The Media's Favorite Part of the Contract   

The move to restrict punitive damages would provide relief in libel cases.

While the Republicans' Contract With America has received heavy news coverage, the media's enthusiastic support for one of its components has been largely ignored. That is the clause that limits punitive damages – potentially a sturdy legal shield against megabuck verdicts in libel suits.

Punitive damages are an added penalty that juries may assess in civil lawsuits on top of compensatory damages that cover actual economic losses. The punitive aspect of the verdict is designed to punish serious wrongdoing and to deter others from similar behavior. That is a most effective way for jurors to vent their wrath, and they often do so in libel cases.

Corporate America has complained for years that punitive damages are a crippling penalty that may have so little rational basis as to be a matter of jury whim. Corporations and their trade groups have been major supporters of the anti-punitive clause in the GOP contract. The news media, a prime target of such monetary punishment in recent years, are as eager for relief.

A single libel lawsuit, notorious among media lawyers, illustrates the problem. Former Philadelphia prosecutor Richard A. Sprague won $3 million in punitive damages in a 1983 libel verdict against the Philadelphia Inquirer for a series of stories about his role in a murder investigation. After the verdict was thrown out on appeal, a new jury gave Sprague a far more generous helping of punitive damages: $31.5 million. Both juries, of course, were dealing with the same facts. But they obviously had quite different notions of how hard they wanted to slam the Inquirer.

The case also shows that juries do not necessarily have the last word on the amount of punitive damages. The Inquirer appealed the second verdict, and a state appeals court cut the punitive damages from $31.5 million to $21.5 million. That's not uncommon, but it's not enough to calm the media's fear. (The case has been appealed further.)

The jury's generosity appears to be part of a recent trend. As lawyers for a group of media companies and organizations noted in a brief filed in March in a Supreme Court case, juries "continue to award enormous sums in punitive damages against the media in libel cases. The last decade has seen multimillion dollar verdicts against libel defendants rise precipitously, and most..include sizable punitive damages awards."

The news industry, like most of corporate America, would get instant relief if Congress were to pass the Republican plan to curb punitive damages. Under the version passed by the House in March, punitive damages could be no more than three times the amount of the economic damages awarded, or $250,000, whichever is greater. To illustrate the effect on the press, consider the second verdict in the Sprague case: since the jury awarded Sprague $2.5 million in basic damages, it could have awarded only $7.5 million in punitive damages, a quarter of the amount it did award.

The final shape of a congressional limit on punitive damages is not yet known, but the prospects for relief for the media seem to be waning. The Senate's bill is far narrower, with no limits on libel damages. A final compromise between the two versions may be very hard to come by.

If Congress doesn't come to the rescue, there are only two other ways for the media to find relief: getting individual state legislatures to put caps on punitive damages in their states, and persuading the Supreme Court to use the Constitution (especially the First Amendment) as a basis to limit punitive verdicts against the media.

The state-by-state approach is a laborious one, with uncertain prospects. No one knows whether the Supreme Court might be induced to help out but media lawyers are pursuing that alternative nonetheless.

The court has moved gingerly in recent years to impose constitutional limitations on punitive damages, generally in cases involving companies outside the news industry. Media lawyers have fretted that the court in such cases might not go far enough to protect publishers and broadcasters.

So some of those lawyers have stepped into a punitive damages case now awaiting Supreme Court review even though it has nothing directly to do with the media.

The case involves a $4 million punitive damage verdict against the American distributor of German-made BMW autos for failing to disclose to a BMW buyer that the car had undergone some refinishing before it was sold to him. The jury calculated the buyer's actual damages at $4,000, and then multiplied that by 1,000 to reach its punitive amount.

"The precise limits on punitive damages mandated by the First Amendment remain to be explored in an appropriate future case," the lawyers said in their brief. But, they added, the court should make clear when it decides the case that it is aware of the special problems that arise when punitive damages are aimed at the media. l