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POTENTIAL CONGRESSIONAL RESPONSES TO THE

SUPREME COURT’S DECISION IN STATE FARM

MUTUAL AUTOMOBILE INS. CO. V. CAMPBELL:

CHECKING AND BALANCING PUNITIVE DAMAGES

HEARING

BEFORE THE

SUBCOMMITTEE ON THE CONSTITUTION

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

SEPTEMBER 23, 2003

Serial No. 48

Printed for the use of the Committee on the Judiciary

(

Available via the World Wide Web: http://www.house.gov/judiciary 
(II)

COMMITTEE ON THE JUDICIARY 

F. JAMES SENSENBRENNER, JR., Wisconsin, Chairman 

HENRY J. HYDE, Illinois 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

WILLIAM L. JENKINS, Tennessee 

CHRIS CANNON, Utah 

SPENCER BACHUS, Alabama 

JOHN N. HOSTETTLER, Indiana 

MARK GREEN, Wisconsin 

RIC KELLER, Florida 

MELISSA A. HART, Pennsylvania 

JEFF FLAKE, Arizona 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

JOHN R. CARTER, Texas 

TOM FEENEY, Florida 

MARSHA BLACKBURN, Tennessee 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California

PHILIP G. KIKO, Chief of Staff-General Counsel 

PERRY H. APELBAUM, Minority Chief Counsel 

SUBCOMMITTEE ON THE CONSTITUTION

STEVE CHABOT, Ohio, Chairman

STEVE KING, Iowa 

WILLIAM L. JENKINS, Tennessee 

SPENCER BACHUS, Alabama 

JOHN N. HOSTETTLER, Indiana 

MELISSA A. HART, Pennsylvania 

TOM FEENEY, Florida 

J. RANDY FORBES, Virginia 

JERROLD NADLER, New York 

JOHN CONYERS, JR., Michigan 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ADAM B. SCHIFF, California

CRYSTAL M. ROBERTS, Chief Counsel 

PAUL B. TAYLOR, Counsel 

MINDY BARRY, Full Committee Counsel 

DAVID LACHMANN, Minority Professional Staff Member 
(III)

C O N T E N T S 

SEPTEMBER 23, 2003

OPENING STATEMENT 

Page 

The Honorable Steve Chabot, a Representative in Congress From the State 

of Ohio, and Chairman, Subcommittee on the Constitution ............................ 1

The Honorable Jerrold Nadler, a Representative in Congress From the State 

of New York, and Ranking Member, Subcommittee on the Constitution ....... 2

WITNESSES 

Mr. David Owen, Carolina Distinguished Professor of Law and Director of 

the Office of Tort Law Studies at the University of South Carolina 

Oral Testimony ..................................................................................................... 5

Prepared Statement ............................................................................................. 7

Mr. Robert Peck, President, Center for Constitutional Litigation 

Oral Testimony ..................................................................................................... 32

Prepared Statement ............................................................................................. 34

Mr. Victor Schwartz, Shook, Hardy & Bacon 

Oral Testimony ..................................................................................................... 42

Prepared Statement ............................................................................................. 44

APPENDIX 

STATEMENTS SUBMITTED FOR THE HEARING RECORD

Statement by the Honorable Steve King, a Representative in Congress From 

the State of Iowa .................................................................................................. 83

Statement by the Honorable John Conyers, a Representative in Congress 

From the State of Michigan ................................................................................ 83

MATERIAL SUBMITTED FOR THE HEARING RECORD

Materials submitted by Victor Schwartz ............................................................... 85

Materials submitted by the Honorable Jerrold Nadler, a Representative in 

Congress From the State of New York, and Ranking Member, Subcommittee on the Constitution ............................................................................ 209

(1)

POTENTIAL CONGRESSIONAL RESPONSES TO 

THE SUPREME COURT’S DECISION IN STATE 

FARM MUTUAL AUTOMOBILE INS. CO. V. 

CAMPBELL: CHECKING AND BALANCING PUNITIVE DAMAGES 

TUESDAY, SEPTEMBER 23, 2003

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON THE CONSTITUTION, COMMITTEE ON THE JUDICIARY, Washington, DC 

The Subcommittee met, pursuant to call, at 2:05 p.m., in Room 

2141, Rayburn House Office Building, Hon. Steve Chabot [Chairman of the Subcommittee] presiding. 

Mr. CHABOT. Good afternoon. This is the Subcommittee on the 

Constitution. I am Steve Chabot, the Chairman. This afternoon’s 

hearing is concerning the issue of punitive damages. 

I will begin by making an opening statement. If one of our Democratic colleagues gets here, they will have an opportunity to do that 

as well; and then we will introduce our panel. 

The United States Supreme Court noted in 1974 that, ‘‘Juries assess punitive damages in wholly unpredictable amounts bearing no 

necessary relation to the actual harm caused.’’ Until 1976, there were only three reported appellate court decisions upholding awards of punitive damages in product liability 

cases, and the punitive damages awarded in each case was modest 

in proportion to the compensatory damage award. Then, in the late 

1970’s and 1980’s, the size of punitive damage awards increased 

dramatically. The advent of mass tort litigation led to an increase 

in punitive damages claims against manufactures, including the 

possibility of repeated imposition of punitive awards for essentially 

the same conduct. Along with these changes came a dramatic increase in the size and frequency of punitive awards. 

Today juries have awarded punitive damages against companies 

in amounts exceeding a hundred billion dollars, well in excess of 

the gross domestic products of many industrialized nations. These 

enormous punitive damage awards have greatly enriched the personal injury industry, which a report released today by the Manhattan Institute Center for Legal Policy calls Trial Lawyers Inc. 

That report shows that Trial Lawyers Inc. rakes in almost $40 billion a year in revenues, which is one and a half times more than 

Microsoft or Intel and twice as much as Coca-Cola. 

On April 7th, 2003, the Supreme Court, in State Farm Mutual 

Automobile Insurance Company v. Campbell, held that an award of 
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$145 million in punitive damages on a $1 million compensatory 

judgment violated due process. 

The Court further held that the jury had been allowed unconstitutionally to award punitive damages to punish and deter conduct 

that occurred out of State and bore no relation to the insured’s 

harm. 

Finally, the Court stated that, for purposes of determining 

whether an award of punitive damages is excessive, an award that 

exceeds a single-digit ratio between punitive and compensatory 

damages may comport with due process where a particularly egregious act has resulted in only a small amount of economic damages, 

but that higher ratios are likely to be unconstitutional. 

Even Supreme Court Justice Ruth Bader Ginsburg, who disagreed with the majority’s constitutional analysis and dissented in 

the State Farm case, nevertheless stated that, ‘‘Damage-capping 

legislation may be altogether fitting and proper.’’

In light of the Supreme Court’s decision, today the Constitution 

Subcommittee will explore the insights of the Court into the unfairness of large punitive awards in certain circumstances and steps 

Congress might take to alleviate that unfairness. Indeed, Federal 

statutory guidelines for the award of punitive damages would provide potential wrongdoers with the sort of, ‘‘fair notice,’’ regarding 

potential punishments the Supreme Court has held is required 

under the due process clause. 

Possible steps Congress might take to that end include the following: 

Prohibiting the multiple imposition of punitive damages by 

courts in different States for the same conduct; 

Requiring that punitive damages be redirected to the State, with 

appropriate safeguards for the abuse of punitive damages; 

Providing for protections from excessive punitive damages for 

small businesses; and 

Providing that judges decide the appropriate size of punitive 

damages, just as judges decide on appropriate sentences in criminal cases. 

Congressional action might also be necessary to codify the due 

process standards the Supreme Court handed down in State Farm

because some lower courts are attempting to skirt the impact of the 

ruling by broadly defining compensatory damages and thereby 

bringing large punitive awards within single-digit ratios to compensatory damages. 

As the Wall Street Journal recently editorialized, ‘‘A high point 

of the Supreme Court’s last term was its 6–3 decision to draw the 

line on outrageous punitive damages awards. But a large section 

of the Nation’s plaintiffs’ bar and even some judges have been 

working harder since to undermine the ruling.’’

I look forward to hearing from all of our witnesses here this 

afternoon and exploring ways Congress might enact checks and 

balances that deter abuses of punitive damages. 

I would now recognize the gentleman from New York, the Ranking Member, Mr. Nadler, for the purpose of making an opening 

statement. 

Mr. NADLER. Thank you, Mr. Chairman. 
3

This Committee has devoted a great deal of time to the question 

of punitive damages and Congress’ role to the extent there might 

be appropriate and constitutional policy grounds to intervene. 

While the Supreme Court has made clear that in its opinion due 

process rights are implicated in the awarding of punitive damages, 

and the Supreme Court seems to be reestablishing substantive due 

process, it is not entirely clear to me how much beyond the Court’s 

own strictures we may permissibly go. I hope our witnesses will address this. 

The limits on Congress’ power to enforce the due process clause 

under section 5 of the 14th amendment is one that this very activist Court has pushed front and center. If more judicial activists like 

the President’s ideal Justices, Scalia and Thomas, should find their 

way onto the Court, our power to address any such issues will likely be further diminished as the Court decreases the power of Congress under section 5 of the 14th amendment. 

It is our Subcommittee’s direct responsibility for reviewing such 

issues, and I hope we can get to this. 

In addition to the constitutional limits of Congress’ power, I 

would also hope that we would try to clarify what in fact the Court 

was telling us in State Farm and in BMW v. Gore. Reading some 

of the discussions of these cases, I can’t help but sense an overriding desire on the part of some commentators to read far more 

into these cases than the Court wrote into its decisions. 

Punitive damages serve a number of important functions which— despite a few horror stories, which are themselves either apocryphal or overturned in the courts, the functions remain valid and 

in the public interest. Persons causing great harm—persons deliberately or with gross negligence causing great harm should not 

view paying damages as merely a cost of doing business, a cost that 

might fit neatly into a risk analysis of wrongdoing. That is what 

happened in the Ford Pinto case in which the cost of paying claims 

to victims of a known deadly hazard was deemed less than the cost 

to retool the assembly line, and thus the hazard was maintained 

knowing full well that further people—more people would be injured or killed. 

This is the purpose of punitive damages, to punish this kind of 

egregious wrongdoing, and to deter, to be a deterrent to such conduct. It is not immediately clear why a deterrent—or the necessity 

of the deterrent should bear any great relationship to the amount 

of actual damages in a given case. There is nothing wrong and indeed something highly desirable in maintaining this disincentive to 

wrongdoing in an appropriate relationship to the harm and the 

conduct of the tort-feasor. 

The Court has made some effort to spell out those factors without setting a bright line formula. I would hope that we can get a 

clear view of those factors. 

Similarly, when looking at the imposition of punitive damages in 

multiple jurisdictions, I would ask our witnesses to consider that 

proposal in conjunction with the Supreme Court’s restriction on the 

awarding of punitive damages for action jurisdictions other than 

the one hearing the case, as well as the extent to which such a proposal might undermine the core deterrent purposes of punitive 

damages. 
4

In other words, if you are in Michigan, deliberately making a car 

that is knowingly unsafe, how do you fashion punitive damages for 

someone who is injured in New Jersey or in New York and who 

doesn’t suffer a heck of a lot of damages, although the next fellow 

might be killed in a way that would serve the deterrent function 

of the punitive damages and will meet the requirements of the 

Court with respect to multiple jurisdictions? 

Finally, with respect to various other proposals, including those 

suggested that the Government, rather than the injured parties receive some or all of the punitive damages, how would this affect the 

rights of plaintiffs and whether current law allows for the appropriate use by Government of some portion of an award or settlement? 

I might add here that I made a proposal a number of years ago 

suggesting that where a very large punitive damage award was 

necessary for deterrent or punishment purposes but that in a case 

in which this might result in unjust enrichment to a plaintiff who 

had suffered damages and got the damages, then you wanted to 

award, because it is against a very large tort-feasor, a very large 

award as a deterrent to further wrongdoing, that perhaps a fraction, perhaps the amount that the plaintiff received should be— have some relation to the damages, and the balance should go to 

Government or some charity or whatever. So you wouldn’t limit the 

deterrent effect of the punitive damages but would do something 

about the sense of injustice of an unjust enrichment of a plaintiff. 

I thank the Chairman for scheduling this hearing. I hope it will 

clear away much of the uncertainty surrounding the Court’s punitive damages decisions and yield some clarity in this field, and I 

yield back. 

Mr. CHABOT. Thank you very much. 

At this time, we will introduce the panel this afternoon. 

Our first witness is David Owen. Mr. Owen is the Carolina Distinguished Professor of Law and Director of the Office of Tort Law 

Studies at the University of South Carolina, where he teaches 

courses on tort law and products liability. In addition to numerous 

journal articles, Professor Owen has edited and coauthored various 

books, including Prosser and Keaton on Tort Law, several books 

and a treatise on products liability law, and Philosophical Foundations of Tort Law. He is also an advisor to the American Law Institute on the Restatement (Third) of Torts, and he was the editorial 

advisor for the Restatement of Products Liability. We welcome you 

here this afternoon. 

Our second witness is Robert Peck. Mr. Peck is Senior Director 

of Legal Affairs and Policy Administration for the Association of 

Trial Lawyers of America. He is also President of the Center for 

Constitutional Litigation. In 2001, Mr. Peck shared the Public Justice Achievement Award from Trial Lawyers for Public Justice with 

other members of his law firm and received the Pursuit of Justice 

Award from the American Bar Association’s Tort and Insurance 

Practice Section. And we welcome you here this afternoon. 

Our third witness will be Victor Schwartz. Mr. Schwartz is a 

member of the American Law Institute. He has served on the Advisory Committee on the Restatement of Torts, Products Liability, 

and he continues to sit on the Advisory Committee to the Restate-
5

ment of Torts Third, General Principles. For over two decades he 

has been the coauthor of the most widely used torts casebook in the 

United States, Prosser, Wade and Schwartz Cases and Materials on 

Torts. He has authored hundreds of law review articles and speaks 

before national and international audiences interested in civil justice reform. Mr. Schwartz also co-chairs the Civil Justice Reform 

Committee of the American Legislative Exchange Council and 

chairs the American Bar Association’s Legislative Subcommittee of 

the Product Liability Committee. He is also a partner at Shook, 

Hardy & Bacon. And we welcome you here this afternoon as well. 

We look forward to all of the testimony this afternoon. 

You are probably familiar with our 5-minute rule. The lights in 

front of you will indicate—when the yellow light comes on, you 

have 1 minute to wrap up. When the red light comes on, your 5 

minutes is up, and we would appreciate if you would conclude at 

approximately that time. 

Mr. CHABOT. We will begin with you, Mr. Owen. 

STATEMENT OF DAVID OWEN, CAROLINA DISTINGUISHED 

PROFESSOR OF LAW AND DIRECTOR OF THE OFFICE OF 

TORT LAW STUDIES AT THE UNIVERSITY OF SOUTH CAROLINA 

Mr. OWEN. Thank you, Mr. Chairman, Members of the Committee. It is my great pleasure to be with you today to talk about 

what I have been researching, writing and teaching about for 30 

years, which is punitive damages law. 

My particular areas that I have emphasized in that field are 

products liability in particular but more broadly punitive damages 

in general. 

In 5 minutes, I would like to summarize what I have learned in 

30 years; and I understand that the purpose of the panel’s meeting 

today is to see if there is a way to constitutionalize legislatively punitive damages in order to make them more reasonable and perhaps more effective. 

The first point I would like to make, because I think the assumption behind this hearing is that punitive damages are bad, is that 

in fact I believe that, on balance, they are good, that they are an 

important, vital, historical, ancient part of the jurisprudence of 

most civilizations. 

In fact, the very earliest known legal code known to men and 

women, the Code of Hammurabi, had provisions for punitive damages for particular wrongful acts. And through Mosaic law of 1200 

BC through Roman law up through the middle ages in England 

and from America in the 1700’s, we have had this form of principle, 

with one foot in the criminal law and one foot in the civil law, to 

punish egregious acts of misconduct that are not caught by the 

criminal prosecutor and that do not fully compensate the victim. 

So while most modern civilized countries have abandoned at a 

superficial level punitive damages, I think it is important to realize 

that it is deeply imbedded in our own jurisprudence, both in some 

State constitutions, in many Federal statutes, and in many State 

decisions and also legislation. 

So that is my first point. 
6

My second point, however, is that it is a very powerful instrument of the law, and it can be substantially abused. So I think the 

underlying purpose behind this hearing is vital, and that is, the 

State patchwork of judicial and statutory rules governing the limitations on punitive damages, and there have been a number of substantial reforms enacted by State legislators and by common law 

judges as well as by the Supreme Court over the last decade. Despite those substantial reforms, I think in a Nation such as ours, 

where manufacturers market to the 50 States, that it would be 

helpful to have principles that were more predictable in the way 

that the Supreme Court suggests is desirable. 

So my conclusion is that Federal reform appears to be a desirable 

path; and I make that conclusion as a tort and punitive damages 

specialist, not as a constitutional scholar. 

Now, what I would like to do is to identify those reforms. I have 

studied all of the various reforms for, as I say, three decades, that 

I believe are the most straightforward, that might have the best 

potential for keeping the substance of punitive damages punishment, deterrence, and I believe retributive compensation, while 

harnessing them to a manageable level. 

The first such reform I would propose is that the standard of 

proof be identified as clear and convincing evidence, as opposed to 

the normal preponderance of the evidence in civil actions, remembering that punitive damages are in a sense quasi-criminal, standing half-way toward the criminal law. I think that is an effective 

reform. 

Another reform that the Supreme Court hinted at but has not 

yet required, is to require trial judges to issue written opinions. I 

think that would be a very important way that would help appellate courts then review their rationality and appropriateness. 

Finally, I think the most important reform is to enact some form 

of cap. Although I believe in the theory that Mr. Nadler was suggesting in terms of allowing punitive damages as high as possible 

for individualized justice in a particular case, I like that view from 

a theoretical perspective, I think it is correct ideologically. I think 

in the real world it doesn’t work and that it causes more injustice 

than justice and that caps such as treble damages in the antitrust 

area and with respect to consumer protection statutes are a particularly desirable way to go. 

So my particular recommendation would be, in that respect, to 

impose a principle of treble damages, either as a maximum or simply as an absolute amount in every case, plus attorneys fees and 

the costs of litigation to take care of the cases involving less substantial harms to be sure that the litigation costs are fully compensated. 

Then, together with that, I would have a special cap for mass 

disaster cases, that is like asbestos, what might have happened in 

the Firestone/Ford Explorer situation had that litigation not been 

effectively controlled, and that might be that once a litigation was 

designated as defined somehow in the legislation as a mass disaster, thereafter the cap would be reduced from three times compensatory damages to one times compensatory damages. That 

would assure that every plaintiff was fully compensated for attorneys’ fees, costs of litigation and something extra. And yet, as the 
7

companies perhaps march toward bankruptcy, more would be left 

in the corporate tills for the remaining plaintiffs. 

Those are simple reforms. They are straightforward. I think they 

are reasonable and help from a due process perspective to tailor 

punitive damage assessments in a way that can be contemplated 

by defendants, that will be painful to defendants, but they will not 

give rise to the type of extraordinary awards such as we saw in 

State Farm. 

Mr. CHABOT. Thank you very much. 

[The prepared statement of Mr. Owen follows:]
8

PREPARED STATEMENT OF DAVID G. OWEN
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Mr. CHABOT. Mr. Peck. 

STATEMENT OF ROBERT PECK 

Mr. PECK. Thank you, Mr. Chairman and Members of the Subcommittee. It is a pleasure to start some remarks without having 

to say, ‘‘Mr. Chief Justice and may it please the Court.’’ For the past 25 years I have been a constitutional lawyer and 

scholar. I don’t pretend to have the expertise on tort law that my 

colleagues on this panel have, but I do have expertise on constitutional law. 

So when we look at constitutional court cases like State Farm, we begin with the empirical evidence. Clearly, the best statistics 

are those that have been generated by the Bureau of Justice Statistics. That Department of Justice agency has found that there are 

only 3 percent of cases in which plaintiffs are successful and punitive damages are awarded, and that the median award is $38,000. 

That is not exactly an eye-popping amount that requires this Committee’s attention. 

What is remarkable is that, 4 years earlier, it showed that 

awards of punitive damages were at 6 percent of plaintiffs cases 

and $50,000. So what we are seeing is actually a downward trend 

rather than an upward one. 

Professor Michael Rustad has done a comprehensive study of punitive damages in products liability cases. In 1992, his study indicated that there had been, in the previous 25 years, a total of 355 

products liability punitive damage cases. Because of the downward 

trend——

Mr. NADLER. Successful cases or cases? 

Mr. PECK. Total cases where punitive damages were awarded. 

Many of them were also in low amounts. 

What we see from the trend downward in products liability litigation generally is that that is probably now a high-water mark 

and that there has not been an increase. 

To turn to Campbell, everyone talks about the ratios because 

that was the headline in the newspapers, that a single-digits ratio 

may be the outer limit of constitutional propriety. Well, that kind 

of description is wishful thinking. What the Court specifically said 

is that we have consistently rejected the notion that the constitutional line is marked by a simple mathematical formula, even one 

that compares actual and potential damages to the punitive award. 

We decline again to impose a bright line ratio. 

Now, remember, when the Court talks about ratios, they are not 

talking about the amount of compensatory damages awarded. They 

are talking about the harm and potential harm to plaintiffs and 

similarly situated plaintiffs and that the State has a right to vindicate the rights of all of those citizens in that State who could have 

been injured by this harmful, egregious, reprehensible conduct. 

They said that we are going to offer these ratios, but these ratios 

are not binding—this is the Supreme Court’s words. This is not 

spin. They are instructive—and that there are no rigid benchmarks 

that punitive damages may not surpass. 

So the Court is sending all sorts of signals that this is not a hard 

and fast rule. This is not something that someone is supposed to 

codify. They indicated that a 9 to 1 ratio, the single-digit ratio, is 
33

more likely to pass constitutional muster than 500 to 1, but more 

likely means that there are circumstances in which 500 to 1 does 

pass constitutional muster. They said the precise award in any particular case must be based on the facts and circumstances of the 

defendant’s conduct and the harm to the plaintiff. That does not 

give rise to a simple mathematical formula. 

What the Court found that Utah had done wrong—it is not that 

the jury had done it wrong. Because the Utah Supreme Court, trying to obey the strictures of the U.S. Supreme Court, engaged in 

de novo review. They took a $30 million punitive damage award, 

and they restored to it a $145 million award because they found 

the actions of State Farm to be so reprehensible. 

Where they went wrong is that they tried to do it on the basis 

of nationwide conduct, which was fraudulent, wherever it might 

have been, but the Supreme Court, announcing a new rule, said 

that you cannot even punish for unlawful out-of-State conduct, 

making punitive damages an entirely in-State issue. 

This has bearing on the federalism issue. Because the Court has 

recognized that under our principles of federalism—and they say so 

directly in State Farm—under our principles of federalism, a State 

may make its own reasoned judgment about what conduct is permitted or prescribed within its borders and what measure of punishment, if any, to impose. Congress has no authority to override 

that. This is basic 10th amendment law. 

Now, one thing that Mr. Schwartz says in his testimony is he 

points out that there are some rogue courts out there that are not 

following the strictures of the Supreme Court. He identified three. He identifies the Utah Supreme Court for issuing its $145 million award, which under the law that existed before State Farm v. 

Campbell was not a violation of any order from the U.S. Supreme 

Court. They followed BMW v. Gore. They followed Copper v. 

Leatherman. He points to the Alabama Supreme Court in the BMW v. Gore

case. And again, what they did not follow, because they followed 

the Haslip decision which said that Alabama’s procedures for 

awarding punitive damages met due process. So until they enunciated in BMW v. Gore the way that you evaluate excessiveness 

there was no problem. 

And, finally, he points to an Oregon Court of Appeals case where 

they awarded a 7-to-1 ratio which—punitive damages to compensatory damages which still meets State Farm v. Campbell. And he 

seems to think that just because the Court remanded in light of 

Campbell that that has meaning. But the Supreme Court itself 

calls that a GVR order—grant, vacate and remand. It is a docketclearing device. It has nothing to do with any substantive evaluation of the case. It simply says we have made an intervening decision. It may change your mind. It may not. We are giving you another opportunity. So that is not a substantive decision on their 

part. 

Finally, let me just say that there is an issue that Congress can 

deal with, and that is the tax issue that I raise in my testimony, 

where it is possible that someone who can win a punitive damage 

judgment will end up owing more than they have won because of 

the strange operation of the tax laws that also tax them for the 
34

1 1 Linda L. Schlueter & Kenneth R. Redden, Punitive Damages § 1.0, at 1 (4th ed. 2000) 

(finding that punitive damages ‘‘evolved from the common law . . . to meet certain societal 

needs such as compensation for mental anguish or other intangible harms, punishment and deterrence of wrongdoers, and as a substitute for revenge’’). Schlueter and Redden also note that 

use of multiple damages for these purposes existed at least as far back as the Code of 

Hammurabi in 2000 B.C. Id. 2 Huckle v. Money, 95 Eng. Rep. 768 (C.P. 1763); Wilkes v. Wood, 98 Eng. Rep. 489 (C.P. 1763). 3See City of West Covina v. Perkins, 525 U.S. 234, 247 (1999). 

amount that would go to the State on a State—on a sharing type 

of institute or on the amount that goes to their counsel, who will 

also still have to pay taxes on that. 

Senator Hatch offered an amendment to the tax bill earlier this 

year to try and resolve that problem. That did not end up in the 

tax bill. I commend it to you to move on to other of your colleagues. 

Mr. CHABOT. Thank you very much. 

[The prepared statement of Mr. Peck follows:]

PREPARED STATEMENT OF ROBERT S. PECK

I. INTRODUCTION

Mr. Chairman and Members of the Subcommittee: 

I thank the Subcommittee for its invitation to testify today on the topic of punitive damages. To begin, allow me provide the Committee with a little of my background. I am president of the Center for Constitutional Litigation, P.C., a Washington, D.C. law firm that limits its practice to constitutional cases in furtherance 

of access to justice. One of our firm’s clients is the Association of Trial Lawyers of 

America, for whom I serve as Senior Director for Legal Affairs and Policy Administration. 

In addition to being a practitioner, I also serve as an adjunct professor of constitutional law at the law schools of both American University and George Washington 

University. I am as well a member of the Board of Overseers of the RAND Institute 

for Civil Justice, the Lawyers Committee of the National Center for State Courts, 

and the Council of the American Bar Association’s Tort Trial and Insurance Practice 

Section. 

Of most immediate relevance to the Subcommittee’s topic today, I argued a punitive damage case, Rhyne v. K-Mart, Inc., in the North Carolina Supreme Court just 

two weeks ago. The case involved the constitutionality of a state statute limiting punitive damages and, alternatively, the application of State Farm Mutual Automobile 

Insurance Co. v. Campbell. I am also Counsel of Record in Philip Morris v. Williams, where the defendant has sought review of a punitive damage judgment in 

the United States Supreme Court on the issue of excessiveness. My law firm also 

represents the Smith family in Estate of Smith v. Ford Motor Co., which will be argued in the Kentucky Supreme Court in a few weeks on remand from the U.S. Supreme Court in light of Campbell. 

The Campbell decision has also figured in other activities of mine. On Friday of 

last week, I participated on a panel with the two lawyers who will be arguing the 

remand of the Campbell case before the Utah Supreme Court in a few weeks. I have 

also chaired a continuing legal education program for the Practicing Law Institute 

on ‘‘Punitive Damages after State Farm v. Campbell,’’ and will participate in a second program of the same title for them in New York on October 7. Finally, I am 

the author of the upcoming American Jurisprudence Proof of Facts 3d on Punitive 

Damages. I come to this hearing with a close and thorough appreciation of Campbell. 

II. THE LANDSCAPE OF PUNITIVE DAMAGES

A. Legal Treatment of Punitive Damages 

It is useful to begin with an understanding of the development and law of punitive damages. Punitive damages originated in the common law.1 In 1763, English 

courts firmly established the legitimacy of punitive, or exemplary, damages as a 

common-law device within the jury’s province.2 In Wilkes, one of the most important 

and influential cases of English law to the American founders,3 Lord Chief Justice 

Pratt announced: ‘‘[A] jury shall have it in their power to give damages for more 

than the injury received as a punishment to the guilty, to deter from any such pro-
35

4Wilkes, 98 Eng. Rep. at 498–99. 5See Genay v. Norris, 1 S.C.L. (1 Bay) 6 (S.C. 1784). 6 Coryell v. Colbaugh, 1 N.J.L. 77, 77 (N.J. 1791). 7See, e.g., Harton v. Reavis, 4 N.C. 256 (N.C. 1815). 8Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 255 (1984). 9Day v. Woodworth, 54 U.S. (13 How.) 363, 371 (1851). 10 Id. (emphasis added). 11Pendleton v. Davis, 46 N.C. 98, 1853 WL 1452, at 1 (1853). 12Worthington v. Bynum, 290 S.E.2d 599, 606 (N.C. 1982). 13 499 U.S. 1 (1991). 14State Farm Mut. Auto. Ins. Co. v. Campbell, 123 S. Ct. 1513, 1524 (2003), characterizing 

Haslip, 499 U.S. at 23–24. 15 509 U.S. 443 (1993). 16 Id. at 18 (footnote omitted). 

ceeding for the future, and as a proof of the detestation of the jury to the action 

itself.’’ 4

Soon after Wilkes, American courts began to award punitive damages, with South 

Carolina being the first in 1784.5 Typical of these cases was a 1791 New Jersey case 

in which the jury was instructed ‘‘not to estimate the damage by any particular 

proof of suffering or actual loss; but to give damages for example’s sake, to prevent 

such offenses in [the] future.’’ 6 Typically, if the jury’s punitive verdict was either 

insufficient or excessive, the appropriate remedy was a choice between a judge-chosen number (remittitur) or a new jury trial.7 Given this history, the U.S. Supreme 

Court has observed that punitive damages ‘‘have long been a part of traditional 

state tort law.’’ 8

From those early days, the practice was not without criticism. Still, while acknowledging that ‘‘some writers’’ had questioned the ‘‘propriety’’ of punitive damages, the U.S. Supreme Court in 1851, ruled that this ‘‘well-established principle of 

the common law’’ was too much a part of the fabric of the law to undo.9 In fact, 

the Court said: 

if repeated judicial decisions for more than a century are to question will not 

admit of argument. By the common law as well as by statute law, men are often 

punished for aggravated misconduct or lawless acts, by means of civil action, 

and the damages inflicted, by way of penalty or punishment, given to the party 

injured . . . the damages assessed depend on the circumstances, showing the 

degree of moral turpitude or atrocity of the defendant’s conduct, and may properly be termed exemplary or vindictive rather than compensatory . . . This has 

been always left to the discretion of the jury, as the degree of punishment to 

be thus inflicted must depend on the peculiar circumstances of each case.10

As the Court’s opinion indicates, the jury was vested with broad discretion to determine the amount of punitive damages without limitations and respecting only the 

circumstances of the case. Early caselaw also recognized that the punishment of 

wealthy defendants often required a larger punitive amount than poorer defendants 

because ‘‘a thousand dollars may be a less punishment to one man than a hundred 

dollars to another.’’ 11 Authority to determine that a punitive award was excessive 

rested with the trial judge, who had ‘‘a unique opportunity to consider the evidence 

in the living courtroom context’’ and would only be overruled for an abuse of discretion.12

Recently, another wrinkle was added to punitive damages—constitutional considerations of due process. In Pacific Mutual Life Insurance Co. v. Haslip,13 the Supreme Court held that the Fourteenth Amendment’s Due Process Clause applies to 

a punitive damage award between private litigants, but that the Alabama procedures at issue in that case satisfied due process. The Haslip Court, much like the 

Campbell Court, offered a ratio as guidance to the lower courts. Although not creating any hard and fast rule, it said ‘‘an award of more than four times the amount 

of compensatory damages might be close to the line of constitutional impropriety.’’ 14

In its next decision, the Court showed how little that ratio mattered. In TXO Production Corp. v. Alliance Resources,15 the Court was asked to rule that $10 million 

in punitive damages was unconstitutionally excessive when compared to an award 

of $19,000 in compensatory damages, which consisted entirely of the cost of defending a declaratory judgment action. The Court ruled that the 526:1 ratio was not excessive considering the potential loss to the plaintiff if the fraudulent scheme had 

succeeded, the bad faith of the defendant, the fact that the scheme was part of a 

‘‘larger pattern of fraud, trickery and deceit, and [the defendant’s] wealth.’’ 16

Next, rather than consider issues of excessiveness, the Supreme Court found that 

judicial review of punitive damages was needed and the standard employed had to 
36

17 Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415 (1994). 18 517 U.S. 559 (1996). 19 Id. at 575–76. 20 532 U.S. 424 (2001). 21 U.S. Dep’t of Justice, Bureau of Justice Statistics, TORT TRIALS AND VERDICTS IN LARGE

COUNTIES, 1996 (NCJ 179769), at 1 (Aug. 2000). 22Theodore Eisenberg, et al., Juries, Judges, and Punitive Damages: An Empirical Study, 87 

CORNELL L. REV. 743 (2002). 23 U.S. Dep’t of Justice, Bureau of Justice Statistics, CIVIL JUSTICE SURVEY OF STATE COURTS, 1992: CIVIL JURY CASES AND VERDICTS IN LARGE COUNTIES, at 1 (1995). 24Thomas A. Eaton, et al., Another Brick in the Wall: An Empirical Look at Georgia Tort Litigation in the 1990s, 34 GA. L. REV. 1049, 1094 (2000). 25 Neil Vidmar & Mary R. Rose, Punitive Damages by Juries in Florida: In Terrorem and in 

Reality, 38 HARV. J. LEGIS. 487, 487 (2001). 26 Jury Verdict Research, 1998 North Carolina Verdict Survey 9 (1998). 27Michael L. Rustad, Unraveling Punitive Damages: Current Data and Further Inquiry, 1998 

WIS. L. REV. 15, 69. 28Stephen Daniels & Joanne Martin, Myth and Reality in Punitive Damages, 75 Minn. L. Rev.

1, 64 (1990) (footnotes omitted). 29 Neil Vidmar, MEDICAL MALPRACTICE AND THE AMERICAN JURY 254 (1995). 30Deborah Jones Merritt & Kathryn Ann Barry, Is the Tort System in Crisis? New Empirical 

Evidence, 60 OHIO ST. L.J. 315, 388 (1999). 31 Vidmar & Rose, supra note 25, 38 HARV. J. LEGIS. at 487. 

be more than whether there was evidence to support the verdict.17 Then, in BMW 

of North America, Inc. v. Gore,18 the Court found, for the first time, that a punitive 

award violated due process by being grossly excessive. To make that determination, 

the Court established three guideposts, the most important of which was the extent 

of reprehensibility of the defendant’s conduct, which in turn is measured, in large 

part, by the presence of up to five aggravating factors.19 These guideposts remain 

the means of measuring constitutional excessiveness. 

The last of the pre-Campbell punitive damage cases is Cooper Industries, Inc. v. 

Leatherman Tool Group, Inc.20 Cooper established that punitive verdicts in federal 

court are subject to de novo review and that the Seventh Amendment jury trial 

right does not reexamine punitive damages, even though it left that subject untouched when it comes to state constitutional law in state courts. 

B. Empirical Data on Punitive Damages 

Before briefly reviewing the Campbell decision, it is worth reviewing the relevant 

empirical research on punitive damages. First, it is important that this Subcommittee understand that punitive damage awards remain the most rare of results. When awarded, the numbers are simply not eyepopping. A study conducted 

by the U.S. Department of Justice, using 1996 statistics from 75 of the Nation’s 

largest counties found that only three percent of plaintiffs who won their cases were 

awarded punitive damages and that the median punitive damage award was 

$38,000.21 More recent empirical studies conducted by researchers at the National 

Center for State Courts confirm those findings.22 These figures represent a decline, 

rather than an upward trend. The previous Justice Department study, using 1992 

data, showed about six percent of plaintiffs received an award and that the median 

award was $50,000.23 The trend is downwards. 

Statewide studies similarly show punitive damages are insignificant. The most recent Georgia study, for example, concludes ‘‘punitive damages currently are not a 

significant factor in personal injury litigation.’’ 24 In Florida, the statistics show punitive damage verdicts to be ‘‘strikingly low.’’ 25 A comprehensive study by Jury Verdict Research (JVR) found that for the period 1992–97 North Carolina punitive damage awards represented only four percent of all plaintiff verdicts.26

In fact, as one researcher put it after surveying the academic literature, ‘‘[e]very 

empirical study of punitive damages demonstrates that there is no nationwide punitive damages crisis.’’ 27 Even an 11-state study of 25,627 civil jury verdicts concluded 

claims of a punitive damage crisis were ‘‘unfounded, and perhaps manufactured.’’ 28

Punitive awards in medical malpractice and products liability also tend to be 

sparse. Duke law professor and sociologist Neil Vidmar reviewed 1,300 medical malpractice cases in North Carolina, finding only two cases awarded punitive damages.29 In demographically important Franklin County, Ohio, which is a microcosm 

of the entire U.S. population, researchers reviewed every verdict issued over a 

twelve-year period and found not a single punitive award in a medical malpractice 

or product liability case.30 The Florida researchers found that, ‘‘with the exception 

of asbestos cases, punitive damages were almost never given in products liability 

cases.’’ 31 Incidently, when punitive damages have been awarded in medical mal-
37

32Michael Rustad & Thomas Koenig, Reconceptualizing Punitive Damages in Medical Malpractice: Targeting Amoral Corporations, Not ‘‘Moral Monsters,’’ 47 RUTGERS L. REV. 975, 1034– 35 (1995). 33 Eisenberg, supra note 22, 87 CORNELL L. REV. at 779. 34 Rustad & Koenig, supra note 32, 47 RUTGERS L. REV. at 1027. 35William M. Landes & Richard A. Posner, THE ECONOMIC STRUCTURE OF TORT LAW 185 

(1987). 36See, e.g., Eisenberg, supra note 22, 87 CORNELL L. REV. at 756; Vidmar & Rose, supra note 

25, 38 HARV. J. LEGIS. at 500–05. 37 Erik Moller, et al., Punitive Damages in Financial Injury Jury Verdicts, 28 J. LEGAL STUD. 283 (RAND 1999). 38 Campbell, 123 S. Ct. at 1524, quoting BMW, 517 U.S. at 582 (emphasis in original, citation 

omitted). 39 Id. 40 Id. (emphasis added). 41 Id. 42 Id. (there is no ‘‘bright-line ratio which a punitive damage award cannot exceed’’). 43 Id. (citation omitted). 44 Id. (citation omitted). 

practice cases, a shockingly high number of the cases involved sexual assault and 

battery on patients by the medical provider.32

Nor do the studies show a difference between awards made by judges and awards 

made by juries. The National Center for State Courts study found that ‘‘[j]uries and 

judges award punitive damages at about the same rate, and their punitive awards 

bear about the same relation to their compensatory awards.’’ 33 Study after study 

demonstrates that punitive verdicts correlate closely with the seriousness of the 

misconduct. One study of medical malpractice cases over a period of 30 years found 

‘‘punitive damages were awarded in only the most egregious cases involving 

healthcare practitioners.’’ 34 Judge Richard Posner and Professor William Landes reviewed products liability cases to conclude ‘‘the cases as a whole are generally congruent with the formal legal standard for awarding punitive damages.’’ 35 Even 

when awards appear on their face to be disproportionate, the underlying facts often 

reveal them to be warranted.36

Surprisingly, while so much legislative attention is paid to these unremarkable 

physical harm cases, the real action appears to be in financial injury cases, where 

punitive awards are increasing in number and size.37 In fact, all of the punitivedamage excessiveness cases reviewed in the U.S. Supreme Court have involved pure 

economic harm, rather than physical harm. Simply put, punitive damages in personal injury matters are being handled sensibly by juries and judges. They remain 

infrequent, are generally modest in size, correlate closely with the severity of the 

misconduct, and are vigilantly reviewed by courts for excessiveness. No crisis warranting congressional attention is evident. 

III. WHAT STATE FARM V. CAMPBELL HELD

Critics of punitive damages engage in wishful thinking when they claim the Supreme Court’s opinion in Campbell established that a ratio of punitive to compensatory damages in excess of single digits is presumptively unconstitutional. It clearly does not. Instead, Campbell reiterated:

‘‘[W]e have consistently rejected the notion that the constitutional line is 

marked by a simple mathematical formula, even one that compares actual and 

potential damages to the punitive award.’ We decline again to impose a brightline ratio.’’ 38

In fact, the Court stated the ratios it articulated ‘‘are not binding, [instead] they 

are instructive.’’ 39 Still, it said, ‘‘there are no rigid benchmarks that a punitive damages award may not surpass.’’ 40 The Court did suggest that a 9 to 1 ratio was ‘‘more 

likely to comport with due process . . . than awards with ratios in range of 500 to 

1.’’ 41 However, the Court’s use of ‘‘more likely’’ signals that there will be circumstances where a 500:1 ratio would be appropriate. The ‘‘precise award in any 

case, of course, must be based upon the facts and circumstances of the defendant’s 

conduct and the harm to the plaintiff.’’ 42

Campbell acknowledges, for example, that ‘‘ratios greater than those we have previously upheld may comport with due process where ‘a particularly egregious act 

has resulted in only a small amount of economic damages’ ’’ 43 The Court further 

noted that a higher ratio might be necessary where ‘‘the injury is hard to detect or 

the monetary value of noneconomic harm might have been difficult to determine.’’ 44

Justice Stevens, the author of the BMW v. Gore decision, explained another of the 

circumstances warranting a high ratio:
38

45TXO, 509 U.S. at 460 (emphasis added). 46 Campbell, 123 S.Ct. at 1521. 47 BMW, 517 U.S. at 572. 48 Campbell, 123 S.Ct. at 1522. 49 Id. 50 Id. 51 42 U.S.C. § 1981a(b)(1). 52 Id. at § 1981a(b)(3). 53See Moller, supra note 37. 

It is appropriate to consider the magnitude of the potential harm that the defendant’s conduct would have caused to its intended victim if the wrongful plan 

had succeeded, as well as the possible harm to other victims that might have 

resulted if similar future behavior were not deterred.45

A plain reading of Campbell, contrary to the fevered accounts that imaginative 

advocates have penned, indicates that there is nothing magical about the ratios. 

Moreover, because due process is a two-edged sword, there may be a due process 

violation of the plaintiff’s rights by the creation of a rigid ratio that is less than necessary to serve the punishment and deterrence purposes of punitive damages in relation to the harm caused by the conduct. 

So, then, what did Campbell do that is new? Certainly, it did nothing new with 

respect to gross excessiveness. The Court found the excessiveness issue in Campbell ‘‘neither close nor difficult’’ while applying the well-established ‘‘principles set forth 

in BMW of North America, Inc. v. Gore.’’ 46 It did not change or further explain the 

guideposts established in BMW, although it could be argued that the third guidepost 

(comparability to civil or criminal fines or other punitive damage awards) is less relevant now. 

What it did do, however, is limit the use of out-of-state conduct to determine punitive damages. Previously, the Court prohibited punitive damages based on out-ofstate conduct that was lawful in other states.47 In Campbell, the Court ruled that 

a State does not have a ‘‘legitimate concern in imposing punitive damages to punish 

a defendant for unlawful acts committed outside of the State’s jurisdiction.’’ 48 In 

other words, when Utah levies punitive damages against a company for acts that 

are also illegal in other states, it must only concern itself with the impact in Utah 

and leave it to other states’ courts to award appropriate punitive damages for the 

effects in those states. By doing so, the Court endorsed the multiple punitive damage approach that Mr. Schwartz has asked this Subcommittee to prohibit by law. 

Thus, his proposal is not an implementation of Campbell, but a repudiation of it. 

Second, while acknowledging that wealth may be offered into evidence, the Court 

said that it alone may not justify the size of a punitive damage verdict.49 Finally, 

to the extent evidence is introduced to demonstrate recidivism, the Court found that 

the prior acts must be similar on all points.50 Thus, the bad-faith insurance claim 

at issue in Campbellhad to be paired with similar bad-faith automobile insurance 

instances, rather than instances involving, for example, earthquake, hurricane or 

flood damage. 

IV. FEDERALISM CONCERNS LIMIT CONGRESSIONAL AUTHORITY OVER

PUNITIVE DAMAGES

Before Congress acts, it must come to terms with the very serious federalism concerns that indicate that there is a very circumscribed role for Congress in the area 

of punitive damages. Congressional authority is limited to federal causes of action 

that justify punitive damages, for punitive damages have no existence independent 

of the underlying cause of action, and to certain taxation issues. Federal actions in 

which punitive damages are authorized are largely civil rights actions. For example, 

the Civil Rights Act of 1991 authorizes punitive damages in Title VII cases where 

an employer intentionally discriminates ‘‘with malice or with reckless indifference 

to the federally protected rights.’’ 51 Even so, Congress has seen fit to limit the 

amounts of such awards on a sliding scale based on the employer’s size. The limits 

apply to the ‘‘sum of the amount of compensatory damages awarded . . . for future 

pecuniary losses, emotional pain, suffering, inconvenience, mental anguish, loss of 

enjoyment of life, and other nonpecuniary losses, and the amount of punitive damages awarded.’’ 52

Civil rights cases, however, are not the types of cases that have brought the proponents of legislative action before this committee. They instead have focused their 

attention entirely on state-based personal injury causes of action. This is curious because, as I indicated earlier, there is no punitive damage crisis in this area. It is 

instead in financial injury cases where there has been a growth in the number and 

amounts of punitive damage verdicts.53 Each of the excessiveness cases heard in the 
39

54 United States v. Lopez, 514 U.S. 549, 577 (1995). 55Silkwood, supra, 464 U.S. at 255. 56 BMW, supra, 517 U.S. at 568. 57 Campbell, supra, 121 S.Ct. at 1523. 58 Id. at 1522. 59Gregory v. Ashcroft, 501 U.S. 452, 460 (1991). 60See, e.g., N.H. Rev. Stat. § 507:16 (outlawing punitive damages). 61 Craig S. Bonnell, Back and Forth with the I.R.S.: Taxation of Wrongful Death Damages in 

Alabama, 17 CUMB. L. REV. 53, 68 (1987). 62 529 U.S. 598 (2000). 63 Id. at 608 (citations omitted). 

U.S. Supreme Court—Haslip, TXO, BMW, Cooper and Campbell—have involved economic injuries, which the Court has repeatedly indicated are less reprehensible as 

a rule than those that involve physical harm. 

In asking for a federal regulatory overlay on punitive damage judgments, advocates for the change are asking Congress to exceed its constitutional authority and 

intrude into a realm that the Constitution reserves to the States. The Supreme 

Court warned that Congress bears a ‘‘very heavy burden when affecting areas of traditional state concern.’’ 54 To understand why that burden cannot be met here, one 

need look little further than the Supreme Court’s punitive damage decisions. Nearly 

twenty years ago, the Supreme Court recognized that punitive damages ‘‘have long 

been a part of traditional state tort law.’’ 55 They serve the purpose of ‘‘further[ing] 

a State’s legitimate interests in punishing unlawful conduct and deterring its repetition.’’ 56 In Campbell, the Court reiterated the connection to a State’s sovereign authority: 

A basic principle of federalism is that each State may make its own reasoned 

judgment about what conduct is permitted or proscribed within its borders, and 

each State alone can determine what measure of punishment, if any, to impose 

on a defendant who acts within its jurisdiction.57

For these reasons, the CampbellCourt ruled, a State may not impose ‘‘punitive 

damages to punish a defendant for unlawful acts committed outside the State’s jurisdiction.’’ 58 Thus, because punitive damages may be assessed only to vindicate the 

State’s sovereign interests in punishment and deterrence, it is part of the irreducible core of a State’s authority and protected by the Tenth Amendment from congressional interference. It is intimately related to the process of democratic self-government, any interference with which, the Supreme Court has said, ‘‘would upset 

the usual constitutional balance of federal and state powers.’’ 59

A further complication is that some states do not permit punitive damages at 

all.60 In other states, punitive damages have a compensatory element. For example, 

in Alabama, punitive damages in wrongful death are compensatory; the usual rules 

on punitive damages do not apply.61 This lack of uniformity in the states is a feature of federalism that the Constitution celebrates, rather than condemns. It poses 

insuperable obstacles to a federal regulatory scheme. 

I am confident that the Court would find congressional interference with the core 

state function of assessing punishment in the form of punitive damages unconstitutional. Before the Campbelldecision, multiple awards vindicating interstate interests 

were possible in a single State’s court and logically could have provided a basis for 

congressional action. After Campbell, that is no longer possible. With its disappearance as an issue, whatever congressional authority may have existed also evaporated. Congress may not legislate against multiple punitive damage judgments that 

vindicate a State’s own interests against reprehensible conduct, nor may Congress 

allocate how such an award is distributed when there is only a State, and not a 

federal, interest at stake. 

The two most likely counterarguments that proponents of such measures might 

raise are easily dismissed. First, I can imagine these advocates asserting that such 

a law would be premised on congressional authority over interstate commerce. However, a State’s authority to punish and deter egregious misconduct is not a matter 

of commerce, but a function of their police power; it is not subject to federal preemption. 

Nor can a credible argument be formulated that punitive damages place a burden 

on interstate commerce. A similar argument, supported by detailed legislative findings and voluminous testimony, was insufficient to save the Violence Against 

Women Act (VAWA) from constitutional invalidation in United States v. Morrison.62

Morrison said that the scope of the interstate commerce power must respect our system of dual sovereignty, including States’ rights.63
40

64 Cooper, supra, 532 U.S. at 432. 65Lopez, supra, 514 U.S. at 561, quoted in Morrison, supra, 529 U.S. at 610. 66Morrison, supra, 529 U.S. at 610. 67 Id. 68Lopez, supra, 514 U.S. at 562, quoted in Morrison, supra, 529 U.S. at 612. 69Morrison, supra, 529 U.S. at 612–13, quoting Lopez, supra, 514 U.S. at 564. 70 Id. at 613, quoting Lopez, supra, 514 U.S. at 564. 71 Id., quoting Lopez, supra, 514 U.S. at 577 n.2. 72 Id. at 614 (citation omitted). 73 Id. 74 Id. at 618. 

Punitive damages are similar in that they are ‘‘quasi-criminal,’’ 64 and thus, ‘‘by 

its terms has nothing to do with ‘commerce’ or any sort of economic enterprise, however broadly one might define those terms.’’ 65 To fall within the commerce power, 

the law must regulate an economic activity that substantially affects interstate commerce. Morrison, the VAWA case, involved noneconomic, criminal conduct.66 Punitive damages similarly involve some egregious and reprehensible acts that are 

quasi-criminal and not economic in nature. The Court’s evaluation of the type of 

conduct being regulated turns on whether the underlying conduct constitutes ‘‘some sort of economic endeavor.’’ 67 Thus, the Court considered whether possession of a 

gun in a school zone in Lopez or the violent sexual assault on a woman in Morrison

constituted an economic activity within the commerce power. Neither qualified. 

The conduct that engenders punitive damages also cannot be regarded as economic activity. There is no commercial market for willful, fraudulent or malicious 

acts that merit the community’s moral condemnation—for that is what punitive 

damages punish. No one can seriously claim that encouraging such acts aids economic development or contributes to a stable national economy. 

Obviously, punitive damages also affect considerable tortuous conduct utterly 

unconnected to any commercial enterprise, such as particularly malicious intentional torts like assault and battery or injuries that result from a drunk driver’s reckless conduct. Because of that, the Supreme Court requires those laws premised 

on the Commerce Clause to contain jurisdictional restrictions that limit the reach 

of the regulation to those activities that have ‘‘an explicit connection with or effect 

on interstate commerce.’’ 68

Here, as was claimed in Lopez, one can imagine proponents of legislation alleging 

that the costs of punitive damages are spread throughout the economy and would 

adversely affect national productivity and, thus, interstate commerce. The Court, 

however, rejected those justifications in both Lopez and Morrison, ‘‘because they 

would permit Congress to ‘regulate not only all violent crime, but all activities that 

might lead to violent crime, regardless of how tenuously they relate to interstate 

commerce.’ ’’ 69 With respect to punitive damages, the same could be said of all civil 

sanctions for reprehensible misconduct. 

The Morrison Court then tellingly quoted the Lopez decision for its holding that ‘‘[u]nder the[se broad aggregate-effect] theories . . . , it is difficult to perceive any 

limitation on federal power, even in areas such as criminal law enforcement or education where States historically have been sovereign. Thus, if we were to accept the 

Government’s arguments, we are hard-pressed to posit any activity by an individual 

that Congress is without power to regulate.’’ 70 The Court refused to travel down 

that path, as it undoubtedly would with respect to punitive damages. 

The Morrison Court’s decision also overrode numerous findings by Congress. Anticipating criticism for that action, the Court said that just because Congress deems 

that an ‘‘activity substantially affects interstate commerce does not necessarily 

make it so.’’ 71 Consider the findings the Court found insufficient to sustain VAWA. 

Congress found gender-motivated violence affects interstate commerce 

by deterring potential victims from traveling interstate, from engaging in employment in interstate business, and from transacting with business, and in 

places involved in interstate commerce, . . . by diminishing national productivity, increasing medical and other costs, and decreasing the supply of and demand for interstate products.72

One would imagine that proponents of punitive-damage legislation would advocate 

quite similar findings. Yet, the findings were rejected because it would allow ‘‘the 

Commerce Clause to completely obliterate the Constitution’s distinction between national and local authority.’’ 73 One could also easily imagine the Court concluding 

that the ‘‘punishment of [egregious and reprehensible acts of wanton, reckless or 

willful misconduct] is not directed at the instrumentalities, channels, or goods involved in interstate commerce [but] has always been the province of the States.’’ 74

Punitive damage regulation does not fall within the Commerce Power. 
41

75 Id. at 619–20. 76 Id. at 626. 77TXO, supra, 509 U.S. at 457 (citations omitted). 78See, e.g., Restatement (Second) of Torts § 908, Comment e (1977); Owens-Corning Fiberglas 

Corp. v. Malone, 972 S.W.2d 35 (Tex. 1998); Schaffer v. Edward D. Jones & Co., 521 N.W.2d 

921 (N.D. 1994); Tetuan v. A.H. Robins Co., 738 P.2d 1210 (Kan. 1987). 

A second flawed argument would invoke Section 5 of the Fourteenth Amendment. 

That section gives Congress the authority to enforce the rights preserved through 

the Fourteenth Amendment by appropriate legislation. The argument in favor of 

legislative authority here would assert that legislation was needed to restrain States 

from violating the due process rights of punitive-damage defendants. However, to 

make such as assertion of need, proponents must bear a particularly heavy evidentiary burden, one that they simply cannot sustain. After all, VAWA was also justified on grounds that there was a ‘‘pervasive bias in various state justice systems 

against victims of gender-motivated violence,’’ which a ‘‘voluminous congressional 

record’’ set out in detail.75

The Court, however, found that it was not uniform across the country. It noted 

that broad remedial measures cannot pass constitutional muster when the due-process violation does not ‘‘exist in all States or even most States.’’ 76 Thus, for example, 

the Voting Rights Act’s preclearance provisions are confined in operation to those 

regions of the country where voting discrimination was most flagrant. It is difficult 

to imagine Congress segregating out States for Section 5 punitive damage reasons 

for coverage in a regulatory scheme. 

In fact, with respect to punitive damages, no compelling case can be made that 

all or most States violate a defendant’s due process rights. States have enacted laws 

carefully delineating the necessary proof and level of misconduct to permit a valid 

punitive damage verdict. States have implemented special and specific jury instructions. Each state requires, should a defendant elect, mandatory appellate review, 

often, if not uniformly, de novo. Criminal sentencing does not receive as much scrutiny and due process. Perhaps the biggest coup de grace to allegations of widespread 

due-process violations comes from the Supreme Court’s TXO decision:

Assuming that fair procedures were followed, a judgment that is a product of 

that process is entitled to a strong presumption of validity. Indeed, there are 

persuasive reasons for suggesting that the presumption should be irrebuttable, 

or virtually so.77

A case for widespread and longstanding due process violations cannot be made. 

V. MULTIPLE PUNITIVE DAMAGE AWARDS

Although I have already expressed the strong constitutional reasons why Congress may not regulate when a State may require punitive damages for the same 

pattern of conduct that may have merited punitive damages in another State, it is 

worth examining somewhat further the flawed logic of the anti-multiple punitive 

damage position. 

If a State could punish a defendant for its nationwide conduct, a result foreclosed 

by Campbell, there might be merit to limits on multiple awards. However, Campbell

makes clear that each punitive award can only be sufficient to punish and deter for 

what harms the defendant visited upon that State’s citizenry. Thus, if an organization that operates nationally engaged in an egregious fraud, the Illinois courts may 

award punitive damages based on the harm or potential harm the fraud had in Illinois, as well as the illicit Illinois-based profits generated by the fraud. The award 

may not consider the harms or profits generated by the same illicit fraud in Wisconsin, which alone may exact punishment for that in-state misconduct. 

Still, the law of most States would allow the defendant to introduce evidence of 

the first punitive award, show that it has effectively caused the defendant to mend 

its ways, and seek to avoid or limit any subsequent punitive damages because of 

the earlier award.78 The problem of multiple damages has been effectively treated 

by these provisions. 

Given that the Campbell Court endorsed the multiple punitive damage concept by 

limiting awards to in-state harms, Congress clearly cannot claim that it is implementing Campbell or responding to potential due-process violations. 

VI. REDISTRIBUTION OF AWARDS IS A STATE MATTER

I understand there is some interest on the Subcommittee in considering whether 

an award-splitting bill should be enacted. A number of states have adopted similar 

statutes that appropriate a percentage of any punitive damage judgment to the 
42

79 Utah Code Ann. § 78–18–1(3). 80See Cheatham v. Pohle, 789 N.E.2d 467 (Ind. 2003). 81See, e.g., Or. Rev. Stat. § 18.540 (60 percent). 82Dardinger v. Anthem Blue Cross & Blue Shield, 781 N.E.2d 121 (Oh. 2002). 83 Kirk v. Denver Publishing Co., 818 P.2d 262 (Colo. 1991)(statute designating one-third of 

punitive damage award as due to state general fund violated state and federal constitutions’

taking clauses). 

state or a public purpose. Utah was the first to enact such a law; there, 50 percent 

of any award goes to the State.79 Other states take a higher percentage. For example, Indiana takes 75 percent.80 Other states have similarly high percentages.81 In 

addition, one state supreme court, Ohio’s, has imposed a similar regime by judicial 

decision.82 And another state supreme court has found that such a reallocation law 

constitutes a taking of property without just compensation.83

Enacting such a law, to the extent permitted by the State’s constitution, is a sovereign choice that a State alone is entitled to make. The federal government cannot 

require such a choice. Nor may it, outside the tax laws, seek to share in the award, 

which, after all, exists to vindicate an individual State’s interest. 

VII. TAX LAW TREATING PUNITIVE DAMAGES NEEDS TO BE CHANGED

There is one area where Congress can do something about the unfair operation 

of the law on punitive damages. Punitive damages are taxable. When a state claims 

a portion of the punitive damages, the federal government still taxes the portion 

that goes to the State, even though those proceeds are never seen by the plaintiff. 

Also, under the majority view in the courts, the lawyers’ fee is not netted out 

against the recovery, so the plaintiff must pay taxes on that amount as well. The 

result, remarkably enough, is that the successful punitive-damage plaintiff may 

sometimes owe more in taxes than he or she receives from the judgment. 

Earlier this year, Senator Hatch offered an amendment to the tax bill to rectify 

this situation. It was not included in the final bill. I have attached a copy of his 

proposal, as well as several articles detailing the plight of plaintiffs here. This is 

one area where Congress does have power to remedy an injustice. I urge that it be 

passed along to the appropriate committee. 

VIII. CONCLUSION

Congress has little authority to regulate punitive damages or enact legislation 

that might control State authority in the realm of punitive damages. Moreover, the 

empirical evidence on punitive damages strongly suggests that there is no appropriate concern to be pursued here. The Campbell decision not only presents no new 

reason for Congress to act, but actually forecloses areas that once might have been 

appropriate. The Court endorsed a multiple punitive damage approach; Congress 

may not change the law in the opposite direction. Still, there is one area where Congress could and should act. It should fix the tax laws, which currently hold the prospect that a punitive damage awardee will end up owing the government more than 

he or she receives.

Mr. CHABOT. Mr. Schwartz. 

STATEMENT OF VICTOR SCHWARTZ 

Mr. SCHWARTZ. Chairman Chabot, Mr. Nadler, thank you for inviting me here today. I was just out in Cincinnati, in Findlay Market, and I mentioned your name, and they like you out there, 

which is a nice thing. 

Mr. Nadler, I am from your neighborhood. They like you there, 

too. So it is nice to have people that the voters like. I have been 

in hearings where they don’t. 

Mr. CHABOT. You are doing great so far. 

Mr. SCHWARTZ. On a serious note which affects our testimony, 

Mr. Nadler, for years you have been a defender of the Constitution, 

a defender of people’s rights, however unpopular. That is very relevant in what we are going to talk about today—what some of us 

are going to talk about, anyway. 
43

Punitive damages for years really presented no problem. They 

were awarded for intentional wrongdoing, for trespass, for things 

that we learned in the first year of law school about intentional 

torts. 

But it changed in the 1970’s, and then they started to be awarded for things that were not intentional. And then, because it was 

not intentional, they were awarded against product manufacturers. 

I won a case in Ohio, and the 6th Circuit sustained it, where I 

won a punitive damage against a company. And I remember Judge 

McCree said to me, ‘‘Professor Schwartz’’—whenever they said Professor Schwartz, I knew that I was in trouble—how can we award 

punitive damages here where the Admiral Television Company 

makes hundreds of sets and it can be awarded again and again and 

again? And I said, ‘‘Well, it is fair at least to award it in this case.’’

But there is a problem once you change the fundamental nature 

of punitive damages, and they are not awarded for intentional 

torts, and they are awarded again and again for the same conduct. 

And that does occur. 

Another change was in the amount. Until the 1970’s, you had no 

awards over a million dollars. Now they are commonplace. The 

studies that my colleagues refers to are—some are 10 years old. In 

one of them, the Rustad study, Professor Rustad says in his study 

nobody knows how many punitive damages there are and nobody 

ever will. 

One thing that is clear, though, is that multimillion dollar 

awards occur; and if they occur in 6 percent of the cases—if I had 

a gun to my head and it would only fire 6 percent of the time, I 

don’t think I would fire it. It is the threat of them that has actually 

reduced the number of cases that go to trial, because people can 

get whacked with very outlandish high awards. 

Now the Supreme Court more than once has said that punitive 

damages have run wild in this country, and the Court has tried to 

put some constraints on punitive damages. They are sound restraints. They have put up three factors in the Gore case—

reprehensibility, ratio and comparison with criminal conduct—that 

are good. 

But I disagree, and I am going to put some stuff in the record 

to show that lower courts have failed to follow what the Supreme 

Court has said, as recently as a few weeks ago when in a case 

called Key Pharmaceuticals, in which we filed the principal amicus 

brief, was remanded to an Oregon court. 

They got it half right. They applied the 9-to-1 ratio, which the 

Court did say was the rule, except if you have that unusual case 

where there is very little compensatory damages and there is very 

serious wrongdoing. There the 9-to-1 doesn’t fit, but in the rest of 

the time it does. 

If you read the opinion and read it as a legislator, as a matter 

of policy—anyway, they remanded it. The Court said, we will follow 

the ratio, no more than 9-to-1, but then they didn’t read the rest 

of the opinion and they allowed in, to inflate that award, evidence 

that was not directly dealing with the plaintiffs in the key case, 

some of it out-of-State evidence. 
44

1See Huckle v. Money, 95 Eng. Rep. 768 (C.P. 1763) (first case to use the term ‘‘exemplary 

damage,’’); Wilkes v. Wood, 98 Eng. Rep. 489 (C.P. 1763); Dorsey D. Ellis Jr., Fairness and Efficiency in the Law of Punitive Damages, 56 S. Cal. Rev. 1, 1 (1982). 

I would say for this Committee and in the record, there is not 

a doubt in the world that some lower courts are going to, some of 

them, thumb their nose at the Supreme Court. 

If people are interested in protecting constitutional rights—and 

this body has done it with voter rights, civil rights, all over the 

place, and I am going to submit an article written by a very good 

professor, not moi, not anybody on the panel about this—those constitutional rights need to be protected against rogue courts that 

have ignored the Supreme Court. 

This body can and should consider implementing the rules of 

State Farm and do it in a way that is easy to understand so that 

lower court judges understand what the rules are and higher court 

judges follow the rules, even though we are talking about unpopular defendants. 

The second thing this body can consider is multiple imposition of 

punitive damages for the same thing. And I take—and I have read 

very carefully my colleague’s testimony, but there is no—absolutely 

no warranty that people will not be punished again and again for 

the same thing. 

I found it interesting that he said, and I will conclude, that, well, 

you can go in front of a jury, and Mr. Peck is a litigator, and tell 

the jury that—you are just the jury now—I am not sure my client—they had one bad verdict against them, so I said, ladies and 

gentlemen—this is the way I begin my case—another jury has already punished you for punitive damages, my client, but you 

should just not think about that. 

So you are put in this dilemma of either telling them that your 

client has already been punished by another jury or not telling 

them and letting them think that they are the sole punisher and 

this is the only body that really can address that problem. 

I really thank you for holding hearings on this topic and for allowing me to present these remarks today. 

Mr. CHABOT. Thank you very much. 

[The prepared statement of Mr. Schwartz follows:]

PREPARED STATEMENT OF VICTOR E. SCHWARTZ

Mr. Chairman, I welcome your kind invitation to participate in this oversight 

hearing on ‘‘Potential Congressional Responses to State Farm Mutual Automobile 

Insurance Co. v. Campbell: Checking And Balancing Punitive Damages.’’ You have 

shown wisdom and good judgment in holding this hearing. Congressional action is 

needed to assure that fundamental due process rights, both substantive and procedural, are respected in order to protect citizens against unconstitutional punitive 

damage awards. 

Let me begin with a brief background about punitive damages. 

BACKGROUND ON PUNITIVE DAMAGES

Punitive damages began in England with a very legitimate purpose. They were 

used to help supplement the actions of state law enforcement to assure that wrongdoers were punished.1 When punitive damages began to be utilized by some of our 

states, they were similar to the laws of England in their scope and purpose. They 

were confined to intentional wrongdoing, such as battery, assault, false imprison-
45

2See Victor E. Schwartz et al., Reining in Punitive Damages ‘‘Run Wild’’: Proposals for Reform 

by Courts and Legislatures, 65 Brook. L. Rev. 1003, 1007–08 (1999). 3See Southern Kan. Ry. v. Rice, 38 Kan. 898 (1888) ($35 costs and fees, $10 injury to feelings, $71.75 punitive); Woodman v. Town of Nottingham, 49 N.H. 387 (1870) ($578 actual, $100 exemplary). See also R. Blatt et al., Punitive Damages: A State By State Guide To Law And Practice

§ 1.2, at 5 (1991) (‘‘[G]enerally before 1955, even if punitive damages were awarded, the size of 

the punitive damage award in relation to the compensatory damage award was relatively small, 

as even nominal punitive damages were considered to be punishment in and of themselves’’); 

Dorsey D. Ellis Jr., Fairness and Efficiency in the Law of Punitive Damages, 56 S. Cal. L. Rev. 

1, 2 (1982) (For most of their history, punitive damages were ‘‘rarely assessed and likely to be 

small in amount.’’). 4 J. Ghiardi & J. Kircher, PUNITIVE DAMAGES LAW & PRACTICE § 21.01, at 1 (1985). 5See, e.g., Rubeck v. Huffman, 374 N.E.2d 411, 413 (Ohio 1978) (‘‘caused by intentional, reckless, wanton, willful and gross acts or by malice inferred from conduct and surrounding circumstances’’); Seals v. St. Regis Paper Co., 236 So. 2d 388, 392 (Miss. 1970) (gross negligence 

and ‘‘reckless indifference to the consequences’’). See also J. Sales & K. Cole, Punitive Damages: 

A Relic That has Outlived Its Origins, 37 Vill. L. Rev. 1117, 1130–38 (1984) (discussing standards of conduct giving rise to punitive damages award). 6 J. Ghiardi & J. Kircher, PUNITIVE DAMAGES LAW & PRACTICE § 21.01, at 1 (1985). 7This trend has led one commentator to suggest that ‘‘[p]unitive damages have replaced baseball as our national sport.’’ Theodore B. Olson, Rule of Law: The Dangerous National Sport of 

Punitive Damages, Wall St. J., Oct. 5, 1994, at A17. See also Malcolm E. Wheeler, A Proposal 

for Further Common Law Development of the Use of Punitive Damages in Modern Products Liability Litigation, 40 Ala. L. Rev. 919, 919 (1989) (‘‘Today, hardly a month goes by without a 

multimillion-dollar punitive damages verdict in a product liability case.’’). 8TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 475 (1993) (Kennedy, J., concurring) 

(citing Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 9–12, 18 (1991) and Gertz v. Robert 

Welch, Inc., 418 U.S. 323, 350 (1974)). 9Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 18 (1991). 10See Victor E. Schwartz et al., Reining in Punitive Damages ‘‘Run Wild’’: Proposals for Reform by Courts and Legislatures, 65 Brook. L. Rev. 1003, 1007 (1999). 11 Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832, 839 (2d Cir. 1967) (‘‘The legal difficulties engendered by claims for punitive damages on the part of hundreds of plaintiffs are staggering. . . . We have the gravest difficulty in perceiving how claims for punitive damages in 

such a multiplicity of actions throughout the nation can be so administered as to avoid overkill.’’). 

ment and trespass.2 Their amounts were limited, rarely being greater than actual 

damages.3

Punitive damages standards remained the same for more than two centuries. Beginning in the 1970s, however, they started to change.4 Judges, not legislators, 

made these changes and because judges did so, they made their application retroactively. 

First, the fundamental concept of intentional or purposeful wrongdoing was 

muted. Reckless or even gross negligence was deemed enough to punish.5 This was 

a significant change, because the standards of gross negligence and recklessness are 

more amorphous than intentional, purposeful conduct. 

Second, there was an increase in the number of cases in which punitive damages 

were sought and the types of conduct that might fall under their web.6 Damages 

were assessed for failure to have a correct warning, a mistake in a surgical procedure, or a failure to have discovered a particular risk before a product was put on 

the market. These now come within the scope of punitive damage awards. 

Third, the size of the awards increased astronomically. Prior to 1970, there was 

no punitive damage verdict of more than one million dollars. Today, multi-million 

or even multi-billion dollar verdicts shock no one.7 This change caused the Supreme 

Court of the United States and its Members to ‘‘time and again’’ 8 express their concern about ‘‘punitive damages awards that run wild’’ in this country.9

Finally, punitive damages for the same conduct began to be assessed a multiplicity of times. In early common law, this was virtually impossible, as punitive 

damages were assessed against individuals for harm they caused to one person.10

Once punitive damages were extended to product manufacturers or hospitals, or any 

entity that engaged in similar conduct with potentially multiple plaintiffs, the scepter of multiple punishment was possible and was often used. Decades ago, Henry 

Friendly, one of the most distinguished judges of the Twentieth Century warned 

against this,11 but his warnings were ignored. 

THE SUPREME COURT RECOGNIZES THAT PUNITIVE DAMAGE AWARDS MAY TRAMPLE

ON THE CONSTITUTION

There have been many debates about punitive damages: Are they worthwhile? 

How should they be confined? The Supreme Court of the United States was not part 

of these debates. The Court only entered the fray when punitive damages trespassed 

on the Constitution. The Supreme Court has now visited the issue seven times, for-
46

12State Farm Mut. Auto. Ins. Co. v. Campbell, 123 S. Ct. 1513 (2003); Cooper Indus., Inc.

v. Leatherman Tool Group, Inc., 532 U.S. 424 (2001); BMW of N. Am. v. Gore, 517 U.S. 559 

(1996); Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415 (1994); TXO Prod. Corp. v. Alliance Res. 

Corp., 509 U.S. 443 (1993); Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1 (1991); BrowningFerris Indus. of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257 (1989). 13See Campbell v. State Farm Auto. Mut. Ins. Co., 65 P.3d 1134 (Utah 2001), rev’d 123 S. 

Ct. 1513 (2003). 14See Bocci v. Key Pharmaceuticals, Inc., 35 P.3d 1106 (Or. App. 2001), vacated by 123 S. Ct. 

1781 (2003). 15See BMW of N. Am. v. Gore, 646 So. 2d 619 (1994), rev’d, 517 U.S. 559 (1996). 16 347 U.S. 483 (1954). 17 384 U.S. 436 (1966). 18 410 U.S. 113 (1973). 19 376 U.S. 254 (1964). 20The Sept. 10, 2003 editorial, Punitive, Schmunitive, also is available online at http://

www.wsj.com (subscription only). 21 376 U.S. at 279–280. The Court extended its rule some time later to public figures in Curtis 

Publishing Co. v. Butts, 388 U.S. 130 (1967). 22 123 S. Ct 1781 (2003). 23On remand from the U.S. Supreme Court, the lower court allowed out-of-state lawful conduct to be considered as a basis to sustain the punitive damages award. Bocci v. Key Pharmaceuticals, Inc., 2003 WL 22097104 (Or. App. Sept. 10, 2003). 

mulating rules for both procedural and substantive due process.12 The Court has 

recognized that unrestricted punitive damages violate fundamental rights of our 

citizens. They can be destructive of property interests, cause economic chaos, including loss of jobs, and be palpably unfair. 

While the Supreme Court decisions have been welcome, a brand-new phenomenon 

has occurred since their decisions were rendered. In some states, lower courts either 

have either not grasped the meaning of these decisions or have ignored them. Those 

lower courts include, among others, the Supreme Court of Utah,13 the Court of Appeals of Oregon,14 and the Supreme Court of Alabama.15

If this phenomenon had occurred with important Supreme Court decisions, such as Brown v. Board of Education,16 Miranda v. Arizona,17 Roe v. Wade,18 and perhaps most on point, New York Times v. Sullivan,19 the mainstream media would 

have been outraged. Until a recent Wall Street Journal editorial, which is appended 

to this testimony, the willful failure of some courts to follow Supreme Court guidelines have been ignored.20

Now, a number of state supreme courts have and will continue to assiduously follow the Supreme Court’s constitutional guidelines that protect people from the imposition of excessive and unconstitutional punitive damage awards. For that reason, 

some have suggested that action by Congress is unnecessary. This perspective, however, misconstrues the impact that just a few maverick courts can have when they 

do not follow Supreme Court guidelines on the Constitution. 

Consider an example with some similarities that can be especially appreciated by 

the media. Almost forty years ago, the Supreme Court of the United States decided 

New York Times v. Sullivan, which provided protection under the First Amendment 

of the Constitution in a defamation case brought by a public official seeking to impose liability as well as punitive damages.21 The Court held that the media could 

not be subject to a successful defamation action unless it was shown that it had engaged in actual malice. Fortunately, virtually every court in the United States followed the New York Times decision. What if some lower courts had decided not follow it, in the same way some courts have not followed the Supreme Court’s mandate 

on punitive damages? The very policy concern of the Supreme Court in New York 

Times—a chilling effect on reporters writing about public figures—would still remain. This is because many newspapers and broadcast outlets are distributed 

throughout the United States. Many manufacturers, distributors and others operate 

in all fifty states. Unconstitutional punitive damage awards chill their benign actions. They could have a detrimental effect on jobs, costs, innovation and other activities that society wants. A few courts who do not follow these guidelines should 

not infringe upon the protections adhered to by a majority of courts. 

This phenomenon prompts the need for Congress to consider model constitutional 

guidelines for punitive damage awards in legislation. The case of State Farm v. 

Campbell makes the need for such legislation even greater, because the State Farm

decision specifically spelled out outer constitutional limits on punitive damages. Unfortunately, already, at least one lower court, in a case in which we were directly 

involved, Key Pharmaceuticals, Inc., v. Edwards,22 has ignored a portion of the State 

Farm decision—even though the Supreme Court of the United States had vacated 

a very large punitive damages award in that case under the auspices of State 

Farm.23
47

24The Model Act is also available online at http://www.alec.org. 25 532 U.S. 425 (2001). 26 123 S. Ct. at 1523. 27William Schwarzer, Punishment Ad Absurdum, 11 CAL. LAW 116 (Oct. 1991). See also 

Juzwin v. Amtorg Trading Corp., 705 F. Supp. 1053, 1064 (‘‘[T]he court holds that due process 

places a limit on the number of times and the extent to which a defendant may be subjected 

to punishment for a single course of conduct. Regardless of whether a sanction is labeled ’civil’

or ’criminal’ in nature, it cannot be tolerated under the requirements of due process if it 

amounts to unrestricted punishment’’), vacated, 718 F. Supp. 1233 (D. N.J. 1989), rev’d on other 

grounds sub. nom. Juzwin v. Asbestos Corp., 900 F.2d 686 (3d Cir.), cert. denied, 498 U.S. 896 

(1990); In re N. Dist. Of Calif. ‘‘Dalkon Shield’’ IUD Prod. Liab. Litig., 526 F. Supp. 887, 889 

(N.D. Cal. 1981) (‘‘A defendant has a due process right to be protected against unlimited multiple punishment for the same act’’), vacated and remanded on other grounds, 693 F.2d 847 (9th 

Cir. 1982), cert. Denied, 459 U.S. 1171 (1983); Racich v. Celotex Corp., 887 F.2d 393, 398 (2d 

Cir. 1989) (‘‘we agree that the multiple imposition of punitive damages for the same course of 

conduct may raise serious constitutional concerns, in the absence of any limiting principle’’); In 

re Fed. Skywalk Cases, 680 F.2d 1175, 1188 (8th Cir.) (Heaney, J., dissenting) (unlimited punishment for one course of conduct ‘‘would violate the sense of ’fundamental fairness’ that is essential to constitutional due process’’), cert. Denied, 459 U.S. 988 (1982); Magallanes v. Superior 

Ct., 167 Cal. App. 3d 878, 888 (1985) (‘‘It is also fair to ask whether a defendant who has been 

punished with punitive damages when the first case is tried should be punished again when 

the second, or the tenth, or the hundredth case is tried.’’); King v. Armstrong World Indus., Inc., 

906 F.2d 1022, 1031 (‘‘It must be said that a strong arguable basis exists for applying the due 

process clause . . . to a jury’s award of punitive damages in a mass tort context.’’), reh’g denied, 

914 F.2d 251 (5th Cir. 1990), cert. Denied, 500 U.S. 942 (1991); McBride v. General Motors 

Corp., 737 F. Supp. 1563, 1570 (M.D. Ga. 1990) (‘‘due process may place a limit on the number 

of times and the extent to which a defendant may be subjected to punishment for a single course 

of conduct’’). 28Ga. Code Ann. 51–12–5.1(e)(1) (West 2003). 

The American Legislative Exchange Council (ALEC) has adopted a Model Constitutional Guidelines for Punitive Damages Act, created for state legislation. The 

Act, which is appended to this testimony, could also serve as a model for federal 

legislation.24

ALEC’S MODEL CONSTITUTIONAL GUIDELINES FOR PUNITIVE DAMAGES ACT

The Model Act assures procedural due process in punitive damage cases. It is not 

intended to establish punitive damages in any state, or supplement tort reforms 

that may limit when punitive damages should be awarded, or the amount of those 

damages. Its purpose is to incorporate the Supreme Court’s decision in Cooper Industries v. Leatherman Tool Group,25 which required appellate courts to provide a 

de novo review of the constitutionality of punitive damages. This means that lower 

courts cannot make discretionary, subjective and non-reviewable decisions about 

whether punitive damages award are constitutional. It is our understanding that in 

some jurisdictions, the Leatherman decision has been given lip service at best. 

Perhaps of greater importance, ALEC’s Model Act spells out fundamental, substantive due process guidelines for punitive damage awards. It makes clear what 

evidence a court may consider, as well as evidence that a court may not consider; 

for example, evidence of general wrongdoing on the part of a defendant. As the Supreme Court of the United States in State Farm v. Campbell made clear, ‘‘Punishment on these bases creates the possibility of multiple punitive damage awards for 

the same conduct....’’ 26

We also suggest that the Congress consider legislation that directly addresses the 

problem of multiple imposition of punitive damages. 

CONGRESSIONAL ACTION TO STOP MULTIPLE IMPOSITION OF PUNITIVE DAMAGES

FOR THE SAME CONDUCT

There is only one civil justice tort reform agreed to by liberal, moderate and conservative judges: to place reasonable limits on multiple imposition of punitive damages for the same or similar conduct. Respected Senior Federal District Judge William Schwarzer of California has written: ‘‘Barring successive punitive damage 

awards against a defendant for the same conduct would remove the major obstacle 

to settlement of mass tort litigation and open the way for the prompt resolution of 

the damage claims of many thousands of injured plaintiffs.’’ 27 Judicial scholars realize that individual states cannot resolve the problem of multiple imposition of punitive damages. While some states, for example, Georgia, have successfully tried,28

they can only prevent multiple imposition of punitive damages within their borders. 

All a plaintiff lawyer need do is to shop for another forum that is still available, 

and hit a company again for the same wrongdoing. 
48

29See Edwards v. Armstrong World Indus., Inc., 911 F.2d 1151, 1155 (5th Cir. 1990) (‘‘If no 

change occurs in our tort or constitutional law, the time will arrive when [defendant’s] liability 

for punitive damages imperils its ability to pay compensatory claims and its corporate existence.’’) 30Senate Bill No. 78 (105th Cong. (1997)) also is available online at http://www.thomas.gov. 

Since a company may have injured many people, some have suggested that there 

would be nothing wrong with multiple hits, but there is. Multiple imposition of punitive damages for the same basic conduct has and will drive companies into bankruptcy before people receive their compensatory damages.29 Moreover, a jury may 

not appreciate that the defendant has already been punished for the same basic 

wrong. Some have suggested that defense lawyers can control this by telling the 

jury that their client has already been punished. Anyone who understands basic 

trial tactics knows, however, that if a lawyer tells a jury during a trial that the defendant has not only been found liable, but has already been punished by another 

jury, the door would be closed on his or her defense. A defense lawyer is placed in 

a true dilemma: if he or she does not tell a jury about a prior award, the jurors 

would assume that they are the only ones to punish the defendant. If the lawyer 

tells the jury about a prior award, he or she has conceded the case. 

Senator Hatch, Senator Lieberman, and others have worked in the past on the 

problem of multiple imposition of punitive damages. I have attached a copy of a bill 

on the subject that was developed by Senator Hatch in a prior session of Congress.30

There has been scholarship on the issue, showing the extent of the danger of multiple imposition of punitive damages. 

CONCLUSION

The Supreme Court of the United States has spoken loud and clear in State Farm 

Mutual Automobile Insurance Co. v. Campbell that substantive constitutional limits 

must be placed on punitive damages. There is a very real danger that these limits 

will be ignored or not understood by courts. That is why this oversight hearing is 

of particular importance, because this body can assure that basic, fundamental constitutional rights are protected with respect to outrageous punitive damage awards. 

No other body can do so. Consideration should be given to sound legislation to address this issue.
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Mr. CHABOT. Now each of the Members up here, we have an opportunity to address questions to the panel for 5 minutes; and I 

will begin with myself. 

Mr. Owen, I will start with you first. 

Given that the Supreme Court takes up an extremely small percentage of the cases it is requested to hear each year, many lower 

courts may not fear being overturned by the Supreme Court in any 

given case. Does that strengthen the argument for Congress’ stepping in to at least codify the outermost constitutional boundaries 

of punitive awards that Congress can discern from the Supreme 

Court’s decisions? 

Mr. OWEN. Yes, Mr. Chairman, I think it most certainly does. 

Following up on Mr. Schwartz’s observations, enforcement of constitutional rules is very slight and expensive and takes many years 

and is unusual. It is really only the rarest case that ever really 

gets a fair, full constitutional hearing. But, if I can just change the 

direction on that a little bit, I think, since there are constitutional 

implications, very definite ones in the punitive damages area, and 

there are certain due process prohibitions that would be very helpful to enact by legislation, I think this Committee would be doing 

a disservice if it tried to limit its scope of punitive damages reform 

to those that are constitutionally required. I would suggest that 

you begin with the constitutional core but then add in other fair 

and appropriate reforms, whether demanded by the Constitution or 

not. 

Mr. CHABOT. Thank you very much. 

Mr. Peck, let me go to you next, if I can. Justice Ginsburg, who 

did not agree with the State Farm case, nevertheless stated that— this is her quote: ‘‘Damage capping legislation may be altogether 

fitting and proper.’’ I would assume, based upon your testimony, that you disagree 

with that point of view. Why do you disagree with Judge Ginsberg 

on that? 

Mr. PECK. Well, first of all, she was referring to State legislation. 

She was not at all suggesting that Congress had any authority 

here. 

Mr. CHABOT. But we are essentially the same thing as a legislature that is at the Federal level. 

Mr. PECK. No, you are not, because you have the restriction of 

the 10th amendment. You cannot invade something that is of State 

concern. And it is part of the State’s interest to award punitive 

damages, as the Campbell case says itself, to determine what the 

amount of that punishment is. It is clearly outside of the Federal 

jurisdiction here. 

Mr. CHABOT. So your allegation is, if we act upon this, it itself 

would be declared unconstitutional or declared as such? 

Mr. NADLER. With respect to the States. You may be thinking of 

Federal Courts. 

Mr. PECK. To the extent that you are talking about Federal 

causes of action. 

I argued a case this term in the Supreme Court called Jinks v. 

Richland County. What it validated—I was defending a congressional enactment in that particular case. This was a supplemental 

jurisdiction tolling provision that operated on the State statute of 
69

limitations. What saved it and what my successful argument was 

was that the underlying cause of action began as a Federal cause 

of action. If it had only been a State cause of action, the Court, 

which unanimously ruled in my favor, would have unanimously 

ruled the other way. 

But let me say that, in the Cooper case, the Court noted that 

there were four instances in which States enacted caps on punitive 

damages since the BMW v. Gore case: Ohio, Alabama, North Carolina, and Alaska. 

In Ohio, that cap was struck down by their State Supreme Court 

under their State constitution. 

In Alabama, a previous cap had been struck down. That case has 

now been abrogated, but no one has challenged the current statute. 

But, as Professor Owen’s testimony shows, there is a compensatory 

element to Alabama punitive damages, so, therefore, there is a real 

question about its constitutionality. 

Alaska was challenged. It was upheld by a 2–2 vote in their Supreme Court, having no precedential value as a result. 

And, finally, the North Carolina cap was argued by me two 

weeks ago in the North Carolina Supreme Court. As I argued 

there, the fact is that the only branch of Government that has the 

authority to set aside a jury verdict or a judge’s judgement as excessive is the judiciary. 

Mr. CHABOT. My time is winding down. So let me ask one more 

question, if I can. 

Mr. Schwartz, do you have any comments on the empirical research of Dr. Daniel Kahneman, who won the 2002 Nobel Prize in 

economics? He wrote, and I will quote, ‘‘Judges should decide on 

the appropriate level of punitive damages just as they do criminal 

punishment, subject in both cases to guidelines laid down in advance.’’ Do you have some comment? 

Mr. SCHWARTZ. I think it would be constitutional to do that, because judges decide sentences in criminal cases. It is not a reform 

that I think will dramatically change the current situation. It will 

cut down on outliner verdicts, in other words very, very extreme 

verdicts. 

I do want to suggest that your question about Justice Ginsberg 

was never answered. The answer is that she favors it, and there 

are caps on punitive damages in a number of States that have been 

sustained. The issues where it has been held unconstitutional are 

under provisions of State constitutions; and State constitutions, as 

you may know, are 3 or 400 pages. And if a particular judge has 

a particular ideological view, he has or she has a lot of room to 

strike down anything. 

So I just want to mention that in response to the question you 

asked. 

Mr. CHABOT. Thank you very much. 

I now recognize the gentleman from New York for 5 minutes. 

Mr. NADLER. Let me ask first Mr. Peck. I was intrigued by what 

you were saying a moment ago. Only the judiciary can limit a jury 

verdict constitutionally, is that what you are saying? 

Mr. PECK. The determination that a jury’s verdict is excessive is 

one that by practice and precedent for 200 years we have said belongs within the judiciary as part of the fair administration of jus-
70

tice. Separation of powers prevents the legislation from overriding 

it. 

Mr. NADLER. So you think that a congressional limit, even in a 

Federal case, would be unconstitutional for that reason, violation 

of separation of powers? 

Mr. PECK. I agree that it does, and so does Justice Scalia who 

wrote to that point on the Plaut case. 

Mr. NADLER. Certainly a—this is on punitive damages? 

Mr. PECK. Regardless. 

Mr. NADLER. On compensatory damages the same? 

Mr. PECK. Yes. 

Mr. NADLER. So you think that all the proposals in Congress that 

we have been debating for the last God number of years are unconstitutional? 

Mr. PECK. I do. 

Mr. NADLER. Thank you. And it would be more so were we to attempt, with respect to the 10th amendment, to legislate a limit on 

State court punitive damages, I would assume? 

Mr. PECK. Absolutely. 

Mr. NADLER. Mr. Owen, you said that theoretically you want punitive damages as a deterrent to wrongdoing, as a punishment for 

egregious misconduct, but in real world it doesn’t work. In two sentences, please, why doesn’t it work in the real world? What is the 

problem with it? 

Mr. OWEN. The problem, Congressman, is that there are the outlying verdicts. 

Mr. NADLER. The problem is it is abused, is what you are saying? 

Mr. OWEN. Yes. 

Mr. NADLER. Let me ask you a different question. Given—well, 

first of all, do you accept the propriety of the idea of punitive damages as a deterrent to egregious misconduct so that people can’t 

say, all right, we will kill a number of people or injure them and 

pay damages as a cost of doing business? 

Mr. OWEN. I agree that it is a deterrent. I think there is a real 

question of how empirically——

Mr. NADLER. Fine, you agree theoretically that that is a good 

purpose. 

Mr. OWEN. Oh, yes. 

Mr. NADLER. Let me ask you the final question. Why should 

there be any limitation—I shouldn’t say limitation. Why should 

there be any connection between the amount of damages someone 

actually suffered, compensatory damages, actual damages, and punitive damages? If punitive damages are a deterrent, shouldn’t it 

really be determined by the size of the pocket of the tort-feasor, so 

that the mom and pop that is deliberately putting something out 

in front that someone is going to trip over, because he just likes 

people to trip, $10,000 punitive damages might deter that. 

But, General Motors, that has a few billion dollars in the bank, 

you might, in order to stop them from doing whatever it is they 

might have done once or might in the future do again, without 

casting any aspersions against General Motors or anyone else at 

this point, but with a large tort-feasor, you might need very large 

punitive damages, not because of the actual damage suffered by the 

guy who was injured by the car turning over but by the fact that 
71

you want them not to manufacture cars that they know are going 

to turn over all of the time. 

So why is that—if you are going to put a limit on—any limit on 

punitive damages, why shouldn’t that limit have some relevance to 

the pocket of the tort-feasor, rather than to the actual damage of 

the individual plaintiff, who after all is getting compensated? But 

what you really want to do with punitive damages is make sure 

that there aren’t a lot of other victims in the future. 

Mr. OWEN. I do think that is one reasonable way to limit punitive damages, although not as effective as a multiplier. 

Mr. NADLER. But a multiplier has no reference to how effective 

that is going to be. My problem with the multiplier is that you may 

suffer $10,000 worth of damages from your injury when your car 

turned over. The next guy suffers a hundred thousand. The third 

guy suffers a hundred thousand. The 500th guy suffers a hundred 

thousand. And $90,000 damage is nine times your actual damages, 

is a cost of doing business to the guy manufacturing the car that 

flips over all of the time. Whereas, if you take a look at them and 

you say—well, let’s take someone else. Daimler-Benz has billions of 

dollars. We should have a very large damage to prohibit them from 

doing this. Isn’t that a more fair and effective way of measuring it 

than a nonexistent connection with the actual damages by a particular plaintiff? 

Mr. OWEN. Yes. In an individual case it is definitely more fair 

and logical. It is a question then of—— Mr. NADLER. Which is more fair and more logical? 

Mr. OWEN. Your approach, that is, unlimited punitive damages 

measured by wealth, reprehensibility and—— Mr. NADLER. Deterrence. 

Mr. OWEN. Deterrence and also the plaintiff’s harm. 

Mr. NADLER. Thank you. 

Would you comment on this, Mr. Peck? 

Mr. PECK. Yes. Since it is supposed to vindicate the State’s interests it is not supposed to be measured by what damage was to the 

individual plaintiff. I think it is far more logical. And most States 

have that in there not only for that reason but also to make sure 

that you don’t bankrupt a defendant and to make sure that it is 

proportionate to their wealth. 

Mr. NADLER. Most States have a relationship to—— Mr. PECK. Yes. 

Mr. CHABOT. The gentleman’s time has expired. 

Mr. NADLER. Can I have one additional minute, please? 

Mr. CHABOT. Without objection. 

Mr. NADLER. Thank you. 

Given that and the fact that the Court said that in State Farm, 

how do you deal with the courts also talking about a relationship 

to multiple of actual damages for a particular plaintiff? 

Mr. PECK. The fact is that they are talking about harm and potential harm, and that is only supposed to be one of the factors. So 

you are not looking at this individual plaintiff’s compensatory damages, but you are looking at the harm to the whole. 

Mr. NADLER. Thank you. 

So any so-called codification which said X dollars would be 

against what the Supreme Court is really saying? 
72

Mr. PECK. It would not only be against it, but the fact is due 

process is a two-edged sword. It is supposed to work for the plaintiff as well. 

Mr. NADLER. So it would be unconstitutional in your opinion? 

Mr. PECK. Yes. 

Mr. CHABOT. The gentleman from Iowa, Mr. King, is recognized 

for 5 minutes. 

Mr. KING. Thank you, Mr. Chairman. 

I thank the panel for their testimony here this afternoon. A series of things are on my mind about it, but I would initially like 

to go to Mr. Schwartz and ask you if you believe it would be unconstitutional for Congress to establish caps on punitive damages. 

Mr. SCHWARTZ. Absolutely not. I would submit for the record our 

paper in the Harvard Journal of Legislation which outlines all of 

the case law as wide support. This body has acted to limit and restrict people’s rights to sue. The General Aviation Recovery Act of 

1994, which Mr. Peck’s group said was unconstitutional, was 

upheld, has been upheld. It has been law since 1994. It has produced about 25,000 jobs. 

I am not going to turn this into a legal debate, but our cases are 

strong, and this is absolutely valid law. This body has the right, 

under the commerce clause and also under the 14th amendment, 

to put in place restrictions on punitive damages. 

Mr. KING. Thank you, Mr. Schwartz. 

Mr. Peck, given that your position prevailed and the caps would 

be unconstitutional in your view, in the event that we had multiple 

punitive damages that were awarded by multiple States in a massive fashion that impacted upon our economy in such a negative 

way that we couldn’t sustain our infrastructure, how might we 

then provide a solution for that problem in your view? 

Mr. PECK. There are tax laws that can provide different kinds of 

ways in which Congress can address the economic position of those 

companies. 

But let’s remember that in the Campbell decision, by saying that 

you can only punish for in-State harms, they have basically endorsed multiple punitive damage awards. They have said that you 

can only punish in Utah. Someone in Illinois who suffers the same 

thing, they can seek punitive damages for the harms that occurred 

in Illinois, and so they have multiple punitive damages here. 

Mr. KING. Yet the judgment of the State court might be excessive 

to the damage within that particular State, and then your view 

that it’s outside of the purview of the Supreme Court? 

Mr. PECK. No. If it is excessive on a constitutional basis, then the 

U.S. Supreme Court can reverse it. In fact, the State courts take 

what the U.S. Supreme Court does very, very seriously. On Friday 

of this past week I was in Salt Lake City and served on a panel 

with the two people who are arguing the remand of the Campbell

case. They are arguing on the basis of a 1-to-1 or 1-to-9 ratio. That 

is essentially what the debate is going to be before the Utah Supreme Court. 

Mr. KING. Thank you. And I tend to concur with Mr. Nadler and 

his consideration of that ratio and the validity or lack of validity 

thereof. 
73

But back to Mr. Schwartz. Do you have a sense of what litigation 

is costing this country as, say, a percentage of our gross domestic 

product? 

Mr. SCHWARTZ. There was a report called Trial Lawyers, Inc. 

that came out this morning; and there is also a telling House report that can give better information than I of the billions of dollars that it costs, and we will see that you have copies of the report. 

Mr. KING. I look forward to seeing that report. 

And then might you also have some ideas on how we could rein 

in the punitive damages portion of this litigation that haven’t been 

delivered here this afternoon? What would be—if you had to put 

out the menu of how we might address this, what else is on the 

menu that we haven’t spoken about this afternoon? 

Mr. SCHWARTZ. Well, I think the principal menu has been covered. But I would emphasize—and since Mr. Peck has said here 

today—because since we need to pass legislation, not just go in the 

world of ideas that go nowhere, if I understand him, he has said 

that the Supreme Court of the United States has held that you 

cannot consider in State A activities that occured in another State. 

It will help a lot simply to have that framed in law and deal with 

the problem of hitting a company again and again for the same 

thing. 

My testimony has quotes from judges all over this country calling 

upon this body to deal with multiple imposition of punitive damages, and I think that is something around which a consensus can 

be built. There are many other ideas on the punitive damages, but 

we want to have ones that can be enacted into law, and that one 

I believe can develop a consensus of people from both parties. 

Mr. KING. Do you believe that unnecessary litigation is being 

driven by contingency fees? 

Mr. SCHWARTZ. No, I don’t. I think that the unnecessary litigation is dealt with because we don’t have strong rules—and Mr. 

Peck will disagree. But I believe that we do not have strong rules 

against frivolous suits. If we had strong penalties on lawyers who 

brought baseless litigation, they wouldn’t bring them. But right 

now they know it is heads I win, tails you lose. If they bring a 

baseless lawsuit, some of them—and I respect how they figure—

calculate exactly what defense’s costs are going to be almost to the 

nearest thousand dollars, make an offer of settlement that is under 

that cost, and the case is settled. If you have strong, vigorous rules 

against baseless lawsuits where the attorney who brought that 

lawsuit had to pay, that is the way to go with that problem, not 

the contingency fee which provides a vehicle for people who may 

not have money to have a lawyer. 

Mr. KING. Might you also provide that in print for me if it is possible? 

Mr. SCHWARTZ. Yes, sir. 

Mr. KING. Thank you, Mr. Schwartz and Mr. Peck; And I want 

to thank you, Mr. Chair. 

Mr. CHABOT. Thank you very much. 

The gentleman from Alabama, Mr. Bachus, is recognized for 5 

minutes. 
74

Mr. BACHUS. I thank the Chairman, and I appreciate all of your 

testimony. 

My first question, I guess I will start with all of you who believe 

that punitive damages are appropriate and serve a valid purpose 

in our judicial system? 

Mr. PECK. Professor Owen testified to that. Let me put myself on 

the record believing that as well, yes. 

Mr. BACHUS. All right. 

Mr. SCHWARTZ. Punitive damages can deter wrongful conduct, 

and that is the good side. The bad side is that they are out of control. They can deter good things that they need. They can cost jobs. 

They can hit pension funds. They can stop work when our country 

needs full employment, not less employment because of excessive 

punitive damages. 

Mr. BACHUS. So a legitimate purpose, but they can be abused? 

Mr. SCHWARTZ. Yes, sir. 

Mr. BACHUS. Okay. I know when this subject comes up we all 

hear of runaway juries. You know, you also hear of frivolous lawsuits or, you know, lawsuits are outrageous in some fact situations. 

What you don’t hear is a practice on the other side of plaintiffs, 

people that have been harmed where it takes a long time to compensate them or where they are not compensated. You know, insufficient compensation. Would you agree that if the judges review 

cases to decrease damages, would they also be appropriate to let 

them increase damages? 

Mr. PECK. I would like to address that. In the courts we have 

concepts called remittitur and additur. 

Mr. BACHUS. That is right. 

Mr. PECK. The fact is that if a judge does have the authority and 

it is not a function of the jury to determine the amount of damages, 

then they have the authority for additur. But it has been the history of this country, too, that juries have the authority to determine the amount of damages, which is why when a judge orders 

a remittitur you have to offer a new jury trial. That is the substance of the 7th amendment, and it is the substance of the cognate 

right to trial by jury in every State constitution. 

Mr. BACHUS. Would either—— Mr. NADLER. Excuse me. Would the gentleman yield for a moment? Would the gentleman yield for a moment to clarify something? 

Mr. BACHUS. Without losing any of my time. 

Mr. NADLER. With the Chairman’s indulgence. 

Mr. CHABOT. For an additional 1 minute. 

Mr. NADLER. Were you saying that—I thought I heard you saying 

this. But were you saying that if a judge decreases the amount of 

jury award, it has got to go to another jury? 

Mr. PECK. That is what the remittitur is. Unless you accept the 

decreased amount, you have the right to opt for a new jury trial 

and have a new jury come up with a new determination, because 

that is the substance of the right to trial by jury. And the Supreme 

Court said that in 1996 in an opinion written by Clarence Thomas 

for the unanimous court. 

Mr. NADLER. I suppose I am glad to hear that. But I always took 

for granted—I always thought—you read all the time about the 
75

jury awarded X dollars and the Court thought it inappropriate and 

reduced it to Y. 

Mr. PECK. What happens is that a lawyer will often accept the 

reduced amount rather than go to the expense of a new trial. 

Mr. BACHUS. I have accepted reduced amounts. They encourage 

in a lot of cases settlements of cases, which I think it is in the interest of all of us to speed justice. Now, it can be a gun to your 

head, but would you comment on that? 

Mr. OWEN. I will comment on it, Mr. Congressman, from a more 

theoretical view. I am not in the courtrooms, but I have read considerably about their use in court. And, yes, I am sure, as Mr. 

Schwartz said—although I think he was suggesting that in a negative way—that it does encourage settlement. In cases where there 

is a fair argument for punitive damages there is usually fair evidence of reprehensibility, and I think then that what is likely to 

happen is that the case is likely to settle for full value of compensatory damages including perhaps attorney’s fees, and so it serves 

a very, in my judgment, a positive role there. 

Mr. SCHWARTZ. I don’t think they are positive in a lot of roles 

today, if you have and are threatened with an unlimited amount 

of punishment, A. B, punitive damages in most States are not covered by insurance, which is an important thing to note in this 

record. So that has an effect in the terms of settlement that can 

create irrational behavior on both the part of the insurer that worries about a case against it if it doesn’t settle, by its insured, and 

the result may not be justice at all. If there were reasonable limits 

on punitive damages and it was not out of control, as the Supreme 

Court has said, then they would serve a proper function. 

And forgive me for this one, but two of my young colleagues are 

here and I tell them, at every hearing I learn something; and I 

have—to hear Mr. Peck, who is a dear friend, quote both Justices 

Thomas and Scalia to Mr. Nadler is something new to me. So I just 

would share that with the Committee. 

Mr. CHABOT. It is a new experience for all of us. 

Mr. PECK. And I do it all the time in court. 

Mr. BACHUS. Can I close with one question? And this is to me 

what my concern in all this is. These panelists, obviously you all 

are much more qualified than any of us. You know, you have specialized in these things, and you have come to sort of different conclusions. And this is my basic question. 

You know, the problem, to the extent that there is a problem, 

with punitive damages, and I think we all admit that there are 

problems, should it be addressed by the judicial branch? And would 

it be more appropriate for it to be addressed there? Would it not 

be a less political disposition? 

Mr. SCHWARTZ. Well, the others have spoken. I will be very brief. 

Mr. Peck and I have a fundamental disagreement about this. I 

believe the legislature has the right to make laws on damages, and 

they have had that right since the very beginning. Because you 

don’t——

Mr. BACHUS. And I am not arguing. I believe I agree with you 

and probably disagree with Mr. Peck in that I think that we have 

the right. What I guess I am saying is would it be more appro-
76

priate or could the judicial branch not do a more expertise or a better job? 

Mr. SCHWARTZ. That is a very good point. If the judicial branch 

acted in some harmony, we would be fine. I cite a number of Supreme Court opinions in my text where all courts have really followed them—Brown v. Board, Miranda. With punitive damages, I 

submit they haven’t done that. So a few courts, five, six courts, can 

up-end the public policy of the whole Nation. 

If you have, for example, with a Supreme Court case that dealt 

with first amendment rights and libel, New York Times v. Sullivan, five States that simply didn’t follow it, the New York Times, I have 

to worry about those States. 

So I think this body, with this subject, to protect this constitutional right, should act; and we cannot leave it to random action 

by the judiciary. 

Mr. CHABOT. The gentleman’s time has expired. 

Mr. BACHUS. If we might let the other two respond? 

Mr. CHABOT. If you both want to respond. 

Mr. PECK. Let me briefly add that if Brown v. Board of Education had been followed, we wouldn’t have had Cooper v. Aaron.

Where the Supreme Court forced compliance with Brown v. Board 

of Education, we wouldn’t have had many other subsequent cases. 

The judiciary is very good at policing itself, and here we are talking about something that you have to evaluate the individual evidence that has been put into that case about how reprehensible an 

act is. No mathematical formula can do that. That is why you have 

to leave it to the courts, and the courts are constantly refining 

those formulas. 

Mr. CHABOT. Mr. Owen, did you want to respond to that? 

Mr. OWEN. You know, just briefly, that here again I am in the 

middle, that from a theoretical perspective I would much prefer 

that it be left with the courts on an individualized case basis and 

rule basis. But as a practical matter I think treble damages will 

do pretty good rough justice in a complicated world. It works in 

anti-trust. It works in consumer protection statutes. It punishes. It 

gives retribution. And that would be my recommendation as a second-best solution. 

Mr. CHABOT. The gentleman’s time has expired. 

Mr. BACHUS. Thank all the panel. 

Mr. CHABOT. The gentleman from Florida, Mr. Feeney, is recognized for 5 minutes. 

Mr. FEENEY. Thank you, Mr. Chairman; and thank all of you for 

your testimony. 

I guess I want to focus on what we are empowered to do under 

the Constitution. I think Mr. Owen gave us great testimony. We 

appreciate that. And the bottom line is, your conclusion is the old 

saw problem: The old saw works in theory; it just doesn’t work in 

practice. And we can debate that, and probably Congress is the 

best place to have those old saw debates. 

But with respect to what we are empowered to do, I am very interested, because part of Mr. Owen—I would like to hear especially 

from Mr. Peck and Mr. Schwartz. Part of what Mr. Owen has 

taught us, and of course we remember from our Prosser on Torts, 

is that punitive damages are quasi-criminal. 
77

As we look at how we deal with the criminal juris prudence on 

Federal crimes as opposed to regulating State issues, there are 

some interesting differences there. But we did enact the sentencing 

guidelines in 1984, and we do expect increasingly judges to follow 

those guidelines. It will remind I think everybody, because, Mr. 

Peck, you didn’t say what you thought we could do with respect to 

Federal punitive damages awards. 

But the bottom line is, we establish the courts, other than the 

Supreme Court, we establish their jurisdiction, and impliedly both 

with respect to Federal sanctions and civil sanctions, we ought to 

have the complete, unfettered power. Whether we ought to exercise 

it is a different question. 

The second thing that I would like you to talk a little bit about 

is the 10th amendment argument, because I am very interested in 

the fact that the 10th amendment, as Mr. Peck suggests, may prohibit us from basically interfering with a power reserved unto the 

States. But it occurs to me that the 10th amendment implies equally, no greater or lesser, to both Congress and the Federal court system. 

The 10th amendment is not a proscription against what Congress 

may or may not do, unlike other amendments. It is proscriptional 

to Federal Government. And to the extent that the Federal Government has told us, for example, in decisions like Campbell and Alliance Resources, that there is an absolute Federal obligation to protect people’s property interests and substantive due rights interests 

under the 14th amendment and elsewhere, the Federal courts, the 

Supreme Court has already decided that there is not just a power 

but an obligation to limit certain things that occur in the State 

court realm. It seems to me that undermines Mr. Peck’s argument 

that we are not empowered to do what the Supreme Court has insisted that they must do in spite of the 10th amendment. 

I guess, finally, the question here is, what is the difference between what we may do with respect to Federal punitive damage 

awards and what we may do getting to practical problems like the 

fact that people can forum shop in multijurisdictions the repetitive 

nature of punitive damages? I would like you to delineate for us as 

best you can what parts of the Constitution and the amendments 

are implicated by these questions. 

Mr. Schwartz, maybe you can tell us, if we were really draconian 

here, how far you think we were empowered to go. Mr. Peck, you 

have already sort of set out the boundaries; and, Mr. Owen, I am 

happy—you said you were not particularly expert in the constitutional arguments, but thank you for setting up the history of all 

this. 

Mr. SCHWARTZ. First, I would like to submit for the record an article from the Virginia Law Review by Professor Lupo, Statutes Revolving in Constitutional Orbits. With a fancy title, it shows that 

the 14th amendment empowers this body to enact legislation based 

on the Supreme Court’s decision. The article is the best scholarship 

I have seen on point, and it makes clear that you have that power. 

[The information referred to follows in the Appendix] 

Mr. SCHWARTZ. Second, when you talked about guidelines, yes, 

most people who would be concerned about a defendant’s rights 

would say you can’t have a system where there is absolutely no 
78

guidelines. Jury, decide how bad they are, and let it go. Somehow 

something happens when we get over to the tort side. And—— Mr. Conyers is here. Good afternoon, sir. 

When you get over to the tort side, guidelines are unnecessary. 

They are needed. You have unfavorable, unfavored defendants, and 

some guidance is needed. There is no guidance now in most of our 

States. Most of our States have no statutes on punitive damages. 

And, third, you talked about the impact on commerce from repetitive awards. Yes, the commerce clause is directed just that, this 

type of situation where no one State can pass legislation that will 

help and stop multiple imposition of punitive damages for the same 

thing. And the Supreme Court ruling cannot control that. 

So your questions are very relevant to this hearing and the 

power of this body to act. 

Mr. PECK. Let me very quickly——

Mr. FEENEY. One last thing before I lose my time, because I do 

want Mr. Peck to respond. But you didn’t answer the 10th amendment question about why we ought to mandate States. States may 

not have punitive damage awards because they don’t want them. 

Now if California wants to tax and regulate and punitive damage 

itself into despondency and bankruptcy, why is that the business 

of the Federal Government? 

Mr. SCHWARTZ. Because you are empowered to act under the 

10th amendment when you are considering well-grounded interests 

in interstate commerce. Otherwise, this body would be paralyzed. 

If the action of one State, California, affects the whole Nation by 

bankrupting a company that is providing jobs throughout this Nation, you have the power to act; and we have cases in our Harvard 

Journal of Legislation article that support that position. 

Mr. PECK. My testimony indicates that I think that you do have 

power over Federal causes of action, because in the Cooper v. 

Leatherman case, the courts said that the reexamination clause of 

the seventh amendment does not apply to punitive damages. That 

does not mean that the right to jury trial does not apply in the 

States and they are free to decide that it does or doesn’t, as States 

have come to different conclusions about it. So you do have authority within the Federal system because you are creating the cause 

of action. 

The causes of action that apply to punitive damages at the Federal level were statutorily created. Because they are not matters of 

the common law that had been committed to the jury prior to 1791, 

they are within your jurisdiction to do. That is the measurement 

that the Court does. It is enunciated in the case of Markman written by Justice Souter. 

On the other hand, the argument that my friend Victor here 

makes about the commerce clause and section 5 of the 14th amendment was rejected by the Supreme Court in the Morrison case, 

United States v. Morrison, where they struck down the Violence 

Against Women Act. There, this Congress held voluminous hearings on the connection with commerce. They made findings that 

said that it deters potential victims from traveling interstate, from 

engaging in employment in interstate business, from transacting 

with business in places involved in interstate commerce, by diminishing national productivity, increasing costs, decreasing the supply 
79

and demand of interstate products. And the Court said, no, that is 

insufficient, because it has to be the underlying conduct, the assault on the woman that has to be commerce. 

Here, the willful, wanton, malicious conduct that gives rise to punitive damages is not something that is part of a commercial enterprise. There is no market for it. That cannot be commerce. 

Second, the Court said that the section 5 of the justification here 

also did not apply. Why didn’t it apply? Because, again, there are 

ways. The fact is that not all or even a majority of States engage 

in a violation of due process. There is no finding that that is necessary, that the courts are inadequate to deal with that. And, indeed, as a result of that, they are pointing to the Voting Rights Act 

as an example where you focus on a particular region where there 

is a history and a continuing transgression of constitutional rights. 

Here, you can’t do that. And Morrison said it is necessary. 

Moreover, this Committee should be particularly mindful of the 

Religious Freedom Restoration Act. This was an act passed by Congress almost unanimously to vindicate religious freedom, and the 

courts struck that down saying that was no right to try to vindicate 

rights under section 5 of the 14th amendment. This is a court that 

takes federalism very seriously and will not accept this kind of a 

judgment. 

Mr. CHABOT. The gentleman’s time has expired. 

The gentleman from Michigan, Mr. Conyers, the distinguished 

Ranking Member of the full Judiciary Committee, is recognized for 

5 minutes. 

Mr. CONYERS. Thank you, Chairman Chabot. 

I have a statement to enter into the record. 

[The prepared statement of Mr. Conyers follows in the Appendix] 

Mr. CONYERS. One of the things that bothers me, is this a get 

punitive damages beginning of a movement in the Congress? The 

State Farm case is not all that much of a breakthrough. As a matter of fact, the Court reiterated what I think is known, that there 

is no mathematical formula for determining punitive damages and 

there is no ratio for compensatory damages and punitive damages. 

So, Mr. Owen, who recommends a rule of treble damages, I ask 

Mr. Schwartz if that meets with his approval. 

Mr. SCHWARTZ. Well, there are two separate things, sir. One 

would be what the Constitution requires. And people debate about 

cases, as you know, sir. The Court laid down as a general rule that 

nine to one was the maximum amount. And I will submit the precise language to this Committee. 

The only exception that they talked about—and this is the Constitution—would be in cases where a defendant’s conduct was reprehensible and the compensatory damages were very little. A person throws acid at another individual and—— Mr. CONYERS. So the answer is yes. 

Mr. SCHWARTZ. But three to one is a policy issue. 

Mr. CONYERS. All right. So the answer is no. 

Mr. SCHWARTZ. One is constitutional; one is just a matter of policy. 

Mr. CONYERS. Well, one of your answers is yes and the other is 

no. 

Mr. SCHWARTZ. Okay. 
80

Mr. CONYERS. Is that right? 

Mr. SCHWARTZ. If I connect with your questions, yes, sir. 

Mr. CONYERS. Because, you know, of all the subjects we have got, 

punitive damages has been a part of the tort law for as far as all 

of us can recall. They punish defendants for egregious conduct. It 

is designed to deter others from engaging in similar conduct. They 

are awarded only in cases where the defendant’s conduct has been 

willful and malicious. What is wrong with that? It is not a perfect 

system. There has been—I know everybody has memorized all the 

few instances of excessive awards. But look at the Department of 

Justice study. Only 3 percent of the trials won by plaintiffs involved punitive damages. Does that present a problem? Mr. Peck? 

Mr. PECK. I do not believe it presents any problem at all. 

Mr. CONYERS. Well, I yield my time, if there is any left, to the 

Ranking Member, Mr. Nadler. 

Mr. NADLER. Thank you. I have two questions, one for Mr. 

Schwartz, to follow up on what the distinguished Ranking Member 

of the full Committee was asking. 

Since punitive damages is a deterrent purpose, which everybody 

agrees to, and since you think that it can be, it is abused and we 

ought to limit it greatly, Mr. Owens was saying that he thought the 

same purpose could be served—forget constitutionally whether it is 

mandated, it is a matter of policy now. Mr. Owens said, well, if you 

got—I think, if I am not misquoting him, I hope—that, well, if you 

could do away with punitive damages, the standard treble damages 

wherever you found reprehensibility would serve the same purpose. 

My question to you is, would you support, would you think it a 

good idea, sir—forget about punitive damages—but wherever we 

find gross negligence or deliberate tortious conduct, apply across 

the board treble damages? Would that be a good idea? 

Mr. SCHWARTZ. No. 

Mr. NADLER. Why not? 

Mr. SCHWARTZ. Because I think you are talking about a ceiling 

versus a floor. And when—you use two terms there. Gross negligence, if I heard Mr. Conyers correctly, was not the standard he 

used for punitive damages. He talked about willful conduct. 

Mr. NADLER. How about willful conduct? 

Mr. SCHWARTZ. With respect to, if you are talking about purposeful, willful conduct where somebody intends a result, I can see having that type of punishment. 

Mr. NADLER. Let me specify again with the famous case. Somebody is manufacturing automobiles. They find out that the way 

they manufacture them is one out of every hundred is going to flip 

over and injure somebody, and they figure, well, the damages are 

cheaper than changing it, so we will let that happen, and we will 

pay the damages whenever they occur. That is my definition of 

willful: It is reasonably foreseeable that continuing in this course 

of conduct is going to injure people and we are going to do it anyway. Are automatic treble damages okay? 

Mr. SCHWARTZ. With due respect, sir, our definitions of willful 

are different. 

Mr. NADLER. In such a case. Never mind the legal definition of 

willful. I just defined a situation. In that type of situation, would 

you say, all right, as a matter of policy, eliminate punitive damages 
81

and we will deter such conduct by having—if you proved this kind 

of conduct, that kind of mindset—automatic treble damages. 

Mr. SCHWARTZ. Okay. If you did it in a limited number of times 

and you didn’t punish people again and again for the same thing, 

I could subscribe to what you are saying. But if you are going to— if they make 100,000 cars and you are going to punish them three 

to one for every single incident that occurs, I don’t agree with that. 

If you are talking about one particular case or two particular cases, 

I do agree. But I think if you do it again and again, that is not 

right. 

Mr. NADLER. If that was in the confines of each jurisdiction, once. 

Mr. SCHWARTZ. What will come in evidence is what they did nationally. You have tried cases, sir, and you know——

Mr. NADLER. No, I haven’t. 

Mr. SCHWARTZ. All right. Well, if you had that opportunity, the 

way evidence goes in front of a jury is not in neat little boxes. And 

the picture of what the company did on a national basis will arise. 

But if you had some way of limiting the incident to what Ford did 

or what Buick did or what any of the car companies did with a specific wrongdoing and that was the punishment, three to one, if it 

was adequate enough would be enough. But I wouldn’t hit them 

again and again 50 times. 

Mr. CHABOT. The gentleman’s time has expired, but he can ask 

one more question. 

Mr. NADLER. Let me just comment before I ask Mr. Peck the 

question that I would think if they kept doing it they ought to be 

hit again and again. But that is a different—that is beside the 

point right now. 

Mr. Peck, going back to an earlier part of this hearing, the proposal has been made that punitive damages, since you want a deterrent, it should be limited by any reference to the actual damages 

because, after all, the deterrence impact on a large tort feasor may 

have no reference to the actual damages to one particular victim 

who might not have a lot of damages, but the next guy might have 

a lot of damages, and never mind the next hundred thousand victims. So you want a big deterrent. On the other hand, that might 

be an unjust enrichment for a particular plaintiff. 

So the proposal’s been made, as you know, that perhaps we 

ought not to cap the damages, the punitive damages for the tortfeasor, but cap the amount that the defendant gets. Now—not the 

defendant, that the plaintiff gets, so as to have no unjust enrichment. 

Now, an objection to that proposal has been that you have to 

allow adequate punitive damages so it is worthwhile for the attorney in terms of his costs of proving the egregious conduct. I mean, 

if he can’t get a very large award, it is just not affordable to bringing in the extra evidence to prove the egregious evidence. 

What would you say to a proposal that said, all right, we will not 

limit the size of a—there will be no caps on size of punitive damages. The more egregious, the more hysterical the jury gets, the 

more they can do—the more justifiably hysterical the jury gets, I 

mean. And we will specifically—we will limit how much the plaintiff can get, but the contingency fee of the attorney bringing it will 

have some relationship to the total cost so that he will have the 
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incentive or she will have the incentive to try to get the punitive 

damages where society as a matter of deterrence would want this 

done. 

Mr. PECK. Well, let me say, a number of the States have passed 

laws like this. They regard punitive damages essentially as performing a private Attorney General function, encouraging the exposure of bad actors. And, you know, that means also those instances 

where the harm was not easily detected, which the Supreme Court, 

in addition to what Mr. Schwartz said, said it is a higher ratio, too. 

But in almost all of the statutes, as Professor Owens’ testimony indicates, what they do is allow the contingency fee to be taken over 

out of the whole amount, and then they split up the remaining 

amount between the State and the plaintiff, and sometimes 75 percent of it going to the State for that function. 

Now I think that when you reach a certain level in punitive damages, when you are not talking about your median award of 38,000, 

but when you are talking about large awards, there is some merit 

to this. Although I would think that the defense side would object 

to that, because you have now given the State an interest in the 

award. They may want their judges to award higher punitive damages because each of these cases get de novo review by the judges; 

and, therefore, they have an incentive to promote punitive damages 

in the State, which leads to the possible argument that this is a 

taking. 

Mr. CHABOT. The gentleman’s time has expired. 

I would like to thank the panel for very enlightening testimony 

here this afternoon. I think all of us that had an opportunity to 

hear it and question definitely gained something from this, and it 

will certainly enter into our consideration as to whether it is proper 

and appropriate for Congress to act on this or not. 

Mr. Nadler. 

Mr. NADLER. Thank you, Mr. Chairman. I also thank the panel. 

Mr. Chairman, I ask unanimous consent that all Members have 

5 legislative days to revise and extend their remarks, to submit additional materials for the record, and to submit questions in writing for the witnesses. 

Mr. CHABOT. Without objection. 

If there is no further business to come before the Committee, we 

are adjourned. 

[Whereupon, at 3:25 p.m., the Subcommittee was adjourned.] 
(83)

A P P E N D I X 

STATEMENTS SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF CONGRESSMAN STEVE KING

Thank you, Mr. Chairman, for holding this hearing today. Runaway punitive damages are hurting our national economy. It is up to Congress to do something about 

this drag on our national economy. We cannot rely on the Supreme Court to step 

in every time a grossly excessive punitive damages award is made. 

We must do something to end the danger of multiple punitive damages imposed 

in multiple cases for the exact same conduct. We must restore justice and equity 

to the system. Among other ideas, I support reducing or eliminating the contingency 

fees on punitive damages awards. In addition, currently, federal judges sentence 

criminal defendants uniformly using the U.S. Sentencing Guidelines. We should explore the option of allowing judges to set punitive damages with guidance from Congress in order to insure uniformity and reasonableness. 

Thank you Mr. Chairman. I look forward to hearing from the witnesses.

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR. 

Ever since the Republicans have been in control of the House they’ve tried to limit 

or eliminate punitive damages in many different areas, including medical malpractice, products liability, and other personal injury cases—areas that have traditionally been within the province of the States. Because the title of this hearing includes the words ‘‘Potential Congressional Responses’’ to the State Farm case, I’m 

worried that the majority is about to embark on yet another mission to eliminate 

punitive damages in tort law. 

Punitive damages are an important part of tort law. They punish defendants for 

egregious conduct and are designed to deter others from engaging in similar conduct. They are awarded only in cases where the defendant’s conduct has been wilful 

and malicious. 

Without punitive damages in tort cases, verdicts such as those involving the 

Dalkon Shield would never have been rendered and corrupt defendants wouldn’t 

have been punished for their bad acts. In fact, the Dalkon Shield IUD is an excellent example of how the system worked to protect the lives of millions of women. 

Eight punitive damage awards were made before A.H. Robins recalled the product. 

If they faced no accountability for punitive damages, manufacturers and others 

would have no reason to fear and would be less likely to act prudently to improve 

the safety of their products by better design and clear warnings about possible hazards. 

While the system is not flawless, and while there have been instances of excessive 

awards, overall our society has achieved the right result. In fact, excessive punitive 

damage awards are quite rare. A new study by the Justice Department, which reviewed 10,278 tort trials in 1996 in the nation’s 75 largest countries, found that punitive damages were awarded in only 162 cases, or 3.3% of the 4,879 trials won by 

plaintiffs. The study also found that the median award from a jury was $27,000 and 

that most punitive damage awards were for less than $40,000—hardly a number 

one could call ‘‘excessive.’’

So when we say we are holding an oversight hearing into the potential Congressional responses to the State Farm case, I get a little worried. I question whether 

Congress even has a role in this debate to begin with. Principles of federalism require that Congress not intrude into matters that are traditionally of state concern. 

Punitive damages have long been part of state tort law—they serve the state’s interests in punishing unlawful conduct and deterring its repetition. Some states have 
84

limits on punitive damages and some don’t have any. But the point is that it is the 

states, not Congress, deciding these issues. 

But even if I agreed that Congress had any kind of role following the Supreme 

Court’s decision, I still don’t see what the big deal is. Those who don’t like to see 

plaintiffs recover punitive damages have been chomping at the bit since the State 

Farm decision. But the decision was hardly a breakthrough, as some tort reform advocates claim. 

Rather, the Supreme Court reiterated what we all already know: there is no 

mathematical formula for determining punitive damages and there is no set ratio 

for compensatory damages and punitive damages. Lower courts must consider factors such as the reprehensibility of the defendant’s conduct, the disparity between 

the harm suffered by the plaintiff and the punitive damages award, and the difference between the punitive damages awarded by the jury and those in other similar cases. The only thing the Court did that was new was limit the use of out-ofstate conduct to determine punitive damages. Big deal. 

Don’t we have better things to do with our time?
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Æ