When Rhetoric Meets Reality

California governor Arnold Schwarzenegger was clearly drinking the Kook-Aid when in 2004, he proposed filling a $450 million budget gap by allowing the state to take 75 percent of all punitive damage awards in civil lawsuits. Perhaps we can forgive the Terminator for believing the rhetoric about skyrocketing punitive damage awards. Smarter people before him have fallen for it (think Sandra Day O'Connor). Few have been so bold, though, to try to run a state government on those mythical numbers.

When the so-called "split-recovery" law lapsed in July, it had generated exactly zero dollars for the state coffers. No surprise there. Punitive damages are really rare. The Bureau of Justice Statistics found that of the 356 civil trials that resulted in punitive damages in 2001 in the nation's biggest counties, only nine resulted in an award larger than $10 million, and that's before they were appealed. The median award was a mere $50,000. There weren't enough punitive damage awards in the whole country to fill California's budget gap.

The interesting thing about the California law is that the state legislators who wrote the bill knew all this. According to the Capital Weekly, legislators simply thought it would play well with voters. That explains why Democrats recently moved to extend the law for five more years. It's the kind of measure that allows liberals to say they're not in the pocket of the trial bar while actually doing nothing to change the status quo. (Former senator John Edwards has become the master of these sorts of proposals.) In any event, Schwarzenegger vetoed the bill on Oct. 10, as business groups decided jurors might give even bigger awards if they thought most of the money would go to the state and not the plaintiff.