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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight and analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes of the Bloomberg Law Podcast on Apple podcast, SoundCloud

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Speaker 1: and on Bloomberg dot com slash podcast. A four point

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Speaker 1: seven billion dollar jury verdict against Johnson and Johnson in

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Speaker 1: July helped to trigger the company's biggest annual share loss

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Speaker 1: in a decade. The sixth highest jury award ever in

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Speaker 1: a product defect case highlighted the potential costs ahead in

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Speaker 1: the legation over its iconic baby powder. But how much

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Speaker 1: of that verdict will Ja and Jay actually have to pay?

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Speaker 1: Joining me, is Robert Hocket, a professor at Cornell Law School,

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Speaker 1: Bob tell us about the case and the verdict. Yeah, sure,

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Speaker 1: so um. The verdict was reached out of this past July,

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Speaker 1: and of course it was just upheld this past December,

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Speaker 1: and essentially what it found was both liability on the

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Speaker 1: part of Johnson and Johnson, and of course it is

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Speaker 1: set to punitive damages in addition to the regular compensatory

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Speaker 1: damages in the case. That's where the lion's share of

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Speaker 1: that four point seven billion came from that would be

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Speaker 1: shared over twenty two plaintiffs. It was a class action

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Speaker 1: brought by a number of women who purported to have

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Speaker 1: suffered a variant cancer as a result of asbestos in

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Speaker 1: the baby powder. So, Bob, you often hear about these

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Speaker 1: enormous jury verdicts, and then years later you hear that

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Speaker 1: they've been reversed or dramatically cut down. What happens in

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Speaker 1: between the verdict and the lowering of the amount. Various

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Speaker 1: things happen, but typically prominent among them are numerous appeals. Right, So,

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Speaker 1: typically the defendant in a case like this, in order

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Speaker 1: to have had punitive damages of this size against it

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Speaker 1: in the first place, it has to, by definition, to

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Speaker 1: be a very large firm with lots of resources, so

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Speaker 1: it's typically able to hire all sorts of high priced

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Speaker 1: lawyers and to sort of drag on the litigation through

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Speaker 1: various appeals for a lengthy period of time. And during

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Speaker 1: that time sometimes the resources of the plaintiffs run out,

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Speaker 1: they become demoralized, perhaps, or they decide ultimately to settle

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Speaker 1: for something less, just if for no other reason than

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Speaker 1: just to sort of get the litigation behind them and

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Speaker 1: bring closure to the case, Bob, Why shouldn't the trial

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Speaker 1: judge and the jury be the final arbiters of what

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Speaker 1: a verdict should be if the essential judgment is not reversed. Well,

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Speaker 1: it's not. I mean, I can tell you what the

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Speaker 1: typical reason is it's given, it's not clear to me

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Speaker 1: that it's actually a compelling reason. And in consequence, I

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Speaker 1: think there's actually a better reason that ought to be

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Speaker 1: talked about. So the putative reason or the reason you

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Speaker 1: typically here is that, well, the thought is that these

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Speaker 1: jurors are kind of irrational. Their emotions get the better

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Speaker 1: of them because the case is so sympathetic, or the

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Speaker 1: case is so dramatic, or the harm suffered by the

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Speaker 1: plaintiff isode dramatic that you know, they really seem to

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Speaker 1: deserve some kind of extra compensation, or there's extreme indignation

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Speaker 1: at the defendant, or what have you. And the thought,

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Speaker 1: I said, that can be irrational, and so it's up

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Speaker 1: to the appellate court to sort of correct for that irrationality. Again,

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Speaker 1: I don't think that's a particularly compelling argument. Typically for

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Speaker 1: no other reason than that the trial judge who presides

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Speaker 1: over these things usually is clear headed. That's kind of

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Speaker 1: what the judge is meant to be. So you know

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Speaker 1: what I think is really going on in cases like

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Speaker 1: this is it's essentially there's an ambivalence about punitive damages

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Speaker 1: that stems from a certain ambiguity about punitive damages. Right.

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Speaker 1: So this is a really key point I think for

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Speaker 1: the public. Bear in mind, when you sue somebody, right,

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Speaker 1: you're suing them first of all, to be compensated for

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Speaker 1: what actual harm you've suffered, right, And that's what we

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Speaker 1: call the compensatory damages. The punitive damages are meant to

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Speaker 1: be an extra punishment against the defendant to sort of

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Speaker 1: change their incentives so that they will be more careful

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Speaker 1: next time. But you'll note that that second rationale has

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Speaker 1: nothing to do with the plaintiff. It's all about the

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Speaker 1: incentives of the defendant. And so many see a huge

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Speaker 1: punitive damages award like that awarded to a plaintiff as

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Speaker 1: being a windfall for the plaintiff because they're not really

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Speaker 1: compensate in the plaintiff. That's what the compensatory damages do.

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Speaker 1: They're just about penalizing the defendants. And so there's ever since,

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Speaker 1: I think because of that kind of dual role You

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Speaker 1: might say that punitive damages play that they're awarded to

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Speaker 1: plaintiffs on the one hand, but they're really just about

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Speaker 1: defendant incentives on the other hand. We've always as a

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Speaker 1: culture of an ambivalent about punitives, and I think that's

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Speaker 1: why they're vulnerable. Bob J and J is facing close

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Speaker 1: to twelve thousand CHELC related cases. Bloomberg Intelligence reports that

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Speaker 1: it may have to cough up as much as twenty

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Speaker 1: billion dollars in settlements to resolve all the cases. How

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Speaker 1: does a company decide which cases to settle and when

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Speaker 1: and which to keep on fighting. It's a pretty complicated calculus,

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Speaker 1: units you might imagine, right, There are many many factors

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Speaker 1: that have to be sort of factor in this decision.

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Speaker 1: One of the factors, of course, is just how strong

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Speaker 1: the case looks, right, Does it look as though there's

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Speaker 1: a compelling case against the company, or does it have

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Speaker 1: a pretty good defense to be sort of spoken for?

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Speaker 1: Another is how sympathetic are the plaintiffs or the victims? Right?

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Speaker 1: Are they? Are they the sorts of people who jurors

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Speaker 1: are likely to sympathize with, or are they you know,

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Speaker 1: kind of bad guys too or something you know that's

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Speaker 1: another another thing. Another consideration is how well resourced the

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Speaker 1: plaintiffs or the classes of plaintiffs are, how long does

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Speaker 1: it look like they can go on with protracted litigation

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Speaker 1: involving multiple appeals. And then another factor, of course is

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Speaker 1: where are these various points that's located, Because, as we know,

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Speaker 1: some courts in some states tend to be more plaintive friendly,

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Speaker 1: in other courts in other states sometimes develop reputations for

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Speaker 1: being more defendant friendly. So there's you know, a variety

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Speaker 1: of factors like that i've i've only begun to scratch

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Speaker 1: the service. Are quite a few more as well, for example,

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Speaker 1: what law firm is helping the plaintiffs, or what law

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Speaker 1: firms or which lawyers are helping the plankets right? And

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Speaker 1: how good are the lawyers that the defendant thinks that

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Speaker 1: it can retain um. So all of those things kind

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Speaker 1: of factor into it, and in consequence, it's hard to

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Speaker 1: develop any single algorithm to sort of predict which cases

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Speaker 1: are likely to be appealed or dragged out and which

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Speaker 1: one they're not. Just that's why they call it complex litigation. Indeed,

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Speaker 1: thanks some much, Bob, of a great weekend. That's Robert Hockett.

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Speaker 1: He's a professor at Cornell Law School. Thanks for listening

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Speaker 1: to the Bloomberg Law Podcast. You can subscribe and listen

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Speaker 1: to the show on Apple podcast, SoundCloud, and on bloomberg

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Speaker 1: dot com slash podcast. I'm June Brosso. This is Bloomberg