THE $4.9 BILLION judgment against General Motors Corp. on Friday is the latest example of the irrationality of our current litigation system. A California jury awarded this incredible sum for a horrific accident in which a 1979 Chevrolet Malibu was rear-ended by a drunk driver traveling at more than 50 miles per hour. The gas tank exploded, causing terrible burns to the passengers. The plaintiffs apparently proved to the jury's satisfaction that these gas tanks were faulty and that the company knew it but decided not to recall the cars because of the cost.
If this is true, damages clearly seem appropriate -- and even punitive damages don't seem out of line. But consider that the award is greater than the GDP of a small country and that the bulk of it is the punitive damage component of a judgment for injuries in an accident caused chiefly not by a faulty tank but by a drunk driver. The award makes the tort system into a kind of lottery in which clever trial lawyers and a few victims get very rich at the cost of society's confidence in the justice system. This is a very bad trade.
The magnitude of this judgment is unlikely to be upheld. Judges have a way of scaling back excessive punitive damage awards. But the real point remains that our litigation system is one in which damage requests and awards are almost entirely divorced from any reasonable assessment of actual harm, a factor that encourages extortionate settlement agreements and frivolous litigation. Somehow, the system needs to be rationalized.
If these plaintiffs suffered because of GM's greed, they should certainly be compensated. But ever-growing punitive damage awards do more than -- as their defenders claim -- send a message to manufacturers about the need to make safe products. They also send a message to the public at large that the courts are more like a casino than a hall of justice.