Will punitive damages soon be extinct?

Folio: The Magazine for Magazine Management, May, 1989 by Slade Metcalf

Will punitive damages soon be extinct?

"Hey Martha, did you see this? What a verdict! Do you remember John Wilmont over on Thorton Street? He just won $10 million from The Bugle for an article that said he had been picking up his dogs by their ears."

"How could he have been given so much?"

"It says here that the jury awarded him one dollar for harm to his reputation and $9,999,999 in 'punitive damages,' whatever they are. But, hey, who cares? He just won the real jackpot!"

Out of control

No, someone does care. Every publisher and journalist cares--and the general public should also care because these multimillion dollar punitive damage awards are a menace to freedom of the press. Punitive damages have definitely gotten out of control.

The law in this country has developed two basic types of damages that can be recovered in law suits: compensatory and punitive. . Compensatory damage: The concept of compensatory damage is to permit the injured party to recover monies for actual harm he or she has suffered. In a libel case, that harm would normally constitute injured reputation or mental distress and embarrassment. . Punitive damages: Punitive damages, on the other hand, are designed not to benefit the injured party, but to punish the wrongdoer and to deter similar conduct in the future. In most states, the size of the punitive damage award need not bear any reasonable relationship to the amount of the compensatory damage award. Punitive damages are assessed in instances when the conduct of the "wrongdoer" is so egregious that society demands that it be punished.

In the libel context, the United States Supreme Court has required that it be shown that the publisher has disseminated the offending material either knowing that the wording was false, or having serious doubts about its truth. Many states have added the requirement that the injured party demonstrate that the publisher either hated the person suing, or deliberately disregarded the consequences of publication. This kind of attitude on the part of the publisher is legally known as "malice." However, it is not the same kind of "malice" developed by the Supreme Court in New York Times Co. v. Sullivan, which focuses on the publisher's attitude toward the truth of the publication, not toward the person suing.

Increasingly commonplace

However, despite these seemingly high barriers to an award of punitive damages, multimillion dollar awards in the libel field have become increasingly commonplace. For example, a jury in Nevada awarded entertainer Wayne Newton $5,000,000 in punitive damages based on an NBC television report that tied Newton to a man allegedly associated with organized crime. The trial court upheld the punitive award and the case is now on appeal.

A jury in Houston, Texas, awarded the relative of a murder victim $7.5 million in punitive damages for a classified advertisement placed by the murderer in Soldier of Fortune magazine. That case is also on appeal.

Also, there is the notorious example of the Alton Telegraph, a newspaper in Illinois that went into Bankcruptcy Court in order to forestall paying a $9.2 million judgment in a libel case resulting from a memorandum that was never even published in the newspaper. The publisher, with the help of its insurer, was able to settle for a substantially lower amount rather than go out of business.

Two years ago, a Federal appellate court upheld a jury verdict of $2,050,000 against CBS Inc. and a television commentator employed at one of CBS's owned and operated stations based on a report that Brown & Williamson Tobacco Corp. had developed an advertising strategy to attract young people to smoking. In fact, the tobacco company had rejected such a strategy submitted by its advertising agency and (worse) had allegedly informed an employee of the television station of this fact prior to the offending broadcast.

In affirming the punitive damage award, the appellate court set forth several factors that the jury could have considered in arriving at that huge amount:

1) The amount of the attorney's fees incurred by the tobacco company in bringing the libel suit

2) The wealth of CBS

3) The conduct of CBS.

Because the amount of Brown & Williamson's attorney's fees was $1,360,000 and CBS's net worth was approximately $1,500,000,000, the court found that the $2,000,000 punitive award against CBS was not unreasonable. (The remaining $50,000 punitive award against the television reporter was justified, in the court's view, by the reporter's net worth of over $5,000,000.)

The court felt that this massive award "might provide some deterrence to future misconduct and yet will not burden CBS with a debt that it cannot easily discharge." The court pointedly avoided the constitutional impact on CBS's free speech rights. The award amounted to a direct warning to all investigative journalists that they should be wary of doing stories on large corporations that manufacture controversial products.

Looking for guidelines

One of the chief problems with punitive damages is their inherent irrationality. There are no standards for a jury to follow in gauging an appropriate dollar amount of punitive damages. In effect, the jury is given a blank check to "punish" the magazine or newspaper publisher based, to a large extent, on the jury's visceral reaction to the nature of the conduct and the subject matter of the publication. There is little doubt that sexually explicit magazines (such as Hustler) and celebrity tabloids (such as The National Enquirer) stand little chance of a warm, positive reaction from a jury. It seems that the jury award of $1,300,000 in punitive damages (later reduced by the court) in favor of comedienne Carol Burnett and against The National Enquirer was in part motivated by the content of the publication. Similarly, an Ohio jury rendered an award of $37 million in punitive damages against Hustler and publisher Larry Flynt arising from a photograph of the plaintiff's head superimposed upon a man engaged in a homosexual act. The appellate court reversed the punitive award, which was based on "passion and prejudice." The jury obviously had a negative reaction to the subject matter of the magazine.