Tort law for federalists (and the rest of US): private law in disguise.

• Author: Goldberg, John C.P.

The question posed for this panel reads as follows: Should tort law be a form of public regulatory law? My answer is no. What I mean by that will become clearer in a moment, but let me offer an immediate set of qualifications. I do not mean to dispute that there are certain respects in which tort law is public. For one thing it is law, provided by government--no service, no sheriff, no tort law. For another, its operation can have widespread effects--a tort suit can change how cars are designed and how health care is delivered, for example. Finally, through its day-to-day operation, tort law undoubtedly promotes public objectives including deterrence of risky or otherwise undesirable conduct, maintenance of social cohesion, vindication of individual rights, affirmation of the equality of persons under law, and reinforcement of the ideal of limited government. (1)

But now consider the following question: What, in the first instance, does tort law promise to do that warrants retaining it as a distinctive facet of our law? (Or: What is it about tort law that renders it capable of delivering goods such as the ones just catalogued?) Because of tort law's unique features--plaintiff-initiated complaints, the right to a jury trial, litigation and adjudication turning on rules and concepts designed to help determine whether a person can be held responsible for having injured another, etc.--its best justification is that, unlike all the other political and legal institutions we have for dealing with antisocial conduct and injuries (administrative regulation, criminal law, public welfare law, private insurance, bankruptcy, contract, etc.), it provides a means by which those who have been wronged can seek redress against those who have wronged them. By contrast, the tort system is not well designed to function as a form of disaster relief for injury victims because of its high transaction costs and its tendency to produce feast-or-famine compensation. It is also not well equipped to provide public safety regulation because of, among other things, judges' and jurors' lack of agenda control, their limited access to information, and their relative lack of expertise and accountability. In this sense, I maintain, tort law is not defensible as public regulatory law.

In providing a negative answer to the panel question, I have already declared myself to be outside the mainstream among torts professors. Indeed, most would profess puzzlement at its having been asked in the first place. To inquire whether tort law "should be" public regulatory law supposes that it could be something else--"should" implies "can." And very few scholars believe that it can. Instead, they would say that the real issue is whether, given that tort law is of course regulatory law, it should be celebrated or condemned. I will argue that tort law is poorly served--and poorly serves us--when academics attempt to describe and defend it as public regulatory law.

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Let me illustrate my point by discussing a famous tort suit that raised issues ultimately decided by the U.S. Supreme Court in 2003: State Farm Mutual Automobile Insurance Co. v. Campbell. (2) State Farm issued auto insurance to the Campbells. After Mr. Campbell's careless driving caused a car accident, he was sued for negligence by the person he injured. State Farm took over the defense of the suit and willfully mishandled it. In particular, it declined an offer to settle the case at the rather modest limits of the Campbells' policy. State Farm's "bad faith" breach of the duty to defend resulted in a judgment against the Campbells that exceeded their coverage by more than $135,000 and put them in danger of losing their home. (3)

A Utah jury hearing the Campbells' claim against State Farm awarded them $2.5 million in compensatory damages (mostly for emotional distress). In addition, based on evidence of sharp practices employed by State Farm in handling other claims by other insureds, the jury awarded $145 million in punitive damages. Although the compensatory award was later reduced to $1 million, the punitive award was upheld by the Utah Supreme Court. The U.S. Supreme Court reversed, concluding that the punitive award was so excessive, as measured by the criteria set out in BMW of North America, Inc. v. Gore, (4) as to violate State Farm's due process rights. (5)

Campbell presents a delicate set of issues for Federalist Society members. Perhaps most fundamentally, it raises the question of whether the U.S. Supreme Court has any business invoking the vague guarantees of the Due Process Clause as a basis for second-guessing state common law. (6) However, I wish here to consider a different aspect of the decision.

According to Justice Kennedy's majority opinion, the problem with the Utah Supreme Court's ruling was not that it permitted some punitive damages to be awarded to the Campbells. (7) Based on the evidence presented at trial, the jury acted reasonably in concluding that State Farm had willfully mistreated the Campbells. Rather, the problem was the magnitude of the jury award: "While we do not suggest there was error in awarding punitive damages based upon State Farm's conduct toward the Campbells, a more modest punishment for this reprehensible conduct could have satisfied the State's legitimate objectives, and the Utah courts should have gone no further." (8) In this one sentence resides a deep tension, a clue as to what makes modern punitive damages practices so seemingly suspect, and a suggestion for a better approach.

The tension resides in the evident shift of focus that takes place between the first two clauses of the sentence. In explaining why some punitive award was appropriate, the Court's focus is the Campbells' claim for what State Farm did to them. Yet in assessing the size of the award, the majority opinion ceases to be concerned with what was done to the Campbells and instead asks whether the award the Campbells stood to receive was necessary to further the interests of the State of Utah in punishing and deterring bad behavior. What is initially cast as an entitlement of the Campbells is quickly recast as an interest of the State. What started out as a claim for private redress brought by the victim of a wrong has become a claim brought on behalf of the public to vindicate its interest in maintaining sound insurance practices. (9)

I want to suggest that Campbell provides a clear example of the sort of slippage that legal academics have promoted and that has led us into a bind in our thinking about punitive damages and other subjects within torts. Many Federalist Society members will be unsympathetic with Professor Bogus's claim that large punitive awards are desirable from a regulatory perspective. (10) But he is right about one thing, and the Supreme Court agrees with him in this particular instance: corporations and individuals commit egregious wrongs that permit a certain kind of punitive response via the legal system. (11) Where he goes astray, in my view, is in thinking--as the Supreme Court does--about the justification in terms of the state's regulatory objectives. What is at stake in Campbell is not Utah's interests in obtaining retribution on behalf of its citizens or in deterring sharp business practices, but the Campbells' interest in vindicating their rights not to be mistreated in the way that they were. Thus, the proper question for the jury was not: How much money may be extracted from State Farm in order to vindicate the laws of Utah or to promote better insurance-company behavior in Utah? Instead, the question should have been: How much money will it take to make things right for the Campbells, not just in the sense of compensating them for their losses, but in the sense of providing them with satisfaction--a remedy adequate to acknowledge and avenge State Farm's predatory conduct towards them? (12)

The reader might be inclined to regard this explanation as a game of semantics, but I don't think it is. Ask yourself: What sort of award will be sufficient to cause State Farm and other well heeled insurance companies to take notice that, when in Utah, they had better behave themselves? A very big number might come to mind, perhaps even one in the hundreds of millions. Now ask yourself: How much money are the Campbells entitled to extract from State Farm, on top of damages for any losses they suffered, in...