Supreme Court to Hear Punitive Damage Case

Yesterday I heard that the United States Supreme Court agreed to review a case concerning the appropriateness of an award of punitive damages against the Phillip Morris Company. This case involves allegations that Phillip Morris wilfully concealed the dangers of smoking for years and that this conduct was “extraordinarily reprehensible.” According to the Oregon Supreme Court, such extraordinarily reprehensible conduct justified an award of puntitive damages of approximately 80 million dollars. The United States Supreme Court agreed to review whether a punitive damages award of approximately 100 times actual damages was justified in light of the company’s extraordinarily reprehensible conduct.

I personally believe that without a risk of substantially high punitive damages awards, companies have little to no incentives to make products safe. Just look at the Phillip Morris example. According to the article about this case, for years the company

“knew that smoking caused serious and sometimes fatal disease, but it nevertheless spread false or misleading information to suggest to the public that doubts remained about the issue.”

I could not think of a better punishment than an enormously high punitive damage award against a company choosing to actively conceal adverse safety-related information. Possible punitive damage awards hanging over corporations concerned with the bottom line force accountability and give appropriate incentives to prioritize safety in the context of accountability and profitability. As the law currently exists, corporations must look at the risk of punitive damages as a cost of doing business. If the cost of a possible high punitive damages award is high enough, corporations choose to make safer products rather than risk accountability in the form of litigation and judgments. On the other hand, if corporations have little or no risk of high punitive damages awards, they have economic incentives to cut corners and make unsafe and shoddy products. In my opinion, we have seatbelts, airbags and other safety devices in our products because corporations have the right economic incentives to prioritize and reward safety in the context of innovation.

If the United States Supreme Court rejects this position, consumer law in our country will be dealt a major setback lasting for years. Gone will be the days when corporations must deal with safety as a priority or face accountability in the form of a possible high punitive damage award. Corporations will instead be given the okay to place profits ahead of people and safety. I hope our Supreme Court makes the right decision and allows companies to make a fair profit and not a profit at the expense of people and safety.