The Magazine

A Big Fat Jury Verdict

Trial lawyers aren't the only problem with the tort system.

Jun 14, 2004, Vol. 9, No. 38 • By WILLIAM TUCKER
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IN LATE APRIL, a Beaumont, Texas, jury voted to award $1 billion to the family of a plaintiff who allegedly lost her life as a result of taking fen-phen, a drug combination popular among dieters in the 1990s before it was linked to heart-valve damage. The woman, who was morbidly obese and whose family had a history of heart problems, took fen-phen for five months in 1997 before Wyeth Laboratories, the losers in the lawsuit, withdrew their drug Pondimin (the "fen" half of the combo) from the market. She also took four other diet drugs before being diagnosed with hypertension in 2002.

John O'Quinn, the Elmer Gantry of Texas tort law, preached to the jury that Wyeth had "acted with malice in marketing of this drug by putting its making of money ahead of human life and safety." The jury awarded more than $113 million in compensatory damages and tacked on $900 million in punitive damages.

The verdict will probably be knocked down to something more reasonable--say $50 million. Wyeth has set up a $3.75 billion trust fund to accommodate the victims of fen-phen, but 75,000 people have already opted out of the class action and intend to sue separately. The idea that one victim with a good lawyer will walk away with about $1 billion of that pool is a little impractical. The verdict blatantly violates a Texas statute that says punitive damages can only double compensatory damages. But Texas courts--which have made suing major corporations a cottage industry--aren't paying much attention. Indeed, the trial judge upheld the award.

What the verdict did emphasize is something that is inching towards becoming a consensus among experts--juries that hand down such mind-boggling damage awards have no idea what they're doing. The most dramatic research has been assembled by University of Chicago professors Cass Sunstein and Reid Hastie, working with a team that included Nobel Prize winner Daniel Kahneman of Princeton and David Schkade of the University of Texas, and was published a couple of years ago as Punitive Damages: How Juries Decide (University of Chicago Press, 2002). Sunstein presented their findings at an April 28 conference on punitive damages in Washington sponsored by the U.S. Chamber of Commerce.

The book includes several studies involving more than 8,000 jury-eligible citizens in Illinois, Colorado, Texas, Arizona, and Nevada. In one study, "jurors," who were paid for their time, were brought together in small groups over the course of five years for what amounted to mock trials. They were presented with evidence and jury instructions from a series of actual courtroom cases and asked to reach a verdict in two ways. They were asked to both rank the culpability of the defendant on a scale from zero to six, and to assign a dollar value in punitive damages that would reflect the degree of culpability.

"The responses to the first question are extraordinarily uniform across the board," says Sunstein. "The correlation is about .99," which is to say almost unanimous. "Race, sex, economic class--it makes absolutely no difference. We attribute this remarkable degree of consensus to shared cultural standards in judging responsibility for social conduct."

When it came to assigning dollar amounts that reflect this culpability, however, the results were all over the lot. "There's a slight bell curve but it's skewed far to the right," meaning toward higher awards, says Schkade. "The figures ranged anywhere from a few thousand to hundreds of millions. People were obviously making a stab in the dark."

Sunstein says these findings duplicate psychological results going back to the 1950s, where people were asked to perform a simple task like evaluating the brightness of a light or the loudness of a noise. "If you give people a scale from zero to ten, they come up with very uniform results," he says. "But if you give them a scale from zero to infinity with no further explanation, the consensus falls apart. It's called 'scaling without a modulus.' People need an anchor to have their evaluation make sense.

"All this undermines the populist credentials of juries when it comes to assigning punitive damages," he says. "When you ask a group of people to pick a number between one and infinity without any reference to what other juries have awarded in similar situations, you're not matching human capabilities to the demand of the task."

Sunstein and his coauthors assumed that juries would settle on an award amount in the manner of Olympic gymnastics judges--with the highs and lows thrown out and the group deciding on something in the middle. "In each case, we presumed that the median juror would represent the entire group's decision," says Sunstein. But the results were otherwise. In 500 deliberations, conducted with 3,000 jurors, "We found that, on average, where jurors found a high degree of reprehensibility, the jury was more punitive than its median member. Where perceived guilt was low, on the other hand, the jury was less punitive than its median member."

Most stunning was this: In 17 percent of the cases where punitive damages were awarded, the group settled for the highest dollar award chosen by any juror; in 10 percent they reached a number higher than any individual juror had originally chosen. "The essential problems are compounded rather than alleviated by jury deliberations," says Sunstein.

The researchers found three other factors that help explain the jury's decision: (1) juries will give larger awards to plaintiffs who are viewed as "local"; (2) juries will give higher awards when the defendants are viewed as having a lot of money; and (3) juries will give higher awards when the plaintiff attorney asks for higher amounts. The last is particularly significant. It suggests that, in the no man's land of punitive damages, plaintiff attorneys can "anchor" the jury's thinking simply by asking for outlandish amounts. In one trial, simply tripling the plaintiff's request from $50 million to $150 million raised the award by $35 million.

All this goes a long way toward explaining what is going on in American courtrooms. Tort reformers now generally agree that rationalizing punitive damages would help curb the Wild West anarchy of jury verdicts. "What's happened is the civil courts have essentially taken over what is supposed to be a punitive function," says Walter E. Dellinger III, professor at Duke University Law School. "Yet at the same time, most of the protections afforded to criminal defendants by the Constitution have not been carried over for civil defendants."

One of the most obvious is the Eighth Amendment's prohibition of "excessive fines." In a highly controversial decision, the Supreme Court decided in 1989 that the Eighth Amendment does not protect civil defendants because punitive damages--even though they might stretch into the billions--do not constitute "fines." In State Farm v. Campbell, the Court did decide, however, that punitive damages could be regulated under the more ambiguous Fourteenth Amendment. The justices further suggested that punitive damages should not exceed compensatory damages by a factor of 9 to 1--which would still make the fen-phen verdict permissible.

The real question is whether juries should be picking these numbers at all--at least without some kind of statutory guideline. "When someone is convicted of armed robbery, we don't say to the jury, 'All right, how many years do you think they should serve? Pick a number between 1 and 80,'" says Dellinger. "We have statutory sentencing and then the judge decides."

Trial lawyers, of course, will go to the mat to protect their right to charm a jury. "Punitive damages are delivered in only 5 percent of all cases," says Thomas Goldstein, a Washington attorney who argued State Farm before the Supreme Court. "Frankly I can't see where there's any crisis at all."

But with jury verdicts becoming a billion-dollar lottery, others are likely to feel that the time has come to act.

William Tucker is a fellow at the Discovery Institute. His book on trial lawyers, Civil Lynchings, will be published next year.