The phenomenon of defendants facing the prospect of excessively high awards – known as ‘nuclear verdicts’ – against them in litigation, particularly in state courts in the US, appears to be happening with increasing frequency. What can be done to counter them?

The term ‘nuclear verdict’ refers generally to a jury verdict exceeding USD 10 million, or one in which non-economic damages are way out of proportion to economic damages. It can also refer to a jury verdict of less than USD 10 million, but substantially more than expected for the type of case.

Apart from the economic impact, litigation may become unduly prolonged as plaintiffs hold out for bigger settlements and cases become prone to an extensive cycle of appeals.

Statistics tell a story

The differential between economic and non-economic damage awards helps drive nuclear verdicts. It is the non-economic damages (primarily pain and suffering) that generally form the largest component of nuclear verdicts. Indeed, in six of the 10 years between 2010 and 2019, the total non-economic damages in nuclear verdicts exceeded the total economic and punitive damages combined. In a study analysing over 1,300 nuclear verdicts in that decade, the US Chamber of Commerce Institute for Legal Reform concluded that they are increasing in both amount and frequency.

This study found that almost 50% of the awards were between USD 10 million and USD 20 million, with a further 33% falling between USD 20 million and USD 50 million. The remainder, exceeding USD 50 million, included 101 ‘mega’ verdicts in excess of USD 100 million. Just six states (California, Florida, Illinois, New York, Pennsylvania and Texas) accounted for 63% of these verdicts, although other states (including Georgia, Missouri, New Jersey and Washington State) appear to be following suit in recent years.

Contributing factors

There are a number of factors that have led to these developments.

1. Reptile Theory

This tactic focuses on safety and security to encourage jurors to put themselves in the plaintiff’s situation. It engages the most primal part of the brain to suggest that if a defendant’s conduct is not punished, then the community at large may be in danger.

2. Anchoring and Adjustment

This technique presents a mental shortcut that influences the way jurors assess numerical estimates by allowing them to make a decision or solve a problem quickly with minimal mental effort. Anchoring bias refers to the tendency to rely too heavily on early information that is offered (‘the anchor’) when making decisions. Plaintiffs’ attorneys use anchoring to propose massive awards or present arbitrary formulas to justify massive figures for pain and suffering, which are hard for jurors to quantify.

3. Priming and Recency

This is the practice of repeating something often enough to get jurors so used to it so that they accept it. Repetition of massive numbers is commonplace.

4. Large Number Bias

People generally do not understand large numbers. The psychological principle known as ‘scalar variability’ states that the ability to comprehend numbers decreases as the number increases. Also, asking jurors for large numbers makes them feel that they are deciding a big, important case.  

5. Third-Party Litigation Funding

Litigation funding has become a multibillion dollar industry. Plaintiffs and their attorneys contract with third-party investors, who help fund litigation in exchange for a share of the verdict. Third-party funding may result in riskier and more speculative lawsuits being filed. Litigation funding companies have been accused of wrongfully taking control of litigation by blocking plaintiffs from accepting a settlement.

6. Attorney Advertising and Media

Publicity and advertising of nuclear verdicts desensitises jurors to the astronomical amounts requested at trial, leading jurors to believe that massive awards are normal and legally sound. Less attention is given to whether such awards are subsequently reduced or overturned. Further, media tend to focus on bad actions by a few corporations, creating a perception that corporations overall are bad.

Countering nuclear verdicts

The defence bar is taking steps to counter the proliferation of nuclear verdicts and the following activities have been adopted with some success.  

1. Legislation

Legislative or judicial remedies may address some of the factors leading to such verdicts, including capping certain non-economic damages, preventing misleading attorney advertising, making third-party litigation funding more transparent (or ending the practice entirely) and prohibiting forum shopping.

2. Settlement considerations

Careful assessment of case prospects includes considering what is reasonable versus the worst-case scenario. While the median nuclear verdict is about USD 20 million, the mean is substantially higher, influenced by the occasional ‘mega’ award in the hundreds of millions, that typically include heavy punitive damages.

3. Alternative Damage Valuations

It can be effective to suggest alternative damage valuations early in the case, reminding jurors that they are not bound by the plaintiff’s numbers. It may be effective to expose the plaintiff attorney tactic of ‘anchoring’ and propose a counter-anchor. Engage in thorough trial prep, including focus groups and mock trials to gauge potential juror reactions to the case, the parties’ theories and the potential for a substantial verdict.

4. Preach to the Jury

Seek to strike jurors who seem susceptible to the Reptile Theory, have an anti-corporation bias, or are interested in enacting social change. Offer a jury instruction advising that an award cannot be based on fear, anger or emotion, and cannot be used to punish a defendant or ‘send a message’. Remind jurors to decide the case according to the law and the facts, and that state damages are not to be based on sympathy or prejudice.

5. Be Proactive

The best strategies for countering adverse verdicts begin before an incident happens. Building evidence around enhancing safety protocols, efforts to comply with safety regulations, and reliable record-keeping are vital to presenting the best case.

After an incident occurs, act quickly to investigate and gather information that may help at trial. Once in litigation, get ahead of any negative image by utilising experts to depict the company in the best possible light and managing perceptions of the company’s operations and culture.

We gratefully acknowledge the input of Bill Ryan and Shari Friedman of Chicago law firm Marwedel, Minichello & Reeb at a Thomas Miller Bodily Injury Seminar, from which this article has been derived.

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