Magazine article Insight on the News

Clinton Wrong to Stand Behind Punitive Awards

Magazine article Insight on the News

Clinton Wrong to Stand Behind Punitive Awards

Article excerpt

President Clinton's vow to veto liability-reform legislation because it modestly pinches outlandish punitive-damage awards is as troglodyte as Luddite opposition to manufacturing machinery. The bill would boost innovation and entrepreneurship by removing a sword of Damocles over product manufacturers that chills socially beneficial risk-taking. The veto may win Clinton handsome political support from the American Trial Lawyers Association but not a Nobel Prize in economics.

Punitive damages of any amount in tort litigation are dubious. Civil law customarily is employed to ensure that an aggrieved party is compensated for all actual losses -- tangible or intangible. Thus, a person injured by a defective product invariably is entitled to compensation covering lost earnings and medical or rehabilitation costs, supplemented by a sum for pain, suffering, emotional distress, loss of society and companionship, loss of consortium, injury to reputation and humiliation. In other words, the concept of compensatory damages is exceptionally generous and sufficiently elastic to invite a jury to pad an award out of sympathy toward the injured consumer or hostility toward the commercial defendant.

Punitive damages are thick frosting on this tasty compensatory cake. For example, an Alabama jury last year awarded $15 million in punitive damages for the sale of a worthless insurance policy, a treasure trove subsequently reduced to a $5 million munificence by the Alabama Supreme Court.

It has been argued that punitive damages help deter deficient business conduct, an argument more facile than edifying. The pillory for corporate executives or minimum damages equivalent to a company's net worth also would deter. Enlightened civil law, however, searches for a line that avoids deterring constructive business activity without callousness toward injured consumers. Compensatory damages achieve that objective; punitive damages do not.

The prospect of crippling punitive-damage awards frightens businesses from product invention, innovation and development. Such awards decimated a flock of contraceptive manufacturers and were driving child-vaccine manufacturers from the market until Congress ended the punitive-damage sniper fire with the National Childhood Vaccine Injury Act. Congress similarly found in the legislation awaiting Clinton's veto that current tort-liability rules were threatening the availability of lifesaving or life-enhancing human-body implants by making the monetary risks to component-part or raw-material suppliers prohibitive. …

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