| Tortes, Not Torts |
14 April 2003
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Tort Reform On the Way, Maybe
After baseball, the American pastime is litigation. In part, this is because Americans lack the centuries of common customs that many cultures have for conflict resolution. However, it is also partially due to the legal system in the US that has allowed punitive damages, those over and above actual economic losses suffered, to metastasize. Punishment should not enrich the other side.
According to Lord Levene, the chairman of Lloyd's of London, this system costs is the equivalent of a 5% tax on wages. As with any tax, it takes some of the steam out economic activity, but unlike a proper tax, it leaves the government with no extra funds because the successful party to the lawsuit receives the punitive damages, with the lawyer getting 30-40% of that.
What is wrong with this system is the payment of a fine, regardless of the legal terminology used to describe it, to a private party. Plaintiffs are paid, quite handsomely, for all economic losses. Punitive damages exist to punish the tortfeasor, which certainly should be done. Yet, one fails to see why the beneficiary of this payment should not be the civil authorities since the injured party has already received its due recompense.
Juries, of course, are less likely to award multi-millions or even billions in punitive damages if the government will receive the funds. The significance of this cannot be over-stated. Jury awards are constantly lowered on appeal because the jury hands out huge amounts to make the little guy rich.
The change is simple -- give the government all punitive damages and exempt them from any fee earned by contingency-based lawyering. One can hear the ABA squealing already.