Alternative Damage Awards: Worth the Risk?

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BY GARY GIEWAT, PH.D., STUART SIMON, & ALLAN CAMPO*
Published in the Westchester Bar Journal Fall/Winter 2009 Edition:

In civil litigation, defendants are often faced with the question of whether it is wise to offer alternative damage awards as part of the defense. In instances where the defendant concedes liability, there is little question that offering alternative damage calculations is usually warranted. But, in instances where the defense has a strong case or when liability is not clear cut – a “close case”- what is the best course of action? When should alternative damages be offered?

The discussion has persisted since 1985, when a Houston jury awarded a Texassized $10.5 billion judgment to Pennzoil against Texaco, claiming that it sabotaged Pennzoil’s contract with Getty Oil. Many legal experts believed the jury award to be disproportionate to the injury. Post-trial interviews with members of the jury revealed that jurors felt they had no choice but to use the plaintiff’s damages evidenceas a basis for their verdict on damages, and that formulating an alternative amount was not proper given the judge’s instructions to base their verdict on only what was presented in court.1 The risk of such an outcome serves as the reason why some defendants believe that providing an alternative award recommendation to the plaintiff’s request is something to be considered, especially if the plaintiff’s demand is a large number.

During mock trials, surrogate jurors sometimes view alternative damage awards offered by a defendant as acknowledging or conceding responsibility for an injury, even if the defendant has vigorously contested liability. For example, in a product liability case a surrogate juror asked, “If it wasn’t defective, why did they [defendant corporation] suggest money at the end?” The purpose of this article is to review the research concerning how jurors determine damage awards and discuss when it might be advisable for a defendant to offer an alternative damages recommendation at trial.

SOCIAL SCIENCE RESEARCH & DAMAGE AWARDS
How and by what procedure do jurors and juries determine damage awards in civil litigation? Research often points to the phenomenon of “anchoring,” which is based upon jurors’ use of a suggested award, the plaintiff’s target number (“PTN”).

In the context of damage awards, a PTN serves as the anchor or a holding point, and jurors subsequently use that value as the reference point for determining damages. Assimilation will occur if jurors view the suggested award as reasonable and proper. However, there will be a contrast effect — a lesser award — if the PTN is viewed as excessive in the eyes of jurors.

In the Chicago Jury Project from the 1950s, Dale Broeder2 was among the fi rst to examine the infl uence of PTNs. In six of the seven cases where the jury rendered a verdict favorable to the plaintiff, Broeder found that a PTN was infl uential in the final damage awards. In essence, the PTN was a point of reference from which jurors calculated damage awards. It has become common to refer to this point of reference as a damages “anchor.”

More recent research3 serves as a robust example of the anchoring effect as it relates to jury damage awards. It has since been replicated numerous times, with researchers routinely finding that damage awards are shaped and directed by the damage requests of the plaintiff. The primary fi nding from this more recent research is: “The more you ask for, the more you get.” This, of course, refers to the chief finding that plaintiffs can promote larger jury awards simply by making larger requests.

While several studies confirmed this robust fi nding, there are limits to the effectiveness of the PTN. While the pervasive fi nding is that the more a plaintiff asks for, the more he receives, it is not without exception. Some studies have revealed contrast effects related to PTNs.4 These researchers found that extreme PTNs resulted in a “boomerang effect,” or a backfi re. In such instances, participants were more likely to provide a larger award with a lower, more reasonable anchor than with an extreme and inflated anchor.

Research from the social sciences is useful in understanding the effi cacy of defendant alternative award recommendations. Over the past 40 years psychologists have studied this heuristic, or mental shortcut, usually calling it anchoring or “adjustment bias.” Anchors serve to simplify judgments that involve uncertainty or have little to no objective basis. People often rely on an anchor when making quantitative judgments.5 While new information (an alternative award) may lead to adjustments away from the anchor, the resulting response (i.e., damage award) will still have been influenced by the location of the anchor on a numerical scale. When judgments are made in the context of an anchor, one of two things may occur. If the anchor falls within a range of alternatives the decision maker believes is reasonable, assimilation will occur, and the response is drawn toward the anchor. If the anchor is not within the range of acceptable responses, the response is displaced away from the anchor, a contrast effect.

DEFENDANT ALTERNATIVE DAMAGES: IS A COUNTER-ANCHOR EFFECTIVE?

It is well-established that the PTN proposed by plaintiffs has a biasing effect on juror damage awards. While much of this research has focused on PTNs and caps alone, there have also been some studies that examine the infl uence of defense counter-anchors or alternative damage awards. The consensus of this research is that alternative defense damages can mitigate plaintiff damage requests in certain circumstances. Generally, if an alternative damage award is provided and is perceived as reasonable, jurors will assimilate that value and reduce the damage award. However, if the alternative damage award is viewed as unreasonable or excessively small, a contrast effect will likely occur and damage awards may increase.

Raitz and colleagues6 incorporated defendant alternative damage awards in their research examining the influence of expert testimony. The research design involved: a control group where no recommendation was made for damages by either party; a condition that involved plaintiff’s economist offering opinion on damages while the defense attorney countered with an amount that was approximately half the plaintiff amount; and a condition where damages were proffered by opposing experts. The counterexpert condition was the most effective in reducing the damage awards. The data from this study revealed that when opposing experts offered different figures, 21% of participants provided awards that matched the plaintiff’s figure and 20% awarded the defendant’s recommendation – a clear example of the anchoring effect.

Using the same stimulus materials as Raitz and colleagues, similar research7 also evaluated the effects of PTNs and defense alternative damages. However, this research incorporated a deliberative component with group decision making as opposed to individual verdicts. The results here were not as extreme as those found by Raitz, et al., suggesting that deliberations attenuated the effect to some extent. Also, there were fewer awards that matched the plaintiff’s request and none of the awards matched that of the defense’s alternative. However, in the condition where opposing experts provided damage recommendations, the average award was almost exactly midway between the suggestions of the experts. The authors conclude that jury awards may be reduced when the defense presents alternative damages.

Marti and Wissler8 conducted research that involved manipulation of plaintiff and defense award recommendations. Generally, their findings are consistent with previous research in which it was found that plaintiffs who asked for higher awards got them. Defense recommendations also were found in this research to moderate damage awards. Furthermore, these researchers concluded that, as defense recommendations increased, the variability in awards decreased. The research suggests that jurors view the defense recommendation as the absolute minimum award and negotiate upwards from that point.

Accordingly, research from the social sciences provides strong evidence that defense alternative damages serve as a counter anchor and can effectively mitigate PTNs. However, much of the research falls short because it does not consider the effect of an alternative damages number upon the jurors’ perceptions of defendant liability.

DEFENDANT LIABILITY
From a legal perspective, liability and the amount of damages awarded are two separate and distinct decisions to be made by jurors, and the evidence relevant to one should not influence the other. The reality, however, is that this is not the case in jury decision-making. As Ellis9 points out, when liability evidence does not clearly favor one side over another, jurors may look for information to assist in their decision.
An additional piece of information they might consider in making a decision regarding liability is the defense recommendation for damages.

The dynamics behind jury and juror decision making in awarding damages is complex and interacts with many variables such as severity of the injury/claim, the type of damages sought (e.g., economic, non-economic, and punitive), varied extralegal factors (plaintiff race or gender, defendant wealth) and defendant liability, or juror perceptions of liability. Ellis highlights the dilemma of the defendant who contests liability, vigorously defending liability for the plaintiff’s injuries, but then advises jurors as to what a proper damage award might be.

Do defendant alternative damages implicitly lead jurors to believe the defendant is liable? Is arguing damages worth the risk? Discussed next is the literature that addresses the impact of defendant alternative damages on perceptions of liability.

THE INFLUENCE OF ALTERNATIVE DAMAGES ON PERCEPTIONS OF LIABILITY
Plaintiff injury severity has a strong impact on judgments regarding liability, as demonstrated by Bornstein.10 This research underscores what many litigators know, that liability decisions are strongly affected by jurors’ desire to compensate a plaintiff for his/her injuries. In one experiment, Bornstein held liability evidence constant, but varied the severity of the injuries. The outcome was that jurors favored the plaintiff on liability when the injuries were more severe, but were less favorable toward the plaintiff when the injuries were less severe. A second experiment was conducted using the same scenario. However, jurors were not afforded the opportunity to award damages; their only task was to determine liability. When there was no opportunity to award damages in this second study, the results revealed no difference in the frequency of liability verdicts between severe and less severe injuries, suggesting that jurors may ignore the distinction between liability and damages in order to provide compensation.

In research focused on bifurcated trials, Horowitz and Bordens11 presented liability and compensatory damages evidence to participants in either a unitary presentation or in a bifurcated format, so damages evidence was presented only if they rendered plaintiff liability verdicts. Data in this research revealed that juries assigned more responsibility to the defendant in the unitary trial than in a bifurcated setting, and that plaintiff verdicts were more frequent, suggesting that presentation of evidence on damages influenced perceptions of the defendant’s liability.

In the sole study to date that examined the role of defense damage recommendations on liability verdicts, Ellis12 found that jurors were more likely to find for the plaintiff when the defendant made a recommendation than when it did not. However, the effect of the defense recommendation on verdicts depended on how strong the plaintiff’s liability evidence was – an interactive effect. When the evidence favored a plaintiff verdict or did not favor either side, the liability verdicts were unaffected by the defense recommendation. On the other hand, verdicts were affected by the presence of a defense award recommendation when the liability evidence favored the defendant. When the evidence was favorable to the defense and the defense did not provide an award recommendation, only 20% of jurors found for the plaintiff.
But, when the evidence favored a defense liability verdict and the defense provided an award recommendation, the verdicts were more likely to favor the plaintiff than when the defendant made no award recommendation. When the defense made a low, moderate, or high recommendation, 40%, 33% and 50% of jurors respectively favored the plaintiff on liability. Thus, in the scenario of a strong liability defense, defendant alternatives to the PTN led to a higher rate of plaintiff verdicts.

This section addresses the practical application of the theory, and the factors to be considered prior to implementation. What is the woman on the street reading, watching, learning, thinking and saying about corporations, about defendants? Keeping in mind that the prevailing research on the subject was done during different periods; namely, during the post-war economic boom of the 1950s, at the height of the Enron scandal, in the midst of the Arthur Andersen accounting debacle and during turbulent economic times, one must consider the status quo prior to advancing any theory. Currently, we face the Madoff scandal, and the associated failure of those entities responsible for supervision, control and regulation of that business. We are faced with the mortgage and banking crisis and the rapid decline in our economy’s productivity and overall value. The status quo of American’s perception of the climate of corporate America is the broad foundation for standing to make the alternative award presentation. With the understanding of the broad status of the corporate defendant’s place in the current climate and culture, we can move to the specific standing of the individual defendant and its standing to offer the alternative anchor.

Simply, a defendant attempting to anchor jurors with an alternative measure of damages in an adverse climate and culture for corporations must defy the current pre-dispositions of jurors and appear to be the “7UP of corporations,” or the Un- Corporation. If the status quo among jurors is that corporations are engaged in deceptive practices, closed to outside scrutiny, underhanded, self-interested and even committing fraud, then the goal prior to introducing the alternative damage theory is to convey the openness, transparency and genuine commitment to good business practices of the defendant corporation. Standing is real, and so should the basis befor achieving it. Once standing is established so too is the expectation among jurors that the theory to be espoused does not exceed the foundation. The alternative scenario should match the defendant.

SUMMARY & CONCLUSION
The literature from the social sciences makes clear that jurors often anchor their damage awards on the basis of the PTN. Furthermore, a counter anchor from the defendant, or alternative damage awards, also appears to mitigate the influence of the PTN on the award provided by a jury. However, there is evidence of an interactive effect between defendant alternative damage awards.

Based on empirical research and subsequent field experience13 Ellis suggests that in the context of a weak liability defense, it is advisable to make a counter recommendation regarding damage awards via vigorous cross examination of plaintiff damages expert(s) and testimony from a defense damages expert. In the context of a strong liability defense, it is best not to offer an alternative damage award, as it has a negative effect on perceptions of defendant liability.

When the strength of the liability defense is moderate (50/50) the defense should evaluate carefully how to argue damages, if at all. Some “on the fence” jurors might be pushed in favor of the plaintiff. There should, however, be a vigorous attack on the plaintiff’s damages via cross examination. This is what we call “moving the anchor.” Rather than providing a defendant’s alternative to the plaintiff’s number, the goal here is to drive the plaintiff’s number down. This approach can sometimes expose an over-reaching plaintiff’s damages case to the contrastive effect discussed earlier. The jury may refuse to assimilate it, finding it unreasonable.

Moving the anchor is also the desired approach in a case in which the defendant’s case on liability is strong, but is nevertheless offset by the prospect of a catastrophically injured plaintiff for whom the jury may feel great sympathy. In such an instance, a strong liability defense may still not avail the defendant of a favorable verdict. The middle course must be taken, with a strong cross-examination of the plaintiff’s expert and a re-capitulation of that cross-examination in the closing to drive home the message. Similarly, the defendant may be an unpopular company in a difficult venue, making even a strong liability defense a weapon of little effect with the jury. For such occasions, a move-the-anchor approach to damages may also be indicated. To carry this thought to its logical end: It is possible that a defendant with a strong liability defense has learned from jury research or from experience that – notwithstanding the good defense – a plaintiff’s verdict is almost certain to eventuate. In an instance of this sort, a full-on alternative damages strategy should be considered.

If alternative damages are offered, it must come from expert opinion and not simply attorney summation. Furthermore, if an alternative value is offered it is best not to offer one that is especially low so that jurors do not contrast it with the PTN, thus providing an even larger award. Any recommendation must also be accompanied by language that provides a rationale as to why the alternative figures are being provided to minimize the perception that the alternative award is perceived as an admission of liability. The goal is that jurors will perceive the recommendations as an indication of what the defense believes is appropriate, just as the plaintiff request is an indication of what they believe is appropriate. Jurors see both sides’ recommendations as starting points in a negotiation – as two anchors.

Endnotes1 Greene, E., On juries and damage awards: The process of decision making, Law and Contemporary Problems 52, 225-46 (1989).2 Broeder, D., The University of Chicago Jury Project, NEB. L. REV. 38, 744-60 (1959).3 Chapman, G.B., & Bornstein, B.H., The more you ask for, the more you get: Anchoring inpersonal injury verdicts, Applied Cognitive Psychology 10, 519-40 (1996).4 See Chapman, G. B., & Johnson, E. J., The limits of anchoring, Journal of Behavioral DecisionMaking 7, 223-42 (1994); Marti, M.W., & Wissler, R.L., Be careful what you ask for: Theeffects of anchors on personal injury damages awards, Journal of Experimental Psychology:Applied 6, 91-103 (2000).5 Greene, E. & Bornstein, B.H., Determining Damages: The Psychology of Jury Awards,Washington, D.C.: American Psychological Association (2003).6 Raitz, A., Greene, E., Goodman, J. & Loftus. E. F., Determining damages: The influence ofexpert testimony on jurors’ decision making, Law and Human Behavior 14, 385–95 (1990).7 Greene, E., Downey, C., & Goodman-Delahunty, J., Juror decisions about damages inemployment discrimination cases, Behavioral Sciences and the Law 17, 107-21 (1999).8 Supra note 5.9 Ellis, L., Don’t find my client liable… but if you do: Defense recommendations, liabilityverdicts, and general damage awards, Unpublished Doctoral Dissertation, University ofIllinois, Chicago (2002).10 Bornstein, B.H., From compassion to compensation: The effects of injury severity on mockjurors’ liability judgments, Journal of Applied Social Psychology 28, 1477-502 (1998).11 Horowitz, I.A. & Bordens, K.S., An experimental investigation of procedural issues incomplex tort trials, Law & Human Behavior 14, 269-285 (1990).12 Ellis, supra note 5.13 Personal communication with L. Ellis, Aug. 10, 2007.