Punitive Damages: Public Wrong or Egregious Conduct? A Survey of New York Law

By Leventhal, John M.; Dickerson, Thomas A. | Albany Law Review, Winter 2012 | Go to article overview

Punitive Damages: Public Wrong or Egregious Conduct? A Survey of New York Law


Leventhal, John M., Dickerson, Thomas A., Albany Law Review


I. INTRODUCTION

New York's punitive damages jurisprudence has oftentimes been confusing. Courts have at times required plaintiffs to establish a public wrong in order to award punitive damages. (1) At other times, courts have required plaintiffs to establish egregious conduct. (2) This article provides a historical perspective of punitive damages and the rationales for their imposition. This article then references relevant case law to examine legal determinations of punitive damage awards in tort, fraud, breach of contract, breach of fiduciary duty, and General Business Law ("GBL") section 349 causes of actions, particularly when a public wrong is required to warrant such an award.

II. HISTORICAL DEVELOPMENT OF THE DOCTRINE OF PUNITIVE DAMAGES

The concept of punitive damages was present in the oldest recorded legal systems: Babylonian law in the Code of Hammurabi, Hittite Laws of approximately 1400 B.C., the Hebrew Covenant Code of Mosaic Law c. 1200 B.C., and the Hindu Code of Manu c. 200 B.C. (3) Anglo-Saxon law included a related practice which required wrongdoers to pay money damages for almost every type of crime, including homicide. (4) For example, in many enumerated crimes in the Laws of Wihtred, (5) the wrongdoer was subject to either a physical punishment or a fine payable to the victim. (6) If the wrongdoer killed another man, he was bound to pay the man's family a certain price, which was his wergild, or "man-payment," based upon the deceased's social rank. (7) The purpose of the payment was compensatory, rather than penal, and also served to maintain the peace in a society where revenge feuds were common. (8) These payments differed from the modern concept of punitive damages because they did not consider the egregiousness of the wrongdoing, but rather the nature of the injury. (9) Nevertheless, courts sometimes considered the circumstances behind the crime when determining whether or not to impose wergild payments on a wrongdoer. (10)

Early English law codified a court's common law ability to impose punitive damages. (11) The first of such statutes appeared in 1275 (12) and was followed by many others until 1753. (13) The first English cases awarding punitive damages are purported to be Wilkes v. Wood (14) and Huckle v. Money. (15) In Huckle, the court awarded exemplary damages (to make an example of the wrongdoer) to a man who was unlawfully detained on governmental orders, even though he suffered neither physical injury nor economic loss, because the action was "worse than the Spanish Inquisition." (16) In addition, it is believed that juries had often awarded punitive damages even before this remedy was officially codified. (17)

The first reported case awarding punitive damages in the United States was Genay v Norris, (18) in which a plaintiff was awarded exemplary damages after a physician spiked his drink following their altercation. (19) In 1851, in Day v. Woodworth, (20) the Supreme Court first acknowledged the states' past practices of awarding punitive damages. (21)

As early as 1817, New York cases referred to extra-compensatory damages as "smart-money." (22) This term referred to the manner in which courts awarded extra-compensatory damages as "consideration in amends for the pain which [the victim] has unjustly suffered." (23) In other words, courts awarded damages that did more than compensate an injured party, because the defendant caused an injury that hurt or "smarted." In this way, early "smart-money" resembled the modern-day concept of compensatory damages for pain and suffering. (24)

Eventually, the term "smart-money" took on a more punitive connotation. (25) "Smart-money" referred to the pain or "smart" caused to the defendant who was required to pay above and beyond compensation. (26) In New York, "smart-money" has become synonymous with "vindictive damages," (27) "exemplary damages," (28) and "punitive damages," (29) as articulated in Fry v. …

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