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Wednesday, June 16, 2010

Punitive Damage

by digby

Chris Hayes has an insightful piece up at The Nation about America's strange predeliction to show compassion for corporations and throw the book at individuals:

For a long time, conservatives and big corporations have hated punitive damages. The amounts are decided by juries, who have a tendency, when faced with stories of corporate malfeasance, to stick it to the bastards. In the 1980s conservatives began a legal assault on punitive damages, in "an effort coordinated very closely with the Chamber of Commerce," says Stanford law professor Jeff Fisher. "The first few fits and starts didn't work, but they kept hammering away."

In the 1990s enemies of punitive damages found the perfect case when an Alabama doctor sued BMW for having sold him a repainted new car without disclosing the repainting to him; a jury awarded him $4,000 in compensatory damages and $4 million in punitive damages. The Supreme Court found that the punitive damages violated the due process clause of the Fourteenth Amendment; but it didn't specify guidelines for the level of punitive damages that would run afoul of the Constitution.

Which brings us to the last catastrophic American oil spill: the 1989 Exxon Valdez disaster. Five years after the spill, an Alaska jury found Exxon guilty of reckless disregard for allowing a drunken sailor to steer its ship. Exxon paid $507 million in compensatory damages, and the jury assessed it $5 billion in punitive damages.

After several rounds of appeals, the courts cut that award in half. In 2008 the Supreme Court invalidated the award, stating that in the Exxon case, no more than a 1:1 ratio between compensatory damages and punitive damages was allowable. As Senator Patrick Leahy pointed out at a recent Judiciary Committee hearing on liability caps, the decision profoundly altered the incentives faced by firms like BP: "It reduced the consequences of their misconduct to a discounted cost of doing business. That's almost like saying, 'We're giving you a green light to do whatever you want to do.' I can't imagine why anyone would be surprised that...oil companies cut corners and compromised safety." (Leahy's colleague Sheldon Whitehouse has introduced a bill that would overturn the 1:1 cap for maritime law.)

Aside from the practical consequences of altering the incentive structure, the Exxon case and other statutory caps on liability present a deeper threat to the American moral fabric. Set against the increasingly punitive posture of the state toward its citizens over the past several decades, the arbitrary limits on punishment available to a party like Exxon make a mockery of equal justice under the law. Our criminal justice system is the most punitive of any industrialized democracy. We have 2.3 million people incarcerated, half of them for nonviolent property and drug offenses. At least two dozen states have three-strikes laws, and in some cases citizens can face life imprisonment for minor nonviolent offenses. In 2003 the Supreme Court upheld a fifty-year sentence for a California man caught stealing videotapes.

And things are even harsher for Americans unlucky enough to need succor from the state to survive, a k a poor people. Just one drug-related felony conviction can get you booted from welfare, or from public housing (though if you own a house, the IRS will still allow you your mortgage-interest deduction). Under federal law, a drug bust disqualifies a college student from all federal student aid. As a result, between 2001 and 2006 almost 200,000 students lost access to aid. The greatest Congressional champion of this unforgiving policy was Mark Souder, the Indiana Republican who resigned after revelations of his affair with a staff member. In his farewell speech, he took solace in the possibility of forgiveness.

A punitive society is not the best kind of society: there's a real virtue in forgiveness, in second chances. But for years we've been applying Rand Paul's "accidents happen" principle to those at the top while heaping blame, scorn and draconian punishment on those at the bottom. Punitive damages are capped for corporations, while punitive policies proliferate for citizens. This tears the social contract apart, and the only way to repair it is to apply the same principles of accountability up and down the social hierarchy. We should start with BP.

Indeed. But I have to believe that the actual human beings will be protected by their class from any serious consequences beyond irrelevant (and transient) social disapprobation from the polloi. After all, they were just doing the job they were paid to do, which was to protect and raise shareholder value. In our economic system, corporations and the people who staff them are not expected to have consciences or morals. The best we could ever hope was that they had a primitive sense of self-preservation toward the system in which they exist, but even that's been proven wrong. Capitalism is not, contra Ayn Rand, a moral system. It's more like a primitive organism.

Hayes has framed this in a way I hadn't thought of and it makes this recent criminalization of poor humans (h/t Allison Kilkenny) all the more appalling. As a society we have been hoodwinked into seeing corporations as equal to human and allowed them more rights and required less responsibility than your average working person who's just trying to get by. And now, this same punitive attitude toward the poor is encroaching on the middle class which has been hit hard by a recession thy didn't cause. It's an incredible upending of the value system we all grew up with. And I can't help but think it signals something very dangerous.