Ending a decade of appeals, last month, the Oregon Supreme Court ruled that Philip Morris must pay Oregon approximately $47.7 million of a $60 million punitive damages award made by a jury in March 1999.  In the 1999 case, Williams v. Philip Morris, the estate of Jesse Williams, a long-time smoker of cigarettes manufactured and marketed by Philip Morris, sued Philip Morris for damages related to Mr. Williams’ smoking-related lung cancer death.  The estate alleged that Philip Morris’s fraud and negligence caused the deceased’s untimely death.  The jury awarded the estate compensatory damages and $79.5 million in punitive damages.  Under Oregon law, the state is entitled to 60% of the punitive damages award.

Philip Morris ultimately paid 40% of the award to the Williams estate but refused to pay the 60% to Oregon, arguing, in essence, that paying Oregon its portion of the punitive damages award would constitute an end-run around Oregon’s settlement with Philip Morris in the MSA.  More specifically, Philip Morris argued that Oregon had released its rights to the share of punitive damages when it signed the MSA.  After Oregon took the matter to court, the trial court agreed with Philip Morris, finding that neither Oregon nor the Williams estate had a right to the portion of damages at issue.  The state and the Williams estate appealed this ruling to the Oregon Supreme Court, which reversed the trial court’s ruling last month.

In reaching its decision, the Oregon Supreme Court held that “the state’s statutory right to a share of punitive damages is not a ‘released claim,’ as that term is defined in the [MSA], 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 [signed the MSA].”  The MSA releases claims “directly or indirectly based on, arising out of or in any way related” to certain specified tobacco-related conduct.  In the court’s view, the state’s interest in the punitive damages award did not arise out of any direct participation in the Williams case but, instead, by operation of Oregon law.  Therefore, any claim to the money made by the state would be to enforce a statute, not to recover damages for Philip Morris’s tobacco-related conduct.  In short, according to the court, the state’s right “to the statutory share is not, even indirectly, related to or dependent on the tobacco-related conduct that is described in the MSA.”

It is unknown at this time whether Philip Morris will appeal, but a spokesman for the Oregon Attorney General has indicated that the office does not believe the December decision is the end of the litigation.   In the meantime, as other states catch wind of this decision, they may seek to pass similar laws allowing them to recover a portion of private plaintiffs’ punitive damages awards.

Contributor: Brenna Newman

For questions and/or comments, please contact Bryan Haynes, at 804.697.1420 or by email.