February 21, 2009

Editorial Touts Deterrent Effect of Punitive Damages

The South Carolina legislature is considering a proposal to cap punitive damages at $250,000. This editorial in the Greeneville Times criticizes that proposal, arguing that punitive damages are necessary to deter corporations from distributing products that a dangerous to the public.

The editorial cites the salmonella contamination scandal involving Peanut Corporation of America (in neighboring Georgia) as an example of the sort of corporate behavior that punitive damages deter. That seems like an odd example. Georgia law allows punitive damages, and has no cap on punitive damages in products liability cases. In other words, the Peanut Corporation of America was exposed to claims for punitive damages up to the maximum amounts permitted by the Due Process Clause. Indeed, someone has already sued PCA for punitive damages. Apparently, the possibility of a large punitive damages award did nothing to deter PCA from shipping tainted products. Does that example really support the editorial's argument?

Whenever a state considers imposing caps on punitive damages, opponents tout the deterrent value of punitive damages and argue that the state will become more dangerous for consumers if the cap is adopted. Someday, someone will conduct a study comparing the states that have adopted caps (or have outlawed punitive damages altogether) with the states that haven't, to determine whether citizens in the uncapped states really are safer.