Walter Olson Knows The Difference Between Punitive And Compensatory Damages, Right?
I ask because over at Point of Law, he links to a post criticizing the $300 million dollar verdict against Philip Morris. The post badly distorts the law:
Think for a minute about this theory of justice. Imagine applying it to, say, car accidents. By this logic, if a billionaire in a Rolls Royce crashed into Mr. Smith's car and caused $3,000 worth of damage, and if a middle-class driver in a Buick crashed into Mr. Jones's car and caused $3,000 worth of damage, the key variable in deciding how much money Mr. Smith or Mr. Jones should be compensated isn't how much damage was done to their vehicles, but how much money the driver who crashed into them has in the bank.
The author of that blog post doesn’t seem to understand the importance of the fact that the jury verdict was broken down into $56 million dollars in compensatory damages, and $244 million in punitive damages. I know that Walter knows why that’s important, so I’m surprised he’d link to an article at Point of Law that so badly misstates a fundamental point of law. To clarify using the example above:
If a billionaire in a Rolls Royce (why not a Veyron?) crashed into Mr. Smith’s car and caused $3,000 worth of damage, and a middle-class driver in a Buick (the new Lacrosse looks nice!) crashed into Mr. Jones' car and caused $3,000 worth of damage, they would both be liable for $3,000. That’s because the $3,000 is an award of compensatory damages. Those are damages intended to compensate the plaintiff for his or her loss. Now, the $244 million dollars in the tobacco verdict were awarded as punitive damages. Those damages are intended to punish. Let’s tweak the hypo: Imagine the billionaire and the middle class guy were both drunk when they crashed into the respective vehicles. The billionaire is worth (duh) billions, and let’s say the middle class guy has $25k in savings. The jury will learn the wealth of these two drivers in the punitive damages portion of the trial, because wealth is relevant to punishment. A $5,000 punitive damages award against the middle class guy would wipe out 20% of his net worth. A $5,000 punitive damages award against the billionaire could be about 10% of price of the meal he ate for lunch before he went for a drive. (Think I’m exaggerating? Check out this $52,000 lunch bill.) If the billionaire was drunk because he drank a $5,000 magnum of Cristal, wouldn’t a punitive damages verdict of anything less than the cost of the magnum seem a little inadequate?
Now, I don’t fault The Future of Capitalism for misunderstanding the difference between punitive and compensatory damages. Unless you’re in the legal profession, you’d have no reason to know, so I suspect this was an honest mistake on their part. Why Walter (a man who makes his living criticizing the legal profession) would link to a post he knows to be wrong is another matter entirely.