Punitive Damages Hurt Bad People
I am going to file a formal complaint with my law school: It failed to teach me how to understand the arguments on punitive damages currently being circulated by brilliant, highly respected lawyers, law professors, lawmakers, and judges (who apparently went to a different law school).
Take, for example, the article by no less than the former Governor of Pennsylvania and the former Attorney General of the United States, Richard Thornburgh, which appeared in the August 5, 1996 issue of the Pennsylvania Law Weekly as a commentary on the United States Supreme Court's ruling in Gore v. BMW. I have no quarrel with Mr. Thornburgh's plea for the establishment of a uniform, national, ascertainable standard for assessing whether punitive damages should be awarded. [One cannot, however, avoid mentioning the irony of this assertion by Mr. Thornburgh, a high-ranking member of the Republican party. If the sovereign states are competent to handle innumerable other decisions which Republicans seek to return to them, why are they incapable of each devising their own punitive damages and tort standards?]
Where my law school education fails me is when Mr. Thornburgh (and many others) turn to the question of the size of the punitive award. In my opinion, if an individual or company has not acted in violation of the applicable punitive damage standard (in Pennsylvania where I practice: "outrageous conduct evidencing reckless indifference to or willful disregard for the safety of others"), then the punitive award should be zip, zero, nada. So much of the discussion about the size of punitive damages seems to be grounded in the feeling that they are being awarded in situations where retribution against the tortfeasor is not merited. If that is the case, then the remedy is to tighten up the definition of when punitive damages are awarded; the remedy is not to artificially squash them when a defendant has "earned" them. If punitive damages are appropriate, they should do what they say: punish.
Let us assume that an individual or company has done a very bad thing and as a result has inflicted serious injuries on another person or even killed her. Let us assume first that the victim of this callous behavior is your elderly mother. Because of her station in life, her compensatory damages will be relatively modest. Now, change the scenario. Assume the identical reprehensible conduct but assume that the victim is a former baseball and basketball player who now plays a lot of golf while at the same time shilling every product under the sun. Needless to say, the damages to which he is entitled will be somewhat higher than your mother's. The point? Compensatory damages rarely, if ever, correlate with the reprehensibleness of the behavior, which inflicted them. Due to my apparently inadequate legal education, I cannot fathom the logic that pegs punitive damages to compensatory damages. Under such a scheme, whether the multiplier be 2, 5, 10, or ... choose-a-number ... the punitive awards would be vastly different in your mother's case versus Mr. Jordan's case -- for the exact same reprehensible conduct.
Why then do such respectable spokesmen as Richard Thornburgh, along with legislators and judges continue to harp on the tune that punitives should be a multiple of compensatories? Even the American Bar Association has adopted the position that punitive damages bear a reasonable relationship to compensatory damages. Perhaps, there is some concern that an enormous punitive award will run a reprehensible person or company out of business? OK. Forgive and forget is a fundamental principle of our Judeo-Christian tradition. So, perhaps, if we give this evil entity another chance, it will act responsibly this time and not kill or maim again.
To further ensure that one evil deed will not drive a despicable maimer or killer from the marketplace, those "tort reformers" who have spent so much energy attacking the size of punitive damage awards also seek to protect the guilty by placing a cap on punitive damages. The Illinois legislature, in its wisdom, has capped punitive damages at $250,000 or six times compensatories. Ohio finds $250,000 to be a good number, but users a multiplier of three to set the cap. Again, my law school education has failed me because I fail to see the logic of these caps? [Since the original composition of this article, the Ohio Supreme Court has declared that cap unconstitutional.]
To evaluate the logic of a cap, let's return to the evildoer who maimed your mother and that famous sneaker salesman. Let us further accept the premise that it would be inimical to the American Economy to bring to its knees through punitive damages the individual or entity who maimed or killed them through a "reckless disregard for the safety of others". If the heinous perpetrator is a young entrepreneur cutting corners to make ends meet in his fledgling business, a $250,000 cap does him little good. If the vile offender is a multi-billion dollar company seeking to enlarge its bottom line by the money it makes while exhibiting a callous disregard for the life and limb of its consumers, a $250,000 payment is nothing more than a nuisance, an easily bean-counted cost of doing business. $2.7 million may be catastrophic for your local mom-and-pop diner; but, for your friendly, golden-arched, multinational, mulit-billion-dollar, fast-food chain, it's chump change: two days of coffee sales. [Now, who do you think is laughing at legislatures like those in Illinois and Ohio all the way to the bank?]
So, you ask, if caps and multipliers make no sense and juries are to be given an opportunity to assess meaningful punitive damages, what do we do? My response would be to do what we have done for decades, give the jury information on the Plaintiff's net worth and let them make the final decision. If we must "cap" their ability to make that decision, at least express the cap as a percentage of net worth. Then, the debate would be focused where it should be: should someone who would stoop so low as to engage in conduct worthy of punitive damages be forced to pay up to 25% of its net worth? 15%? 50%?
If I could go back to my law school and teach about punitive damages, this is what I would say: I think that well-meaning, hard-working, dedicated business people should be able to go to sleep at night knowing that their company will not be wiped out by an unjust punitive damage award. To ensure that they get a good night's sleep, I would urge that the standard for punitive damages be high and clearly understood. I think that those who would willfully disregard the safety of others, those who would knowingly sacrifice the lives of others, those who would intentionally put your mother and your favorite athlete at risk, should not get a good night's sleep because they should have to worry about financial ruin for that kind of conduct. If we still think we must give those kinds of people some measure of protection against being wiped out by a punitive damage award (even though they did not care that what they were doing was wiping out human lives or destroying the financial well-being of the little guy), then do it in a way that will still have meaningful impact: cap punitive damages as a percentage of net worth. That's the only cap that's even close to being worth wearing.
Terry W. Light, J.D. © 1999 All Rights Reserved
[Terry W. Light is a 1974 graduate of the Harvard Law School, who practices personal injury law in Lewisburg, Pennsylvania.]
Unpublished
tlight@brann-light.com
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