October 31, 2006
Punitive Damages Posted by John Steele Gordon at 02:00 PM EST The Supreme Court today will take up the case of Philip Morris USA v. Mayola Williams.
Very briefly, the history of the case is as follows. Mrs. Williams’s husband, Jesse, was a three-pack-a-day smoker who died of lung cancer in 1997. Mrs. Williams sued Philip Morris, claiming that the company had engaged in a 40-year publicity campaign to allay concerns about the health risks of smoking cigarettes, all the while knowing of those risks, thus misleading her husband into thinking cigarettes were safe. The jury found for the plaintiff and awarded her $821,000 in compensatory damages and $79.5 million in punitive damages. Court records indicate that part of the punitive damages was to punish Philip Morris for harm done to other smokers who were not parties to the case.
Philip Morris appealed the verdict, claiming that the award was excessive under a Supreme Court decision in 2003 that ruled that any punitive damages that were more than 10 times the compensatory damages could be presumed to be excessive and therefore a denial of due process under the Fourteenth Amendment. Philip Morris also argued that the jury had no right to punish it for damages to individuals who were not parties to the case. The Oregon Supreme Court upheld the award, and the U.S. Supreme Court decided to take the case on a writ of certiorari.
I have no comment on the case itself. But the concept of punitive damages has an interesting history.
Anglo-American law is divided into civil and criminal. In the latter, punishment is the whole point if the defendant is found guilty, in order to deter him (or her, of course, although over 90 percent of the jail population is male) from committing a crime in the future and, equally important, to deter others from doing so. The law positively bristles with the rights of defendants in criminal cases to ensure that only the guilty are punished. Civil law deals with such matters as contract disputes and torts, where harm was unintentional. Defendants have far fewer rights in civil cases.
While punitive damages have an ancient history in the common law, they were always uncommon and mostly confined to cases involving assaults, false imprisonment, and such where harm had been the whole point of the misconduct. While allowed in tort cases where the interaction was unchosen (such as an automobile accident), they were hardly ever applied in contractual disputes. By the early twentieth century many legal scholars thought that punitive damages, already rare, would disappear. Never common in Britain or the Commonwealth and virtually unknown in the code-law world, several American states abolished them altogether. By the mid-twentieth century punitive damages were a bit like the appendix, still there but nonfunctional, little more than a vestige of an earlier time.
But, also like the appendix, punitive damages were a potential disaster. As the tort-law industry began to rev up in the last 40 years, punitive damages staged a spectacular renaissance. The reason is not hard to find: Like compensatory damages, punitive damages go to the plaintiff. As tort lawyers work on a contingency basis, they take a healthy slice of any punitive damages awarded. The number of cases involving punitive damages began to increase markedly, and the sorts of cases where judges allowed them to be considered expanded dramatically as well. The number of awards of punitive damages began to grow quickly, as did the amounts awarded.
I have no problem with the idea of punishing people or companies who, while committing no criminal act, behave so badly that they and others of a like frame of mind should be deterred from such conduct in the future.
But punitive damages are, of course, exactly that: punishment. And yet they are imposed under civil law, not criminal law, with far fewer protections against injustice for the defendants. Worse, they are arbitrary. If you have murder on your mind, you can easily look up what your downside risk is in terms of the potential punishment (although I suspect that very, very few murderers do). But punitive damages are awarded by juries, often with no guidelines. So one jury might find no punitive damages at all and another, considering identical circumstances, might decide to “send a message” and hit the defendant with an award of millions or even billions of dollars. The level of punishment for a given degree of misconduct should not be determined solely by the histrionic talents of lawyers or whether members of a jury got out of bed on the wrong side that morning.
Punitive damages should be awarded by judges (once the jury has made the appropriate findings), and under explicit guidelines written by legislatures. And there should be one other significant change in the law as it stands today: Punitive damages are fines and like fines imposed under the criminal law, they should go to the state, not the plaintiff and his lawyer. The compensatory damages are supposed to make the plaintiff whole, and it simply makes no sense to make him rich because someone else behaved badly. Under the current system, lawyers have a huge incentive to push for punitive damages, even where was no intentional misconduct, often resulting in what is called “jackpot justice.” It is simply common sense to make the law as unarbitrary as it is reasonably possible to make it.
Tort lawyers argue that punitive damages give them an incentive to police the marketplace and go after wrongdoers. In other words, it enables them to act like the privateers of old, when governments at war granted citizens licenses (called letters of marque) to attack enemy shipping and keep the ships and goods successfully attacked. The trouble with privateers, of course, was that they had a very bad habit of turning into pirates. The same can be said of all too many tort lawyers, thanks to punitive damages. They take cases not to right wrongs but to profit. The marketplace should be patrolled by society—i.e., a government answerable to the people—not by private individuals with private motives.
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