NCPA - National Center for Policy Analysis

Alabama Adopts Tort Reform

June 2, 1999

For decades, Alabama has been infamous for its outlandish jury awards to plaintiffs. That now appears to be a thing of the past as the state overhauls its civil liability system -- long a goal of business owners. The state's legislature has passed legislation placing a ceiling on punitive damages awarded by juries. The bill is scheduled to be signed by the governor next week.

The straw which broke the camel's back was an award of $581 million to a family which had been overcharged $1,200 in the purchase of two satellite dishes.

  • The bill limits punitive damages in noninjury cases against large businesses to three times the compensatory damages, or $500,000 -- whichever is greater.
  • For verdicts against small businesses, the limits are $50,000 or 10 percent of the business's net worth -- whichever is greater.
  • In cases involving an injury, the caps are the greater of three times the compensatory damages or $1.5 million.
  • Alabama becomes the 23rd state to enact such caps.

Apparently, the award in the satellite-purchase case forced even lawyers to admit the need for reforms. The president of the Alabama Trial Lawyers Association said the size of that award provided the incentive both sides needed for an agreement. But he said he was pleased that caps were not placed on awards in wrongful-death cases or on claims of mental anguish.

The legislature earlier passed a bill limiting "jury shopping" -- in which plaintiffs filed cases in rural counties known for large verdicts, and a bill making it harder to get a case certified as a class action.

Observers say that the matter of outrageous awards had become the most contentious political issue in the state. The business community had argued that countless firms had avoided moving to Alabama in fear of being slapped with a crushing verdict.

Source: David Firestone, "Alabama Acts to Limit Huge Jury Awards," New York Times, June 3, 1999.


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