Intentionally destroying property-boundary markers by sawing down the posts.1 Causing environmental disasters.2 Fraudulently refusing to settle insurance claims within coverage limits.3 Bad-faith dealing in big oil contracts.4 Hiding mild weather damage to new vehicles.5 Creating and marketing cigarettes while knowing about their carcinogenic risks.6 Contributing to automobile accidents.7
No, these are not items on some nefarious villain's to-do list. These are all examples of cases where courts have awarded punitive damages against the tortfeasors on top of their compensatory liability. While each tort is unquestionably wrong, some certainly appear more wrong than others.
In recent years, punitive damages have become a fashionable topic in the legal community - and unsurprisingly so, given their prevalence and gaudy statistics. After all, civil plaintiffs in state courts of general jurisdiction win over $40 billion each year in punitive-damages awards,8 and this figure doesn't even include money recovered in federal court. Needless to say, such high figures draw attention. Commentators, judges, and even nonlawyers have all pointed to punitive-damages awards as evidence of a runaway judicial system that throws out fiscal penalties like Monopoly money.
First to respond were the state legislatures. As of 2005, twentynine states have instituted statutory caps on punitive-damages recovery, and thirty-four states have amended their state codes to reduce the magnitudes and frequencies of punitive-damages awards.9 Most of these limitations were implemented within the last twenty years.10
The Supreme Court has also noticed the trend in punitivedamages awards. In a series of decisions from 1991 to 2003, the Court implemented procedural- and substantive-due-process restrictions on punitive-damages awards, culminating in a holding that punitivedamages awards more than nine times the magnitude of compensatory rewards would rarely satisfy due process requirements.11 More recently, in the litigation stemming from the Exxon Valdez oil spill, the Court used its common-law-making authority to place a more stringent ratio cap of one-to-one for punitiveto-compensatory damages in maritime cases.12
Despite the legislative and judicial changes to punitivedamages jurisprudence, the doctrine remains in a state of disarray. Some commentators call for the abolition of punitive damages altogether,13 while others bemoan the restrictions imposed by the Court and the state legislatures.14 It's easy to be pessimistic about the prospects of establishing a predictable, rational, and efficient system for awarding the damages.
The real problem with punitive-damages jurisprudence is that neither the courts nor the political branches have decided what the damages stand for. Do they make up for the legal limits on a wronged plaintiffs compensation for his injuries? Are they meant to impose criminal-like sanctions on the wrongdoer that go beyond eye-for-aneye justice? Without a theory that defines the basic purpose for the damages, it has proven impossible to provide a reliable framework for calculating and limiting them.
In this Note, I argue that the proper role - the only role - for punitive damages is to disincentivize tortfeasors from engaging in socially harmful conduct that would otherwise go undeterred. In order to establish this role for punitive damages, Congress should use its power to craft subject-matter jurisdiction over maritime law to establish a comprehensive, meaningful, and useful system for calculating punitive-damages awards to maximize effective deterrence in admiralty cases. While maritime law only encompasses a small portion of all punitive-damages jurisprudence, it is the ideal nesting ground for doctrine reform. Congress can transfer the authority to award punitive damages in maritime cases from juries to judges. Once judges are shown to be more competent and more consistent administrators of an organized, deterrent-maximizing punitivedamages framework in maritime cases, the states will follow suit by placing the power of awarding punitive damages solely in the hands of the judiciary. …