Washington State Offers Legal Reform Lessons
Its limit on damage awards may be test case for nation
WHEN Jeff Heidingsfelder was killed in a refinery explosion in 1991, his family received a $4.6 million settlement from the refinery's owner, BP North American Petroleum Inc.
What the family could not do, because the incident occurred in Washington State, was sue the company for ''punitive damages,'' money added to punish a defendant for its irresponsibility in the case.
Washington is one of the only states that bans punitive damages, and thus holds lessons for the nation as Congress considers whether to put limits on this controversial legal tool.
Yesterday the Senate was expected to pass a long-debated legal reform bill that included limits on punitive damages awarded in faulty-product cases. The legislation marked a retreat from an earlier version that would have limited punitive damage awards in all civil lawsuits.
The Senate bill is much less sweeping than reform legislation passed earlier by the House, which means its ultimate outcome remains uncertain.
Paul Luvera, the attorney who represented Mr. Heidingsfelder's family, says Americans should be wary of such sweeping reforms.
Although $4.6 million may represent an fair compensation for the family's loss, Mr. Luvera says it did little to send a signal to the company, which he alleges ''knowingly bypassed their own safety procedures'' while rushing to get its plant reopened.
Supporters of punitive damages are adamant in their claims that the extra monetary award is powerful protection for the consumer. The Ford Pinto automobile and flammable children's pajamas ''would still be on the market today,'' without strong punitive damages, says Nicholas Corning, president of the Washington State Trial Lawyers Association.
Don Cramer, general counsel for US Marine, the world's leading recreational motorboat manufacturer, says his company and others take product safety extremely seriously because consumers demand that.
What limits on punitive damages would do, he says, is give manufacturing companies and their insurers a rough idea of their exposure to lawsuits.
As it is now, ''you have to call up management and say, 'I just lost $10 million,' '' he says, recalling a case the Arlington, Wash., firm lost in Iowa. (Plaintiffs typically sue in the state where an incident occurred, so Washington's law does not insulate state firms from all punitive damages.)
A national law setting guidelines, Mr. Cramer says, would help reduce the current hodgepodge of state laws and differing standards. Currently, ''if you get sued in east Texas, you better bring your checkbook,'' he says.
Many states passed reforms in the mid-1980s intended to limit liability lawsuits. Most states have high standards of requiring proof of malicious or reckless conduct before punitive damages can be imposed.
But the impact of punitive damages may be overplayed by both sides. A study three years ago found that since 1965, punitive damages have been awarded only 355 times in federal and state courts. In 40 percent of the cases, the awards were later dropped; in 14 percent awards were reduced. The median award was $625,000.
Cramer argues that even in cases where no damages are awarded, the costs of defending against such charges are a significant burden -- one that the firm would not have to bear if all states had Washington's provision. Louisiana, New Hampshire, Massachusetts, and Nebraska also have limits on punitive damages.
Two months ago US Marine was fighting two separate New York lawsuits alleging that a cleat for mooring lines had been poorly placed on its boats. One lawsuit found fault with the cleat being placed on the side of the boat. The other said it was misplaced on top of the deck. ''It's got to go somewhere,'' Cramer says.
But Mr. Corning, representing the state's trial lawyers, says the common view of trial lawyers as sue-happy is misleading. The high cost of bringing a lawsuit is a strong deterrent to frivolous cases, he says.
And linking punitive damages to compensatory damages can be problematic, Corning says. He points to a case in another state where a jury found an elderly woman deserved no compensatory damages in a fight over a defective drug. But her role as a whistle-blower led the jury to impose significant punitive damages.
In some cases, lawyers here have convinced local juries to apply punitive-damage rules from other states. The Heidingsfelder's attorney tried to apply an Ohio law to their suit against BP, one of the world's largest corporations, since the firm has its US headquarters there.
And Jim Sorrels, an attorney in Edmonds, Wash., hopes to get a California punitive-damage law applied here in Washington in a case he is preparing against a California insurance firm.
''Punitive damages are the equivalent of getting an extra foul shot where there's an intentional foul in basketball,'' he says.