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So the Supreme Court has just about had it with juries in tort cases. In a decision involving punitive damages earlier this month, State Farm Mutual Automobile Insurance Co. v. Campbell,six justices said enough is enough. More specifically, they slapped new limits on the damages above and beyond compensation that juries can award. Maybe they think that 12 angry men can be putty in the hands of slick plaintiffs lawyers. Maybe they think that ordinary men and women let their deepest fears run rampant in the jury room. Maybe they think that jurors see only the poor victim and forget about the society that must accommodate their verdict. Funny thing, though. It might not just be jurors who sometimes forget about the big picture in big-dollar cases. Hath not justices hands, organs, dimensions, senses, affections, and passions? It’s those passions I’m worried about. Justice Anthony Kennedy’s opinion for the Court took a step to limit punitive damages in tort suits, but didn’t really address the consequences of doing so. To be sure, there’s nothing sacred about our tort system. But there is something sacred about the values that the tort system promotes: compensation, deterrence, and punishment, among others. And if the Supreme Court — or Congress or the president, for that matter — won’t let juries secure all these values, something else will have to do the job. AN ACCIDENT So what was this decision that got the justices so hot and bothered? State Farm initially failed to pay off the full verdict in a trial against policyholder Curtis Campbell, who was responsible for causing a disastrous traffic accident in Utah that killed one person and disabled another. Campbell, in partnership with his victims and their estates, sued the insurance company for bad faith, fraud, and intentional infliction of emotional distress in failing to settle the claim. Then the insurance company paid up the original verdict against Campbell. Nonetheless, in the case against State Farm, Campbell won $1 million in compensatory damages and $145 million in punitives. With these facts (which included arguments by Campbell’s lawyers focusing on State Farm’s actions against other policyholders in other states), and with that sort of a ratio between compensatory and punitive damages (1-to-145), the Supreme Court decided to act. It reversed the $145 million award. And for good measure, it set a new limit for most punitive damages: usually no more than the underlying compensatory award, almost always no more than nine times as much. In the words of Justice Kennedy, the case was “neither close nor difficult.” Maybe. But the tort system itself is intricately balanced. Shift the weight a bit here or there, and the whole thing — or at least the benefits that we get from it — may come tumbling down. Keeping everything in equilibrium can be very difficult indeed, a challenge that Justice Kennedy’s opinion virtually ignores. UP WITH TORTS Look at what we get out of the tort system. Maybe most important is the ability to make the victim whole, at least economically speaking. If you hit me with your car, I’ll need (at least) reimbursement for medical expenses, lost wages for the recovery time, possibly lifetime lost wages if I’m permanently disabled, and probably salve for my pain and suffering. We call this compensation. Or we can use a synonym, economically speaking — call it a form of insurance. Something bad happens to me, and society provides a means by which I won’t necessarily have to bear the expense of it alone. With both litigation and insurance, the goal is to get someone else to cover my losses to help make me whole. (Mainly, anyway — both insurance and torts have their compensation limits.) Compensation is the most tangible need, but there are other important goals of the tort system. And they’re mainly accomplished through punitive damages (though compensatory awards do some of these things, too). First, there’s deterrence — of both the guy who hurt me (he’ll think harder before doing it to someone else) and of others (seeing that the guy who hurt me has to pay, they’ll change their behavior so they won’t have to). That’s a benefit to society at large: The world is made safer for everyone. Another goal is retribution. You hurt me (literally), so I hurt you (financially). That might look like a more limited concern — society might not care specifically whether I get a pound of flesh from the guy who mangled mine. But if enough people think that no one feels their pain, then it issociety’s problem. Maybe those people grow disenchanted with government. Maybe they take justice into their own hands. Either way, the impact goes beyond an isolated settling of scores. And a third goal of punitive damages is, well, punishment. That is, society itself steps into the fight to express the people’s disapproval of someone’s bad acts. There are also less obvious benefits of a vigorous tort system. Lawsuits uncover facts that society wants to know. Think of the claims against the Roman Catholic Church for pedophilia — thanks to the litigation, we now know about both the history of the abuse and the church’s actions to conceal it. By offering a reward to those who uncover things that might harm many other people, the tort system provides an incentive for individuals to pursue facts through the courts. Better information reaches the public, which makes for a better functioning democracy. And then there’s just plain old fairness. If I think that you’ve wronged me, I get my day in court (even if I don’t win). That’s the reason just getting before a judge is not that difficult — aside from the merits, merely pleading a case satisfies a fundamental human need to gripe. DOWN WITH TORTS But for all its benefits, there are also deep flaws in America’s tort system. The intricate balancing contraption may already be collapsing. Not everyone who gets hurt sues, often because the system is ultimately so complex and expensive to negotiate. And many people who haven’t sustained glaring losses can manipulate the system to get huge payouts. Think back to Mr. Campbell, who won (on paper, for a while) $146 million, in short, because his insurer hemmed and hawed before agreeing to pay off a jury verdict. Maybe Campbell suffered some real anxiety — the insurer, at one point, did tell him to put a “for sale” sign on his property. But $146 million worth of agita? Then there are all those plaintiffs attorneys who stir up lawsuits (look at the late-night TV ads of personal injury lawyers trolling for clients). And there are the class actions — sometimes for massive verdicts — that seem to benefit lawyers more than victims. The results can be ugly: increased health care costs for everyone, fewer swing sets in parks for anyone. Factor in insurance, and wrongdoers often don’t bear much financial burden at all (some jurisdictions even let insurance pay off punitive awards). Factor in settlements, which is how the overwhelming majority of cases get resolved, out of court and so out of the public eye. And factor in the jury system, with its always unpredictable, often arbitrary, and sometimes colossal awards. All this raises serious questions about how well the tort system is actually serving us. TINKER HERE, TINKER THERE So we tinker with torts, hoping to fix them, but running the risk that we’ll just upset the whole balancing act in a different way. Maybe we make it harder for plaintiffs to sue, say, in shareholder suits against corporations. Fewer frivolous “strike suits” might be the upside; more room for Enron to build offshore shelters could be the downside. Or maybe we abolish a class of torts altogether, like those of employees against employers for on-the-job accidents. Instead we set up a schedule of lump-sum, uniform payments and call it workers’ comp. But won’t some companies play the numbers and decide that it’s cheaper to lose a worker than an aging jigsaw? Enter the regulators to set up standards. Enter the lobbyists to influence the regulators. Enter the taxman (or at least higher prices) to pay for the regulators and the regulations (and the lobbyists). When you factor in all those costs, who knows if the new system is cheaper, or more effective, than the tort system (even the imperfect one that we have)? A few decades ago, New Zealand took things even further. For all accidents, it simply abolished the tort system. Instead, the country established a new bureaucracy, the Accident Compensation Corp., to make regular payments for all accidental harms that people suffer. One benefit for New Zealanders is economic efficiency. Less money — in legal fees, for example — gets eaten up in the process. Another is fairness. No longer intimidated by a cumbersome court system, people seem to put in claims that they otherwise would have let lie. And the downside? People may simply be bringing more of the still-permissible kinds of lawsuits. The New Zealand judiciary has had to beat back attempts by plaintiffs to win compensatory damages — which should be covered exclusively by the government program — in the guise of punitive damages. People seem to want their day in court after all. Another problem, at least some have argued, is that New Zealand is less safe today; there’s less incentive for people to fix things if they don’t have to pay for the injuries. Plus, the system requires taxes to pay for all the compensation. And a massive bureaucracy has grown up, complete with all the anti-individualistic overtones we tend to associate with giant state institutions. To get a measure of how large that bureaucracy can grow, consider that at one point the Accident Compensation Corp. was New Zealand’s fourth largest investor, which gave it significant power to influence the nation’s economy. So a system meant to fix the problems of tort law must struggle with its own trade-offs between benefits and burdens. To be sure, Justice Kennedy’s opinion in the State Farmcase hardly spells the end of the American tort system — or even punitive damages as we know them. The Supreme Court still allows punitives, sometimes even beyond its new presumed limits. And the truth is that we don’t need the tort system. What we do need, though, is some way to accomplish everything that the tort system is supposed to accomplish. And that’s a very tough balancing act. So, fine, go ahead and trim punitive damages, Justice Kennedy. What do you have for us instead? Evan P. Schultz is associate opinion editor atLegal Times . His column, “Controversies & Cases,” appears regularly. He can be reached at [email protected].

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