The myth of out of control punitive damages
 in the American legal system
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How many times did we hear that story about the lady who spilled coffee on her legs at McDonald's and was supposedly awarded millions in court? The answer is: if you live in the US, thousands of times. It is used over and over again both by well intended politicians who aspire to reform the legal system and also by conservative talk radio hosts who like to throw dirt on the Democrats. But how much truth is there in it? Anybody with some healthy distrust for easy arguments should guess that things are not so clar-cut, but the fact is that I never came across any information to discredit such demagoguery... until now, of course.

Date: Mon, 4 Nov 2002 19:10:08 -0600
From: Jesus Ortega
To: Leslie Ortega
Subject: The myth of out of control compensatory and punitive damages in the US


It's somehow ironic that I had to find an article like this in the foreign 
press, but it basically comes to confirm what I had suspected for a while
now.  It turns out the familiar complaints we all hear about excessive and
ridiculous compensatory damages awarded by American juries is, to a great
extent, nothing but a myth.  I just came across this article published by
"El Pais", and so that you don't have to read it all in Spanish I will also
write a few lines with the outline.

To start with, only around 10% of all civil cases that were brought to 
justice as a consequence of medical negligence, accidents and damages or
injuries caused by defective products ends up in a sentence that involves
some form of compensation.  By the way, these are the official numbers of
the Justice Department, and not some made up numbers that some interested
party came up with. 

Second, most of the compensatory and punitive damages awarded by juries are
subsequently reduced significantly in the second part of the trials, to the
point that quite often the final amount is several hundred _times_ less
than the initial amount.  

In any case, what I find extremely interesting is that the author takes the
time to discuss that famous case of the woman who got burn while drinking
coffee at McDonald's and sued the company to get an irrational amount of
money.  As it turned out, neither the amount of money ended up being as
high as we all read nor the verdict was so preposterous once one takes the
time to hear the arguments and check the facts.  Unfortunately, this is
not something that is done very often these days.  It's always easier to
shout in outrage and disbelief.  So, here are some of the interesting 
facts regarding that case:

o While the initial sentence awarded the victim a total of US $2.7 million,
  the final amount that she ended up getting was actually below 401,200
  euros (the dollar and the euro are pretty close in the exchange markets
  these days).  

o Although one keeps reading how outrageous this verdict was, there are
  a few details that are usually left out of the picture:
  - McDonald's refused to pay the hospital charges the woman incurred as
    a consequence of the injuries.
  - McDonald's had utterly ignore over 700 similar complaints from its
  - McDonald's refused to decrease the average temperature at which it
    kept the coffee even though it already was 20 degrees (celsius, I 
    assume) _above_ the average temperature of any other similar business.
o Finally, although the compensatory and punitive damages awarded by the
  jury may also sound outrageous, they only represented the equivalent of
  what McDonald's pocketed selling coffee for two days.  In any case, the
  judge would later reduce that amount to less than US $500,000 and a
  settlement agreement between the defendant and the plaintiff is thought
  to have included a similar figure (by the way, the victim's lawyers also
  pocketed approximately half of that final amount).  

So, as you can see, the story is not as irrational and outrageous as all
those emails being sent on the Internet want us to believe.  Once more, 
as I have said repeatedly, when one takes the time to hear the arguments
held by the different parties involved in the dispute and learn about the
facts... well, things end up being not so black and white.  Of course, the
problem is that with this measured attitude there would be nothing to be
outraged about, and one wouldn't be able to stir up the worst feelings  
among the audience in the good tradition of John Stossel's "Give Me a
Break" segment on TV.  One would have to... imagine that, respect the
audience as thoughtful and mature individuals.  Wow!  What a concept!

By the way, I'd appreciate if you can forward this email to Amy, your mom
and whoever else you know may be prone to believe all this propaganda that
TV tends to air all the time.

Jesus Ortega