Anecdotes and Jury Reform

I have to disagree with Ethan (in his most recent concession), Paul, Kate Litvak (in the comments) and the many, many other folks who believe that the Merck verdict highlights the need for further limitations on civil juries in tort cases.  The issues involved in mass-tort reform are complex, so let me just start the ball rolling here, possibly to return later in the week.

I'll begin with the obvious: the Vioxx case tells us about as much about the health of the civil jury system as President Bush's speeches do about the state of the Iraq War.  Anecdotal stories about complicated social events may signal something about reality, indeed, may provide some vivid and incidentally truthful examples,  but to know what is actually going on, we need something more.  We need comparisons across time, across decision-makers, across jurisdictions, across countries.  In a word: data.  I know that most folks on the blog will agree.

All the data I've seen suggests that punitive damage awards are and remain rare; juries are just as if not more predictable than judges in both the liability and damages phases of civil trials; there is no clear "sock the rich defendant" effect nor are there non-wealth related demographic differences in jury awards; and (crucially) there is no good evidence that liability concerns are reducing Big Pharma's innovation pipeline.  The obvious place to look is Ted Eisenberg's SSRN page -- so go there for a taste.  And then go read Marc Galanter on how anti-jury forces go about pressing the anecdotal case.  I'll be fair: here is Prof. Polinsky in response.  [Note: if you want to engage in a debate about decision making by model juries, like Prof. Sunstein et al., that is a discussion for a different post.]

Now, Paul worries that "this can be a bet-the-company set of cases, insurance notwithstanding."  Set of cases is the key qualification, and the result in Texas tells us basically nothing about the answer to this question.  But it strikes me as extraordinarily unlikely.  This case was decided on its facts, and it is clear from the news reports that the defense team made a complete hash of things.  They lost.  It happens.  They will try again, probably with lawyers who don't read their opening to the jury and fail to adequately prep their deposition and trial witnesses (if that is the cause of those witness's awful testimony, as opposed to, well, the truth coming out). 

Maybe Merck will lose a few more cases.  Then they will settle - rational plaintiffs won't force them into a litigation induced bankruptcy (the asbestos cases are an exception the proves the rule, generating from the long lag time and poorly capitalized primary defendants, as well as *real* attenuation problems).  Settlement costs will be absorbed by insurance, by higher drug prices, and, therefore, will be spread to society at large (including government drug benefit programs).  If the pressure gets too large, Merck will petition legislatures for relief - as Big Pharma did in the autism/vaccine mess - and likely will get it, evidence of wrongdoing notwithstanding.

Let's pretend, though, that Merck chooses to go into bankruptcy to get the liability off its back.  The loss will fall primarily on its investors, as Kate Litvak points out.  But why do we care?  If, as Prof. Bainbridge concedes,   the "evidence of cover-ups and so on at Merck is non-trivial," haven't those investors already made lots of money they should not have made on Vioxx's deceptive marketing (i.e., marketing that misstated the benefits and hid the costs of the drug)?  If the investors lose money now, all other things being equal, doesn't that amount to the sort of wealth transfer the legal system is comfortable with?

All of the forgoing analysis puts to one side the possibility that the Texas Vioxx jury was acting in a nullificatory way, acting to control wrongdoing when the ordinary democratic branches have failed to do so.  If that were the case, of course, I think we would want to spare the messenger, and turn our eager reforming eyes on the government that has failed us.