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Misbehaving Employers, Hot Coffee, and the Depp-Heard Case Show What’s Wrong With Punitive Damages Today

A few days before the jury’s verdict in the recent Johnny Depp–Amber Heard defamation trial you might have heard about, our firm received a favorable decision from a Pennsylvania Workers’ Compensation Judge in a case you surely didn’t hear about. In that case, the judge granted our penalty petition—the Pennsylvania Workers’ Compensation Act’s equivalent of punitive damages—and awarded our client almost $60,000.

A $60,000 recovery in a client’s case may not seem significant to many. But in the workers’ compensation realm, a $60,000 penalty award is nothing to sneeze at. The penalty award, along with the ubiquitous “golden arches” of McDonald’s that dot our landscape, and the $5 million in punitive damages awarded by the Depp–Heard jury to Mr. Depp, got me thinking about the role of punitive damages and other legal penalties. Far too often today, they fail to have the deterrent effect they were designed to have.

Penalties can’t deter bad behavior if they’re not levied by fact finders

Section 435 of the Pennsylvania Workers’ Compensation Act allows for Workers’ Compensation Judges to penalize employers and insurers for violating the statute, including assessing a penalty five times as large as the default penalty in situations where they cause unreasonable or excessive delays. Section 435 was designed to deter bad behavior by employers and insurance companies, similar to how punitive damages theoretically deter bad behavior in the common law and in various civil statutes.

Penalty petitions are a tool Pond Lehocky Giordano uses often in our efforts to hold employers’ and insurance companies’ feet to the fire when they attempt to unlawfully deny our clients compensation or payments for medical expenses. But repeatedly, fact finders greet these tools with a chilly reception. This is almost tragic considering the propensity for self-insured employers and insurance companies to play the games corporate defendants so often play in litigation. Sure, there’s the normal self-help and flouting of court orders. There’s often also the flat out ignoring of Pennsylvania Supreme Court precedent regarding subrogation on medical payments, which was the basis for the almost $60,000 penalty award I mentioned above.

Unfortunately, claimant firms like ours spend much of their time practically being forced to file penalty petitions to compel defendants to fulfill their legal obligations regarding such things as sending claimants their weekly benefits checks. If a penalty was assessed against a defendant in a case where a claimant is owed maximum compensation, the penalty could be up to a whopping $500.

Would that deter such behavior? Of course not.

But if receiving weekly benefits checks is the only way claimants can afford to pay rent because they live paycheck to paycheck, then full-blown litigation with serial hearings is often conducted to compel employers and insurance companies to pay what they are obligated to pay.

Does this additional litigation deter such behavior? Again, no.

What will deter such behavior are large penalty awards on large amounts due. Claimant firms could avoid having to clog up the legal system with future penalty petitions if fact finders send the message to insurance companies and employers to stop this kind of behavior.

Sadly, the apparent reluctance by fact finders to penalize or be punitive in response to defendants’ bad and egregious behavior affecting an individual’s rights under the law—behavior which is often overturned on appeal—guts the effectiveness of the threat of punitive damages and penalties. As a result, employers and insurance companies feel emboldened to behave inconsistently with their contractual obligations to pay claimants in accordance with the law. The courage to issue these penalties or punitive awards would bring about the effect a legislature intended, that is, holding individuals and corporations accountable for not fulfilling their contractual and legal obligations, and deterring such behavior in the future.

Ever wonder why your McDonald’s coffee is still sold piping hot?

There’s no doubt punitive damages and other penalties work as deterrents and are feared by bad actors when properly wielded. That’s why the famous 1993 McDonald’s hot coffee case was turned on its head as a poster child for “tort reform.” Yet, even after that case, McDonald’s doesn’t seem to fear punitive damage awards.

A look at the facts of the late Stella Liebeck’s case against McDonald’s and the company’s operations today shows precisely why we need punitive damages. In that case, the 79-year-old Ms. Liebeck suffered second- and third-degree burns to her pelvic area when a McDonald’s coffee she was attempting to add cream and sugar to, and which she had placed between her legs because she was a passenger in a car that was not moving, spilled. She was hospitalized for eight days and required skin grafts and other costly treatments. Ms. Liebeck left the hospital weighing 83 pounds after losing 20 pounds (or about 20% of her weight) while there.

Ms. Liebeck’s injuries were caused by coffee that was sold at between 180 and 190 degrees Fahrenheit, per McDonald’s policy. Liquids at these high temperatures can cause third-degree burns within three seconds of contact. Other major fast-food restaurants kept their coffee between 150 and 160 degrees. Your coffee maker at home likely keeps your coffee at between 135 and 150 degrees. At these temperatures, hot liquids take at least five to six times as long to cause burns, allowing consumers more time to clean up spills before they cause injury.

At first, before filing a lawsuit, Ms. Liebeck asked McDonald’s to pay around $20,000 to cover her medical bills and the wages her daughter lost when she stayed home to care for her. McDonald’s offered $800.

The lawsuit filed in 1993 in New Mexico federal court saw both sides score points with the jury. While the evidence showed McDonald’s knew about the 700+ injuries caused by its hot coffee, the number pales in comparison to the billions of cups of coffee it served each year. However, the evidence also showed McDonald’s neither realized the burn risks associated with serving coffee at the temperature it was serving it, nor was it warning customers about those risks.

Eventually, the jury awarded Ms. Liebeck $200,000 in compensatory damages, an amount reduced to $160,000 because the jury deemed her 20% liable, and $2.7 million in punitive damages—equivalent to roughly two days’ worth of sales of McDonald’s coffee. The judge reduced the punitive damages award to $480,000—three times compensatory damages. (The awarded damages, combined, totaled about one half day’s worth of sales of McDonald’s coffee.) The case then settled soon after for an undisclosed amount.

Despite all the publicity around the case, which was often sympathetic to McDonald’s for several reasons I won’t get into, has McDonald’s changed its policy and moved away from serving its coffee at a temperature that is known to quickly cause burns? Nope. The company’s policies reportedly still call for coffee to be served at temperatures of at least 180 degrees. And the company is still facing lawsuits over severe burns suffered from spilled coffee.

One would surmise that McDonald’s analyzed the dollar and branding cost of reducing the temperature of its coffee (and, thus, its perceived freshness) versus the cost of resolving lawsuits regarding its coffee. Just like Ford did with its Pinto, McDonald’s must have decided it was better for business to resolve individual legal disputes than to change its policies and coffee makers. If the company’s undoubtedly intelligent business executives and lawyers feared punitive damages, this calculation would look much different and would have perhaps compelled different policies regarding the temperature the company serves its coffee at.

Punitive damages without teeth scare nobody and deter nothing

In the recent Depp–Heard case, a Virginia jury awarded $5 million in punitive damages against Ms. Heard after finding she defamed Mr. Depp. The jury’s award of punitive damages for what it must have considered reprehensible behavior both penalizes Ms. Heard and serves to deter future instances of her behavior because future potential defamers would know it might cost them dearly to do so. (Let’s put aside for a moment the various other aspects of this case that spurred tough conversations about televised trials, spousal abuse, and the role of social media in high-profile trials.)

But the problem, purely from a policy perspective, is that in Virginia, like all other states, there are caps and limits on punitive damages. In Virginia specifically, punitive damages are capped at $350,000. A five-million-dollar punitive damages award is much more likely to deter behavior deemed unlawful by a jury than a $350,000 award. Meager punitive damages awards are not going to make deep-pocketed defendants stop and think before they engage in unlawful behavior.

If we as a society truly believe the rule of law should be complied with, and if we want to make sure egregious intentional bad behavior that hurts our citizens—whether they’re injured workers, fast food consumers, or divisive actors—is costly for perpetrators and should not be engaged in by future would-be perpetrators, then punitive damages and penalties need more teeth and need to be more regularly awarded in order to effectively deter future potential bad behavior.

(Deterrents come in various forms. While recently traveling in Algeria, our guide told us to not worry about leaving our cell phones unattended. That’s because, a few years back, the country passed a law that imposed a mandatory criminal sentence of two years in prison for the theft of a cell phone. What was once a significant societal ill was stopped in its tracks.)

Our society and culture seem to have drifted away from insisting that certain behaviors have consequences. We need to hold ourselves accountable and hold others accountable. If we do not, or cannot, we need to have a legal backstop in place to do so. That’s why punitive damages and other penalties in the legal system need to be wielded with a frequency and severity that make them the deterrent they were intended to be.

​​Samuel H. Pond is the managing partner of Pond Lehocky Giordano LLP, the largest workers’ compensation and social security disability law firm in Pennsylvania. He can be reached at spond@pondlehocky.com.

Reprinted with permission from the July 19, 2022 edition of The Legal Intelligencer © 2022 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.

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