Monday, July 18, 2011

What will Congress do regarding the tax treatment of punitive damages?

For the last couple years, I've been interested in the proper tax treatment of punitive damages as a consequence of my collaboration with my erstwhile colleague, Gregg Polsky, who's now at UNC. There have been some developments on this front that should be of interest to both practitioners and legal academics interested in litigation, tax, and torts. And that's why I'm curious, as the title of the post suggests, what Congress will do. To begin, Gregg and I wrote a piece that came out last fall in which we argued that (1) plaintiffs should be able to introduce evidence to the jury or judge regarding the marginal tax rate associated with business defendants in punitive damages cases so as to allow a tax-informed "gross-up" of punitive damages, and (2) that the tax-informed jury/judge (with an ability to gross-up) was a better solution to "the insufficient sting" concern than the option touted by President Obama, which was simply to remove the ability of businesses to deduct payments of punitive damages as ordinary business expenses. The arguments we made in this piece were largely analytic and prescriptive given the constraints and goals established by the current doctrine as we saw it. Importantly, we think the arguments of our paper should trigger lots more interest by plaintiffs' tort lawyers, since they now have a set of tools that can increase the recovery for their clients in a variety of tort cases involving malicious or reckless misconduct.* In response to these arguments, we were delighted to see that Professor Larry Zelenak from Duke and Paul Mogin (from Williams and Connolly) wrote responses to our piece for Virginia Law Review's online companion, In Brief. Gregg and I now have a working draft of our reply up on SSRN, entitled, Revisiting the Taxation of Punitive Damages. Thus, in an Escheresque-turn, we now invite comments on our comments on their comments on our paper :-)

On a related note, I earlier this year published a companion paper that took a more expressly normative perspective on the optimal design of the tax treatment of punitive damages. That piece -- Overcoming Tradeoffs in the Taxation of Punitive Damages -- is now out, and I've just recently put up a final version on SSRN. In that article, I explained that the tradeoffs created under current law between ostensibly unnecessary plaintiff enrichment and proper tax incentives for business defendants could be overcome by implementing the punitive damages reforms of the sort I have recommended elsewhere.  These reforms would disaggregate the purposes of punitive damages more clearly so that the optimal deterrence function and the victim vindication function could be separated cleanly from the function of vindicating the public's interest in meting out a retributive intermediate civil sanction. More specifically, I argued that the proper tax treatment of the punitive damages (with respect to whether the defendant's payments should be deductible or not) will depend on what goals states have for their punitive damages regimes, and what goals the federal government has with respect to subsidizing those regimes.  Now, if I were you, I'd be wondering, what's Markel know about tax? That's not an unsound intuition. But I had a lot of help from Gregg and a gaggle of other tax prawfs, and my hope is that this piece will be of interest to anyone intent on understanding the full tax dimensions of punitive damages design specifically (and penalties more generally), especially and insofar as these penalties relate to optimal deterrence, victim-vindication, or public-interested retributive justice. 

Last, Gregg and I have just seen one of Congress' Joint Committee on Taxation reports for 2011, and we noticed that the Committee has acknowledged our argument, but hasn't really grappled with its implications fully. So, at this point, we are waiting to see what happens. Our hope is that the Obama Administration and folks in Congress (and the relevant lobbyists too!) read our work and realize that a repeal of the deductibility of punitive damages will interfere with both the appropriate punishment of business defendants and the states' choices to run their tort system in a way that achieves the goals they intend to set out for themselves.   

* Here's how a friend of mine described to his partners at a prominent class action firm the gist of the claim Gregg and I advance with respect to settlement dynamics and the benefits of our argument.

I think the upshot is that if Ds know you have a credible threat of getting the jury to award more in punis because of the gross-up threat, they'll settle for a higher amount.  Same logic as when you try to get a high pre-trial settlement based on the argument that the jury pool in the particular area is plaintiff-friendly.  Eg:
 
1.  expected compensatories = 1m
2.  expected punis (with jury unaware of tax issues) = 3m
    expected punis (with jury informed about tax deductibility) = 4m (because they know the pain to D is only gonna be 2m)
3.  chance of victory = 25%
 
settlement value under old scenario = (1+3)*25% = 1.00m
 
settlement value under new scenario = (1+4)*25% = 1.25m

 

Posted by Dan Markel on July 18, 2011 at 01:38 PM in Article Spotlight, Dan Markel, Retributive Damages, Tax, Torts | Permalink | Comments (0) | TrackBack

Tuesday, January 18, 2011

Some not-so-random updates on the scholarship front; or, what I like to tell my deans I did on winter "vacation."

I'm excited to say I've just begun my first semester of teaching leave. While I am excited to tackle some new projects now, I am also clearing some other ones off the decks. (And yes, I hope the leave facilitates some more substantive blogging too.)  In any event, for the benefit of my mom and a handful of other folks looking for something to read besides Amy Chua or Ethan Leib or Paul Horwitz's new books, I thought I'd let you know that there are new (and nearly final) versions of a couple pieces of mine up on SSRN and I just added a draft of a new piece.

The first new version is of my chapter, What Might Retributive Justice Be?, for the Retributivism volume edited by Mark D. White.  (I am hopeful that this volume gets the same publicity Mark was able to generate for his edited volume on procrastination--a review in the New Yorker!). As I alluded to when I put the draft up first, it is a relatively short overview of contemporary retributive justice theory (more specifically, the conception of that punishment theory that I favor). Thus, for those of you prawfs teaching criminal law to first year students this semester, and punishment theory this week or next, please feel free to circulate the draft or the link to your students who are still puzzled by the accounts of retributive justice offered up in their casebooks. 

The second piece I have revised, which is now up on SSRN, is entitled Overcoming Tradeoffs in the Taxation of Punitive Damages. This piece should be coming out in the next couple months and is a companion to a piece Gregg Polsky and I did last year entitled Taxing Punitive Damages.  Btw, Larry Zelenak of Duke wrote a super interesting reply to that piece, which you can see here; I suspect Gregg and I will write up a short reply in the near future. Anyhow, whereas the piece with Polsky made its recommendations regarding the taxation of punitive damages largely in response to the practice of punitive damages law currently governing in most American jurisdictions, the new companion piece is designed to advance the discussion of the normatively desirable tax treatment of punitive damages once punitive damages are properly disaggregated to serve the separate functions of cost internalization, victim vindication, and retributive justice.  In developing the normative policy recommendations, the new piece builds on the earlier work I've done regarding the reformation of punitive damages law.

Finally, and somewhat more exciting, Chad Flanders (SLU), David Gray (U. Maryland), and I have just uploaded a draft of a new piece of ours, coming out in April, which is entitled Beyond Experience: Getting Retributive Justice Right. It's an essay that continues and, for now, concludes our part in the conversation about the relevance of subjective experience, and in particular, hedonic adaptation, to retributive punishment. Although interest in subjective experience for purposes of punishment goes back at least as far as Bentham, this was a topic whose salience for retributive justice theory was most recently revivified in 2009 and 2010 by Adam Kolber; John Bronsteen, Chris Buccafusco, and Jonathan Masur (BBM); and, to some extent, my colleague Shawn Bayern. Chad and I wrote up an article (entitled Bentham on Stilts: The Bare Relevance of Subjectivity to Retributive Justice) trying to explain the wrong turns associated with such arguments. Separately, and roughly around the same time, David Gray wrote up his trenchant critique of Kolber and BBM (entitled Punishment as Suffering). BBM responded to our sallies in their recently published essay, Retribution and the Experience of Punishment. The piece I've just uploaded to SSRN, Beyond Experience: Getting Retributive Justice Right, is our attempt to deal with some of the new (and old) arguments and formulations advanced by BBM.  Doubtless, you're tempted to wade into this stunningly important debate yourself :-), but if you've been overcome by other obligations, here's the punchline of our piece: we're still not persuaded that hedonic adaptation is of any substantial significance to punishment theory or policy guided by retributive principles worthy of adhering to. 

Posted by Dan Markel on January 18, 2011 at 07:22 PM in Article Spotlight, Criminal Law, Dan Markel, Legal Theory, Retributive Damages | Permalink | Comments (1) | TrackBack

Thursday, July 01, 2010

Oped on Taxing Punitive Damages

Happy Canada Day!

Well, I guess now that summer's indisputably here, it's the season for prawfs to start writing more opeds.

As you saw the last few days, Ethan and Eduardo recently penned something for a broader audience. And Ethan also deserves a shout-out for a SCOTUS citation to his criminal juries piece. See McDonald v. Chicago, slip op. 34 n. 28. 

Anyway, here's a link to a short piece in today's NYT by Gregg Polsky, my patient and wise co-author of our forthcoming Taxing Punitive Damages article, and me. I'll post the text below the jump.

Damages Control

WHEN corporations like Exxon, State Farm and Phillip Morris lose tort cases, juries occasionally award, in addition to compensation for the plaintiff’s injuries, extensive punitive damages.

But jurors are often unaware that companies are able to deduct those punitive damages in calculating their federal income taxes, saving them millions of dollars and undermining the original goal of the damages: to punish reprehensible corporate behavior.

BP might soon be added to the list of payers of punitive damages for its role in the Gulf oil spill. Perhaps with that in mind, the Senate recently approved a measure to repeal deductibility for punitive damages.

The measure is well intentioned. But because most cases are settled before they reach a jury, it won’t work. Fortunately, there’s a better approach.

When plaintiffs and defendants reach a settlement before a trial, which happens in most cases, they aren’t required to specify which parts of the settlement are punitive and which are compensatory; there is typically just one number. That allows defendants to disguise the amounts that they would have paid as punitive damages as additional compensatory damages.

And because the measure maintains the deductible status of compensatory damages, nearly all punitive damages will remain, as a practical matter, deductible. This easy circumvention surely explains the meager revenue projections from the measure: $315 million over 10 years.

While the Internal Revenue Service might try to dissect settlements and classify portions of them as punitive damages, to do so it needs help from both parties to the negotiation. The problem here is that plaintiffs have no incentive to characterize the settlement correctly. Indeed, in cases involving personal physical injury, plaintiffs are better off tax-wise by characterizing the settlement as entirely non-punitive because, while the punitive damages they receive are subject to tax, the compensatory damages are not.

Put a different way, the root of the problem is that jurors tend to believe that punitive damages are not deductible, even though they are. So why not have plaintiffs’ lawyers make jurors aware of the tax deductibility of punitive damages, and teach them how to adjust their awards to offset the deduction’s effect? While plaintiffs’ lawyers don’t do this now, there is no precedent or persuasive legal argument that prevents them from doing so.

Such “tax-aware” juries would probably award higher punitive damages to offset the fact that punitive damages were tax-deductible. But more important, the prospect of tax-aware jurors would also raise the amounts of settlements before trial — when, again, most cases are actually resolved. This is because the amount of a settlement depends on the amount that a jury is expected to award after a trial. If tax-aware juries became the norm, plaintiffs would push for higher settlements, and thus both settling and non-settling defendants would bear the correct amount of punishment. Under the Senate’s approach, in contrast, only the very few non-settling defendants would bear that punishment.

The tax-awareness approach is by no means perfect. It requires juries to determine yet another fact during punitive-damages proceedings, namely the defendant’s marginal tax rate. It also increases the sizes of recoveries to punitive-damage plaintiffs and their lawyers, which is either a good or a bad thing, depending on your perspective. Nevertheless, given the practical futility of the Senate measure, tax-awareness is a far better approach to solving the problem of under-punishment.

There is a good chance that the Senate measure will become law, if only because the public is exasperated by the BP fiasco and Congress desperately needs revenue, even a relatively small amount. But if it does, it will be yet another example of expedient politics trumping sound policy.

Gregg Polsky and Dan Markel are, respectively, law professors at the University of North Carolina at Chapel Hill and Florida State University.


Posted by Dan Markel on July 1, 2010 at 12:30 PM in Article Spotlight, Current Affairs, Dan Markel, Retributive Damages, Tax, Torts | Permalink | Comments (0) | TrackBack

Thursday, June 17, 2010

The Senate has mucked things up--hopefully the House won't follow suit

(This post is by Prof. Gregg Polsky and me.) 

Yesterday, the Senate passed an amendment that would make punitive damages paid by businesses nondeductible for tax purposes.  The nondeductible rule is intended to pay for a 90 day extension of the home buyer's tax credit.  On the face of it, this seems like a great idea--after all, why should defendants get tax breaks for malicious or reckless wrongdoing?

But as we've recently argued in our forthcoming paper, Taxing Punitive Damages,  a rule of nondeductibility is the wrong approach. It would be easily circumvented by defendants through settlements that disguise punitive damages as additional compensatory damages. Indeed, easy circumvention is fully consistent with the measly revenue projections from the rule:  a mere $315 million over 10 years.  It would be far, far more effective, in our opinion, to allow plaintiffs to introduce tax evidence against the defendant in the punitive damages phase and encourage juries to "gross up" damage awards to offset the effect of deductibility.  As we explain, a number of other factors (including concerns for federalism and regulatory diversity) also push in favor of our proposed solution over a rule of nondeductibility.      

To be sure, a nondeductibility rule looks good superficially (especially at a time when people are foaming at the mouth for Obama and the feds to do *something*). And no question, the need for immediate projected revenue (no matter how pitifully small) is great.  So while we think there's a decent chance the Senate's proposal will go through, despite its significant real-world flaws, we will be trying to explain along the way why the better strategy in this case is to do nothing and let the states work this out on their own. If it passes, we'll be joining the Office of the Repealer for these limited purposes!  

P.S. The new draft on SSRN contains a response to Professor Geistfeld's interesting critique of our paper. 

Posted by Dan Markel on June 17, 2010 at 11:10 PM in Article Spotlight, Current Affairs, Dan Markel, Retributive Damages, Tax, Torts | Permalink | Comments (0) | TrackBack

Monday, May 03, 2010

Geistfeld on Polsky and Markel's Taxing Punitive Damages

Over at the TortsProf Blog, NYU Prawf, Mark Geistfeld, just posted an interesting set of reactions to the draft of Taxing Punitive Damages that Gregg Polsky and I have posted on SSRN. Thankfully, these reactions appeared prior to publication (go SSRN!!) and so, with some luck and the indulgence of our editors, Gregg and I will have the chance to consider and respond to Mark's comments over the next few weeks as we tweak our draft. (Naturally, we invite others to share their thoughts with us too, either online or offline, prior to publication. And if you'd rather hold your fire until after the piece is out, Virginia Law Review runs "In Brief," an online companion that it will use to host responses to our piece, and our eventual reply.)  

Mark's comments appear below: 

As the academic year winds down, I usually rearrange the piles on my desk in an effort to mark the onset of another summer full of promise and unrealistic expectations. While rearranging the pile “tort-related things I’d like to read when I get a chance,” I came across the article by Gregg D. Polsky & Dan Markel, “Taxing Punitive Damages” (2010) (forthcoming Virginia Law Review).  Earlier this semester I had downloaded the manuscript and dutifully placed the printout in the appropriate pile. Since then, I’ve seen passing reference in the media to the apparent absurdity of federal tax rules that permit the deductibility of punitive damage awards—a deduction targeted for elimination in President Obama’s 2011 fiscal year budget.  How could punishment plausibly deserve a tax break?  The issue is more interesting than I had initially recognized, so I paused to peruse more closely the offerings of Polsky & Markel on the matter. 

They make the nice point that if punitive damages are not deductible, then plaintiffs and defendants have an incentive to “disguise punitive damages as compensatory damages in pre-trial settlements.” Doing so decreases the (after tax) cost of settlement for defendants, creating a gain that can then be shared by the settling parties.  By way of extended analysis, Polsky and Markel go on to conclude that the best way to solve the “under-punishment problem” created by deductibility is not to eliminate the tax break, as everyone had previously concluded, but instead to apprise juries of the deductibility issue so that they will “gross up” the punitive award to offset the tax break. 

Largely missing from the analysis, however, is discussion of how liability insurance affects the incidence of tort liability. Once this dimension of the problem has been recognized, it becomes apparent that there is a much stronger case against the deductibility of punitive damages.

Consider a world (largely like our own) in which every defendant worth suing has liability insurance covering at least a portion of a tort judgment (or any other form of civil liability that permits the award of punitive damages).  Suppose our insured defendant has incurred punitive damages liability. Perhaps surprisingly, this form of liability is not expressly excluded from coverage under the standard-form liability-insurance contracts.  Whether the defendant can actually collect on the insurance, however, depends on whether the jurisdiction permits the insurability of punitive damages as a matter of public policy.

Nine or so jurisdictions, including California and New York, prohibit the insurance of punitive damages.  In these jurisdictions, any settlement between an insured defendant and the tort plaintiff presumably will allocate the appropriate amount to punitive damages. Regardless of how the defendant and plaintiff would otherwise like to characterize the proportion of compensatory and punitive damages covered by the settlement, the insurer is obligated to indemnify only the former category and accordingly will seek to maximize the portion of the settlement attributable to punitive damages (and excluded from coverage).  The insurer usually can police the terms of the settlement directly (the insurance contract gives the liability insurer the right to settle the case).  But if the insurer does not fully participate in the settlement, the terms of the settlement would not have preclusive effect in a subsequent coverage dispute with the tort defendant/policyholder regarding the amount of the settlement that is covered by the policy and properly allocable to compensatory damages.  The liability insurer, therefore, presumably will monitor the portion of the settlement allocable to punitive damages, effectively precluding plaintiffs and defendants from otherwise manipulating settlements in a manner that would thwart efforts to restore the full “sting” of punitive damages by making them nondeductible.

The argument against deductibility then largely generalizes to the remaining jurisdictions that permit the insurability of punitive damages.  The standard-form liability-insurance contracts do not cover liabilities for “expected or intended harms.”  In these cases, the insurer can deny coverage altogether—for both compensatory and punitive damages—and so it will not monitor the portion of any settlement properly allocable to punitive damages.  In light of the settlement problem identified by Polsky and Markel, the best approach would be to deny deductibility for the entire liability.  These instances of intentional wrongdoing clearly implicate the retributive concerns that would create a problem of “under punishment” in the event that the punitive award receives a tax break.  Rather than let the litigants manipulate settlements for tax reasons, why not eliminate the tax break altogether for liabilities of this type?  Why should these intentional wrongdoers be able to deduct any of their liabilities as a cost of doing business?

Regardless of how one answers this question, the case for nondeductibility remains intact.  The public policy concerns implicated by the insurability issue are substantively identical to those posed by the deductibility issue: each allows the tort defendant to distribute the cost of the punitive award to a wider group (other policyholders; other taxpayers).  In deciding to permit the insurance of punitive damages, a jurisdiction has concluded that the redistribution afforded by liability insurance does not create any public policy problem of “under punishment.” So, too, in these jurisdictions the redistribution afforded by the deductibility of punitive damages does not create any public policy problem of “under punishment.” Consequently, even if a tax rule of nondeductibility could be largely circumvented by the settling parties as Polsky and Markel conclude, there is no “under-punishment problem” created by the de facto deductibility of punitive damages.  This does not mean that the deductibility issue is largely irrelevant.  The tax rule against deductibility is still desirable as a federal matter because it furthers the public policy of those states that reject the insurability of punitive damages on the ground that wrongdoers should not be able to redistribute their punishment to others.

Admittedly, I live in a state where punitive damages are not insurable, and the analysis of Polsky and Markel has much more to offer than I have indicated.  They artfully unravel the surprising complexity of what appears to be a rather straightforward issue—whether bad behavior deserves a tax break.  Clearly, I should have put this article into my “read right away” pile (although that pile, of course, also ends up getting shuffled around at the close of the academic year).

 

- Mark Geistfeld

Sheila Lubetsky Birnbaum Professor of Civil Litigation

New York University School of Law

Posted by Dan Markel on May 3, 2010 at 11:48 AM in Article Spotlight, Dan Markel, Retributive Damages, Torts | Permalink | Comments (1) | TrackBack

Thursday, April 29, 2010

Punitive Damages and Private Ordering Fetishism

In two recent response essays by distinguished torts scholars, Professors David Owen and Michael Krauss, I was charged with "aggravating punitive damages" and instigating the "death of private ordering." 

Who, me?

In seriousness, I have a somewhat more considered and elaborated answer, and I've got a draft of that reply in a new essay up on SSRN by the title of Punitive Damages and Private Ordering Fetishism.  I'd be grateful if you could share with me any thoughts or reactions; it weighs in at just under 10,000 words. Here's the abstract, with links to the full conversation after the jump.

This essay is a reply to two recent responses that appeared in the U. Penn Law Review's online companion, PENNumbra by Professors Michael Krauss and David Owen. The essay's principal goal is to clarify some areas where I think Professors Krauss and Owen misunderstood some aspects of my proposed framework for restructuring punitive damages, a framework I developed in two recent articles. Those clarifications address issues including but not limited to how punitive damages law ought to address the wealth or financial condition of the defendant, the defendant’s status as a corporation, settlement dynamics and insurance. Before I answer Professor Krauss’s and Professor Owen’s challenges in those particular domains, however, I begin the essay with some more general observations about what role tort law could and should serve. My hope is that these initial remarks will provide some context for the nature and significance of the particular policy disputes we have with respect to punitive damages law.

You can find the articles Professor Krauss and Owen respond to here:

Markel, Retributive Damages: A Theory of Punitive Damages as Intermediate Sanction, 94 Cornell L. Rev. 239-340 (2009) (available at http://ssrn.com/abstract=991865 )

Markel, How Should Punitive Damages Work?, 157 University of Pennsylvania Law Review 1383 (2009) (available at http://ssrn.com/abstract=1260019

You can find Professor Krauss's Response here:
Michael I. Krauss, Response, “Retributive Damages” and the Death of Private Ordering, 158 U. Pa. L. Rev. PENNumbra 167 (2010), http://www.pennumbra.com/responses/02-2010/Krauss.pdf

You can find Professor Owen's Response here:
David G. Owen, Response, Aggravating Punitive Damages, 158 U. Pa. L. Rev. PENNumbra 181 (2010), http://www.pennumbra.com/responses/02-2010/Owen.pdf

Posted by Dan Markel on April 29, 2010 at 10:31 AM in Article Spotlight, Criminal Law, Dan Markel, Legal Theory, Retributive Damages, Torts | Permalink | Comments (2) | TrackBack

Wednesday, March 17, 2010

Taxing Punitive Damages, coming soon

My colleague Gregg Polsky and I have a piece called Taxing Punitive Damages that we're pretty excited about, which we've just uploaded finally to SSRN. It's a draft and so we welcome comments and feedback. I may take the liberty of sharing some more of the paper in some coming posts, but in case I don't get to that soon, here's the link to the whole thing, and the abstract appears below:

There is a curious anomaly in the law of punitive damages. Jurors assess punitive damages in an amount that they believe will best “punish” the defendant. But, in fact, defendants are not always punished to the degree that the jury intends. Under the Internal Revenue Code, punitive damages paid by business defendants are tax deductible and, as a result, these defendants often pay (in real dollars) far less than the jury believed they deserved to pay. 

To solve this problem of under-punishment, many scholars and policymakers, including President Obama, have proposed making punitive damages nondeductible in all cases. In our view, however, such a blanket nondeductibility rule would, notwithstanding its theoretical elegance, be ineffective in solving the under-punishment problem. In particular, defendants could easily circumvent the nondeductibility rule by disguising punitive damages as compensatory damages in pre-trial settlements. 

Instead, the under-punishment problem is best addressed at the state level by making juries “tax aware.” Tax-aware juries would adjust the amount of punitive damages to impose the desired after-tax cost to the defendant. As we explain, the effect of tax awareness cannot be circumvented by defendants through pre-trial settlements. For this and a number of other reasons, tax awareness would best solve the under-punishment problem even though it does come at the cost of enlarging plaintiff windfalls. Given the defendant-focused features of current punitive damages doctrine, this cost is not particularly troubling. Nonetheless, a related paper of ours furnishes a strategy for overcoming this tradeoff through some basic reforms to punitive damages law.

Posted by Dan Markel on March 17, 2010 at 04:58 PM in Article Spotlight, Criminal Law, Dan Markel, Legal Theory, Retributive Damages | Permalink | Comments (1) | TrackBack

Sunday, July 26, 2009

Taxing Punitive Damages, etc.

Update 8/16: We've now got a first shitty draft available for private circulation; if there are tax or torts mavens who wish to read it, please email me asap. Thanks.

It's about four days until my wife is "due." During this pre-baby period, one of my projects has been an effort with my friend and co-author, Gregg Polsky, to finish our "shitty first draft" of Taxing Punitive Damages. I'm happy to say we're almost there. This paper is actually the fourth paper on punitive damages I've been involved with the last few years. The first two came out this past spring (here and here) and I was initially planning on turning to work further on and submit the third one, Punitive Damages and Complex Litigation, later this summer.  But for a cluster of reasons, that piece is now on the back burner and has swapped places with the fourth piece -- the one with Gregg on the intersection of taxation and punitive damages. 


Unlike the earlier co-authoring work I did (and am doing still) with Ethan and Jennifer, where we had overlapping areas of expertise as well as separate ones, this piece with Gregg presents a collaboration where there's really no overlap of expertise. He's the tax guy and I'm, well, the guy who does whatever it is that I do. While I'm definitely not the tax guy -- I never took tax in law school, to my regret, so I've been trying to learn a few things while writing this paper up -- I confess I've had fun learning about all this new legal mumbo jumbo. Tax is fun.  Yeah, I said it.*

Over the next week or so and in the course of a few posts, I'll try to share some parts of the paper's main ideas. There's a rough stab at an abstract after the jump. But keep in mind that all this is tentative, so if you think we're off-base, please let us know.  By the way, we expect to have a circulable draft in the next week or two. If you're a tax person and/or interested in federalism (Brian G? Rick H?), we hope you'll be among the first to read it.

Taxing Punitive Damages
In this article, we address the important but astonishingly under-examined issues associated with the taxation law and policy related to punitive damages. For the most part, the tax consequences of punitive damages are not on anyone’s minds, and as a result of this blind spot, plaintiffs and their lawyers are likely leaving enormous amounts of money on the table in every case involving punitive damages against defendants whose torts occurred in the context of business operations. Of course, even if we assumed that decision-makers regarding punitive damages were aware of the relevant tax effects, there are still a number of other important issues affecting whether a jurisdiction should make punitive damages a) deductible from defendants’ gross income or non-deductible, and b) taxable gains to the plaintiff.  This Article examines those issues, and by doing so, spotlights the policy difficulties associated with trying to use tax law to help achieve the goals of current punitive damages law.  Contrary to a number of scholars who have flatly endorsed the move to a non-deductibility rule to simply increase the putative “sting” of punitive damages, we explain what that change in taxation would augur for a broad array of policy concerns including federalism, settlement incentives, collusion against third parties, and administrative oversight. Because we think a lot of the difficulties associated with the taxation of punitive damages cannot be readily fixed simply by tweaking tax law, we sketch out a vision for what a more attractive punitive damages regime would look like, and how the tax rules would correspond appropriately. 

*Btw, I associated the "Yeah, I said it" line with Chris Rock and his famous joke about who can and cannot be First Lady, but it seems Wanda Sykes may have laid claim to it more prominently by her book title.

Posted by Dan Markel on July 26, 2009 at 02:00 PM in Article Spotlight, Dan Markel, Retributive Damages, Torts | Permalink | Comments (2) | TrackBack

Friday, July 10, 2009

Sheila B. Scheuerman on Markel's "Retributive Damages"

Somewhat randomly, I just stumbled across this new essay on the Legal Workshop by Professor Sheila Scheuerman that takes my "Retributive Damages" piece in Cornell to task for a) conjuring a scheme that does not resemble punitive damages, and at the same time b) ostensibly suffers from due process questions arising from the SCT's punitive damages jurisprudence.  Hmmm.  

After the jump, I've reprinted her critique. I'll try to work up a response and share it next week. Though I guess the title of her response suggests something like I'm Alice in Wonderland, I'm nonetheless very grateful to Prof. Scheuerman for the attention she's paid to my work. I hope it withstands her scrutiny, at least when viewed in conjunction with the second piece in the series, How Should Punitive Damages Work?, which came out in final form a couple months ago. If you've read my piece(s), feel free to weigh in on the matter in the comments. Have a good weekend!


Through the Looking Glass: A Response to Professor Dan Markel’s Retributive Damages

In Retributive Damages: A Theory of Punitive Damages as Intermediate Sanction,1 Professor Dan Markel “reimagine[s]” the law and proposes an interesting theory of punitive damages.2 Unlike work by other scholars,3 Professor Markel intentionally situates his theory of “retributive damages” outside the historical framework and doctrinal limits of punitive damages.  Instead, Professor Markel argues that states should replace the current punitive damages framework with a new statutory scheme akin to the federal sentencing guidelines.  Though satisfying on a purely theoretical level, Professor Markel’s paradigm raises two initial questions.  First, can the “retributive damages” model properly be considered punitive damages?  Second, do “retributive damages” avoid the doctrinal problems that have plagued punitive damages for decades?  In my view, the answer to both questions is “no.”

 
I.
It’s Not “Punitive Damages”

In this first article in a planned quartet, Professor Markel proposes using public retributive justice theory to frame a new system of punitive damages.  Under his proposal, state legislatures would define the conduct subject to retributive damages by statute.  Plaintiffs who were harmed by a defendant’s violation of the retributive damages statute could seek retributive damages as a remedy in a traditional tort action.  However, if the plaintiff chose to forgo retributive damages or if the statutory violation did not cause any harm, private attorneys general could bring an action for retributive damages alone.  In either case, the jury would use a set of legislative guidelines to determine a reprehensibility “score” for the defendant’s conduct.  In a structure similar to the criminal sentencing guidelines, the judge would then take the jury’s reprehensibility score and apply it to a statutorily defined table setting the amount of damages based on the defendant’s wealth.  Next, courts would evaluate the profitability of the defendant’s conduct.  If the reprehensibility-based damages combined with compensatory damages did not eliminate the profit from the defendant’s wrongdoing, courts also would impose a gain-elimination penalty.  The reprehensibility penalty and the gain-elimination penalty would both be paid to the state and could be credited against future criminal sanctions.  To encourage suits under this scheme, the defendant would be required to pay a fixed $10,000 award to the named plaintiff as well as the plaintiff’s attorney’s fees.  Finally, a plaintiff could not settle a retributive damages claim without state approval.

Putting aside the merits of Professor Markel’s retributive damages scheme as a type of damages, one thing is clear: it is not punitive damages.  Like Professor Markel’s “retributive damages,” punitive damages are “extra-compensatory” in that both types of awards exceed the plaintiff’s actual harm.4 But that’s where the similarities end.  Unlike the statutory scheme envisioned by Professor Markel, punitive damages are a type of common law damages available in a civil tort suit by a private plaintiff.5 In most states, juries are instructed to calculate the amount of punitive damages based on a variety of factors.6 Those factors include the reprehensibility of the defendant’s conduct, but they also include numerous other factors.7 Moreover, in most states, plaintiffs keep the bulk of a punitive damages award.8

Professor Markel would change so many of these characteristics that it is impossible to consider his proposal a form of “punitive damages.”  Consider just a few of the differences.  Retributive damages can be pursued by uninjured third parties or the state itself; punitive damages can be pursued only by the tort victim.  Retributive damages are awarded wholly to the state; punitive damages are awarded to the private plaintiff.  Retributive damages are calculated according to a statutorily defined table; punitive damages are calculated by a jury according to common law principles.  Retributive damages cannot be settled without the approval of the state; punitive damages can be settled at the will of the parties.

To be sure, scholars have criticized many of these features of punitive damages.9 And it is true that judicial opinions largely have failed to articulate a coherent rationale for punitive damages.  Nevertheless, despite the ongoing debate about the theoretical justifications for punitive damages, nearly all fifty states and federal courts have accepted the doctrine of punitive damages.10 Indeed, punitive damages have a long historical pedigree dating back to the Hammurabi Code in 2000 B.C.11

 
II.
A Few Due Process Problems with “Retributive Damages”

The question then becomes whether “retributive damages” would be better than the current system of punitive damages.  Because Professor Markel’s article is only the first of a planned series, much is left unanswered at this stage, which makes a complete assessment of “retributive damages” difficult.  I’d like to consider a couple of threshold due process issues.

As an initial matter, tying the amount of the retributive damages award to the defendant’s wealth, as Professor Markel’s model would do, raises facial due process concerns.12 Under Philip Morris v. Williams, the Court held that “the Constitution’s Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury that it inflicts upon non-parties or those whom they directly represent, i.e., injury that it inflicts upon those who are, essentially, strangers to the litigation.”13 In addition, under State Farm v. Campbell, “[a] State cannot punish a defendant for conduct that may have been lawful where it occurred.”14 Nor can a state punish the defendant for unlawful conduct outside its jurisdiction.15 Basing a retributive damages award on a defendant’s wealth, however, risks punishing a defendant for harm to non-parties in violation of Philip Morris, and further risks punishing a defendant for lawful conduct and out-of-state conduct in violation of State Farm.16

Moreover, anchoring the amount of a penalty to the defendant’s wealth does not take into account the second BMW guidepost: the ratio between the extra-compensatory award and “the actual harm inflicted on the plaintiff.”17 Although Professor Markel correctly notes that “harm” is not per se limited to compensatory damages alone, his retributive damages scheme does not provide room for the jury—or judge on post-verdict review—to evaluate the reasonable relationship requirement.  In response, Professor Markel points to the legislative foundation of his new system and argues that the statutory nature of retributive damages justifies greater deference by courts.  Thus, he suggests that the reasonable relationship requirement would not apply to “retributive damages.”  As I previously have argued,18 however, legislative penalties are not immune from constitutional scrutiny.  Rather, the Supreme Court has applied the same constitutional excessiveness standards, including the reasonable relationship requirement, to jury awards of punitive damages as well as criminal fines and sentences.19 Thus, this constitutional requirement cannot be ignored.

Finally, allowing a private attorney general to sue based on harm to a non-party violates the black letter of Philip Morris. Professor Markel acknowledges this issue, but he argues that the retributive damages scheme survives constitutional scrutiny because the private attorney general “is not suing to recover for harm to the victim, but rather to initiate an intermediate sanction for the defendant’s wrongful conduct.”20 This argument misses the mark.  The Supreme Court stated unambiguously that the amount of a punitive damages award must be tied to the harm to the individual plaintiff: a punitive damages award cannot be used “to punish a defendant directly on account of harms it is alleged to have visited on nonparties.”21 Moreover, allowing a retributive damages award to be based on harm to non-parties would prevent the defendant from raising all possible defenses.  In Philip Morris, for example, the Court noted that other allegedly injured smokers might have known smoking was dangerous or might not have relied upon the defendant’s statements.22 Professor Markel’s retributive damages scheme raises similar concerns.

 
III.
Conclusion

In short, Professor Markel does not suggest a new theory of punitive damages that harmonizes the rather confused law in this area.  Rather, he offers a new statutory civil penalty system, and it remains unclear whether this system will survive due process scrutiny.  Beyond these questions, I wonder about the inevitable issues that would arise from a system that combines aspects of the harshly criticized sentencing guidelines with the complexity of qui tam law added on top of existing punitive damages jurisprudence.  I look forward to seeing how Professor Markel addresses these and other underlying issues in his subsequent pieces.dingbat


Acknowledgments:

Copyright © 2009 Cornell Law Review.

Sheila B. Scheuerman is Associate Professor of Law at Charleston School of Law.

Special thanks to Keith N. Hylton, Anthony J. Sebok, Christopher J. Robinette, and Benjamin C. Zipursky for comments.

This Editorial is a response to the following Legal Workshop Editorial:  Dan Markel, Retributive Damages as Intermediate Public Sanctions: A Synopsis, LEGAL WORKSHOP (May 12, 2009), based on A Theory of Punitive Damages as Intermediate Sanction, 94 CORNELL L. REV. 239 (2009).
Click Here for the Markel Legal Workshop Editorial.
Click Here for the full Markel Article.

  1. Dan Markel, Retributive Damages: A Theory of Punitive Damages as Intermediate Sanction, 94 CORNELL L. Rev. 239 (2009). 
  2. Id. at 246. 
  3. See, e.g., Keith N. Hylton, Reflections on Remedies and Philip Morris v. Williams, 27 REV. LITIG. 9 (2007); Christopher J. Robinette, Peace: A Public Purpose for Punitive Damages?, 2 CHARLESTON L. REV. 327 (2008); Anthony J. Sebok, Punitive Damages: From Myth to Theory, 92 IOWA L. REV. 957 (2007); Benjamin C. Zipursky, A Theory of Punitive Damages, 84 TEX. L. REV. 105 (2005). 
  4. E.g., Gertz v. Robert Welch, Inc., 418 U.S. 323, 350 (1974) (noting that punitive damages “are not compensation for injury”). 
  5. See, e.g., Catherine M. Sharkey, Punitive Damages as Societal Damages, 113 YALE L.J. 347, 357 (2004) (describing “individual-harm paradigm” of punitive damages). 
  6. Sheila B. Scheuerman & Anthony J. Franze, Instructing Juries on Punitive Damages: Due Process Revisited After Philip Morris v. Williams, 10 U. PA. J. CONST. L. 1147, 1165-99 (surveying jury instructions on punitive damages in state and federal courts). 
  7. Id. 
  8. See e.g., Sharkey, supra note 5, at 372-89 (noting only eight jurisdictions where plaintiffs share a portion of a punitive damages award with the state). 
  9. See, e.g., Hylton, supra note 3, at 22-24; Sebok, supra note 3, at 962-1002; Zipursky, supra note 3, at 167-70. 
  10. See Scheuerman & Franze, supra note 6, at 1166 n.130 (noting that all states except New Hampshire and Nebraska allow some form of punitive damages). 
  11. LINDA L. SCHLUETER, PUNITIVE DAMAGES 1 (5th ed. 2005). 
  12. Although Professor Markel acknowledges this issue with respect to his proposed gain elimination damages, Markel, supra note 1, at 297, he does not address the issue with respect to the use of wealth generally. 
  13. Philip Morris USA v. Williams, 549 U.S. 346, 353 (2007). 
  14. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 421 (2003). 
  15. Id. 
  16. Scheuerman & Franze, supra note 6, at 1206. 
  17. BMW of N. Am., Inc., v. Gore, 517 U.S. 559, 580 (1996). 
  18. Sheila B. Scheuerman, Due Process Forgotten: The Problem of Statutory Damages and Class Actions, 74 MO. L. REV. 103 (2009). 
  19. See id. at 122. 
  20. Markel, supra note 1, at 283 n.157. 
  21. Philip Morris USA v. Williams, 549 U.S. 346, 355 (2007). 
  22. Id. at 354-55 (”Yet a defendant threatened with punishment for injuring a nonparty victim has no opportunity to defend against the charge, by showing, for example in a case such as this, that the other victim was not entitled to damages because he or she knew that smoking was dangerous or did not rely upon the defendant’s statements to the contrary.”). 

Posted by Dan Markel on July 10, 2009 at 02:59 PM in Article Spotlight, Criminal Law, Dan Markel, Retributive Damages, Torts | Permalink | Comments (0) | TrackBack

Friday, May 29, 2009

Final version of How Should Punitive Damages Work? now available

Via the Tarlton Library email at UTexas, I just saw that the final version of my recent piece on punitive damages is now out. It's called How Should Punitive Damages Work?, and it's the second in a projected 4 part series of articles designed to rethink punitive damages policy and doctrine. You can find the most recent and final version of it here. If the piece enrages you with its perverse, futile, or wildly reckless and unconstitutional suggestions, then I think Penn LR will be open to publishing responses through its excellent online companion, Pennumbra.  As a former Pennumbra author, I highly recommend it--your piece ends up on Westlaw and you get the talented UPLR students working on it too. The abstract of the piece appears after the jump. The article's predecessor, "Retributive Damages," is available here; and a synopsis of "Retributive Damages" can be found on the new Legal Workshop website, over here.


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: .

Posted by Dan Markel on May 29, 2009 at 02:32 AM in Retributive Damages | Permalink | TrackBack

Tuesday, March 31, 2009

SCOTUS Digs Philip Morris

Thanks to Adam Richardson, one of my RA's and fave students, I just got word that the Supreme Court dismissed cert on the Philip Morris punitive damages case as improvidently granted. It was a one line per curiam statement, available here. Lyle Denniston of the indispensable SCOTUSBlog has this brief report.   I'd be curious to hear rank speculation about why the case got DIG'd in the comments. In the meantime, here's a snippet of Lyle's work, and some links to my own recent and forthcoming work in the area of punitive damages. 


Mrs. Williams’ lawyers told the Court this time: “Twelve years after the tragic death that gave rise to this action and nine years after the lengthy trial of this case, with four appellate reviews in Oregon, and five years after the first of three trips to this Court, it is time for this litigation marathon to end.”  The marathon, however, may not be over yet.  Philip Morris, at an earlier stage in the case, reserved the right to challenge a state law that requires that 60 percent of a punitive verdict goes to the state of Oregon. The company’s argument against that is that Oregon has achieved all of the proceeds it is entitled to have under the global settlement of a group of states’ lawsuit against the industry. Mrs. Williams’ lawyers, backed by the Oregon attorney general, have argued that the tobacco settlement only applied to that specific case, and thus would have no effect on the verdict in her case.   Philip Morris must take an affirmative new step to revive this issue, according to lawyers involved. The verdict stood at nearly $143 million a year ago when Philip Morris filed its latest petition in the Supreme Court.  Under Oregon law, the interest rises at 9 percent a year, indicating that the award is now worth something around $156 million.  Mrs. Williams’ 40 percent share would thus appear to be somewhere above $60 million.  (The compensatory award of $521,485.50 has not yet been paid, because Philip Morris’ various appeals sought a new trial on the entire verdict.)

Posted by Dan Markel on March 31, 2009 at 12:40 PM in Article Spotlight, Constitutional thoughts, Dan Markel, Retributive Damages | Permalink | Comments (1) | TrackBack

Friday, March 06, 2009

Can Punitive Damages Law Inform the Copyright Infringement Litigation?

I'm just now getting a chance to listen to UCLA prawf Doug Lichtman's really cool podcast on the relationship between punitive damages law and the copyright infringement litigation. I haven't gotten to the point yet where my voice pops up, which is all for good since I often cringe at the playback of my recorded voice.  Here's the summary of the podcast, which is part of Doug's ongoing IP Colloquium series


Joel Tenenbaum looks a lot like every other defendant who has been accused by the music industry of illegally sharing copyrighted work online, but with one key difference: his defense attorney is Harvard Law School Professor Charlie Nesson, and Nesson is out to turn his case into a public referendum not only on the music industry's efforts to enforce copyright through these direct-infringer suits, but also on the copyright rules that make the industry litigation possible.
In this program, we engage Nesson's key arguments, focusing especially on Nesson's claim that copyright law's statutory damages regime runs afoul of constitutional protections against excessive and/or arbitrary civil damages awards.
Guests include Professor Nesson himself; Steven Marks, General Counsel for the Recording Industry Association of America; and three of the leading academic experts on punitive damages: New York University Professor Catherine Sharkey, Florida State Professor Dan Markel, and George Washington University Professor Thomas Colby. UCLA Law Professor Doug Lichtman moderates.

Posted by Dan Markel on March 6, 2009 at 10:34 AM in Culture, Current Affairs, Dan Markel, Information and Technology, Intellectual Property, Retributive Damages | Permalink | Comments (0) | TrackBack

Monday, February 16, 2009

Final and New Drafts

I hope everyone had fun celebrating Valentine's day, or not, if that's your preference. Among other things, I had the chance to see the Clint Eastwood movie, Gran Torino.  I thought the acting was a bit forced at times (I'm not sure growling counts as acting), but the movie crescendoes in a very powerful way, especially, I imagine, for fans of Christology. Eastwood's movie-making the last decade or so has been reliably beautiful and so this might be one worth visiting the cinema for, rather than waiting for Netflix. I have it on good authority, by contrast, that Confessions of a Shopaholic and He's Just Not That Into You are ones that can wait until their release on cable.


In any event, I thought I'd just post a quick note to say that the final version of Retributive Damages: A Theory of Punitive Damages as Intermediate Sanction is now available on SSRN or in your local January 2009 issue of the Cornell Law Review.  I will at some point soon be writing a short version of it for the new collaboration among law reviews called The Legal Workshop.*  I hope and invite others to respond to the final version in that forum (or elsewhere).  I've also just posted on SSRN a new working draft of the successor piece to Retributive Damages, entitled "How Should Punitive Damages Work?"  This piece will be coming out later this spring and I only have a couple weeks left before I have my last chance to touch it again, so if there are any folks who have written on or near the subject and wish to weigh in with comments or suggestions for further reading/citations, I would welcome your input via email. 

Last, I've also posted a newly revised and working version of Executing Retributivism: Panetti and the Future of the Eighth Amendment up on SSRN. As with the other working paper, I welcome comments by all and especially from those who have worked in or near the area (of the death penalty, Eighth Amendment generally, and/or punishment theory) and might wish to provide comments or suggestions for further reading and citations (including your own!). My apologies in advance if I neglected to address your work or those of your colleagues--please help me out before it's too late...
   
*This is what I heard about this new enterprise: Legal Workshop, a new online project, is a free electronic resource created and controlled by many of the nation's top Law Reviews, including the Harvard Law Review, the Stanford Law Review, and the NYU Law Review.  Its chief goal is to increase online exposure of published articles. For the Legal Workshop, all of our authors now prepare, with the help of the Executive Articles Editor with whom they are paired, a shortened version of their Article (1500-4000 words), without footnotes, analogous in style to a very brief essay or newspaper op-ed.

Posted by Dan Markel on February 16, 2009 at 12:55 AM in Article Spotlight, Dan Markel, Retributive Damages | Permalink | Comments (0) | TrackBack

Sunday, August 31, 2008

How Should Punitive Damages Work?

Update 8/31: I'm moving this up to save having to write a new post. I just wanted to share the exciting news that I've just accepted an offer to publish this piece in the University of Pennsylvania Law Review in volume 157 (spring 2009 sometime). Interestingly, the piece didn't get picked up through an expedite, which should hearten those authors who wonder whether and how much "law review strategery" is necessary.  I owe a giant thanks especially to Jason Solomon and the attendees at Prawfsfest! at Hofstra, who helped me see the need to restructure the piece entirely in the last month. Once I get some more revisions on that death penalty paper done in the next few days, I will blog about this paper some more.

***

I'm very excited to announce that I've recently uploaded to SSRN a working draft of my new paper, How Should Punitive Damages Work? You can download it here. It's still a work in progress but I hope to have solved a few policy and constitutional issues in it. As the sequel to my Retributive Damages piece coming out this January in Cornell LR, it tries to lay out in more careful detail how to build a better punitive damages regime. This particular piece focuses on issues common to all kinds of punitive damages cases.*

After providing some background, I explain that there are three normative goals that punitive damages can and should achieve:
1) the public interest in retributive justice, which is vindicated through what I call "retributive damages."
2)  empowering victims with a mode of recourse that permits but does not obligate the victim to vindicate the injury to his/her dignity interest, an interest that is not otherwise compensated under traditional compensatory damages, and which I, following some Commonwealth jurisdictions, call "aggravated damages."
3) the pursuit of cost-internalization or "optimal deterrence" the extent to which it is permitted after Philip Morris. These are called "deterrence damages."

To make punitive damages work well, I argue that we have to separate retributive damages from damages meant to achieve deterrence or to vindicate the victim's dignity and autonomy 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.

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

The argument is largely a prescriptive one: that is, if you agree with these rationales, which have been separately defended in the literature, then here's how to build an attractive pluralistic damages regime. However, I also want to ensure that this pluralistic extra-compensatory damages regime is in fact  consistent with the Supreme Court's various cases, so there's an element of doctrinal analysis too.

Indeed, there are a number of constitutional arguments I make that counter, on the one hand, arguments by those like Tom Colby, who thinks that "retributive damages" would require the panoply of criminal procedural safeguards, and on the other hand, arguments by those like Marc Galanter and David Luban, who think the fact of privately initiated lawsuits for punitive damages means that relatively nothing in the way of procedural safeguards are constitutionally required or normatively justified.

My own view is that both of these positions are wrong.  I explain why after the jump.

In short, pace Colby, retributive damages are not criminal fines because they don't entail criminal convictions or trigger the cluster of collateral consequences that typically attach to all sorts of convictions. But they are, contra Galanter and Luban, nonetheless a rebuke of the defendant that involves elements of both public censure and punishment, albeit of a civil, not criminal, kind. Thus, for reasons I elaborate in Part III of the paper, retributive damages are best understood as an intermediate civil sanction that require (constitutionally and normatively) an intermediate level of procedural safeguards, that is, a level falling roughly between what is due defendants facing on the one end, compensatory damages, and on the other, criminal fines.  Where there is no obvious "intermediate" level, some analysis of how the safeguard works to advance the reduction of Type I or Type II errors is required. Along the way, I also explain which procedural safeguards would be appropriate to implement "deterrence damages" and "aggravated damages."

I note that this version of my paper includes a bunch of claims that critique Tom Colby's SSRN draft (from June 27th, 2008) of his forthcoming Yale LJ piece. I shared my draft with Tom yesterday (8/27) to make sure he was comfortable with the way I was characterizing his arguments, and after reading it, he informed me that in the non-public version he's currently editing, he had already made some changes in light of some earlier comments I sent him, and that, in light of the draft I sent him yesterday 8/27), he is now planning on making a few more changes that are responsive to my points. I mention this chiefly to signal that I will revise my draft a bit later on to make sure it addresses the changes Tom plans on making to his final draft.  But as of now, the version of my article on SSRN addresses the June27th version, which is available here. His SSRN link is here in case you want to see subsequent drafts. Once his final paper comes out, I'll be sure to post a revised version of mine that avoids any confusion. I confess that the moving target aspect of some of this exchange is a bit cumbersome, but I guess when SSRN gets you tomorrow's research today, you have to accept the consequences! 

* I hope to finish the series of articles this spring by writing something tentatively called, Punitive Damages and Complex Litigation, which addresses the specific questions associated with misconduct by entities and misconduct that affects multiple parties within and across jurisdictional lines. I'm planning on putting the three pieces together into a book, tentatively called The Punitive Damages Mess: How To Fix It.

Posted by Dan Markel on August 31, 2008 at 03:35 PM in Article Spotlight, Criminal Law, Dan Markel, Retributive Damages, Torts | Permalink | Comments (0) | TrackBack

Thursday, July 31, 2008

New Version of Retributive Damages up on SSRN

Just a note to highlight that there's a revised draft of my article, Retributive Damages, up on the funky new SSRN over here. The article, which sets out a normative theory defending punitive damages as an intermediate sanction from a retributivist perspective, is coming out in January 2009 in the Cornell Law Review. I just sent this new draft to the folks at Cornell.  I also recently sent the draft to a bunch of the people whose work I cite, use or criticize to make sure they are happy with the way I've characterized their work. I probably left out some people, so if you find yourself in the paper or  not in the paper but think you should be, I'd be most grateful for any suggestions to improve it.

As I think I've said here before, this paper is the first in a series on "retributive damages." I'm presenting the second one, Implementing Retributive Damages, tomorrow at 130pm at a SEALS panel I put together on trends in punishment and privatization. Also on the panel will be Prawfs' Jason Solomon, and Kenworthey Bilz (Northwestern), and Ric Simmons (Ohio State). Kenworthey will be discussing developments flowing from her work on the puzzle of delegated revenge, Ric will discuss themes from his work on "private criminal justice," and Jason will be talking about new developments in his revenge against the USNews rankings work in the civil recourse theory of tort law. Should be very exciting.

I should add parenthetically that it looks like, after the feedback I received at Prawfstra, I will probably be spinning off a short piece from the current version of Implementing Retributive Damages. The current working title of the spin-off is Pluralism and Punitive Damages after Philip Morris. Depending on dates, etc., I will be happy and grateful for the opportunity to come talk about any of these projects this coming year if you're looking to round out your faculty workshop series.

Posted by Dan Markel on July 31, 2008 at 08:53 AM in Article Spotlight, Criminal Law, Dan Markel, Retributive Damages, Torts | Permalink | Comments (1) | TrackBack

Friday, July 11, 2008

Revisiting Cost Internalization and Punitive Damages after Philip Morris

More than a year ago, the Supreme Court handed down its decision in the Philip Morris case. I blogged about it at least a couple times. It's on my mind again, since I'm spending this month, among other things, revising my  Retributive Damages article (coming soon to a Cornell L. Rev. near you), and trying to finish drafting the successor article in the trilogy, Implementing Retributive Damages.

What I want to provoke here is some discussion about whether what Tom Colby (GW) and others call "total-harm" damages  extra-compensatory damages are permissible after Philip Morris if they are characterized simply as augmented damages for the purposes of cost-internalization or optimal deterrence (let's run those two notions together here, shall we?).  In Tom's latest work on punitive damages, which is forthcoming in Yale LJ, and is available in draft here (SSRN version of June 27, 2008), he argues that cost-internalization damages would and should be an available option (constitutionally speaking) so long as state legislatures or courts said they were not engaged in awarding "punitive damages," which is to say, so long as language of condemnation or language of punishment is not explicitly used.

My own view is that Colby's reading of the implications of Philip Morris for augmented or "total-harm" damages could logically be correct. But it seems a weird and ultimately, to my mind, wrong way to read what the litigants and the majority of the Court thought they were up to in the Philip Morris dispute and in this opinion. My extended thoughts are after the jump, and basically excerpted from my rough IRD draft. I invite your thoughts about the future of optimal deterrence/cost-internalization in the comments. (Btw, I will probably have more to say on Tom's article in other posts or perhaps in a response I might draft.)

Update: I made the mistake of conflating Tom's conception of "total-harm" damages with cost-internalization. As Tom kindly reminded me, his notion of "total-harm" damages, as used in his 2003 article, included a retributive component in addition to a deterrence signal.

To my mind, the proponents of the cost-internalization approach now face substantial difficulties on account of the Supreme Court’s recent decision in Philip Morris USA v. Williams. Implicitly repudiating the language of its TXO decision, which permitted punitive damages awards to consider the harm or potential harm from the conduct “as a whole,”[i] the Court reversed course. Writing for a 5-4 majority, Justice Breyer held that the Due Process Clause forbids punishing a defendant for harms to nonparties to the instant litigation because the defendant would not have the ability to “defend against the charge,” depriving the defendant of notice and imposing a substantial degree of arbitrariness and uncertainty in punishment.[ii] Thus, in assessing the putative excessiveness of punitive damages in a given case, a court must scrutinize whether a jury is punishing a defendant an amount of punitive damages that considers the harms actually suffered by strangers to the litigation.

By restricting the permissible scope of harm and potential harm, the Philip Morris decision now raises questions about whether full cost internalization is forbidden when establishing the amount of punitive damages. The ambiguity is subtle and has been brought to my attention by Professor Tom Colby’s forthcoming article on the subject.[iii] Professor Colby argues that states could constitutionally pursue “total harm” damages meant only to achieve cost-internalization so long as the state said there was nothing “punitive” to this cost-internalization approach. That would leave punitive damages, in his view, to pursue only the goals associated with what I have been calling "victim vindication" or "aggravated" damages.[iv]

The problem with Colby's narrow reading of Williams is that it reads the Court’s holding into, effectively, a nullity, giving with one hand a right that defendants would want and have fought repeatedly for and then stripping away the value of that right with the other hand. It’s hard to believe that the Court and litigants would be divided so sharply on an issue with such apparent lack of consequence--by letting total harm damages erupt without any procedural or substantive safeguards so long as the courts or legislatures say they're not punishing, they're just regulating. And unlike United States v. Booker -- which did recognize a defendant’s right only before demolishing its significance -- there aren’t separate opinions in Philip Morris regarding the “merits” and the “remedy.” Philip Morris is just one opinion and therefore susceptible to less plausible charges of schizophrenic reasoning.

To my mind, the better reading of the case undermines the feasibility of a cost-internalization agenda, but for two reasons, it does not destroy the agenda in one fell swoop.

First, the goal of achieving cost internalization remains feasible to the extent that jurisdictions make available class action or other aggregative litigation strategies that protect the rights of defendants; once a class is certified, at that point, nonparties become parties to the litigation. That said, more class actions will only permit the consideration of actual litigants, not the “quasi-parties” on whose behalf Professor Sharkey also advocated.

Second, the prospect of obtaining augmented damages outside the class action also continues to survive Philip Morris to the extent the defendant caused potential harm to the plaintiff(s). In other words, under my proposed reading of the case, the operative question (for purposes of cost-internalization) is now: what harm or potential harm did the defendant cause this particular plaintiff (rather than what harm or potential harm of this sort did the defendant cause)? The potential harm to the plaintiff, which the Court still permits as a consideration, plausibly encompasses the likelihood that the defendant would escape compensating this particular plaintiff. And to those that worry that Philip Morris eviscerates optimal deterrence, consider cases like those presented in the Supreme Court’s TXO decision, where an augmented damages award could be justified based on potential harm to the particular plaintiff on account of the tortfeasor’s concealment or deceit. If we assume a situation where a plaintiff faced a 1/3 chance of discovering that it was this defendant who caused the harm to the plaintiff, then that should, in theory, allow a jury pursuing cost internalization to impose augmented damages that are double the compensatory damages. (Per Polinsky and Shavell, “the total damages imposed on an injurer should equal the harm multiplied by the reciprocal of the probability that the injurer will be found liable when he ought to be.”[v] Thus, if a harm of 10 is caused and there is 1/3 chance the D will be held liable, then augmented damages should be 20 in addition to the 10 in compensatory damages, for a total of 30, or 3 times the harm.)

In sum, under my reading of Philip Morris, if a multiplier were based solely on the likelihood that the harm or potential harm to the plaintiff would be detected and compensated, it would pass constitutional muster, as suggested in Justice Breyer’s concurring opinion in BMW v. Gore.[vi] But Professor Colby is correct to emphasize that augmented damages need no finding of reprehensibility to warrant their award, and in such a situation, they should not logically be thought of as part of the punitive damages constitutional analysis.[vii] Instead, they involve a fact-finding determination, much like the amount of compensatory damages. And because augmented damages are essentially a regulatory tool to facilitate cost-internalization, states should be permitted to pursue different regulatory strategies, with tort law as one of several instruments to pursue that goal. A jury verdict form that reflects this ambition simply has to limit the jury’s consideration appropriately. The Appendix to [the IRD and RD articles] makes such an effort though it does so based on my reading of Philip Morris’s implications for cost-internalization, not on what I think would be logically required on a blank slate.

I should add that I don’t particularly have a dog in the fight; if it turns out Colby’s reading of cost-internalization after Philip Morris is regarded as correct, then I’d be happy to have the jury instructions I offer in the Appendix to my article -- the ones dealing with cost-internalization -- adjusted accordingly.



Standard of Review for Augmented Damages

 

What’s important about this decoupling of purposes (separating out the retributive purpose from the cost-internalization perspective) is that it logically calls for a different standard of review on appeal. In Cooper Industries, the Supreme Court announced that in federal cases the amount of punitive damages should be reviewed de novo, and that decision was predicated in part on the claim that determinations of punitive damages involve a moral component that has to be weighed against a defendant’s due process rights. That holding is only true for the retributive (and arguably the complete, not optimal, deterrence) part of extra-compensatory damages; by their nature,  augmented damages for the sake of cost-internalization involve only matters of empirical estimation (ie, what’s the likelihood the defendant would escape having to compensate this plaintiff), and thus are no different than compensatory damages (which ask, among other things, what kind of pain and suffering did the defendant’s action cause?), and thus determinations of augmented [total-harm] damages deserve greater deference when reviewed on appeal.


[i] Gore, 517 U.S. at 584 (indicating punitive damages award may reflect harm caused to all in-state purchasers);

[ii] Philip Morris, 127 S.Ct. at 1063 (slip op. at 6).

[iii] Thomas B. Colby, Clearing the Smoke from Philip Morris v. Williams: The Past, Present, and Future of Punitive Damages, 118 Yale L.J. (forthcoming 2009; manuscript on SSRN).

[iv] Professor Colby thinks, based on his understanding of the constitutional issues, that a public interest in retributive justice cannot be pursued outside the criminal law because of the absence of procedural safeguards. In this respect, he seems to agree with the view articulated by Redish, Emory L.J. But this perspective, to my mind, requires a finding that an intermediate sanction cannot be imposed even if it is accompanied by intermediate levels of procedural safeguards. My view is that with some basic safeguards, we can tolerate and embrace the use of intermediate sanctions. And given what the Supreme Court has repeatedly said in the last thirty years about the “quasi-criminal” purposes of punitive damages, there’s no reason to suspect that a space for an intermediate sanction cannot be carved out.

[v] See Polinsky & Shavell, supra note, at 889.

[vi] BMW of N. Am. Inc. v. Gore, 517

U.S.

559, 562 (1996) (Breyer, J., concurring).

[vii]

While the Court has in the past referred to deterrence as a goal of punitive damages, cost-internalization is about optimal or efficient deterrence, whereas what’s probably being adverted to by the Court is the goal of complete deterrence. The goal of complete deterrence signals that the conduct is prohibited whereas the goal of cost-internalization suggests that the defendant’s conduct is “priced.” Because cost-internalization refers to a different kind of deterrence (optimal) than the one (of complete deterrence) probably subsumed under the Court’s pronouncements in the constitutional analysis, Colby’s conclusion is highly plausible as a matter of theory and logic; but for the reasons I mentioned in the text, I doubt this conclusion is what the Court meant in Philip Morris.

 

Posted by Dan Markel on July 11, 2008 at 08:49 AM in Article Spotlight, Criminal Law, Current Affairs, Dan Markel, Retributive Damages, Torts | Permalink | Comments (1) | TrackBack

Wednesday, May 28, 2008

Retributive Damages, Privacy and Procedural Safeguards

Greetings from gorgeous Vancouver, where I'm camped out for the next month at the extraordinarily lovely and temperate surroundings of Green College at UBC.  When not teaching comparative sentencing law and policy to a group of wonderful students this coming month, I'll be working on a couple writing projects: among them, the book on family ties and criminal justice, and the first two installments of my retributive damages trilogy.

Today, I was working on Implementing Retributive Damages, the second of the trilogy, and I've been mulling over the need for procedural safeguards in the context of punitive damages. One puzzle got me thinking, about which I thought I'd invite some conversation. Here's the issue after the jump. Let me know what you think.

In an article published more than a dozen years ago, Professors Marc Galanter and David Luban argued that criminal defendants need additional procedural safeguards because of “two concerns — about the centralized power of the state and about state abuse of prisons and physical violence.” Because Galanter and Luban believe that neither concern is implicated by punitive damages – actions for punitive damages are brought by private parties who cannot obtain relief in the form of physically restrictive punishment – there is no need for increased procedural safeguards. I take issue with this conclusion in the article because it seems to me that both of these reasons are insufficiently defended. Here I want to ventilate part of that critique by focusing here on the first reason; what follows is still quite tentative so please take it in the spirit of a trial balloon rather than a conclusion of my well-considered views.

Specifically, I want to focus on the idea that the centralized power of the state as such is a reason to extend procedural safeguards to defendants. It seems to me that safeguards are necessary largely to reduce Type I errors where we either mistakenly punish someone or overpunish them compared to comparable offenders. That is, when we are punishing someone, the reason we want procedural safeguards is not to curb the centralized power of the state as such, but because of our desire to make sure that any such power is properly exercised against a particular person or entity.

One way of making this argument is by analogy to the realm of privacy intrusions. Let me explain. To my mind, a person's well-being is impaired when he suffers a setback to his interests, e.g., when the privacy of his (mis)conduct is revealed through either private or public agents. If a private investigator for a plaintiff comes rummaging (with no notice or temporary authorization through my garage,) I am still reasonably upset or resentful. I can imagine I may reasonably be even more upset when the government is the intruder instead of a private investigator for a third party—after all, the government purports to act in my name. But to the extent my choice is to shield something from exposure to public view, the legitimacy of the interest I have in keeping that information private doesn’t hinge -- does it? -- simply on whether the intruder wears the government’s badge.  [Do people have different views about this than I do? If so, why?]

Similarly, in the context of punitive damages designed to advance the public's interest in retributive justice through the use of retributive damages (for now, think of this simply as a fine, the basis of which is instigated through civil suits launched by private parties), we each, ex ante, have an interest in ensuring that the government strikes the right balance between type I and type II errors. Procedural safeguards are the primary way to reduce type I errors, and to some extent type II errors having to do with underpunishment relative to comparable offenders. From the defendant's perspective, he should want procedural safeguards to avoid the mistaken assignation of condemnation and the accompanying hard treatment, regardless of whether the person whose detection of the underlying wrong is the sovereign (public prosecutors) or private plaintiffs. In other words, a person subject to a retributive condemnation has no reason to think fewer safeguards are desirable since in both cases (privately launched or publicly launched suit), the state is making the adjudication involving condemnation and imposing the punishment.

The procedural safeguards, then, are necessary because the state has power to do things that we worry about to people, not simply because the state has power. In the context of retributive damages, the state has the power, through its courts, to enforce deprivations of property or reputation, and thus the concerns that motivate procedural safeguards in the criminal context arise, though to a lesser extent, when retributive damages are at issue. To the extent retributive damages can plausibly be said to be an intermediate sanction on the register of severity of condemnation (whether in the intensity of available punishments or the collateral consequences one might face), it would call for an intermediate level of protection against its wrongful imposition. Thus, actions involving retributive damages should exhibit more concern for Type I error reduction than is warranted in suits involving mere compensatory damages but less concern for Type I error reduction than is warranted in criminal prosecutions of defendants. Precisely how to draw that line is something I'll leave for another day.

Back to the privacy issue. There's not really much gained here by way of the analogy I suppose, but the point I think I'm making here is that just as we want protections against unwarranted intrusions against our privacy so too do we want sufficient protections against unjust imposition of punishments; and it seems to me that the scope of the protections we want does not really turn on who is the source of intrusion so much as the nature of the intrusion itself. Galanter and Luban seem to be making the contrary claim; if that's right, I can't really understand why.

Posted by Dan Markel on May 28, 2008 at 12:41 AM in Article Spotlight, Dan Markel, Retributive Damages | Permalink | Comments (0) | TrackBack

Friday, March 28, 2008

Retributive Damages: Possible Jury Instructions

In earlier posts gathered here, I laid out the structure, rationale, and constitutional implications for a new way to think of punitive damages as an intermediate sanction designed to facilitate the public normative interest in retributive justice.

In today's post, after the jump, which is also the last post in this series, I've tried to distill many of the major policy prescriptions in this project in capsule quasi-jury instructions. I say quasi-jury instructions because I've had feedback suggesting that they are potentially too complicated for most juries. I've often been confounded by jury instructions so I'm not sure these are much more complicated than the kind normally approved, but I'm open to thinking about these instructions as a set of guidelines that may help legislatures or judges recraft their own punitive damages practice.

The material below appears in unfootnoted and unformatted form, but you can read a draft of the whole article with apparatus on SSRN here. After a busy expedite season, I'm happy to announce that the whole article will be coming out in January 2009 in the Cornell Law Review. Feel free to send me your thoughts via email.

APPENDIX: INSTRUCTIONS FOR ASSESSING EXTRA-COMPENSATORY DAMAGES

What follows is a distillation of the principal conclusions of this punitive damages project, which could be used to craft jury instructions. These instructions are designed to take into account the Supreme Court’s recent decision in Philip Morris.

NB: These instructions are a substantially modified version of the kind found in Professor Polinsky and Shavell’s article in HLR 1998. In some places, having mostly to do with cost internalization, I expressly borrow the language from their proposed jury instructions.

* * *

In considering the amount of extra-compensatory damages on the defendant, you should determine whether three separate dollar amounts are necessary:  (A) an amount to accomplish retributive justice against the defendant; (B) an amount to accomplish cost-internalization; (C) and an amount to accomplish compensation for the plaintiff’s personal dignity harms. 

A.            Retributive Damages

Retributive damages fulfill the punishment objective of extra-compensatory damages. These instructions apply only to defendants who have committed misconduct that you have found to be malicious or reckless in nature.  If you do not think, based on clear and convincing evidence, that the conduct in question was malicious or reckless in nature, do not award retributive damages. 

Malicious conduct is that conduct which was done with a purpose or knowledge of causing harm, and no other legally recognized excuse or justification for the conduct is available as a defense.

A defendant acts recklessly when he consciously disregards a substantial and unjustifiable risk that harm will result from its conduct. The risk must be of such a nature and degree that, considering the nature and purpose of the actor’s conduct and the circumstances known to the defendant, his disregard involves a gross deviation from the standard of conduct that a law-abiding person would observe in the actor’s situation. If there are multiple defendants, you must undertake this analysis separately for each of the defendants based on each defendant’s misconduct. A defendant corporation will not be held legally responsible for all the misconduct of each of its employees. You must ask whether each defendant’s action was malicious or reckless.

If and only if you have determined that a particular defendant’s misconduct was undertaken with malice or recklessness, then the next step requires consultation of the chart prepared by the state legislature that should help you determine where on a scale of 1 to 20, with 20 being the most reprehensible and 1 being the least, the defendant’s misconduct lies.  The chart tells you whether to add points to the scale based on various factors and whether to subtract points based on other factors. Your job is to assess the wrongfulness of the defendant’s misconduct based on the reprehensibility chart. [It may also be your job to determine the wealth of the defendant, or its net value if the defendant is an entity.] It is not your job to assess how much harm the defendant’s misconduct has caused to society or other nonparties to this litigation. This finding should also be accompanied by an explanation of what facts you considered relevant to your determination.  Once you have deter-mined the level of reprehensibility, the court will use a different chart to determine the amount of retributive damages that the defendant will pay based on your assessment of reprehensibility. 

In determining the reprehensibility of the defendant’s misconduct, you may but are not required to consider “evidence of actual harm to nonparties” because that can help show “that the conduct that harmed the plaintiff also posed a substantial risk of harm to the general public, and so was particularly reprehensible.” Similarly, you may also consider the harm or potential harm the defendant’s conduct caused to others in determining whether the defendant’s misconduct was accidental or deliberate or part of a policy or pattern and practice. However, it is important that you not consider the mere fact that others were harmed as a basis for assessing retributive damages. Those others who are not plaintiff(s) in this case can bring their own suits for compensatory and other damages.   

Two facts are relevant to your task -- though they should not inform your actual assessment of the reprehensibility of the defendant’s misconduct.  First, the plaintiff will personally receive no more than $10,000 of the retributive damages award. The balance will go to the state [to advance law enforcement objectives, including but not limited to provide services necessary for victims and offender re-entry into society.] Second, the purpose of retributive damages is to make the defendant worse off than it would have been had it not undertaken its malicious or reckless misconduct. Thus, when determining the level of reprehensibility, do not consider the amount of other damages (whether compensatory, aggravated, or augmented, described below). [If the defendant has made such payments or has been otherwise punished through the criminal justice system of this jurisdiction, then you ought to forego making any reprehensibility assessment.] [Note to judges: civil penalties al-ready taken by the defendant for this misconduct against this plaintiff should be credited against retributive damages. No retributive damages are available if the government has already criminally prosecuted the defendant for the wrong to the particular plaintiff in this case.]

After you make your assessment of reprehensibility, the court [or you the jury] will determine whether any other gains or profits by the defendant need to be forfeited in addition to the reprehensibility-based retributive damages award.  The court may also make subsequent determinations regarding reasonable attorneys’ fees and costs (to be determined in light of the risk, time, expense and expertise related to this litigation).

B.            Aggravated Damages for Repairing Personal Dignity Harms

In deciding the remedy for personal dignity harms, please first make sure that you have not already figured this amount into your assessment of compensatory damages, perhaps based on what you attributed under pain and suffering or other non-economic damages endured by the plaintiff. Once you are certain that the amount of compensatory damages has not mistakenly included an amount for insult to the plaintiff’s dignity, consider what action or amount of money is appropriate to compensate the plaintiff for the injury to the plaintiff’s personal dignity.  Injuries to personal dignity, as understood here, are injuries where the defendant specifically targeted its misconduct toward this particular plaintiff. If the defendant is a corporation, consider whether the injury to the plaintiff was part of a larger course of conduct or whether it was specifically aimed at denigrating the dignity of this particular plaintiff. To facilitate review of your verdict and ensure even-handed con-sistency across similar cases, you are required to explain the basis for your reasoning in a few sentences or more.  The remedy you choose here may be an amount of money that you determine is appropriate to alleviate this particular injury to personal dignity.  Bear in mind that the plaintiff (and, depending on the circumstances, his/her counsel) will receive the entirety of the amount you decide under this heading.

Additionally, or alternatively, you may require the defendant to apologize to the plaintiff for the injury to the plaintiff’s dignity in person or via written communication. You may also suggest other possible actions that might repair the injury to the plaintiff’s dignity.

C.            Augmented Damages for Cost Internalization

In some cases, extra-compensatory damages are desirable to serve the function of making sure that defendants do not impose costs on others that the defendants do not pay for. In making your assessment for promoting cost internalization, bear in mind that you are not able to extract money from the defendant for harms that happened to persons or entities who are not parties to this litigation.  You may only consider what harm or potential harm the defendant’s conduct caused to the plaintiff(s) in this case. Other possible victims of the defendant’s misconduct may bring their own suits. 

Augmented damages fulfill the objective of making sure the defendant pays for the injuries it causes to the plaintiffs in the litigation. But augmented damages will undermine the cost internalization objective if they cause defendants to take wasteful steps to prevent harm, if they cause the prices of products and services to rise excessively, or if they cause firms to withdraw socially valuable products or services from the market.

Thus, ask yourself whether the defendant might have escaped having to pay for the harm for which he or she should be responsible to this plaintiff.  For example, if the harm was substantial and noticeable and likely to lead to a lawsuit, your estimate of the likelihood of escaping liability would be relatively low.  But if the harm might not have been attributed to the defendant, or if the defendant tried to conceal his or her harmful conduct, your estimate of the likelihood of escaping liability would be relatively high. You should use the table below to determine the augmented damages multiplier that corresponds to your estimated probability of escaping liability to this particular plaintiff.  Then multiply the compensatory damages amount [plus an amount, if any, for compensating personal dignity harms] by your augmented damages multiplier.  The resulting number is the base amount for augmented damages. 

The base augmented damages amount should not be adjusted upward or downward because of any of the following considerations:

  (a) reprehensibility of the defendant's conduct;

  (b) net worth or income of the defendant or net profits;

  (c) gain or profit that the defendant might have obtained from his or her harmful conduct;

  (d) litigation costs borne by the plaintiff;

  (e) whether the harm included physical injury.

Probability of                     Augmented Damages

Escaping Liability               Multiplier   

                  0%                    0

                 10%                  .11

                 20%                  .25

                 30%                  .43

                 40%                  .67

                 50%                 1.00

                 60%                 1.50

                 70%                 2.33

                 80%                 4.00

                 90%                 9.00

***

In sum, if you find the conduct at issue was undertaken with malice or recklessness, you should make a finding of reprehensibility (using the chart and its commentary and guidelines provided by the state) based on a scale of 1 to 20. Second, you should also determine an amount of aggravated damages necessary, if any, to compensate the plaintiff for personal dignity harms that were not already covered by the compensatory damages. This finding should be accompanied by an explanation of what facts you considered relevant to your determination. Finally, you should make, if necessary, a recommendation of the amount needed to pursue augmented damages for cost internalization of the harm and potential harm to this plaintiff.  Recall that other victims of the defendant’s conduct might bring their own suits and you do not need to punish the defendant or extract compensation from the defendant based on harms that happened to these non-parties.

Posted by Dan Markel on March 28, 2008 at 09:34 AM in Article Spotlight, Dan Markel, Retributive Damages | Permalink | Comments (0) | TrackBack

Retributive Damages: Some Constitutional Analysis

In earlier posts gathered here, I laid out the Introduction and some relevant background regarding
punitive damages law, recent scholarship, and retributive justice. Subsequent posts addressed: which misconduct should be the subject of retributive damages and whether non-victims of wrongdoing should be empowered to bring claims for retributive damages (and if so, under what restrictions); how to bring rationality and fairness to determining the amount of retributive damages; and how to allocate the retributive damages among the state, lawyer and plaintiff. Yesterday's post focused on the case for developing an intermediate sanction of retributive damages that follows the structure described earlier.

In today's post, after the jump, I discuss the constitutional questions my proposal may raise and the discussion also includes a retributivist critique of the Supreme Court's recent decisions in Gore and State Farm that link punitive damages to a multiplier of compensatory damages. (Judges, lawyers, and clerks may be particularly interested in this discussion.) I also offer a brief conclusion. The next and last post in the series captures most of the policy prescriptions in this project in capsule quasi-jury instructions.

The material below appears in unfootnoted and unformatted form, but you can read a draft of the whole article with apparatus on SSRN here. Feel free to send me your thoughts via email.

SOME CONSTITUTIONAL IMPLICATIONS

There are a variety of constitutional questions that might arise in response to re-tributive damages. Some of these questions I answer in the next installment of this project, where I address in greater detail the procedural safeguards for defendants. That said, I want to address constitutional issues that may arise regarding the structure of retributive dam-ages scheme described in Part III.

First, if a state chose to adopt a structure of retributive damages like the one de-fended here, that structure and the awards of retributive damages arising under it would be entitled, I believe, to far more deference from the Supreme Court than is normally extended to awards of punitive damages in common law jurisdictions. After all, the retributive dam-ages structure extends far more granular attention to the concerns of even-handedness, pre-dictability, impartiality, accuracy, and proportionality than does the common law method used in many jurisdictions; in so doing, the retributive damages scheme is more solicitous of the values informing interpretation of both procedural and substantive due process.  Even if the Court refused to credit a careful legislative scheme of retributive damages with sub-stantial deference, in most cases, the outcomes from the retributive damages scheme I’ve described are sure to be compatible with the Court’s procedural due process cases and are very likely to be compatible with the Supreme Court’s excessiveness review under sub-stantive due process or even under the Eighth Amendment’s Excessive Fines Clause. 

With respect to procedural due process, the structure of retributive damages is fully compatible with judicial and appellate review (per Honda), de novo review of retributive damages in federal courts (per Cooper Industries), and a prohibition on punishing a defen-dant based on harms to strangers to the litigation (per Philip Morris).

As to excessiveness review, the Court places primary importance on the degree of reprehensibility of the defendant’s misconduct. As described in Part III.B, reprehensibil-ity is the driving force behind the amount of retributive damages also. But the Court, after State Farm, also requires consideration of the “disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award”; presumes that double digit ratios between punitive damages and compensatory damages are incompatible with due process; and states that the courts consider “the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.”

  The most salient problem that comes to mind regards the potential for the retribu-tive damages scheme to result in very high amounts of retributive damages awarded against very wealthy persons or entities who commit reprehensible conduct of the sort that might trigger a ten percent penalty. An award of retributive damages against Bill Gates, for instance, raises the possibility of multibillion dollar retributive damages. In a case where compensatory damages to the plaintiff are relatively low, such a result might be viewed as constitutionally suspect because of the supposed “disparity” between the “actual or poten-tial harm suffered by the plaintiff and the punitive damages award.” In other words, the multi-billion dollar award, when framed as a dollar amount, rather than as a percentage of net wealth, could, after BMW v. Gore, raise the proverbial judicial eyebrow.

One response to this problem is to note that those situations simply won’t occur too often, and if they do, these results should not be viewed as controversial compared to the various cases in which courts have upheld punitive damages awards that constitute a far higher percentage of net wealth or value than what I’ve suggested under retributive dam-ages. Moreover, because the legislature has passed a retributive damages scheme, sub-stantial deference should be extended to outcomes like these.  Another and less palatable option is to acquiesce to judicial application of the State Farm “disparity” test, and accept reduced retributive damages awards in those unusual cases. A reduction of retributive damages in a given case on “disparity” grounds does not call into question the entire struc-ture itself even if one could reasonably complain that such reductions undermine commit-ments to equality since wealthy persons would benefit from unjustified downward adjust-ments.

A more intellectually serious response however would take issue with the Court’s “disparity” criterion altogether. In State Farm, a majority of the Court declared an affinity for the presumptive use of single-digit multipliers of compensatory damages. This pre-sumption, as applied to retributive damages, is highly problematic.

Since the reprehensibility analysis drives retributive damages and constitutional due process review, the real constitutional problem for the retributive damages regime is the disparity criterion, which asks whether there’s a reasonable relationship between the amount of harm or potential harm and the penalty imposed. Stated at that level of general-ity, and in conjunction with the Court’s emphasis on reprehensibility, there is likely to be little friction between the Court’s punitive damages jurisprudence and the retributive dam-ages scheme defended here.

But two problems come to mind: first, courts often uncritically conflate the harm or potential harm to the plaintiff with the compensatory damages actually paid. Second, after State Farm, a “reasonable relationship” has morphed into a judicial presumption against punitive damages awards that are ten times or higher than the compensatory dam-ages award. In what follows, I explain why both compensatory damages anchors and the presumptive single-digit multiplier are often misguided.

Using compensatory damages as an anchor for the disparity inquiry lacks sufficient justification, at least in cases involving or risking physical injury. In those situations, as explained in Part III.B.4, using compensatory damages as a benchmark for measuring re-tributive damages would create a signal of inequality of human worth since compensatory damages are often keyed to one’s economic status in life, not one’s political status wherein one bears the privileges and burdens of equal citizenship. It’s possible that compensatory damages are a useful baseline in cases involving only financial losses by plaintiffs who were not targeted on account of their lack of resources, but that’s a position that needs ar-gumentation, not conclusion by assumption.

The principal justifications for anchoring disparity inquiries off the shoals of com-pensatory damages are its administrability and the sense of finitude it provides. But both these factors underdetermine the doctrine because it would be equally administrable to al-ways award a billion dollars or zero dollars in extra-compensatory damages regardless of the tort or to impose a flat limit of $500 for punitive damages. Once we’re in the business of reasoning out extra-compensatory damages to reach a non-absurd result, we should be able to offer relevant reasons for our decisions. The current doctrine is substantially lacking one, especially because the cost-internalization proponents also criticize the use of com-pensatory damages anchors. Notwithstanding the fact that there is little justification for insisting on a relationship between compensatory damages and retribution or deterrence, some courts have uncritically fastened to it.

On top of the problematic use of compensatory damages, the disparity analysis is undermined by the Court’s preference for a presumption of a single digit multiplier, which may lead courts to apply the single digit multiplier even in cases where the rationales for retribution, victim-vindication, or cost internalization require more, either separately or in combination. Indeed, the preliminary evidence supports this concern.

Like the compensatory damages anchor, a presumptive single digit multiplier is re-puted to help achieve administrability and some degree of notice about the bounds of one’s liability. But even after State Farm, the pretense to such predictability is overstated. In-deed one might wonder just how much notice is afforded when juries can basically choose virtually any multiplier less than 10.

Importantly, administrability and notice are at least as well satisfied by the retribu-tive damages scheme. A guidelines-based reprehensibility scale is not substantially more difficult to apply than the determination currently made by juries, which judges subse-quently review in an hoc manner. More importantly, the retributive damages structure provides far more particular notice to defendants about their potential liability than is pro-vided for by the current regime of punitive damages regulation, wherein most assessments of punitive damages will receive a pass on scrutiny as long as it is nine times or less than the amount of compensatory damages.

Thus, especially in light of the Court’s stated aversion to regulating extraordinary criminal punishments against defendants, there would be little basis for objecting to civil penalties that would ensure the defendant did not profit from his action and that removed no more than (say) 10% of his wealth and would do so only in a manner where the defen-dant enjoyed the benefit of various procedural safeguards. Recall that retributive dam-ages also abide by an intent requirement by which a defendant should be given the oppor-tunity to internalize the values of retributive justice. Thus, if retributive damages were set so high as to economically destroy or bankrupt a defendant, that would go too far – at least from the perspective that views retributive damages’ purpose as an intermediate sanction, rather than one that results from a full-fledged criminal prosecution.

In sum, it is doubtful that the retributive damages structure is constitutionally in-firm. At worst, and assuming the Court extended no special deference to this intricate scheme of intermediate sanctions, it may mean that in certain cases, the jury’s award of an amount of punitive damages is deemed excessive, a determination that applies now in ju-risdictions that apply a whole range of structures and procedures, but which offer far less in the way of notice and even-handedness than the structure I’ve advocated. And, as I inti-mated earlier, a jurisdiction that took pains to structure the distribution of punitive damages in the careful manner advocated here would have, by my lights, done at least what is neces-sary to survive constitutional scrutiny under the Due Process Clause.

Indeed, in light of the fact that the Court has in the past allowed horrifically long sentences to be imposed on those whose misconduct is far less egregious than, say, Philip Morris’ conduct was, the structure of retributive damages—which would involve steep but relatively difficult to obtain awards of retributive damages—is a decent way of addressing the perverse approach the Court has adopted when portioning punishment over the last fif-teen years: i.e., with substantial excessiveness review of punitive damages and very limited review of excessiveness in the imposition of prison incarceration.

The last point about constitutional law worth mentioning here focuses on the de-fendant’s wealth. Recall from Part III that the reprehensibility of the defendant’s miscon-duct will in turn track a percentage of the defendant’s wealth (or net value, in the case of entities). Various jurisdictions around the country currently inform juries that they may consider the defendant’s wealth in trying to figure an amount of punitive damages that will adequately punish and deter the defendant. The Supreme Court has not held that a de-fendant’s wealth cannot be factored into the amount of punitive damages. Rather, what the Court has said is that wealthy defendants are just as entitled to fair notice as “impecunious individuals.” The structure of retributive damages discussed in Part III provides constitu-tionally adequate notice designed to communicate that sanctions for reckless or malicious wrongdoing won’t be mere luxury taxes on the rich.

CONCLUSION

Structured properly, retributive damages awards are a pragmatic form of redress against anti-social misconduct, especially when undertaken by wealthy and powerful enti-ties. In this respect, there’s a real synergy between retributive damages and the work of “social justice” tort theorists. On the other hand, a dose of retributive damages is strong medicine, and it needs to be distributed far more sensitively to the values of equality, pre-dictability, and modesty than the careless way punitive damages are currently awarded and reviewed by courts.

This Article, the first of a trilogy, has tried to extend substantial consideration to these and other relevant concerns. Providing a framework to translate the values and limits of retributive justice into a practical scheme of retributive damages, the Article has identi-fied what sorts of conduct should warrant this intermediate sanction, what factors should inform the amount of retributive damages, and who should receive retributive damages and in what relevant proportions. While this Article provides the foundations of retributive damages, in truth, more needs to be said about their contours: specifically about how to implement retributive damages in simple and complex litigation contexts. In the com-panion articles to this one, I take up that challenge.

Posted by Dan Markel on March 28, 2008 at 12:26 AM in Article Spotlight, Dan Markel, Retributive Damages | Permalink | Comments (0) | TrackBack

Thursday, March 27, 2008

Retributive Damages: The Case for Partial Outsourcing of Retributive Justice to the Tort System

In earlier posts gathered here, I laid out the Introduction and some relevant background regarding
punitive damages law, recent scholarship, and retributive justice. Subsequent posts addressed: which misconduct should be the subject of retributive damages and whether non-victims of wrongdoing should be empowered to bring claims for retributive damages (and if so, under what restrictions); how to bring rationality and fairness to determining the amount of retributive damages; and how to allocate the retributive damages among the state, lawyer and plaintiff.

Today's post focuses on the case for developing an intermediate sanction of retributive damages that follows the structure described earlier. The material below appears in unfootnoted and unformatted form, but you can read a draft of the whole article with apparatus on SSRN here. Feel free to send me your thoughts via email.

MOTIVATING RETRIBUTIVE DAMAGES

Knowing what they look like, we can now try to explain the affirmative rationale for retributive damages awards. Section A examines the particular strengths of retributive damages against powerful and wealthy entities and individuals in particular. Section B ex-plains what a retributive damages scheme in general can achieve. Section C summarizes these benefits and articulates the comparative advantages of retributive damages vis-à-vis compensatory damages, class actions, criminal sanctions, and extra-compensatory damages awarded for victim-vindication or cost-internalization. Last, in Section D, I explain why retributive damages should remain a supplement to, rather than a substitute for, traditional criminal punishment.

A. Retributive Damages Against the Wealthy or Powerful

Perhaps the most important reason for making retributive damages available is to facilitate a modest form of punishment that is otherwise especially difficult to obtain against wealthy and powerful persons and entities. In other words, even when the criminal justice system would normally seek to punish offenders for serious wrongs, it might be par-ticularly difficult to do so when the offender is a wealthy or powerful person or entity. In such situations, retributive damages proceedings might generate relevant information (spe-cifically information related to a defendant’s mens rea) for possible subsequent prosecution efforts against the defendant or related parties by the state that would not be made available by relying on compensatory damages suits alone.

1.  Obstacles to Investigating Misconduct

Retributive damages schemes are attractive because they help overcome the diffi-culties associated with the historically scant investigation of wrongdoing by powerful and wealthy individuals and entities. As Professor Darryl Brown points out, many kinds of white-collar or corporate misconduct are harder to investigate because, compared to street crime, they are both more private (in the sense of obscured from view) and more complex.

In terms of privacy, the misconduct perpetrated by the wealthy and powerful oc-curs largely indoors, and as Professor Bill Stuntz, among others, noted various criminal procedure doctrines protect privacy. Coupled with the fact that inculpatory documents might be shielded by privilege available to those who can afford counsel before arrest, it is no surprise that the misconduct of wealthy and powerful entities and persons will more likely be obscured relative to the misconduct of those lacking substantial resources and op-erating in plain view of others.

Additionally, investigation of misconduct by wealthy and powerful persons and entities is impeded by the complexity of the criminal activity. As one former prosecutor put it, “The history of punishment in corporate cases is not very good,” because often “[t]hese are complex schemes, and it's sometimes difficult to unwind them from an investigative standpoint and ultimately explain them to a jury.” And as Professors Galanter and Luban have cogently explained, there are many times when reliance upon state-initiated investiga-tions is inadequate to the task of ferreting out the type of malfeasance that passes the repre-hensibility threshold associated with punitive damages.

To see how this pattern unfolds, consider the difficulty of detecting malfeasance in the context of manufacturing activity. Imagine a defendant manufactures a product and in the course of its design makes various calculations not to disclose substantial hazards that might be associated with its design. Consequently, various users are injured across the country. The local and state police are unlikely to detect problems with the product out-side their locality, at least initially. Moreover, the law enforcement authorities will have no reason to suspect that there were culpable decisions made at the company headquarters, of-ten in another state and outside their jurisdiction. As Professors Galanter and Luban de-scribe the problem,

Even federal authorities will have no reason to believe that anything other than a typical series of []accidents has occurred unless they perform a statistical analysis of the pattern. Suppose, then, that punitive damages were replaced by criminal sanctions in morally culpable product liability cases. Law enforcement would re-quire statistical analyses of all patterns of automobile accidents, and appliance ac-cidents, and pharmaceutical accidents, and heavy equipment accidents, and on and on, around the country, which is utterly impossible. Even if it were possible, the analysis would overlook those culpable injuries that do not leave a statistical fin-gerprint behind them. Finally, once an investigatory agency becomes convinced that an offense has occurred, it would have to investigate the offending company to establish culpable negligence. No federal agency has or could have the resources to carry out so many investigations, nor would we be likely to welcome a federal agency that is such a nosy intruder.

As Galanter and Luban observed about Ford’s failure to recall the Pinto, “the re-peated pattern of [car crashes and subsequent burnings] indicating a defective design emerges only after we consider evidence from many different states and jurisdictions. Thus, the entire pattern will not typically be investigated by state authorities.”

Similar difficulties occurred in the aftermath of the Catholic clergy sex abuse scandals, where Church officials suppressed vital information about the misconduct of its priests. In various jurisdictions where the Catholic Church had close relationships with local prosecutors and police officials, public investigation into the Church’s role was sty-mied because of affinities between officials and the Church. As described by Professor Lytton, only after dogged use of discovery and other private litigation tactics were plain-tiffs’ attorneys able to reveal the extent of the complicity by higher officials within the Church. In many situations, only once private litigants shared their information to the me-dia did law enforcement and state legislatures grapple with the misconduct they were oth-erwise ignoring or downplaying.

These examples illustrate how complex and private misconduct by wealthy or powerful individuals or entities can be quite hard to detect in the course of activity both within and across jurisdictions. Moreover, relying exclusively on public agencies to de-tect this misconduct is an inadequate strategy in a world governed by non-ideal conditions of democratic deliberation and scarce social resources. Indeed, in a regulatory environment often affected by agency capture, we should probably expect spotty government inspec-tions. As one agency official noted recently: “Private enforcement is a necessary sup-plement to the work that the [agency] does. It is also a safety valve against the potential capture of the agency by industry.” Indeed, even when government forces desire investi-gations, access to vital information may be impeded or blocked altogether by competent white-collar criminal defense lawyering. Needless to say, the threat of agency capture and obstructionist lawyering might also serve as obstacles to governmental prosecution of wrongdoing by powerful and wealthy persons or entities. Because of these impediments, it is unlikely, though not impossible, that a cadre of state investigators will effectively under-take national research—and then file suit at each of the state levels.

Although such coordination efforts can happen through the promise of compensa-tory damages alone or in a class action, there are two reasons to think retributive damages as I’ve described them are be an important supplemental tactic to achieve adequate detec-tion and punishment of private or complex misconduct. First, with compensatory dam-ages alone, the lawyers are not incentivized to inquire into the aspects of the defendants’ misconduct that reveals a reprehensible state of mind or mens rea. Satisfying the elements of a case that require mens rea is, on average, more expensive to pursue than satisfying the elements of a case that need only show negligence or strict liability. Without fees for re-tributive damages available, lawyers may decide to settle cases that involve culpable mis-conduct too cheaply. Second, if compensatory damages are really designed to compensate plaintiffs for actual harms to them, it hardly seems right that their lawyers should take a share of that compensation rather than be paid by the malfeasant defendant separately. The bill for the lawyers should not be conflated with the harms to the plaintiffs.

Because inducing public investigation of wrongdoing against financially formida-ble persons or entities within society is sometimes difficult to achieve, the prospect of obtaining (fees and rewards for) retributive damages motivates plaintiffs and lawyers will-ing and financially able to ferret out whether harms or risks were culpably undertaken. In short, retributive damages may work as an effective supplemental strategy of law enforce-ment, a form of sousveillance against the rich and powerful who might otherwise evade the surveillance undertaken by public law enforcement agencies.

2. Obstacles to Prosecuting Misconduct

Beyond simple investigation, we must also consider the comparative difficulty of prosecuting crimes (or claims generally) against wealthy persons or entities. Such “white-collar” defendants often have excellent counsel, and, conventional wisdom to the contrary, are often able to overwhelm the relatively scarce resources of the prosecution, es-pecially at the state level where the bulk of wrongdoing is prosecuted and punished. Put more modestly, skilled defense counsel will be effective, at least on the margins, at making the unreasonable seem reasonable, which is particularly helpful for defendants trying to es-tablish reasonable doubt about the ambiguous areas of moral wrongdoing sometimes asso-ciated with white-collar misconduct. As Galanter and Luban have noted, a variety of fac-tors help make prosecuting white-collar conduct more difficult:

White-collar criminals have more influence over sources of damaging information; the evidence of white-collar crimes may be more dispersed and less exposed; the definition of the crimes is typically more ambiguous, so that defendant behavior is more likely to look marginally legal and get the benefit of the doubt from prosecu-tors and judges; white-collar criminal defendants have more resources and are more sophisticated; agencies investigating white-collar crimes are more likely to allow precharge adversary hearings in which the defendant's lawyer can argue against indictment; the government is less likely to make arrests or physical searches in white-collar cases; white-collar indictments are more delayed, allowing better preparation for defense; and the defense lawyer in white-collar criminal cases is usually better qualified.

To be sure, the odds for federal prosecutors have substantially improved against corporations and executives, particularly in recent years with respect to securities fraud. Prosecutors now routinely use threats of conspiracy prosecutions against low-level execu-tives to secure cooperating witnesses, and through those witnesses, they can generate copi-ous amounts of information about the more senior officials and the misconduct within the corporate bureaucracy. Additionally, in some jurisdictions, prosecutors offer leniency for the “fruits of employer coercion of employees to waive their rights to silence,” waiver of the entity’s attorney-client privilege, or the termination of indemnification of attorney fees to the entity’s agents. Taken together, these constitute increasingly powerful incentives for persons or entities to share information about potential culpability.

In response, critics have sounded alarms over the sweeping effects of such appar-ent over-criminalization and over-enforcement, suggesting instead that much of this mis-conduct is better left addressed through the civil, not the criminal, system.

Unfortunately, the impediments to effective redress in the civil system are difficult to surmount, especially in a world without ready access to remedies like retributive dam-ages. The result, according to Professor Christine Hurt, is a criminal system that creates too much risk of severely punishing conduct that is not all that egregious while at the same time failing to ensure adequate redress against those whose actions warrant, at the very least, some form of intermediate sanction. In other words, it’s a system with too great a risk of Type I errors in the criminal context and too great a risk of Type II errors in the civil system.

3. The Low/High Problem With Criminal Penalties As Applied

The apparent imbalance espied by Professor Hurt suggests that retributive dam-ages, if properly designed, might also provide a way around what might be thought of the “low/high” problem as it applies especially to corporate criminal activity. As various scholars have demonstrated, non-custodial criminal penalties against persons and entities have in the past tended to be extremely low, often rendering them mere “costs of doing business” rather than signals that the conduct in question should be categorically prohib-ited. Additionally, notwithstanding the social stigma typically attaching to criminal con-victions, individuals within corporations themselves may feel somewhat insensitive to that stigma because responsibility for particular misconduct is dispersed across persons, place and time. The consequences are predictable in such situations: defendants might view fines as prices, not sanctions.

For example, where state fines were set too low, railroads in Wisconsin repeatedly ignored their lack of compliance with rules necessitating repairs that could cause fires to brush that had not been removed from the area around the tracks. Only after a substantial punitive damages award was levied against the railroad did the company strengthen efforts to ensure compliance with the rules governing maintenance and brush-clearance issued by the state’s Department of Natural Resources. Similar examples abound. As alluded to earlier, legislatures have responded selectively to the problem of low penalties in recent years. In the federal context, the focus of these high penalties has been on preventing and punishing securities fraud.

But with these high criminal penalties lies an additional problem, related to con-cerns of proportionality: overkill in the form of disproportionate punishment. Critics of corporate criminal liability have raised concerns about the danger that indictments against the corporation pose: in particular, they might destroy the entire company and the jobs of innocent persons instead of focusing on the malfeasance of the bad actors or the failure of the managers and owners to adequately control the bad actors. Consequently, companies might be both too weak (against the perils associated with corporate criminal prosecution) and too strong (against regulatory powers where the investigative functions are stymied or corrupted through capture or rent-seeking). As a result, the prospect of a retributive dam-ages scheme as an intermediate sanction expands the arsenal of tools to facilitate compli-ance and the detection and punishment of misconduct by wealthy and well-organized per-sons or organizations.

B. What Might Retributive Damages Achieve Generally?

This section explains why retributive damages might be a socially beneficial policy prescription broadly speaking. In light of the account in Part II, it’s not especially hard to see why we might establish a system of criminal law and punishment to serve these pur-poses. It is a bit harder to see why we might additionally use a civil system to impose re-tributive damages. Why not simply invest more social resources in the criminal justice sys-tem if we are concerned that the project of retributive justice is being given short shrift? Retributive damages are not necessarily a more efficient sanction, but they may be ap-pealing for reasons described below.

1.  Retributive Justice in the Real World

Making retributive damages available provides society some flexibility it might not otherwise have regarding allocation of public resources. To see why, we must first appreci-ate the major differences between a retributive damages action and a criminal penalty: a) criminal penalties are usually prosecuted exclusively by a state attorney, b) defendants in American criminal actions are entitled to a richer panoply of procedural safeguards, c) criminal penalties often lead to a host of collateral sanctions, and d) criminal penalties may include prison time for individual defendants. The combination of these factors works to create a stronger social stigma or condemnation of the defendant than there would be in the absence of these factors. Of course, retributive damages are still a coercive condemnatory sanction that sets defendants back in a position worse than where they were prior to the misconduct; thus, they do serve to effectuate retributive justice. But those differences ren-der retributive damages an intermediate sanction, lying between compensatory damages and criminal penalties.

A society that did not want to spend scarce prosecutorial resources investigating and prosecuting minor wrongs could nonetheless make available a legal forum where per-sons can seek bring actions against malefactors whose misdeeds have failed to trigger criminal prosecution because of more urgent priorities in prosecutors’ offices. The bare reality is that prosecutors typically don’t have the resources to investigate and prosecute all the criminal conduct that arises. Thus the tort system serves as a corrective to public in-action in some cases, allowing private parties to vindicate the kinds of wrongs the criminal system might, in a fully-funded world, pursue. Insofar as the CCR not only permits reason-able punishment but also encourages the punishment of legal offenses (to reduce Type II errors and avoid the sense of impunidad that would be communicated to offenders and ex-pressed to the public), a retributive damages structure is a way of dealing with scarce pub-lic resources that must be allocated among a variety of compelling moral priorities. Of course, if this is the rationale, we need to ensure that defendants receive procedural protec-tions necessary for imposing an intermediate sanction on them: access to counsel, an in-termediate standard of proof (i.e., clear and convincing evidence), protections against du-plicative punishment for the same misconduct toward the same victim; and guidelines that both inform and limit the amount of penalties a defendant faces on account of its miscon-duct.

2.  Proportionality

A second general rationale for a retributive damages scheme is that it might better facilitate the promotion of proportional sanctioning between misconduct and penalties. Re-tributivists and others might want a softer sanction for misconduct that is not worthy of be-ing deemed or condemned in the strongest terms as “criminal.” Allowing for retributive damages facilitates that goal, in particular because incarceration and collateral sanctions (e.g., disenfranchisement, residency restrictions) would not attach to the award of retribu-tive damages under this proposal. Thus, in some cases, retributive damages might be a penalty that seems suitable to the comparatively less severe wrongdoing at hand. Because of the collateral consequences ensuing from a criminal conviction, even a criminal fine might be viewed as too onerous a penalty for certain misconduct. Thus, prosecutors could look at successful retributive damages actions and determine whether additional prosecution is appropriate.

One might respond by simply asking to expand the range of criminal sanctions so that some criminal penalties do not carry collateral consequences in less severe cases. That’s not a bad idea, as far as it goes. But if we think there is something distinctive and worth preserving about the higher level of condemnation communicated through a criminal sanction compared to the presumably lower level of condemnation communicated with a civil sanction, then keeping some of the relevant and reasonable collateral consequences of conviction might better facilitate the realization of that gradation. And inasmuch as ex-panding the range of criminal sanctions would serve, arguendo, to impede the availability of retributive damages in the tort system, it would likely impede the realization of retribu-tive justice in situations of scarce public resources, such as those discussed immediately above.

3.  Encouraging Market Transactions

Imagine X Corp wants to develop a product for consumers. Y Corp makes a simi-lar product using proprietary information. X Corp decides to steal Y Corp’s information and manufactures the new product at a lower price than Y Corp. By ensuring that X Corp will be in a worse position if it is caught for its theft, the availability of retributive damages encourages market transactions with respect to misconduct that violates property rules, that is, those rules which require parties to negotiate over the transfer of legal entitlements prior to their exchange. When a defendant knows he has to pay more in excess of its gain or the harm caused – and retributive damages will always exceed more than the greater of these two figures – a defendant in X Corp’s position should prefer to bargain. Unsurpris-ingly, this is part of the logic behind some criminal penalties too.

This structure is beneficial for two reasons. First, the transaction costs associated with ex ante bargaining in the marketplace are likely to be lower than those associated with ex post litigation in the courts. Second, to the extent that fewer potential defendants take rights (and possibly pay for them ex post through the tort system), it helps eliminate the wasteful precautions associated with trying to prevent mistreatment of one’s rights. At the same time, retributive damages might perform this task more cheaply or effectively than use of criminal sanctions, since there are fewer deleterious consequences to the defen-dant and fewer costs associated with enforcing the rights of criminal defendants. If we want to encourage market transactions at a cheaper social cost than criminal penalties, which often have socially burdensome and problematic collateral sanctions associated with them, retributive damages might provide a superior tool to do so, at least in contexts in-volving violation of property rules.

C. The Comparative Benefits of Retributive Damages

As Nietzsche pointed out, punishment’s utilities are overdetermined. I take the central benefit of retributive damages to be the fact that their availability helps effectuate the good of retributive justice by reducing the incidence of Type I and Type II errors. By imposing an intermediate sanction only on reckless or malicious wrongdoing, a retributive damages scheme will facilitate conventional criminal law punishment against those pock-ets of society that have traditionally been able to resist punishment by virtue of the rela-tively private and complex nature of their misconduct. This misconduct would, ex hy-pothesis, otherwise be on the agenda of the prosecutor’s office but, because of difficulties in detecting the private and complex wrongdoing, escape such condign punishment. Re-tributive damages schemes also: facilitate legal condemnation for wrongdoing that is not on a prosecutor’s office agenda because of pressing budget constraints and political re-sponsibilities (or improper external pressures); afford more granular proportionality be-tween misconduct and penalty and thus avoid overkill by use of criminal indictments against corporate entities; and encourage market transactions and concomitantly reduce so-cially wasteful expenditures on preventions against unauthorized takings or violations of rights. To the extent retributive damages can aid in achieving these purposes, one can see what public benefits might accrue from the availability of awarding retributive damages to the state and private plaintiffs.

One might wonder whether some of these benefits arise when extra-compensatory or compensatory damages are available on non-retributive grounds and in class actions. Below is a chart in which I summarize how retributive damages would stack up against re-liance upon other remedies and mechanisms. [OMITTED. SEE ARTICLE ON SSRN FOR CHART.]

As one can see, class actions seeking only compensatory damages might address the incentives problem for lawyers to bring cases of misconduct. But so long as they were seeking compensation for the plaintiff or cost-internalization for the class of plaintiffs, they would not need to inquire into evidence that indicated malice or recklessness. That de-prives the state of knowledge possibly relevant to imposing retribution on wrongdoers and issues no judgment of condemnation. From an economic perspective, compensatory dam-ages simply price behavior rather than punish it, allowing defendants to undertake all sorts of misconduct if they are willing to pay damages. If extra-compensatory damages were awarded on the grounds of cost-internalization alone, they would suffer from the same problem. They would leave the defendant no worse off than a position in which they sim-ply price their conduct according to its harms. Damages designed to achieve cost internali-zation might be appropriate when the defendant acts with adequate regard for the security and well-being of others, but they are inadequate, on a retributivist rationale, when the de-fendant’s misconduct evinces grossly insufficient care for the interests and well-being of others.

Extra-compensatory damages might also be contemplated solely for the purpose of victim-vindication (what I have called “aggravated damages”). These aggravated damages would go to the plaintiff as compensation for uncompensated dignity harms (separate and apart from pain and suffering). While aggravated damages might encourage lawyers to fer-ret out evidence of a defendant’s state of mind, they would fail to do much for the public’s interest in retributive justice. That’s because with aggravated damages, the victim is em-powered to seek or not seek such damages; Type II errors are more likely, since the victim-vindication model doesn’t purport to restrict the plaintiff from either forbearing from seek-ing punitive damages or to settle at an amount lower than what is necessary to signal to the defendant to forbear from such misconduct in the future. Moreover, proponents of victim-vindication models haven’t embraced any real constraints on jury discretion, which gives awards of punitive damages a very ad hoc veneer.

Importantly, while retributive damages have some distinctive advantages, there is no good reason to doubt that they can interact well with cost-internalization strategies (like class actions for compensatory damages) to avoid working at cross-purposes or duplica-tion. While I leave that proposition to defend in the next article, for now, I hope I have brought into better focus the intelligibility and advantages of retributive damages as com-pared to compensatory damages, criminal sanctions, or damages designed to achieve cost-internalization and victim-vindication.

D. Why Not Private Criminal Punishment?

Thus far I have explained why the state would be interested in outsourcing part of its investigative and prosecuting functions to private parties and why such outsourcing would not be inherently disruptive to the project of retributive justice. What I also need to explain is the attractiveness of retributive damages vis-à-vis the private enforcement of the criminal justice system. Some of the benefits described above might arise if we had statutes that permitted private citizens to serve as prosecutors under the criminal law, or if we had mechanisms that allowed private citizens to compel prosecutions in the criminal justice system, or at least forced prosecutors to give reasons for declining to prosecute certain ac-tions.

Without arguing that retributive damages would be a superior strategy to all these other mechanisms, let me raise a few cautionary points. If we allowed only private actions brought under the criminal law, we would lose both the expertise and the disciplinary op-portunities to keep the prosecutor in check, facts that occur as a result of the government serving as a repeat player in the criminal justice system. There would also be a risk that the criminal justice system’s moral credibility would be undermined (further?) since only those with time and resources would serve to prosecute claims and that would systematically dis-advantage the poor.

If we allowed a private right of action under the criminal law to supplement rather than supplant the government’s work, other problems unfold: there might be races to the courthouse between public and private representatives to avoid double jeopardy concerns; government prosecutors would have less incentive to do its job if the private sector could wholly displace it; and, most importantly, we might have a higher error rate of both Type I and Type II kinds if private citizens’ or their hired agents couldn’t be counted on to do their work competently, diligently, and fairly in large part because they were not repeat players and because they could reasonably be viewed as more biased (whether consciously or unconsciously) against possible defendants. It would also be hard to imagine how one privatizes prosecutions without privatizing the investigative function of police too.

A more modest proposal would be to allow private citizens to lodge complaints or request explanations for prosecutorial inactivity, but that’s something that already exists in a few jurisdictions, and fits compatibly with our current regime and a scheme of retributive damages. Another alternative, which some have suggested, would be a public regulatory system with fines and sanctions, and rewards and lawyers’ fees for whistle-blowers who call attention to unsafe products or conditions, the detection efforts of which can be dele-gated to private attorneys general who might not be actual victims. Assuming this model introduced intermediate sanctions and had the procedural safeguards defendants would need, this model could plausibly achieve many of the benefits retributive damages actions seek to achieve. However, it is unclear whether an adjudication and penalty through an administrative agency would suffice in actually conveying the condemnation through communal judgment that a judgment of retributive damages would through the use of a jury trial and/or judge. Moreover, there might be some efficiency gains by having retribu-tive damages actions ride piggyback to the tort system. If we relied on a public regulatory system to do some of the work done by punitive damages now, it might require the devel-opment of a whole new governmental apparatus. Indeed, a public regulatory system, at least as some of its advocates would have it, also requires the introduction of large social insurance schemes to replace tort law. My sense is that these alternatives are not meant to render retributive judgments but simply to ensure compensation and deterrence more effi-ciently.

By contrast, the basic structure for retributive damages already exists within our extant tort law system and would require just a few modifications. Indeed, if a state wanted to be serious about retributive damages as a fair scheme of imposing an intermedi-ate sanction, there are only a handful of critical and relatively straightforward steps it must take. First, pass a statute that says retributive damages will be available for X, Y and Z kinds of misconduct. Second, declare which, if any, of these wrongs (just X and Y?) are enforceable by private attorneys general after the government has declined to sue. Next, indicate that all suits must initially allege retributive damages in the complaint and that all settlements will have to be approved by the court and the attorney general's relevant office. Then, devise guidelines and commentary to track reprehensibility and assess what percent-ages of wealth or net value will correspond. Fifth, draft instructions for juries on retribu-tive damages inspired by the instructions appended to this article. Last, allow defendants to credit retributive damages against any subsequent criminal penalties.

Posted by Dan Markel on March 27, 2008 at 12:15 AM in Article Spotlight, Dan Markel, Retributive Damages | Permalink | Comments (0) | TrackBack

Wednesday, March 26, 2008

Retributive Damages: How much and to whom?

In earlier posts gathered here, I laid out the Introduction and some relevant background regarding
punitive damages law, recent scholarship, and retributive justice. Yesterday's  post articulated some of the basic structure for retributive damages, focusing on what misconduct should be the subject of retributive damages and whether non-victims of wrongdoing should be empowered to bring claims for retributive damages (and if so, under what restrictions).

Today's post discusses a) how to bring rationality and fairness to determining the amount of retributive damages, b) how to allocate the retributive damages among the state, lawyer and plaintiff, and c) how this account offers prosaic justice, not poetic justice--and why that's ok, contra Luban, Galanter, Sebok, and Zipursky. The material below appears in unfootnoted and unformatted form, but you can read a draft of the whole article with apparatus on SSRN here. Feel free to send me your thoughts via email.

Implementing Fair Notice for Amounts of Retributive Damages

This section’s discussion lays out the key factors affecting the amount of retribu-tive damages. There are several elements that must be considered in determining the amount of retributive damages in a given case.

A concern for achieving even-handedness among similar cases is important from a variety of retributivist and rule of law perspectives. From this vantage point, a defendant should not face an award of retributive damages that varies substantially from another de-fendant’s punishment when both committed the same misconduct and are being punished by the same sovereign in the same jurisdiction. Consistent with the retributivist com-mitment to rule of law values, individuals should have some reasonable sense of not only what kind of conduct is prohibited by pain of retributive damages liability but also what kind of penalty and how much of a penalty they might predictably face as well. This section tries to provide a scheme that can help implement fair notice and horizontal equality regarding the scope of damages. It also addresses some of the difficult questions arising in the context of settlement.

1. Reprehensibility-Based Damages Based on Scaled Guidelines

The main feature of a retributive damages award is a reprehensibility-based fine. This fine’s amount requires two kinds of measurements. The first is a number on a repre-hensibility scale. The second measurement translates that reprehensibility score to an amount of damages.

Thus, as a preliminary matter, state legislatures or a sentencing commission should devise a set of guidelines for juries (or judges in bench trials) to help them assess how rep-rehensible the misconduct is. The guidelines would calibrate reprehensibility, perhaps on a scale of 1-20, with 20 being the worst, using the factors, discussed earlier, that courts currently use to evaluate the defendant’s reprehensibility. Some factors might increase rep-rehensibility, such as a defendant’s history of past adjudicated misconduct, and other factors might mitigate, such as pre-existing compliance programs or remedial actions and restitution measures taken by the defendant upon discovery of the misconduct. In addition, the guidelines would provide hypothetical examples of misconduct that fell on various places on the scale.

This kind of scaling approach would enhance not only fair notice and horizontal equality, but also rational decision-making by jurors. It would do so by reducing the risk of isolationism, which is a cognitive bias that arises when individuals are required to make judgments in isolation of other factors that provide a richer context. The scheme suggested here enables jurors to deliberate over and contextualize the conduct they are assessing in comparison to other types of conduct. For example, if viewed separately a jury may rank a given financial harm as a 6 and a given physical harm as a 7. But if the two scenarios are viewed together, the jury may rank the financial harm as a 5 and the physical harm as a 9. The rankings may be different when conduct is ranked alone because “judgments are spon-taneously normalized to the frame of reference implied by the category.” Sunstein et al. provide another example that may be easier to understand. When viewed separately, the answers to both the following questions may be “yes”: “is an eagle large?” and “is a cabin small?” But when viewed together, one’s answers may change because the frame of ref-erence is wider than one particular implied category. Hence, the examples of conduct pro-vided to juries should feature conduct from a wide spectrum of categories so that retribu-tive damages can be calibrated to be coherent across a broad array of conduct, instead of simply one separate category of conduct.

Bear in mind that determining reprehensibility along a scale is only part of the task. We must also determine how the reprehensibility translates to the amount of the pen-alty. According to Professors Sunstein et al., jurors in psychology experiments demonstrate great difficulty in translating their condemnation of defendants’ behavior into predictable scales of dollar amounts. (Some scholars, looking at real life data, contest that juries dis-pense unpredictable amounts of punitive damages. )

To reduce the difficulties juries or judges might encounter when called to translate “outrage into dollars,” the number on the reprehensibility scale would track some portion of the individual defendant’s net wealth. The precise tracking between reprehensibility and wealth would be decided ex ante by a legislature or a state sentencing commission, but that linkage need not be communicated to the jury. The jury’s focus instead would be on what happened and the moral evaluation of the defendant’s reprehensibility in light of the guidelines and commentary. With a corporation, we would look at the worth of the enter-prise as measured by valuation models used on Wall Street. Reliance on net wealth of enti-ties can be misleading because it would simply encourage corporations to use debt to fi-nance themselves instead of equity.

To illustrate, a finding of 2 on the scale could lead to a retributive damages award of 1% of defendant’s net wealth, and a finding of 20 could lead to 10% of the defendant’s value being assessed. Scaling the amount of the penalty to a percentage of wealth is a bit unorthodox in this country but it is not without precedent. Currently more than a dozen ju-risdictions use a similar program of day fines that are prevalent in

Europe

, by which a judge determines the severity of the offense with reference to a number, and that number is multiplied by the income a defendant has on a daily basis.

This kind of scaling to wealth or value is important for four reasons: it avoids emit-ting the wrong signals to the public about the worth of poor people in cases involving physical injury; it facilitates rational jury decision making; it helps reduce, but does not eliminate, the problem of the diminishing utility of money; and last, it provides reasonable incentives for plaintiffs’ lawyers to take cases even after Philip Morris. Let me elaborate each reason.

The first major advantage of a reprehensibility-scaled guidelines approach is that it ensures that the reprehensibility of the defendant’s misconduct is what is being measured and punished, rather than say, morally irrelevant facts about the underlying tort. As ex-plained in Part I.A., various jurisdictions have insisted that the amount of punitive damages be tethered tightly to the amount of compensatory damages awarded.

This tethering is unreasonable from a perspective of retributive punishment, espe-cially in cases involving or risking physical injury because doing so is inconsistent with the belief in the equal worth of human life under the law. When a defendant’s misconduct kills or injures a poor person – i.e., someone whose death or injury triggers smaller payouts in compensatory damages under conventional valuation models – such misconduct will yield a lower punitive damages award where there is a requirement that punitive damages be based on compensatory damages than if the defendant killed or injured a wealthy per-son. Not only is this outcome objectionable from a perspective that values equal respect for all persons before the law, it will encourage defendants to undertake unjustifiably risky conduct in a manner that will disproportionately affect the poor and disenfranchised. If leg-islatures have imposed caps on punitive damages through using a certain multiple of the compensatory damages or a certain flat dollar amount, then the wealthy defendant will simply view the punitive damages award as just a tax or a cost of doing business. By contrast, the assessment of a percentage of wealth would help rupture that sense.

The second benefit of using percentages of net wealth or net value is that a defen-dant’s wealth won’t be used to affect the jury’s decision-making. This approach protects defendants by preventing trial courts devolving into “a field day in which the financial standing of the defendant would become a major issue.” In other words, the plan here does not allow for the introduction of evidence regarding the financial condition of the de-fendant because such information might poison the jury’s decision; instead the jury is tasked simply with assessing the reprehensibility of the misconduct.

A third advantage to assessing retributive damages this way is it helps ensure that the sting of the punishment will be more consistent across persons and that similarly situ-ated defendants who commit similar types of misconduct within a given jurisdiction will be punished in a roughly similar way. Under the retributive damages scheme, the worse the conduct, the higher the percentage of net wealth that will be forfeited. Of course, given that the marginal utility of money diminishes, one might think there is a need for progressively staggered percentages that increase as a function of both reprehensibility and wealth (or value). It’s quite difficult, however, for legislatures or sentencing commissions to assess different marginal utility functions for different persons.

Moreover, there is a principled reason to treat similar offenders who commit simi-lar misconduct in similar manners, and thus the principle of equality under which retribu-tive punishment serves would likely be undermined by a progressively increasing punish-ment structure because the variability of marginal utility rates would be idiosyncratic across persons (or entities). At least with flat fines (dollar amounts) or flat percentages of wealth, the equality principle can be plausibly invoked to most people. Thus, because scal-ing retributive damages “progressively” is an issue whose outcome I don’t think retributive theory can resolve with firmness, I would counsel caution. Moving from fixed dollar amounts or multiples based on compensatory damages to fixed percentages of wealth re-gardless of the wealth of the defendant would itself be a substantial improvement.

Last, there might be some additional benefit to the approach described here, one that is especially salient after the Court’s Philip Morris decision. As mentioned earlier, the Court ruled that a jury may not award punitive damages based on the amount of harm caused to nonparties to the litigation. Although the reason for this holding makes good and under-appreciated sense from a retributivist perspective – a person ought not be punished for conduct that has not been clearly proven to be the defendant’s culpable misconduct, es-pecially if the defendant has various defenses that could be raised as against particular claimants – the new holding poses a substantial risk of reducing incentives to plaintiffs and their counsel because they cannot pursue a jackpot of punitive damages based on “total harm.” If a jurisdiction decided (against my advice offered below) to allocate the retribu-tive damages awards to the plaintiff and her counsel, then the reprehensibility-based guide-lines approach reduces the problem of diminished incentives in the aftermath of Philip Morris. (But to my mind a better solution is for the state to take the award and to simply provide that the defendant pay lawyer’s fees based on risk, time and expense.)

Some additional points warrant attention. Consistent with the virtue of retributive modesty, mentioned in Part II, in situations where a defendant has reason to doubt its vi-ability if required to pay one lump sum, legislatures may authorize courts to order defen-dants to pay the amount as a percentage of profits in coming years. Additionally, if one is concerned that a defendant committed grave misconduct and then undertook to restructure its finances to make it appear that it cannot pay its tab, the courts might adjust the retribu-tive damages based on the wealth or value of the defendant at the time the misconduct last occurred.

The scheme described above furnishes potential defendants little basis for com-plaint that the amount or award of retributive damages is a surprise, since the standards that would be applied to them are no different than the guidelines that have now become famil-iar in many jurisdictions when assessing criminal liability and sentencing issues. Of course, the defendants in criminal cases have more procedures in place, and thus, if we are deputiz-ing plaintiffs to facilitate punishment of the defendant through an intermediate sanction, this requires enhancing at least some of the procedural safeguards in place in retributive damages cases, an aspect of the argument I develop in greater detail in the next installment of this project.

2. Penalties for Gain-Stripping

In addition to the reprehensibility-based fine, courts should assess the net profit-ability of the misconduct, if any, toward the plaintiff involved. This determination is neces-sary because retributive damages awards signal two commitments: first, that misconduct of this sort should not occur, and second, if such misconduct does occur, the defendant should not profit from it. So, in addition to the reprehensibility-based fines, the amount of retribu-tive damages should also include the retrieval of whatever profits can be tied to the mis-conduct toward the plaintiff.

The gain-stripping penalty should be treated distinctly from the reprehensibility-based fine. Gain stripping alone puts the defendant at the status quo ante, which doesn’t communicate the wrongness of the action; adding the reprehensibility-based fine makes the defendant worse off for his culpable conduct, as he should be from a retributive perspec-tive. Thus, if the defendant were to pay a hypothetical reprehensibility fine of 200 and had gained from the misconduct 200, then the defendant should pay (at least) 400. That said, the gain of the defendant needs to be considered in light of the harms the defendant has been forced to compensate also. Thus, if the defendant gained 200 but is required to pay 100 to the plaintiff in compensatory damages, then the defendant really gained only 100, and so should be forced to pay the compensatory damages to the plaintiff (100), the extra profits (100), and then also pay a retributive damages award that puts the defendant in a worse position than earlier, based on how reprehensible the conduct was.

One caveat is necessary. Any gain-stripping penalty against the defendant will, in the aftermath of the Philip Morris decision, have to be limited to the gain the defendant made against the plaintiffs in the litigation rather than gains made against others who are strangers to the litigation. This also reduces the amount of potential reward to contingency fee-based plaintiffs’ lawyers, so states may need to enact provisions allowing for reason-able fees for plaintiffs’ lawyers in cases where retributive damages are warranted. I address this next.

3. Providing Litigation Fees and Expenses

In addition to gain-stripping and reprehensibility-based fines, the state must also consider the significance of having the defendant pay for litigation fees and expenses when determining retributive damages.

Though the state ought to receive the bulk of the retributive damages (for reasons I explain in the next Section), it needs to provide incentive for plaintiffs and their lawyers to bring retributive damages actions to the attention of the state. We need to determine how that general allocation strategy affects incentives for lawyers to bring retributive damages actions. If we assume that the state takes the lion’s share of the retributive damages penal-ties for the reprehensibility-based fine and the gain-stripping (in light of the public interest in retributive damages), we increase the likelihood that the plaintiff will have a difficult time in finding a lawyer to take the case absent compensation for fees and expenses. That’s because compensatory damages may not sufficiently motivate lawyers where the damages are insubstantial or uncertain. For cases where compensatory damages are uncertain or small, provision of lawyers’ fees provide motivation to tort lawyers who might not take these cases otherwise. Additionally, it incentivizes plaintiffs’ lawyers to find and promul-gate evidence of a defendant’s mens rea that they might not otherwise pursue if they were looking strictly for compensatory damages. Moreover, these issues cast a significant shadow over settlement discussions. So if we want to make sure high quality lawyers are marginally more attracted to this area of law than they would be under conditions that lead to compensatory damages only, we have to ensure fees are provided for to motivate private lawyers to invest in these cases.

If reasonable fees and expenses are awarded – and adjusted for risk, time, and ex-pertise – for all victorious plaintiffs in retributive damages claims, then that would create incentives for lawyers to bring good cases. It’s a good general rule, and reflects the same commitments to human values as when we make losing defendants in civil rights cases pay for the costs of litigation.

But it might also encourage suits with very little money at stake. Thus, the alloca-tion of lawyers’ fees will say a lot about how much should be spent on reducing Type II errors. If, for example, John maliciously stomps on exactly one of Neighbor Nancy’s prized roses in her presence, should Nancy have a retributive damages action against John for the sentimental and market value of the rose? If so, should John pay

Nancy

’s lawyer and the court costs too? A lawyer will bring suit here only if she thinks she will get paid if she prevails, unless she works for an entity (perhaps governmental or non-profit) that sub-sidizes these actions. But if lawyers aren’t available, it may mean that John can stomp on

Nancy

’s roses with impunity especially if he does it on the installment plan. There’s al-ways the threat of criminal sanctions to prevent John’s actions but prosecutors are also sometimes reluctant to charge low-value perpetrators.

Given its primary focus on the criminal justice system, retributive theory quite naturally doesn’t have a lot to say about the architectural design for solving this particular problem. The retributive interest is in encouraging high quality lawyers to invest in strong cases that vindicate the wrongs perpetrated against society. But various structures might be able to achieve this aside from a blanket rule awarding lawyers’ fees in successful retribu-tive damages awards. For instance, some jurisdictions might decide that the state prosecu-tor will seek retributive damages when the fear is that the defendant can’t afford to pay the lawyers’ fees. Alternatively, the state may decide to subsidize private lawyer’s fees out of the public fisc especially in cases susceptible to class treatment. One thing is clear. Juris-dictions facing competing moral obligations for scarce resources may decide that a conces-sion to administrative cost is necessary. Those that do make that choice will force a drag on the goal of using retributive damages to reduce Type II errors, but as stated in Part II, we can’t expect to spend every last unit of social resources on retributive justice. Trade-offs have to be made somewhere.

4. Rewards for Plaintiffs and the Risks of Collusion

Considering the interests of potential plaintiffs’ lawyers in this scheme is not enough. It would only create an incentive for enterprising lawyers to find plaintiffs. It would not do the job of channeling plaintiffs to lawyers, especially if the aggravation of a lawsuit coupled with the chance of not winning were otherwise sufficient to dissuade a plaintiff from bringing suit. The availability of retributive damages with some portion of it going to the plaintiff creates the conditions for more enforcement of the public values at stake. From the public’s perspective, then, the amount of retributive damages awarded to the plaintiff should be the amount necessary to reward the plaintiff for bringing the suit to the lawyer and the lawyer for bringing the suit to public attention. Thus, in addition to the fee structures discussed immediately above, jurisdictions could provide that plaintiffs in victorious retributive damages suits will receive, say, a $10,000 finder’s fee, in addition to compensatory damages if applicable.

The flat fee reward encourages all citizens to bring cases warranting retributive justice without making the windfall to the plaintiff contingent on morally arbitrary features such as the defendant’s wealth. The benefit of such a finder’s fee is it makes the project of retributive justice likely while being less susceptible to lottery effects that undermine re-tributivism’s commitment to fairness and equality across persons.

The flat fee award might create a risk of collusion such that defendants would try to “bribe” plaintiffs to settle for, per our example, $10,001 above their compensatory dam-ages. If we adopted the flat fee award under our current system, we would encourage de-fendants to pay for wrongs they might never have been committed to make suits go away. Meanwhile, secret settlements of this sort embolden the original wrongdoers who are never held liable – are never confronted with their wrongdoing – for wrongs that they actually did commit.

To avoid these problems, the litigation process should take three steps. First, plain-tiffs must signal in their initial complaint that they are seeking retributive damages; they must also lodge a copy of the initial complaint with a state attorney general’s representa-tive. Second, courts must scrutinize and make transparent all settlements of all suits where retributive damages claims are lodged in the initial complaint. Third, the state attorney general’s representative has to either agree to the settlement or buy the retributive damages claims of plaintiffs (for the finder’s fee) so that the state can prosecute the retributive dam-ages aspect of the litigation. These rules would prevent private parties from settling in a way that deprives the public potentially critical information involving public misconduct and conveys to the court (and the state) a basis for scrutinizing any settlements that arise regarding the nature of the misconduct. Moreover, it also encourages defendants to contest liability for retributive damages unless they actually did something wrong.

Thus if a plaintiff decided to go ahead and allege retributive damages in the initial complaint, he would not be prohibited from settling subsequently. But this scenario would require plaintiffs to secure governmental approval to settle and it would force defendants to either admit responsibility and pay some amount of retributive damages to the state or to deny responsibility. If the defendant denied responsibility, he would have to convince the state’s representative that this particular claim was not worth pursuing because of lack of merit. Otherwise, the state — or conceivably another PAG if the state declined — could decide to risk litigating against the defendant. Clearly, the dynamics of settlement would change because defendants would have little incentive to settle without admitting liability. Knowing these diminished incentives, plaintiffs will be unlikely to bring suits merely for the purposes of harassment.

In sum, where retributive damages are warranted, a defendant should pay repre-hensibility-based fines, attorneys’ fees (informed by risk, time, expertise, and expenses), a state-determined flat award going directly to the plaintiff, and the elimination of any net gains made by the defendant from his misconduct toward the plaintiff that was not part of the compensatory damages to the plaintiff. This structure creates a quid pro quo. The finders’ fee helps channel cases to lawyers; the lawyers who invest in these cases are paid for the risk and effort they take. Meanwhile, defendants are made worse off as a result of their culpable misconduct. But before that happens, they enjoy a set of procedural safe-guards and advance legislative notice of what conduct instigates retributive damages in ways that are more restrained and predictable than the extant regimes in most jurisdictions around the nation.

C. Allocating Retributive Damages Chiefly to the State

By virtue of their punitive, educative, and preventive effects, retributive damages serve a public purpose in effectuating the CCR’s values described earlier in Part II. This public nature indicates why the defendant should pay retributive damages, but it does not yet explain who should receive the retributive damages awarded. Indeed, both the retribu-tive and the cost-internalization functions are largely satisfied by extracting damages (or other relevant remedies) from the defendant. But neither function seems at first blush to re-quire the plaintiff to be the exclusive beneficiary of that penalty. Let me try to elaborate why, at least with respect to retributive damages, the state should capture the bulk of the retributive damages award.

To be sure, there are good arguments that tort victims should have an avenue of re-dress for compensation for their losses, though of course compensation could alterna-tively be achieved through social insurance schemes. Perhaps tort victims should addi-tionally be compensated through “aggravated damages” for the dignity harm they have personally endured, if, for some reason, their compensatory damages did not properly en-compass those harms. But if extra-compensatory damages are inflicted to achieve the pub-lic’s interest in retributive justice, then we must see the recovery by private plaintiffs of any “retributive damages” as merely a contingent result, not one that is necessary or neces-sarily desirable.

Indeed, it is wrong-headed to award plaintiffs the bulk of retributive damages. The quintessentially socio-legal interest underlying the CCR counsels in favor of awarding only that incentive to the plaintiff and her lawyer necessary to bring the suit to public attention, and to dedicate the balance of the retributive damages award to other pressing social obli-gations, including but not limited to remedial services for crime victims or other law en-forcement budgets.

In the world before the Supreme Court’s recent Philip Morris decision, the risk of giving the plaintiff—who might only be one of many victims of the defendant’s conduct—the entire punitive damages award was that it would more likely undermine the state’s in-terest in ensuring a fair distribution of both compensatory and retributive damages for oth-ers, since a crippling retributive damages award might impair the availability of adequate compensation funds (or punitive damages) for future claimants. In light of the Court’s pro-nouncement that punitive damages may not be calibrated based on the amounts of harm in-flicted on other victims who are non-parties to the litigation, this reason is admittedly weaker as a justification for the state to take the lion’s share of retributive damages, espe-cially in simple litigation where the defendant’s misconduct only hurts one party.

But even in the post-Philip Morris context, giving more than a reasonable award (say, of $10,000) in addition to compensatory damages and litigation expenses would make the system vulnerable to lottery effects that are incompatible with a scheme of retributive justice committed to condemning misconduct in the public’s name, rather than the vic-tim’s. As I explained in greater detail in Part III.B.4, why should plaintiffs benefit from re-tributive damages because they had the “good fortune” of a wealthy injurer?

There are two additional reasons — not intrinsic to retributive theory per se but re-lated to the fairness considerations that animate retributive justice nonetheless — to ensure that plaintiffs don’t enjoy windfalls through awards of retributive damages. First, as long as lawyers’ fees are sufficient to induce counsel to take worthy cases, the state should treat retributive damages as a vehicle by which revenue may be raised efficiently and fairly. That efficiency is enhanced when most of the retributive damages awards go to the state because plaintiffs don’t plan on being victims of punitive damages awards and they, for the most part, have other incentives to pursue compensatory damages. In other words, the state can collect revenue for valuable social projects without deterring plaintiffs and their law-yers “from bringing suits and deterring difficult-to-detect or intentional torts.” A second consideration is that awards of retributive damages are windfalls to plaintiffs that work a form of lottery, which a risk-averse population would reject ex ante in favor of lower taxes (or more services).

D. Retributive Damages: Prosaic Justice, not Poetic Justice

Looking backward now, I want to highlight how this structure for retributive dam-ages reflects the CCR’s values and not revenge or victim-vindication.

First, decisions about the pursuit of retributive damages claims and their settlement are not left solely in the hands of the victim. The state basically has a veto on settlements in cases alleging retributive damage. Moreover, either through a PAG alone or in the seg-mented strategy I endorsed earlier, a defendant’s misconduct is subject to retributive dam-ages even if the victim doesn’t pursue retributive damages. These rules work to reduce Type II errors resulting from too much control the victims might have. And by tempering the power of the victim, the CCR also makes retributive damages less like revenge.

Indeed, if we recourse back to the previously mentioned differences between retri-bution and revenge, and apply those conceptual differences to retributive damages, we see that retributive damages, properly implemented, look quite like the kinds of conven-tional criminal fines used around the world. As I conceive them, retributive damages are subjected to proportionality safeguards; impartially administered by the state; attached di-rectly to the offender; and serve as an expression of the state’s power to coerce the offender in particular ways, such that certain ideas can be communicated through that coercion. Where appropriate, retributive damages might also be accompanied by other measures short of criminal sanctions such as injunctive relief.

To be sure, the plaintiff seeking retributive damages might feel vengeful, and might take pleasure in the suffering of the defendant, but, per the regime I have described, the state won’t punish the defendant by extracting the fine without its customary – or aspi-rational — concern for the free and equal nature of the offender. Thus, unlike revenge, re-tributive damages would not be available if typical excuses and justifications apply to the defendant’s actions. Moreover, nothing about retributive damages is inconsistent with re-tributivism’s intent requirement, discussed earlier, which requires that the punishment not preclude the internalization of the “sense of justice” that would allow for an offender to demonstrate his respect for the norms of moral responsibility, equal liberty under law, and democratic self-defense. Retributive damages, properly constrained as an intermediate sanction, do not prevent the defendant from ongoing activity nor do they aim at the defen-dant’s destruction or social isolation.

And while the private plaintiff may have no interest in the general application of the law, the state, which extracts the retributive damages fine, does. Specifically, a retribu-tive damages action brought by one plaintiff does nothing to preclude the punishment of other defendants for similar wrongs; does nothing to preclude punishing the same defen-dant for other wrongs against other victims; and – through its information-generating ef-fects about a defendant’s mens rea – actually facilitates the pursuit of criminal sanctions against the same defendant within the criminal justice system for the same wrongdoing to the plaintiff-victim as well as for other wrongs the defendant may have perpetrated against others. So retributive damages, at least when properly constrained and conceived, might actually increase the likelihood of fair and general applications of the law.

This concern for fair and general applications of the law is manifested also by seeking to ensure the defendant is not over-punished (generally and relative to similar of-fenders). Unlike the current regime, the retributive damages structure would permit a de-fendant to credit any retributive damages paid against any fines imposed in subsequent criminal actions brought by the state for the same misconduct. Conversely, defendants would not face retributive damages awards for certain misconduct if they have already been criminally convicted in that jurisdiction for that particular misconduct. In that situa-tion, the state has already done the hard work of ferreting out the misconduct and proving it beyond a reasonable doubt. Thus there would be no reason to give lawyers or plaintiffs a reward for pursuing retributive damages against an already convicted defendant. (Whether indictments should suffice is a harder issue. )

Additionally, this structure reflects the CCR’s concern for equality, proportionality and even-handedness. Across the realm of cases, state-drafted guidelines and commentary are used to inform judicial or juries’ deliberations about the appropriate level of the defen-dant’s reprehensibility. The goal behind this is to reduce Type I over-punishment and Type II under-punishment problems (compared to others) because the guidelines will give juries a far more effective way to avoid the ad hoc determinations that afflict the common law method of portioning punitive damages. Indeed, because the correct interpretation of the guidelines would effectively be a legal question susceptible to much less deference from reviewing courts, the jury’s role would be more circumscribed. Moreover, by restricting plaintiff’s share of the punitive damages award to a flat “finder’s fee,” we avoid creating lottery effects or windfalls to plaintiffs lucky enough to have a wealthy injurer. Last, the sanctions imposed under a retributive damages scheme communicates that the misconduct is prohibited and not simply priced based on morally arbitrary features of the victim, such as his earning power. In other words, plaintiffs won’t receive windfalls because they have the good fortune of a wealthy injurer and defendants shouldn’t receive penalty discounts based on the good fortune of having a low-earning victim instead of a high-earning one.

Last, the CCR’s concerns for accuracy and modesty are reflected in the procedural and substantive safeguards defendants would be entitled to under a retributive damages scheme: a right to counsel, judicial review, and a higher burden of proof (clear and con-vincing evidence), and a right to credit retributive damages amounts against subsequent criminal sanctions would protect defendants from risks of duplicative or inaccurate pun-ishment (Type I errors). Defendants should enjoy certain procedural safeguards that elevate our confidence levels above what’s necessary for compensatory damages but below what’s expected for full-blown criminal sanctions. Moreover, a concern for modesty would entail limiting and structuring retributive damages payments so they operate as an intermediate sanction, and hence, won’t jeopardize the ability of the defendant to continue his life or business in compliance with the law’s dictates.

Taken together, these notions readily separate the retributive damages scheme from prior accounts of punitive damages emphasizing revenge, “poetic justice,” or victim-vindication through civil recourse, theories propounded with different emphases by Profes-sors Zipursky, Sebok, Galanter and Luban. For instance, notwithstanding its effectiveness in explaining part of the rationale for punitive damages, Galanter and Luban’s poetic jus-tice account is unpersuasive in defending the lack of procedural safeguards for defendants, the imposition of punishment for harms occurring to non-parties to the litigation, and the extension of great deference to a jury’s ad hoc determination of punitive damages. What we really need is prosaic justice, not poetic justice.

Moreover, like Professors Zipursky and Sebok, Galanter and Luban propose little in the way of trying to ensure any degree of proportionality or even-handedness in the sanctions imposed on comparable defendants. Last, Professors Sebok and Galanter and Luban exhibit hostility to punitive damages used to pursue cost-internalization, even though there is no principled reason that extra-compensatory damages could not be struc-tured to allow a state to pursue retributive damages alongside remedies designed to pursue other purposes, including both cost-internalization and compensating victims for uncom-pensated harms to their dignity.

It goes without saying that the entire design of a retributive damages scheme needs some explanation for why it would be useful beyond mere reliance on the tort system to provide compensation for victims and the criminal justice system to inflict retribution against criminals. The next Part tries to explain what makes retributive damages, as I’ve described them in this Part, attractive as an intermediate sanction falling between compen-satory damages and criminal penalties.

Posted by Dan Markel on March 26, 2008 at 12:12 AM in Article Spotlight, Dan Markel, Retributive Damages | Permalink | Comments (0) | TrackBack

Tuesday, March 25, 2008

Speaking of punitive damages...

Yes, I know I've lately been a bit of a one-track retributive damages "promoter" -- the word "pimp" seems more appropriate but the last time one of us used it, well, that's another story -- but I just noticed that Adam Liptak's got a new article in the Times about the "American Exception" of punitive damages. Adam writes:

Most of the rest of the world views the idea of punitive damages with alarm. As [an] Italian court 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.

Some common-law countries do allow punitive damages, though in limited circumstances and modest amounts. In the United States, by contrast, enormous punitive awards are relatively common, although they are often reduced or eliminated on appeal. Last month, for instance, the United States Supreme Court heard arguments in the Exxon Valdez case, where a jury’s initial award of $5 billion was later reduced to $2.5 billion. Still, such awards terrify foreign courts.

As I read Adam's piece, I couldn't help but think that if more American jurisdictions adopted my proposal of casting punitive damages as an intermediate sanction, there'd be far fewer problems in getting these judgments enforced against foreign defendants, not to mention there'd be much less risk of being found at odds with the Court's substantive and procedural due process analysis of punitive damages. At the very least, I hope the constitutional analysis at the end of my piece will prove somewhat useful to courts both here and abroad that are contemplating the problematic relationship between punitive damages and compensatory damages. (More on that in this coming Friday's post.)

Posted by Dan Markel on March 25, 2008 at 11:40 PM in Article Spotlight, Dan Markel, Retributive Damages, Torts | Permalink | Comments (0) | TrackBack

Retributive Damages: Designing A Structure

In earlier posts gathered here, I laid out the Introduction and some relevant background regarding
punitive damages law and recent scholarship. In yesterday's post, I provided the basic sketch of retributive justice that informs the reconstruction of punitive damages that I propose.

In today's post, after the jump, I begin sharing some of the basic structure for retributive damages in unfootnoted and unformatted form. The two important discussions here today are what should be the subject of retributive damages and whether non-victims of wrongdoing should be empowered to bring claims for retributive damages (and if so, under what restrictions). Tomorrow's post discusses how to bring rationality and fairness to determining the amount of retributive damages.

You can read the whole article with apparatus on SSRN here. Feel free to send me your thoughts via email.

DESIGNING RETRIBUTIVE DAMAGES

It bears mention that at no point in the discussion of the CCR in the previous post was the word crime or criminal used in the course of describing the underlying values of, or limits upon, retributive justice. This omission should be suggestive, indicating that perhaps in some situations, the values of retributive justice – which include commitments to accuracy, responsibility, modesty, equality, and impartiality – can be served through a civil system’s use of punitive damages under conditions described here coupled with some intermediate level procedural safeguards such as a standard of proof that required clear and convincing evidence of the reprehensibility of the defendant’s conduct and state of mind.

This Part tries to show how the design of a retributive damages scheme can be made more sensitive to the concerns of critics and proponents of punitive damages alike. Section A discusses what kind of conduct should trigger retributive damages and who should be able to bring those actions. Section B explains how retributive theory’s concerns for reducing both Type I and Type II errors informs the structure for thinking about the amount of retributive damages in a given case and across cases. Finally, Section C suggests some principles for how the retributive damages sanction would best be allocated among the state, the plaintiff and her counsel.

A. Which Conduct Should Retributive Damages Punish? Who Should Bring Retributive Damages?

If a state adopted retributive damages, it would have to decide what conduct to punish through retributive damages and who could bring these actions. These two ques-tions seem distinct but as the discussion below suggests, the rationale for retributive dam-ages suggests a need to view these together.

1.   Should Retributive Damages Reach Beyond Criminality, and If So, How?

To assess which conduct ought to be subject to retributive damages as an interme-diate sanction, there are at least two possible conventional sources for answers with at least four possible outcomes. First, we could use the extant standards for punitive damages in tort law in a given jurisdiction. Second, we could look instead to the criminal law in that jurisdiction for guidance. Third, we could look to both tort and criminal law and incorpo-rate both spheres of law to announce the standards of wrongdoing. Fourth, we could choose to select only discrete areas of conduct from both tort and criminal law.

This Section doesn’t offer a comprehensive theory of retributive damages legisla-tion, but it will suggest a few possible guiding principles and some of the advantages and drawbacks to these various choices.

One option a legislature might take is deciding to pass a statute that simply prohib-its all conduct that demonstrates reckless or malicious disregard for the legal rights and le-gitimate interests of fellow individuals or institutions. In order to reduce the scope of conduct associated with such a statute, jurisdictions might wish to add, per Professor David Owen, that the misconduct in question constitutes “an extreme departure from lawful con-duct.” Prospective defendants would then be on notice that reckless or malicious mis-conduct would no longer simply be “priced” in the tort system according to the harms caused, but instead would be prohibited—and the sanction for violating such a rule could include the award of retributive damages. This hybrid choice would cover conduct nor-mally covered both by tort law principles as well as criminal legislation, but not all tort law and not all criminal law.

One concern with this approach is that this legislative standard – prohibiting, by threat of retributive damages, misconduct undertaken with malice or recklessness – pro-vides insufficient guidance to those concerned with affording fair notice to defendants and ensuring even-handed application by juries and judges. In defense of the current conven-tions, however, the following can be said: courts routinely apply purportedly vague stan-dards in criminal law – “good faith” in mistake of fact, “reasonableness” in sentencing, “beyond a reasonable doubt” – though not necessarily to their credit. Indeed tort law’s dominant norm is negligence, and that typically requires a jury determination of whether the defendant’s conduct was “reasonable,” which is likely more nebulous than whether someone acted maliciously or recklessly. Anxiety about such vagueness, even in the crimi-nal law context, is typically reduced through the accretion of precedent, which provides greater predictability to prospective litigants regarding what counts as reprehensible. Moreover, such anxiety might be further allayed by the recent studies of communal intui-tions of justice that show striking agreement among people about the nature and severity of wrongdoing.

The standard Professor Owen articulates is useful for further limiting the cases in which the fact-finder determines liability for retributive damages. But more granular guid-ance can be found by looking at the various factors that currently inform courts’ analyses of the amount of punitive damages. For example, in its State Farm decision, the Supreme Court told courts to consider whether the misconduct caused harm that “was physical rather than economic;” whether “the target of the conduct had financial vulnerability;” whether the “conduct evinced an indifference to or a reckless disregard of the health or safety of others;” and whether the harm resulted from “intentional malice, trickery, or de-ceit, or mere accident.” This inquiry into reprehensibility can be made even more sensi-tive. Courts have offered various other factors to assist the fact-finder: e.g., the extent of hazard posed to the plaintiff and the public; the degree of defendant’s awareness of the hazard and its excessiveness; the cost of correcting or reducing the risk; the duration of both improper marketing behavior and its cover up; the attitude and conduct of the defen-dant upon discovery of the misconduct; and the defendant’s reasons for failing to act.

The legislature may also wish to require consideration of other factors often deemed relevant to filing charges against a corporate defendant: for example, “the perva-siveness of wrongdoing within the corporation, including the complicity in, or condonation of, the wrongdoing by corporate management”; the defendant’s: history of similar conduct, including prior criminal, civil, and regulatory enforcement actions against it; the corpora-tion’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents; the existence and adequacy of the corporation’s pre-existing compliance program; the corporation’s remedial actions, including any efforts to imple-ment an effective corporate compliance program or to improve an existing one, to replace responsible management, to discipline or terminate wrongdoers, to pay restitution, and to cooperate with the relevant government agencies.

A simpler way to reduce vagueness is by restricting retributive damages liability to situations where the harm was only physical as opposed to economic. But such a restriction would, from a retributivist perspective, undermine the goal of ensuring that more offenders receive at least some coercive condemnatory deprivation. The better strategy, then, is to deploy all the preceding factors within the statute as considerations for determining the amount of retributive damages to award in a given case (as I explain shortly). Of course, as these various considerations demonstrate, the culpable misconduct that triggers retributive damages is, unlike a cost-internalization approach, not simply a matter of what harm was caused by the defendant. Indeed, on a retributivist rationale, the award of punitive damages has comparatively little to do with the actual amount of harm caused. What matters to vir-tually all retributivists is the culpable conduct of the offender, and that will entail exami-nation of harm alongside a defendant’s imposition of unreasonable risk of harm and any relevant defenses.

A legislature that wanted to reach conduct that wasn’t already criminalized could do so using the general statute described in this section. Nonetheless, in service to princi-ples of legality, legislatures would do well to be as specific as possible in the context of prohibiting that misconduct which should trigger retributive damages.

2.   Should Retributive Damages Reach “Harmless” Misconduct? If So, Who Sues?

A more interesting and complex issue to consider is whether all conduct in a juris-diction already prohibited by criminal law should be subject to retributive damages actions. I can imagine why some legislatures might wish to exempt various offenses such that their violations would not be eligible for retributive damages. However, it’s not entirely clear that such exemptions would be justified on retributivist grounds. Let me explain.

Two areas seem particularly pertinent here: first, “harmless crimes” where certain conduct irrespective of harmful result is prohibited, such as driving under the influence of alcohol; and second, inchoate crimes: e.g., solicitation, attempt, and conspiracy. In those two areas of criminal law, criminal penalties are available to punish misconduct even where harms to others did not actually materialize. These two kinds of conduct are some-what confounding in the context of retributive damages because in the domain of tort law, a finding of harm to a victim is conventionally required. But with both these areas of criminal law, there is no victim available to bring a suit for retributive damages even though we have conduct deemed worthy of substantial condemnation.

The relevant question is whether standing to sue for retributive damages should be available broadly. One might restrict the pool of plaintiffs here only to those who were likely victims of the defendant’s actions. Another strategy, which I believe is more con-sistent with the retributivist goal of reducing Type II errors, is for legislatures to empower private attorneys general (PAGs) who discover proscribed misconduct to bring suit for re-tributive damages. This would look similar to the qui-tam structure in which the federal government encourages whistle-blowers to report fraud on the government.

Private attorneys general are entrenched and pervasively influential actors across spheres of law ranging from consumer protection to environmental enforcement. Con-ceived here as those who bring claims without a particular interest as an aggrieved party to the defendant’s misconduct, PAGs would supplement the government’s enforcement work for a range of misconduct that the legislature specifically denominates. While this may seem odd, historically, private parties, including non-victims, were also empowered to prosecute crime for the government. In fact, those PAGs who initiated actions often gar-nered the entirety of the criminal fine that may have been awarded, even if they weren’t victims. To be clear, I’m not suggesting we use PAGs and retributive damages to serve as a complete substitute for the public enforcement of criminal law. As I explain in Part IV.D, there are good reasons for having a professionalized prosecutorial force at the gov-ernment’s employ. But having PAGs empowered to bring an intermediate sanction against defendants is a cost-effective and politically independent mechanism to bring justice to those who perpetrate legislatively proscribed actions.

Two problems with PAG suits exist: first is the fear that they will be brought vexa-tiously against the defendant, increasing the likelihood of Type I errors. Second is the con-cern that having PAGs (rather than public prosecutors) enforce certain laws might jeopard-ize our commitments to other values (such as free speech). But these threats have responses: the rules of legal ethics and civil procedure instruct and forbid lawyers from bringing frivolous or bad faith litigation claims; and the economics of litigation encourage plaintiffs’ lawyers only to take on suits that have some good prospect of recovery. Moreover, under the retributive damages scheme, heightened procedural burdens would be imposed — such as clear and convincing evidence — that would reduce the incidence of false positives. Additionally, to the extent that other values are jeopardized by PAG en-forcement, that decision is one a legislature can make by delineating which rights are sub-ject to PAG enforcement and which ones are not.

A preferable measure to reduce Type I errors, while still remaining true to the re-tributive energy that seeks the reduction of Type II errors (the wrongdoers who escape pun-ishment), would be to adopt a segmented litigation strategy. That is, courts would allow plaintiffs who were actually harmed by the defendant’s conduct to pursue retributive dam-ages in the traditional tort structure. But for those cases involving a PAG, where there was no actual harm, the PAG would be required to notify a governmental agency, perhaps a section of the state attorney general’s office that deals with tort litigation, of the defen-dant’s misconduct. The PAG would lodge the complaint and its evidence against the de-fendant with the government office, and the government would decide whether to bring a case. If the government brought and won a retributive damages action, a portion would go to the PAG as a reward for bringing this misconduct to public attention, much like many jurisdictions reward those who call in crime-stopping tips.

If the government chose not to sue by a certain time, it would have to set out its reasons in a statement. This would facilitate both democratic accountability and judicial or executive review of the declination. The government’s declination would permit the claim to go back to the PAG, who could decide to sue for retributive damages if she se-cured counsel.

This public-private scheme would apply by the same logic to a more controversial realm: those cases where the defendant caused harm to a victim but the victim chose not to seek retributive damages. It is more controversial because allowing third parties to seek re-tributive damages here supervenes upon the choice of a victim to seek or not seek redress against the wrongdoer. From some perspectives, punitive damages serve to vindicate the wrongs against the actual interests of actual victims. By such lights, the PAG scheme would be problematic where victims choose to extend mercy to their wrongdoer by not seeking compensation or retribution. Indeed, some might think the tort system’s essential structure is to empower but not require victims to seek recourse against their wrongdo-ers. Thus to allow for a PAG to seek retribution against the wrongdoer for another per-son’s suffering would be seen as disempowering to the victim, especially if the victim had to testify against his or her will.

From the CCR’s perspective, however, a victim’s declination not only risks leav-ing the state unaware of the defendant’s misconduct (when the defendant could be humbled through coercion otherwise) but it leaves the defendant a risk to other people’s rights, in-cluding, possibly the victim’s. Think here of a victim of a teacher or clergyman’s sexual abuse; if there was independent evidence of the abuse -- say a PAG’s testimony and cam-era-phone pictures -- we might still want a PAG to share awareness of this to punish and prevent this abuse.

Together, these admittedly disparate areas of misconduct—inchoate crimes, con-duct crimes with no resulting harm, and misconduct with resulting harm to victims who don’t wish to seek recourse for the wrong—may all be seen, at least in some contexts, as situations where moral luck operates. The store owner whose fraudulent scheme fails be-cause an honest employee tips off the customer; the drunk who luckily drove home without injuring anyone; the molested altar boy who forgives his parish priest—these each involve situations where a defendant’s culpable misconduct is worthy of sanction, and nonetheless, under a traditional torts scheme, the wrongdoer might escape being held legally responsi-ble. To be sure, these cases could be left for the criminal justice system exclusively. But that would likely leave this category of cases under-enforced in light of the government’s scarce investigative resources and scarce prosecutorial resources (discussed next in Part IV). Moreover, since many retributive theorists take the position that culpable wrongdoing is what generally ought to trigger sanction, not the instantiation of actual harm, it makes sense to have a retributive damages scheme that would endeavor to be indifferent to these eruptions of moral luck.

Punishing these spheres of misconduct through retributive damages might be con-troversial because it involves a paradigm shift for the tort system. States like

that have tried uncoupling victimhood from standing to sue as a civil plaintiff have encountered resistance. Thus a jurisdiction might find more acceptability by using the hybrid regime mentioned earlier to empower PAGs to bring retributive damages actions following a gov-ernment declination; the government may also decide to restrict these cases to alleged mis-conduct involving or risking physical harm or for financial misconduct involving losses greater than (say) $100,000.

Subsequent criminal liability of course only attaches if the underlying conduct is subject to criminal sanction. Thus, depending on the jurisdiction, a defendant facing re-tributive damages for defamation might not trigger any subsequent criminal liability. But a defendant sanctioned for fraud in tort might subsequently be prosecuted under the criminal law. As mentioned earlier, any retributive damages penalties a defendant pays would be credited against subsequent criminal penalties assuming the prosecution was for the same misconduct the defendant was accused of in the retributive damages proceeding. Con-versely, PAGs would not be entitled to bring actions for retributive damages after the gov-ernment has already signaled its intent to criminally prosecute the defendant for the same misconduct. (That would only encourage free-riding on the government’s prosecutorial ef-forts.)

Notice that this approach to figuring out what can be punished through retributive damages doesn’t posit that there is an intermediate category of wrongdoing between so-called private and so-called public wrongs. No intermediate category of wrongdoing (in the sense that it is less severe than criminal wrongs but more severe than private torts) is nec-essary to justify having an intermediate sanction of retributive damages. But it’s important to note that this account also doesn’t view retributive damages as justified only because it serves as a means for enforcing criminal liability. Rather, the wrongs, for purposes of re-tributive damages, are delineated by the legislation authorizing retributive damages, and the scope of that conduct is up to the legislature.

As one can see, the question regarding the proper scope of retributive damages is complicated. My own sense is that retributive damages statutes should come close to track-ing much of what we already criminalize—though I also believe we have too many crimes on the books with penalties that are too harsh. Ideally, we’d have a narrower criminal law and a retributive damages regime that would match much of it, with specific assurances that any conduct punishable through retributive damages would have a mens rea require-ment of recklessness or higher along with appropriate procedural safeguards to reduce Type I errors of false positives. But I don’t view an all-encompassing retributive damages scheme to be required. As with much of criminal law, it should be the product of careful legislative deliberation and subject to heightened scrutiny.

In sum, we can see two approaches here. A familiar and more restrictive approach endorses retributive damages actions only against certain misconduct that actually left vic-tims in its wake, victims who are permitted but not required to bring conventional tort suits including retributive damages A major disadvantage is that such an approach leaves the criminal justice system alone to deal with the whole array of wrongdoing that warrants ret-ribution.

In a world where detecting complex wrongdoing occurring in private is difficult, as I describe in the next Part, and people may not even know they have been victimized, we might want a broader approach that increases the incentives for reporting misconduct to the system. The broader approach would have retributive damages legislation track not only familiar bases for punitive damages in tort law but also a society’s criminal laws.

The broad strategy follows a basic logic. If the underlying misconduct is suffi-ciently noxious to allow criminal sanctions, then the intermediate sanction of retributive damages is also permissible if a defendant’s interests in a fair and impartial adjudication are protected. The broader approach would have the advantage of achieving more instances of retributive justice; and because of the prevention likely instigated by the PAG scheme, it would entail fewer encroachments upon the rights of persons to their bodies and property. The social costs of administration and enforcement would probably increase initially but over time we might see that fewer wrongdoers require punishment because there’s less temptation to commit wrongdoing if they know that any observer (and not just police or prosecutors) can initiate claims. A wider scope of liability, however, would leave more people worried about erroneous accusations and punishments, and could affect people’s preferences regarding how much time they spend in observable spaces.

California

Posted by Dan Markel on March 25, 2008 at 12:03 AM in Article Spotlight, Dan Markel, Retributive Damages | Permalink | Comments (0) | TrackBack

Monday, March 24, 2008

Retributive Damages: The Basic Account of Retributive Justice

In earlier posts gathered here, I laid out the Introduction and some relevant background regarding
punitive damages law and recent scholarship. In today's post after the jump, I share an un-footnoted and unformatted version of the basic sketch of retributive justice that informs the reconstruction of punitive damages I propose in subsequent posts. For those of you somewhat familiar with my account of retributive justice, I recommend looking at section D, below, because it foreshadows the kinds of concerns a retributivist should have about proposing an intermediate sanction of punitive damages for retribution's sake, or what I call "retributive damages," as opposed to damages for the sake of revenge or victim-vindication.

You can read the whole article with apparatus on SSRN here. Feel free to send me your thoughts via email.

THE CONFRONTATIONAL CONCEPTION OF RETRIBUTIVISM

 

This Part focuses attention on the meaning of retributive justice, in particular upon something I call the “confrontational conception of retributivism” (or “CCR” or “confrontational retributivism”). The CCR is designed to show both the internal intelligibility of retributive punishment situated in a liberal democracy and the limits that attach to the pur-suit of that social project of retributive justice. As the notes below reveal, this account builds upon prior accounts of retributive justice; but it also departs from them in various ways. My point here, however, is not to trumpet or explicate these differences or claim originality on the whole account right now. It’s enough if I can simply paint a rough sketch of retributive justice that is sufficiently sympathetic and attractive to warrant thinking about how to restructure punitive damages in light of it.

The late John Rawls once defined retributive justice as a view of punishment based on the idea that “wrongdoing merits punishment. It is morally fitting that a person who does wrong should suffer in proportion to his wrongdoing … and the severity of the appro-priate punishment depends on the depravity of his act. The state of affairs where a wrong-doer suffers punishment is morally better than the state of affairs where he does not; and it is better irrespective of any of the consequences of punishing him.” As Professor Michael Moore summarized, retributivism is the “view that punishment is justified by the moral culpability of those who receive it.” Underlying this description is a sense that imposing punishment for wrongdoing is a self-evidently attractive obligation.

The problem with this intuitive view is that many people think the nature of this obligation still needs more explication. Imagine Jack. He has spitefully run over his neighbor’s prize-winning dog. If the state seeks to punish Jack on account of his purported moral desert, several questions arise. First, why does Jack deserve punishment? Why shouldn’t Jack undergo some form of “treatment,” where we can cure Jack’s anti-social condition or disease? Skeptics might ask why one should embrace the pursuit of retribu-tive justice qua coercive condemnatory deprivation.

Second, even if one agrees with the claim that Jack deserves to endure some pun-ishment in the form of a coercive condemnatory deprivation, it does not automatically fol-low that the state has a right or a duty to punish Jack. Why is the state involved -- and not the victim or her allies? We need an account that can help us understand what it is about Jack’s past offense that might entail the state’s prima facie right and obligation to punish him. Third, we need to figure out the relative weight of the obligation to achieve retributive justice: is it absolute or weighed against other duties and projects?

The account below tries to situate retributive justice as a socio-legal practice whose value is internally intelligible, that is whose value is realized by the communicative experi-ence that occurs when the state inflicts some level of coercion upon an offender who has been adjudicated through fair and reasonable procedures of violating an extant legal norm. In contrast to the account alluded to by Rawls, whose description neither mentions the state nor limits the scope of wrongdoing to legal offenses, the account I offer is essentially a le-gal or institutional view of retributive punishment.

 

A. The Animating Principles of Retributive Justice

 

Though there is a rich philosophical literature about the nature of moral desert and its relationship to punishment, my sense is that we need to look elsewhere to understand why punishment against legal wrongdoers is justified in liberal democracies. Someone who is industrious, wise and kind may deserve plaudits, after all, but liberals (among oth-ers) tend not to believe that it is the state’s responsibility to bestow those plaudits as a mat-ter of social programming. Conversely, one might be miserly, greedy, and indolent, but one’s viciousness is generally not understood to be a compelling reason for the state to condemn a person through punishment. So a person’s moral desert, whether negative or positive, is generally and alone insufficient to motivate state action in a liberal democracy.

The CCR, by contrast, explains the attraction of retributive punishment in refer-ence to three other principles that have broader acceptance as specifically, though not nec-essarily only, political ideals: first, responsibility for choices of unlawful actions; second, equal liberty under law; and third, democratic self-defense. On this view, and subject to the constraints of culpability and context, retributive punishment effectuates these ideals that are widely understood and that can be embraced ex ante by citizens of complex liberal democracies such as ours. So when I make the following claims, I am not trying to justify punishment to people who already know they are offenders. I am trying to appeal to their sense of justice in the absence of particular knowledge about their station in life. Under this veil of impartiality, we can assess whether a liberal democracy’s failure to create credible institutions of retributive justice — when it has the means to do so — undermines our commitment to these principles, fostering a sense of impunity and contributing to the con-ditions that erode our belief in the free and equal nature of persons.

Thus, what’s important to see is that the good achieved by punishment is bound up in the practice of punishment itself, so that the practice of punishment has an intrinsic value, and its achievement makes the practice and its limits both internally intelligible and attractive. Equally important, the account offered below explains why the state, rather than the victim or her allies, ought to be the agent that both adjudicates the case of the offender and ensures adequate but not excessive punishment.

 

1. Responsibility for Unlawful Behavior

 

Retributive punishment for legal wrongdoing is justified in part because it commu-nicates to the offender that we are respecting him by holding him as a responsible moral agent, capable of choosing and acting unlawfully and therefore in a blameworthy manner. When we credibly attempt to punish an offender who steals, rapes or murders, we are try-ing to tell him that his actions matter to this community constituted by shared laws, and that he will be held responsible for his unlawful actions. Imagine Jack’s attack on the dog and that such attacks are illegal. If the state, in its ordinary course of business, knowingly did nothing in the face of Jack’s attack, its inaction could be read to express two social facts: first, an indifference to the legal rights of its citizens, particularly to the security of their persons and property; and second, a statement of condescension to Jack that my ac-tions will not be taken seriously by the state. When the state makes a credible effort to punish Jack for his action, he’s told he will be held responsible for his unlawful actions. In this way, the attempt at punishment communicates the view that we are autonomous agents capable of responsibly choosing between lawful and unlawful actions.

Communication to the offender is of fundamental importance here. Indeed, the practice of retribution would itself not be internally intelligible if the offender could not understand the message that the state was sending during its confrontation with the of-fender after its adjudication. The offender must be able to understand the communication, though he need not be persuaded by it. He may proclaim his innocence notwithstanding the evidence to the contrary, but if he cannot understand on what grounds he is being pun-ished, then the punishment is not retributive punishment, but merely a coercive deprivation visited upon the offender whose condemnatory character is lost to the offender.

This argument may seem similar to moral desert, but it’s not exactly the same. Think of Jack. Imagine at T1, Jack crushes his neighbor’s dog but then at T2 he bangs his head accidentally and subsequently no longer remembers who he is or what his actions were at T1. Arguably, nothing has happened to change his moral desert; but the point of punishment would be lost — not because he’s suffered a trauma — but because the pun-ishment would lose its communicative significance.

Of course, through the institution of its communicative practice, the state’s retribu-tive punishment also performs an important expressive function. That is, when the state issues plausible threats of coercive condemnatory deprivation through institutions of re-tributive justice, that threat suffices to signal the norm that our actions and our interests matter to the state and those around us. But the point of the practice of retributive punish-ment is not at its core designed to achieve general psychological satisfaction, reduce pri-vate violence, or educate the public about norms of right conduct. Its value is intelligible independent of those consequences. On the other hand, punishment itself may not be nec-essary to communicate the value of being held responsible in particular instances to par-ticular offenders. We might, for instance, envision an offender who, immediately after committing his misconduct, came forward, made restitution, accepted responsibility, and evinced his awareness of this ideal through his own process of repentance. So something else is at stake when we say that state coercion may justifiably be used even where the of-fenders have apparently internalized the significance of the first ideal.

 

2. Equal Liberty Under Law

 

Even against a quickly repentant offender, retributive punishment is desirable to effectuate our commitment to the principle of equal liberty under law. In a liberal democ-racy, punishment serves to fulfill part of equality’s promise because we are each burdened by a legal obligation as citizens to obey the law. (By situating this account within liberal democracies, I am assuming that the laws in question are both reasonable, and legitimately generated and applied. The account here may alter as applied in contexts that depart from these conditions.) When someone flouts the law, he elects to untether himself from the common enterprise of living peaceably together under a common law. He is not merely flouting a particular law that he may disagree with, but rather he defects from an agreement about the basic structures of liberal democracy that he (would have) made as a reasonable person in concert with other reasonable people. By his act, the offender implicitly says, “I have greater liberty than you, my fellow citizen.” He cuts himself off from the social order for the purpose of imposing a new order by his acts against people who should enjoy equal liberty as guaranteed by the state’s rule of law in a liberal state.

By making credible the threat to impose some level of punishment, the state is giv-ing its best reasonable efforts to reduce the plausibility of individuals’ false claims of supe-riority, over their victims, if there are any, or against the state. The state’s coercive meas-ures serve as measures communicating our fidelity to the norm of equal liberty under law. Moreover, the measures are communicated to the person most in need of hearing that mes-sage: the offender who has been held to violate our laws. This account reveals in part, then, the intrinsic intelligibility of the practice of retributive punishment—apart from the other beneficial consequences that may contingently arise from its practice.

On this view, it does not matter that few people, if given the chance, would seek to steal, rape, or murder. All that matters is that the offender can be seen, ex ante, as defect-ing from a legal order to which he has good reason to give allegiance, and that he defects in such a way that expresses that he has taken license to do that which others are not entitled. If the state establishes no institutions to credibly threaten his punishment, the offender’s implicit or explicit claim to superiority over others commands greater plausibility than it would be if the state had created such an institution. This rationale helps explains both the notion of equal liberty and its reciprocal obligation of restraint.

 

3. Democratic Self-Defense

 

The reasons mentioned so far—effectuating responsibility and instantiating equal liberty under law—are insufficient to explain why the state should decide and implement matters of punishment. All that’s been hitherto explained is why punishing an offender for his unlawful action has some intrinsic intelligibility. But why should the state play the central role in meting out retributive justice? After all, it is only a modern phenomenon that the state has assumed such a function.

Our answer lies in the notion of democratic self-defense. Recall from the sub-section above how an offender’s misconduct implicitly or explicitly serves to substantiate a claim of superiority made by an offender’s unlawful action. That claim of superiority is not merely a claim against his victim. Rather, the offense is a rebellion against the political or-der of equal liberty under law. Each time an offense occurs, the offender tries to shift where the rules of property and inalienability lie, at least with respect to him. In doing so, the offender revolts against the determinations of what those rules are and the constitu-tional rules determining who gets to adjust these rules. Perhaps unwittingly, the offender can be viewed as usurping the sovereign will of the people by challenging their decision-making structure.

The misconduct, then, is not merely against the victim but also against the people and their agent, the state, whose charter mandates the protection, not only of the persons constituting the political order, but also the protection of the decision-making authority of the regime itself. It’s interesting that the principle of democratic self-defense is embodied in the oath taken by federal officers, the substance of which obligates officials to protect the decision-making structure of the nation. The oath illuminates the idea that the Consti-tution must be defended against attack by those who shift the rules unlawfully, thus reveal-ing offenses as, to a greater or lesser degree, forms of rebellion.

To be sure, if we asked the typical offender who commits a “smash and grab,” he would deny that he is making any “implicit” or “explicit” “claim” against the victim, deny that he is engaging in rebellion, and definitely deny that he is trying to “shift” the rules of property or usurp the will of the sovereign. He is just violating the law and hoping to get away with it because he needs or wants the money. Consequently, there might be some-thing unreal about viewing proscribed conduct as a rebellion. But it only looks unreal if I’m supposed to explain why punishment is justified to an offender who already knows he’s an offender. To my mind, that objective seems misplaced. As alluded to earlier, my goal is to explain the attractiveness of retributive punishment to a person trying to secure the conditions for human flourishing ex ante: that is, before he knows whether he’s going to be rich or poor, an offender or a victim, and knowing that he will be able to control his conduct and be punished only for misconduct proscribed by law and subject to his control. Speaking to that person, the attempt to read such misconduct as rebellious seems a lot less unreal.

What’s more, to see the offense as a rebellion is not to say that all rebellions need be quashed with maximal use of resources. Quite to the contrary, the scarcity of social re-sources in a society committed to pursuing various projects of moral significance requires a principle of frugality regarding the use of retributive punishment, such that the state pur-sues and punishes only those acts that are necessary to limit, in order to secure the condi-tions conducive to human flourishing.

Of course, prior to imposing sanctions, the state also must make an adjudication of whether such sanctions are appropriate. What justifies the state’s involvement instead of some private ordering arrangement? For one thing, the modern liberal democratic state serves, almost invariably, as a social union of social unions within a heterogeneous soci-ety. And because private citizens rarely know who will violate their rights to security and property, and thus cannot reach agreement on a dispute resolution mechanism ex ante, the state has the best claim to be both impartial in resolving disputes among its citizens and ac-ceptable to them as the decisor of the disputes among these diverse citizens and the en-forcer of sanctions against the wrongdoer. So we now have a reason to respect the state’s involvement in both adjudication and sanction of wrongful misconduct so long as we can establish a judiciary independent of the executive and capable of ensuring fidelity to liberal constitutional norms that reasonably divide power between prosecutors and judges. This division of labor may be facilitated by the use of juries, especially when there is doubt about the state’s capacity to restrain from tyranny or zeal.

 

4. Why Punish the Guilty and Not the Innocent?

 

Commitments to the three ideals described above explain not only why it is attrac-tive to create institutions of retributive punishment but also why certain individuals should be punished and not others. Specifically, we can see why — without recourse to or reliance upon mere intuitions or emotions of vengeance, anger, or hatred — the state must take care to punish only the guilty, and not the innocent. After all, only an actual offender who has been convicted has been judged to have made claims denying his responsibility, his status as an equal under the law, and his proper role in the chain of democratic decision-making. Those found guilty should be punished to contest their false claims. To not punish when we reasonably could is to signal that we don’t care about the actions of the offender or the rights and interests underlying the rule the offender breached or the integrity of our democ-ratic decision-making structure. Additionally, to under-punish or over-punish relative to comparable offenders is to make (rebuttable) claims that some people are granted favors at the hands of the state, violating a basic liberal commitment to equality under the law. By contrast, the innocent should not be punished because they have neither made claims of le-gal superiority through their actions nor can they plausibly be deemed to have usurped power from the decision-making structure to which they have good reason to obey ex ante.

Two points bear emphasis. First, we now have good reasons to reduce both Type I and Type II errors (including problems of under- and over-punishment) in a system reflect-ing retributive values in a liberal democracy. Second, the internal intelligibility achieved by punishment of a guilty offender in turn explains the conceptual linkage between legal guilt and retributive punishment. That does not mean that other theories that are more self-consciously utilitarian are wholly inappropriate bases for thinking about what conduct to criminalize or how to conceive punishments. It just means that they cannot provide a con-ceptual linkage between legal guilt and punishment for proscribed offenses.

 

B. The Internal Limits on Confrontational Retributivism

 

I still need to articulate the limits of retributive justice. These limits will necessitate some substantive and procedural safeguards if we try to translate the lessons from this dis-cussion about retributive justice to retributive damages.

 

1. Modesty with Power: One Institutional Duty Among Many

 

First, as I adverted to earlier, the practice of retribution is only one attractive social practice among many. Every person interested in social planning must realize that, on the margins, resources spent on the project of retributive justice are resources unavailable for feeding the hungry, housing the homeless, and healing the sick. Thus, to say that retribu-tive justice justifies institutions of punishment in liberal democracies does not mean that punishment ought to be imposed under all circumstances such that the ceaseless or careless pursuit of retributive justice consumes our every and last unit of social resources. This need for moral balancing is consistent with retributivism’s animating moral ideals because, far from being unconcerned with consequences, retributivism urges on offenders the maxim that one cannot disclaim responsibility for the reasonably foreseeable results of one’s freely chosen actions. That maxim applies to retributivist social planners as much as to offend-ers.

Relatedly, the practice of retribution poses significant risks of error and abuse by authorities. When errors or abuses occur, they stand at odds with the animating principles of retributive justice. Consequently, retributive punishment can only be commended when sufficient measures are taken to substantially reduce or eliminate those risks. For that rea-son, retributive practices must be conducted with a degree of modesty, rather than pride, and upon assurances that those risks of error and abuse are tolerably minimal. While invok-ing a principle of modesty may seem theoretically vague, it actually has substantial policy implications. Because the state must demonstrate its awareness for error and abuse, it should forbear from those punishment strategies that evidence a preening sense of superi-ority: modesty in punishment, I’ve argued, entails limits on the state’s ability to adopt pun-ishments like the death penalty that prevent the state from exhibiting contrition to the of-fender wrongly punished.

 

2. Confrontational Retributivism and Prevention

 

Second, viewing retributive justice as an institutional practice raises a related point about prevention of offenses. As a practical matter, the establishment of institutions ad-vancing retributive justice will assuredly have some concomitant effect on preventing wrongdoing in the future. This preventive effect in no way taints the moral worthiness of the practice of retribution. (Indeed, for some non-retributivists, the preventive effects are the evidence of the practice’s morality.) We should not rest on incidental deterrence alone, however. The genuine possibility of achieving greater deterrent effect compels mindful-ness of the way in which the state responds to proscribed misconduct; after all, that re-sponse may directly affect the incidence of the proscribed misconduct. If punishing persons is a way for government to respect persons, as some have suggested, then so too is gov-ernmental attention to the prevention of harm to them (and their rights). Thus, if hypo-thetically we were better able to prevent instances of the offense by spending more on the probability of detection and less on the intensity of punishment, we would be remiss in our responsibilities to each other if our institutions did not reflect that factor at all. Conversely, if we could determine that punishing an offense more severely would, with reasonable evi-dence as our basis, reduce the amount of offenses (or in an error-prone system, reduce the number of innocent persons mistakenly swept up in the enforcement dragnet), then that too would constitute a reasonable consideration from a retributivist perspective that considers its ex ante function properly.

Of course, for the most part, these questions of deterrence are contingent and speculative, at least in situations of street offenders, for whom the attribution of rational calculations is somewhat more problematic than it is for organizations. I mention these issues about deterrence solely to explain that deterrence, or better, “prevention,” is not a concern inherently hostile or antithetical to the project of retributive justice. Indeed, pre-vention of offenses is conceptually entwined in important respects with retributivism’s ex ante function because of the underlying mission of preserving and protecting persons and their rights within a polity committed to obtaining the conditions of freedom and security necessary for human flourishing. For that reason, it should come as no surprise that this pluralistic account of retributive justice is able, in the context of extra-compensatory dam-ages, to recognize the distinctive worth of the values underlying other approaches empha-sizing cost-internalization or victim-vindication.

 

3. Transformative Intent and Confrontational Retributivism

 

Third, and for now, finally, embedded in the account of the CCR is an intent re-quirement on the part of the state’s punishing agents. To insist only on the offender’s per-ception of his defeat, to the exclusion of the potential internalization of correct values that the confrontation encourages, would undermine the (CCR’s first) interest we have in af-firming our recognition of each other as autonomous moral agents capable of responsible decision making. In order to achieve this vision in the concrete practice of punishment, it is crucial that the denial of the offender's message is explained and carried out in a way that is conducive to the internalization of the values that the retributive encounter is meant to uphold. The encounter need not guarantee the internalization of those values, but it cannot proceed without the desire for that result, and the state ought not take measures that, in the course of punishment, would directly preclude it. At bottom, the state must hope its pun-ishment not only works to deny the offender's claim of superiority, but also his transforma-tion.

 

C. Confrontational Retributivism as Distinct from Revenge

 

If we agree that these principles provide a dignified image of retributive justice, then we can see how, contra various courts and commentators, retributive justice might usefully be contrasted with revenge. To begin with, what induces retributive punishment is the offense against the legal order. Where the law runs out, so must retribution. By con-trast, revenge may address slights, injuries, insults, or nonlegal wrongs. The philosopher Robert Nozick identified five other characteristics that tend to distinguish retribution from revenge: (a) retribution ends cycles of violence, whereas revenge fosters them; (b) retribution limits punishment to that which is in proportion to the wrongdoing, whereas revenge is not properly limited by principle; (c) retribution is impartially administered by the state, whereas revenge is often personal; (d) retributivists seek the equal application of the law, whereas no generality attaches to the avenger’s interest; and (e) retribution is cool and unemotional, whereas revenge has a particular emotional tone of taking pleasure in the suffering of another.

A few other important distinctions can be drawn: (f) retributivism always seeks to attach the punishment to the offender directly because it is the offender who makes the claims the state seeks to reject, not the offender’s children or parents, whereas revenge may target an offender’s relatives or allies; (g) retributivism is uninterested in making the of-fender experience generic suffering; rather, and quite distinct from revenge, retribution seeks to use the state’s power to coerce the offender in particular ways, such that certain ideas can be communicated through that coercion; (h) retributivism is interested in, and speaks to, the moral autonomy and dignity of the offender, whereas revenge may be indif-ferent to those qualities; such indifference crucially affects whether and what kind of de-fenses might limit retribution; (i) and finally, retributivism’s intent requirement, discussed above, requires that the punishment not preclude the internalization of the “sense of jus-tice” that would allow for an offender to demonstrate his respect for the norms of moral re-sponsibility, equal liberty under law, and democratic self-defense, whereas revenge has no such requirement.

The value of retributivism, on this account, is realized when the state makes the at-tempt to communicate its commitment to these three norms through the use of its coercive power against him. In contrast to those who might be tempted to view retributivism as merely an “expressive theory” that can be reduced to the success of its norm-projection to society, the CCR reveals retributivism’s intelligibility even if we focus strictly on the rela-tionship between state and offender.

Having explained the internal intelligibility of the public interest in retributive jus-tice, I now turn to how these principles apply to the justification and design of retributive damages.” To be clear, I’m not arguing that confrontational retributivism is the only per-missible justification for extra-compensatory damages; rather, my claim is that adherence to this conception of retributive justice both permits and guides the construction of a re-tributive damages scheme that can be faithful to values including accuracy, modesty, pro-portionality, and equality. Moreover, such a scheme can co-exist peacefully with other purposes sometimes ascribed to punitive damages including but not limited to cost-internalization and vindication of a plaintiff’s autonomy or dignity.

 

D. Some Implications for Retributive Damages

 

In this Section, I merely foreshadow how certain values emanating from the pre-ceding account are relevant to the design of retributive damages. I will say a bit more about this in Part III.D. The values have to do principally with: legality, equality, and modesty. 

First, this is a legal account of retributive punishment, meaning that what triggers any kind of state-backed sanction must be a violation of a clearly delineated statute that spells out with granularity the kind of misconduct that warrants even an intermediate sanc-tion. 

Second, it is an account of punishment animated by concerns for respecting our right to be regarded as equal under the law.  The concern for equality has several notewor-thy implications. To begin with, a system that arbitrarily selected for punishment some people’s illegal misconduct while systematically — or haphazardly — leaving untouched the illegal misconduct of others would be one that participated (perhaps unwittingly) in the making of false assessments of whose interests count how much in a liberal democracy. Consequently, when people defy their equal obligation to obey the rules the state has im-posed to protect the rights of others, the state may seek to punish them through traditional criminal law; but if the state doesn’t know of the misconduct or can’t reasonably put its prosecution at the top of its priority list, then it should at least empower private parties to pursue an intermediate sanction like retributive damages. But because these retributive damages are in fact a state-imposed sanction—that is a coerced condemnatory depriva-tion—these damages should be credited against any further criminal punishments for the same misconduct for the sake of avoiding duplicative and disproportionate punishment.

A concern for equality also means curtailing the lottery effects of most punitive damages structures. Plaintiffs shouldn’t receive windfalls because they have the good for-tune of a wealthy injurer and defendants shouldn’t receive discounts based on the good for-tune of having a low-earning victim instead of a high-earning one. In other words, rewards or penalties should not be contingent upon morally arbitrary features of the victim or the defendant.

The CCR also stressed modesty, which entails a high regard for accuracy-enhancing features of adjudication (i.e., the state shouldn’t leap to conclusions quickly and without solid indicia of reliability) and a disdain for measures of punishment that preclude the defendant’s internalization of the retributive message. Applied to retributive damages, defendants should enjoy procedural safeguards that elevate our confidence levels above what’s necessary for compensatory damages but below what’s expected for full-blown criminal sanctions. Moreover, a concern for modesty would entail limiting and structur-ing retributive damages payments so they operate as an intermediate sanction, and hence, won’t jeopardize the ability of the defendant to continue his life or business in compliance with the law’s dictates. Additionally, modesty requires procedural fairness. Specifically, defendants have a right to present defenses that show the conduct to be excused or justi-fied. This has important implications for doctrine. We cannot assume that because a defen-dant wronged one party that the same conduct would necessarily be culpable misconduct to another person in the same jurisdiction or another. That’s the gravamen of the Court’s holding in Philip Morris: a defendant should be able to present defenses they might have against persons who are strangers to the litigation and they shouldn’t be punished based on the harm they may have lawfully caused another. A defendant’s rights to a fair adjudication can’t be eliminated simply because it would make the case a better vehicle for cost-internalization.

 

E. Why It All Matters

 

Although the vast majority of civil litigants never receive an award of punitive damages, the times that juries do award punitive damages often make the news. The effect of this publicity is not lost on potential defendants: punitive damages influence the way potential parties view or settle an array of torts cases. Indeed, if punitive damages did not raise much concern, it would be hard to understand why various entities have in re-cent years underwritten the activities of think tanks and academics interested in tort re-form.

In the context of retributive damages, those potential costs may be especially sig-nificant if there are inadequate measures to ensure accurate and fair adjudication. Further-more, the fear of retributive damages may cause some defendants to litigate with greater tenacity or they might refrain from the activity under scrutiny because the activity is close to the line of unlawful but still inside the safe zone. The risks associated with retributive damages are not trivial. When courts and juries award punitive damages, they stigmatize and condemn the defendant. Moreover, if erratically assigned, awards of punitive dam-ages imperil the planning and structuring activities of defendants. Hence, to the extent punitive damages are mistakenly and erratically deployed by juries or courts, there are real consequences that should trigger caution prior to their distribution.

For these – and other – reasons, various scholars, judges and politicians have laced into the typical common law punitive damages regime, calling it unpredictable, undesirable, and far worse. Although the dangers regarding the size, unpredictability, and frequency of punitive damages have been exaggerated, the presence of these risks is not trivial and commands a simple precept: if punitive damages are awarded, they should be awarded and distributed in a way that is ultimately beneficial for society and at the same time consonant with the values a just and attractive society should embrace.

This perspective of caution, however, is not regularly voiced from the cheerleaders for punitive damages in the academy or in the bar. For that reason, having a structure that carefully harnesses the energy of retributive justice while minimizing its risks is important. Indeed, I want to alert the reader to the sensitivity I have for both respecting and constraining retributive energy and I hope that what follows will ensure that I’m not, as it were, writing a check on insufficient funds.

Posted by Dan Markel on March 24, 2008 at 12:03 AM in Retributive Damages | Permalink | Comments (0) | TrackBack

Thursday, March 20, 2008

Retributive Damages: Some Recent Normative Scholarship

Earlier posts on the topic of Retributive Damages can be found here. The whole article can be found here.

Recent Normative Scholarship

 

Unsurprisingly, the complexity, significance, and rapidly evolving nature of punitive damages law has attracted the attention of many scholars. Some legal economists, like Professors Polinsky and Shavell, think extra-compensatory damages should focus on advancing the goal of cost-internalization. As I explained earlier, under this economic framework, a defendant’s culpability or state of mind is immaterial to her obligation to pay for the harms that she causes.[1] Instead, what matters is whether there was any likelihood the defendant would evade paying compensation for the harms she caused. If there is such a possibility, then the amount of punitive damages should be calibrated to the likelihood of her evading compensation.[2] This particular economic approach, however, is clearly at odds with the existing doctrine, which, as we saw in the previous Section, generally requires there to be some finding of malice or recklessness before punitive damages can be awarded.

As a matter of policy prescription, the economic approach’s inconsistency with extant doctrine is obviously not a knock against it. Generally speaking, individuals and entities should have to pay for the mess they make; if they can exploit enforcement gaps by private and public parties, there will be an incentive to take insufficient care, which will also run the risk of under-deterrence.[3] But the cost-internalization approach, which is conceptually unconcerned with mens rea or culpability, is better thought of as pursuing “augmented” damages, rather than “punitive” damages.[4] This allows us to contrast augmented damages from other extra-compensatory damages.

Other scholars have provided an alternative to the cost-internalization rationale for punitive damages by instead discussing punitive damages awards in terms of how they vindicate a victim’s dignity and autonomy interests, which have been injured by the defendant’s misconduct.[5] In some common law jurisdictions, these extra-compensatory damages are more precisely labeled as “aggravated” damages—and they would go to plaintiffs for the injury to their dignity.[6] Some supporters of these non-economic accounts have defended large parts of extant common law punitive damages law on the grounds that these practices serve as vehicles by which victims or their allies can take measures to persuade juries to avenge the victim’s interests through ad hoc, and therefore unpredictable, awards of money damages to victims.[7] Indeed, for some social justice tort theorists, common law jury-driven punitive damages practice serves as a way for an ordinary person to fight malfeasant entities and their lobbyists seeking business-friendly “tort reform.”[8] Some scholars, such as Galanter and Luban, drawing on the work of Jean Hampton’s victim-vindication justification for punishment, even view themselves as committed to the goals or values of retributive justice.

But as shown in the insightful interpretive accounts of tort law and punitive damages by Benjamin Zipursky and Anthony Sebok,[9] the tort system conventionally empowers victims to either pursue punitive damages or forbear from pursuing such damages. That’s important because it shows that no one forces punitive damages on the victim in the common law approach; rather leaving the decision to seek recourse to the victim is said to vindicate the victim’s autonomy. The same may be said for allowing victims to have almost unfettered control over settlements with the defendants.

These two practices reveal some space between victim-vindication accounts and the interests underlying a retributivist account. Retributivists, as I will explain shortly, give more weight to the reduction of both Type I false positive errors — in which people are mistakenly punished (or excessively punished relative to comparable offenders) — and Type II false negative errors — in which wrongdoers escape their punishment altogether (or receive too lenient a punishment compared to other similar offenders in the jurisdiction). Importantly, the accounts defending punitive damages as vehicles for victim-vindication or jury expressions of outrage say little about the need for building a system that tries to reduce both Type I and II errors. Indeed, to the extent these accounts are interested in invoking retributive justice values to bolster their accounts, this silence is a real weakness.[10] After all, failing to defend procedural safeguards or to create any real guidelines for cabining jury discretion and judicial review is a recipe for Type I error creation. Moreover, giving only victims the right to pursue retributive damages or giving all victim plaintiffs the unfettered authority to settle a case involving allegations of reckless or malicious misconduct writes a blank check for Type II errors.

If we want a retributive scheme of punitive damages, it has to reflect some concern for reducing both types of errors. Of course, a pluralistic scheme of extra-compensatory damages could be designed to provide space for the pursuit of both cost-internalization and victim vindication. These two goals have received generous and shrewd coverage in the scholarly literature,[11] and thus, in this paper, I don’t spend much time analyzing them here. But what’s really missing is a better understanding of what a public retributive justice theory entails for punitive damages. And in the Parts that follow in this Article, I shall focus on the achievement of retributive justice through the context of “retributive damages.” For that to happen, we must first have an account of retributive justice. To that task I now turn.

 


[1] See supra note 4.

[2]

Id.

[3] See Thomas C. Galligan, Jr., The Risks of and Reactions to Underdeterrence in Torts, 70 Mo. L. Rev. 691 (2005).

[4]See Thomas C. Galligan, Jr., Augmented Awards: The Efficient Evolution of Punitive Damages, 51 La. L. Rev. 3 (1990)

[5] See, e.g., Sebok, supra note 12; Zipursky, supra note 12.

[6] See Bruce Chapman & Michael Trebilcock, Punitive Damages: Divergence In Search of a Rationale, 40 Ala. L. Rev. 741 (1989).

[7] At times, the work of Marc Galanter and David Luban, as well as David Hoffman and Kaimipono Wenger, speak in this register. See sources supra note 12 and 14. For example, Galanter and Luban endorse imposing punitive damages in a single case against a defendant for all the harm the defendant’s misconduct caused in similar situations even if the defendant may have had viable defenses against those other parties. See, e.g., Galanter & Luban, supra note 12, at 1436-38 (providing examples of “expressive defeat” of defendant through punitive damages). They also think judges should extend “great deference” to juries’ determinations because of their special competence in sending “the community’s message through the medium of damages.”

Id.

The view I take circumscribes jury decision-making considerably more.

[8] E.g., Michael L. Rustad, The Closing of Punitive Damages’ Iron Cage, 38 Loy. LA L. Rev. 1297, 1301 (2005) (tort reform of punitive damages is “special legislation to help corporate

America

”); see generally Koenig & Rustad, supra note 16; Richard L. Abel, Questioning the Counter-Majoritarian Thesis: The Case of Torts, 49 DePaul L. Rev. 533 (1999).

[9] See sources supra note 12.

[10] To its credit, Professor Sebok’s state-sanctioned revenge account is consistent with a desire to reduce “piling on” (or Type I over-punishment) errors that occur through introducing evidence apart from that which injured the plaintiff. See Sebok, supra note 12. But he doesn’t address the state’s interest in reducing Type II errors of either sort, or the procedural safeguards necessary to prevent Type I errors of the mistaken punishment sort.

[11] See sources cited supra note 4 (scholars urging punitive damages to pursue cost internalization) and note 12 (scholars urging punitive damages to allow for victim-vindication).

Posted by Dan Markel on March 20, 2008 at 10:22 AM in Article Spotlight, Constitutional thoughts, Criminal Law, Dan Markel, Retributive Damages, Torts | Permalink | Comments (0) | TrackBack

Wednesday, March 19, 2008

Retributive Damages: A quick overview of American Punitive Damages Law

Yesterday I posted the introduction to Retributive Damages. Today I provide some background on the law of American punitive damages and tomorrow I do a quick survey of recent normative scholarship on punitive damages. (You can find the whole article here.)

  Punitive damages have a long history.[1] According to the conventional understanding, early Anglo-American courts awarded “exemplary” damages for a range of purposes, in some cases as compensation to a plaintiff for suffering “intangible wrongs” such as insults that caused dignitary harms and in other cases as punishment of “the defendant for his misconduct.”[2] As the scope of compensatory damages in recent years expanded to include “mental anguish, wounded feelings, indignity and embarrassment,” however, the need to use punitive damages to compensate such harms may have diminished.[3] Indeed, many of the “intangible harms” initially uncompensated are now covered.[4]

Consequently, the Supreme Court has cast its doubts on the compensatory rationale of punitive damages, explaining that today punitive damages should be understood as “quasi-criminal” “private fines” designed to punish and deter the misconduct at issue.[5] Interestingly, although courts frequently view punitive damages as serving both and primarily retribution and deterrence,[6] analysis of these purposes and their implications is often scant. As such, courts rarely instruct juries to consider decoupling these functions by determining the amount of money necessary to serve as the punishment of the defendant and the amount necessary to achieve deterrence.[7] Indeed, the courts rarely bother to distinguish between optimal deterrence (aiming at cost-internalization) and complete deterrence (aiming at stopping the misconduct’s commission in the future).

Today, notwithstanding the public nature of the retributive and deterrent values the Court associates with extra-compensatory damages, only a small number of states have adopted split-recovery schemes through which the state shares in the award of punitive damages.[8] Consequently, in most states, if extra-compensatory damages are awarded, the plaintiff (and her lawyers) will receive most, if not all, of the amount awarded.[9]

Despite the variations in who recovers punitive damages, certain practices are well-entrenched. For example, in every jurisdiction where punitive damages are allowed, the fact-finder must make a predicate finding about the defendant’s culpable state of mind, i.e., did the defendant’s action evince something like “wanton, willful, malicious, or reckless conduct that shows an indifference to the rights of others?”[10] Moreover, most American jurisdictions have in recent decades required that punitive damages be awarded only if the plaintiff has proven the defendant’s culpable state of mind with “clear and convincing evidence,” rather than the traditional, “preponderance of the evidence” standard.[11]

Additionally, the Supreme Court has, in the last fifteen years, begun to establish a constitutional framework for regulating punitive damages. These rules are designed to ameliorate “the basic unfairness of depriving citizens of life, liberty, or property, through the application, not of law and legal processes, but of arbitrary coercion.”[12] The Court’s requirements can be summed up in six rules.

First, when courts review the reasonableness of punitive damages awards, the most important factor they must consider is the degree of reprehensibility of the defendant’s misconduct.[13] Second, reviewing courts must also consider whether the “disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award” is constitutionally excessive.[14] More controversially, in State Farm, the Court established a presumption that “in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.”[15]

Third, reviewing courts should consider “the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.”[16] Fourth, reviewing courts, under the Supreme Court’s new Philip Morris decision, must ensure that the jury is instructed not to punish defendants an amount that figures in the harms to nonparties to the litigation.[17] One might see this as related, though not essential, to the Court’s stated interest in ensuring that one state not try to punish defendants for conduct lawfully performed in another state.[18] Fifth, judicial review of a jury’s award of punitive damages must be available at both the trial and appellate levels.[19] Finally, appellate review of punitive damages must adopt a “de novo” standard of review of the jury’s award, at least when the action is a federal case.[20]

Importantly, although the Court developed these rules to improve fair notice and proportionality to defendants facing these sanctions,[21] the Court has not extended to defendants the protections normally applicable in the criminal law context. Indeed, defendants in punitive damages actions have no right to bifurcated proceedings between liability and punitive damages, no right against vicarious liability,[22] no double jeopardy rights,[23] no right to counsel, no right to standards of proof requiring proof beyond a reasonable doubt, and no right to avoid testifying on the grounds that such testimony might lead to punitive damages liability. Moreover, the Court has not stepped in to prohibit vicarious liability for punitive damages,[24] or multiple awards of punitive damages for the same underlying tortious conduct, such as in a mass torts case.[25] Nor has the Court insisted that the trial court specify its reasons for upholding or remitting the amount of punitive damages.[26]

The Court’s efforts to regulate punitive damages coincide with, and are responsive to, corporate-funded tort reform movements pushing states to place caps that limit a defendant’s exposure to punitive damages payments.[27] Looking at the landscape as a whole, one might be tempted to view the Court’s jurisprudence here as arcing in the direction of retributive justice’s requirements for procedurally fair, proportionate, and even-handed punishment.

But its jurisprudence is decidedly not yet there. For example, as elaborated in Part V, there is no retributivist justification for the

State Farm Court

’s presumption that a single-digit multiplier of compensatory damages is the appropriate measure. Nor is there much justification for the ongoing common law practice of denying defendants the safeguards necessary for the just imposition of even an intermediate sanction.[28] Moreover, to the extent the Court’s jurisprudence can be said to avoid gross disproportionality and unfair surprise, then those are values that Benthamite utilitarians might embrace too—for reasons separate from any retributive leanings to try to reduce Type II errors as well.[29]

As a matter of interpreting the Constitution, the Court should refrain from embracing a particular theory of punitive damages as it goes about delineating the rights of defendants in tort actions. That under-theorized position will permit experimentation among the states. Indeed, that strategy leaves a range of constitutionally available policy options: a state could decide, in furtherance of retributive justice goals, to provide more substantive and procedural protections to punitive damages defendants (and plaintiffs) than it does currently. Alternatively, a state could decide it wanted to rely exclusively on criminal law institutions to pursue retributive justice and instead use extra-compensatory damages simply to pursue, within constitutional limits, goals such as victim-vindication or cost-internalization.[30] More radically, a state could abolish all extra-compensatory damages. The array of punitive damages laws we have now, however, fails to evince much awareness of which goal(s) it is pursuing let alone the goals it ought to be pursuing.

 


[1] E.g., Wilkes v. Woods, (1763) 98

Eng.

Rep. 489 (K.B.); Huckle v. Money, (1763) 95

Eng.

Rep. 768 (K.B). See also Pac. Mut. Life Ins. Co. v. Haslip, 499

U.S.

1, 24 (1991) (Scalia, J., concurring) (furnishing a brief history of punitive damages).

[2] Redish & Mathews, supra note 9, at 13-16 (discussing early English cases where plaintiff showed dignitary harm that would otherwise remain uncompensated in the absence of exemplary damages).

[3] Schlueter & Redden, supra note 3, at § 1.4(B). But see Sebok, supra note 12, at 204-05 (“If punitive damages served a compensatory function [in early cases], it would have been for a category of injury that is still not considered compensable by contemporary tort law, namely the injury of insult that wounds or dishonors.”).

[4] For example, in Philip Morris USA v. Williams, the jury awarded the decedent’s wife $21,000 in economic compensatory damages and $800,000 in non-economic compensatory damages. Additionally, the jury awarded $79.5 million in punitive damages. 127 S.Ct. 1057, 1060-61 (2007). Recently, the Supreme Court of Oregon upheld the jury verdict. See Williams v. Philips Morris Inc., 2008 WL 256614 (Or. Jan. 31, 2008).

[5] Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532

U.S.

424, 432 (2001); Gertz v. Robert Welch, Inc., 418

U.S.

323, 350 (1974).

[6] See, e.g., cases cited supra note 22.

[7] Schlueter & Redden, supra note 3, at § 2.2(A)(1); Restatement (Second) of Torts § 908(1) (1979).

[8] See Sharkey, supra note 4, at 375-80. Compare Ind. Code. Ann. §34-51-3-6(d) (“The office of the attorney general may negotiate and compromise [its portion of] a punitive damage award”) and Ga. Code Ann. § 51-12-5.1(e)(2) (“Upon issuance of judgment [for punitive damages], the state shall have all rights due a judgment creditor until such judgment is satisfied and shall stand on equal footing with the plaintiff of the original case in securing a recovery after payment to the plaintiff of damages awarded other than as punitive damages.”).

[9] See Schlueter & Redden, supra note 3, at § 20.1 (providing state summaries).

[10] Ronald W. Eades, Jury Instructions on Damages in Tort Actions §§ 2-6, 2-7, 2-8 (4th ed. 1998). Some variety exists regarding the level of the defendant’s culpability. For example,

Ohio

requires a finding of actual malice. Rice v. Certainteed Corp. 704 N.E.2d 1217, 1220-21 (

Ohio

1999).

Texas

allows punitive damages for “gross negligence” but its definition approximates what is elsewhere called malice or recklessness. See Gen. Motors Corp. v. Sanchez, 997 S.W.2d 584, 595 (

Tex.

1999).

[11] See Schlueter & Redden, supra note 3, at § 5.3(H). But cf. Priest, in Cass R. Sunstein et al., Punitive Damages: How Juries Decide 12 n.14 (2002) (indicating skepticism toward the suggestion that these different standards are treated differently by jurors).

[12] BMW of N. Am. Inc. v. Gore, 517

U.S.

559, 562 (1996) (Breyer, J., concurring).

[13] State Farm Mut. Auto. Ins. Co. v. Campbell, 538

U.S.

408, 419 (2003). This analysis proceeds by looking at factors including “whether: the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident.” Gore, 517

U.S.

at 576-77. The “existence of any one of these factors weighing in favor of a plaintiff may not be sufficient to sustain a punitive damages award; and the absence of all of them renders any award suspect.” State Farm, 538

U.S.

at 419.

[14] State Farm, 538

U.S.

at 418.

[15]

Id.

at 425.

[16]

Id.

at 428.

[17] Philip Morris

USA

v. Williams, 127 S.Ct. 1057, 1063 (2007). Members of the Court have in the past also expressed some thoughts that if punitive damages were captured in part by the state, that structure might trigger review under the Eighth Amendment’s Excessive Fines Clause. See Browning-Ferris Indus. v. Kelco Disposal, 492

U.S.

257 (1989). However, the statutes in

Utah

and

Oregon

under consideration in State Farm and Philip Morris respectively involved a split-recovery scheme and the Court did not address that issue in either case.

[18] State Farm, 538

U.S.

at 421.

[19] Honda Motor Co., Ltd. v. Oberg, 512

U.S.

415, 432 (1994).

[20] Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532

U.S.

424, 436 (2001).

[21]

See

State

Farm, 538

U.S.

at 416-17.

[22] See

Pac.

Mut. Life Ins. Co. v. Haslip, 499

U.S.

1, 13-15 (1991)

[23] In Hudson v. United States, the Supreme Court stated that it has “long recognized that the Double Jeopardy Clause does not prohibit the imposition of all additional sanctions that could… be described as punishment. The Clause protects only against the imposition of multiple criminal punishments for the same offense.” 522

U.S.

93, 98-99 (1997) (citation omitted).

[24] Haslip, 499

U.S.

at 13-14.

[25] Some federal courts have rejected the “overkill” argument that fundamental fairness precludes allowing a defendant to face limitless multiple punishments. E.g., Cathey v. Johns-Manville Sales Corp.,

776 F

.2d 1565, 1571 (6th Cir. 1985). However, “the vast majority of courts that have addressed the issue have declined to strike punitive damages awards merely because they constituted repetitive punishment for the same conduct.” Dunn v. Hovic,

1 F

.3d 1371, 1385 (3d Cir. 1993). Nothing in the Court’s Philip Morris decision changes this outcome. Thus a tobacco company could easily face punitive damages in separate actions for the same misrepresentations it made about its product’s health effects.

[26] See, e.g., TXO Prod. Corp. v. Alliance Res. Corp., 509

U.S.

443, 464-65 (affirming the trial court’s unelaborated ruling that the large punitive damages award was acceptable).

[27] The variety of reforms can be sensed by glancing at BMW of N. Am. Inc. v. Gore, 517 U.S. 559, 614 (1996) (Ginsburg, J. dissenting) (appendix listing various state reforms).

[28] Haslip, 499

U.S.

at 42 (O’Connor, J., dissenting) (“Punitive damages are a powerful weapon. Imposed wisely and with restraint, they have the potential to advance legitimate state interests. Imposed indiscriminately, however, they have a devastating potential for harm. Regrettably, common-law procedures for awarding punitive damages fall into the latter category.”).

[29] Jeremy Bentham, An Introduction to the Principles of Morals and Legislation 86-88 (John Bowring ed., 1843) (“The punishment should be adjusted in such manner to each particular offence, that for every part of the mischief there may be a motive to restrain the offender from giving birth to it.”).

[30] Justice Breyer’s opinion in Philip Morris suggests that augmenting damages based on optimal deterrence would only be permissible if the penalty were based on potential harm to the particular plaintiff, rather than other potential victims who are nonparties to the litigation. Philip Morris USA v. Williams, 127 S. Ct. 1057, 1063 (2007) (in discussing appropriateness to consider the potential harm by defendant, “we have made clear that the potential harm at issue was harm potentially caused the plaintiff”) (emphasis in original). See also supra note 7.

Posted by Dan Markel on March 19, 2008 at 10:03 AM in Article Spotlight, Criminal Law, Dan Markel, Retributive Damages, Torts | Permalink | Comments (0) | TrackBack

Tuesday, March 18, 2008

Retributive Damages

Two weeks ago, I finally posted the abstract of my latest piece, Retributive Damages, here. You can now get the whole article, in draft form, up on SSRN. Were I content simply to promote the article, I might just stop there. But in fact I'm curious to get the feedback of various people here, and so I will blog excerpts of the paper over the next few days. Today, I'll begin with the introduction. Please send any feedback or reactions via email to me. Many thanks. I should also note that the draft that's up on SSRN is still preliminary, and I'm still working on incorporating much of the useful feedback I have received so far. Nonetheless, it's somewhere between a shitty first draft and a final draft...so here it is.

People and the entities they form sometimes commit wrongs against other people and the entities they form. By allowing plaintiffs to seek punitive damages against defendants, our society has, for centuries, deployed not only criminal law but also tort law, among other regulatory devices, to help punish this misconduct.[1] Punitive damages, however, can serve a range of purposes beyond imposition of punishment.[2] Thus it is more accurate to label them extra-compensatory damages.

Despite the variety of purposes capable of being ascribed to extra-compensatory damages, in recent decades, the Supreme Court has come to see them as fulfilling two particular purposes: to impose retributive justice against wrongdoers and to deter future misconduct by the defendant and others.[3] Imposing retribution triggers its own deterrent or preventive effect, of course, but in recent years, much of the scholarship has been largely driven by law and economics scholars seeking to tweak extra-compensatory damages law to advance the goal of optimal deterrence, or cost-internalization.[4]

Unlike theories that try to calibrate a penalty in part based on the guilty state of mind (mens rea) associated with a defendant’s misconduct, theories embracing cost-internalization need not inquire into the putative reprehensibility of a defendant’s actions. The underlying goal of cost internalization is simply, albeit crudely, “pay for the mess you made, but you can continue to make that mess, so long as you pay for it.”[5] In its recent decision on punitive damages, Philip Morris USA v. Williams,[6] the Supreme Court imposed impediments to the quest for cost-internalization through extra-compensatory damages. By precluding juries from awarding extra-compensatory damages that consider the amount of harm the defendant caused to nonparties, the Court’s holding in Philip Morris necessitates much more litigation to ensure successful cost-internalization.[7]

Consequently, the Philip Morris court subtly directs our attention to the question of the “punitive” aspect of extra-compensatory damages. Oddly enough, that question has received spare and insufficient attention.[8] Though a voluminous literature on punitive damages exists,[9] absent from that literature, as Professor Cass Sunstein and his co-authors lamented ten years ago, is “a full normative account of the relationship between retributive goals and punitive damages.”[10]

In this Article, I try to fill that void by providing a defense of what I call “retributive damages. While retributive damages constitute just one aspect of extra-compensatory damages that warrant attention,[11] it is the aspect I focus on here. Specifically, my goal is to describe and defend a structure for retributive damages as an intermediate sanction – between compensatory damages and criminal punishment. The retributive damages proposal incentivizes plaintiffs and their lawyers in the tort system to help the state obtain a form of fines and other relevant relief against defendants on account of their having proven, under appropriate procedural safeguards, that the defendant committed culpable misconduct. Thus, rather than focusing on a private plaintiff’s vindictive interest against the defendant for aggravated injuries to the victim’s dignity,[12] or the economist’s goal of cost-internalization, this account focuses on the normative public interest in retributive justice.

While the account here promises to makes sense of the Court’s holding in Philip Morris,[13] the goal of this project is not to interpret punitive damages doctrine as it is, but to re-imagine what the law should be. Hence, the regime of retributive damages I endorse is consistent with the constitutional landscape but not a mere reflection of it.

It bears emphasis that retributive theory not only offers a motivation for reconfiguring punitive damages. It also establishes a set of constraints. After all, retributive justice, properly understood, is conceptually tethered to concerns for equality, modesty, accuracy, proportionality, impartiality, and the rule of law—aspects that are largely missing not only from current common law punitive damages practices but also, to varying degrees, from the accounts of those scholars emphasizing punitive damages as vehicles for vindicating a private plaintiff’s interest in “poetic justice” or revenge or a jury’s interest in ventilating its outrage.[14]across the realm of similarly situated defendants; in other respects it means ensuring safeguards to achieve accuracy, impartiality, and proportionality in a particular case. In some respects this means ensuring modest and fair sanctions

This Article unfolds in five Parts. Part I describes some of the familiar features and constitutional requirements associated with contemporary American punitive damages practice. Importantly, the Supreme Court, in developing its rules, has left them under-theorized. Though these rules gesture in the direction of some basic values of fair notice and proportionality, the Court has not extensively articulated how these rules intersect with goals often ascribed to punitive damages by scholars endorsing victim-vindication, cost-internalization, or retributive justice.

As constitutional interpretation, that minimalism may be a desideratum. But in terms of giving guidance to states on matters of grave importance, it is opaque. Moreover, as a brief survey shows, prior scholarly accounts have not adequately explained both how and why states should pursue retributive justice through punitive damages. This article tries to do just that, and in order to do so, some familiarity with the demands and limits of retributive justice is necessary.

Part II provides that familiarity by sketching what I have elsewhere called the confrontational conception of retributivism (or the CCR).[15] The virtue of this account is its ability to explain both the internal intelligibility of retributive justice within a liberal democracy and the limits that may reasonably be placed on that social practice to help distinguish it from naked revenge. Significantly, this account explains the need for reducing two kinds of errors: Type I errors in which people are mistakenly punished or excessively punished relative to comparable offenders, and Type II errors in which offenders escape their punishment altogether or receive too lenient a punishment relative to comparable offenders. Accounts of both retributive justice and retributive damages ought to demonstrate the need for sustained reflection on both kinds of errors. Part II concludes by establishing how the values and constraints of the CCR are helpful in thinking about what structure retributive damages should take, and under what conditions and guidelines they should be awarded to reduce both Type I and Type II errors feasibly.

Part III then begins the hard work of moving from abstraction to policy by devising a structure for retributive damages that reflects retributive justice values. Section A begins with a framework for thinking about which misconduct ought to be eligible for retributive damages as an intermediate sanction. More provocatively, I suggest that non-victims for wrongs that don’t necessarily materialize in harms should be able to bring actions for retributive damages under certain conditions. This would look something like contemporary qui tam statutes. Section B then turns to structuring the amount of retributive damages. Here I argue that legislatures should rationalize jury deliberations by scaling the amount of retributive damages to the culpable wrongdoing via a guidelines approach that fines individual defendants based on a percentage of their net wealth and entities based on a percentage of their net value. The sanction should also include gain-stripping amounts, if any, in excess of compensatory damages, as well as lawyers’ fees and a modest and fixed award for the plaintiff for bringing the matter to the public’s attention. I then explain why and how lawyers and plaintiffs should be rewarded for their efforts by the state and why the state should receive the bulk of retributive damages. These payments together (to the state, the plaintiff, and the lawyer) constitute a sensible way to structure retributive damages in light of the values and limits of retributive justice discussed in Part II.

Drawing upon some of the materials embedded in the social justice accounts of tort law,[16] Part IV clarifies why creating an intermediate retributive sanction under the right safeguards to the tort system is a superior way of punishing and preventing misconduct than strictly relying on compensatory damages, class actions for compensatory damages, extra-compensatory damages for victim-vindication, the criminal justice system as we know it, or even a privately enforced criminal justice system. Part V explains how a retributive damages framework surmounts the constitutional questions raised by punitive damages generally.

This Article lays the foundations for retributive damages. In two subsequent articles, I will grapple with questions regarding the implementation of the retributive damages framework in simple and complex litigation contexts.[17] Thus, by the end of the project, one can discern how retributive damages might co-exist alongside extra-compensatory damages designed to pursue other goals, including cost-internalization. A glimpse of this aspiration to disaggregate and realize the purposes of extra-compensatory damages can be seen with a review of the appendix to this article, which captures most of the main policy ideas as they would affect the development of jury instructions


[1] David. G. Owen, Punitive Damages in Products Liability Litigation, 74 Mich. L. Rev. 1257, 1278 (1976) (observing “strong historical and functional nexus between tort and crime” and viewing punitive damages “as a particularly flexible tool in the overall administration of justice”).

[2] Dorsey D. Ellis, Jr., Fairness and Efficiency in the Law of Punitive Damages, 56 S. Cal. L. Rev. 1, 3 (1982) (noting “at least seven purposes for imposing punitive damages … (1) punishing the defendant; (2) deterring the defendant from repeating the offense; (3) deterring others from committing an offense; (4) preserving the peace; (5) inducing private law enforcement; (6) compensating victims for otherwise uncompensable losses; and (7) paying the plaintiff's attorneys' fees”).

[3] See, e.g., Philip Morris USA v. Williams, 127 S.Ct. 1057 (2007); State Farm Mut. Auto. Ins. Co. v. Campbell, 538

U.S.

408, 409 (2003); Linda L. Schlueter & Kenneth R. Redden, Punitive Damages § 2.2(A)(1) (4th ed. 2000) (“The most frequently stated purpose of punitive damages is to punish the defendant for his wrongdoing and to deter him and others from similar misconduct.”).

[4] Under an optimal deterrence (or efficient deterrence) framework, defendants internalize the costs of their activities so that they face accurate “marginal cost curves,” which facilitates correct pricing of their activity. Thus punitive damages (qua cost internalization) are best calibrated in reference to a defendant’s likelihood of evading detection from paying compensatory damages: the higher the likelihood of not compensating other similarly situated victims, then the higher the augmented damages should be. See A. Mitchell Polinsky & Steven Shavell, Punitive Damages: An Economic Analysis, 111 Harv. L. Rev. 869, 906 (1998) (“That a defendant's conduct can be described as reprehensible is in itself irrelevant. Rather, the focus in determining punitive damages should be on the injurer's chance of escaping liability.”). See alsoPunitive Damages for Deterrence: When and How Much?, 40 Ala. L. Rev. 1143 (1989). One paper in this genre has extended the cost-internalization paradigm by urging that punitive damages be configured to provide for “societal damages,” that is, to compensate society, through split-recovery schemes, for harms the defendant externalized onto society independent of the harms suffered by particular plaintiffs in the litigation. Catherine M. Sharkey, Punitive Damages as Societal Damages, 113 Yale L.J. 347, 391 (2004). Sharkey views her theory as providing a “‘nonpunitive’ rationale” for punitive damages that focuses on compensation, and implicitly on cost-internalization. See id. at 389-90. Robert D. Cooter,

[5] See Polinsky & Shavell, supra note 4. Professor Sharkey’s account, supra note 4, does in fact require fact-finders to make a predicate finding of malice or recklessness, but this aspect of her account is inconsistent with the overall goal of cost-internalization. See Thomas C. Galligan, Jr., Augmented Awards: The Efficient Evolution of Punitive Damages, 51 La. L. Rev. 3, 62-63 (1990) (“focus on the evil defendant is … not consistent with the deterrence justification for augmented awards. [I]n augmented damages cases the court should not focus on the reprehensibility of the defendant's conduct, but on whether compensatory damages are too low.”).

[6] See Philip Morris, 127 S.Ct. 1057 (prohibiting factfinders from imposing punitive damage awards based on the amount of harm caused by the defendant to nonparties to the litigation).

[7] Cost-internalization is still possible after Philip Morris when a defendant’s misconduct affects only the plaintiffs to the litigation. But for torts that sweep more broadly, it will be considerably harder to achieve cost-internalization through piecemeal litigation because not all injured victims bring suit and because not all harms have identifiable victims.

[8] Anthony J. Sebok, What Did Punitive Damages Do? Why Misunderstanding the History of Punitive Damages Matters Today, 78 Chi.-Kent L. Rev. 163, 163 (2003) (“The more basic question—what are the purposes or rationales for punitive damages—has not played as great a role as one might think.”).

[9] For challenges raised about punitive damages’ constitutionality, see, e.g., Thomas B. Colby, Beyond the Multiple Punishment Problem: Punitive Damages as Punishment for Individual, Private Wrongs, 87 Minn. L. Rev. 583 (2003); Martin H. Redish & Andrew L. Mathews, Why Punitive Damages Are Unconstitutional, 53 Emory L.J. 1 (2004); John Calvin Jeffries, Jr., A Comment on the Constitutionality of Punitive DamagesVa. L. Rev. 139 (1986). For overviews of empirical studies of punitive damages, see, e.g., Anthony J. Sebok, Punitive Damages: From Myth to Theory, 92

Iowa

L. Rev. 957, 961 (2007) (analyzing recent empirical studies puncturing various overblown claims about the dangers of extant punitive damages litigation); Brief for Neil Vidmar et al. as Amici Curiae Supporting Respondents, Philip Morris, 127 S.Ct. 1057 (No. 05-1256) [hereinafter Vidmar Amicus Brief]; Theodore Eisenberg et al., Juries, Judges, and Punitive Damages: An Empirical Study, 87 Cornell L. Rev. 743 (2002); see also W. Kip Viscusi, The Challenge of Punitive Damages Mathematics, 30 J. Legal Stud. 313 (2001); Cass R. Sunstein et al., Assessing Punitive Damages (with Notes on Cognition and Valuation in Law), 107 Yale L.J. 2071, 2085 (1998) [hereinafter Sunstein et al., Assessing Punitive Damages]. 72

[10] Sunstein et al., Assessing Punitive Damages, supra note 9, at 2085. In truth, however, there have been some valuable efforts in this direction. See sources cited infra note 12. But these accounts have shortcomings described in Part I.B and II.D.

[11] Thus, as the Appendix shows, juries are encouraged to disaggregate the purposes of extra-compensatory damages and segregate the amounts needed to achieve cost-internalization or victim-vindication from retributive justice.

[12] Some scholars have, in the course of interpreting our current punitive damages law, emphasized the plaintiff’s putative personal right to be vindictive, see Benjamin Zipursky, A Theory of Punitive Damages, 84 Tex. L. Rev. 105 (2005), or a plaintiff’s putative right to “state-sanctioned revenge,” see Anthony J. Sebok, Punitive Damages: From Myth to Theory, 92

Iowa

L. Rev. 957, 961 (2007). The interpretive aim of these victim vindication accounts differs from my normative account. Cf. John Finnis, Natural Law: The Classical Tradition, in The Oxford Handbook of Jurisprudence and Philosophy of Law 55-58 (2002) (arguing that recourse theorists like Zipursky fail to engage in “full-blooded normative justification”). Moreover, my own account, which I develop in Parts II-III, is not predicated on vindicating the victim’s interest in autonomy or dignity as much as it’s focused on the relationship of obligation between the state and the wrongdoer. Another piece worth substantial mention here is Marc Galanter & David Luban, Poetic Justice: Punitive Damages and Legal Pluralism, 42 Am. U. L. Rev. 1393 (1993). The Galanter and Luban article is more self-consciously normative, and putatively concerned with retributive justice in various respects, but I view most of its rationale and recommendations as indicative of victim-vindication. See Parts I.B and II.D.

[13] Some accounts stressing victim-vindication may also be viewed as consistent with the Philip MorrisSee, e.g., Sebok, supra note 12. But compare Galanter and Luban, supra note 12 (viewing victim-vindication as compatible with making defendant pay for harms to non-parties to the litigation). holding.

[14] See, e.g., Galanter & Luban, supra note 12; Sebok, supra note 12, David A. Hoffman & Kaimipono D. Wenger, Nullificatory Juries, 2003 Wis. L. Rev. 1115, 1119 (defending the role of juries in “protect[ing] us from rule by legal economists” through “relatively unconstrained punitive awards”).

[15] Prior works of mine have addressed how this theory applies to other policy issues (such as alternative sanctions, the death penalty, transitional justice in recovering states, and executive discretion): see, e.g., Dan Markel, Are Shaming Punishments Beautifully Retributive? Retributivism and the Implications for the Alternative Sanctions Debate, 54 Vand. L. Rev. 2157 (2001) [hereinafter Markel, Shaming Punishments]; Dan Markel

, State, Be Not Proud: A Retributivist Defense of the Commutation of Death Row and the Abolition of the Death Penalty, 40 Harv. C.R.-C.L. L. Rev. 407 (2005) [hereinafter Markel, Be Not Proud]; Dan Markel, The Justice of Amnesty? Towards a Theory of Retributivism in Recovering States, 49 U. Toronto L.J. 389 (1999); Dan Markel, Against Mercy, 88 Minn. L. Rev. 1421 (2004) [hereinafter Markel, Against Mercy].

[16] See Thomas H. Koenig & Michael L. Rustad, In Defense of Tort Law (2001) (a paradigmatic account of the social justice theory of tort law); sources cited infra note 55.

[17] See Dan Markel, Implementing Retributive Damages; Dan Markel, Retributive Damages and Complex Litigation. In those works, I address various interesting questions given little to no attention here: e.g., are retributive damages schemes compatible with vicarious liability and the punishment of entities? Which procedural safeguards should defendants and plaintiffs have and why? How should retributive damages be taxed? Should an insurance market for retributive damages be permitted? What are the dynamic effects a retributive damages scheme might trigger with respect to criminal prosecutions?

 
 

Posted by Dan Markel on March 18, 2008 at 04:29 PM in Article Spotlight, Criminal Law, Dan Markel, Retributive Damages, Torts | Permalink | Comments (0) | TrackBack