Supreme Court Rules in Punitive Damages Case- Easier for Appellate Courts to Overturn Damages

For Immediate Release:
May 15, 2001

Contact: Joanne Doroshow
212/267-2801

SUPREME COURT RULES IN PUNITIVE DAMAGES CASE- EASIER FOR APPELLATE COURTS TO OVERTURN DAMAGES

New York, NY - In a widely-anticipated decision, the U.S. Supreme Court sided with the interests of the business community by giving appellate judges extremely broad powers to scale-back punitive damages awards they deem "excessive." In an 8-1 decision written by Justice Stevens, with Justice Ruth Bader Ginsburg dissenting, the court ruled that the Court of Appeals should apply a "de novo" standard* when reviewing district court determinations of the constitutionality of punitive damages awards.

Center for Justice & Democracy Executive Director, Joanne Doroshow, said, "If there were ever any doubt that the courts are perfectly capable of dealing with excessive punitive damage awards, this decision should remove all doubt. With this extraordinary decision now the law of the land, there is absolutely no reason why legislatures, awash in corporate campaign money, should interfere with the courts' authority and arbitrarily limit juries' powers to award punitive damages."

The case is COOPER INDUSTRIES, INC. v. LEATHERMAN TOOL GROUP, INC., No. 992035. Argued February 26, 2001; Decided May 14, 2001. After finding Cooper had infringed on Leatherman's design trademark, a federal jury awarded $50,000 in compensatory damages plus $4.5 million in punitive damages. Finding that the punitive damages award was not grossly excessive, the trial court upheld the award. The Ninth Circuit Court of Appeals affirmed the ruling after finding that the District Court did not "abuse its discretion" in declining to reduce the $4.5 million award.

The court said, using analysis with which Justice Ginsburg disagreed (citations omitted):

It might be argued that the deterrent function of punitive damages suggests that the amount of such damages awarded is indeed a fact found by the jury and that, as a result, the Seventh Amendment is implicated in appellate review of that award. …However … it is clear that juries do not normally engage in such a finely tuned exercise of deterrence calibration when awarding punitive damages.…After all, deterrence is not the only purpose served by punitive damages. … And there is no dispute that, in this case, deterrence was but one of four concerns the jury was instructed to consider when setting the amount of punitive damages.

A copy of the decision can be found at: http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&navby=case &vol=000&invol=99-2035

* De Novo means: Anew. Considering the matter anew, the same as if it had not been heard before and as if no decision previously had been rendered. Ness v. Commissioner, 954 F.2d 1495, 1497 (9th Cir. 1992).

FACTS ABOUT PUNITIVE DAMAGES AWARDS:

PUNITIVE DAMAGES ARE RARELY AWARDED: In 1996 -- the latest year studied -- civil juries awarded punitive damages in only 2.5 percent of tort trials. Judges awarded punitive damage more frequently than juries, in 7.9 percent of tort cases. “Tort Trials and Verdicts in Large Counties, 1996,” U.S. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics, NCJ-179769 (August 2000), p.7.

In medical malpractice cases, only 1.2 percent of injured patients are awarded punitive damages. In cases specifically involving defective products, punitive damages were awarded in 1.4 percent of cases. “Tort Trials and Verdicts in Large Counties, 1996,” U.S. Department of Justice, Bureau of Justice Statistics, NCJ 179769 (August 2000), p. 3, 7.

Most punitive damages are awarded in cases involving business suing other businesses and cases involving intentional torts, like assault. In their study of juries published in 1995, the American Bar Foundation’s Stephen Daniels and Joanne Martin found that of the total number of punitive damages awards, 47 percent were in business cases, 36 percent were in intentional tort cases, 5 percent in products liability cases and 12 percent in other tort cases. “Financial harm is not only involved in the largest number of punitive awards, but these awards occur at a higher rate in cases claiming financial harm than in cases involving other types of harm.” Marc Galanter, Real World Torts: An Antidote to Anecdote, 55 Maryland L.Rev. 1093, 1128 (1996), citing Stephen Daniels and Joanne Martin, Civil Juries and the Politics of Reform (1995).

MEDIAN PUNITIVE DAMAGES AWARDS ARE ACTUALLY VERY LOW. In 1996, the median punitive damages award by juries in state tort cases was only $27,000. By contrast, the median tort punitive damage award made by a judge was $75,000, $48,000 higher. The combined judge/jury median punitive damages award was $38,000. “Tort Trials and Verdicts in Large Counties, 1996,” U.S. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics, NCJ-179769 (August 2000), p.7.

Punitive damages decreasing. Between 1992 and 1996, the median punitive damages jury award declined by 25 percent, from $36,000 in 1992 to $27,000 in 1996. “Tort Trials and Verdicts in Large Counties, 1996,” U.S. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics, NCJ-179769 (August 2000), p.7; “Civil Jury Cases and Verdicts in Large Counties,” U.S. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics, NCJ-154346 (July 1995), p. 8.