The Puzzle of Punitive 'Damages'


Last week The New York Times ran a front-page story by Adam Liptak that describes the dismay caused in foreign courts by the American concept of punitive damages. It's not just that such awards are sometimes jaw-droppingly high; it's also that they serve a purpose, punishment/retribution, that is usually said to be a function of the criminal justice system, where defendants enjoy stronger procedural safeguards than they do in civil courts. Punitive damages—which are not really damages at all, since compensation for injuries is not the goal—invite juries to pick numbers out of thin air, with little or no statutory guidance, as an expression of how reprehensible they think the defendant's conduct was. And while the Supreme Court has said the Due Process Clause imposes some limits on the ratio of punitive to compensatory damages, it has not taken the next logical step of saying that when the goal is explicitly punishment rather than compensation, defendants should receive all the protections they would get in a criminal case, including a higher burden of proof for the accuser. To the outside world, Liptak reports, all of this looks pretty bizarre, ad hoc, and unprincipled:

Most of the rest of the world views the idea of punitive damages with alarm. As the Italian court [that refused to enforce a punitive damage award against an Italian company] explained, private lawsuits brought by injured people should have only one goal—compensation for a loss. Allowing separate awards meant to punish the defendant, foreign courts say, is a terrible idea.

Punishments, they say, should be meted out only by the criminal justice system, with its elaborate due process protections and disinterested prosecutors. It is not fair, they add, to give plaintiffs a windfall beyond what they have lost. And the ad hoc opinions of a jury, they say, are a poor substitute for the considered judgments of government safety regulators….

"The U.S. practice of permitting a lay jury to exercise largely discretionary judgment with limited constraints in awarding punitive damages is regarded almost universally outside the U.S. with a high degree of disfavor," said Gary Born, an American lawyer who works in London.

Foreign lawyers and judges are quick to cite particularly large American awards. Julian Lew, a barrister in London, recalled a Mississippi court's $400 million punitive award against a Canadian company in 1995 with scorn. "It did bring America into total and utter contempt around the world," Mr. Lew said.

I express my own high degree of disfavor toward punitive damages here and here, among other places.