The debate about reforming our system of damage awards in civil lawsuits is understandably passionate.
Critics of the system argue that sympathetic claimants are the beneficiaries of excessive awards because jurors, who always hail from the same community as the claimant, believe that justice will be served if the "deep-pocket" defendant is made to dig deep into that pocket. Defenders of the current system of torts (damages suffered by someone for which another person is legally liable) usually are lawyers who represent injured persons on a contingency-fee basis; this arrangement entitles them to receive a percentage of the jury award or settlement (usually one-third). They believe that any limitation on awards is inappropriate.
The real issue, however, is whether the current system deters misconduct while enhancing safety and providing fair compensation to injured persons in a timely fashion. Regrettably, the system fails badly in meeting these objectives.
It is beyond dispute that litigation in our society costs far too much and takes too long to conclude. According to the Senate Committee on Commerce, Science and Transportation, which for more than a decade has considered legislation to establish uniform national rules for product-liability law, cases take nearly three years to conclude once a suit is filed.
Opponents of tort reform argue that there is no "litigation explosion," but the facts speak otherwise. Plaintiffs with legitimate claims often settle for inadequate amounts because they cannot afford to wait years for compensation. Similarly, defendants who genuinely believe they would prevail on merits at trial often decide to settle a case because the costs of litigating would lead to Pyrrhic victory at best.
Who can blame them? Stella Liebeck, an 81-year-old New Mexico woman, was awarded nearly $2.9 million in punitive damages because she spilled hot coffee she had purchased at the drive-up window of a McDonalds restaurant. The jury awarded her a sum equal to two days' coffee revenue for the parent company. Little wonder that attorneys frequently advise their clients to settle for an amount commonly referred to as "nuisance value."
Lest anyone think that the problems described above affect only lawyers, judges and litigants, witness the testimony presented at the May 20, 1994, hearing of the Senate Committee on Governmental Affairs on the liability of raw-material suppliers for medical-device manufacturers. The hearing, led by Connecticut Democrat Joseph Lieberman, provides a frightening assessment of the future of the implantable medical-device industry because of product-liability litigation.
Medical-device manufacturers face a critical shortage in the raw materials needed to make their products. The reason: Raw material suppliers have severely cut back production because their inclusion in product-liability lawsuits makes it a totally unacceptable risk. Du Pont has stopped marketing and distributing a type of polyester yarn used in artificial-heart valves even though its use as a component of medical devices represents a mere .002 percent of the overall market for the fiber. In the case of a defective jaw implant for which the company sold 5 cents worth of teflon for each unit, Du Pont spent $8 million defending itself under the doctrine of joint liability. The company since has reached the rational conclusion that supplying device manufacturers is not worth the risk.
But these decisions, no matter how sensible, have chilling implications for our society. Lifesaving medical devices will, as a result of product liability litigation, either be unavailable or in critically short supply.
One of the witnesses who appeared before the committee was Mark Reily of Houston. Reily was joined by his 9-year-old son, Thomas, who was diagnosed in infancy as suffering from hydrocephalus -- water on the brain. Mark Reily recounted how the fluid buildup led Thomas to experience excruciating headaches as an infant. …