Legal Reform: Punitive Damages

Unpublished; written July 29, 1999
Dear Editor:

The editorial about excessive punitive damages in the July 19 Free Lance struck a chord with me. I have long felt that the punitive damages part of a civil trial needs to be changed. Here's my proposal; now if only somebody could make it into a ballot initiative.

As background, there are two main types of damages in civil litigation -- compensatory, meant to compensate the victim for tangible losses (like money and property) and intangible losses (like pain and suffering), and punitive, meant to punish the wrong-doer. Under the current system, the plaintiff (and his attorneys) get both the compensatory and punitive damages.

In many cases, the punitive damages far outweigh the compensatory damages. This can actually encourage lawsuits where a plaintiff did not suffer much damage, but he (or his lawyer) hopes to get rich on the punitive damages. The case against GM cited by the Free Lance, while not an example of encouraging lawsuits due to the real damage done, illustrates the problem. GM felt it would be cheaper to pay for accidents than to spend $8.59 per car to improve the safety of the Chevy Malibu fuel system. The jury awarded $4.8 BILLION dollars in punitive damages in one lawsuit. That may or may not be a reasonable amount, but why should the plaintiffs (and their lawyers) get it?

So how do we fix this problem? My proposal is simple -- give punitive damages to a worthy and related charity, not the plaintiff. Punitive damages are intended to punish the defendant in a suit, not to enrich the plaintiff.

Under my system, the plaintiff would submit one or more charities to the court for approval, and the court would ensure the punitive damages were awarded to suitable charities. This would have the benefit of improving social conditions in addition to compensating the victim and punishing the wrong-doer.

For example, in tobacco lawsuits, punitive damages could go to cancer research or anti-smoking charities. Punitive damages in the breast implant lawsuit could be awarded to researchers working on breast cancer. For automobile-related lawsuits, damages could be awarded to consumer advocacy groups. Obviously, though, if a charitable group was a party to a lawsuit, they would have to be excluded from receiving punitive damages; we can't allow any conflicts of interest.

There will certainly be some objections to this system (probably from trial lawyers). For example, if charities get the punitive damages instead of the plaintiff and their lawyers, the lawyers might not recover their expenses.

To solve that, I would allow lawyers not working on contingency to have court-approved reasonable expenses paid completely from the punitive damages. This would prevent the plaintiffs from being stuck with a large legal bill. For lawyers working on contingency, I would allow them to paid any difference in court-approved reasonable expenses not covered by their share of the compensatory damages.

The other main issue would be lawsuits where individual plaintiffs have not incurred significant damages, but the wrong-doer has profited by the sheer volume of the wrong-doing. If a plaintiff can't get the punitive damages, some people might wonder how the wrong-doers would be punished.

The answer seems simple, and is already in place. Sue the company in a class action lawsuit. Lawyers would still have reasonable expenses paid as above, plaintiffs in the class would be compensated just as they are today, and charities would get any punitive fallout.

The above proposal does not address the issue of the AMOUNT of the punitive damages. To do that, there would have to be an agreed-upon method for assessing those damages. In the GM case, it seems a more reasonable award would be $8.59 for every Chevy Malibu sold with the defective fuel system. Since triple damages are often awarded for flagrant wrong-doing, that would be $25.77 for every Chevy Malibu sold. That, combined with having to pay damages in any lawsuits, would sufficiently punish the company as they would be spending what they should have spent in the first place plus compensatory damages to victims.

Unfortunately, devising a fair formula will be very difficult to do in many cases, but the issue of who gets the damages can reasonably be separated from the issue of how much the damages should be. Let's remove an incentive for litigation and improve social conditions. Stop giving punitive damages to plaintiffs (and lawyers) and give them to those more deserving of the money.


Want to comment on this? E-mail me at [steve@svpocketpc.com].