Even though it happened ten years ago, the American case of a $3 million damage award for a coffee burn is still discussed today. From a Canadian perspective, the size of the award in Liebeck v. McDonald’s Restaurants was particularly puzzling because multi-million dollar damage awards for personal injury never seem to occur in Canada. In fact, the damages awarded for Stella Liebeck’s pain and suffering were but a portion of the overall award. Most of the $3 million was punitive damages, designed to punish McDonald’s for serving scalding hot coffee, despite its knowledge of hundreds of complaints of burns in the past. While the McDonald’s judgment can be explained on this basis, the reason it would still not be seen in Canada goes deeper than a mere difference in personality between the average American and Canadian jury member. North of the border, Supreme Court of Canada precedent affects the size of damage awards that can be handed out.
There are several different types of damage awards that a trial judge or jury can make, although not every type of award arises in every case:
- Special (or pecuniary) damages that compensate a person for money they have had to spend or will spend in the future. For example, a plaintiff injured in a motor vehicle accident may have to spend money for parking or bus fare to attend therapy appointments, or may have to pay outside help for extra housekeeping if they are not able to do it themselves for a time. They may also have costs of future care and a claim for loss of income. This type of award is not usually controversial as it can be quantified through receipts and other concrete evidence.
- General damages, which are also called compensatory or non-pecuniary damages, are meant to compensate a plaintiff for pain and suffering, insofar as money can. General damage awards may include compensation for reduction of life expectancy and loss of enjoyment of life.
- Punitive damages are awarded where there has been malicious, oppressive, or high-handed conduct that offends one’s sense of decency. The objective of a punitive damage award is to punish the defendant whose behaviour is worthy of extreme disapproval, rather than to reward the plaintiff. These awards are typically seen in lawsuits where damage has been intentionally inflicted on another person, rather than lawsuits based on negligence
With little by way of government regulation, awards of general damages and punitive damages are left to the jury or trial judge in both the US and Canada. In Canada, however, several key Supreme Court of Canada decisions have effectively capped the amount that a judge or jury can award for both types of damages. In the US, the concept of a cap is applied in a different manner than in Canada, leading to larger awards. In addition to these three types of damage awards, the way a court treats the issue of costs of litigation can affect the legal landscape. The system of costs is also treated differently in the US than in Canada; this will be discussed below.
General Damages
One of the most significant differences between the Canadian and US damage award systems is the award of general damages. This is because, since 1978, damage awards in Canada have effectively been subject to an upper limit or cap which, adjusted for inflation, is currently set at about $300,000.
In 1978, three cases (now known as the trilogy) came before the Supreme Court of Canada. In both Andrews v. Grand & Toy and Thornton v. Prince George School Board, young men were rendered quadriplegic due to motor vehicle accidents. In Arnold v. Teno, a four-year-old girl was struck by a car while crossing the street. While she was not paralyzed, her mental faculties were seriously impaired. These three cases, representing catastrophic injuries to young people, were considered by the Supreme Court of Canada to represent the worst end of the spectrum of personal injuries. For policy reasons, the court set the cap at $100,000, to be adjusted for inflation. The policy behind the cap was to control rapidly escalating claims and to promote equity in personal injury damage awards across Canada.
Therefore, while multi-million dollar awards may occur in personal injury lawsuits, the element of the award designated for pain and suffering will rarely exceed $300,000. The rest of the award is generally made up of special damages.
General damages are subject to a statutory cap in some cases. For instance, recent legislative reform in Alberta will likely see damages limited to several thousand dollars for minor injuries resulting from motor vehicle accidents.
In the US, there typically is no cap on general damages, which are then left solely to the discretion of the jury or trial judge. General damage awards are still subject to review on appeal and exceptionally high awards are often reduced.
Punitive Damages
Some of the much larger damage awards in both the US and Canada are, in fact, punitive damages. Not typically seen in the motor vehicle context, significant punitive damages are sometimes awarded in class action or consumer protection-type litigation, or insurance cases.
Recently, the Supreme Court of Canada effectively capped Canadian punitive damage awards. In Whiten v. Pilot Insurance Co., an insurance company had refused to settle a claim when a policy holder’s home was destroyed by fire, on the spurious allegation that arson was involved. The jury awarded $318,252.32 in compensatory damages and $1 million in punitive damages, because the insurance company had not acted in good faith. The punitive damage award was reduced by the Ontario Court of Appeal to $100,000.
In 2002, the Supreme Court of Canada said that the appeal court should not have interfered. The jury’s award, “though very high, was rational in the specific circumstances and within the limits that a jury is allowed to operate,” the Court said. The Supreme Court of Canada was consciously aware that large punitive damage awards could be seen by critics as leading to the Americanization of Canadian law. However, the Court concluded that a litigant who is awarded punitive damages has usually acted in the public interest in the face of daunting circumstances such as very limited financial resources. In that sense, the plaintiff acts as a public interest enforcer against a much larger foe, and there is therefore no policy reason against the windfall punitive damage award for the plaintiff.
In the US, while the Supreme Court has set guidelines respecting punitive damage awards, the awards continue to be much higher generally than in Canada. Some defendants have challenged especially large punitive damage awards on the ground that they violate the due process clause of the American Constitution.
In the McDonald’s case referred to above, a New Mexico jury awarded 81 year old Stella Liebeck $3 million for third degree burns suffered after she attempted to add sugar and cream to her coffee purchased at a McDonald’s drive-thru. Of that amount, $200,000 was compensatory damages. The rest of the award was to punish McDonald’s for knowingly, and without warning, serving coffee that was too hot. The judge in the McDonald’s case reduced the punitive damage award to half a million, and the parties are believed to have settled out of court for even less, although the amount of the settlement is confidential.
As another example, a year prior to the McDonald’s judgment, in TXO Production Corp. v. Alliance Resources Corp., the US Supreme Court upheld a $10 million punitive damage award in a case where compensatory damages were only $19,000.
However, in the 2003 case of State Farm Mutual Automobile Insurance Company v. Campbell, the US Supreme Court invalidated a $145 million punitive damage award. In that case, a Utah jury had awarded $2.6 million (reduced by the trial judge to $1 million) in compensatory damages based on the insurance company’s refusal to settle an automobile accident claim within the policy limits. The US Supreme Court’s decision to reduce the award was based in part on the theory that a punitive damage award should be limited to a single-digit ratio of the compensatory award (i.e., at most 9:1). On April
23, 2004, the Utah court reduced the punitive damage award to $9 million.
Costs
A final financial distinction between Canadian and American civil litigation is that in Canada, subject to legislation to the contrary, successful litigants are usually awarded a portion of their costs. Costs include lawyers’ fees and disbursements such as photocopying, postage, and faxing charges, and are usually left to the discretion of the trial judge. However, costs are usually awarded against the losing party, meaning that it must pay a portion of the winning party’s costs.
In the US, however, it is generally rare for a party to be awarded costs. Without the threat of responsibility for the other side’s legal fees, a litigant is theoretically more inclined to bring a frivolous lawsuit.