There’s an interesting dichotomy regarding the public’s perception of lawsuits in America. On one hand, we love the little guys, Erin Brockovich, and the myriad crusaders for justice in John Grisham’s novels. We hate “big tobacco”, and cheer multibillion dollar settlements in the tobacco litigation. Americans, as a general rule, are distrustful of big corporations. The accounting scandals on Wall Street have left the public with the perception that the bigger the company, the deeper the corruption – remember Enron, Tyco, and Worldcom?
We’re enraged when we hear about companies that put the bottom line ahead of the safety of their customers. Yet, despite our predilection to root for the underdog, many Americans support tort reform.
What is a tort, and what is a tort reform? The classic legal textbook about Torts is called Prosser and Keeton on Torts. In that book, one definition offered of a tort is a “civil crime”; an act that is illegal, but is not criminal. Perhaps the most common type of a tort is an auto accident. Medical malpractice suits are also torts. Tort reform is the effort to “reform” lawsuits so as to prevent “runaway verdicts” that range into the millions of dollars.
Often, tort reform, or “tort deform” as its detractors call it, revolves around setting limits of awards for “noneconomic damages”. Noneconomic damages include things like pain & suffering, mental anguish, and in general, anything you don’t have a fixed bill for. To better illustrate, let’s say you’re in a car wreck and your car receives $5,000.00 in damage, and you need $5,000.00 in medical treatment. You would have $10,000.00 in economic damages. If you were to receive another $7,000.00 for pain & suffering that $7,000.00 would be noneconomic damages.
When you hear about multimillion dollar jury verdicts, they usually involve a form of noneconomic damages that are called either punitive or exemplary damages. Let’s take a look at what punitive/exemplary (P&E) damages are, and are not.
First, punitive damages are not intended to compensate or reward the individual who was wronged. The Merriam-Webster definition of punitive is “inflicting or aiming at punishment”, and the definition of exemplary, in this context anyway, is “to serve as a warning. That means that P&E damages are to punish a party who did something that the jury wants to make sure never happens again, such as knowingly selling a dangerous product, or hiring a bus driver that failed his drug test. Over time, it has been found that the most effective way to deter a company from engaging in unethical or illegal behavior is to punish them financially for their misdeeds. Juries do this by awarding punitive damages, and those awards could be considered a fine. Of course, rather than the state collecting a fine, the punitive damages go to the plaintiff of the lawsuit. From time to time, juries are outraged by a defendant’s behavior and award punitive damages that are far in excess of any suffering the plaintiff endured. These verdicts are what are reported to the public, and these verdicts create the perception of greedy plaintiffs and money-grubbing trial lawyers. However, what is rarely reported are the circumstances that caused a jury to award the large verdict.
Let’s take a burn case for an example. What if a company was making $1.3 million dollars a day selling a product that they admittedly knew routinely caused second and third degree burns to their customers? What if during the ten years they offered this product, over 700 people had been badly burned – some permanently disfigured – by this product? What if this product was sold as something harmless, even common, but this product would cause third-degree burns to the skin within two seconds of contact if it were accidentally dropped? Finally, what if that company called those 700+ burn victims “statistically trivial” and refused to fix the product, even though doing so would cost next to nothing?
What would a fair award be for the callous indifference of a multibillion dollar corporation that made $1,300,000.00 per day – $474,500,000.00 per year – by selling a product that burned over 700 men, women, and even infants?
This isn’t a fictitious case. This is the famed “McDonalds coffee case”, and in that case, six men and six women found that an appropriate punishment for McDonalds was to “fine” them the profit from just two days of nationwide coffee sales.
McDonalds sold their coffee at 180-190 degrees, a temperature that they admitted no human could drink, as it would cause third-degree burns within 2-7 seconds of contact with skin. Over 700 people had been burned within the ten years prior to the McDonald’s coffee case, yet McDonalds wouldn’t lower the temperature of their coffee.
Stella Liebeck was the woman who was burned. She was a 79 year old grandmother who received third-degree burns to her legs, thighs, and genitals when the cup accidentally spilled in her lap. The 190-degree coffee immediately soaked into her jogging pants, and she was unable to do anything to prevent her burns. She had to go through painful debridements (scrubbing with wire brushes), skin grafts, and her treatment lasted two years. Of course, at the end of the treatment, she was left with permanent scars. She offered to settle with McDonalds for the amount of her medical bills, and they refused. After that, she hired an attorney, and the rest became a media circus.
One fact that wasn’t reported very heavily was that the judge reduced the $2,700,000 award to $480,000.00 and Stella settled for an undisclosed figure less than that amount instead of going through a lengthy appeals process. This demonstrates the safety valve inherent in the systems of many states: A judge can often reduce a verdict he or she finds excessive.
Perhaps the most important fact of the case is that the day after the verdict, McDonalds lowered the temperature of their coffee to 158 degrees, a temperature that takes about a minute to cause severe burns; the justice system worked, and it worked because of a large jury verdict.
But America now ridicules a grandmother who received third-degree burns to her genitals: Ever receive a piece of e-mail called “The Stella Awards”? The “Stella Awards” are supposed jury verdicts that purportedly showcase how “broken” the justice system is. None of those verdicts are real; some are laughable. But every laugh at the “Stella Awards” is a laugh at a permanently disfigured grandmother. More importantly, every recipient of the “Stella Awards” is someone receiving misinformation that may influence them to support tort reform.
The real point of tort reform isn’t to prevent multimillion-dollar jury verdicts; most of those awards are reversed or overturned, and even if they weren’t, a $1 million dollar verdict isn’t much deterrent to a company that makes ten billion dollars a year. So what is the point of tort reform? It’s to keep the misdeeds of corporate America out of the public eye. After all, if a plaintiff’s “best day in court” is arbitrarily set at $250,000.00, there’s no incentive to go through a lengthy and expensive trial if the plaintiff is offered $250,000.00 by a company that sells a defective product. Such a settlement would almost certainly be confidential, and the company could continue selling their defective product and killing or maiming consumers without anyone knowing of the dangers of the product. Confidential settlements kept the problems with Firestone tires a secret for years before the recent lawsuits. To put a finer point on it, confidential settlements killed Firestone consumers; it wasn’t until public litigation began that Firestone recalled tires that they had for years known were defective.
The real effect of tort reform will be to ensure that corporations can keep their dirty laundry private, and to place the financial well-being of a corporation ab
ove the physical well-being of their consumers. It’s a sad commentary on our society’s values that corporations will pay more money for defrauding investors out of money than for knowingly selling products that kill their consumers.