Punitive Damages for All (not just a select few)

McKenna

The American system of jurisprudence is constantly evolving and adapting to ensure that those suffering injury are properly compensated for their losses.  There are those who believe that the pendulum has swung too far one way or another and equipoise in the area will undoubtedly never be attained.  In the past, tort victims were compensated only for their physical injuries and not for any mental suffering.  However, over the years, the courts have permitted for that type of injury to be recompensed. 

Punitive damages have been a part of the American legal landscape since the framing of the Constitution.  Today punitive damages are awarded to punish defendants who have acted maliciously or in a wanton fashion illustrating gross indifference to a plaintiff’s rights.  In Gertz v. Robert Welch, Inc., 418 U.S. 323, 350 (1974), Justice Powell characterized punitive damages as “private fines levied by civil juries to punish reprehensible conduct and deter its future occurrence.”    In Browning-Ferris Indus. Of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257 (1989), the Supreme Court held that the excessive Fines Clause of the Eighth Amendment “does not constrain an award of money damages in a civil suit when the government neither has prosecuted the action nor has any right to receive a share of the damages awarded.”  Consequently, an award of punitive damages by a jury, where the government does not receive a share of the award, is not subject to Eight Amendment scrutiny.  Punitive damages can be reviewed under a procedural due process theory on the grounds of excessiveness.  Honda Motor Co. v. Oberg, 512 U.S. 415 ( 1994).

As stated above, the purpose for the award of punitive damages has changed over time.  In addressing this evolution, the Court in Cooper Industries, Inc. v. Leatherman Tool Group, Inc.,  532 U.S. 424, 437 n.11 (2001), noted: “Until well into the 19th century, punitive damages frequently operated to compensate for intangible injuries, compensation not otherwise available under the narrow conception of compensatory damaged prevalent at the time.”  The Court went on to acknowledge that “[a]s the types of compensatory damages to the plaintiffs have broadened … the theory behind punitive damages has shifted towards a more purely punitive (and therefore factual) understanding.” (citations omitted).   Because of this shift, one must question whether the present paradigm for punitive damages properly operates to serve the overall societal needs.

When punitive damages were essentially a way to recompense plaintiffs for damages the law was slow to acknowledge, it made sense that the litigant himself or herself should be the benefactor of the award.  Now that the purpose of a punitive damage award is not to recompense the litigant, but to punish the defendant for “reprehensible conduct and deter its future occurrence,” Gertz v. Robert Welch, Inc., 418 U.S. 323, 350 (1974), the question of why the damage award should go to the particular litigant and not some general fund to serve the greater societal interest becomes relevant.  If punishment for wrongdoing is the purpose, should not all of society benefit from that punishment rather than a particular litigant?  If a large corporation acts improperly in a wanton fashion, is it not to the detriment of all?   Granted, a civil plaintiff has suffered direct harm caused by a defendant’s actions but that harm can be fully recompensed by a jury.  The punitive damages, are, as the Supreme Court has stated, to inflict punishment for the actions and to deter the defendant an others from acting in such an antisocial fashion.  Why then should the punitive damage awards be limited to so few[1]?

In a case brought by Betty Bullock, a smoker who contracted inoperable lung cancer, against the Phillip Morris company for negligence, strict product liability and fraud, the jury awarded Ms. Bullock $850,000 in compensatory damages (she was 64 at the time of the verdict in 2002) and $28 billion in punitive damages.  While the punitive damage award was pared to a mere $28 million, and Ms. Bullock did not survive to see the award, the question really is why should that money, billions or millions, go to a single litigant instead of a general fund for the benefit of society in general?  After all, cigarette smoking affected everyone in increased insurance premiums and second-hand smoke damage that was suffered by even those who never put a cigarette to their lips.  While Ms. Bullock was certainly entitled to damages for the harm caused to her by Phillip Morris, the jury found that her damage was in the line of $850,000 and awarded that to her.  Sad as the case may have been, was Ms. Bullock really entitled to receive all of the $28 billion or even $28 million?  Or was that money better directed to a general fund for the benefit of everyone?

States are starting to see punitive damages as something to benefit the greater societal good.  States such as Alaska, Georgia, Indiana, Iowa, Missouri, Pennsylvania, and Utah have all enacted statutes requiring that government share in some portion of a punitive damage award.  In some cases the amount is as much as 75% and in others, it is limited to only certain types of cases.  Some states direct the funds to particular trusts while in others it goes to a general fund.  In all these states, it creates a situation where punitive damages do not all go to the litigant but benefit the greater population.

Perhaps a fair way to proceed in this area is to cap a litigant’s award of punitive damages to a small percentage of his or her compensatory damages and permit the rest of the award to go to the state for the benefit of all.  Lawyers, too, should not get a punitive damages windfall and their fees should be based upon only the amount of money their client receives and not on the amount that goes to the state.  That will still incent litigants to seek punitive damages where appropriate but will not overly compensate them to the detriment of the greater population.  If punishment and deterrence is the appropriate reason for awarding punitive damages, then the appropriate benefactor of the punishment should be the state and not the individual litigant.

Punitive damages are firmly ingrained in our theory of jurisprudence.  However, their purpose has been redefined over time.  Given that punitive damages are now imposed to punish and deter, and are quasi-criminal in nature, their imposition should not benefit a particular plaintiff or narrow class of litigants.  They should benefit society as a whole.

[1] Since punitive damages are considered quasi-criminal in nature, another question that could be posed is why jeopardy does not attach after an award of such damages, shielding the punished persons or entities from being punished again for the same or similar conduct.  This is a complicated issue with arguments on both sides that is better left for a conversation all its own.

Charles McKenna of Riker Danzig is the former Executive Director of the New Jersey Schools Development Authority and former Chief Counsel to the Governor of New Jersey.

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