At the Center for Justice and Democracy, Emily Gottlieb, Deputy Director for Law and Policy, recently issued an important whitepaper on punitive damages and what you need to know about them. The whitepaper can be downloaded here.
Interestingly, the report begins with a quote by Judge Posner of the 7th Circuit, widely considered a conservative jurist and a law and economics guru at theUniversity of Chicago. Basically, tortfeasors - those who commit harm on others, especially big corporations and manufacturers - will balance costs, that is, weigh the costs of compensation for harm done against the costs of correcting the circumstances which led to the harm.
If the costs weigh in favor of doing nothing, Judge Posner acknowledges the societal interest in eliminating such crass interest calculations in order to minimize the incidence and severity of harm inflicted on honest and innocent people. The way to do that is to pile (the costs of ) "punitive damages" on top of any compensatory damages for the harm inflicted.
The Center's report specifically mentions that some manufacturers engage in this very "cost/benefit" calculation when it comes to defective products, my primary practice area. Remember the Ford Pinto,
Image via Wikipedia
that exploding death trap of which Ford was well aware yet decided to pay out compensation awards rather than eliminate or fix the defect in the gas tanks. It was cheaper to pay compensatory damages to an unlucky few than to correct the defect. The matter ended up in court, which decided that punitive damages are "the most effective remedy for consumer protection." Other defective products which manufacturers allowed to remain on the market based on this profiteering calculus were the Chevy Malibu and the Dalkon Shield.
One major "defect" in the cost calculus is of course that the compensatory damages rarely cover all "true" costs of the harm suffered. How do you measure a person's potential contribution to society, the costs to you? The grossly negligent manufacturers are constantly fighting against the availability of punitive damages - so-called tort reform - and doing everything they can to avoid paying the true total of costs in compensatory damages.
Part 2 coming soon.