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Tuesday, March 25, 2008

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.


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.


Posted by Administrators on March 25, 2008 at 12:03 AM in Article Spotlight, Dan Markel, Retributive Damages | Permalink


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