Randy Barnhart

What Citizens Need to Know About "Punitive Damages" - Part 1

Judge Posner

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.

Tort Deform in Action - No Incentives for Good Behavior

Recently, a federal district court rejected an effort by big pharma, Novartis, to avoind the verdict in a suit for "jaw decay" caused by the drug, Zometa. The smart judge pointed to the evidence which indicated that employees of the drug manufacture engaged in dirty-tricks cover up of crucial evidence of the drug’s side effect on a person's jaw bones.

Novartis failed to warn the plaintiff and other consumers regarding the devastating side effect of Zometa, a side effect scientifcally referred to as osteonecrosis of the jaw or ONJ.

A jury in North Carolina had made an award to the plaintiff's estate for $13 million in both compensatory damages and additional punitive damages. The jury found that the big pharma corporation had intentionally concealed information about the unsafe use of the drug by patients.

Indeed, US District Judge James Beaty ruled that the jury heard “clear and convincing evidence” that Novartis intentionally schemed to cover up the lethal side effects of its drug. In addition, the drug maker attmepted to subvert proper medical and scientific inquiry about the drug's side effects. For example, the jury saw an internal company email from the marketing department which indicated Novartis suppressed a document detailing numerous cases linking Zometa to ONJ.

There are now many lawsuits over the drug and ONJ. Most are already consolidated with suits alleging ONJ caused by Aredia, also made by Novartis. 

Unfortunately, Novartis will likely not change its behavior because so-called "tort reform" laws, in reality tort deformity passed by legislators beholden to special interests, means that the plaintiiff's award will be reduced by almost 90%. 

Update December 9, 2011 - Apparently, Novartis exhibits a pattern of bad behavior:

The U.S. Food and Drug Administration is takingNovartis (NYSE:NVS) CEO Joseph Jimenez to task with a warning letter that cites three of the company’s manufacturing facilities for “significant violations” at the company’s generics drug unitSandoz.

The warning letter, sent to Jimenez on Nov. 18, outlines a long list of findings including insufficient written procedures to prevent microbiological contamination; inadequate procedures to assure that the drugs have the identity, strength, quality and purity they’re supposed to have; and a failure to find the cause of crystallization in an unnamed injectable product.

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Mississippi Supreme Court Asked to Rule on State's Limit on Damages

A federal appeals panel is asking the Mississippi Supreme Court if state law that limits non-economic damages to $1 million in civil cases is constitutional.

via www.insurancejournal.com

A test of tort deform (aka tort reform) ....