Ten-Digit Damages Awards Receding
An American court for Escambia County in Florida has recently (18 July 2014) found a tobacco company liable for USD 3.6 billion in punitive damages to the widowed wife of a smoker. Rulings such as this invite discussion of whether they leave the American judicature any richer and, if so, then if legal mechanisms enabling such awards might be transplanted to the legal systems of other countreis, such as Poland.
Spectacular awards such as the one just mentioned provide textbook studies in the relative advantages and disadvantages of the American approach to punitive damages. The underlying rationale of punitive damages is that, true to their name, they should punish the tortfeasor as well as serving a general as well as specific preventive function. At the same time, exorbitant sums such as this give rise to doubts from the perspective of the American Constitution as well as from that of safeguardhe rights of the defendants to due legal process and of basic equity. The sum awarded by the Florida court to Cynthia Robinson from R.J. Reynolds Tobacco Co. certainly meets the criteria of repressiveness and prevention, but whether or not awarding to a single individual an amount corresponsing to almost 30% of the annual budget of Poland (this in addition to “classic” damages in excess of USD 16 million) is rationally justified remains an open question.
A change of direction
While legal scholars trace the origins of punitive damages to as far back as 1763, the real bourgeoning of this legal institution came in the 20th century, in response to what some saw as rampant disregard of human life and limb by big business in its quest for profit. The record-breaking punitive damages award of USD 145 billion was given by a Miami court in 2000 in Engle v. Liggett Group, a case which also involved Cynthia Robinson as one of the thousands of smokers seeking damages in a class action lawsuit first brought in 1994. When the Supreme Court for the State of Florida quashed the 2000 award on appeal in 2006, Ms Robinson proceeded to bring an individual suit. These awards, while indubitably spectacular, are only two among many where punitive damages ran into the billions of dollars, exceeding the actual harm suffered by the plaintiff by thousands of percent. In fact, it is this disproportion which has been triggering a certain evolution.
Beginning in the 1990s, momentum towards somehow reducing punitive damages has been building up in the United States. Some American jurisdictions (e.g. New Jersey, Virginia, and Georgia) have instituted caps on punitive damages figures allowed under their state laws. Congress, in its turn, has instituted similar caps for certain types of claims at the federal level. The gradually shifting lines of Supreme Court authority are especially interesting. First off, the Supreme Court subjected punitive damage awards to the due proces clause provided for in the constitutional amendments (Pacific Mutual v. Haslip, 1991). It then laid down criteria for assessment of punitive damages figures (BMW v. Gore, 1996); finally, the American Supreme Court held that punitive damages exceeding ten times the ordinary damages can be defended as constitutional in isolated instances only.
The evolution outlined above means that Cynthia Robinson’s happiness at her success in court may turn out to be premature. Moreover, it casts the entire institution of punitive damages in a new light, one which reveals potential applicability within the legal system of, say, Poland.
The debate in Poland
On many occasions, Polish lawyers have argued that the possibility of imposing sanctions of a declaredly repressive character would be incompatible with the very foundations of the Polish legal system (Polish Supreme Court decision of 11 October 2013, case ref I CSK 697/13). Yet certain Polish laws do provide for mechanisms broadly analogous to punitive damages, for instance art 76.1.6 of the Copyright Law, art 18.1.2 of the legislative Act regarding counteraction of unfair competition, or art 24 of the Civil Code. As compared with the American rules, the key difference is that, in Poland, any punitive damages are awarded to a social or charitable cause (usually specified by the plaintiff) rather than to the plaintiff herself; in other words, when repressive measures are applied to a business enterprise guilty of violating the public interest through its commissions or omissions, the moneys thus extracted from the offending enterprise benefit society at large, not the individual plaintiff who brought the suit. Yet this point does not allay all the doubts associated with the repressive aspect of such sanctions, such as those relating to the fact that civil legal proces does not have the same integrated safeguards and guarantees as criminal process.
It is here that American legal doctrine may be of assistance. The doubts referred to above may be obviated by way of measures such as capping damage awards and formulating minimum requirements which must be met when assessing their value. Well-considered solutions in this regard would make for a useful complement to the range of civil sanctions currently available.
If we accept the presumption that punitive damages credited to a charitable purpose would contribute to protecting socjety at large from deliberate torts (such as in the context of liability for unsafe products) and to safeguarding collective consumer interests, a mechanism of the sort discussed above would augment the current mechanisms regulating class action lawsuits in Poland in a welcome way. As it is right now, Polish law – for reasons unexplained – does not provide for making an example of rogue business enterprises occasioning detriment to thousands of consumers through deliberate actions. If such unscrupulous businesses faced the spectre of punitive damages, the might be more willing to settle with aggrieved customers. Some sort of punitive damages mechanism might also serve a broader preventive function, focusing corporate minds on questions of due care and skill. Finally, well-devised changes concerning punitive damages might improve the standing of class action suits… Application of the punitive damages mechanism offers many possibilities and, as such, merits further discussion.
Legal commentators seem to be of the opinion that the award for Cynthia Robinson will not stand on further appeal. This case may be taken as an example of how the American legal system aims to balance the interests of both parties in a dispute by way of trial and error, with punitive damages in the background. Given certain modifications, the mechanism perfected by way of such evolution may be of use also in Poland.