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Rose v. Brown & Williamson Tobacco Corp.9/29/2005
problem with this strategy is that plaintiffs with otherwise valid claims could not afford the up-front cost of litigation, and would not be properly compensated for their injuries. In such a case, the court opined, punitive damages serve an important moderating function between a wealthy defendant and a plaintiff prosecuting his claim on speculation. The addition of the potential for a large punitive damage may realign the risk-reward calculus resulting from the stratagem outlined above. Defendants who would otherwise be willing to litigate their cases to a jury verdict may not be able to tolerate the increased risk of a large punitive damage award. Plaintiffs, on the other hand, may be more inclined to take on such cases, knowing that they could potentially recover many times their actual damages. In such cases, evidence concerning a defendant's wealth would be a critical factor in fixing a correct punitive damages award.
Since defendants did not show that evidence concerning their financial condition was not relevant, the court ruled that this portion of their motion was also without merit.
Defendants' final argument for excluding evidence of their financial condition, that the probative value will be greatly outweighed by its prejudicial affect on the jury, was likewise found to be unconvincing. Defendants argued that any evidence of their financial condition would be, at best, minimally relevant to the question of punitive damages. They further argued that introduction of such evidence posed the very real risk that the jury would base its punitive damages award on certain prejudices the jurors may have had against large corporations and not on defendants' conduct. As noted above, evidence of a defendant's financial condition is highly relevant to the punitive damages award, not "minimally" so, as defendants characterized it. Moreover, two significant safeguards exist to protect defendants from any anti-corporate prejudice on the part of the jury. First, before the trial began, the court ordered that it be trifurcated. In the first phase of the trial, the jury determined that defendants were liable to plaintiffs for compensatory damages. In the second phase, the jury determined whether defendants were liable for punitive damages. After it determined that defendant Phillip Morris USA Inc. must pay a punitive damages award, a third phase of the trial was held to determine the amount of that award. The court did not permit introduction of any evidence of any of defendants' financial condition until this third phase. Therefore, the jury made its determination to award punitive damages based upon defendants' conduct. The risk that the jury would have chosen to punish defendants on the sole basis of their wealth was slight, as the jury had heard no evidence concerning defendants' wealth at that point. In determining the amount of the punitive damages award, the jury could have considered defendants' wealth as a factor, but, as noted above, this was a relevant and material consideration for such an award. By that phase of the trial, its prejudicial effect did not outweigh its probative value.
As a second safeguard, the court can review a punitive damages award to determine whether it comports with the Due Process Clause of the Constitution. Under this power, the court may set aside a punitive damage award that has no relation to the nature of a defendant's behavior, or is out of proportion with a plaintiff's actual or potential injury. Thus, if the jury decided that it would set the punitive damages award based solely upon defendants' wealth, disregarding completely the nature of conduct, or plaintiffs' actual or potential injury, their award would likely run afoul of the Due Process Clau
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