The Fungibility of Damage Awards: Punitive Damage Caps and Substitution

Abstract:     
Conventional wisdom suggests that punitive damages are growing out of control. To stop juries from awarding blockbuster punitive damages, a number of states have passed caps to set a ceiling on the amount of punitives. In principle, if plaintiffs' attorneys and/or juries wish to circumvent such caps, they could simply increase the amount of compensatory damages awarded. To investigate this possibility, we examine data from the Civil Justice Surveys performed by the National Center for State Courts and present evidence in both difference-in-difference and triple differences frameworks that punitive damage caps are associated with an increase in compensatory damage awards. These results suggest that caps alone are a poor way to constrain damage awards.

Keywords: Tort Reform, Blockbuster Awards, Punitive Damages, Punitives, Juries, Litigation

JEL Classifications: K00, K13, K41

Working Paper Series