Thursday, October 5, 2006

Pinto Beancounters

I don't think I've linked to Tort Deform as yet.  It's a project of the Drum Major Institute, and it's got some interesting items from time to time.  It is worth reading.

That said, I've got some issues with today's post from a factual standpoint.  [Update: The TortDeform post has removed the memo excerpt and noted the errors in the version on the front page; at least right now, the first link in this paragraph still goes to a version with the memo.]  The basic idea of it is to use the Ford Pinto gas tank litigation as a basis for an argument against a variety of liability modifications. 

To be clear, I'm generally opposed to many of the modifications that they're against (caps, etc.), but let's take a look at the use of what is identified as "the actual Ford memo relied upon in deciding to let people die."  Earlier in the post, it is made clear that the subject is the gas tank:

The gas tank in the Pinto was known by Ford engineers to be defective. If a Pinto was rear-ended at under 30mph, there was a likelihood that the gas tank would be torn open by protruding bolts, causing gasoline to pour into the car's interior. At 40mph, the same thing would happen... except the doors would also be jammed shut and people would be trapped in their burning Pinto.

And here's the excerpt shown in the post:
Pintodeform_1
Now, a couple of years ago, I wanted to talk about this very memo in class, and I dug around for a few minutes and found this version of it:
Pinto
Now, the one I found is clearly different, so maybe it's not the original.  Given the timeframe, my guess is that the one on Tort Deform is the original one (given its non-proportional typeface). 

But I do notice that the latter one has a header that suggests the issue involves rollovers, not rear-end collisions, and it seems unlikely that it was simply made up.  If that's the case, it may be problematic in other cases, but not in rear-end cases.

I also note that among the "costs" (on both versions) are "11 million cars" and "1.5 million light trucks."  I cannot imagine that there were ever 11 million Pintos sold, and I'm quite certain that the Pinto was never a light truck.

Gary Schwartz's piece at 43 Rutgers L. Rev. 1013 (1991) did a nice job, fifteen years ago, of explaining the myths associated with the memo -- and pointing out that it was not admitted in the trial precisely because it was irrelevant.  It was directed at a proposed NHTSA regulation and used NHTSA's numbers for the financial figures associated with injuries, deaths, etc.

Maybe Ford did this sort of calculation as related to rear-end collisions.  Maybe it would be irresponsible for them not to do such a calculation, or maybe it would be irresponsible for them to do one. But this does not appear to be that calculation, and so it's really not the smoking gun it typically gets identified as.

But there are enough good arguments against to the liability modifications involved that I don't think this needs to be in the mix.

[Note: There are rather interesting bits in the comments to this post as well.]

http://lawprofessors.typepad.com/tortsprof/2006/10/pinto_beancount.html

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Some quick links: Michael Krauss reviews a Mississippi Court of Appeals decision on a bogus fender-bender claim. [Point of Law; Gilbert v. Ireland] Yet another example of overbroad laws on sex offenders (see also Jul.... [Read More]

Tracked on Oct 5, 2006 10:01:16 AM

» Round-up from Overlawyered
Some quick links: Michael Krauss reviews a Mississippi Court of Appeals decision on a bogus fender-bender claim. [Point of Law; Gilbert v. Ireland] Yet another example of overbroad laws on sex offenders (see also Jul.... [Read More]

Tracked on Feb 11, 2007 6:42:44 PM

Comments

I appreciate you giving me the benefit of the doubt as to the source and content of the memo. The image I posted was emailed to me quite some time ago and was represented to be from the Ford memo. If you (or any other reader) has a full copy of the memo, I'd love to read it. The same is true with any other evidence from the Pinto lawsuits and criminal prosecution.

The overall premise of my argument is that it's a mistake to implement caps on noneconomic damages as caps make it more likely manufacturers will release dangerous products. Would you agree with that premise?

Posted by: Justinian Lane | Oct 5, 2006 10:39:01 AM

As I noted, I generally oppose noneconomic damage caps for a variety of reasons, including concerns about incentives. I support a number of other items that might be called "tort reform"; I wrote about a number of them on Point of Law this summer in a series called "Tort Reform for Liberals."

I'm not giving you the benefit of the doubt on the content of the memo. I do assume that your copy is from the original and that mine has been reproduced, but I have no reason to believe it is inaccurate. As the late Prof. Schwartz (who did have the memo; I will see if I can get it from someone) established quite conclusively, the document had nothing whatever to do with rear-end collisions. It had to do with rollovers. The plaintiffs made no effort to argue that it was relevant on liability, only on punitive damages, contending that it had to do with Ford's mentality. But even there, it was not contemplating tort liability, but instead engaging in the risk-benefit analysis that all companies do and that NHTSA expected, using numbers that NHTSA provided.

So I generally agree with what you identify as the overall premise of your argument, but disagree that the memo provides support for it and disagree with almost every component of how you characterized the memo.

Posted by: Bill Childs | Oct 5, 2006 11:18:58 AM

I meant that you were giving me the benefit of the doubt as to whether I was purposely misleading with the portion of the memo I have.

I've been reading Prof. Schwartz' law review article, and he makes many interesting points, as well as answering several questions. If what I was sent is from the memo you and he refer to, then you're correct. That said, Schwartz did reluctantly come to the conclusion that even if this memo wasn't a "smoking gun," a similar analysis most likely took place. Thus, even if the MEMO doesn't support my argument, the Pinto AND the Firestone Tire/Ford Explorer defects do. Would you agree with that?

I'll look for your works on POL.

Posted by: Justinian Lane | Oct 5, 2006 12:56:18 PM

I have now posted the full memo, along with some excerpts.

Posted by: Bill Childs | Oct 5, 2006 1:05:01 PM

I do not think you were being intentionally misleading. I will note that my first-year law students usually take about thirty seconds of seeing that same excerpt on the screen to notice that it refers to a huge number of cars and a large number of pickup trucks and recognize that it could not possibly be Pinto-specific.

As you can see in the new post, Ford did -- in a regulatory context, using the regulators' nubmers, not evaluating tort liability but societal costs -- assume that a similar result would come out in the context of rear-end collisions. (And as I noted in my original post, perhaps it would be irresponsible for them not to do such an analysis.) So, yes, they likely did a risk-benefit analysis.

If your argument is that manufacturers engage in cost-benefit analysis, you don't need anything to convince me or anyone else. Of course they do. You do too, every time you decide to drive and every time you decide how fast to drive, or every time you choose to take an aspirin for a headache.

If your argument is that caps on damages will throw those analyses out of whack, I'm not sure how those cases support that argument, but I certainly agree that caps change the balancing. Assuming that Ford engaged in such a balancing relating to tort liability (rather than the regulatory situation that the memo actually describes), they still produced those cars even without caps. Adding caps would not have made those cars any more dangerous, at least in that aspect.

But you don't need those cases to make your argument. Capping damages will change the company-specific litigation risk/benefit analysis, of course, assuming that they act rationally as to their financial risks.

The argument in response would be (and I'm sure someone who buys it more enthusiastically than I do will chime in) that the uncapped damages do not realistically reflect how society in fact (rather than juries in litigation) values noneconomic damages. For instance, given the opportunity to purchase insurance for noneconomic damages, people don't buy it. Caps, then, the argument goes, simply place a rational limitation on the exposure for noneconomic damages so that the company, when doing its litigation risk/benefit analysis, is doing something closer to societal risk/benefit.

Now, one countervailing problem is that companies also no doubt discount their litigation exposure knowing that some varying but significant proportion of injured people do not bring suit.

Incidentally, my understanding is that a substantial proportion of vehicles on the road at the time of the Pinto had similar or identical fuel tank mechanisms. I don't recall if I read that in Schwartz or elsewhere. Were they all defective? Is my '92 Saturn defective for lacking airbags, when airbags were available in other cars?

Posted by: Bill Childs | Oct 5, 2006 1:21:05 PM

Schwartz stated that the Pinto was about average in total safety compared to other sub-compacts, but below average in rear-end collision safety.

If other cars in the same class and price range as your Saturn had airbags, whether your Saturn is defective is worth discussing. If the only cars with airbags were substantially more expensive and larger, then probably not. But if it turned out Saturn could have stuck airbags in your car for a neglible amount, it would again be worth discussing.

I've tried before to articulate my position on risk-benefit choices before, albeit poorly. I'll try once more. You use the example of determining how fast to drive.

Just the other day, I made the choice to do 75 in a 55... and I got pulled over and received a ticket. I made my choice to speed based upon my assumption I wouldn't get a ticket, and upon my desire to get somewhere a few minutes more quickly. Had I known I would have gotten a ticket, I wouldn't have sped. Thus, my risk-benefit analysis wasn't based on facts, but on assumptions. Upon guesses. I guessed wrong and am forced to pay the consequences.

The penalties for speeding in Michigan aren't so bad that I'm going to go broke. It'll be a couple of hundred bucks I'd rather spend on something else. But they're not so high as to be a deterrent.

Contrast that to my hometown of Las Vegas. An ordinance was enacted that speeding in school zones would be fined at $100 per mph over the limit. Whereas I once had no problem with doing 5 or 10 mph over if there weren't any children present, I *never* sped through a school zone once that law took effect. The consequences were so high if I guessed wrong about whether I would get a ticket that I *always* followed the law. In fact, I usually did 1 or 2mph UNDER the limit, just in case my speedometer was off.

One societal benefit of the civil justice system is the deterrent effect it has upon product manufacturers. I believe those caps help make sure manufacturers don't knowingly release defective products in the same way the $100-per-mph-over fine kept me from blowing through school zones.

If we enact damage caps at some low threshold like $250k or $500k, there's practically no deterrent to a multibillion-dollar corporation. It would be the same to me as if I was forced to pay .10 for every mph over the limit. The consequences for an improper risk-benefit analysis would be so small as to lose all deterrent effect.

While much noise is made about "huge" jury verdicts, the fact is that most of them are in fact reduced upon appeal, and covered at least in part by insurance. The real damage to Ford & Firestone didn't come from the settlements they had to pay for the Pinto and the Explorer, but from damage to their respective reputations and the consequential loss of sales & consumer trust. Oh, and lets not forget the very expensive recalls that were forced only after litigation revealed the product defects.

Damage caps enable companies to keep their defective products out of the public eye by offering confidential settlements at the cap. If the company offers to pay you your full economic damages plus whatever the damage cap is, you have no incentive to sue. If you don't sue, and there's no "huge" verdict to capture the public's attention, the manufacturer is free to continue selling the defective product. They also become more easily able to make the sort of callous decisions portrayed in the Fight Club scene and in what the memo was represented to me as being.

Posted by: Justinian Lane | Oct 5, 2006 2:04:31 PM

I don't think you're failing to articulate your position, and I generally don't disagree with you. But, to be clear, this:

If we enact damage caps at some low threshold like $250k or $500k, there's practically no deterrent to a multibillion-dollar corporation. It would be the same to me as if I was forced to pay .10 for every mph over the limit. The consequences for an improper risk-benefit analysis would be so small as to lose all deterrent effect.

is only accurate if $250K or $500K does not accurately reflect the actual value placed on noneconomic damages by society. I happen to think that those numbers are indeed too small to accurately reflect the worst-case scenario that I would like them to reflect.

But your position focuses on deterrence rather than compensation. That's fine, but you don't take on the idea that caps could accurately reflect the societal views of the value of noneconomic damages (as contrasted with jury views of the value of noneconomic damages). If they do in fact reflect those values accurately, then wanting the caps to be gone for deterrence value takes you out of the core purpose of the tort system -- compensation.

For deterrence beyond compensation, we look to punitive damages. Now, obviously, State Farm and other cases, along with legislation in some states, have substantially limited the availability of punitive damages, but let's at least recognize that blanket opposition to any caps on noneconomic damages means you want a punitive damages aspect to noneconomic damages.

As for the publicity aspects, well, sure, but confidential settlements are far to unique to situations where people are settling at the caps. Why not require settlements to be public?

Posted by: Bill Childs | Oct 5, 2006 2:14:43 PM

The compensation effect of noneconomic damages isn't a societal benefit, except in very limited ways. But since the deterrent effect is a societal benefit, capping noneconomic damages hurts society.

As for societal values? That's a tough one. I don't know how much a human life is worth. I don't know if all human lives are worth the same, or if a priest is worth more than a convicted murderer. I don't know if an old man is worth more than a child. There are so many implications to trying to place a value on human life, that I prefer not to try. I would instead prefer to leave those deliberations to a jury, and let them make the decisions. If they get it wrong and award an outrageous sum, trial judges and appellate judges seem to have a pretty good track record of reducing it. And speaking of getting it wrong - ever notice that no one tries to set minimum damage caps when juries award too little? Or when they don't even award a full measure of economic damages?

Further, how would caps be fair to people in a state like California or New York, in which one portion of the state is significantly more expensive than another? A $1 million dollar award will go much further to someone who lives in rural upstate New York than to someone who lives in Manhattan. Do you calculate the cap on a per-county basis? Or do you just accept the inequities of a one-size-fits-all cap?

I don't believe unlimited noneconomic damages amounts to a form of punitive damages. Proper jury instructions should prevent jurors from treating them as such, and I don't disagree that in many types of cases, punitive damages shouldn't be available.

I have mixed feelings about confidential settlements. Forcing all settlements to be public would benefit society by revealing defective products, but it would also hurt individuals by decreasing the likelihood of settlement and increasing the likelihood of expensive and protracted litigation. This is especially burdensome for plaintiffs with greatly diminished life expectancies.

Where would you set caps, if you were to set them?

Posted by: Justinian Lane | Oct 5, 2006 5:42:18 PM

I think if I were forced to impose caps, I would probably choose a number around $500,000, but with a judge-driven safety valve for when the facts support it. And I would leave to state legislatures the choice of how to set it up and how to address the potential inequities. They do such things in considering pay scales all the time.

As for the compensation aspects of tort liability, I haven't the slightest idea how you could contend that they don't have any societal value. It's what underlies tort law; deterrent effects are an intended but incidental effect, and the deterrent effect should be properly tied to fair compensation.

The idea of the absence of minimum levels for damages being in any remote way unfair or unbalanced is nonsensical. If someone has no damages, they have no damages.

Of course, all of this gets pretty far afield from what I originally wrote and that you've conceded, which is that you (unintentionally but sloppily) misrepresented the facts of the Pinto memo, failed to research its background beyond what was apparently represented to you, and still haven't (last time I checked, at 9:10 p.m.) updated your site to reflect your error. Nor have you approved the trackback I sent to the site. You've posted comments to that very entry and another entry has gone up on the site, but readers still see the plainly inaccurate statement that the memo excerpt you show was Ford evaluating tort liability for rearendings, when in fact it was Ford evaluating a regulatory proposal for rollovers using numbers from NHTSA. You have a reasonable basis for suggesting that Ford at least did a similar evaluation for rearendings, and a reasonable basis for suggesting that Ford went further and evaluated tort liability, but that doesn't make what you showed accurate, and it suggests a sloppiness in your research.

Posted by: Bill Childs | Oct 5, 2006 6:12:14 PM

You may have misunderstood what I meant regarding minimum damages. I've seen cases in which juries decided not to award even the full amount of medical bills that were proven, and I've seen cases in which juries awarded no noneconomic damages when there were injuries that should have supported at least SOME award. To be clear, I'm not arguing that there should be a minimum damage rule for the same reason I don't think there should me a maximum - I'd rather leave it to the jury.

I also want to make my role at TortDeform clear. It's not "my site" and I have no control over the site in general. All I can do is post my own entries. Another person has to approve trackbacks to the site, and even has to approve my own comments on my own posts.

Now that I've finished reading Prof. Schwartz' article and reviewed the memo you posted, I feel that it is necessary for me to revise my post, which I shall do this morning. I would like to thank you for bringing the error to my attention.

Posted by: Justinian Lane | Oct 6, 2006 5:37:13 AM

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