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THE TOBACCO VERDICT AND THE PROBLEM WITH PUNITIVE DAMAGES |
By BARTON ARONSON |
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| Friday, Nov. 17, 2000 |
In the spring of this year, a jury awarded three Florida cigarettes smokers approximately $12 million in compensatory damages (damages for medical expenses, pain and suffering, etc.) in their lawsuit against the cigarette manufacturers. The three were serving as class representatives in an unprecedented class action lawsuit brought by all of Floridas smokers against all of the tobacco companies. In July, the same jury awarded the class approximately $145 billion in punitive damages. Judges frequently reduce large punitive damages awards, but two weeks ago, the judge presiding over the trial upheld the award in its entirety.
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The level of punishment represented by the verdict is breathtaking. $75 billion of the award was assessed against the biggest defendant, Phillip Morris. To put that figure in perspective, Phillip Morris might earn $7 billion in profits in a good year. Thus, the verdict would essentially ensure that the company would be profitless for over a decade. The verdict highlights, as no verdict in American legal history ever has, the nearly unrestrained power of civil juries to punish civil defendants, without any of the carefully crafted protections of the criminal law.
There are two signal differences between the criminal and the civil law. One is a difference of degree: "crimes" are those acts that threaten our system of ordered liberty; torts are, simply, less serious. The other difference is one of kind. By punishment, we mean imposing loss and suffering on a person, the defendant, who previously had not lost or suffered. In civil law, we really allocate: someone has suffered a loss already, and the law is empowered to decide who will bear it.
These distinctions explain why criminal punishments are harsher than civil damages. They also explain why punishments are harder to impose. We take life, liberty, and property pretty seriously, and if the state is going to deprive you of any of those things, it will do so under especially exacting conditions. Thats why, to take a few examples, a criminal case must be proven beyond a reasonable doubt, and why criminal defendants have the right to remain silent.
Punitive damages blur these important distinctions in troubling ways. They are, as the term implies, about punishment. They dont reallocate a loss; they impose one from scratch, like a criminal fine. But they are imposed without any of the protections to which criminal defendants are entitled.
Setting the Limits
For starters, civil defendants do not, in contrast to criminal defendants, have much advance notice that their actions subject them to punishment. All or nearly all of the crimes youre not supposed to commit are in a single book in your local library; before you invest in pipe bomb futures, you should check it out.
Tort law is different. There is no way to define all the acts and omissions that might be negligent. There are countless ways to damage your neighbors birdbath and thats before you get out of your driveway and onto the road, where you can do some real damage. For this reason, the rule of tort law is simply "be careful," or else a jury may later decide you werent careful enough.
This difference is radically distorted by punitive damages. The companies that make cigarettes, like the companies that make diapers or smoke detectors, are engaged in a legal business. The government has not forbidden their activity; indeed, we sent cigarettes to our boys in wartime. On that basis, the cigarette companies have hired workers, built plants, signed contracts, and announced dividends. They have entered into the vast web of interrelationships that the marketplace permits and requires, and on which countless individuals and businesses rely.
A finding that a corporate defendant has committed a tort does not change the fact that the defendants business is legal. In Florida, as in most jurisdictions, a punitive damages award cannot bankrupt the defendant. In other words, punitive damages are not a license for a jury to do through the civil law what the legislature has chosen not to do through the criminal law.
Setting the Numbers
How juries arrive at their punitive damages figures is also troubling. In the federal criminal system, the legislature has defined precisely how many months a defendant can be incarcerated based on a formula that accounts for myriad factors, including defendant's precise role in committing the crime, how quickly (if ever) the defendant admitted guilt, and his criminal record.
If the federal sentencing guidelines feel like math class, punitive damages feel like recess. For punitives, the Florida legislature has written a short jury instruction telling the jurors to consider the nature of the defendants conduct, the financial resources of the defendant, and anything else they consider appropriate. Thats it.
The constitution also protects against "double jeopardy," being punished for the same crime twice. A similar rule applies to punitive damages, but its almost impossible to apply in practice. Well never really know whether the Florida jury precisely calibrated its award to punish the defendants solely for their conduct in Florida.
If we extrapolate from the Florida class action to a national one, the (proportionate) punitive damages figure would be a shade under $3 trillion. The absurdity of that figure strongly suggests that the $145 billion the Florida jury actually did award was intended to punish more than just the defendants conduct in Florida, but already the trial judge has declared that the award is perfectly legitimate. If, tomorrow, the cigarette companies are sued in a statewide class action in New Mexico, there is a serious risk that any punitive damages award will be directed toward the same conduct as the Florida award, with no practical remedy available.
The Problem of Passion
Finally, there is grave danger that punitive damage awards are simply the result of the inflamed passions of a civil jury. Criminal sentences are meted out by judges, the keepers of societys institutional memory of its punishments. Judges following legislative guidelines ensure that punishments are meted out fairly across the spectrum of wrongdoing and wrongdoers. Juries cant do that. They decide the facts of a case based only the evidence presented in that individual case. When considering punishment, whether criminal penalties or punitive damages, we must look beyond the facts of the specific case to other cases, to be certain that we are being fair and not arbitrary. But juries are not knowledgeable about how other defendants have been punished, and there is no practical way to provide them with that information.
The Florida system exacerbates this problem. Florida juries (unlike others) are not instructed to consider the damage actually inflicted on the plaintiff in anchoring a punitive damages award. The juries gaze is directed in contrast to the most basic principles of civil law away from the damages actually inflicted and toward the conduct only of the defendant. Under these conditions, it is difficult to imagine reaching a verdict that is anything more than the jurors monetization of their collectively aroused passions. Those passions may be understandable, but they have no place in a system of equitable punishment.