Comment on Tort Reform-BECKER

I agree with Richard Posner that the ability to sue against medical malpractice, drunk drivers, and sellers of defective and dangerous products induces doctors, producers, and others to pay closer attention to what they do. I also agree that reforms are generally better left to the states than to the federal government in order to allow competition among state legal rules. However, without reform of class action suits, Posner’s appropriate criticism of the right to bring class suits in more generous jurisdictions undermines the argument to leave legal reforms entirely to the states. He is right too that a few foolish cases should not be the basis for policy. Yet there is need for some tort reform because there is too much litigation, compensatory damages are often too low, and punitive damages have sometimes been grossly excessive. “Compensatory” damages are supposed to compensate individuals for their losses from medical malpractice, and other careless or reckless behavior. In practice, they commonly refer to the loss of earnings due to injury or death from such actions. Yet the correct measure of compensatory damages should equal what individuals are willing to pay to avoid death or the injuries in question. The value placed on loss of life, or on substantial disabilities, are usually many times greater than the loss in earnings. Critics of the American tort system generally neglect this tendency to underestimate compensatory damages. To be sure, this is not easily corrected by legislation, although it might be possible to have useful rules of thumb about the appropriate ratio of full damages to lost earnings. And greater recognition that compensatory damages are often much too low would be helpful to juries and judges. “Punitive” damages are often imposed in order to encourage doctors, drivers, and producers to be more careful and responsible. The system would be working well if any underestimated compensatory damages were just about offset by inflated punitive damages. But punitive damages have sometimes been huge multiples of compensatory damages -occasionally exceeding 50 or 100 times compensatory damages- and may only reflect a jury’s or judge’s perception about how deep are the pockets of defendants. Although huge punitive damages tend to be reduced on appeal, they often remain much too large. The rule of thumb in anti-trust litigation is that punitive damages equal to three times compensatory damages sufficiently recognizes that many anti-trust violators are undetected and are not punished. A limited ratio of punitive to compensatory damages would also be appropriate in the great majority of other tort cases. The Supreme Court in a couple of cases in recent years has in fact suggested that punitive damages should generally not exceed nine times (I would add correctly measured) compensatory damages, and their ruling applies to state as well as federal punitive damages. I believe that as in anti-trust cases, the ratio should typically be much less than 9. One exception, first articulated in an opinion by Judge Posner, is when compensatory damages to each person harmed are very low, while the total harm may be large because many persons suffer small loses. In these cases, it would be desirable to raise the punitive-compensatory ratio to encourage lawsuits to discourage the behavior that produced these harms. Excessive litigation in the United States creates inefficient defensive practices by doctors and others, and sometimes destroys good companies, as in the asbestos litigation, and perhaps now in the looming Vioxx class action suits against Merck. Litigation against doctors and others is justified when they could have but did not take sufficient care to insure safety, if they lied, or if they withheld evidence about safety. In these cases, doctors and producers should be responsible because they have much easier access to the relevant information than do patients and consumers. On the other hand, consumers should bear responsibility for their actions when they could have easily prevented the damage. The MacDonald’s customer who drove with hot coffee on her lap should not have won her lawsuit, and perhaps should have been forced to pay at least some of MacDonald’s legal expenses. Similarly, parents who carelessly allow their children access to dangerous medicines should be responsible, not the manufacturer of medicine bottles. In many cases there is reasonable doubt as to whether patients or doctors, consumers or producers, could more readily have avoided the harm. I believe in these cases there should be a presumption toward “caveat emptor”- buyer beware. A bias toward buyer beware when there is considerable doubt about who could have more readily avoided the damages would cut out much useless and costly litigation without discouraging the justified cases where there is negligence, fraud, or information suppression by doctors, drivers, producers, and others.

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