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Friday, Sep 22, 2023

COMMENTARY–Punitive Damages Awards From the Twilight Zone

“It is a dimension as vast as space and as timeless as infinity. It is the middle ground between light and shadow, between science and superstition ”

If the Twilight Zone’s creator, Rod Serling, only knew how neatly that introduction fits into a discussion on punitive damages in our state. It is an area of law without rules and sometimes without reason.

It is also a tool of legal gamesmanship that, unless it is brought under control and governed by the principles of fairness, could single-handedly change the economic landscape in California.

No one would deny that punitive damages are, when fairness is at work, a necessary factor within the justice system. Unfortunately, our current system is grossly unfair, and the principle of punitive damages has been manipulated and twisted to the point that it benefits only the trial lawyers, while jeopardizing the welfare of the many.

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Instead of a weapon to punish egregious action, the punitive damages card is now played in almost every lawsuit against “big business,” regardless of degree of fault.

The personal injury lawyers who make their fortunes from excessive punitive damage awards like to believe that a multimillion-dollar award will “send a message.” That it does. It usually sends the message that it’s time to take business elsewhere.

Threat To Economy

In California, where liability laws are already a burden on the ability of businesses to compete in a global economy, punitive damages have become one of the greatest threats to economic vitality. And by economic vitality we are not just talking about some lofty economic term. What we’re really talking about is jobs.

How serious is this threat? In the business climate survey conducted by the California Chamber and California Business Roundtable, business leaders saw the state civil justice system as having a worse effect on business than public infrastructure, health care costs, and even taxes. Further, data from the Pacific Research Institute shows that 78 percent of claims against businesses include a claim for punitive damages.

When you realize that even one punitive damage award could force a business to close its doors, you don’t need an MBA to understand why California business owners have cause for concern.

Cases Illustrate Problem

Recent news only confirms those fears are justified. In just a period of days in 1999, California set the record, twice, for the largest jury award of punitive damages in history.

In the first case, an automobile manufacturer was hit with an astounding $4.9 billion punitive award in a lawsuit wherein the occupants of a vehicle were severely burned following a rear-end collision.

What the jury was not allowed to hear, for some reason, was that the driver who hit these people was drunk, and traveling 70 miles per hour. Without being allowed to hear these facts, the jury decided to punish the manufacturer.

Even if you don’t account for the fact that the manufacturer didn’t cause this crash, the question remains whether a punitive award that is 45 times the amount of compensatory damages has any justification. A judge said no, and lowered the award to $1.2 billion, which in truth, is still far out of proportion to the defendant’s degree of fault.

Only a few days later, a Modesto jury socked another automobile manufacturer for $290 million in punitive damages, despite the fact it had no responsibility for causing the accident over which the lawsuit was filed.

Further, the only instructions the jury was given in determining punitive damages came from the personal injury lawyer who brought the lawsuit. He told them to pick a number that would make the front page of every newspaper in the country.

As much as these cases are an indictment of how personal injury lawyers can manipulate the truth to generate outrageous awards, they are also an indictment of how punitive damages are determined in the first place. Currently, there are few guidelines given to juries in assessing whether punitive damages are truly appropriate, and what they should be.

Common Sense Needed

If we’re truly going to protect jobs in this state, and give business a reason to relocate or expand here, injecting some common-sense guidelines into the concept of punitive damages must be a starting place.

Let’s have judges, rather than juries, set punitive damage amounts according to specific criteria. Let’s also set reasonable limits on the size of punitive damages that are related to the degree of fault and injury.

Otherwise, business must exist in a strange twilight zone of unpredictability, unsure whether , or when , some questionable lawsuit and runaway damage award might force it to close its doors and put its employees on the street.

Zaremberg is the president of the California Chamber of Commerce.


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