Corporations Don’t Behave Unless You Make Them Behave
A case that began about negligent contamination of rice with genetically modified rice ended with the Supreme Court of the State of Arkansas striking down a legislative “Cap,” or limit, on punitive damages. The Cap was approved by the State’s General Assembly in 2003, but the Court’s Ruling concluded that this Cap conflicted with the State’s Constitutional Prohibition on the General Assembly’s ability to enact laws limiting the amount Plaintiffs can recover for tortuous acts.
Obviously, the Arkansas State Supreme Court got it right. Any Court that invalidates attempts to usurp the function of a jury gets its right. I can’t comment on how the Arkansas State Constitution would read in comparison with that of New Jersey, but I can tell you this: New Jersey has a Cap on punitive damages and as far as I know, there has never been a challenge that the Cap is unconstitutional.
It is, however, unconstitutional. Why?
If you’ve been reading my Blog for any length of time, you know who I am, what I do and how I feel about the propensity of institutions (such as corporations) to act morally and correctly without a hammer ready to crack them on the skull if they don’t. The fact remains that corporations are a paper construct in American Law. They are an abomination before all that is right and proper. They insulate from personal responsibility the directors and employees of the corporation because no matter what wrong they do, they do it “in the name” of the corporations’ profit and that alleviates from all moral (and usually legal) responsibility for what they do in pursuit of money.
If we threw CEO’s of corporations that went into Bankruptcy in Jail, we’d have fewer Bankruptcies. If we threw CEO’s of corporations that made products that harmed or killed, we’d have safer products. But we don’t. We think that would be “bad,” because somehow, the right of the corporation to strive for profits above all moral, ethical and other considerations is a hallmark of the American economy.
So how do we balance that hallmark in Court?
It starts, and ends, with you, regular people, serving on juries.
Juries have the right to “punish” wrong actors. Just because someone does something negligently doesn’t mean the punitive damages happened. They are not allowed to happen when someone only does something “careless.” On the other hand, when someone does something recklessly or intentionally to cause harm, especially when they do it in the name of dollars over fairness, morality or fundamental justice, then punitive damages may be awarded by a jury to deter that conduct in the future.
Do you really think that the people responsible for the debacles at AT&T, Enron, Tyco, WorldCom, and other companies would do the right thing simply out of a moral responsibility to do it? Of course not. They do the right thing only when they fear the consequences if they don’t.
Punitive damages deliver that fear. They represent a stabilizing influence on what would otherwise be a runaway fascist economy run by corporations without any checks and balances. Just because a corporation is made to compensate someone that they harm doesn’t mean that the corporation hasn’t profited by the harm. Corporations often do calculations to decide how many people it can harm, how much it will cost in the occasional lawsuit, and how much more profit they will make than that cost. Thus, they decide to do the harm anyway.
Punitive damages make the corporations afraid that there will be an unintended and immeasurable consequence if they do wrong and so they don’t do wrong.
Or at least, that is how the theory goes.
At Costello & Mains, we applaud the Arkansas Supreme Court and call upon New Jersey’s Legislature to eliminate its Cap or upon the Courts to eliminate the Cap as unconstitutional. I don’t know that it will happen, but it ought to, because the power currently, at least for now, and should always, belong to the people who sit on juries, not to the Judges and Legislatures.
That is how we see it.