GPSolo Magazine - March 2004
Litigating Damages: Actual And Punitive
Whichever side of a case you’re on, you must deal with the issue of damages. One side must prove actual damages, but the other side needs to disprove them. Punitive damages are profoundly different from actual damages and require different tactics on both sides. Actual damages often require proof of incommensurable losses such as pain and mental anguish. But there is not a moral judgment factored in. Punitive damages are awarded in answer to two issues: How reprehensible was the conduct? How large a penalty is needed to deter future misconduct?
Actual damages. Actual damages are the bottom line of most lawsuits. After the closing arguments are made, the factfinder should know exactly what you see on that bottom line. So always make your case clear. A plaintiff’s personal injury lawyer may suggest to the jury an appropriate award, beneath which is a solid evidentiary basis on which the jurors can build up to a substantial award. In a commercial dispute, it is preferable to itemize the dollar value of each element of the plaintiff’s loss. On the defense side, take advantage of any imprecision or overreaching on the plaintiff’s part. For example, if a commercial plaintiff presents a range of damages, the defense has plenty of room for a countercharge.
All through the trial, tell the story behind the actual damages. The same narrative skills you employ in convincing the jury your client has been wronged should be used to show the jury how much your client has lost. The ubiquitous damages expert—a forensic accountant, an investment banker, or an economist—is rarely the right storyteller. It is the personal impact that drives home the story of your client’s damages far more dramatically than any damages expert can. Then the expert’s arithmetic has much more meaning to the jury.
The defense lawyer, meanwhile, must tell the other side of the story in comparable dramatic fashion. You must bring before the jury others in the plaintiff’s industry who can describe the series of events that engulfed them (and the plaintiff), causing the losses the plaintiff now asks the jury to attribute to the defendant. Dramatize the facts with fact witnesses before trotting out the cold, unrelenting economic data.
Nothing makes a jury more suspicious than hearing an inflated demand for damages. Ultimately, it is dangerous for a plaintiff’s attorney to overreach with a jury in any kind of case, because credibility may be sacrificed in the bid for inflated damages. Compromise is the jury’s prerogative. Jurors may tailor a recovery to their collective view of the evidence and the equities. The plaintiff’s lawyer who opens the bidding above what can be proved risks losing everything. The defendant faced with an overreaching plaintiff should, as often as possible, parade the unsupportable damage claims as evidence of greed.
Avoid blunders by your expert. Even a mundane arithmetical error—otherwise harmless and easily correctable—can poison a jury. The conscientious plaintiff’s lawyer in a commercial case sits with a damages expert and does everything possible to ensure the integrity of the numbers. The commercial plaintiff must earn a skeptical jury’s respect every day. Sloppy errors by an expert lessen that respect and create the distrustful feeling that more errors lie elsewhere, even if they have not been detected. Similarly, jurors distrust a lawyer who is sloppy in the presentation of evidence, such as documents with missing pages and demonstrative exhibits not sufficiently prepared or explained. A jury that does not trust the plaintiff rarely returns a generous award.
Oddly, the defendant in a commercial case can get away with minor errors by experts more easily than a plaintiff can because the defendant has only to succeed on one issue in order to gut the plaintiff’s entire case. On the other hand, the plaintiff must prevail on all issues. Jurors sitting on a commercial case rarely let themselves be blinded by emotion and miss the visible flaws in a plaintiff’s case.
Concede where your proof has failed. Do not insult the jurors’ intelligence. If the defendant can point out the shortfall before the plaintiff has an opportunity to gloss it over, that may spell the end of the plaintiff’s case.
Punitive damages. There is a twopart pattern that successful plaintiffs’ lawyers follow in seeking large punitive damages. The first component is to revisit and reemphasize all the conduct the jury is being asked to find to embody wanton disregard of the rights of the injured plaintiff. The second element focuses on the defendant’s finances. Although basing punitive damages in part on a corporate defendant’s financial status is wholly unwarranted in principle, it is a valid consideration under the law of all states except Alabama, Kentucky, and North Dakota, and it is the strongest weapon in the plaintiff’s arsenal. Typically, plaintiff’s counsel urges the jury to frame its punitive award in terms of the defendant’s net worth, income, or revenues, arguing that a company of such large size needs a commensurate sanction in order to make it pay attention. (The Supreme Court’s recent statement in the State Farm case that a defendant’s wealth may not be used to justify an otherwise unconstitutional punitive exaction calls into question the continued legitimacy of this plaintiffs’ strategy.)
The task of the defendant’s attorney is far more difficult. This attorney typically faces a hostile jury whose collective head is spinning with the huge numbers of the defendant’s finances. There are a host of issues to consider and strategies to pursue in seeking to avoid the worstcase outcome. First, to bifurcate or not to bifurcate. Many defense lawyers dislike bifurcated proceedings because they believe bifurcation reduces the leverage of pro-defense jurors to secure a compromise in which liability is found but little or no punitive damages are awarded. In addition, if the second phase consists of nothing more than evidence of the defendant’s finances and closing arguments, that may prove to be a formula for disaster, focusing the jury’s attention on the large financial numbers. On the other hand, a unitary trial can have even more severe disadvantages for the defense. It is entirely consistent with the plaintiff’s case to hammer away at the defendant’s conduct and demand a severe punishment; conversely, it is virtually impossible to put on much of a defense against large punitives when liability is being contested, just as it would be difficult for a criminal defendant to address sentencing issues before guilt has been adjudicated.
Before trial, defendant’s counsel may attempt to keep out the most potentially harmful evidence and arguments regarding punitive damages through a motion in limine. The most harmful evidence to exclude is evidence of wealth and arguments seeking to base punishment affirmatively on the defendant’s finances. Also, because it is difficult to stand up and object during opposing counsel’s closing argument, it is advisable to move the court to bar plaintiff’s counsel from making arguments that seek to capitalize on the defendant’s corporate status or on local bias against outsiders.
Finally, the most challenging aspect of punitive damages defense is the development of an effective evidentiary presentation in opposition to large punitive damages. The second challenge is to provide the jury with a numerical frame of reference that, unlike corporate financials, produces a moderate range within which punishment can be set.
Andrew L. Frey and Dennis P. Orr are partners with Mayer, Brown, Rowe & Maw in New York City.
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