Center for America

Speaker's Resource: 6. Punitive Damages, p 4

 

 

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Key Reference Citations (KRC)

 

Do Punitive Damages Work?

  • “‘States with punitive damages exhibit no safer risk performance than states without punitive damages’. There were no overall differences with regard to safety and environmental performance, and ‘there is no deterrence benefit that justifies the chaos and economic disruption inflicted by punitive damages’.” (KRC: Hantler, “Seven Myths…” p. 2, quoting W. Kip Viscusi, The Social Costs of Punitive Damages Against Corporations, 87 Geo. L.J., pp. 297, 298. 1998)

  • “[W]hen companies weigh the costs of increased safety against the costs of risks, the potential for punitive damages adds to the costs of risks—making safety precautions more attractive.” (KRC: Hantler, “Seven Myths…” p. 2) 

  • “[T]here is no need to augment the safety incentives provided by the market, government regulation, and compensatory damages.  Penalties that go beyond those needed to create an efficient level of safety will produce redundant levels of safety.  These costs, in turn, will lead to higher prices and other adverse economic effects.” (KRC: Hantler, “Seven Myths…” p. 3, citing W. Kip Viscusi, Why There Is No Defense of Punitive Damages, 87 Geo, L.J. 383, 1998)

  • “Juries award punitive damages in such a capricious manner that there is no linkage between the expected punitive damages and the firm’s risk actions. ‘[W]hen firms look forward, the prospect of punitive damages is so uncertain that there is no deterrent effect’.” (KRC: Hantler, “Seven Myths…” p. 3, citing W. Kip Viscusi, Why There Is No Defense of Punitive Damages, 87 Geo. L.J., 83, 1998)

  • “If punitive damages are essentially random, then they will not provide proper incentives for risk mitigation.  Instead, they will operate purely as a ‘tax’ on firms – a cost with no corresponding benefit.” (KRC: Council of Economic Advisors, "Who pays ...", p. 5)

 

U.S. Supreme Court Acts To Limit Punitive Damages

From www.instituteforlegalreform.com

Issues, Punitive Damages

  • “On April 7, 2003, the U.S. Supreme Court in State Farm Mutual Automobile Insurance Company v. Campbell invalidated a $145 million punitive damage award in a case in which the defendant was found liable for only $1 million in compensatory damages.”

  • “The Supreme Court held that this punitive damage award was excessive and in violation of the Due Process Clause of the Fourteenth Amendment, and sent the case back to the Utah Supreme Court for further review.”

  • “The Supreme Court indicated that punitive damages generally should not exceed a low multiple of compensatory damages.  The Court said that in a case like State Farm, any ratio higher than 1:1 would be excessive, and that ratios above 4:1 would rarely pass constitutional muster.  Double-digit ratios hardly ever would, except in those few cases with small compensatory damages and highly reprehensible conduct.”

  • Recently, “the Utah Supreme Court reduced the punitive award to approximately $9 million in a decision that many believe still does not comply with the U.S. Supreme Court decision.”

  • “While the U.S. Supreme Court decision made great strides in providing guidelines to rein in excessive punitive damage awards, last week’s ruling by the Utah Supreme Court shows that the U.S. Supreme Court decision will mean little if not properly enforced by the lower federal and state courts. 

  • “Many courts remain reluctant to reduce punitive awards to the low multiples of compensatory damages suggested by State Farm.”

  • “Despite the State Farm ruling, many business defendants are forced to expend massive resources fighting for due process in appellate courts because trail courts have not uniformly implemented the guidelines outlined in State Farm.”

 

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Please Note:  The material presented in this Speaker's Resource has been collected from a wide variety of sources.  You are welcome to use this material for quotations and factual material in your speeches, presentations and articles.  To the best of our ability, we have provided original citations so that you can document the comments you use.  If you become aware that any of the citations or facts presented in this collection are inaccurate or outdated by newer information, please send an email to Speakers@lawexec.com to tell us so that we can update this material.  The materials cited are generally copyrighted by the original author and when you quote from their material, you should include the original attribution to acknowledge their role as authors.  Original material © 2005 American Justice Partnership.