January 28, 2008

Dueling Op-Eds on Punitive Damages

We previously blogged (here and here) about the California Chamber of Commerce's (unsuccessful) sponsorship of a bill to impose a ratio-based cap on punitive damages. In support of that bill, Kyla Christofferson, a Policy Advocate with the Chamber, submitted a letter to the editor of the Daily Journal (subscription required).

Last week, the Consumer Attorneys of California responded with their own Daily Journal letter to the editor. The letter, authored by Don Ernst, president of the Consumer Attorneys, describes the Chamber of Commerce as a dishonest "front group for corporations seeking to avoid accountability for wrongdoing and negligence." Aside from attacking the Chamber's credibility, Ernst's main argument is that reform is unnecessary because disproportionate punitive damage awards are rare.

I am puzzled by the argument about the rarity of excessive punitive awards. Why should our justice system tolerate any excessive awards, even if they are rare? I doubt that the defendants who get hit with excessive punitive awards find much solace in the notion that such awards are uncommon. And if excessive punitive damages are so rare, why are the Consumer Attorneys so opposed to limiting such awards? What difference would it make, except to the defendants who are unlucky enough to be on the wrong end of those rare awards?

Ernst supports his argument by listing cases in which punitive damages motivated manufacturers to remove dangerous products from the market. Interestingly, he doesn't mention whether the awards in those cases would have been subject to the cap proposed by the Chamber. Out of curiousity, I looked up one of the awards he mentions - -the $125 million punitive damage award in Grimshaw v. Ford Motor Co., the infamous Ford Pinto case. Ernst cites Grimshaw as an example of an award that changed corporate behavior, but he doesn't mention that the punitive damages award in Grimshaw was reduced to $3.5 million (by the trial court), compared to compensatory damages of $2 million. If a ratio of 1.75-to-one was sufficient to change Ford's conduct in Grimshaw, that case hardly supports Ernst's argument against the three-to-one cap proposed by the Chamber.