California's punitive damage standard is tough to meet; studies show that punitive damages are rarely recovered.

  • Punitive damages are awarded in less than 5 percent of civil jury verdicts, according to a 1990 American Bar Foundation study of 25,000 jury verdicts in 11 states over a four-year period. The rarity of punitive damages helps to explain why such awards often have news value.
  • Contrary to allegations about the overuse and excessiveness of punitive damage awards, data collected in the most recent independent National Center for State Courts (NCSC) study reveals that they are awarded in only 6 percent of tort cases in which the defendant was found liable. Further, the NCSC study indicates that the median award of punitive damages is $50,000.
  • A 1995 U.S. Department of Justice study analyzing civil jury cases over a 12-month period in the nation's 75 most populous counties found that juries awarded punitive damages in just 6 percent of all successful suits, and that approximately half of these punitive damage awards were for $50,000 or less.
  • The number of punitive damage awards between 1990 and 1994 in San Francisco and Cook County (Illinois) decreased 59 percent from the 1985-89 period, according to data from a 1995 study by the Rand Institute for Civil Justice. In the 1990-94 period, punitive damages were awarded in only 2 percent of all cases in San Francisco and in 1 percent of all Cook County cases.
  • During the past 25 years, there have been only about 355 punitive damage verdicts nationwide in all products liability cases.  Yet, the risk of punitive damages is a major force in inducing investment in safety and deterring unsafe behavior. (Michael Rustad, Demystifying Punitive Damages in Products Liability Cases:  A Survey of a Quarter of a Century of Trial Verdicts 26-27 (Roscoe Pound Foundation 1992).)

Finally, recent case law dramatically limited the ability to hold corporations accountable with punitive damages.  The United States Supreme Court in State Farm v. Campbell (2003) 538 U.S. 408 suggested that the ratio of punitive damages to compensatory damages should rarely exceed a single digit to pass constitutional muster.  Further, the court held that any use of evidence of conduct by the defendant in other jurisdictions must concern conduct similar to the conduct at issue, and that there must be a nexus between any out of jurisdiction evidence and the facts at issue. The impact of Campbell on the size of punitive damages awards will be significant, further reducing any potential revenue to the state. 

Under existing law, a defendant against whom punitive damages already have been awarded is free to place such evidence before a jury, and a jury can decide whether further punitive damages are warranted.  This is as it should be.  A jury is in the best position to decide whether a defendant has learned a lesson or whether further punishment is necessary.  For example, a jury should decide whether a company that knowingly markets a dangerous product for thirty years should only be punished one time.

Before issuing a verdict, the jury is instructed as follows:

If you determine that punitive damages should be assessed against a defendant, in arriving at the amount of such an award, you must consider:
(1) The reprehensibility of the conduct of the defendant;

(2) The amount of punitive damages which will have a deterrent effect on the defendant in the light of defendant’s financial condition. (Excerpted from BAJI 14.72.2)

This proposal would increase the amount of litigation by requiring a "race to the courthouse" and a race to trial to be the first to win punitive damages.  If a defendant's despicable conduct injures one hundred people, why should the defendant be punished only once?  If an individual rapes one hundred women, would he only be sentenced to prison for only one rape?  Under this proposal, the worst offenders escape punishment and keep their undeserved profit for malicious or despicable conduct.

If someone sets a bomb in a theater and murders 100 people, it doesn't matter that only one bomb was set off.  If a child throws rocks every day at a neighbor’s window, the child is punished for each broken window, even though the same conduct causes the injury.  The same holds true for corporate crime; the enormity of the crime should set the penalty.

For example, Owens-Corning knew for decades that its asbestos-containing insulation caused cancer yet continued to market the product without adequate warning.  Owens-Corning only ceased marketing the known carcinogen after the government refused to purchase the product.  Hundreds of people died because Owens-Corning made a business decision based on profits, not safety.  When asbestos products were no longer profitable, Owens-Corning developed a new product - wood pulp - to achieve the same results.

Furthermore, this “one hit” proposal is a boon for large corporations at the expense of small businesses.  Large corporations are more likely to cause harm to many people than small businesses.  Yet both can only be punished once, regardless of the disparity in the number of people injured.  Thus large corporations can much more easily absorb the cost of punitive damages (and are thereby less deterred) than small businesses.

The one-hit proposal could result in increased costs to the state.

The state has a compelling interest in assuring that its citizens are protected from unwarranted and avoidable injury by manufacturers that are trying to increase and maximize their profits by selling products in the state.  The distribution and sale of a defective product impacts the entire state’s economy.  This is particularly important where the defective product has widespread distribution within the state, such as the Ford Explorer or Firestone tires.  Limiting the punitive damages assessed against the manufacturer to a single award permits the manufacturer to make a simple cost-benefit decision about whether to place a dangerous product in our stream of commerce.  The negative impact on the state’s economy is further heightened in terms of medical care costs, disability payments, lost work hours and resulting loss of production due to those injuries and the resulting economic impact on the state and its citizens.  A limit on punitive damages to one award sharply reduces the deterrent impact of punitive damages awards and increases the likelihood that dangerous products will make their way into California.  Projected revenue savings thus may be offset by an increased drag on the economy.

Caps on punitive damages against “small businesses” are unnecessary.

First, the Supreme Court noted in the Campbell case that “the most important indicium of the reasonableness of a punitive damages award is the … reprehensibility of the defendant’s conduct.”  (Campbell at page 1521.)  Second, the court in TXO Production Corp. v. Alliance Resources Corp. (193) 508 U.S. 443 specifically approved the jury’s consideration of a defendant’s wealth as an appropriate factor in determining the amount of punitive damages to award, “in recognition of the fact that effective deterrence of wrongful conduct may require a larger fine upon one of large means that it would upon one of ordinary means under the same of similar circumstances.” (at page 463.)

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