Consumers are expendable. Shareholders are not.
Question: Why are arbitrary caps on jury awards so important to corporations?
Answer: They haven't forgotten the Pinto (1).
Ford Motor Company had a decision to make regarding its known defective and dangerous automobile, the Pinto. In corporate-speak, doing the “right” thing would have to be weighed against the costs of pretending the problem didn’t exist.
When a corporation decides not to use the $9 part, its number crunchers can calculate, with reasonable accuracy, whether the costs (lawsuit awards with capped damages) are more expensive than the cure ($9 a part in our example).
Ford conducted financial analysis and concluded that it would not be "cost effecient" to add $11 per car to correct the Pinto's critical flaw. Ford estimated its savings at $49.5 million.
Because of the defect, Ford assumed there would be 2,100 burned vehicles, 180 serious burn injuries and 180 burn deaths. Ford further estimated that each death would be worth $200,000 and each burn injury $67,000.
Looking at the numbers Ford made its decision and left the Pinto out on the highway to maim and kill. However, there was one set of costs the corporation (and others like them) cannot currently determine in advance; Jury awards.
Corporations tend to under-valued how mad jurors get -- Democrats, Republicans, elderly, young, in fact, just about everyone -- when they learn that a company decided to severely injure or kill a few hundred people (2).
Not only would jurors value the victim's life much higher than Ford did, the jury would also consider, and award, punitive (also called exemplary) damages to make an example out of a manufacture so others would not commit the same acts.
Jury awards could not, and still cannot, be determined in advance. That was, and is, problematic for corporations seeking to pre-determine the actual future costs of decisions they know will severely injure and kill …those that they intend to make.
The Corporate solution? Make safer products? No, sorry. You guessed wrong. The answer is to place arbitrary limits on jury awards across the board. These arbitrary limits are often called "caps". Make sure no jury can award damages is excess of a fixed amount $250,000 or $500,000. Also, make it much harder for jurors to award punitive damages and place a limit on those as well. Then a corporation can determine exactly how much it will cost when it decides not to spend an extra $9 per vehicle for safety. Cost efficient? Yes. The product of a sick, twisted, psychopathic mind? Yes, that too, but definitely cost efficient. You, the public, are expendable. Shareholders are not.
The lesson to be learned, which corporate America already knows, is arbitrary caps on damages mean higher corporate profits. Caps open the door to products that are less safe and cause more injuries and/or death to consumers. Corporate America reads that sentence and only sees the "higher corporate profits" part. Caps allow a corporation to predict its liability payout amounts for failing to install safety devices and measures.
When a corporation decides not to use the $9 part, its number crunchers can calculate, with reasonable accuracy, whether the costs (lawsuit awards with capped damages) are more expensive than the cure ($9 a part in our example). Without caps, the number crunchers cannot guess what award a jury may give. So the company must, out of financial necessity, strongly consider using available safety options even if it means reducing corporate profits.
That is why caps are important to corporate America. That's also why anyone who loves their family and friends should be against arbitrary caps.
(1) If you are too young to know about the Ford Pinto or your brain, as part of a survival mechanism, has placed such information in an "off limits" section of your memory, please do a google search for "Ford Pinto", or "exploding car" for that matter. You can start your search at http://www.fordpinto.com/blowup.htm or search for Mother Jones' article titled "Pinto Madness." You can learn a great deal about corporate America from this information.
(2) One is almost tempted to say "a few hundred random people." However, this would be inaccurate. The Pinto, and a lot of other defective products, was marketed towards the lower end of the economic scale. It was largely bought by people with less education, less sophistication and Ford knew the people buying this vehicle would be less likely to have access to an attorney.