Tobacco Company Punitive Damages Exceeding Single-Digit Ratio Upheld

The California intermediate appellate court has upheld a significant punitive damages award against Philip Morris.

In Bullock v. Philip Morris USA, Inc., No. B164398 (Cal. App. (2d Dist.) Apr. 21, 2006), the jury awarded a smoker $850,000 in compensatory damages and $28 billion in punitive damages based on findings of defective design, intentional and negligent misrepresentation and fraudulent concealment about the health effects of smoking, and findings that Philip Morris was guilty of malice, fraud, or oppression with respect to each of plaintiffs’ claims. The trial court reduced the punitive award to $28 million (about 33 times compensatory damages) on remittitur.

The appellate court found that a sufficient record was presented to the jury of extensive efforts by Philip Morris to mislead the public about the adverse effects of smoking, and that it was not necessary to prove that defendant made any specific misrepresentation directly to the plaintiff when it had every reason to expect its misrepresentations to find plaintiff indirectly.

The court acknowledged that the California Supreme Court in Simon v. San Paolo U.S. Holding Co., Inc., 35 Cal.4th 1159 (2005), read State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408 (2003), as establishing a presumption that a ratio of punitive to compensatory damages greater than a single digit violates due process, but left open that in cases of “extreme reprehensibility” a greater award might be appropriate. Here, the court found this standard satisfied based on the record, and upheld the award.