Former Illinois Sen. Everett McKinley Dirksen reportedly said of the sums generated by the federal government, “A billion here, a billion there and pretty soon you’re talking about real money.” The almost $145 billion in punitive damages returned by the six-person jury in the Florida tobacco case is real money in anybody’s book. The $5 billion in the Exxon Valdez oil spill and the $2.7 million in the McDonald’s hot-coffee case now are small change by comparison.
The class of plaintiffs who will receive chunks of the Florida award is estimated between 300,000 and 700,000 smokers. That comes on a pro rata basis to about $483,000 each at the lower class estimate and about $207,142 each at the higher estimate. And this is over and above what Florida law will compensate each plaintiff for his or her injuries.
Because this judge-made common law has few limits, the U.S. Supreme Court four years ago held that a $2 million Alabama verdict for a fraudulently repainted BMW automobile violated the due-process clause of the Constitution. Part of the reason was that the $2 million was 500 times more than the actual damage and bore no reasonable relationship to it. The Supreme Court also compared the punitive damage award with the maximum civil or criminal penalty that could have been imposed. The maximum penalty of $2,000 under the Deceptive Trade Practice Act of Alabama was glaringly less than the $2 million awarded for a touched-up BMW falsely sold as new.
In the Florida tobacco industry case the $145 billion was awarded after only three lead plaintiffs proved their actual harm of almost $12.7 million. That means a widely divergent estimate of anywhere from about 297,000 to 697,000 smokers in the class action have yet to prove actual damages.
This awarding of punitive damages without knowing the actual damage is unprecedented. If 500 times a known actual damage was unconstitutional, how can it be constitutional to exact $145 billion before determining the actual harm to each member of the class? Not every smoker suffered the same kind of injury. And if Florida can do this, what is to prevent mega-class actions in each of the remaining 49 states? A mega-billion here, a mega-billion there, and you’re talking real punishment, annihilation.
Punitive damages arguably serve a valuable function in supplementing the criminal law. Realistically, it is exceedingly rare for state prosecutors to pursue criminal actions against multinational corporations and their high-powered executives.
But punitive damages also come with a striking difference. If the tobacco companies had been fined criminally a Florida governmental entity would have received the fine on behalf of the public. But because this $147 billion is a punitive damage award in a civil case brought by a private party, the law of most states allows the plaintiffs to keep the entire award. They keep it even though they will also be fully compensated under state law for their actual injuries.
It is true some states have worked out their own deal with the tobacco companies. But this is not typical of cases where punitive damages are awarded. A better solution is a recent reform movement which allows plaintiffs to keep a percentage of the punitive damages to reward them for their efforts on behalf of the common good. The rest goes to state or local government for public purposes.
Punitive damages have a role to play. Prosecutors simply lack the motivation, the resources and the manpower to prosecute every criminal case. But that role is to punish defendants for harm to the general society and to deter others from doing likewise. This is a public goal and not a private one.
Imagine what some of that $145 billion could do in Florida if it were earmarked for improvement of the court, mental health or educational systems. It might even mean less in taxes. It sure would supplement Gov. Jeb Bush’s measly executive budget of $49.8 billion.
