Punitive Damages and Double Jeopardy
A Florida jury awarded the widow of a deceased smoker $23 Billion in punitive damages against RJ Reynolds.
Here is what confuses me -- the $23 billion is obviously not the damages to the woman and her family directly (that was a separate much lower figure) but is somehow calculated as a penalty for RJ Reynolds pursuing bad practices with everyone. This has to be a penalty for harm to many people, perhaps to all of RJ Reynolds customers. So what happens when there is a second suit? Can another person get yet another $23 billion, forcing RJ Reynolds to essentially pay twice for the same bad practices? Or if a million other ex-customers sued, could RJ Reynolds be forced to pay $23 quadrillion in total? Or should past punitive damages for the same actions be deducted from future awards, saying something like "RJ Reynolds should be penalized $23 billion but that was already paid out to someone else so the net in this suit is zero."
I have no problem suing for actual harm and have opposed limits on regular damage awards -- who can say in advance what the actual damages might have been? Damage caps tend to be a poor substitute for cleaning up the real problems, which include junk science, no penalty for frivolous suits, and presumption of guilt against deep-pocketed defendants. But I have never, ever understood punitive damages.
Update: Jacob Sullum has some related thoughts
Although the main purpose of tort litigation is supposed to be making victims whole, so-called punitive damages explicitly aim to punish wrongdoers. That is usually the function of the criminal justice system, which therefore provides additional protections for defendants, including a higher standard of proof, stricter evidence rules, and penalties prescribed by statute. Attorneys seeking punitive damages do not have to contend with any of those safeguards.
The very concept of punitive damages is oxymoronic, since actual damages (a.k.a. compensatory damages) are a measure of the harm caused by a tort. Punitive damages, by contrast, express a jury's outrage at the defendant's conduct and may be completely unmoored from the injury suffered by the plaintiff (who nevertheless gets the money). In this case, the punitive damages are about 1,400 times the actual damages, which the jury put at $16 million. That huge mutiple seems to violate Florida law, which caps the ratio of punitive to compensatory damages at three or four unless "the defendant had a specific intent to harm the claimant"—a description that clearly does not apply to a tobacco company with millions of customers, even if it prevented them from making informed decisions by hiding the dangers posed by its products.
ErikEssig:
When I first saw this story I thought it had to be a typo. Nobody in their right mind would award $23 Billion, right?
July 21, 2014, 9:54 ambrandonberg:
"Nobody in their right mind would award $23 Billion, right?"
It was a jury.
July 21, 2014, 10:15 ambrandonberg:
In addition, I would argue that it almost never makes sense to award punitive damages in a lawsuit against a publicly-traded corporation. When you sue a corporation, current shareholders are the ones who get punished. Aside from the fact that shareholders generally don't take much of an active role in management, this case is particularly farcical because it's been so long since the practices used to justify the verdict that it's unlikely that any shareholders from that time remain.
In cases egregious enough to award punitive damages, they should go after the specific individuals responsible first, and then go after the corporation itself only for the balance of the compensatory damages not recoverable from the individuals.
July 21, 2014, 10:21 amFelineCannonball:
Double jeopardy is a term for criminal courts. The basic rule for civil awards is that punitive damages must be reasonable and are only allowed in certain cases where there is especially egregious conduct or actual intent to cause harm. A judges discretion in sentencing allows them to reduce civil awards if the hypothetical you create ever became reality. A reasonable award can't be be duplicative or be so high as to constitute and arbitrary deprivation of property. This award will undoubtedly be walked back.
Punitive damages, however are here to stay.
July 21, 2014, 11:26 amCorky Boyd:
The Federal and state governments may have a stake in the outcome of the award. My recollection is that a tobacco company is absolved from making payments to the government under the settlement agreement if they go bankrupt. No matter what, this is an absurd judgment.
July 21, 2014, 11:50 amNehemiah:
Always remember that a good proportion of any award goes to plaintiff's counsel. Don't expect any help from the legal profession to bring tort reform forward any time soon.
July 21, 2014, 12:19 pmDaublin:
Another aspect of this case that bothers me is that Reynolds is being punished for the crime of failing. I doubt anyone in that company was planning to fool the world for 20 years and then cash out before everything collapses. I am sure they were hoping to sell a popular product indefinitely, and that they made efforts to clean it up. If they had succeeded in, say, making a adequate cigarrette filter, then nobody would be talking now about this supposed coverup in the 50s and 60s.
It's only because they are an underdog that nobody in the courts wants to defend them.
July 21, 2014, 1:24 pmCraigNCowartEsq:
The value to society of punitive damages is the deterrent effect and promotion of safety. In a big enough enterprise, risk is quantifiable on almost anything. Potential liability for punitive damages is a wild card in the economic analysis. It makes prudent companies err in product analysis on the side of safety over pure economics. I am not defending the particular award in this case, just explaining why I do believe the risk of punitive damages adds value to the overall system. If you wouldn't feel comfortable explaining the decision to your parents, rethink the decision!
July 21, 2014, 4:11 pmjdgalt:
Coyote's point is well taken, but there's worse. The original, multi-state "tobacco case" (which I assume is being used as precedent for these others) relied on multiple abuses of its own, most notably the deliberate banning and disregarding of the fact that all the government plaintiffs save more money as a result of smokers dying early (and thus collecting less in pensions) than they pay out to treat lung cancer and heart disease.
Perhaps the tort system can provide the cure as well. If I were a tobacco company executive, I'd do the kind of thing EPA does on a daily basis: have some stooges file a class action suit against the company or all tobacco companies, then settle with them. Result: All future claims by people who didn't act to exclude themselves from the class will be dismissable as double jeopardy. Of course since new people are still being born and immigrating, they might need to repeat the process every 10 or 20 years, but what the heck.
July 21, 2014, 5:42 pmjdgalt:
Largely true, and doubly annoying because the obvious goal now is to make tobacco a banned substance (thus showing they haven't learned the lesson of Prohibition even after the War on Drugs confirmed the same very harmful results).
But playing devil's advocate here -- at least two major technical innovations have been around for 40+ years, but the tobacco industry continues to refuse to bring them to market, and in my view that's bad faith. They are:
(1) "Fortify" cigarettes with lots of nicotine (but as little tar as possible), thus allowing smokers (who stop when their nicotine craving is satisfied) to harm their lungs as little as possible.
(2) Add to all cigarettes the chemical that makes them go out if not actively puffed on.
July 21, 2014, 5:49 pmjdgalt:
Jury selection is designed to choose the stupidest people in any community.
July 21, 2014, 5:53 pmW. C. Yaqiyya:
The enormous punitive damage award functions to keep the lawyers 'gainfully' employed. It's ALL about billable hours hombre. In time, another judge or panel of judges will reduce that punitive award dramatically. They need to make it look like the system works. What's left will be 95% allocated to the lawyers. If you see the system for what it is, not what it advertises itself to be, you can figure this stuff out. And the primary function of judges is to keep the lawyers employed. How well they can be expected to perform in that function is the main criteria for picking lawyers to sit on a bench. It's a self regulated monopoly and a very sweet deal.
July 21, 2014, 7:18 pmmarque2:
You can only smoke politically correct products. Tobacco bad - Marijuana good!
Time up all you like!
July 21, 2014, 8:59 pmmarque2:
A lot of states have actuly gone out to limit punitive awards. California was one of the first. You get damages - but punative damages are limited to 250k. Texas is doing it in some cases - they limited medical liability because they had an acute gynecologist shortage and no one to deliver babies - that is easing up now with the medical reforms - too bad they didn't do it for everything.
July 21, 2014, 9:02 pmjonspencer:
This is one of the reasons that FARK has a Florida tag.
July 22, 2014, 6:16 amold dude:
I agree. Several years ago an oil refinery in Richmond CA discharged a gas cloud. Next day hundreds of lawyer canvassed the area and signed up over 1500 plaintiffs to a class action lawsuit. When the case was settled the lawfirms cut worked out to $90,000 per hour with 95% of the total going to the lawyers. The 1500 local residents who were exposed to the gas got to split the 5%.
A local lawyer filed a friend of the court protest to this unfair split . The judge did not find his argument compelling.
July 22, 2014, 7:15 amMaximum Liberty:
Warren:
July 22, 2014, 8:57 amOne important thing for libertarians to consider when thinking about punitive damages is how a landowner would prevent a repeated trespasser. That is fundamentally where punitive damages came from -- the need to punish intentional trespassers when the injured party has suffered no bodily harm or tangible property damage. The other alternative is an injunction, but recall that, in ye olde English system, equity and law were different systems, and an injunction was not available in a common-law court.
Max L.
NL7:
Of course, "the chemical that makes them go out if not actively puffed on" could also be re-interpreted as "the chemical that forces smokers to smoke quickly and more intensely before the cigarette has to be re-lit." And adding more nicotine sounds like a good way to be accused of trying to make it more addictive.
I'm not sure the tobacco companies can really do much. I would say that one way to slightly resuscitate the reputation of tobacco is if hipsters in the Bronx start growing organic tobacco in urban farms and rolling it into artisanal cigarillos. But it might be too unpopular for the foreseeable future to be reclaimed that way.
July 22, 2014, 10:02 amNL7:
Unlimited punishment is an untenable principle. Even if we accept that a tort or crime was committed, that doesn't mean we get to simply vent anger or frustrations on the perpetrator. That's a good way to channel prejudice and ignorance into injustice.
If the law allowed judges and juries to sentence people to death for petty theft or check kiting, we'd say it was unconscionably excessive and cruel, even though the crime itself was harmful and unjust. There's no reason to think the tort system should give juries the power to bankrupt defendants to slake their thirst for self-righteous retribution.
Of course, the tort system is not quite so terrible all the time. A fair number of stupid cases and abusive motions will get caught by judges or rejected by juries. The problem is that some of the excesses are more or less written into the rules (like expansive discovery) and there's not always an effective check on stupidly high awards. So even if the system mostly deals rationally with sympathetic litigants, every so often its monstrously unfair in favor of them. And even in this case, the award will shrink on appeal, after wasting lots of time and energy on the whole process.
July 22, 2014, 10:12 amMaximum Liberty:
W.C.:
A typical attorney's fee award runs from 25% (for large cases where the time invested was lower) to 40% (for smaller cases, where the amount of time invested was higher). I have never personally seen a case where the plaintiff's attorney got more than half. I've seen some where the plaintiff's lawyer cuts the fee, though I don't know to what and it is usually in cases where the claimant is in a bad way and the recovery is low. (Yes, I'm a lawyer, but please don't hold it against me.)
Those percentages are still excessive in many cases, and it really doesn't much matter what the percent is on $23 billion. Even 1% is a windfall that anyone should be ashamed to defend.
Max L.
July 22, 2014, 3:49 pmMaximum Liberty:
old dude:
I can't find any reference on the internet to such a case. There was a 1999 fire at a Chevron refinery that resulted in some cases, but I see nothing about any allegations of misconduct in a class settlement. I also see a 2012 fire at the same facility. Apparently, there are a number of suits pending about that, so it has not settled yet. Do you have a link to something?
Max L.
July 22, 2014, 4:14 pmMatthew Slyfield:
A big part of this, is that US courts have generally read the constitutional prohibition on double jeopardy as only applying to criminal cases. So yes, every single individual tobacco litigant would be entitled to full punitive damages.
July 23, 2014, 9:06 amRick Caird:
It does seem to be a strange contradiction, doesn't it.
July 23, 2014, 2:36 pm