Philip Morris USA, Inc. (Philip Morris), appeals a judgment awarding Jodie Bullock $13.8 million in punitive damages after a jury trial. A jury previously had awarded $850,000 in compensatory damages. Philip Morris contends the punitive damages award is barred by res judicata as a result of the settlement of an action by the California Attorney General against Philip Morris and other cigarette manufacturers, and the award is unconstitutionally excessive. Philip Morris also challenges the award of prejudgment interest from the date of the verdict. We conclude that each of these contentions is without merit.
This action involves a different cause of action from the prior action by the Attorney General so res judicata is inapplicable. In addition, Philip Morris's conduct in intentionally deceiving smokers and the public in general for several decades concerning the adverse health effects of cigarette smoking, while formulating its cigarettes so as to make them more addictive, and aggressively advertising to youths and others before July 1, 1969, was extremely reprehensible. In light of such extreme reprehensibility, including the vast scale and profitability of Philip Morris's misconduct, and its strong financial condition, the $13.8 million in punitive damages, approximately 16 times the compensatory damages award, is not unconstitutionally excessive. Finally, the trial court properly awarded prejudgment interest from the date of the verdict pursuant to Civil Code section 3287, subdivision (a) and rule 3.1802 of the California Rules of Court. In light of these conclusions, we will affirm the judgment and the order awarding prejudgment interest.
Betty Bullock smoked cigarettes manufactured by Philip Morris for 45 years from 1956, when she was 17 years old, until she was diagnosed with lung cancer in 2001. She smoked Philip Morris's Marlboro brand of cigarettes until 1966, and then switched to its Benson & Hedges brand. She died in February 2003.
Scientific and medical professionals in the United States and worldwide generally agreed by the late 1950's that cigarette smoking caused lung cancer, after several epidemiological studies reached that conclusion. Philip Morris
The "Frank Statement" stated, "We accept an interest in people's health as a basic responsibility, paramount to every other consideration in our business. [¶] We believe the products we make are not injurious to health. [¶] We always have and always will cooperate closely with those whose task it is to safeguard the public health." It announced the formation of the Tobacco Industry Research Committee and stated, "We are pledging aid and assistance to the research effort into all phases of tobacco use and health. This joint financial aid will of course be in addition to what is already being contributed by individual companies. [¶] . . . [¶] In charge of the research activities of the Committee will be a scientist of unimpeachable integrity and national repute. In addition there will be an Advisory Board of scientists disinterested in the cigarette industry. A group of distinguished men from medicine, science, and education will be invited to serve on this Board. These scientists will advise the Committee on its research activities." In the years that followed, the Tobacco Industry Research Committee and its publicists disseminated the message that there was no proof that cigarette smoking was a cause of lung cancer and other diseases through news releases, distribution of research and editorial materials favorable to the tobacco industry, personal contacts with editors, journalists, and producers, and other means.
Philip Morris for many years publicly continued to insist that there was no consensus in the scientific community that cigarette smoking was a cause of lung cancer and that Philip Morris was actively pursuing scientific research to resolve the purported controversy, while privately acknowledging that there was no true controversy, that its true goal was to discredit reports that linked smoking with lung cancer, and that it had no intention of funding research that would reveal the health hazards of smoking. The Tobacco Institute, a trade organization funded by Philip Morris and other cigarette manufacturers, issued a press release in 1961 discrediting a recent article and stating that the views that smoking caused cancer "are a subject of much disagreement in the scientific world" and "the cause or causes of lung cancer continue to be unknown." The Tobacco Institute stated in a press release in 1963 that the tobacco industry was "vitally interested in getting the facts that will provide
A cigarette company executive appearing before Congress in 1965 on behalf of several cigarette manufacturers, including Philip Morris, stated that "[n]early everyone familiar with these difficult problems will agree . . . that there is a very high degree of uncertainty" whether "smoking causes cancer or any other disease." Later that year, the Tobacco Institute issued a press release stating, "Research to date has not established whether smoking is or is not causally involved in such diseases as lung cancer and heart disease, despite efforts to make it seem otherwise. The matter remains an open question—for resolution by scientists." The press release stated, "we are earnestly trying to find the answers," and, "If there is something in tobacco that is causally related to cancer or any other disease, the tobacco industry wants to find out what it is, and the sooner the better. If it is something in tobacco or the smoke, I am sure this can be remedied by the scientists."
Philip Morris's chief executive officer and chairman of the executive committee of the Tobacco Institute, Joseph Cullman III, stated on the television news program Face the Nation (CBS, Jan. 3, 1971), "if any ingredient in cigarette smoke is identified as being injurious to human health, we are confident that we can eliminate that ingredient." He stated further, "We do not believe that cigarettes are hazardous; we don't accept that." The Tobacco Institute issued a report in 1979 entitled Smoking and Health 1969-1979: the Continuing Controversy, stating, "Scientists have not proven that cigarette smoke or any of the thousands of its constituents as found in cigarette smoke cause human disease." The Tobacco Institute issued a report in 1984 entitled The Cigarette Controversy: Why More Research is Needed, and emphasized that "it is not known whether smoking has a role in the development of various diseases . . . a great deal more research is needed to uncover the causes and the mechanisms involved in their onset." The 1984 report stated that the theory that cigarette smoking causes various diseases "is just that, a theory" and stated, "There were basic flaws in the methods used in the major epidemiological surveys that cast doubts on the accuracy of the claimed correlations."
Contrary to its repeated public pronouncements, Philip Morris privately acknowledged the link between cigarette smoking and lung cancer and other diseases and sought to avoid promoting any research that would reveal that link. An internal document prepared by Philip Morris in 1961 for purposes of
A 1970 memorandum from a Philip Morris research scientist to its president stated of the Council for Tobacco Research, the successor of the Tobacco Industry Research Committee, "It has been stated that CTR is a program to find out `the truth about smoking and health.' What is truth to one is false to another. CTR and the Industry have publicly and frequently denied what others find as `truth.' Let's face it. We are interested in evidence which we believe denies the allegation that cigarette smoking causes disease." Notes from a 1978 meeting of cigarette company executives and legal counsel state that the Tobacco Industry Research Committee "was set up as an industry `shield' "and that the Council for Tobacco Research "has acted as a `front.'"
Dr. William Farone, a chemist employed by Philip Morris as a scientific researcher beginning in 1976 and as director of applied research from 1977 to 1984, testified at trial that scientists working for Philip Morris knew that cigarette smoking caused cancer many years before he began to work for the company. Dr. Farone testified that during his years at Philip Morris there was no controversy among its scientists as to whether smoking caused diseases, and that public statements that it was not known whether smoking played a role in the development of various diseases and that a great deal more research was needed to identify the causes of the diseases were false. He testified that another public statement challenging the epidemiological research as inconclusive was a misleading half-truth and that Philip Morris's scientists knew that cigarette smoke contained carcinogens and that the carcinogens caused cancer.
Dr. Farone testified that Dr. Thomas Osdene, Philip Morris's director of research, and others told him on several occasions that Dr. Osdene's real job and the job of scientists working under him was to maintain the appearance of a scientific controversy concerning smoking and health. Moreover, Dr. Farone testified that Philip Morris performed no animal toxicity studies of cigarettes in the United States, pursuant to a "gentleman's agreement" with other cigarette manufacturers, but arranged for a company in Germany to perform toxicity tests on animals there. Other Philip Morris scientists explained to Dr. Farone that the reason for testing cigarettes abroad was so the results would not be available by subpoena in the United States. The test results were sent to Dr. Osdene, usually at his home, who would report the results to other Philip Morris scientists verbally and destroy the written records.
Philip Morris conducted animal research in the United States on the addictive effects of nicotine in the early 1980's. It sought to develop a
Philip Morris heavily advertised its cigarettes on television in the 1950's and 1960's, until the federal government banned cigarette advertising on television in 1970. Television advertising had a particularly strong influence on youths under the age of 18, for whom there was a positive correlation between television viewing time and the incidence of smoking. Philip Morris's print advertisements for Marlboro and other cigarette brands in 1956, when Bullock began smoking at the age of 17, and generally in the years from 1954 to 1969, depicted handsome men and glamorous young women. Some advertisements featured slogans such as "Loved for Gentleness" and "`The
The Attorney General of California, on behalf of the People of California, and the California Director of Health Services filed a complaint against several cigarette manufacturers, including Philip Morris, and other tobacco industry organizations in 1997. They alleged that the defendants had conspired to deceive the public concerning the adverse health effects of smoking by suppressing truthful information and spreading disinformation. They also alleged that the defendants had specifically targeted minors in their advertising and marketing campaigns. The Attorney General and Director of Health Services alleged counts for (1) recovery of the value of Medi-Cal benefits provided to treat smoking-related injuries and illnesses (Welf. & Inst. Code, § 14124.71); (2) restraint of trade in violation of the Cartwright Act (Bus. & Prof. Code, § 16700 et seq.); (3) violation of the False Claims Act (Gov. Code, § 12650 et seq.) and (4) unfair competition (Bus. & Prof. Code, § 17200 et seq.). They sought compensatory and punitive damages, civil penalties and a permanent injunction. Similar actions were commenced against the same defendants in other states.
Philip Morris and other cigarette manufacturers entered into a master settlement agreement (MSA) with 46 states, including California, in 1998
Philip Morris issued a statement on its Internet site in December 1999 acknowledging for the first time, "There is an overwhelming medical and scientific consensus that cigarette smoking causes lung cancer, heart disease, emphysema and other serious diseases in smokers. Smokers are far more likely to develop serious diseases, like lung cancer, than non-smokers. There is no `safe' cigarette. These are and have been the messages of public health authorities worldwide." The statement also acknowledged that cigarette smoking is addictive.
Betty Bullock sued Philip Morris in April 2001 seeking to recover damages for personal injuries based on products liability, fraud and other theories. The jury returned a special verdict in September 2002 finding that there was a defect in the design of the cigarettes and that they were negligently designed; that Philip Morris failed to adequately warn Bullock of the dangers of smoking before July 1, 1969;
On appeal, we concluded that the refusal of Philip Morris's proposed instruction prohibiting punishment for harm caused to others was error and that the punitive damages award therefore must be reversed, but that there was no error in the compensatory damages award or the finding of oppression, fraud or malice. (Bullock v. Philip Morris USA, Inc. (2008) 159 Cal.App.4th 655, 667, 693-695 [71 Cal.Rptr.3d 775].) We therefore reversed the judgment as to the amount of punitive damages only and remanded the matter for a new trial limited to determining the amount of punitive damages.
The jury in the limited retrial returned a special verdict on August 24, 2009, awarding Bullock $13.8 million in punitive damages. The trial court entered an amended judgment on December 1, 2009, awarding $850,000 in compensatory damages, pursuant to the prior judgment, and $13.8 million in punitive damages. The court denied Philip Morris's motion for judgment notwithstanding the verdict. The court granted Bullock's motion for prejudgment interest on the punitive damages award from the date of the verdict. Philip Morris timely appealed the amended judgment and the order granting the motion for prejudgment interest.
Philip Morris contends (1) the Consent Decree bars any award of punitive damages in this case under the res judicata doctrine; (2) the $13.8 million punitive damages award is unconstitutionally excessive; and (3) the award of prejudgment interest from the date of the verdict was error.
"`[T]he "cause of action" is based upon the harm suffered, as opposed to the particular theory asserted by the litigant. [Citation.] Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief. "Hence a judgment for the defendant is a bar to a subsequent action by the plaintiff based on the same injury to the same right, even though he presents a different legal ground for relief." [Citations.]' Thus, under the primary rights theory, the determinative factor is the harm suffered. When two actions involving the same parties seek compensation for the same harm, they generally involve the same primary right. [Citation.]" (Boeken v. Philip Morris USA, Inc., supra, 48 Cal.4th at p. 798.)
The primary right that Bullock seeks to vindicate in this action is based on her personal injuries. Those personal physical and emotional injuries differ from the economic injuries and injuries to market competition alleged by the Attorney General and the Director of Health Services in their complaint. We
A court determining whether a punitive damages award is excessive under the due process clause must consider three guideposts: "(1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. [Citation.]" (State Farm, supra, 538 U.S. at p. 418.) The defendant's financial condition also is an essential consideration for a court reviewing a punitive damages award under California law, and is a permissible consideration under the due process clause in determining the amount of punitive damages necessary to further the state's legitimate interests in punishment and deterrence. (Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1185-1186 [29 Cal.Rptr.3d 379, 113 P.3d 63] (Simon).)
On appeal, we defer to findings of historical fact if they are supported by substantial evidence, and we independently assess each of the three guideposts and determine de novo whether the punitive damages award is excessive under the due process clause. (State Farm, supra, 538 U.S. at p. 418;
A court properly may consider the defendant's similar wrongful conduct toward others in determining the degree of reprehensibility of the defendant's conduct toward the defendant. As we stated in Bullock v. Philip Morris USA, Inc., supra, 159 Cal.App.4th at pages 690-691:
Philip Morris knew that the consensus among scientific and medical professionals was that cigarette smoking caused lung cancer and other serious diseases, that its cigarettes contained many carcinogens, and that smokers suffered lung cancer and other serious diseases at rates far greater than nonsmokers. Despite that knowledge, Philip Morris and other cigarette manufacturers for many years conducted a public campaign designed to obscure and deny the truth. Philip Morris falsely asserted that there was no consensus in the scientific and medical community concerning the adverse health effects of smoking and that the relationship between smoking and health was unknown. Philip Morris assured its customers that if it learned that any cigarette ingredient caused cancer it would remove that ingredient, and falsely stated that it did not believe that smoking was hazardous. Philip Morris repeatedly asserted that more research was needed and that it was diligently pursuing that research, but avoided sponsoring any research that would reveal the hazards of smoking and went to great lengths to avoid disclosing its own toxicological data. Rather than remove nicotine from its cigarettes as it had the ability to do, Philip Morris added urea to its cigarettes to enhance the effect of nicotine so as to further exploit its customers' addiction and gain new customers. Its customers included individuals such as Bullock who first began to smoke as youths before July 1, 1969, attracted in part by an aggressive advertising campaign in television, print and other media that was particularly appealing to youths.
The harm caused by Philip Morris's misconduct was physical rather than economic because the evidence shows that Bullock suffered a debilitating and terminal illness, lung cancer, as a result of Philip Morris's fraudulent scheme. The first reprehensibility factor listed by the court in State Farm, supra, 538 U.S. at page 419, "whether: the harm caused was physical as opposed to economic," therefore weighs in favor of high reprehensibility. The second factor, "whether ... the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others" (ibid.), also weighs in favor of high reprehensibility because the evidence shows that Philip Morris knew that many smokers would suffer death or serious injury as a result of smoking but, for pecuniary gain, sought to convince its customers and the public in general that the health concerns were unfounded.
The fourth and fifth factors are "whether . . . the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident." (State Farm, supra, 538 U.S. at p. 419.) Philip Morris's efforts to cast doubt on information concerning the adverse health effects of smoking involved repeated intentional and deliberate actions through various means and for several decades, and the evidence shows that Philip Morris intended to deceive smokers and the public in general. Bullock was only one of many smokers affected by Philip Morris's nationwide efforts to disseminate misleading information and create a false controversy concerning the adverse health effects of smoking. These factors therefore also weigh in favor of high reprehensibility.
Finally, Philip Morris earned well over $100 billion in profits, in 2009 dollars, from 1954 through the original trial date in 2002, arising in large part
Because each of the five factors weighs in favor of high reprehensibility and in light of the vast "scale and profitability" of its actions, we conclude that Philip Morris's misconduct was extremely reprehensible.
The United States Supreme Court has consistently rejected the notion that a mathematical formula or fixed ratio defines the constitutional limit. The high court in Gore stated, "we have consistently rejected the notion that the constitutional line is marked by a simple mathematical formula," and "[i]t is appropriate . . . to reiterate our rejection of a categorical approach." (Gore, supra, 517 U.S. at p. 582.) Similarly, State Farm stated, "[w]e decline again to impose a bright-line ratio which a punitive damages award cannot exceed," and "there are no rigid benchmarks that a punitive damages award may not surpass." (State Farm, supra, 538 U.S. at p. 425.) State Farm stated further, however, "Our jurisprudence and the principles it has now established demonstrate, however, that, in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.... Single-digit multipliers are more likely to comport with due process, while still achieving the State's goals of deterrence and retribution, than awards with ratios in the range of 500 to 1 [citation] or, in this case, of 145 to 1."
The California Supreme Court in Simon, supra, 35 Cal.4th at page 1182, stated that State Farm, supra, 538 U.S. 408, established "a type of presumption" that ratios significantly greater than a single-digit ratio violate due process absent a special justification.
State Farm, supra, 538 U.S. at page 425, stated that a ratio greater than those previously upheld by the high court may be appropriate "where `a particularly egregious act has resulted in only a small amount of economic damages.'" Simon, supra, 35 Cal.4th at page 1182, in contrast, stated in the disjunctive that "extreme reprehensibility or unusually small . . . compensatory damages" may justify a ratio in excess of nine or ten to one. Simon is consistent with the view that State Farm, supra, 538 U.S. at page 425, identified only some of the circumstances that may justify a punitive damages award significantly in excess of a single-digit ratio and did not set forth an exclusive list. (See Hamlin v. Hampton Lumber Mills, Inc. (2011) 349 Or. 526 [246 P.3d 1121, 1126-1127]; Seltzer v. Morton (2007) 336 Mont. 225 [154 P.3d 561, 611, fn. 30].) In any event, we believe that relative to Philip Morris's financial condition, $850,000 in compensatory damages is a small amount. We therefore conclude that "where `a particularly egregious act has resulted in only a small amount of economic damages'" (State Farm, supra, 538 U.S. at p. 425) accurately describes the situation here.
The ratio of punitive damages to compensatory damages here is approximately 16 to one. The $850,000 compensatory damages award includes $100,000 for pain and suffering experienced by Bullock for approximately two years from the time of her diagnosis with lung cancer until she succumbed to her physical injuries and died in February 2003. Unlike the situation where the plaintiff is awarded a generous amount for emotional distress arising from economic harm with no physical injury (State Farm, supra, 538 U.S. at p. 426 [$1 million awarded for 18 months of emotional
Boeken v. Philip Morris, Inc., supra, 127 Cal.App.4th 1640, involved the same defendant, same theories of recovery and much of the same conduct as this case. As in this case, the plaintiff in Boeken began smoking in the 1950's, was diagnosed with lung cancer over 40 years later and died after the conclusion of trial. (Id. at p. 1649 & fn. 1.) The jury awarded Boeken $5,539,127 in compensatory damages and $3 billion in punitive damages. (Id. at p. 1650.) The trial court conditionally granted Philip Morris's new trial motion unless Boeken agreed to reduce the punitive damages award to $100 million. Boeken consented to the reduction. (Ibid.) On appeal, Division Four of the Second District Court of Appeal held that the $100 million punitive damages award was excessive. Boeken concluded that no more than a single-digit multiplier was justified and reduced the award to $50 million, a ratio of nine to one. (Id. at p. 1703.)
Boeken cited the holding in Diamond Woodworks, Inc. v. Argonaut Ins. Co., supra, 109 Cal.App.4th at page 1057, that in an unexceptional fraud case where the conduct was not exceptionally extreme, the constitutional limit was a ratio of four to one. (Boeken v. Philip Morris, Inc., supra, 127 Cal.App.4th at p. 1701.) Boeken also cited the holding in Bardis v. Oates (2004) 119 Cal.App.4th 1, 26 [14 Cal.Rptr.3d 89], limiting the ratio to nine to one in a case where the damages suffered by the plaintiff were small compared to the seriousness of the defendant's conduct but the plaintiff suffered no physical injury or death. (Boeken, supra, at p. 1701.) Boeken noted that some of the facts in Diamond Woodworks and Bardis were distinguishable from the facts in Boeken, but cited both opinions with approval. (Ibid.) The Boeken court did not have the benefit of the later opinion in Simon, supra, 35 Cal.4th at pages 1182-1183, in which the California Supreme Court disapproved the
Boeken v. Philip Morris, Inc., supra, 127 Cal.App.4th 1640, ordered a $50 million punitive damages award for the same course of conduct at issue here. That award was significantly greater than the $13.8 million awarded in this case. To this extent, Boeken is consistent with the view that the punitive damages award in this case is reasonable. Because the $5,539,127 compensatory damages award in Boeken was significantly greater than the $850,000 award in this case, a lesser multiple of compensatory damages in that case was required to further the state's interests in punishment and deterrence relating to the same course of conduct at issue here. For this reason, and in light of Simon, supra, 35 Cal.4th at pages 1182-1183, the conclusion in Boeken that a ratio of nine to one was the constitutional maximum in that case does not suggest that the same is true in this case.
Philip Morris cites Exxon Shipping Co. v. Baker (2008) 554 U.S. 471 [171 L.Ed.2d 570, 128 S.Ct. 2605] (Exxon Shipping) for the proposition that a ratio of one to one would be appropriate here in light of Bullock's "substantial" compensatory damages award. Exxon Shipping involved a massive oil spill from a tanker that ran aground off the Alaskan coast. (Id. at p. 478.) Several civil actions against the shipowner and others were consolidated in a class action. (Id. at p. 479.) Some of the claims were settled, and the jury awarded compensatory damages and $5 billion in punitive damages against the shipowner. (Id. at pp. 480-481.) The trial court found that the total actual harm resulting from the spill was $507.5 million, including compensatory damages awarded by the jury in the class action, compensatory damages awarded in other actions arising from the spill, settlement payments and other amounts. (In re Exxon Valdez (D.Alaska 2002) 236 F.Supp.2d 1043, 1058-1060.) The high court presumed that $507.5 million was the total amount of compensatory damages for purposes of its analysis. (Exxon Shipping, supra, at p. 515.)
The United States Supreme Court in Exxon Shipping reviewed the $5 billion punitive damages award under federal maritime common law and did not decide the maximum amount that would satisfy due process. (Exxon Shipping, supra, 554 U.S. at pp. 501-502.)
Exxon Shipping, supra, 554 U.S. 471, did not signal any departure from the standards articulated in State Farm, supra, 538 U.S. 438. Although Exxon Shipping suggested that the constitutional limit in that case "may well be 1:1," we believe that this merely reflected the enormity of the compensatory damages award and the high court's view that $507.5 million in punitive damages might be the most that would be constitutionally justified in light of the facts and circumstances of that case. We note that the defendant in Exxon Shipping was reckless, there was no finding of intentional misconduct (Exxon Shipping, supra, at p. 480 & fn. 2) and the high court did not characterize the conduct as highly reprehensible, let alone extremely reprehensible. "The precise award in any case, of course, must be based upon the facts and circumstances of the defendant's conduct and the harm to the plaintiff." (State Farm, supra, 538 U.S. at p. 425.)
Citing awards in other cases in California and nationwide, Philip Morris argues that there is an emerging consensus that "six-figure damage awards are more than `substantial' enough to trigger this 1:1 upper limit." We cannot discern any emerging consensus in this regard relevant to the extremely reprehensible conduct at issue in this case. Moreover, we do not regard the amount of compensatory damages as a fixed upper limit where damages are "substantial," as we have stated.
Philip Morris contends its obligations under the MSA, the recently enhanced federal regulation of the tobacco industry and other circumstances reduce the need for punishment and deterrence. Philip Morris argues that its substantial and continuing payment obligations under the agreement and the MSA's prohibition of some of the same types of conduct on which its liability in this case is based serve as deterrents to future misconduct.
Bullock and Philip Morris stipulated that the MSA "provides for payments to the states for reimbursement of funds spent on health care costs of individuals, among other things" and that the MSA "does not provide any payments to individuals and does not provide any payments for punitive damages." The substantial payments under the MSA reflect the substantial damages to the states allegedly caused by the cigarette manufacturers, and are by no means a measure of punishment. In any event, we need not decide whether, or the extent to which, settlement payments for compensatory damages generally may reduce the need for punishment or deterrence and limit the amount of punitive damages that otherwise would be constitutionally permissible because the evidence in this case suggests that the MSA has no meaningful deterrent effect on Philip Morris and others and is not an effective punishment.
Bullock's forensic economics expert testified at trial that Philip Morris's revenues and profits actually increased markedly (revenues increased by $4.3 billion in 1999 alone) due to increased cigarette prices as a result of the MSA. As Boeken v. Philip Morris, Inc., supra, 127 Cal.App.4th at page 1703, explained, "Philip Morris may simply absorb the cost by raising prices without any competitive disadvantage because the other participants are likely to do the same, and if so, there may be no punitive or deterrent effect as a
Philip Morris also argues that the conduct that harmed Bullock was undertaken decades ago by individuals who are no longer associated with the company and that its current employees and shareholders do not deserve to be punished. Philip Morris argues that it "is effectively a different company from the one whose conduct was at issue in this case," and that it now is subject to regulations and other constraints that did not exist in previous years. Philip Morris argues further that the evidence shows that it is "committed to change" and that it "has neither the inclination nor the capacity to repeat the misconduct that gave rise to this case."
Although these arguments might have persuaded the jury to award a more moderate amount than was awarded in the original trial, they do not compel the conclusion that the $13.8 million award is grossly excessive in relation to California's legitimate interests in punishment and deterrence.
Finally, the Civil Justice Association of California as amicus curiae argues that prior awards of punitive and compensatory damages against Philip Morris for the same course of conduct are relevant to the amount of punitive damages necessary to deter and punish in this case. (See Boeken v. Philip Morris, Inc., supra, 127 Cal.App.4th at p. 1701; Stevens v. Owens-Corning Fiberglas Corp. (1996) 49 Cal.App.4th 1645, 1661 [57 Cal.Rptr.2d 525].) Philip Morris, however, presented no evidence at trial of any prior awards and does not argue this point on appeal. An amicus curiae ordinarily must limit its argument to the issues raised by the parties on appeal, and a reviewing court need not address additional arguments raised by an amicus curiae. (Costa v. Workers' Comp. Appeals Bd. (1998) 65 Cal.App.4th 1177, 1187-1188 [77 Cal.Rptr.2d 289].) We therefore decline to address this issue.
Civil Code section 3287, subdivision (a) states, "Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt. . . ."
Damages determined by a verdict are made certain as of the date that the verdict is entered, so prejudgment interest begins to accrue on that date. (Holdgrafer v. Unocal Corp. (2008) 160 Cal.App.4th 907, 935 [73 Cal.Rptr.3d 216]; cf. Britz, Inc. v. Alfa-Laval Food & Dairy Co. (1995) 34 Cal.App.4th 1085, 1106 [40 Cal.Rptr.2d 700] [damages made certain by an arbitrator's award].) A legal dispute as to the plaintiff's entitlement to the amount awarded does not render the damages uncertain. (Olson v. Cory (1983) 35 Cal.3d 390, 402 [197 Cal.Rptr. 843, 673 P.2d 720].) Rule 3.1802 of the California Rules of Court properly requires the clerk to "include in the judgment any interest awarded by the court and the interest accrued since the entry of the verdict." Contrary to Philip Morris's argument, Civil Code section 3287, subdivision (a) does not distinguish between compensatory and punitive damages and applies equally to both. We conclude that the trial court properly awarded prejudgment interest on the punitive damages award from the date of the verdict.
The judgment and order awarding prejudgment interest are affirmed. Bullock is entitled to recover her costs on appeal.
Klein, P. J., concurred.
KITCHING, J., Dissenting.
In State Farm Mut. Automobile Ins. Co. v. Campbell (2003) 538 U.S. 408 [155 L.Ed.2d 585, 123 S.Ct. 1513] (State Farm), the United States Supreme Court addressed the circumstances under which an award of punitive damages violates the due process clause of the Fourteenth Amendment to the Constitution of the United States. A key component of the court's analysis was the ratio between punitive and compensatory damages. Although the court declined to impose a bright-line rule, it stated that "in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process." (State Farm, at p. 425.) Later, in Exxon Shipping Co. v. Baker (2008) 554 U.S. 471, 507 [171 L.Ed.2d 570, 128 S.Ct. 2605], the high court reiterated that the ratio between punitive and compensatory damages is "a central feature in [its] due process analysis."
Under State Farm and its progeny, the punitive damages award constitutes excessive punishment in violation of the due process clause. Boeken v. Philip Morris, Inc. (2005) 127 Cal.App.4th 1640 [26 Cal.Rptr.3d 638] (Boeken), which I shall discuss post, is directly on point and involved the same defendant and facts strikingly similar to this case. There, the court held that the plaintiff was entitled to recover punitive damages no greater than a 9-to-1 ratio. (Id. at p. 1703.) I would do the same here. I therefore dissent from the portion of the majority opinion that affirms the punitive damages award.
In State Farm, the Supreme Court applied three guideposts set forth in BMW of North America, Inc. v. Gore (1996) 517 U.S. 559 [134 L.Ed.2d 809, 116 S.Ct. 1589], for determining whether an award of punitive damages violates the constitutional right to due process: "(1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases." (State Farm, supra, 538 U.S. at p. 418.)
As to the first guidepost, I agree with the majority opinion that the conduct of Philip Morris USA, Inc., was highly reprehensible and more egregious than other conduct that would support an award of punitive damages. As to the third guidepost, I agree with the majority opinion that "[w]e are aware of no statutory penalty for misconduct that is comparable in a meaningful way to the misconduct at issue here." (Maj. opn., ante, at p. 570.) The third guidepost, therefore, plays no role in my conclusion that the punitive damages award of $13.8 million in this case violates due process.
The second State Farm guidepost is the ratio of punitive to compensatory damages. As to this guidepost, the State Farm court explained that "courts must ensure that the measure of punishment is both reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered." (State Farm, supra, 538 U.S. at p. 426.) The court noted that
Interpreting this latter statement, the California Supreme Court held in Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159 [29 Cal.Rptr.3d 379, 113 P.3d 63] (Simon) that ratios significantly greater than 9 or 10 to 1 are "presumptively" invalid. (Id. at p. 1182.) The court further explained: "Multipliers less than nine or 10 are not, however, presumptively valid under State Farm. Especially when the compensatory damages are substantial or already contain a punitive element, lesser ratios `can reach the outermost limit of the due process guarantee.'" (Ibid., citing State Farm, supra, 538 U.S. at p. 425.)
Both State Farm and Simon recognized a few limited exceptions to the single-digit ratio limit. The only one potentially applicable in this case is where the compensatory damages consist of a "small" (i.e., not "substantial") amount and defendant's conduct is "highly" or "extremely" reprehensible (i.e., "particularly egregious").
In State Farm, the court explained this exception as follows: "[B]ecause there are no rigid benchmarks that a punitive damages award may not surpass, ratios greater than those we have previously upheld may comport with due process where `a particularly egregious act has resulted in only a small amount of economic damages.' [Citations.] The converse is also true, however. When compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee. The precise award in any case, of course, must be based upon the facts and circumstances of the defendant's conduct and the harm to the plaintiff." (State Farm, supra, 538 U.S. at p. 425.)
In Simon, the California Supreme Court also addressed this exception. The court initially touched upon the exception in passing by stating: "[R]atios between the punitive damages award and the plaintiff's actual or potential
The first is that when Simon actually discussed the exception it quoted State Farm. The Simon court held: "Nor can the 340-to-1 ratio here be justified on the ground that `"a particularly egregious act has resulted in only a small amount of economic damages"'" (Simon, supra, 35 Cal.4th at p. 1183, italics omitted, quoting State Farm, supra, 538 U.S. at p. 425.) This description of the exception is not in the disjunctive.
Moreover, the Simon court did not apply "extreme reprehensibility" and "small amount" of damages as separate exceptions. In Simon, the amount of compensatory damages was $5,000 (Simon, supra, 35 Cal.4th at p. 1166), which the court found to be "quite small" (id. at p. 1189). The defendant's conduct, however, was "not highly reprehensible" when compared to conduct in other punitive damages cases. (Id. at p. 1183.) The court thus held that "[t]he nature and size of the compensatory award here . . . militates for a maximum award at the top of, but not significantly beyond, the single-digit range." (Id. at p. 1189.) The court reversed a $1.7 million punitive damages award and limited the plaintiff's punitive damages to $50,000, which is a 10-to-1 ratio. (Ibid.)
Had the Simon court held that a small amount of damages was an independent exception to the single-digit ratio limit, the case would have gone the other way. The plaintiff could have recovered punitive damages in an amount more than 10 times the amount of the compensatory award because the compensatory damages were small. The implication of Simon, therefore, is that either an award of a small amount of damages or a finding of high reprehensibility is not enough, by itself, to justify an exception to the single-digit limit. At a minimum, Simon holds that the two components must be viewed together for purposes of the ratio guidepost.
This interpretation of the small-damages-high-reprehensibility exception was applied in Planned Parent v. Coalition, Life Activists (9th Cir. 2005) 422 F.3d 949 (Planned Parenthood). In Planned Parenthood, the defendants engaged in a "`campaign of terror and intimidation'" designed to prevent the plaintiffs from providing abortion services. (Id. at p. 952.) Although the court
Planned Parenthood is consistent with my interpretation of State Farm and Simon. Even when the defendant's conduct is highly reprehensible, if the compensatory damages are substantial, an award exceeding a single-digit ratio between punitive and compensatory damages to a significant degree violates due process, unless another exception applies.
In this case, the jury awarded Jodie Bullock $850,000 in compensatory damages. This was a substantial compensatory award. Although Philip Morris's conduct was highly reprehensible, under both State Farm and Simon, a punitive damages award in the amount of $13.8 million does not comport with due process because it exceeds a single-digit ratio to a significant degree.
The majority opinion states "relative to Philip Morris's financial condition, $850,000 in compensatory damages is a small amount." I disagree with this analysis. Defendant's financial condition is irrelevant to the issue of whether a compensatory award is "small" or "substantial" for purposes of the ratio guidepost.
I recognize that drawing a line between small and substantial damages for purposes of determining whether an award of punitive damages can exceed the single-digit ratio limit is not an easy task. The $850,000 award in this case, however, clearly falls in the substantial damages category. The State Farm court held that a $1 million compensatory award was substantial. (State Farm, supra, 538 U.S. at p. 426.) The compensatory award here is not materially less.
In Gober v. Ralphs Grocery Co. (2006) 137 Cal.App.4th 204 [40 Cal.Rptr.3d 92], the court held that compensatory damages ranging from $75,000 to $50,000 could not be characterized as "nominal," and thus a ratio of more than 6 to 1 could not be justified. (Id. at pp. 222, 224.) Likewise, numerous courts in other jurisdictions have held that awards considerably less than $850,000 were substantial for purposes of determining whether an exception to the single-digit ratio limit applies. (See, e.g., Bains LLC v. Arco Products Co. (9th Cir. 2005) 405 F.3d 764, 776 [$50,000]; Bridgeport Music,
In its discussion of the ratio guidepost, the majority opinion states that "[w]e . . . have no reason to believe that [Bullock's] compensatory damages contain any significant punitive element." (Maj. opn., ante, at p. 567.) I agree. That conclusion, however, does not justify exceeding the single-digit ratio limit.
In State Farm, the court noted that sometimes compensatory damages have a punitive element because they include compensation for emotional distress caused by humiliation or indignation aroused by the defendant's conduct. (State Farm, supra, 538 U.S. at p. 426.) When that occurs punitive damages are somewhat duplicative. (Ibid.) The State Farm court held that in such situations a lower ratio can be justified. (Ibid.) It did not hold, however, that the absence of a punitive element in the compensatory award permits an exception to the single-digit ratio limit.
It is important to keep in mind that where, as here, the compensatory award is substantial, a ratio of 1 to 1 "can reach the outermost limit of the due process guarantee." (State Farm, supra, 538 U.S. at p. 425.) The significance of the absence of a punitive element in the compensatory award is that the ratio can be higher within a constitutionally permissible range. Other factors, such as the reprehensibility of the defendant's conduct and the defendant's wealth can also increase the ratio up to, but not exceeding to a significant degree, a single-digit ratio, unless one of the limited exceptions described in State Farm applies. In this case, because there is no punitive element in the compensatory award and in light of Philip Morris's highly reprehensible conduct and great wealth, punitive damages in the top end of that range are justified.
The present case is identical in all material respects to Boeken. As the majority opinion in this case concedes, the Boeken case involved the same defendant, the same causes of action, the same counsel, and virtually the same conduct. The jury in Boeken awarded the plaintiff $5,539,127 in compensatory damages and $3 billion in punitive damages, which was reduced by the trial court to $100 million. The Court of Appeal, however, held that the plaintiff was entitled to no more than a single-digit ratio of
The majority opinion attempts to distinguish Boeken by noting that the Boeken court cited Diamond Woodworks, Inc. v. Argonaut Ins. Co. (2003) 109 Cal.App.4th 1020 [135 Cal.Rptr.2d 736] (Diamond Woodworks), which was disapproved of in Simon, supra, 35 Cal.4th at pp. 1182-1183. In Simon, the California Supreme Court stated "we do not agree with the court in Diamond Woodworks], that `in the usual case' the high court's decisions establish an `outer constitutional limit' of approximately four times the compensatory damages." (Simon, at pp. 1182-1183.) Boeken's reference to Diamond Woodworks is inconsequential because the Boeken court did not rely on or apply the part of Diamond Woodworks disapproved of in Simon, namely a 4-to-1 ratio limit "in the usual case."
The majority opinion also states that Boeken is distinguishable because the Boeken court did not have the benefit of Simon, which was subsequently published. There is nothing in Boeken, however, that is inconsistent with Simon. Simon simply applied State Farm to the facts in that case. It did not, of course, alter State Farm's holding regarding federal due process limitations on punitive damages. With respect to the ratio guidepost, Boeken relied heavily on State Farm (Boeken, supra, 127 Cal.App.4th at pp. 1695-1696), and there is no reason to believe that the Boeken court would have decided the case differently in the wake of Simon.
Finally, the majority opinion argues: "Because the $5,539,127 compensatory damages award in Boeken was significantly greater than the $850,000 award in this case, a lesser multiple of compensatory damages in that case was required to further the state's interests in punishment and deterrence relating to the same course of conduct at issue here." (Maj. opn., ante, at p. 568.) I disagree.
For purposes of the ratio guidepost, the compensatory award in this case is not materially different from the one in Boeken because both awards are substantial. The purpose of the ratio guidepost is to ensure that punitive damages are "reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered." (State Farm, supra, 538 U.S. at p. 426.) Thus the only significance of the greater compensatory award in Boeken is that the outer constitutional limit of the gross amount of punitive damages there (i.e., $50 million) is higher than it is here. This does not mean that the ratio of punitive to compensatory damages can be higher. Accordingly, a $50 million punitive damages award in Boeken is constitutionally
Under State Farm, Simon, and Boeken, Bullock was entitled to no more than a single-digit ratio of punitive to compensatory damages. However, because of Philip Morris's highly reprehensible conduct and its great wealth, as well as the lack of a punitive element in the compensatory award, I conclude, like the Boeken court, that Bullock was entitled to an award of punitive damages at the highest end of the single-digit ratio range. (Boeken, supra, 127 Cal.App.4th at p. 1703.)
The $13.8 million punitive damages award exceeded, to a significant degree, a single-digit ratio in comparison to the compensatory damages, and is in violation of due process. I therefore respectfully dissent.
