Capping Jury Awards in Civil Cases

Some months ago, I published a piece with this title in the Dallas Business Journal. It contained the following text:

 “The move to put caps on awards is justified as a way “to put an end to frivolous lawsuits that are forcing doctors in Texas out of business.” Even if “frivolous medical malpractice lawsuits cost the health care system $1 million a day,”  capping malpractice awards won’t reduce their number, for lawsuits that convince a jury to award huge amounts cannot be considered “frivolous.” If such suits were frivolous, what would a serious lawsuit be?

Second, law firms are private businesses, that derive their income from most civil suits by charging a percentage of the award. If the awards are capped, law firms’ incomes will be reduced and that can only encourage such firms to file more rather than fewer lawsuits.

If there are frivolous lawsuits in the system, many of them surely are the appeals of jury awards made by defendants who have lost their cases. The only reason these appeals are filed is that the defendants know that our appeals-court judges are apt to reduce the amounts awarded. And that is a practice which also makes no logical sense and reveals the disingenuousness of our judicial system.

Judges are often disinclined to overturn a jury verdict in a criminal case, because the jury not only heard the evidence but also observed the behavior of the witnesses which often conveys information about their credibility. But jurors in civil cases are selected from the very same jury pool which jurors in criminal cases come from, and civil and criminal juries hear evidence in identical ways. So no judge can logically be inclined to overturn a civil award and also be disinclined to overturn criminal sentences. The only difference in the two types of cases is the standing of the defendants. The defendants in civil cases are quite often big contributors to political campaigns, while those in criminal cases are not.

So the upshot of all of this is that if you give this movement the analysis it deserves, the only conclusion that can be drawn is that the movement is really aimed at paying off insurance companies for their political contributions.

But people have a way of outwitting the system, and capping awards may be a cure that turns out to be worse than the disease. Just ask yourself what will happen when juries understand what is going on and begin awarding all plaintiffs maximum amounts? What will the legislators, judges, and insurance companies say then?”

Well, the onslaught has begun.

The Economist (August 13, 2005) has a piece entitled,, “A blazing summer,” which says this:

“America’s new Class Action Fairness Act seeks to curb frivolous class-action lawsuits. . . . But before companies declare victory, they should reflect that the law of unintended consequences can sometimes be stronger than the law itself. The Private Securities Litigation Reform Act of 1995 was meant to curb frivolous class-action suits within the field of securities law. But in forcing class-action lawyers to raise their game, it has contributed to a new era of big lawsuits and even bigger settlements.

Total settlements swelled from $145m in 1997 (in 2004 dollars) to $5.5 billion last year, while the number of lawsuits stayed roughly constant. . . .”

What’s the old aphoristic advice? “Be careful what you wish for, for when you get it, it may not be what you want.”