Monday, March 19, 2007

More on the US Supreme Court Punitive Damages Tobacco Case : The Origin of Punitive Damages and Related Issues

This is an update to our previous posting on Phillip Morris USA v. Williams, No. 05-1256 (U.S. Feb. 20, 2007).

Mathias v. Accor Economy Lodging, Inc. and Motel 6

Typical for the egregious heights which punitive damage awards have reached is Judge Posner's opinion in Mathias v. Accor Economy Lodging, Inc. and Motel 6, 347 F.3d 672 (7th Cir. 2003), where the Court upheld a compensatory award of $5000 against a wealthy corporate hotel chain ownership ($1.6 billion net worth) for not having fumigated a hotel known to have bedbugs - which had bitten the plaintiffs - and further upheld an additional award of $186,000 (!) in punitive damages [how many years does an average man have to work to earn that much money?] because the hotel chain owner wilfully used its corporate wealth to resist the lawsuit, as if defending against a lawsuit using aggressive lawful litigation tactics and employing one's available resources to do so was a "punishable" act. It makes a very disturbing view of the adversary system of law to see that a defendant is punished for defending himself aggressively and to see the Court calling that defense "secondary reprehensability" in a tort case. Is the assertion of legal rights becoming a civilly "punishable" offense?

As written here, the total award of $191,000 was apparently calculated on the basis of $1000 per room for the hotel's 191 rooms (!) Really, we expect more law and less of that kind of "tea leaf reading" when determining damages in American courts of law.

An additional absurd element in the "bedbug lawsuit" was the fact that such outrageous punitive damages were granted in a case for which the local health department should have "jurisdiction" and where the local health authorities should be coming in and coming down hard on health code violators and simply closing down hotels like this as also assessing severe fines if the health standards are not up to par. Nationwide, the enforcement of health code standards could never depend upon civil suits - rather, health standards are directly dependent on the enforcement of strong health standards by the regulatory authorities, who clearly failed their jobs in the instant case.

In that Motel 6 case we are by no means on the side of the bedbug infested hotel and its management or owners, nor do we understand why the Chicago health authorities were not aware of the problem, and if they were, why they had done nothing about it. We are against all of those wrongdoing and culpable parties. However, a civil suit and the imposition of punitive damages against the corporation per se is most certainly not the preferred or the right remedy at law because it imposes no sanction against the actual people who committed or are committing the civil wrongs. The law has more appropriate and more effective remedies, and these should be used.

As Posner writes, given the fact the bedbug problem in the hotel was known in advance by the hotel management and hotel owners, we have the law that:

""A person who causes bodily harm to or endangers the bodily safety of an individual by any means, commits reckless conduct if he performs recklessly the acts which cause the harm or endanger safety, whether they otherwise are lawful or unlawful." 720 ILCS 5/12-5(a). This is a
misdemeanor, punishable by up to a year’s imprisonment or a fine of $2,500, or both. 720 ILCS 5/12-5(b); 730 ILCS 5/5-8-3(a)(1), 5/5-9-1(a)(2). (For the application of the reckless-conduct criminal statute to corporate officials, see Illinois v. Chicago Magnet Wire Corp., 534 N.E.2d 962, 963 (Ill. 1989).)
"

What the trial judge in the instant case should have done is to enlist the aid of the local prosecutor to bring criminal charges against the persons in the hotel management and ownership responsible for intentionally permitting a known bedbug problem to remain unresolved, for which a maximum of one year in jail would have faced those persons.

Giving away a few hundred thousand "write-off" corporate dollars as punitive damages to a pair of guests and their lawyers will have little or no impact on improving hotel and motel health and hygiene nationwide by hotel managers and owners, who can shrug off the dollars by simply passing the costs on to their customers. On the other hand, the threat of jail terms will make it clear to hotel management and ownership that intentional disregard of known health and hygiene dangers will lead to severe personal consequences for the wrongdoers. Legislation should so provide.

On the Origin of Punitive Damages

So why are the courts trying to deal with these simple problems by civil law actions and punitive damages, rather than relying on the better tools available to them? It all has to do with history.

The doctrine of punitive damages in written law originated about 4000 years ago in the Ancient Middle East in an era when the modern distinction between the criminal law (of the State) and the civil law (applicable to private persons) did not exist. In those days, the civil law thus understandably had a punitive component to serve as a retributive deterrent.

Kelly-Rose Garrity, in her Note, Whose Award Is It Anyway?: Implications of Awarding the Entire Sum of Punitive Damages to the State, Washburn Law Journal, Vol 45, p., 19 April 2006, writes inter alia as follows (footnotes omitted) concerning the origin and development of punitive damages:

"The origin of punitive damages dates back to the Code of Hammurabi in 2000 B.C. [which] imposed "multiple damages".... Multiple damages, like punitive damages, provided monetary payment in excess of what was necessary to compensate for the injured party’s actual harm. The Bible and the Hindu Code of Manu also imposed damages in excess of the amount necessary to compensate the victim.

[T]he American tradition of punitive damages developed from, and most closely resembles, the English tradition. English common law first permitted punitive damages in the thirteenth century; however, punitive damages were not explicitly recognized by the courts until the late-eighteenth century. Early English courts limited the availability of punitive damages to intentional tort cases involving oppression, malice, or gross fraud. Despite recognition, English common law struggled to define the purpose of punitive damages until the middle of the twentieth century. Today, English law only permits punitive damages in three narrow categories of cases.

Since the late-eighteenth century, American courts have acknowledged the availability of awarding damages beyond what is necessary to compensate the plaintiff. In 1851, the United States Supreme Court stated:

It is a well-established principle of the common law, that in actions of trespass and all actions on the case for torts, a jury may inflict what are called exemplary, punitive or vindictive damages upon the defendant, having in view the enormity of his offense rather than the measure of compensation to the plaintiff. [Day v. Woodworth, 54 U.S. (13 How.) 362, 371 (1851).]

Courts in the United States initially limited the categories of cases that warranted punitive damages, as well as the size of the awards. Until the middle of the twentieth century, American courts limited the availability of punitive damages to "a relatively small group of torts involving conscious and intentional harm inflicted by one person on another."

The 1960s marked the beginning of an immense growth in the amount of punitive damages awarded and an expansion of the types of cases warranting punitive damages, both of which continue today. Most notably, product liability cases began to serve as a springboard to sizeable punitive damages awards. State legislatures also began to allow punitive damages for unintentional torts. Many jurisdictions expanded the conduct required to support a claim for punitive damages to include "willful, wanton, or gross misconduct." As punitive damages became more available, the amount awarded also increased exponentially as compared to compensatory damages. Today, almost all states recognize punitive damages; however, the “‘dramatic increase’ in the incidence and size of punitive damages verdicts” has led to widespread legislative reform intended to curtail such awards.
"

Phillip Morris v. Williams Revisited (see Phillip Morris USA v. Williams)

Via the March Law@Stanford Newsletter for alumni and friends of Stanford Law School we looked at the February 21, 2007 Los Angeles Times article, Tobacco award overturned: The high court limits damages in a smoker's lawsuit, saying firms can't be punished for harm to outsiders, by Times Staff Writers David G. Savage and Molly Selvin, where they write:

"Los Angeles lawyer Theodore J. Boutrous Jr., who represents Ford Motor Co. and other firms that are fighting large punitive verdicts, said the ruling would be very helpful to corporate defendants.

"This is very significant because this situation comes up all the time," Boutrous said....

But a lawyer who worked on the suit against Philip Morris, a unit of Altria Group Inc., downplayed the effect.

The court's opinion, said Robert Peck, a lawyer for the Center for Constitutional Litigation, said juries could punish companies for "reprehensible conduct," and that could include the effect on others.

"This may require new jury instruction, and I don't think the ultimate impact will change," Peck said.
"
[links added by Law Pundit]

We definitely think that Boutrous represents the more realistic view of the future of punitive damages in American law. In our opinion, the writing on the wall is clear. Punitive damages have "peaked out". Notwithstanding rather one-sided attempts by others to portray punitive damages as useful, Savage and Selvin observe the following recent developments:

"[Jury awards in product liability and medical malpractice cases rose steeply [from 1992 to 2001] — by 287.9% and 70.4% respectively."

The reason for this explosion of damage awards in those cases is surely grounded in "soak the rich" sympathies such as pointed to e.g. in argumentation in an amicus brief filed in Williams by a group of law professors and scholars, who claim that "American juries render punitive damages competently and responsibly and in a manner similar to decisions of experienced trial judges" which can hardly be true (unless trial judges be equally incompetent), given the tremendous rate at which jury awards are reduced on appeal. We quote from that amicus brief:

"Some studies have found that the wealth of the defendant is correlated with the size of the punitive award. This should not be surprising, nor inappropriate. In 1869, the Maine Supreme Judicial Court in Goddard v. Grand Trunk Railway concluded that large punitive damages against a corporation served an "impressive lesson."

Despite the obvious logic of making the wealthy pay more to achieve commensurate punishment, research indicates that jurors take defendant wealth into account in a responsible way rather than in the irresponsible way that critics of juries often attribute to them. Hans conducted systematic, in-depth interviews with jurors who had recently decided cases involving business corporation defendants and rendered punitive awards. The interviews revealed that juries took the wealth of the corporation into account, but they did not do so casually. [! LawPundit has added the emphasis out of astonishment] Jurors viewed larger corporations as capable of paying more than smaller corporations, but at the same time did not want to excessively harm them financially. Hans concluded that “[j]urors’ remarks reflect concern about emptying a corporate defendant’s pockets, ruining a business through high awards. Other comments indicate that jurors in punitive damage cases consider the deterrent impact of an award.”

The desire to punish reprehensible behavior commensurate with harm or potential harm appears to be the primary, indeed, the controlling motive, behind jury awards of punitive damages....

Sebok has shown that in the nineteenth-century the primary function of punitive damages was for punishment and vindication.
" [emphasis added by LawPundit]

What is astonshing to this author is that this kind of argumentation is found in e.g. an amicus brief submitted by a collection of presumably modern persons in charge of educating the next generations of law professionals in the United States. What kind of outdated law is being taught in the law schools of the United States today? As we have noted at this LawPundit posting, Europe has no punitive damages - you have to prove the harm done.

Here are our questions for those who support punitive damages:
  • What is the difference between civil law and criminal law? historically, in practice and theory? To what degree are exemplary damages primitive vestiges of a long past era? See in this regard e.g. Damages. Exemplary Damages. Liability of a Corporation for Punitive Damages for the Tort of an Agent, Harvard Law Review, Vol. 33, No. 1 (Nov., 1919), pp. 111-112; John C. Coffee, Jr., Paradigms Lost: The Blurring of the Criminal and Civil Law Models. And What Can Be Done about It, Yale Law Journal, Vol. 101, No. 8, June, 1992, Symposium: Punishment, pp. 1875-1893; Adam M. Gershowitz, The Supreme Court's Backwards Proportionality Jurisprudence: Comparing Judicial Review of Excessive Criminal Punishments and Excessive Punitive Damages Awards, Virginia Law Review, Vol. 86, No. 6 (Sep., 2000), pp. 1249-1302.
  • Michael Abramowitz writes in On the Alienability of Legal Claims, Yale Law Journal, Vol. 114, No.4, that "A public prosecutor must act in the best interests of society and not for the sole purpose of maximizing penalties." To what degree does this difference between criminal and civil law limit the use of the civil law for punishment and retribution?
  • What is the primary role of the criminal law? punishment? retribution? specific and/or general deterrence?
  • What empirical evidence exists for the actual effectiveness of civil punishments or deterrents? Do we have ANY evidence that this works?
  • What is the primary role of the civil law? to settle disputes between private legal persons? restitution of damages? compensation of injuries? reparation of wrongs? what about matters beyond compensation??? to insure compliance with the law? to insure compliance with obligations? to regulate behavior? whose compliance? whose obligations? and whose behavior?
  • Is there any basis in the United States Constitution to support the use of the civil law as a means for private persons to exercise primitive retribution, vengeance or revenge?
  • Is there any basis in the United States Constitution to support the use of the civil law as a "private" deterrent of any particular challenged behavior?
  • Outside of the criminal law, what is the legal justification for using monetary penalties in civil law cases to punish behavior?
  • Is there any basis in the United States Constitution to support the use of the civil law to punish challenged behavior? How does that square with the Founders' intentions?
  • If it is argued that the civil law can be used for purposes generally reserved to the criminal law, such as punishment and retribution, then how are the traditional protections accorded to the accused in criminal law trials to be guaranteed to defendants in the civil law? what about mens rea? standards of proof for elements of a crime? rules for the submission of evidence? what about the punishment fitting the crime? what about sentencing? etc.
  • If a view is taken that the civil law should be used to punish and/or deter individual or institutional behavior, then what is the legal basis and constitutional authority for using "money" damages as the standard of punishment or deterrence? and not some other punishment(s)? e.g. revocation of the incorporation of corporations, rescission of contracts, invalidation of patents and copyrights, limitations on the right to do business, etc.
  • If money damages are invoked as the punishment, then what possible reason is there in law or logic to award those damages to a claimant who also receives full compensatory damages for his or her injury? Why are those damages not awarded, e.g., to charities or other non-profit institutions, rather than to the claimant? Why is punishment defined in terms of awarding damages to a private claimant, who thereby "profits" from a civil wrong already compensated?
  • For what reason in law or logic should civil trials involving punitive damages be determined by juries having no expertise in the matters being decided? The whole idea of juries was trial by "peers". Do jury trials today abide by that principle?
  • How can punishment and deterrence be used as the rationale to assess punitive damages against a corporation whose management and/or shareholders may be different from those who prevailed at the time of the wrong? In some circumstances, those who actually profited monetarily from the wrong are completely exculpated and those who happen to manage and/or own the corporation at the time of the suit and/or judgment are punished.
  • To what degree are the Constitutional provisions on Due Process and Equal Protection of the Laws violated by civil judgments which impose punitive damages based upon the wealth of the defendant rather than upon the wrong allegedly committed? How - constitutionally - can one justify any award of damages (money or otherwise) imposed as punishment, retribution or deterrence, which award is then given as a representative gift (?) to a private claimant who is already being compensated for the actual wrong inflicted?

Extreme Sports : Skiing Cross Country Across Finland Border to Border (Rajalta Rajalle-Hiihto) from Russia to Sweden

Have you ever imagined seeing a herd of reindeer crossing your ski trail? Now THAT is a unique and unforgettable experience.

That is what happened a few days ago to one of our friends (BB2 2007), who just finished participation in one of most unusual extreme sports offered on our planet, the annual international Border to Border (Rajalta Rajalle-Hiihto) literal "cross country" ski event across the country of Finland from the border of Russia to the border of Sweden on a route skirting the Arctic Circle (Kuusamo - Taivalkoski - Pudasjärvi - Ranua - Keminmaa - Tornio).

This tour has been described by Cross Country Skier as "a week-long odyssey in which marathon distances become a lifestyle".

The ca. 440 kilometers (ca. 275 miles) of the ski route are covered in 7 days with daily cross-country skiing distances of anywhere from ca. 44 to 78 kilometers (on a "non-competitive" basis) as fixed variously by the organizers, with the difficulty of - and time required for - each daily ski stage being greatly dependent on the weather.

The Border to Border ski tour is an organized event for experienced and hardened ski tourists involving 7 straight days of up to 50 miles per day of physically demanding skiing. Cross Country Skier even writes: "This is a vacation that requires months of advance training", although persons not highly trained have managed this tour. Still, training is highly recommended so that one does not have to give up because untrained joints in the legs, arms or wrists are strained or because blisters on soft skin not hardened by experience may make further progress difficult. The right equipment and clothing for temperatures below freezing are also essential, especially for the feet.

Travel by bus, food and lodging are provided - for which reason participation involves registration and payment of substantial charges, including payment of a small deposit upon registration for the tour. See e.g. the tour prices charged by Nordic Saga Tours Sports & Adventure in Edmonds, Washington, USA or Schulz Aktiv Reisen in Dresden, Germany. Still, costs are kept as low as possible by the fact that the organization is done through 6 Finnish municipalities and nearly 200 volunteer workers. Otherwise it would probably be impossible to run this kind of an adventure ski tour at an affordable price.

Very nice to very simple accommodations are provided in hotels, huts, youth hostels and schools. A sleeping bag is required, but this and other belongings including extra and very necessary clothes are transported along the ski route by bus. Because of the sometimes close accomodations (many persons sleeping and perhaps snoring on the floor of a school in sleeping bags in more remote locations), earplugs may be recommended.

Interested persons should read carefully the general requirements listed at Rajalta Rajall-Hiihto, the Border to Border home website. And, for persons not accustomed to the extraordinary skiers of every age out there, including seniors . . . as noted at Cross Country Skier: "Just prepare your ego to be passed on the trail by some 70-year-old Finnish lady."

The ski-trail track (loipe) is marked (groomed) by snowmobiles and a snowmobile follows the last skier in each group to make sure no one is lost, while participants for safety reasons carry mobile (cell) phones. Periodic way stations at appropriate intervals for food and drink along the way are manned by volunteers, who are residents of the region. There is a possibility for skiers to take a bus rather than to ski a segment if the skiing becomes difficult for whatever reason.

Border to Border traditionally takes place each year in the first half of March and registration to participate in one of the 4 tour groups of maximally 100 skiers per group must be made by December 31 of the preceding year, for example, by 31 December 2007 for the 2008 tour (experience indicates that registrations should already be in by June to be sure of getting a spot).

Four tour groups are scheduled for 2008 and given below (for 2009 and 2010 see http://rajaltarajallehiihto.ranua.fi/?deptid=9559).

The Year 2008 Border to Border group ski tours
March 6 to March 12
March 7 to March 13
March 8 to March 14
March 9 to March 15

As written by Border to Border guide Jaakko Heikkinen:

"The Border to Border ski tour has established its position as a major ski and tourism event in northern Finland."

The home page of the Border to Border tour is found in Finnish and English language at Rajalta Rajalle Hiihto

Other interesting links involving Border to Border are:

Cross Country Skier - Finland from Border to Border (2003)
at crosscountryskier.com

Skiing across Finland (2004)
by JoAnn Hanowski at MasterSkier.com and Nordic Skiing Magazine

Skiing in Lapland
by Olaf Bochmann of Ames, Iowa

Border to Border: 440 kilómetros esquiando por tierras de Santa Klaus
from Antonio León García, Spain (2004)

Finnish Tourist Board

Rajalte-Rajalle : ein Skilauf quer durch Finnland (2005 - in German, auf deutsch, von Andrea Blüthner)

Århus Skiklub - Dagbog fra "Border to Border"

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