The Estate Of Michelle Schwarz v. Philip Morris Inc.

• Citation: 235 P.3d 668,348 Or. 442
• Decision Date: 24 June 2010
• Docket Number: CA A118589,(CC 000201376,SC S053644).
• Parties: The ESTATE OF Michelle SCHWARZ, Deceased, by and through her Personal Representative, Paul Scott SCHWARZ, Petitioner on Review,v.PHILIP MORRIS INCORPORATED, a foreign corporation, Respondent on Review.
• Court: Supreme Court of Oregon

348 Or. 442

235 P.3d 668

The ESTATE OF Michelle SCHWARZ, Deceased, by and through her Personal Representative, Paul Scott SCHWARZ, Petitioner on Review,v.PHILIP MORRIS INCORPORATED, a foreign corporation, Respondent on Review.

(CC 000201376; CA A118589; SC S053644).

Supreme Court of Oregon.

Argued and Submitted Nov. 2, 2009.

Decided June 24, 2010.

On appeal from the Court of Appeals.^*

Maureen Leonard, Portland, argued the cause and filed the briefs for petitioner on review. With her on the briefs were Robert K. Udziela, D. Lawrence Wobbrock, Charles S. Tauman, and Richard A. Lane.

William F. Gary, Harrang Long Gary Rudnick P.C., Eugene, argued the cause and filed the briefs for respondent on review. With him on the briefs were Sharon A. Rudnick and Susan D. Marmaduke.

W. Eugene Hallman, Pendleton, filed a brief for amicus curiae Oregon Trial Lawyers Association.

Before DE MUNIZ, Chief Justice, and DURHAM, BALMER, WALTERS, and KISTLER, Justices.^**

WALTERS, J.

The Due Process Clause of the Fourteenth Amendment ¹ prohibits a jury from imposing punitive damages to punish a defendant directly for harm caused to nonparties. However, a jury may consider evidence of harm to others when assessing the reprehensibility of the defendant's conduct and the appropriate amount of a punitive damages verdict. Philip Morris USA v. Williams, 549 U.S. 346, 356-57, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007) ( Williams II ). In this “low-tar” tobacco case, we decide that the trial court correctly refused defendant's requested instruction that would have informed the jury on the impermissible uses of evidence of harm to others without also instructing the jury on its permissible use, but that the trial court erred in giving an instruction on punitive damages that was, conversely, incomplete and therefore incorrect. We affirm the decision of the Court of Appeals vacating the jury's punitive damages award Estate of Michelle Schwarz v. Philip Morris Inc., 206 Or.App. 20, 135 P.3d 409 (2006), and remand the case to the trial court for a new trial limited to the question of punitive damages.

I. FACTS AND PROCEDURAL POSTURE

In 2000, plaintiff, the husband and personal representative of decedent Michelle Schwarz, brought this action against defendant, Philip Morris. Plaintiff asserted three claims for relief based on allegations of negligence, strict product liability, and fraud in the manufacture, marketing, and research of defendant's brand of low-tar cigarettes. At trial in 2002, plaintiff adduced the following evidence.

Michelle Schwarz began smoking cigarettes in 1964 when she was 18 years old. She attempted to quit smoking numerous times but was unable to do so. In 1976, defendant introduced a new product, Merit cigarettes, to the market for tobacco products. Advertisements for the new brand touted that the cigarettes contained less tar than existing “full-flavor” cigarettes but still tasted like the full-flavor brands. Out of a belief that “low tar and nicotine filters are better for you,” decedent switched from a full-flavor brand that defendant manufactured to its low-tar Merit brand. After switching brands, decedent continued to smoke the same quantity of cigarettes-approximately one pack per day-but subconsciously altered her method of smoking. She took longer puffs, inhaled the smoke more deeply, and held it longer in her lungs. In 1999, at the age of 53, decedent died from a brain tumor that was the result of metastatic lung cancer.

The method of smoking that decedent had adopted after switching to defendant's low-tar brand was consistent with the behavior of smokers generally. Persons addicted to nicotine in cigarettes tend to develop a certain “comfort level” of nicotine, and, when smoking cigarettes that contain less nicotine, those smokers are likely to “compensate”-that is, adjust subconsciously the manner in which they smoke-in order to achieve that “comfort level.” Compensation causes smokers of low-tar cigarettes to inhale the same levels of tar, the primary carcinogen found in cigarettes, as they would ingest by smoking a full-flavored brand. Defendant was not only aware of that phenomenon, that awareness played a major role in the development of its low-tar brand. A primary purpose of defendant's decision to bring low-tar cigarettes to market was to give smokers what one tobacco executive labeled a “crutch,” that is, a product that enabled smokers to rationalize continued indulgence of a habit that they otherwise would consider to be deadly.

Defendant's behavior with respect to the development and marketing of low-tar cigarettes was but one iteration of a larger pattern of deceiving smokers and the rest of the public about the dangers of smoking. See Schwarz, 206 Or.App. at 29-35, 135 P.3d 409; Williams v. Philip Morris Inc., 340 Or. 35, 39-43, 127 P.3d 1165 (2006) ( Williams I ) vacated on other grounds by Williams II, 549 U.S. 346, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007) on remand, 344 Or. 45, 176 P.3d 1255 (2008) cert. dismissed, --- U.S. ----, 129 S.Ct. 1436, 173 L.Ed.2d 346 (2009) (explaining in greater detail defendant's conduct). Beginning in the mid-1950s (when reports first emerged about a link between smoking and lung cancer and other deadly diseases) and enduring throughout decedent's smoking life, defendant conspired with other cigarette manufacturers to wage a massive disinformation campaign designed to create the perception of uncertainty about the health risks of cigarettes, when in fact secret research by those same tobacco companies confirmed the adverse health consequences of smoking.

Plaintiff offered expert testimony on the substantial harm that that pattern of fraud and deception had imposed on others not party to the litigation in this case. Each year, in the United States, there are approximately 400,000 deaths attributable to cigarette smoking, and approximately 15 million Americans have died from cigarette smoking in the last century.

At the close of evidence, the trial court gave the jury the following instruction on punitive damages, tailored on Uniform Civil Jury Instruction (UCJI) 75.05A (Oct 1997) (the uniform jury instruction):

“To recover punitive damages, [plaintiff] must show by clear and convincing evidence that defendant Philip Morris

“has shown a reckless and outrageous indifference to a highly unreasonable risk of harm and has acted with a conscious indifference to the health, safety, and welfare of others[.]

“Clear and convincing evidence is evidence that makes you believe that the truth of the claim is highly probable.

“If you decide that the defendant has acted as claimed by the plaintiff, you have the discretion to award punitive damages.

“Punitive damages, if any, shall be determined and awarded based on the following:

“(1) The likelihood at the time that serious harm would arise from the defendant's misconduct;

“(2) The degree of the defendant's awareness of that likelihood;

“(3) The profitability of the defendant's misconduct;

“(4) The duration of the misconduct and any concealment of it “(5) The attitude and conduct of the defendant upon discovery of the misconduct;

“(6) The financial condition of the defendant; and

“(7) The total deterrent effect of other punishment imposed on the defendant as a result of the misconduct, including, but not limited to, punitive damages awards to persons in situations similar to the claimant's and the severity of criminal penalties to which the defendant has been or may be subjected.

“The amount of punitive damages you award may not exceed $300,000,000.00.”

At the time of trial, the United States Supreme Court had not yet indicated that the constitution required any particular instruction on punitive damages. Indeed, the leading punitive damages cases at that time had arisen in the context of post-verdict judicial review of jury awards. See, e.g., Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001) (conducting post-verdict analysis of jury award); Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 7, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991) (same); see also BMW of North America, Inc. v. Gore, 517 U.S. 559, 586, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996) (leaving to states to determine in the first instance whether adjustment to “grossly excessive” award should be made by independent appellate review or remanded for new trial on punitive damages). Consistent with those cases, the uniform jury instruction informed jurors of the factors that Oregon law permitted them to consider in awarding punitive damages. If a jury returned a verdict for any amount of punitive damages, then a defendant could seek judicial review on the constitutionality of the amount of that award. See Parrott v. Carr Chevrolet, Inc., 331 Or. 537, 555, 17 P.3d 473 (2001) (federal constitution requires the availability of post-verdict judicial adjustment of grossly excessive punitive damages awards).

Defendant acknowledged that the uniform jury instruction correctly stated Oregon law, and that, as a descriptive matter, courts in Oregon and elsewhere had tended to reserve for themselves the gate-keeping function of ensuring that punitive damages awards were constitutional. However, defendant argued that the uniform jury instruction was incomplete. In order to be an adequate instruction, defendant asserted, the instruction also must inform the jurors of the limits that the constitution places on the jury's discretion to award punitive damages. Specifically, defendant asserted that the uniform jury instruction was incomplete because it “allow[ed] the finder of fact to award or calculate punitive damages based on harms to persons other than Michelle Schwarz.”

To rectify the problem it perceived, defendant offered its proposed instruction 41, which provided:

“You are not to impose punishment for harms suffered by persons other than the plaintiff before you.”

As an alternative to proposed instruction 41, defendant also offered its proposed...