Supreme Court Facilitates the "Tort Reform" Bait And Switch

Yesterday, many conservatives managed to work themselves into a lather about a plausible interpretation of the Constitution with exceptionally few real-world consequences. I noticed much less outrage about the Court’s opinion in Exxon Shipping v. Baker, which read the justice’s public policy preferences into the law with considerably less textual support in order to protect poor, defenseless Exxon in the light of the Exxon Valdez spill. (Four justices held that the corporation was not liable at all.)

The majority argues that the potentially arbitrary nature of punitive verdicts requires a fairly strict upper limit, with punitive damages virtually never permitted to exceed a 1-1 ratio with compensatory damages damages. However, the fact that punitive damages will vary to some degree is an inevitable consequence of the American system of relying on torts rather than regulation to create disincentives for corporate behavior. Limiting punitive damages with an arbitrary upper end — even in what, as even the usually sympathetic Breyer notes, were quite unusual circumstances — makes punitive damages a highly ineffective means of constraining bad behavior. That would be fine if people who agreed with the majority wanted to move to a more European-style regulation-based system, but needless to say that won’t happen.

The key to the case is that Scalia and Thomas, who haven’t joined past attempts to find limits on punitive damages in the constitutional text (and still disagree with these holdings), joined this time, presumably because of the majority’s reliance on maritime law. In dissent, however, Stevens points out quite compellingly that the limits on compensatory damages in maritime law make arbitrary upper bounds on punitive damages even less appropriate.