DAVID FOLKENFLIK, HOST:
Thirty years ago today came the verdict in a trial about scalding coffee and a fast food giant that captivated and polarized the nation. Liebeck v. McDonald's Restaurants became a punchline for comedians and critics who argued the justice system had run amok. To others, it was an example of an ordinary citizen taking on a global corporation and winning. So how does it look in retrospect? Catherine Sharkey is the Segal family professor of regulatory law and policy at the New York University School of Law. She joins us now to talk about the case. Welcome to the program.
CATHERINE SHARKEY: Thank you.
FOLKENFLIK: Professor, can you remind us - what were the facts in this case?
SHARKEY: The facts were that Stella Liebeck was in the passenger seat of a car being driven by her grandson. They had gone through the drive-in window. They were parked at the time. Ms. Liebeck put the coffee between her legs and opened the top of it, and it spilled into her lap, causing serious burns. So initially, she wrote, on her own, a letter to McDonald's asking them just to compensate her for her medical expenses, somewhere between 10- and 20,000 dollars. McDonald's refused that, and they offered her $800. She then consulted with a plaintiff's attorney, and they took McDonald's to trial.
FOLKENFLIK: And what did the jury rule?
SHARKEY: So the jury awarded $200,000 in compensatory damages, then, in the part that really made this case take wind, 2.7 million in what are known as punitive damages.
FOLKENFLIK: Critics of Stella Liebeck, the plaintiff, argued this was a prime example of a system that allows frivolous lawsuits to flourish. Did those critics have something of a point?
SHARKEY: Well, this case became, as you mentioned, a true flash point, where I think there are kind of exaggerated claims on both sides. So it became known for kind of a frivolous lawsuit. Everyone knows coffee is hot. There are risks in life. You know, get over it. And then, on the other hand, there's the idea that we have a system in place where individuals bring lawsuits, you know, against corporations to try to make them change some of their corporate policies.
FOLKENFLIK: How do you feel about how it was resolved? What does it say to you about that verdict but also about our system?
SHARKEY: So actually, a very underappreciated aspect of this case and how it reflects our system is that that jury's award of 2.7 million was reduced after trial by the judge, who reduced it to 480,000. I think many times, people don't appreciate that we have not only a jury-awarded damages system, but we have many, many layers of appeals. And, in particular, punitive damages, when they're awarded by juries in very large amounts, almost never stand after the appellate process runs its course.
FOLKENFLIK: A lot of folks in the legal community and outside it use this to call for tort reform. Tell us what that means and where those calls went.
SHARKEY: So tort reform was really quite a compelling coinage for trying to reform a tort system, namely awards by juries, that were allegedly running amok. And many of the tenets of tort reform include things like trying to cap damages and, in particular, restraining punitive damages in cases where juries are allowed to award what seem to many as astronomically high levels of awards. There have been a lot of efforts, particularly at the state level, to enact caps on damages. And there also has been a lot of activity at the level of the U.S. Supreme Court, all of which postdates the Liebeck case, where the U.S. Supreme Court got involved to set up rules to mediate punitive damages and to basically restrain them within single-digit ratios, which is exactly what the judge in this case did.
FOLKENFLIK: So why should people care now about this?
SHARKEY: Probably one of the most sustaining impacts of this case is about the power of culture. The popular interpretation of this case is pretty far removed from kind of serious issues of how our system operates. Do tort awards deter corporate misconduct? And what are the purposes for which we should be awarding punitive damages? To me, those are really interesting, difficult legal issues, but they're completely obscured by a kind of popular legend version of this case.
FOLKENFLIK: I've been talking with Catherine Sharkey. She's a professor at the New York University School of Law. Professor Sharkey, thanks so much for joining me.
SHARKEY: Thank you very much.
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