August 22, 2005
Tort Reform in Action
Over the weekend it was announced that a Texas jury granted a widow a $253 million award in her lawsuit against Vioxx. Impressive, but less so after you realize:
Under Texas law capping punitive damages, though, that part of the penalty will automatically be limited to $1.6 million, meaning the overall award would not exceed $26.1 million and could be reduced by Texas appellate courts.
One thing that is often forgotten by proponents of "tort reform" is that large punitive damages do not exist to fatten trial lawyers or reward overly litigious idiots. They exist to act as punishment for malefactors (both corporate and otherwise). That punishment is meant to act as a deterrent to prevent others from following in their footsteps and to force the bad actor in question to change their ways.
In the third quarter of 2004, Merck & Co. made $1.33 billion in profits. That was a drop from the previous year's third quarter earnings of $1.86 billion. The entire drop can be accounted for by the losses incurred by removing Vioxx from the market - $552 million.
Punitive damages of $1.6 million? You'd get more money vacuuming out the couch cushions in Merck's advertising offices. Yeah, that'll teach 'em.
Posted by ben at August 22, 2005 11:12 PM