Simple Solution to the Not-So-Simple Problem of Tort Reform

WHATEVER happened to tort reform? Sabotaged, no doubt, by the threat of filibusters and presidential vetoes - showing how difficult it is to craft a sensible and acceptable tort-reform package. Tort reform is dead, at least in the 40th Congress.

But there's a simple solution.

Reformers on the right want to place stringent limits on the size of awards for punitive damages. They worry about the proliferation of frivolous lawsuits and the tendency of juries to come up with over-the-top awards. It's a reasonable concern. Who would deny that our society is too litigious and some awards are offensive and outlandish? Limiting the size of punitive-damage awards would remove almost all incentive for mounting frivolous suits without compromising the opportunity to sue for real damages.

Opponents worry about the practical problems of individuals trying to bring legal action against large, powerful corporations with comparatively unlimited resources. A cap on punitive damages also would mean little or no punishment for civil offenses - making it difficult, if not impossible, to hold firms accountable for negligence or incompetence.

Few would be comfortable knowing that tort reform, combined with reductions in government regulation of private enterprise, would leave businesses largely free to do whatever they wanted, provided they don't commit crimes and they willingly pay for some of the specific and demonstrable damages they are responsible for.

Both sets of concerns, however, could be addressed by this simple proposal: Permit lawsuits to proceed as before with no limit on the size of punitive-damage awards, but require that all such awards - above $250,000 for example - be paid not to the plaintiff but to the government as a fine.

Under such a proposal, plaintiffs would not hope to enrich themselves through the legal process. Though the incentive for frivolous suits would virtually disappear, individuals would still have ample opportunities to initiate legal action to recover for true damages. Juries also could continue to sock it to businesses that have caused avoidable harm.

Such juries would understand that forcing large companies to pay only for actual damages often doesn't constitute a sufficient deterrent to negligence or incompetence. Indeed, one can imagine that the size of punitive awards might even increase, because juries would know that such awards would no longer make some individuals arbitrarily rich. The money would go into public coffers, benefiting us all.

Of course, corporations would not be very supportive. The public, on the other hand, would like it a great deal.

Punishments would be assessed not by a government bureaucrat or elected official beholden to corporate contributors, but by ordinary men and women who make up juries in civil cases. What could be more in keeping with the spirit of democracy - with the populist spirit of the Contract With America - than that?

One can imagine a technical objection: To make punitive damages payable as fines to the government might inappropriately mix civil and criminal actions. Yet there is nothing in civil law that prohibits the assessment of fines, and my guess is that there's nothing to prevent those fines from being reconceptualized as, say, fees or taxes.

Would the proposal undermine the incentive of plaintiffs' attorneys to pursue cases with sufficient enthusiasm? I see nothing to debar a provision that would allow law firms to continue to receive a percentage of the entire award, including the portion that would go to the government as a fine - perhaps with a restrictive cap on fees that would rule out outrageous windfalls for lawyers.

Indeed, the only genuine objection to the proposal would be that big business wouldn't like it. But this would help distinguish true reformers from frauds. Tort-reform advocates who would oppose this kind of proposal would prove themselves servants of big-business interests rather than of the public interest.