SACRAMENTO - Assemblyman Robert Pacheco today introduced a bill (AB 840), sponsored by the Civil Justice Association of California (CJAC), to bring much needed, targeted reforms to California's out-of-control punitive damage award system.

The bill would limit punitive damage awards against small businesses to three times the "actual" (economic plus pain and suffering) damages awarded at trial. For other defendants, the bill would allow full appellate court review of awards in excess of three times actual damages. The bill provides needed protections for small businesses and reasonable procedural safeguards for all defendants.

The current system of determining punitive damages has been widely criticized. Juries are called upon to set the amount with none of the guidelines and protections applied to punishment in criminal law. As a result, wildly different and unpredictable verdicts are more the rule than the exception.*

The situation has brought criticism from prominent observers like the late U.S. Supreme Court Justice Lewis Powell who wrote that "The grant of standardless discretion to punish has no parallel in our system of justice....It is long past time to bring the law of punitive damages into conformity with our notions of just punishment, and with the tradition of other nations that also protect their citizens against arbitrary deprivations."

The huge contingency fee potential from a punitive damage verdict has made punitive damage claims almost routine. A 1996 CJAC study in four major counties found that a third of all contract and tort cases involved demands for punitive damages.

There has been a steady movement among states to rein in punitive damage verdicts. At least 15 states now have a variety of caps on these damages. Seven states either do not allow punitive damages at all or greatly restrict their use, and several federal laws limit punitive sanctions to three times actual damages.

A Los Angeles jury's $4.8 billion punitive damage verdict in 1999 was described by the Washington Post, in an editorial entitled "Casino Justice," as "the latest example of the irrationality of our current litigation system." The verdict prompted the Los Angeles Times to editorialize that "public trust in product liability cases tried by juries might well be going down the drain with these excessive awards" and that "unpredictable decisions might also prove to be the weakest point in the American system."

* A study in the mid-1990s found punitive verdicts ranging from 710 to .0001 times actual damages!