April 6, 2012

U.S. Supreme Court decisions in BMW and State Farm have failed to reduce punitive damages awards, according to new paper

Tort reform of punitive damages has failed, according to Cornell law professor Theodore Eisenberg.

In The Empirical Effects of Tort Reform, a chapter from the forthcoming Research Handbook on the Economics of Torts, Professor Eisenberg uses statistical analysis to study the effects of various efforts to rein in punitive damages, including the U.S. Supreme Court's opinions in BMW v. Gore and State Farm v. Campbell.  As most readers of this blog know, those decisions held that an award of punitive damages is unconstitutionally excessive if it is disproportionate to the reprehensibility of the defendant's conduct and the actual harm that the defendant inflicted upon the plaintiff.  One might expect those decisions to produce a general decline in the average ratio between punitive damages and compensatory damages.  Eisenberg's statistics show no such decline. In fact, his statistics show that, in cases involving compensatory damages awards up to $100,000, the average ratio of punitive damages to compensatory damages actually increased after State Farm.

Eisenberg characterizes the Supreme Court's tort reform effort as a failure, but that's OK with him because he does not believe there was anything to reform in the first place.  Rather, he blames the Chamber of Commerce for stoking public outrage about a mythical punitive damages crisis that never really existed.

He grudgingly acknowledges, however, the existence of evidence showing that tort reform has succeeded in reducing "extreme" punitive awards.  He makes that acknowledgment only in passing, but it seems to severely undercut his conclusion that reform of punitive damages has failed.  The main focus of tort reform in the punitive damages context has been to reduce the "outliers," not to reduce the average ratio on a nationwide basis.  That's certainly what the Supreme Court was aiming at in BMW and State Farm.  So if tort reform is responsible for a reduction of the the extreme awards, perhaps it isn't a failure after all.  Anyway, it's an interesting article and well worth a read to anyone interested in empirical analysis of tort reform, not just of punitive damages, but also in the context of medical malpractice and products liability litigation.
Hat tip: TortsProf Blog