The Jury Keeps Its Big StickTim Smart
Even for execs used to costly jury verdicts, the ruling was a stunner. On Mar. 4, the U. S. Supreme Court said it wouldn't rescue business from soaring punitive damage awards. Written by Justice Harry A. Blackmun, the 7-1 ruling upheld a $1 million award to an Alabama woman who suffered only $4,000 in insurance-fraud losses.
With little prospect of congressional help, business faces a costly and drawn-out battle in the states. Limiting damage awards will require trench warfare in scores of state legislatures, where trial lawyers wield heavy political clout. "I don't underestimate the difficulty of the battle," says Stephen Bokat, counsel for the U. S. Chamber of Commerce.
More than 24 states are now mulling limits. Key fights are expected in Texas, Pennsylvania, and New York. In Texas, business hopes to fare better than in 1989, when a broad product-liability bill passed the House but failed in the Senate. A Pennsylvania bill to limit manufacturers' liability, which lost by four votes last fall, is being pushed again this year. And New York's Business Council is lobbying to reduce the bills of defendants who are held less than 50% responsible for damages.
In upholding the $1 million award against Pacific Mutual Life Insurance Co., the court rejected arguments that the absence of strict jury guidelines violates the right to due process. The court "is sending a decision to those who make unsafe products and who defraud consumers," says Michael Maher, president of the Association of Trial Lawyers.
One survey of 1990 jury awards found over 600 awards of $1 million or more. Appeals often cut or reverse such awards, but they also scare other companies into settling. So expect to see the battle over jury awards get bloodier.