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May 17, 2004

Good Idea from Governator

When juries award damages to a plaintiff, the money awarded is supposed to do two things:
(1) Compensate the plaintiff for actual harm, including money damages and pain and suffering;
(2) Award additional punitive damages against defendants who have deliberately endangered the broader public.

The theory on punitive damages is that if defendants pay only the harm caused to specific plaintiffs, they may calculate that, since they aren't caught each time, they can continue the same behavior; occasional jury payouts become just the cost of doing business.

Punitive damages are essentially a standin for the damage done to other potential plaintiffs who never had the energy or understanding to go through a long drawn-out trial.

In a sense, punitive damages are equivalent to fines regularly assessed against companies when the government brings a lawsuit in order to deter bad acts. But if punitive damages represent a social assessment for broader harm against the public, the quirk of the system is that the plaintiff gets to keep the money really meant for the broader public.

So the Governator has the right idea to take 75% of punitiive damages for the state government.

This will improve the debate on punitive damages. Right now, when large judgements are made against a defendant, the question is whether this is too large a "jackpot" for the plaintiff. Now, the question will be whether the the broader public has been fairly compensated for the overall social harm by the defendant, an assessment that would justify far larger judgements.

For this reason, I expect big business lobbyists to join opposition to the proposal by trial lawyers (who would lose a chunk of income). On the other hand, a number of states already have a version of the proposal in place:

Alaska, Georgia, Illinois, Indiana, Iowa, Missouri, Oregon and Utah already collect as much as 75 percent of punitive awards. And though there is no such law in Ohio, judges there recently gave one-third of a $27.5 million punitive award to a public university's cancer research fund.

Posted by Nathan at May 17, 2004 07:00 AM