Punitive Damages and Class Actions

17 Pages Posted: 7 Sep 2008 Last revised: 17 Sep 2008

Francesco Parisi

University of Minnesota - Law School; University of Bologna

Marta Cenini

University of Milan - Faculty of Law

Date Written: September 6, 2008

Abstract

Punitive damages and class actions can be viewed as sharing a common economic function - creating optimal deterrence. This is a function that these remedies can best pursue in different domains. When a tortfeasor causes harm that affects many victims, the preferred remedy is a class action. This is especially so when the amount of compensatory damages are high. There are scenarios, however, in which imposing punitive damages represents the best solution. We identify some of these scenarios to suggest the proper domains of these two remedies. Finally, we identify situations where a combined use of these two remedies is desirable. We suggest that when the amount of losses suffered by victims is so small as to preclude a class action due to transaction costs and inactivity, it may nevertheless be useful to combine punitive damages with a class action. Punitive damages should be awarded within a class action if and only if there are frictions that could prevent the injured party from taking legal action.

Keywords: punitive damages, class actions

Suggested Citation

Parisi, Francesco and Cenini, Marta, Punitive Damages and Class Actions (September 6, 2008). Minnesota Legal Studies Research Paper No. 08-38. Available at SSRN: https://ssrn.com/abstract=1264511 or http://dx.doi.org/10.2139/ssrn.1264511

Francesco Parisi (Contact Author)

University of Minnesota - Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

University of Bologna ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

Marta Cenini

University of Milan - Faculty of Law ( email )

Via Festa del Perdono, 7
20122 Milano
Italy

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