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Supreme Corp.: Limiting Punitive Damages When Corporations Kill

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Message Bruce Morris
The United States Supreme Court on Tuesday decided to impose more limits on what a jury can consider in deciding whether to impose punitive damages on corporate defendants found to have injured or killed people in reprehensible ways. (Phillip Morris USA v. Williams, http://www.supremecourtus.gov/opinions/06pdf/05-1256.pdf). The Supreme Court has sadly once again sided with big corporate interests against not only injured persons, but also against the ability of individual states and local juries to decide how to dispense justice for their residents against corporate wrongdoers. The United States Constitution, former protector of individual rights, is again adapted to protect massive accumulations of wealth in non-human legal fictions called corporations.

The Supreme Court's decision Tuesday to limit the bases for punitive damages ultimately arises from two long-standing aspects of our society. The first is the brutal reality that large corporations sometimes decide to continue knowingly maiming and killing people with their highly profitable products or practices rather than change their ways and risk losing money. The second is our legal tradition of allowing the people of each community, sitting as a jury, to decide whether to hold these corporations responsible for their actions and how much to award to compensate injured people (compensatory damages).

Unfortunately at times the probability of losing cases combined with the amounts awarded in compensatory damages does not hit the bottom line hard enough to convince some businesses to change their dangerous ways. Companies sometimes find it more profitable to drag out lawsuits and maybe pay few judgments to the injured or families of the killed than to alter a highly profitable but highly dangerous product or practice (an inhumanity self-ridiculing the status of corporations as "persons" under our laws). This has been the calculation of the tobacco industry for decades, and was also behind leaving the "blow-up" Pinto on the road in the 1970s and the "exploding gas tank" pick-ups in the 1990's, among other infamous cases.

This is where punitive damages come in. When a business knows it can be punished with damages many times the actual amount the injured party is awarded, it may alter its calculation in favor of correcting the problem and letting the public know about it.

The entire purpose of punitive damages is just what it sounds like: to punish liable defendants beyond the limits of compensatory damages when their behavior is sufficiently reprehensible to justify harsher sanctions. A second, but equally important purpose is to deter that defendant and others from engaging in similar bad behavior. One traditional factor in assessing and awarding punitive damages is whether the defendant's actions also harmed or risked harm to others or to the general public.

This is what the Supreme Court limited in the Phillip Morris case to overturn a $79,000,000 award to the family of a man their cigarettes killed. The Court ruled that punitive damages cannot be awarded to punish a defendant for harm to other people not before the court in that particular case. However, the Court said the jury can consider harm to others or the general public in deciding how reprehensible the defendants' actions were, a legitimate basis for punitive damages. Yes, I stated that correctly, and if you find this distinction almost purely semantic, you are not alone. "This nuance alludes me," said Justice Stevens in dissent.

As you can see, the import of the Phillip Morris case is not an end to punitive damages. What it does, on a much more practical level, is provide yet another ground to overturn punitive damage awards on appeal. With appellate judicial positions becoming more and more political, this allows Republican judges more latitude to protect theirs and their party's corporate benefactors.

Imagine how difficult it will be for a judge to instruct jurors that they cannot consider damage to others directly in deciding punitive damages, but they can consider damage to others for the purpose of deciding reprehensibility of the defendant's conduct in deciding punitive damages. A possible result in the jury room will be to ignore damages to others altogether just to be safe. Furthermore, the exact language of those instructions will be fertile ground for more appeals dragging out cases even longer in furtherance of a strategy to keep peddling deadly products as long as it is profitable to do so.

To make matters worse, the Phillip Morris case comes atop other recent cases limiting punitive damages: BMW of North America, Inc. v Gore, 517 U.S. 559 (1996) (limiting bases and ratio of punitive damages to compensatory damages); State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S.408 (2003) (acceptable ratio "more likely" limited to less than ten times compensatory damages.) In this case, actual damages were just over $800,000. How much would $8,000,000 really impact Phillip Morris?

Back to the Phillip Morris case. In perhaps an even more important ruling, the Court based its decision on the Constitutional right to Due Process. Applied to Phillip Morris, of course, this is a further expansion of the rights of that hideous and dangerous oxymoron, the corporate "person."

Here's the deal about punitive damages: the jury never even gets to them until the defendant is found responsible for injuring the plaintiff. So, we are talking here about the rights of a corporation legally found to have hurt someone.

The Majority reasoned that allowing punishment for harm to others outside the case would violate a defendant's right to "an opportunity to present every available defense" against allegations of every outside person's injuries. Anyone else screaming about that? At a time when our President proposed and Congress passed a law denying certain actual persons the right to present any defense at all to horrible criminal accusations (think Military Commissions Act), the Supreme Court is granting "every available defense" to corporate "persons" who are hurting people, thereby reducing the economic incentive to stop doing so. (This may, however, also be a good omen for review of the MCA)

Nevertheless, if the same evidence of harm to others is allowed to show reprehensibility, then how can a judge avoid violating the defedant's rights during trial. Again, it appears the judge would have to give an instruction every time evidence of injury to others or the general public is offered, creating even more opportunity for appeals and further muddling of the trial to the defendant's advantage.

I could go on and on to legally analyze the Court's seeming stretch to aid corporate wrongdoers ("near standardless dimension" anyone?), but the bottom line, as the New York Times said Wednesday ("Shielding The Powerful," http://www.nytimes.com/2007/02/21/opinion/21wed1.html), is that this case is another indication that the Supreme Court is more interested in protecting the powerful than the powerless. At a time when the Federal government and many states are restricting the rights of injured parties to recover against corporations in court and the amounts they can recover (in so-called tort-reform or lawsuit-reform); at a time when Congress passes laws making bankruptcy from corporate-imposed debt harder to prove; at a time when corporations are allowed to just walk away from employee obligations; the Supreme Court is expanding the arsenal of rights and defenses corporations can assert against injured people. One has to wonder, if tort reform makes it to the Supreme Court, will the court find that injured human beings have a due process right to "assert every available CLAIM." Or does due process only apply to non-human persons who harm human persons these days?

A couple of footnotes:

This case was not decided by the usual conservative/"liberal" split. Here liberal Breyer and centrist Souter joined more conservative Kennedy and arch-conservatives Roberts and Alito in the Majority. Liberal Ginsberg joined centrist Stevens and arch-conservatives Scalia and Thomas in dissent. Breyer and Souter in the majority, with Breyer writing, concerns me that even some "liberals" are so pro-corporate. I said concerned, not surprised.

Even so, this case shows us again that Presidential elections matter to the preservation of justice. Had Kerry won in 2004, this case may very well have gone the other way. We progressives really HAVE to make the Supreme Court and federal judiciary in general a HUGE issue in 2008. Stevens will not last another Presidential term, and retirements of Ginsberg, Breyer and Souter are likely looming. Imagine a Supreme Court with three or four more young arch-conservative Republican justices added to the Four already there.
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Bruce is 46 year-old father of one, stepfather of three and grandfather of two, who left a lucrative law practice at a large national law firm to work, advocate and write for social justice and equality and find a way to incorporate a spiritual life (more...)
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