The idea behind punitive damages is supposed to be — as the name implies — to punish those whose actions were so reckless and irresponsible that simply compensating their victims is insufficient. But somewhere along the way, the concept got reversed, and punitive damages became a reward for those people who were injured by "willful, wanton, or reckless conduct," as state law calls it — as opposed to those who suffered the very same injury at the hands of someone who was merely careless. If the person who injured you was a really bad guy, you hit the jackpot; if not, you're doubly out of luck.
The bill the S.C. House passed last month in the name of "tort reform" does nothing to set the system right, and in fact it has the potential in some cases to diminish what little punitive effect punitive damages have.
Yes, I realize that returning the system to the original concept wasn't the purpose of the House bill. The purpose of the House bill was to reduce the cost - or, more frequently, the potential cost - of doing business in South Carolina. To remove one more excuse companies might have for moving to states with better school systems and healthier populations and more livable communities than ours. (Hint: Although our state surely needs some short-term strategies for attracting businesses, and although there is room to improve our tort laws, the key to long-term economic development lies in that last sentence.)
But if you're going to try to fix a broken system, why not actually fix it?
Why not eliminate the lottery aspect of punitive damage awards, while maintaining at least their potential to punish where punishment is warranted?
Punishment for wrongdoing, we might want to remember, is not the business of individuals. It is the business of the government. In fact, one reason we have government is to eliminate the need for vigilante justice.
When the state assesses fines and fees as part of the punishment for criminal wrongdoing, it doesn't turn the money over to the victims. So why, when a judge or jury assesses punitive damages against a business or individual for wrongdoing in a civil suit, should the money go to the victim? Why shouldn't it go to the government, just like those criminal fines?
Frankly, there shouldn't even be a place for punitive damages in civil law; anyone who does something that deserves punishment should be punished, by the state, through criminal law or administrative penalties. But that's an even bigger flaw in our system of justice, and one that's so big - and expensive to correct - that it's probably not practical to even think about addressing it.
The idea of awarding punitive damages entirely or mostly to the state makes sense first and foremost simply because it makes sense. But shifting to this approach would have the secondary benefit of changing the way juries look at punitive damages - not as a way to give a windfall to someone jurors feel sorry for (compensatory damages are supposed to cover the cost of actual harm done to the plaintiff; if they don't, then we need to fix that problem) but as a way to punish for and deter future bad behavior.
Trial lawyers say the potential for punitive damages is the only thing that makes it worth their time to pursue the cases most likely to produce them. Fair enough. They still should receive some portion of any punitive damages, as payment for the work that they are doing in effect on behalf of the state; but the state can and should establish what that percentage will be. (If the attorney doesn't like the deal, or if the injured party doesn't like the thought of her attorney working on behalf of the state, there's an obvious, if curt, solution: Don't seek punitive damages.)
I don't particularly like arbitrary limits on anything, but I do respect the business argument for them (that businesses need to be able to have some idea of their maximum exposure, and plan accordingly) as well as the economic development argument (if all your competition has caps, you need to have them as well).
The problem with the House's $350,000 limit on punitive damages is that its effect is grossly uneven - and so its punitive effect is grossly uneven. A $350,000 award truly is punitive to a mom-and-pop retailer that's barely able to generate enough revenue to pay mom and pop a living wage; for a multi-national corporation, it's a cost of doing business - no different than liability insurance or office supplies.
The House bill does set an alternative cap, of three times the actual damages, and that has the advantage of creating some nexus between the damage done and the punishment. But it still punishes a small business much more than a large business for the very same behavior.
Fixing that problem requires far less of a change than the first: The cap on punitive damages should be a percentage of a defendant's revenue or assets rather than some arbitrary, fixed amount that disregards the size of the defendant company. Making that simple change to the House's bill could make it at least tolerable. Making both changes would transform this into smart legislation.