Estate of Schwarz v. Philip Morris Inc.

Decision Date17 May 2006
Docket NumberA118589.,0002-01376.
Citation206 Or. App. 20,135 P.3d 409
PartiesThe ESTATE OF Michelle SCHWARZ, Deceased, by and through her Personal Representative Paul Scott Schwarz, Respondent-Cross-Appellant, v. Philip Morris Incorporated, a foreign corporation, Appellant-Cross-Respondent, and Roths I.G.A. Foodliner, Incorporated, an Oregon Corporation, Defendant.
CourtOregon Court of Appeals

William F. Gary, Eugene, argued the cause for appellant-cross-respondent. With him on the briefs were Sharon A. Rudnick and Harrang Long Gary Rudnick P.C.

Maureen Leonard argued the cause for respondent-cross-appellant. With her on the briefs were Robert K. Udziela, D. Lawrence Wobbrock, Charles S. Tauman, and Richard A. Lane.

Before BREWER, Chief Judge, and EDMONDS, LANDAU, ARMSTRONG, LINDER, WOLLHEIM, SCHUMAN, ORTEGA, and ROSENBLUM, Judges.

EDMONDS, J.

Defendant appeals a judgment based on a jury verdict that awarded plaintiff Richard Schwarz, the personal representative of the estate of his wife Michelle Schwarz (decedent), compensatory damages totaling $168,514.22 and punitive damages of $150 million against defendant Philip Morris Incorporated.1 Plaintiff alleged that decedent's death resulted from metastatic lung cancer that was caused by her smoking cigarettes that defendant manufactured and promoted as "low-tar." Defendant makes numerous assignments of error on appeal that we discuss below in detail. Plaintiff cross-appeals, challenging the trial court's reduction of the jury's punitive damages award from a total of $150 million to $100 million. On appeal, we affirm the portion of the judgment that finds defendant liable for compensatory damages. However, we vacate the judgment for punitive damages on all claims and remand for a new trial on the amount of those damages. We dismiss the cross-appeal as moot.

We state the facts in the light most favorable to plaintiff because of the verdict in his favor. Or. Const., Art. VII (Amended), § 3; Jensen v. Medley, 336 Or. 222, 226, 82 P.3d 149 (2003). Decedent began smoking in 1964, when she was 18 and a student in nursing school. Plaintiff and decedent were married in 1965, the year after they met. After they were married, decedent did not complete her nursing studies but instead raised the couple's children. When decedent started smoking, she knew that there was a potential link between cigarettes and illness, including lung cancer. Her parents had discouraged her from smoking, in part because of health concerns. Plaintiff quit smoking several years after he and decedent were married and he encouraged decedent to follow his example. However, throughout their marriage, she was unable to quit despite a number of attempts to do so, and she continued to smoke about a pack of cigarettes a day.

Decedent first smoked Benson & Hedges cigarettes, a full-flavor brand manufactured by defendant.2 In 1976, defendant introduced Merit cigarettes to the public with an extensive advertising campaign that emphasized that Merits had less tar than full-flavor brands but, according to the advertising campaign, tasted like full-flavor brands. At about the same time, plaintiff and decedent discussed her quitting smoking. Decedent suggested that, rather than quitting, she would try a low-tar cigarette; plaintiff agreed, believing that switching brands would be a step toward weaning her off cigarettes entirely. Soon after their discussion, decedent began smoking the Merit brand instead of Benson & Hedges. According to her mother's testimony, decedent switched to the Merit brand because she believed that "the low tar and nicotine filters are better for you," an idea that others talked about at the time. Indeed, decedent's stepfather had previously switched to a low-tar brand because he believed that they were safer than full-flavor cigarettes.

After switching to the Merit brand, decedent continued to smoke the same number of cigarettes as before. However, according to the testimony at trial, her method of smoking changed; she took longer puffs, inhaled the smoke more deeply, and held it longer in her lungs. She began smoking each day early in the morning and continued until late at night. She could not go without smoking a cigarette for more than an hour and a half without feeling deprived. Being without cigarettes made her act nervous, edgy, and irritable; smoking a cigarette would cause her to become calm and serene. On one long international airplane flight, she was so obviously upset from the lack of a cigarette that a flight attendant showed her how to smoke in a rest room without setting off the smoke alarm.

After switching to the Merit brand, decedent made further attempts to stop smoking entirely, including using nicotine patches, but she was always unsuccessful. She once told a physician that she had stopped smoking for six months, but plaintiff testified that she never actually quit. An expert on addictive substances testified unequivocally that decedent was addicted to nicotine. Decedent was diagnosed with a brain tumor in February 1998 that proved to be the result of metastatic lung cancer. Despite treatment and a period of temporary remission, she died on July 13, 1999, at the age of 53. At her son's wedding shortly before her death, while she was in a wheelchair and on oxygen, she begged her mother for a cigarette.

Plaintiff brought this action against defendant for damages in February 2000. The case went to trial in February 2002 on plaintiff's third amended complaint, in which he alleged claims based on theories of strict products liability, negligence, and fraud.3 The gist of his allegations was that (1) the Merit brand of cigarettes was unreasonably dangerous in a manner that was not contemplated by the consumer because it was marketed as a less harmful alternative to ordinary cigarettes; (2) defendant had been negligent in the manner in which it tested, manufactured, and marketed the Merit brand; and (3) defendant had defrauded consumers by making false claims about the health effects of the Merit brand, the contents of the brand itself, and its addictive nature.

After a lengthy trial, the jury returned a verdict for plaintiff on all his claims. As to the strict products liability and negligence claims, it apportioned fault between defendant (51 percent) and decedent (49 percent). As to the fraud claim, the jury found in defendant's favor on two specifications of fraud and in favor of plaintiff on two other specifications. It awarded compensatory damages consisting of $118,514.22 in economic damages and $50,000 in noneconomic damages. The jury also awarded punitive damages of $10 million on the strict liability claim, $25 million on the negligence claim, and $115 million on the fraud claim, for a total punitive damages award of $150 million. The trial court entered judgment for the full amount of the compensatory damages, reasoning that apportionment of fault did not apply to the fraud claim. It also reduced the total award of punitive damages to $100 million without apportioning it among the various claims. As stated above, both parties appeal.

On appeal, defendant makes 21 assignments of error. They include challenges to the denial of motions for directed verdicts for defendant on plaintiff's claims, challenges to the trial court's decision to give or not to give certain jury instructions regarding those claims, a challenge to the court's failure to grant a mistrial, and challenges to the jury instructions pertaining to, and the constitutionality of, the punitive damages awards. We reject without discussion any assignments of error and any arguments not addressed below. We begin with the assignments of error that pertain to the judgment on plaintiff's fraud claim.

I. THE FRAUD CLAIM

In his third amended complaint, plaintiff, after incorporating other allegations in the complaint, alleged "13.

"Defendant * * * recklessly and/or intentionally made fraudulent misrepresentations about its tobacco products, including misrepresentations about adverse health effects, the addictive nature of its tobacco products, and their contents.

"14.

"Defendant * * * engaged in an ongoing public relations effort beginning in the early 1950s, designed to manipulate public opinion by creating doubt about the adverse health effects of smoking and to provide rationalizations to help smokers keep smoking in spite of the adverse health effects. Defendant * * * made statements which were intended to and did cause cigarette smokers such as [decedent] to continue smoking cigarettes in spite of their adverse health effects. Defendant voluntarily assumed a duty to disclose all research.

"15.

"[Decedent] did not know defendant['s] representations were false and reasonably relied on, and suffered and died as a result of defendant['s] misrepresentations.

"16.

"Defendant['s] misrepresentations included the following and similar misrepresentations:

"a. That the causal link between cigarette smoking and human disease was in doubt or `had not been proven' in repeated statements during the past 50 years;

"b. That cigarettes are not addictive; and

"c. That `low tar' cigarettes delivered less tar and nicotine to the smoker and were therefore safer and healthier than regular cigarettes as an alternative to quitting smoking."

Answering specific interrogatories, the jury found in plaintiff's favor on two theories of fraud. First, it found that defendant voluntarily assumed a duty to disclose all research regarding smoking and health to consumers, that it breached that duty by concealing research from consumers, that decedent, one of defendant's consumers, reasonably relied on defendant's performance of its assumed duty, and that those representations and reliance were a cause of her death. Second, the jury...

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2 books & journal articles
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    • United States
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    ...third person may act on them, may be liable to the third person for fraud." Estate of Schwarz v. Phillip Morris Inc., 206 Or App 20, 43, 135 P3d 409 (2006), aff'd, 348 Or 442, adh'd to on recons., 349 Or 521 (2010) (citing American Nat. Bank of Denver v. Tonkin, 286 Or 73, 81-83, 85-86, 592......
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