How Should Punitive Damages Work?

Abstract

What are punitive damages for? In a companion article,* I argued that states should re-conceive and restructure punitive damages to advance, in part, the public's interest in retributive justice. I called such damages "retributive damages." Although that article provided the rationale and basic structure for retributive damages as an expressly "intermediate sanction," and explained why society should want retributive damages independent of other remedial or penal options, the theoretical nature of the proposal only scratched the surface of how they would operate in practice.

This Article addresses the next critical question: how should punitive damages work? This question is especially timely in light of the Supreme Court's recent decision in Philip Morris v. Williams, which held that juries may not consider the harms to non-parties in determining the amount of punitive damages a defendant must pay.

To make punitive damages work, we must first separate retributive damages from damages meant either to achieve optimal deterrence (to the extent permitted by Philip Morris) or to vindicate the victim's dignity interests. Because these purposes are distinct, a jurisdiction that conflates them risks both under- and over-protection of various defendants. Once we correctly understand these distinct purposes, our institutional design for civil damages should map these values appropriately.

This Article begins that important task, first by explaining why and how defendants should enjoy certain procedural protections depending on which purpose the damages vindicate, and second, by addressing two critical implementation issues associated with this pluralistic scheme of extra-compensatory damages: insurance and settlement.

*The companion article, Retributive Damages: A Theory of Punitive Damages As Intermediate Sanction, can be found here: http://ssrn.com/abstract=991865.

Keywords: criminal law, torts, punitive damages, Philip Morris, optimal deterrence, victims' rights