The Court issued two decisions of interest to the business community today.

Philip Morris USA v. Williams, No. 05-1256. In this landmark punitive damages decision, the Court--in a 5-4 opinion by Justice Breyer--held that the Due Process Clause does not "permit[] a jury to base [a punitive damages] award in part upon its desire to punish the defendant for harming persons who are not before the court (e.g., victims whom the parties do not represent)." The Court reasoned that (i) "a defendant threatened with punishment for injuring a nonparty victim has no opportunity to defend against the charge, by showing, for example in a case such as this, that the other victim was not entitled to damages because he or she knew that smoking was dangerous or did not rely upon the defendant's statements to the contrary"; (ii) "to permit punishment for injuring a nonparty victim would add a near standardless dimension to the punitive damages equation" and "the fundamental due process concerns to which our punitive damages cases refer--risks of arbitrariness, uncertainty and lack of notice--will be magnified"; and (iii) "we can find no authority supporting the use of punitive damages awards for the purpose of punishing a defendant for harming others." The Court made clear that, notwithstanding this holding, juries can continue to consider harm to non-parties in gauging the degree of reprehensibility of the defendant's conduct.

Mayer Brown represented Philip Morris, the prevailing party in this case. If you have any questions about this decision, please contact Evan Tager at etager@mayerbrown.com or 202-263-3240.

Weyerhaeuser Company v. Ross-Simmons Hardwood Lumber Co., Inc., No. 05-381. The Court, in a unanimous opinion by Justice Thomas, ruled that the two-part test that the Court applied to antitrust claims based on a competitor's sales at predatory low prices in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993), also applies to antitrust claims based on a competitor's purchases at alleged predatory high prices. Accordingly, a plaintiff who seeks to establish an antitrust violation based on alleged predatory buying must prove that: (i) the purchaser's bidding on the input price caused its costs of producing the relevant output to rise above the revenues generated in the sale of those outputs; and (ii) the purchaser has a dangerous probability of recouping the losses incurred in bidding up input prices through the exercise of monopsony power (monopoly power on the buying side of the market). The Court concluded that the standard should be the same on both the selling and buying side, because monopoly and monopsony are theoretically similar, and there are practical similarities between predatory selling and predatory buying. The Court also observed that a more lenient standard would pose an intolerable risk of chilling legitimate procompetitive conduct--price competition among buyers. The Court's adoption of an objective standard supports efforts to increase the administrability of the antitrust laws without deterring substantial procompetitive conduct.

Mayer Brown represented Weyerhaeuser Company, the prevailing party in this case. If you have any questions about this decision, please contact Andy Pincus, who argued the case, at apincus@mayerbrown.com or 202-263-3220.