 549

BROWN & WILLIAMSON TOBACCO CORP. v. GAULT et al.

No. S05Q1465.

Supreme Court of Georgia.

March 13, 2006.

Reconsideration Denied April 13, 2006.

Dorian Noel Daggs, Balch & Bingham, LLP, William Randall Bassett, Jr., William E. Hoffmann, Jr., Eric M. Wachter, Richard A. Schneider, Gordon Allen Smith, King & Spalding, LLP, Atlanta, for appellant.

Ralph Irving Knowles, Jr., Robert E. Shields, Leslie J. Bryan, Doffermyre Shields Canfield Knowles & Devine, Atlanta, Clifford E. Douglas, Tobacco Control Law & Policy Consulting, Ann Arbor, MI, for appellee.

Thurbert E. Baker, Atty. Gen., Isaac Byrd, Deputy Atty. Gen., Sidney R. Barrett, Jr., Asst. Atty. Gen., other party representation.

HUNSTEIN, Presiding Justice.

In 1997 the State of Georgia brought suit in the Superior Court of Fulton County against a number of cigarette manufacturers, including Brown & Williamson ("B & W"), asserting product liability claims and seeking compensatory and punitive damages "to restore to the State's treasury those funds spent [by the State] for tobacco attributable health care costs." The parties settled the case one year later when the tobacco companies paid the State of Georgia $4.8 billion. The Master Settlement Agreement, which was approved by the superior court, provided, inter alia, that "no part of any payment under this Agreement is made in settlement of any actual or potential liability for . . . enhanced damages." It also provided that the State agreed to "absolutely and unconditionally release and forever discharge all released parties from all released claims that the releasing parties directly, indirectly, derivatively or in any other capacity ever had, now have, or hereafter can, shall or may have."

The agreement defined "releasing parties" in pertinent part as "persons or entities acting in a parens patriae, sovereign, quasi-sovereign, private attorney general, qui tam, taxpayer, or any other capacity . . . to the extent that any such person or entity is seeking relief on behalf of or generally applicable to the general public . . . as opposed to solely private or individual relief for separate and distinct injuries." It also defined both "released claims" and "claims." "Released claims" are defined, in part, as being "directly or indirectly based on, arising out of or in any way related, in whole or in part, to (A) the use, sale, distribution, manufacture, development, advertising, marketing or health effects of" tobacco. The definition of "claims" included "liabilities of any nature including civil penalties and punitive damages."

Clara Gault Freeman died of lung cancer in 2001. Plaintiffs Willie Gault, the administrator of the deceased's estate, and Danny Freeman, the deceased's widower, brought this product liability action against B & W in Fulton County seeking compensatory and punitive damages. B & W removed the case to the United States District Court for the Northern District of Georgia and moved for summary judgment, asserting that the plaintiffs' punitive damages claim is barred by the doctrine of res judicata. Thereafter, the district court certified this question:

Does the doctrine of res judicata bar individual Georgians from seeking punitive damages against [B & W] when the Attorney General of Georgia, suing on behalf of the State of Georgia, released [B & W] from all future punitive damages claims related to the manufacture or use of tobacco products by signing the Master Settlement Agreement?

See 1983 Ga. Const., Art. VI, § VI, Par. IV (conferring in this Court jurisdiction to answer question of law from "any state appellate or federal or district or appellate court.") For the reasons that follow, we answer the question in the affirmative.

The doctrine of res judicata prevents the re-litigation of all claims that have already been adjudicated, or that could have been adjudicated, between identical parties or their privies in identical causes of action. OCGA § 9-12-40. In order for the doctrine to apply, three prerequisites must be satisfied: (1) identity of the parties or their privies; (2) identity of the cause of action; and (3) previous adjudication on the merits by a court of competent jurisdiction. Gunby v. Simon, 277 Ga. 698, 699, 594 S.E.2d 342 (2004); Waldroup v. Greene County Hosp. Auth., 265 Ga. 864(1), 463 S.E.2d 5 (1995). See Davis and Shulman's Ga. Practice & Procedure, (2001 ed.), §§ 27-3, 27-4. We find these prerequisites are satisfied under the facts of this case.

1. Res judicata applies only to the parties to the prior suit and those in privity with them. OCGA § 9-12-40. It is undisputed that plaintiffs were not parties in the action between the State and B & W. Thus, we must consider whether they were in privity with the State.

A privy is generally defined as "one who is represented at trial and who is in law so connected with a party to the judgment as to have such an identity of interest that the party to the judgment represented the same legal right. [Cits.]" Butler v. Turner, 274 Ga. 566, 568(1), 555 S.E.2d 427 (2001). In this case, privity is alleged to exist through application of the doctrine of parens patriae. The doctrine of parens patriae grants standing to a state to sue on behalf of its citizens. See Alfred L. Snapp & Son, Inc. v. Puerto Rico, 458 U.S. 592, 600, 102 S.Ct. 3260, 73 L.Ed.2d 995 (1982). The State can, as parens patriae, maintain an action on behalf of its citizens to seek compensation for sovereign or quasi-sovereign claims, but it may not represent its citizens' private interests. Id. at 607, 102 S.Ct. 3260. This means that the State and its citizens can be privies only with regard to public claims; they cannot be privies with regard to private claims.

These principles were elucidated in Satsky v. Paramount Communications, 7 F.3d 1464(II)(B) (10th Cir.1993), in which the court determined that plaintiffs and the State of Colorado were privies for "common public rights," but were not in privity when it came to "purely private interests." Id. at 1470. In making that determination, the court explained:

"There is no definition of `privity' which can be automatically applied to all cases involving the doctrines of res judicata and collateral estoppel," [cit.], since "privity depends upon the circumstances." [Cit.] "Privity may . . . be established if the party to the first suit represented the interests of the party to the second suit." [Cits.]

The [U.S.] Supreme Court has recognized the "right of a State to sue as parens patriae to prevent or repair harm to its `quasi-sovereign' interests." [Cit.] "In order to maintain [a parens patriae] action, the State must articulate an interest apart from the interests of particular private parties, i.e., the State must be more than a nominal party. The State must express a quasi-sovereign interest." [Cit.] . . . Although the [U.S.] Supreme Court has not expressly defined what is a "quasi-sovereign" interest, it is clear that a state may sue to protect its citizens against "the pollution of the air over its territory; or of interstate waters in which the state has rights." [Cit.] It is equally clear, however, that a state may not sue to assert the rights of private individuals. [Cits.]

Id. at 1468-1469. In those instances where a state has standing to maintain an action as parens patriae, the resulting judgments have been held to be binding on the citizens of the state as privies for purposes of res judicata. See, e.g., City of Tacoma v. Taxpayers of Tacoma, 357 U.S. 320, 340-41, 78 S.Ct. 1209, 2 L.Ed.2d 1345 (1958); Satsky, supra, 7 F.3d at 1470; Vacco v. Reebok Int'l, 96 F.3d 44, 48 (2d Cir.1996); Alaska Sport Fishing Ass'n v. Exxon Corp., 34 F.3d 769(III)(A) (9th Cir. 1994) (per curiam).

In acknowledgment of the above principles, B & W does not dispute plaintiffs' right to seek compensatory damages in this product liability case. Inasmuch as plaintiffs' claim for compensatory damages is of a private, individual nature, it cannot be said that plaintiffs and the State are in privity with respect to such claims. However, B & W does dispute plaintiffs' right to seek punitive damages in this action. In this regard, B & W posits that a punitive damage award in a product liability case is a matter of public interest; that in the prior proceeding the State sought punitive damages on behalf of all of its citizens; that plaintiffs and the State are in privity with regard to public claims; and that, therefore, plaintiffs' punitive damages claim is barred.

OCGA § 51-12-5.1(c) expressly states that punitive damages are not to be awarded as compensation "but solely to punish, penalize, or deter a defendant." In recognition of this purpose, Georgia law limits the recovery of punitive damages in product liability cases to one award of punitive damages from a defendant in a court in this State "for any act or omission . . . regardless of the number of causes of action which may arise from such act or omission." Id. at (e)(1). Even then, 75 percent of the punitive damages awarded in a product liability action, less a proportion of the costs of litigation, are to be paid into the State treasury. Id. at (e)(2). Thus, unlike compensatory damages, punitive damages serve the public interest by punishing, penalizing, and deterring the wrongdoer. See Id. at (c). See generally Mack Trucks v. Conkle, 263 Ga. 539(2)(a), 436 S.E.2d 635 (1993).

Because punitive damages serve a public interest and are intended to protect the general public, as opposed to benefitting or rewarding particular private parties, we find the State, in seeking punitive damages in the suit against B & W, did so as parens patriae and in this capacity represented the interests of all Georgia citizens, including plaintiffs here. Accordingly, we conclude that the State and plaintiffs were privies in that action. See Waldroup, supra, 265 Ga. at 866(1), 463 S.E.2d 5 (husband and wife in privity where wife previously sued in both...