NCPA - National Center for Policy Analysis

Will Supreme Court Restore Proportionality in Damage Awards?

December 11, 2002

Today the U.S. Supreme Court hears oral arguments in Campbell v. State Farm - a case the Supreme Court of Utah allowed, involving $1 million in compensatory damages and a $145 million judgment in punitive damages.

The case presents the court an opportunity to slap down outrageous punitive damages and replace them with damages proportional to actual harm done the plaintiff.

Legal scholars contend America's tort system has become one of the most costly and inefficient methods of dispute resolution in the world -- raising the cost of goods and services while reducing the availability of important products in the market place.

  • All told, the legal system's direct costs are more than $180 billion annually -- amounting to roughly 2 percent of gross domestic product.
  • Furthermore, less than half of the money spent on tort litigation goes toward actual compensation.
  • The bulk of the costs are administrative and legal fees.
  • The court took up the same subject earlier in Gore v. BMW -- reversing a judgment of $4 million in punitive damages for a $4,000 paint job.

Finding the punitive damages excessive in that case, the court recommended establishing a proportionality between compensatory and punitive damages.

Source: C. Boyden Gray (Citizens for a Sound Economy), "Damage Control," Wall Street Journal, December 11, 2002.


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