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Thursday, April 10, 2003
Last week the U.S. Supreme Court decided State Farm Mut. Auto. Ins. Co. v. Campbell, holding that the Due Process Clause of the Fourteenth Amendment, which prohibits the deprivation of life, liberty, or property without due process of law, imposes sharp limitations on the states' power to impose punitive damages. The decision was drowned out by war coverage, but this decision promises to fundamentally change American law and call into question some of the basic assumptions of our tort system.

There is a longstanding debate about whether America is lawsuit-happy, and whether various sorts of limitations should be imposed on the tort system. This debate is going on in both state legislatures and Congress, who have been egged on by conservative groups (funded by corporate and insurance industry contributions) who want to limit damage awards. While traditionally, state legislatures and state court systems determine the compensation available for the victims of accidents in tort lawsuits, there is at least a colorable argument that Congress might have a role in regulating such compensation, both because it seems somewhat unfair that a defendant in Mississippi might have to pay much more in damages for the same wrongful act than a defendant in Texas, and also because a huge award affects not only a company's business in the state that imposes the damages, but also impacts the company's out-of-state business as well.

What is notable, however, is that these are essentially liberal, big government justifications for federal action. Under the arguments that conservatives have used to strike down civil rights statutes and federal gun laws, these sorts of justifications would probably not permit Congress to regulate state tort actions in this matter. Thankfully for the conservatives, however, the Supreme Court has found another means to nationalize tort reform-- the federal judiciary.

In the Campbell case, the Court held that: (1) no state may impose a punitive damage award that exceeds 10 times the compensatory damages awarded, and that in many cases, a punitive damage award equal to the compensatory damages will be appropriate, (2) the defendant's wealth, recognized since the adoption of the Constitution as a consideration in fixing the amount of punitive damages (a $10,000 penalty means a lot to a middle class individual but very little to a multinational corporation), may not be used as a consideration in justifying a large award, and (3) the facts supporting punitive damages award will be reviewed anew by appellate courts, with none of the traditional and well-established deference given to the facts as found by the jury or the trial court.

None of this appears anywhere in the Due Process clause. First of all, as long as there is a fair trial and a jury determination on punitive damages, there is no sense in which it could be said that a punitive damages award deprives property without due process of law. What is really being talked about is an unenumerated right in the Constitution. And the Court ignores the tests that the Court and most conservatives endorse for determining the existence of such rights, i.e., whether the right has traditionally been recognized and is implicit in the concept of ordered liberty. And it is no wonder-- large punitive damage awards have been around since the founding of the republic. Nobody ever thought they were prohibited. (To their credit, Justices Scalia and Thomas have consistently argued that the Constitution imposes no limits on punitive damages based on the nonexistence of any such tradition.)

What is even more breathtaking than the hypocrisy and lack of principle behind the Court's decision, however, is the impact that it will have on future cases. The constitutionality of punitive damages awards will now be an issue in every tort case where they are available. Further, the deterrent value of such damages will be substantially reduced-- especially since it is now unconstitutional to impose an award of sufficient size to dent the finances of a wealthy defendant. Hundreds of years of common law experience that has established punitive damages as an effective means of punishment and deterrence has been thrown out the window in favor of an unproven and contestible theory as to what should and shouldn't be considered by juries and judges in fixing damages. Of course, a state legislature, and perhaps Congress, could decide that this is an experiment worth attempting. But the judiciary has no business doing this.

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