Williams v. RJ Reynolds Tobacco Co.

• Decision Date: 02 December 2011
• Docket Number: CC 970503957; SC S059014 (Control); CC 970604457; SC S059248.
• Citation: 271 P.3d 103,351 Or. 368
• Parties: Mayola WILLIAMS, Personal Representative of the Estate of Jesse D. Williams, Deceased, Plaintiff–Appellant,andState of Oregon, acting by and through the Department of Justice, Cross–Appellant Cross–Respondent, v. RJ REYNOLDS TOBACCO COMPANY; Fred Meyer, Incorporated; and Philip Morris Companies, Inc., Defendants,andPhilip Morris, Inc., nka Philip Morris USA, Inc., Defendant–Respondent Cross–Respondent.State of Oregon, Plaintiff–Appellant, v. American Tobacco Company, Inc., et al., Defendants,andPhilip Morris, Inc., Defendant–Respondent.
• Court: Oregon Supreme Court

271 P.3d 103

351 Or. 368

Mayola WILLIAMS, Personal Representative of the Estate of Jesse D. Williams, Deceased, Plaintiff–Appellant,andState of Oregon, acting by and through the Department of Justice, Cross–Appellant Cross–Respondent,

v.RJ REYNOLDS TOBACCO COMPANY; Fred Meyer, Incorporated; and Philip Morris Companies, Inc., Defendants,andPhilip Morris, Inc., nka Philip Morris USA, Inc., Defendant–Respondent Cross–Respondent.State of Oregon, Plaintiff–Appellant,

v.American Tobacco Company, Inc., et al., Defendants,andPhilip Morris, Inc., Defendant–Respondent.

CC 970503957; SC S059014 (Control); CC 970604457; SC S059248.

Supreme Court of Oregon.

Argued and Submitted Sept. 19, 2011.Decided Dec. 2, 2011.

James S. Coon, Swanson Thomas & Coon, Portland, argued the cause for appellant, Mayola Williams, and Stephanie Striffler, Senior Assistant Attorney General, Salem, argued the cause for cross-appellant-cross-respondent State of Oregon. James S. Coon filed the briefs for Appellant. With Stephanie Striffler on the briefs for cross-appellant-cross-respondent were John R. Kroger, Attorney General, and Mary H. Williams, Solicitor General.

William F. Gary, Harrang Long Gary Rudnick PC, Eugene, argued the cause for respondent-cross-respondent Philip Morris United States of America Incorporated. With him on the answering brief was Sharon A. Rudnick.

Lisa T. Hunt, Portland, filed a brief on behalf of amici curiae American Lung Association of the Mountain Pacific, American Cancer Society, Campaign for Tobacco Free Kids, Upstream Public Health and the Tobacco–Free Coalition.Janine Robben, Oregon Crime Victims Law Center, Portland, filed a brief on behalf of amicus curiae Oregon Crime Victims Law Center.Margaret Garvin, Executive Director, National Crime Victim Law Institute, at Lewis & Clark Law School, Portland, filed a brief on behalf of amicus curiae National Crime Victim Law Institute.Before DE MUNIZ, Chief Justice, and DURHAM, KISTLER, WALTERS, and LINDER, Justices.^*

DE MUNIZ, C.J.

This is a certified appeal from the Court of Appeals. See ORS 19.405 (describing process for certification of appeal to this court). The dispute arises out of the case of Williams v. Philip Morris Inc., in which, in 1999, a jury awarded the Estate of Jesse Williams (the Williams estate) compensatory damages and $79.5 million in punitive damages for Philip Morris, Inc.'s (Philip Morris) fraud and negligence leading to the smoking-related lung cancer death of Jesse Williams. After over a decade of appeals, during which the case has been before this court multiple times, the punitive damages award now has been affirmed.¹ Philip Morris has paid the compensatory damages and part of the punitive damages to the Williams estate, but has refused to pay the 60 percent of the jury's punitive damages award that is allocated to the state under Oregon's split recovery statute, ORS 31.735.² The state and the Williams estate have sought to force Philip Morris to pay that 60 percent share, either to the state, as the statute directs, or, alternatively, to the Williams estate. The trial court ruled that the state had released its claim to those punitive damages in a settlement agreement in another action, and that the Williams estate also has no right to the portion of the punitive damages award allocated to the state under ORS 31.735. The state and the Williams estate appealed that ruling to the Court of Appeals, which certified the appeal to this court. We now hold that the state's statutory right to a share of punitive damages is not a “released claim,” as that term is defined in the settlement agreement in the other action, and therefore, the state did not release its right to pursue payment of its statutory interest in 60 percent of the Williams punitive damages award when it settled that other action. We therefore reverse the judgment of the trial court.

The following facts are undisputed. For decades, Jesse Williams smoked cigarettes manufactured and marketed by Philip Morris. In March 1997, Williams died of lung cancer, and later that year, his estate filed a complaint against Philip Morris, alleging that the company's fraud and negligence caused his death. In November 1998, the Williams estate moved to amend the complaint to add a claim for punitive damages. Philip Morris opposed that motion, but the trial court granted the estate leave to file the amended complaint in December 1998. In March 1999, a jury returned a verdict in favor of the Williams estate, awarding the estate economic and noneconomic damages on the negligence and fraud claims, and awarding $79.5 million in punitive damages on the fraud claim. As noted, the case, and particularly the punitive damages award, has been the subject of protracted appeals in this court and in the United States Supreme Court. This court ultimately affirmed the punitive damages award, Williams v. Philip Morris Inc., 344 Or. 45, 176 P.3d 1255 (2008), cert. dismissed as improvidently granted, 556 U.S. 178, 129 S.Ct. 1436, 173 L.Ed.2d 346 (2009), and the appellate judgment issued in 2009.

Also in 1997, the State of Oregon filed an action against Philip Morris and other major domestic cigarette manufacturers and distributors of tobacco products, alleging unfair trade practices, ORICO violations, and other claims. In State v. American Tobacco Co., Inc., et al. ( State v. Philip Morris), ³ the state alleged that it had incurred hundreds of millions of dollars in increased Medicaid expenses for medical care for low-income Oregon residents and increased health insurance premiums for public employees as a result of the tobacco companies' unlawful conduct. In 1998, Oregon settled its claims against the tobacco companies when its attorney general, and the attorneys general of 45 other states, entered into a “Master Settlement Agreement” (MSA), a global settlement agreement with Philip Morris and the other tobacco companies. As part of the MSA, the tobacco companies agreed, among other things, to make annual payments to the settling states to compensate the states for past and future health care expenses. They also agreed to adhere to restrictions on their advertising and marketing. In return, the settling states agreed to release the tobacco companies from past and future claims relating to the manufacturing of, sale of, and exposure to tobacco products, as well as claims relating to research, statements, or warnings regarding tobacco products.⁴ Oregon Attorney General Hardy Myers signed the MSA in November 1998, and the trial court entered a consent decree based on that agreement in December 1998.

In April 1999, after the jury returned the verdict in Williams v. Philip Morris, Philip Morris sent the Oregon Attorney General a letter asserting that the MSA released Philip Morris from its obligation under ORS 31.735 to pay the state its 60 percent share of the punitive damages award.⁵ The state then moved in State v. Philip Morris for declaratory relief concerning its entitlement to part of the punitive damages awarded in Williams. The trial court stayed the proceedings pending the outcome of the Williams appeals.

After the Williams punitive damages award was affirmed on appeal in 2009, Philip Morris paid the Williams estate over $61 million in full satisfaction of the award of economic and noneconomic damages, and in full satisfaction of the estate's interest in 40 percent of the punitive damages award allocated to the Williams estate under ORS 31.735, plus costs and interest on those awards. The Williams estate executed a partial satisfaction of money judgment, but asserted that, if the state had released its share of the punitive damages award, then the estate was entitled to recover that share. ⁶

The trial court then lifted the stay in State v. Philip Morris and recommenced the proceedings on the state's action to construe the terms of the MSA. The court consolidated Williams v. Philip Morris and State v. Philip Morris to decide the legal questions surrounding entitlement to the punitive damages award: viz., whether by signing the MSA, the state released its allocated share in the Williams punitive damages award and, if so, what should happen to that money.

In briefs and in arguments in the consolidated cases, the state and the Williams estate contended that the state's statutory allocation of 60 percent of any eventual punitive damages award was not a “Claim” or a “Released Claim” under the MSA, because the state was entitled to a share of the punitive damages award by operation of law, or alternatively that the MSA was at least ambiguous as to whether the state had released its right to recover 60 percent of the punitive damages award.⁷ In that latter regard, the Williams estate also argued that the MSA contained conflicting provisions, one appearing to provide that the state released claims for punitive damages, and another appearing to provide that such claims are not part of the settlement.

In addition, both the state and the Williams estate argued that extrinsic evidence supported their position that the state had not released its right to the 60 percent allocation of the punitive damages award under ORS 31.735. In particular, they asserted that, when the Oregon Attorney General signed the MSA, he was aware of the Williams case and the fact that the Williams estate claimed punitive damages, and that, by the end of December 1998, only a few weeks after signing the MSA, the Attorney General wrote at least two official letters assuring the recipients of those letters that the settlement would not affect any interest of the state's other than those the state asserted in State v. Philip Morris. In addition, the state and the Williams estate argued that Philip Morris appeared to share that belief, pointing to evidence that, on December 22, 1998, counsel for the tobacco companies (including Philip Morris) sent a notice to the attorneys general, as required by the MSA, listing “potential...