The Supreme Court granted certiorari today in one case of interest to the business community:

Procedural Default—Independent and Adequate State Grounds—Punitive Damages.

Procedural Default—Independent and Adequate State Grounds—Punitive Damages. In Philip Morris USA v. Williams, 127 S. Ct. 1057 (2007), the Supreme Court vacated a $79.5 million punitive damages award imposed by an Oregon jury against Philip Morris USA. The Court held that the trial judge had violated Philip Morris’s due process rights by refusing its request to instruct the jury that punishment could be imposed only for harm suffered by the plaintiff, not for injuries the company allegedly inflicted upon those not party to the litigation. The Court remanded the case to the Oregon Supreme Court with instructions to “apply” the constitutional standard set forth in its opinion. On remand, however, the Oregon court “adhered to” the vacated judgment and affirmed the punitive damages award, holding that Philip Morris had procedurally defaulted under state law and had therefore forfeited its claim of federal constitutional error. Today, the Supreme Court granted certiorari to decide whether it was proper for the Oregon court to “interpose—for the first time in the litigation—a state-law procedural bar” that, Philip Morris argues, “is neither firmly established nor regularly followed.”

The issue in this case is of great importance to the business community. The decision in Williams I confirmed a significant constitutional principle—that due process “forbids a State to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties.” 127 S. Ct. at 1063. That holding is a vital protection for defendants against the threat of arbitrary or duplicative punishment. The latest iteration of the case, Williams II, will decide how robust the Court’s original holding is.

The Oregon Supreme Court’s willingness to avoid applying the holding by invoking a procedural bar it had not previously addressed is a stark but not atypical example of some lower courts’ resistance to the Supreme Court’s punitive damages jurisprudence in general and the holding of Williams I in particular. As numerous amici pointed out in briefs submitted in support of certiorari, a number of state courts—including the high courts of California, Louisiana, and West Virginia— have declined to follow Williams in the year since it was decided, citing a variety of state-law justifications or narrow interpretations of the decision under federal law. Another important punitive damages decision, State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), has received similar treatment.

The petition for certiorari argued that, like several other lower court decisions in this area, the Oregon Supreme Court’s decision is pretextual—i.e., designed to avoid application of constitutional principles established by the United States Supreme Court. In opposing certiorari, respondent argued that the procedural rule cited by the Oregon court is firmly established in state law and was clearly violated by Philip Morris. Oregon courts are the final arbiters of state law, and respondent argued that the Supreme Court may not disturb their procedural rulings. The decision in this case will signal how deferential the Supreme Court intends to be to state courts in this context.

Mayer Brown is counsel of record to petitioner Philip Morris USA. Absent extensions, which are likely, amicus briefs in support of the petitioner will be due on July 31, 2008, and amicus briefs in support of the respondent will be due on September 2, 2008. Any questions about this case should be directed to Lauren Goldman (212 506 2647) in our New York office.

Mayer Brown also represents the petitioner in the only other case in which the Court granted plenary review today, Fitzgerald v. Barnstable School Comm., No. 07-1125, which presents the question of whether Title IX’s implied right of action precludes Section 1983 constitutional claims to remedy sex discrimination by federally funded educational institutions.

In addition to granting review in the cases noted above, the Supreme Court today also invited the Solicitor General to file a brief expressing the views of the United States in the following case of interest to the business community:

AK Steel Corporation Retirement Accumulation Pension Plan v. West, No. 07-663. The pending petition for certiorari presents two questions: first, whether an ERISA plan’s failure to use a “whipsaw calculation” when determining the value of lump sum distributions to early retirees constitutes a statutory violation cognizable under ERISA § 502(a)(1); and second, whether a plan administrator’s reasonable interpretation of an ambiguous term of an ERISA plan can be rejected by a court under the principle of contra proferentem when the plan grants the administrator discretion to interpret the plan’s terms.

Today the Court also announced the October argument calendar. As Chief Justice Roberts revealed at least week’s D.C. Circuit Judicial Conference, the Court—in a break from recent practice—has scheduled three, rather than two, arguments per day on most of the days on which it will hear oral argument. According to the Chief Justice, scheduling more arguments earlier in the Term will reduce the crush of cases that frequently arises toward the end of the Term.