Thursday, June 01, 2006

Judicial activism, big-business style.

Financial Times legal columnist Patti Waldmeir writes a completely obtuse piece about limits on punitive damages and the Supreme Court's grant of certiorari in a case involving a $80 million award of punitive damages against Phillip Morris. In recent years, a slim majority on the Supreme Court has fashioned a new rule, in ostensible application of the Due Process Clause, limiting awards of punitive damages to a multiple of a plaintiff's actual damages. Waldmeir: "The court said, in a 2003 ruling, that in most cases punitive damages would not be more than four times compensatory damages, and that the ratio should almost never exceed single digits." Business loves the rule, for obvious reasons, but principled conservatives should object, since there is no plausible argument that the Constitution's framers had any such thing in mind. It's judicial activism, pure and simple, of a distinctly (lower-case "f") anti-federalist flavor, since most punitive damages are awarded in state courts under state law. Justices Scalia and Thomas have not joined in these decisions for these reasons, and the Chamber of Commerce might reasonably fear that Justices Roberts and Alito will stand on principle here, unlike the Justices whom they replace, O'Connor and Rehnquist, who were open to a certain expediency.

What is wrong with Waldmeir's column? To start with, it is overblown. She writes, "The future of the American economic model -- light on government regulation, heavy on private litigation -- could be profoundly affected by the outcome [of the Williams case]." This is malarkey. The American economic model did quite well for years without constitutional limits on punitive damages. If the Supreme Court were to ease the limits it has recently created, and the American economy were to shudder and slow in response, nothing would stop Congress from creating such limits by enacting a federal law.

But more essentially, relying on Waldmeir's column will actually make you dumber about the issues involved. It misinforms. The question in the Williams case arises under the Due Process Clause. And yet here is how she characterizes what is at issue:
The questions facing the justices are ones they have faced before: is it fair to let juries impose huge punitive damages awards against companies that make things that hurt people -- damages that are out of all proportion to the harm caused to the person bringing the lawsuit? Should jurors be allowed to punish defendants for harm they may cause to people who are not party to the suit? Is that necessary to deter corporate wrongdoing? Or is it economically counter-productive -- and constitutionally unconscionable -- to hit corporate defendants with damages in three-figure millions for each case of wrongdoing?
Set aside that juries certainly are not hitting corporate defendants with nine-digit awards for "each" case of wrongdoing. Waldmeir acknowledges here that the issues in the case are constitutional, but "unconscionability" is not a constitutional doctrine. Indeed, calling her obtuse is probably too kind in this instance, since the choice of words suggests that she has decided not to explain how punitives limits have been grafted onto the Due Process Clause, lest it sound jurisprudentially ridiculous.

I have no idea whether Waldmeir is the sort of conservative who would happily abandon her principles in this for a result that seems right, but what's the point in writing a column about the law that ignores and obfuscates the law?

Waldmeir says, "it is normally a very bad idea to punish defendants for hypothetical wrongdoing that has not been tried in court." And later she suggests that juries have been "award[ing] huge sumes in punitive damages for alleged wrongdoing that has never been proved in court." But punitive damages are not about hypothetical wrongdoing -- there are other legal doctrines to take care of that problem. Juries make these awards on the basis of actual evidence, not allegations.

Punitive damages are -- of course -- designed to punish, not to compensate, two concepts that Waldmeir cannot seem to untangle. The address the situation in which the actions of the defendant seem incommensurate to the harm suffered by the plaintiff, the situation in which something more than compensation seems called for. The question in these Supreme Court cases is, does the Constitution permit states to have laws permitting these sorts of awards?

But you wouldn't know it from Waldmeir's column. She concludes:
Courts should punish companies that engage in wrongdoing. But public policy should be made by legislatures and regulators, not individual juries trying individual cases: juries should stick to the facts before them, and keep punitive damages within single-digit limits. To do anything else puts them on the wrong side of justice . . . .
Public policy should be made by legislatures, and not by courts, as Waldmeir favors. Legislatures and regulators should not be in the business of punishment; indeed, Article I, Sections 9 and 10, of the Constitution forbids federal and state legislatures from enacting bills of attainder. And shouldn't punishment be considered in "individual cases?"

Waldmeir's argument is incoherent, but for her public-policy preference that federal courts prevent the states from allowing juries to award punitive damages of more than nine times compensatory damages. You can check the Due Process Clause, and the rest of the Constitution, but you won't find that limit in there.

The interesting question that the Williams case will help answer is what kind of justices Roberts and Alito will be. Waldmeir discusses a punitives decision upholding a ration of 37:1 written by Judge Posner, who is notorious for law-and-economics-inspired judicial activism. But notwithstanding that case, you don't need to stray from the Constitution's text to think that the Court's recent decisions on punitives are misguided. If Roberts and Alito halt the development of this doctrine, big business may be unhappy, but movement conservatives will have reason to be pleased.

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