Punitive Damages in Mass Torts Cases: Outrageous and in Reckless Disregard of Fairness

by Reed Smith
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It was over 32 years ago that we graduated from the University of Chicago Law School.  The three years in Hyde Park were a punishing experience.  There was one class in particular when Prof. Richard Epstein used the Socratic method to pummel our intellect and ego. By the end of the exercise, we were a puddle of incoherence.  The class was called Advanced Torts.  It is a bit funny that we today practice a form of Advanced Torts, even though Prof. Epstein long ago exposed our idiocy in the field.  But all is forgiven, if not quite forgotten, and we are grudgingly grateful for the hard lessons learned at his feet (from his vigorous kicking away at our preconceptions).  One of the things that Epstein did in that class was rip into the N.Y. Times v. Sullivan decision.  That case is usually thought of as one of the crown jewels of First Amendment jurisprudence, as it furnishes almost absolute protection to the press.  Basically, newspapers and other press media can skate past libel liability, no matter how false their publications, unless the press published with “actual malice” –  knowing the statement was false or acting in reckless disregard.   Epstein’s point was that while it was nice for the press that they would defend against most libel claims successfully, the state of mind inquiry was intrusive and complex, and the stakes involved, which could include punitive damages, were frighteningly high.  Such uncertainty and expense are not in society’s interest.  It sounds like heresy, but a simple standard of falsity, plus a cap on damages, would probably result in better outcomes and would certainly cabin discovery madness.

It occurs to us that punitive damages in mass tort cases suffer from the same, ahem, defect. Punitive damages require jurors to read the minds of corporate defendants, looking for bad intent or reckless disregard.  Conduct and documents that would otherwise be out of bounds for discovery and would never be paraded before the jury become fair game if punitive damages are available.  Moreover, due process considerations be damned, courts seem to permit jurors to flip around punitive damage figures in the tens or hundreds of millions of dollars as if they were nickels.  There is no consistency to the process.  One case might get halted by a judge who applies Daubert to preclude junk science, while another judge waves virtually the same case by and a jury socks the defendant with a $110 million verdict.  Or perhaps you have heard of jurors who conclude that the product did no real harm to a plaintiff, but are still sufficiently miffed at the company to award punitive damages.  It isn’t right. It makes no sense.  It probably won’t survive judicial scrutiny.  But the craziness happens.  No wonder our system of civil litigation looks like jackpot justice.  Pull the handle, watch wheels of inconsistent evidentiary rulings, inflammatory arguments, and jury lunacy spin, and see if the result is a shower of money.  If one pull comes up empty, never mind, keep pulling.  Whether or not you think the game is rigged, any rational defendant dragged into the courtroom casino knows it is a sucker’s game.  Better to pay a settlement and find the exit.

It turns out that we are hardly the only ones to rue the unfairness of punitive damages in mass torts.  A recent paper from the Cornell Law School  Legal Studies Research Paper Series (No. 17-33) by Cornell Law Professor James A. Henderson, Jr., “The Impropriety of Punitive Damages in Mass Torts,” dissects the issue nicely.   Other academics (think of Kip Viscusi) have exposed the wrongheadedness of punitive damages in mass torts, but Patterson’s paper is particularly compelling and timely.  He shows that punitive damages in mass torts are capricious, unfair, and unpredictable.  The joint justifications for punitive damages are retribution and deterrence.  But the retribution for any limited case at issue loses all sense of scale, and there is zero evidence that mass tort punitive damages actually improve corporate conduct or make anyone safer.  The problem is that the triggers for punitive damages, vague words such as “outrageous” that are meant to suggest “different levels of heinousness,”  are unclear to the point where jurors can do pretty much whatever they want.  That latitude is especially pernicious in the context of mass torts, where aggregation of claims is not just procedural, but substantive.  That is, the mass-ification of torts almost always prejudices the defendant by eroding defenses that would typically make the difference in a one-on-one case.  For certain industries, or whenever the government is involved, the law cheerfully dispenses with such niceties as fault, reliance, and causation.

Patterson takes us through some of the newer, non-traditional mass torts, such as asbestos, tobacco, lead paint, firearms, and no-injury economic loss cases where corporate defendants have been stripped of procedural and substantive defenses.  We’ve worked on a couple of these species of cases, and can vouch for the accuracy of Patterson’s analysis.  We’re by no means asbestos lawyers, but we once handled a couple of asbestos cases as a favor to a client.  We still occasionally bolt upright in the middle of the night, sweating from our memories of the asbestos docket call.  The client never manufactured anything with asbestos, but some of its products were later taken by a downstream manufacturer that placed some asbestos into the product before unleashing the products upon the populace.  The downstream manufacturer had shallow pockets, so the asbestos plaintiff lawyers added our client to the latest wave of defendants.  We proved to the plaintiff lawyer that our client had nothing to do with the asbestos, and the plaintiff lawyer shrugged and named some ludicrous figure for us to settle and get out of the case.  Sure – and then we’d be added to the asbestos sucker lists and face never-ending litigation.  We wanted to file a motion, but the insanity of the asbestos litigation “program” was that no defense motions would be considered until trial was only 30 days away.  Who wants to face that kind of brinksmanship?  Have you ever heard of the abomination called “near beer”?  Well, asbestos litigation is “near law.”  In fact, it is hardly law at all.  Rather, it is a system of taxing an unloved industry.

Viewing corporate conduct with hindsight, and assuming that corporations know everything and dwell purely on the bottom line, jurors are quick to reach for the spanking paddle.  That spanking means millions of dollars.  Risk averse corporate managers, and insurers worried about bad faith liability for failing to settle within policy limits, more often than not succumb to settlement blackmail.  The possibility of stratospheric punitive damages is simply a risk not worth taking.

Here are some other points that Patterson makes about punitive damages in mass tort cases:

  • Multiple successive punitive damages awards for the same alleged conduct are unfair to defendants.   (Maybe you could tell the jury that your company was already punished by another jury – but do you really want to do that?)
  • Any retribution is typically suffered by innocent, powerless shareholders, not the faulty managers.  Big surprise: expressing moral outrage toward corporations is unrealistic.
  • Punitive damages can deplete assets to the prejudice of later-filing plaintiffs.
  • Punitive damages are utterly unnecessary.  Large compensatory awards are more predictable and internalize social costs better than random punitive awards.

To quote a historical figure who clearly and devilishly believed in punishment, what is to be done?  Patterson mentions some marginal changes.  One idea is to require more specific triggers for punitive damages, such as criminal conduct (with a higher burden of proof).  Another idea, already existing in rare enlightened jurisdictions, is to let judges decide the amount of punitive damages.  It is well past time for courts to limit evidence of harm to that which was actually visited upon the particular plaintiff.  Patterson also discusses the possibility of limiting punitive damages to one case, which then creates a trust fund out of which later plaintiffs take their share.  But all of this is nibbling around the edges.  Patterson alludes to legislative changes, but seems pessimistic that our elected solons will ever risk displeasing a plaintiffs’ bar that is clever and promiscuous when it comes to slinging cash contributions to their favorite candidates.  That leaves the problem in the hands of judges, who will need to toss some troublesome precedents in the dustbin of history and start emphasizing the justice over the jackpot.

Patterson’s paper is clearly written and well-argued, and replaces our crankiness with a surfeit of citations.  It is well worth reading.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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