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Punch and CounterPunch

Tort reform nemesis Clay Conrad has an extended piece on CounterPunch that rehashes many of the arguments made in our recent exchange on the subject.

In the last of his blog posts on the subject, Conrad responds to my arguments (but more to the work of Cass Sunstein and a group of law & economics professors he calls the "Behavioralists") writing:

What the "Behavioralists" in Punitive Damages claim is that punitive damages awards given by juries have no relationship to the harm or wrongdoing by corporate defendants. The niggardly interpretations of harm and wrongdoing accepted by the "Behavioralists" are unsatisfying (except, of course, to corporate counsel.)

Could a jury rationally believe a cost/benefit analysis cannot rationally justify placing a dangerous product in the stream of commerce - and punish the company that did so? Harshly? Not according to the �Behavioralists.� The �Behavioralists� want the legal system to provide no more than "economically efficient" deterrence of corporate misconduct. Juries, on the other hand, want fairness and justice.

What Conrad never explains, however, is how to determine "fairness and justice" when the outcome produced by the system (awards of punitive damages, for example) has "no relationship to the harm or wrongdoing by corporate defendants."

If our civil justice system did, in fact, produce "economically efficient deterrence of corporate misconduct" (not to mention the misconduct of individuals), Conrad would say that the outcome was not "justice".

Much of Conrad's argument is adopted from a law review article, How Relevant is Jury Rationality? by Temple University Professor David Hoffman.

Like Conrad, Hoffman also attacks Sunstein's book, at first referring to his school of thought as the "Behavioralists" and later adopting the more prejorative label, "paternalists".

Conrad and Hoffman both concede, fairly quickly, that Sunstein was correct as a matter of fact: juries do make decisions about punitive damages that are "unreliable, erratic and unpredictable." They both also proceed to conclude, without support, that jurors' proclivity to be unreliable, erratic and unpredictable reflects their rejection of "efficiency and deterrence" and their embrace of "what individual citizens want (fairness and justice)." Hoffman at 512.

But one citizen's "fairness" is another's "mob rule".

Here is where Conrad's argument falls apart.

The primary idea behind most in the "reform" camp when it pertains to punitive damages is that the rule of law requires there to be some relationship between the culpability of the defendant and the defendant's liability.

This idea is central to our common law notions. If Hadley v. Baxendale stands for nothing, it stands for the proposition that the defendant ought not be responsible for something he could not have reasonably forseen. The principle extends not only to damages for breach of contract, but also to the responsibility a manufacturer should have for its products more generally.

In the wake of State Farm v. Campbell the principle of proportionality is Constitutional: substantive due process requires that there be some measure of proportionality between an award of punitive damages and the "reprehensibility" of the defendant's conduct.

The reform camp stands for the proposition that the law can be improved in those situations where its outcomes do not reflect a rational relationship between culpability and damages.

Conrad and Hoffman recoil in horror at Sunstein's proposed reforms--limiting the function of civil juries--but they cannot describe how they would measure "fairness and justice". All Conrad will say is that it's something more than the economical deterrence of wrongdoing.

Both Hoffman and Conrad seem to fear Sunstein's solution of limiting the role of juries. They view his proposal as "paternalistic" (Hoffman) and "the narrow logic of technocrats" (Conrad).

I can't speak for Sunstein's proposals, but my own do more to empower individual litigants than they do to entrench any bureacracy. As I describe in Out of Balance, an offer of judgment rule would be extremely effective in forcing parties realistically to determine the value of their cases and in requiring them to bear responsibility for their decisions to litigate or settle.

And, by shifting a prevailing party's attorneys' fees to the party who gambled on a recovery but failed, the reform would discourage the litigation lottery and encourage individual responsibility.

Is that not justice?



Rafael Mangual
Project Manager,
Legal Policy

Katherine Lazarski
Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.