Exploding Jury Awards Bode Ill for U.S. Economy in 21st Century

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The 20th century may have passed into history, but its effects live on. Not just the consequences of communism, fascism, and world war. But the effects of smaller, more mundane trends with potentially huge societal impacts.

America’s liability explosion is a prime example. The top 10 jury awards to individuals and families in 1999 totaled $9 billion. Every one topped $100 million. Two of them exceeded $1 billion. And that doesn’t include big class actions and corporations suing each other.

According to Lawyers Weekly USA, last year’s $9 billion was triple the sum in 1998 — and 12 times the total in 1997. Just one of the verdicts in the latter year would have made it onto 1999’s list.

This phenomenon does not reflect increased negligent behavior or defective products. Rather, the staggering judgments result from juries’ growing willingness to impose huge punitive awards on defendants, irrespective of the actual damages.

In the biggest case of 1999, a jury assessed $4.8 billion in punitives (subsequently reduced to a mere $1.09 billion) on General Motors for an allegedly defective gas tank.

GM’s liability was not obvious; the accident resulted when a drunk traveling at an estimated 70 mph hit the plaintiffs’ stopped car.

At least in this case there was traumatic injury. In three of the top ten actions massive punitive damages were levied without anyone suffering serious physical or emotional harm.

An Alabama jury topped its recompense of a few thousand dollars in sales overcharges with a punitive judgment of $580 million.

An Alaska insurance agent collected a cool $150 million in punitives after losing his job.

A Georgia salesman who was fired and lost $182,000 in commissions enjoyed a punitive judgment of $136 million.

In theory, punitive damages are supposed to punish criminally irresponsible defendants. In practice, punitives have become a commonplace response to everyday disputes.

California seems to be one of the trend‐​setters. Just three days after a Los Angeles jury hit GM with the $4.8 billion penalty, jurors farther north, in Modesto, whacked Ford with a $295 million award, $290 million of which were punitives.

In the latter case 19‐​year‐​old Juan Romo crashed in 1993 while driving his family. Romo was speeding slightly and was probably tired; his five passengers had all fallen asleep. After nearly 200,000 miles and several owners, his 1978 Ford Bronco was well‐​used.

Romo lost control when he swerved to avoid hitting the van that he had been passing on the right, before it changed lanes in front of him. The Bronco flipped over. His parents and brother died; he and his two sisters survived with minor injuries.

Romo and his sisters blamed Ford, claiming that the Bronco was prone to roll over and had a weak roof.

The Bronco was manufactured like other sports utility vehicles and had the same accident rate. It exceeded federal roof guidelines in 1999, as well as those from two decades before. The Bronco also met government roll‐​over standards.

Nevertheless, the jury held Ford responsible. While the liability verdict seems dubious, it is at least defensible.

The disproportionate punitive judgment is not. The plaintiffs’ emotional pitch overwhelmed serious reflection. For instance, in his closing argument, the plantiffs’ attorney encouraged jurors “to say a number that gets on the front page of every newspaper in the country.”

Both plaintiff lawyers, Joseph Carcione and Lawrence Drivon, publicly lauded the GM verdict, announced while the Ford jury was deliberating.

Moreover, Drivon mailed to each juror a copy of his book, defending large liability judgments and attacking Ford by name. He did so after the verdict, but before the company had collected juror declarations as part of its post‐​trial motion to set aside the punitive award.

During deliberations, a juror cited an old 60 Minutes story on supposedly defective Ford Mustangs as evidence of the company’s malice. One juror mistakenly claimed that Ford had admitted preferring to settle lawsuits rather than remedy defects. Jurors also talked about a different TV program on the alleged propensity of SUVs to roll over.

Another juror reported a dream in which Ford attorneys jeered while her and other jurors’ kids died in a Bronco accident. She termed her dream an “omen” and urged her fellow jurors to “save the babies.”

Because of these factors, Superior Court Judge Robert Beauchesne ordered a new trial on the issue of punitives. But Ford, and all other potential defendants, people as well as companies, remain at risk of huge punitive awards.

Romo’s lawyers, indeed, have indicated they would like nothing better than to eclipse the GM award’s record total of $1.08 billion. Given the right California jury, that’s entirely possible.

Sometimes people make mistakes. And they should be held liable when they do. But today’s tort system too often punishes the innocent, enriching trial attorneys more than compensating injured parties.

As we enter a new century, Americans must bring their liability laws under control.

Doug Bandow

Doug Bandow is a senior fellow at the Cato Institute. A graduate of Stanford Law School, he is a member of the California and D.C. bars.