American Justice Partnership

Speaker's Resource: 6. Punitive Damages, p 2

 
 

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Key Reference Citations (KRC)

 

The Chilling Effects of Punitive Damages

  • “Despite evidence of punitive damages awards on the rise, opponents of punitive damages reform have argued that changes in the law are not needed, because headline-grabbing awards are often reduced on appeal.  For example, one study funded by plaintiffs’ lawyers has suggested that there were only 355 punitive damages awards in products liability cases from 1965 to 1990.  The study, however, overlooked the practical reality that actual punitive awards represent just the tip of the iceberg in regard to their impact.  They are dwarfed by the amounts paid out in settlements due to in terrorem effect of punitive damages.” (www.atra.org  ATRA Issues, Punitive Damages Reform)

  • “‘[T]he availability of unlimited punitive damages affects the 95% to 98% of cases that settle out of court prior to trial.  It is obvious and indisputable that a punitive damages claim increases the magnitude of the ultimate settlement and, indeed, affects the entire settlement process, increasing the likelihood of litigation’.” (www.atra.org  ATRA Issues, Punitive Damages Reform, quoting Yale law professor George Priest)

  • “Plaintiffs’ attorneys tell us not to believe the headlines; real courthouse practitioners know that punitives are rarely obtained, and often reduced.  There is some truth to this, but even so, it is grossly misleading.  Most cases do not result in punitive damages for the simple reason that most defendants are terrified of going to trial under these rules. So they opt to pay the blackmail.” (KRC: Hantler, “Seven Myths…” pp. 11, 12)

  • “The true cost of punitive damages, however, does not lie in the occasional blockbuster award.  That is the tip of the iceberg.  A more serious problem is the increasingly pervasive presence of punitive damage claims.  Cases that previously would have been pursued as simple breach of contract actions now frequently include an additional claim for punitive damages. This trend has a destabilizing effect on the legal process and the conduct of legitimate business affairs.”  (www.wlf.org  Advocacy Ads, Ellis J. Horvitz, Horvitz & Levy, LLP)

  • “A claim for punitive damages introduces a “wild card” by raising the financial stakes enormously.  The resulting uncertainty makes disputes more difficult to settle.  The important social goals of uniformity, stability and predictability are subverted.  And the costs of litigation and excessive settlements are ultimately passed on to customers in higher prices.”  (www.wlf.org  Advocacy Ads, Ellis J. Horvitz, Horvitz & Levy, LLP)

 

Impact on the Civil Justice System

“Multiple punitive damage awards undermine the integrity of the justice system by transforming it into a lottery where a few people collect arbitrary ‘wins’ at the expense of everyone else – the company, its employees, its shareholders and investors, and other consumers.  With the exception of those lawyers who reap windfalls from repetitive punitive damages, nobody can seriously argue that repeatedly punishing anyone for a single act makes sense or benefits society.” (www.atra.org  ATRA Issues, Punitive Damages Reform)

“All has not been well in punitive damages land, where the landscape has been dotted with startling jury verdicts – occasionally in the billions and not infrequently in the tens or hundreds of millions – that reflect a system that is too often out of control, a system in which one jury might find no punishable misconduct while the next imposes an eight- or nine-digit sanction for the same product design defect or allegedly deceptive corporate marketing practice.”  (Andrew L. Frey, No More Blind Man’s Bluff on Punitive Damages: A Plea to the Drafters of Pattern Jury Instructions, Litigation, Volume 29, Number 4, Summer 2003, p. 28)

“One cannot help but recall the words of Justice Lewis Powell, who wrote: 

‘The grant of standardless discretion to punish has no parallel in our system of justice . . . a jury imposing punitive damages acts as a legislator and judge, without the training, experience, or guidance of either . . . the plaintiff in a punitive damage case has every incentive to seek to inflate the award in any way possible, since the award will go into his pocket. It is long past time to bring the law of punitive damages into conformity with our notions of just punishment, and with the tradition of other nations that also protect their citizens against arbitrary deprivations.’”

John H. Sullivan, New State Data Confirms Runaway Abuse of Punitive Damages, citing draft opinion circulated March 6, 1986 by Justice Lewis Powell to his associates in Aetna Life Insurance Co. v. Lavoie (draft in papers of Justice Thurgood Marshall at the Library of Congress, excerpts published in The Wall Street Journal, Mar. 8, 1995, originally published in The Legal Backgrounder, a publication of the Washington Legal Foundation, February 7, 1997).

 

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