Putting Punitive Damages into Perspective

Science magazine, one of the most prestigious publications of our scientific community, has also become, of late, one of the most calm and credible voices in the debate over the U.S. liability system. Recent articles have addressed such problems as the rise of junk-science "clinical ecology" in U.S. courts(1) and the collapse of the U.S. contraceptive industry under assault from the liability system.(2) In the article we enclose here, two Science authors take a look at the effects of erratically imposed punitive damages on U.S. innovation.

The authors, Richard J. Mahoney, chief executive officer of the Monsanto Company, and Stephen E. Littlejohn, Monsanto's Public Affairs Director, are, of course, associated with a company that has a very direct stake in liability reform. But that association is also what enables Mahoney and Littlejohn to discuss the problem with the insight of firsthand experience.

Ever wonder what could make an effective substitute for asbestos in buildings, brake linings, and gaskets? Monsanto wondered, and proceeded to develop a safe, biodegradable alternative. But liability concerns now prevent Monsanto from bringing to market any product that might be swept into the firestorm of asbestos litigation.

Or have you ever paused to ask who will supply the next generation of contraceptives, as our liability system attacks one existing product, and then another, with scattered, lottery-like verdicts of not only compensatory but also punitive damages against every major option? A Monsanto subsidiary, G. D. Searle & Company, used to be an important player in that field, with a product that medical experts, almost uniformly endorsed as safe and effective. But the product—and the Searle company itself—have been driven from the contraceptive market by a Cataract of ill-founded litigation. A recently released study by the National Academy of Sciences concludes that the United States—which pioneered the development of modern contraceptives thirty years ago—is now falling decades behind other countries in the provision of newer, safer birth control methods, in large part because of the liability system's depressive impact on the industry.

Among the many other casualties of a liability system that deters too onerously and indiscriminately we may count Merrell Dow Pharmaceuticals, Cessna, Union Carbide, a dozen or so vaccine manufacturers, and thousands of obstetricians and other medical specialists. In their Science article, Mahoney and Littlejohn provide their own testimony from the trenches. It adds up to a sobering analysis of how the liability system's erratic award of punitive damages undercuts innovation and thus competitiveness in America today.

Liability is unpredictable in many other respects, but the punitive verdict remains a problem in a class by itself. The awards can be arbitrarily large, and they carry far more social stigma than ordinary verdicts. Living on the same block with a wellintentioned but bumbling and unpredictable neighbor is a problem. Living on the same block with the same neighbor, now armed with an AK47 assault rifle, is a much bigger problem, so much bigger that it requires special and urgent attention. The punitive award is the assault rifle of today's U.S. liability system, and it is entrusted to hands that simply do not aim or control it property. As Mahoney and Littlejohn show, some of the very best and most innovative producers are abandoning the neighborhood.