Punitive Posner

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Alex Tabarrok at Marginal Revolution points to one of Judge Richard Posner's notoriously sharply-worded opinions [PDF], which also serves as a pretty good primer on the law-and-economics approach to punitive damages. I'm less convinced than Posner that "justice" is really just "efficiency" done up in voodoo and Pig Latin, but it beats the hell out of the SC's "I know it when I see it" approach to evaluating punitive damages.

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  1. Why are punitive damages paid to the plaintiff? (Are they?) Compensatory damages, ideally, fix the harm, and that’s all the plaintiff deserves. The punitive portion, however figured, is extracted from the defendant to discourage “bad behaviour”. The victim, as I see it, is actually positioned to benefit from the bad behaviour.

    I’ll willingly suffer numerous bug bites in exchange for $186K.

    Give the lawyers their cut and put the rest of punitive damages toward the public debt, or more directly, public defender programs.

  2. Huh-huh. He said “tortfeasor”.

  3. Yes, punitives are paid to the plaintiff, I guess on the theory that of all the available recipients, the plaintiff is the most deserving. I personally am opposed to any proposal that puts more money in the hands of the state, so I wouldn’t want punitives applied to the public debt or public defenders or any other state obligation.

    Paying them to the plaintiff also gives an incentive to seek punitive damages to the only person in a position to do so, for what that’s worth.

  4. Posner discusses the logic of assigning punitive damages to the plaintiff at some length, and (as per the usual for RP) it has nothing to do with desert. The idea is that when facing a defendant with deep pockets (and the aggressive legal team that buys) and with sufficiently low compensatory damages in the individual case, large punitive awards are necessary to make it worthwhile for anyone to take the time and risk of filing.

  5. It’d be interesting to see a compare-and-contrast critique of Posner’s approach to the damages problem vs. David Friedman’s account in _Law’s Order_.

  6. The purpose of punitive damages is to punish. The impact of the size of the award on the responsible party is entirely appropriate. If the jury can’t factor in this item, then you get either GM walking away with a “loss” that costs them less than the coffee their legal team bought during the trial, or a mom and pop operation paying facing a judgement that would sting Boeing. Neither of which is acceptable.

  7. The reason you can’t give punitive damages to the government is that plaintiffs would then no longer ask for them. Furthermore, they’d try to ask for “actual” damages that are as sky-high as possible and would only get annoyed at runaway juries trying to solve social problems rather than the case at hand.

  8. What a great decision. Simply worded so a layperson like me can understand it, logically founded and not based on any airy undefinable terms, and sharp when it needs to be.

    Of course, the fact that I agree with it helps too. 🙂

  9. The problem, of course, is that there is no balancing cost for bringing a suit and failing. There are many venues available, so, as Walter Olson put it we are in a situation of Heads the Plaintiff wins, and tails they Get to Flip again. Just as large corporations can absorb small costs of failed defenses, large law firms can absorb the small costs of filing over and over again in the hopes of getting a big pay day. Once the first payday comes, by precedent, more will follow.

    For the dark side, have a look at Olson’s overlawyered.com.

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