Ghost of Pennzoil-Texaco: hidden risks of arguing alternative damages.

• Author: Sobus, Mark S.

Should the defense sponsor alternative damage numbers? There's no one answer because it depends on the strength of the defense case

IMAGINE this: The plaintiff's case has been presented to the jury, and the defense is under way. The defense trial team evaluates the shots it has taken and examines how well it can respond to the key liability issues. There is concern about exposure to a large verdict and the need to offer an alternative damage number. But what about the other side of the coin? Will that course undermine the liability case?

After evaluation, the defense concludes it can safely critique the plaintiff's damage numbers without sponsoring an alternative for the jury to consider. It is going for a zero verdict. The defense has decided to work without a safety net, and yet it has made a reasoned decision, fully taking into account the risks and benefits of its chosen strategy.

If this example sounds like fiction, it should. Because of the fear of another runaway Pennzoil-Texaco verdict, many defense counsel believe that not providing an alternative damage theory in a jury case is tantamount to malpractice. As a result, trial teams spend a great deal of time figuring out how to best present an alternative figure, but they never question how such a presentation will affect their case or whether it is even in the client's best interest to argue alternative damages.

GHOST OF BIG VERDICTS PAST

In the Pennzoil-Texaco case, a Texas jury handed out a damages award that has yet to be forgotten. Most lawyers don't remember what the case was about and what issues were tried, but they do remember that the Texaco trial team chose not to counter Pennzoil's damage theory. Texaco went for a zero verdict. Unfortunately for Texaco, the jury decided that because Pennzoil was treated unfairly, it should get the full amount it requested. The verdict sent a shock wave throughout the legal community. Defense lawyers became committed to the idea that they would never again try a case to a jury--especially in a big-ticket case--without presenting a clear position on damages. In short, the Pennzoil verdict became the single reference point for establishing a professional standard on the issue of arguing alternative damages.

Over time, the details of Pennzoil-Texaco have become a bit fuzzy, but its legacy is as sharp as ever. In addition, there has been a long list of well-publicized plaintiffs' verdicts over the years that have reinforced the Pennzoil-Texaco phenomenon. These outcomes haunt defense counsel who feel they have no choice but to argue damages, even in cases in which they feel they have a good chance to win.

While it may be convenient to accept this fate, there is compelling evidence to suggest that, in certain circumstances, presenting alternative damage theories actually increases both the risk of losing a case and the size of the verdict, as compared to what would have been achieved if no alternative figure had been suggested. This means that defense counsel who believe they are protecting their client against big verdicts are, in some cases, exposing their clients to significant hidden risks.

To appreciate this point fully requires some understanding of the psychology of jurors' damage decisions.

HOW JURORS DECIDE DAMAGES

It is tempting to believe that jurors invest the same amount of energy in determining the appropriate amount of damages as the plaintiffs' and defense attorneys spend in trying to establish or debunk a particular damage number. But nothing could be further from the truth. It has become clear from having viewed literally thousands of jurors struggle with the issue of setting damages that most of a jury's energy is applied to the liability decision. Damage decisions are made with whatever psychological and motivational energy that remains.

This happens for two main reasons. First, deciding damages is the last step in the process, and by definition, jurors are most tired at this point. Second, while jurors take their job seriously, they tend to be ill-equipped to conduct a detailed economic analysis to determine the specific amount due to the plaintiff. When energy is low and people feel deficient to do detailed analyses, that is exactly the time people are susceptible to taking shortcuts and using whatever information is comprehensible and readily available to reach a decision.

An appreciation of this phenomenon begins to explain why alternative damage arguments are effective. When jurors are tired and not driven to undertake detailed analyses of damages, they understandably are looking for guidance, and the numbers proffered by the plaintiff and defendant provide immediate direction to any damage discussion.

Of course, along with juror energy and ability, there are motivational factors that drive each juror's desire to award a particular number. Each juror may have a very different...