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Punch and CounterPunch - Redux

Continuing our recent debate, Texas trial lawyer Clay Conrad continues the argument in a recent post in which he makes (by my count) five primary arguments. In his response he claims that my analysis �ignores� his points but instead knocks down �several obvious straw men�. To the contrary, I think that�s what Conrad has done.

1. A Rational Link Between Punitive Damages and Economic Harm.

Conrad now denies that he previously conceded that punitive damages �have no relationship to the harm or wrongdoing by corporate defendants�.

He now claims, �While punitive damage awards have a relationship to the harm or wrongdoing of corporate defendants, that is not the ONLY thing they have a relationship to. Other factors come into play � and properly so. Juries also determine the likelihood of the harm being repeated, the wealth of the corporation . . . the attitude of the corporation towards their wrongdoing . . . and numerous of factors.�

Setting aside the question of whether Conrad really is conceding the lack of a rational link between punitive damages and economic harm, his response proves my point.

Factors like �the wealth of the corporation� and �the likelihood of the harm being repeated� should not properly be a part of a jury�s consideration of punitive damages.

Conrad likes to compare punitive damages to the sentence imposed in a criminal case. Could a criminal jury in the U.S. properly consider the wealth of the defendant? Could it properly consider whether the defendant was likely to repeat the crime if let free?

It was precisely this kind of rationale that was struck down by the Supreme Court in State Farm v. Campbell, where Justice Kennedy noted that the lowers court�s consideration of evidence of the defendant�s practices in other states and in other cases was not a proper consideration in an award of punitive damages in the case at bar.

If Conrad�s argument is that juries, as a matter of fact, actually do consider a defendant�s wealth and likely repetition of the tort, Conrad is telling us that there is no rational link between the harm caused by the defendant and the size of a punitive damages award. That was precisely my point.

2. What is Justice?

Conrad claims, without support, that �economically efficient deterrence of corporate misconduct is not and has never been the goal of the civil justice system.�

Remove the pejorative word �corporate� and Conrad�s claim becomes false. The economically efficient deterrence of misconduct, together with the efficient reparation of tortious harms done, is precisely the goal of the civil justice system.

Despite denying my formulation of the goals of the civil justice system, Conrad doesn�t tell us should be its goals. Conrad compares civil justice to criminal justice by claiming that �we do not flinch against allowing criminal courts to impose exceptional sentences in order to deter other actors against committing similar crimes.�

But we do flinch. We have elaborate (some would say too elaborate) safeguards to prevent criminal juries from imposing unjust sentences. A criminal case must be proven to a higher standard of proof than in a civil case. A criminal defendant has discovery rights (i.e., the exclusionary rule) against the prosecution that go beyond what a civil defendant would have. Jurors in criminal cases must be chosen through a process that meets standards of procedural fairness. Sentences in criminal cases are restrained by both statutory and Constitutional limits.

Until recently (and only in some states) there were no limits on punitive damage awards against civil defendants. To the extent there are limitations today, they are the result of the civil justice reform movement that Conrad decries.

3. Doing What You Say and Saying What You Do

Conrad claims that there is a difference between �what tort reformers DO, and what they SAY� (emphasis in original). This is a challenge that applies generically to any movement: When there is a broad range of rationales for change and a broad range of prescriptions for change, there will always be some movement rationales that conflict with some movement prescriptions.

To this end, however, Conrad claims that there is no rational relationship between capping awards of non-economic and punitive damages and limiting frivolous lawsuits. But there is.

As I describe in Out of Balance, while there are several factors contributing to the nationwide problem of excessive litigation, one of the contributing factors is that particular kind of case where a plaintiff can raise a claim for punitive damages (or substantial non-economic damages) out of proportion to the real value of the case. Because each party bears its own attorneys� fees (under the current American rule) this allows the plaintiff to extort a settlement from a defendant.

In all of our exchanges so far, Conrad has never denied that this phenomenon exists.

4. The Constitutionality of Cost-Shifting

Conrad attacks my proposal to modify Fed. R. Civ. P. 68 to allow an offer of judgment that shifts attorneys� fees in addition to �costs�. (Under current law, a Rule 68 offer of judgment will shift attorneys� fees only when fees are provided for in the underlying statute; otherwise, only a party�s costs can be shifted).

Conrad claims that my proposal would be unconstitutional, making the remarkable claim that �any procedural rule that would tax the insistence on trial by jury" would violate the Seventh Amendment.

Rule 68 has been on the books for decades and there is no reported federal case where it was held to violate the Constitution. If Rule 68 is constitutional as written, how could it be unconstitutional if it were amended to shift attorneys� fees in addition to costs.

The Constitutional question of cost-shifting is an interesting one at the state level, however, and I am aware of a number of trial lawyers associations that are circulating briefs to challenge Georgia�s recent cost-shifting reform through this line of reasoning. Perhaps, this should be the subject of a separate debate?

5. There is no Litigation Lottery

Conrad�s final argument responds to a straw man argument I never made. He claims, �The statistics simply don�t support this idea that juries are bankrupting corporations left and right. There is no �litigation lottery.��

In none of my prior posts have I ever claimed �juries are bankrupting corporations left and right�. My claim, which is shared by many, is that our civil justice system drains approximately $300 billion out of the U.S. economy every year, an amount that is more than all of the income tax paid by all of the corporations in American is a single year. Ours is the most expensive civil justice system on the planet, consuming nearly 2.4% of GDP.

Conrad never denies these statistics.

As to whether or not there is a �litigation lottery� I�ll leave that to you, the reader, to decide. My experience tells me that there are far too many weak and frivolous suits brought by plaintiffs who are banking on the prospects of a nuisance settlement. If your experience doesn�t lead you to agree, well, you�re on your own.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.