The Volokh Conspiracy

I suppose the chances of the Supreme Court abolishing this perverse and unjust doctrine are nil. . . The idea that if a rich person and a poor person suffer the same injury, the poor person's punitive damages must be lower, as a matter of law (because the economic value of a rich person is higher, and hence the "actual" damages are higher) is morally indefensible.

I sincerely hope that the reason that the Court has agreed to hear the case is to reexamine whether the Due Process Clause of the 14th Amendment has any relevance to the amount of punitive damages that can be awarded in a state court proceeding. Justice Scalia's dissenting opinion in BMW of North America, Inc. v. Gore (1996) should become a majority opinion.

SLS1L - What would be refreshing would be for the Court to discard once and for all the thoroughly repulsive doctrine of punitive damages. Why are civil juries deciding how much to punish defendants? Punitive damages serve the same purposes as criminal fines - why don't those defendants have the rights that other defendants facing substantial fines have (e.g., proof beyond a reasonable doubt)?

I'm glad, though, to see that you believe that justice requires uniformity and even-handedness. I'm sure you'll agree that allowing juries to decide such mixed questions of law and fact as "what is reasonable behavior" undermines the principles of uniformity and even-handedness. Obviously one jury can find one set of facts to be reasonable and other might not. To make matters worse, neither jury would consider the social impact of a finding of reasonableness in any given case (e.g., whether the utility of public playgrounds outweighs the risk of harm to children). Keeping these decisions in the hands of judges would restore unformity and bring balance to public policy making. I trust you will turn your admirable idealism and energy towards restoring the role of judges as guardians of the law.

My constitution also doesn't contain a punitive damages clause, although I believe a due process argument is at least colorable. What we need here is congressional action.

Exactly. Congress has all sorts of punitive damage limits in various statutes. The problem is state laws, and whether "federalism" lets Congress say how much damages can be for violations of state laws. Between the Supreme Court and Congress, Congress appears to be the better body to make the decision, but between Congress and State Legislatures I think we're going to see a lot of faint-hearted federalist turncoats, like in the Medical Marijuana, Assisted Suicide, and Federal Abortion Ban areas where the "Conservative" feds are acting to pre-empt "Liberal" state actions.

The due process arguments against punitive damages, at least in the current setting, are quite strong. How does it comport with due process for one defendant to be punished multiple times for the same offense - which is what happens when any manufacturer is hit with punitive damages by the purchaser of one product based on the defendants' conduct in selling that product to many people over many years? That's a bit different, I think, than the old common law form of punitive damages: e.g., batterer is sued for punitive damages for intentionally hitting plaintiff, not for intentionally hitting other persons who are not before the court.

A point often overlooked is that "corporations" as corporations do not engage in outrageous activities. It is a person (or a group of people) in a corporation who do outrageous things. They do so in the name of the corporation to be sure but sometimes at a time when the activity was not regarded as outrageous and often years if not decades before the "outrageous" activity has manifested itself by causing injury. The individuals who do the "outrageous" acts are rarely sued, and in any event, at least some of them have very shallow pockets, and in some instances they may be long gone from the corporation when the suit is filed. As an example, when Ford Motor Company was sued because of "defective" fuel tank placement on Pintos, Lee Iacocca, the person who had authorized the particular placement (which was cheaper than some other alternatives, and Ford was trying to build a car which would compete with the growing incursion in the marketplace by inexpensive Japanese imports) had long before departed Ford and was President of rival Chrysler. The Ford shareholders were left holding the bag on punitive damages and presumably Chrysler was benefitted by a weakened Ford rival.

IF the purpose of punitives is to deter outrageous conduct, then they should be assessed against the individuals who actually engaged in the conduct, not against shareholders who had no say in the decisions leading to the conduct. Of course that would reduce the amount of collectible punitive damages awards, both because the individuals would have much less money (though I imagine Lee Iaccoca could have paid a substantial amount had he been sued for the Pinto's defects) and because a jury is much less likely to find conduct outrageous when it is an individual who is being sued (unless the conduct is, in fact, outrageous) as opposed to a faceless large corporation where the conduct may have been merely imprudent or negligent, but far short of outrageous.

I don't mean to suggest that corporations should not be held liable for compensatory damages caused by their agents. That is something which very much should be a corporate responsibility under ordinary "respondeat superior" rules. But punitive damages are not for compensation, but to penalize someone who has done bad things which caused injury--and though employees of a corporation may do sufficiently bad things to warrant such a punishment, the corporation itself (and its shareholders) haven't engaged in such activities. Further, if the individual who does the bad things doesn't experience any adverse consequences, then the punitive damages haven't really served any purpose (except as a lottery for plaintiffs and a pay-day for their attorneys).

The Philip Morris case is probably the worst situation in which to point out the incongruity of assessing punitive damages against corporations. Certainly any current shareholder of Philip Morris knows that there is a risk of huge judgments against it, compensatory and punitive, because of the nature of the products and the length of time their bad effects have been known. But there are a lot of situations where the shareholder is unaware of potentially bad conduct. I suspect that a majority of Exxon shares are held by pension plans (public and private), mutual funds (especially index funds) and in 401k plans. Whatever punitive damages are ultimately paid because of the Valdez disaster comes out of their pockets, not the pockets of persons who decided to hire a captain who had been an alcoholic (though if he appeared to be a recovered alcoholic, that couldn't be held against him in making a hiring decision under the ADA) or to operate a single hulled tanker.

I realize this doesn't address the problem of the constitutional limits on punitive damages, but it is still a factor which needs to be kept in mind in my opinion. Further, until forty or fifty years ago punitive damage judgments (except in defamation cases where actual damages are extremely hard to measure) were extremely rare and the amounts awarded were generally very small. Thus, whether there were constitutional limits was not something which needed exploration.

One final, somewhat related, thought. What happens to cigarette smoking if punitive damage awards drives all of the cigarette companies into bankruptcy. All smokers simply stop smoking? (Also, what happens to the not inconsiderable taxes most states collect on cigarettes?)

Besides, I still don't understand the justification for paying one plaintiff out of the presumably tens of thousands involved the punitive damages. Why him?

If the plaintiff doesn't receive the punitive damages, he has little incentive to make the case for punitive damages in the first place.

Yes, this case will provide an excellent vehicle for Roberts et al. to further screw people who have been injured or who have had family members killed by Phillip Morris over the years.

The idea that people should be able to recover more than 9 times their actual damages from a defendant - regardless of how evil the defendant is - is apalling.

Christopher Cooke: I agree that a corporation must pay whatever compensatory damages are caused by the wrongful acts of its management (and lesser employees as well) and this will penalize "innocent" shareholders. Punitives are a form of punishment and I think on that basis, are distinguishable. In reality shareholders have little incentive and no ability to "supervise" management and hold them accountable for careless behavior. The only practical course for a shareholder is to sell if he or she detects managerial malfeasance, and of course, as you noted, it may be years after the fact that the malfeasance becomes known.

As to recouping corporate losses by an indemnity action against the individuals responsible. the corporation will have to convince a jury that the individuals had acted in a manner that deserved punitive damages. The individuals are not bound by the result of the prior action, and it is a lot harder to convince a jury that a particular person (especially if the activity had involved a chain of command) did something so terrible as to merit an award of punitive damages. It is much easier for a jury to assess punitive damages against a soul-less corporation. Further, in many if not most cases the individual would likely be close to judgment proof making an indemnity action fruitless even if it is otherwise a promising suit.

Finally, I quite agree that loss of tax revenue from cigarette sales has any constitutional relevance, but it has practical relevance if tobacco corporations are all driven into bankruptcy because of repeated high punitive damage awards. The now overturned punitive damage verdict in the Florida case would have done just that. Further, no one would buy the factories at a bankruptcy sale (to continue the business) because this would simply invite further punishing punitive damage awards. So, smokers would have to go cold turkey or go to another country for a cigarette. Personally, this wouldn't bother me at all because I don't smoke, but I imagine some smokers might object to this outcome, even though they know the risks involved with smoking. But, even this probably doesn't rise to being a constitutional deprivation.

I have to assume that either this plaintiff was able to opt out of the major class action suits, or is otherwise exempt from them. After all, it sure seems like that was the entire point of those suits, and the tobacco companies settling them, as they did. If plaintiffs can keep coming around, recycling the class action evidence for further punitive damage awards, then why should companies ever settle such suits.

I am, of course, receptive to more information on this subject.

The purpose of punitive damages is to deter calculated violations of the tort law, and this purpose is totally at odds with the Supreme Court's "single digit" standard.

To understand what I mean by "calculated violations," take this simple example: A corporation manufactures 1 million widgets that its managers know contain safety defects that will very likely kill one or two of its customers. Nevertheless, management decides to proceed with the defective design because they estimate that it would be cheaper to settle two wrongful death suits than to fix the problem.

A strident and unpredictable regime of punitive damages serves to introduce an element of uncertainty into the equation and deter this type of behavior. Those two deaths might cost the corporation much more than they bargained for! The Supreme Court, unfortunately, has now brought certainty and security to Corporate America, and made the lives of America's consumers much more hazardous.

On the punitive damage award against OJ Simpson, I think it was only one or two times the amount of the compensatory damage. One might quibble that the compensatory damage award was, itself, far beyond what a wrongful death award would ordinarily be (if the defendant weren't OJ and if the death was clearly accidental) thus amounted to a disguised punitive damage award, but that is a different issue. As an aside, in CA, punitive damage awards have to take into account the defendants wealth, and the trial judge allowed expert evidence that OJ would be able to earn in each future year roughly the same amount of money he had been earning in years just proceeding the trial. Thus, as far as the trial record was concerned, OJ would be earning a huge income in the future which, of course, would warrant large punitive damages. Funny, Hertz didn't offer to renew his contract after the trial if he was such a hot property. (Also, the huge award had a perverse effect on OJ, even if he could earn a huge salary. He had no incentive to do so since he couldn't retain it, and further, he had a $400,000 a year ERISA protected pension thus doesn't need to work, so the Goldman family has realized almost nothing from their judgment. Some justice!

As to the Electronic Anarchists point, under his definition virtually every product sold would be the basis of a punitive damage award. If an automobile company builds a million cars which weigh only 3000 pounds (e.g., a Ford Focus or Honda Civic) it is a virtual certainty that several people will be killed because a few of the cars will be in an accident with a much heavier vehicle. The only way to prevent this is to build a car similar to (but larger than) the H1 Hummer, with an armored fuel tank and all sorts of other safety features and at a cost upwards of $250,000. Perhaps the Sierra Club would like this since almost no one would be able or willing to afford a car and the environment would be saved, but I suspect 99% of the population would object strenuously. ANY product has some sort of cost-benefit calculation built into it, since a 100% guarantee that there will be no dangerous defects whatsoever is an impossible goal. (See Learned Hand's opinion in the Carroll Towing case.) I don't mean to suggest that at some point a carelessly made or designed product which creates a substantial risk shouldn't be subject to a lawsuit for negligence, but only that a "perfection" standard is grossly unrealistic--indeed impossible.