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.

American Subpoena In Connection With European Proceedings Quashed As Attempt To Circumvent Foreign Rules

Microsoft Corporation recently attempted to use a subpoena issued through Massachusetts federal court under 28 U.S.C. § 1782(a) to obtain certain documents from competitor Novell Inc. for use in connection with European antitrust proceedings. In re Application of Microsoft Corp., No. 06-10061-MLW (D. Mass. Apr. 17, 2006).

The European regulator found that Microsoft failed to comply with an earlier order, and it provided a set of documents to Microsoft in support of its finding. Microsoft subpoenaed Novell to obtain additional documents not provided by the regulator, but the subpoena was quashed.

The federal court relied heavily on the views of the European regulator, who took the position that the use of American third-party discovery techniques circumvented the balance struck under the European system designed to avoid a chilling effect on third-party cooperativeness in antitrust investigations. Finding that § 1782(a) was designed to aid foreign tribunals, not interfere with them, the court refused to enforce the subpoena.

Non-ISP Lacks Standing To Challenge Party Seeking Identity Of Internet Poster

As computer users have embraced the apparent anonymity of the Internet, businesses who find themselves the targets of online disparagement have attempted to sue the responsible parties for defamation. To do so, they often bring third-party discovery against the Internet service provider (“ISP”) to reveal the identity of the account holder who posted the defamatory remarks.

In Matrixx Initiatives, Inc. v. Doe, No. H028699 (Cal. App. (6th Dist) Apr. 18, 2006), the court observed that in a typical such case, the anonymous party normally steps forward to oppose the disclosure of his or her identity, and clearly has standing to do so. In Matrixx, however, the plaintiff was able to trace users who posted allegedly defamatory comments on a Web site to a hedge fund called Barbary Coast Capital Management, and in a deposition the principal of that company refused to answer direct questions about the identity of the posters.

The California court held that the witness in this case had no protected interest in the matter and lacked standing to assert the First Amendment rights of the anonymous posters. The court ordered the witness to answer plaintiff’s questions.

U.S. Supreme Court Allows Citation To Unpublished Opinions

One of the procedural issues that has been debated in the federal courts for many years involves the citation of so-called “unpublished” opinions.

The federal courts of appeal have disposed of many appeals with abbreviated opinions that are not published in the official reports (i.e., West’s Federal Reporter), and have in varying degrees prohibited the citation of such opinions. However, those opinions have long been available through Lexis and Westlaw, and in recent years through the courts’ own Web sites.

On April 12, 2006, the U.S. Supreme Court approved new Fed. R. App. P. 32.1 to allow citation of unpublished opinions. The new rule, which becomes effective on December 1, 2006 unless Congress intervenes, prohibits federal courts from restricting the citation of federal unpublished opinions released beginning on January 1, 2007. If a party cites an unpublished opinion, it must furnish copies along with its brief. The new rule only speaks to citation rules, and does not prohibit courts from assigning such opinions different precedential weight.