Punishment but Not a Penalty? Punitive Damages Are Impermissible under Foreign Substantive Law

By Hoversten, Paul A. | Michigan Law Review, March 2018 | Go to article overview

Punishment but Not a Penalty? Punitive Damages Are Impermissible under Foreign Substantive Law


Hoversten, Paul A., Michigan Law Review


INTRODUCTION

"The Courts of no country execute the penal laws of another . . . A1

When a broken rule results in punishment, the authority to punish belongs to the person or entity who owns the rule.2 You don't punish your neighbor's child for staying up past bedtime in her own house while her parents are home. She's not your child, it's not your house, and most importantly, it's not your rule.

Courts behave the same way. State courts routinely apply other states' substantive law in civil cases, but they never apply foreign penal law.3 A Wisconsin court will not hold a defendant criminally liable under a Minnesota statute. Either it will punish the defendant under Wisconsin law or it will not punish her at all. Courts' refusal to apply foreign penal law extends beyond the criminal context; it extends to civil penalties as well.4

This principle is grounded in part in norms of fairness to defendants and the legitimacy of punishment.5 States can exercise coercive power on behalf of the entire community in a way that individuals cannot.6 The people of Wisconsin, for instance, have conceded to their government the authority to make laws, prosecute them, adjudicate guilt, and punish the guilty.7 They consent to the prosecution, by the state of Wisconsin, of wrongs that violate the laws of Wisconsin.8 As a condition of that concession of authority, the people demand certain procedural protections for actual and would-be defendants, among them notice of laws and trial by a jury of peers in the community.9 The people of Wisconsin, however, have not consented to prosecution of wrongs that violate Minnesota's laws, which they played no role in enacting. Such a prosecution or punishment would breach the social contract that the people of Wisconsin have made with their government. It would violate basic norms of notice and fairness to defendants, and any ensuing punishment would be illegitimate.10 In general, therefore, courts decline to apply the penal laws of another sovereign.11

It is not hard to understand why an out-of-state defendant would feel uneasy at the prospect of punishment by a foreign court or judgment by a foreign jury. Former Chief Justice Neely of the West Virginia Supreme Court of Appeals quipped,

As long as I am allowed to redistribute wealth from out-of-state companies to injured in-state plaintiffs, I shall continue to do so. Not only is my sleep enhanced when I give someone else's money away, but so is my job security, because the in-state plaintiffs, their families, and their friends will reelect me.12

Justice Neely was being wry, but it is true that out-of-state defendants often find themselves in hostile courtrooms. One scholar has found that "[s]tate court judges are about twice as likely to choose law that favors the plaintiff if the plaintiff is local and the defendant is out-of-state" than in the inverse situation.13 Other scholars have discovered that in states where judges are appointed, damages awards are almost twice as large when the defendant was from out of state.14 There is an even greater disparity in states where judges are elected.15

If out-of-state defendants already face hostile judges and juries, then the availability of punitive damages16 significantly multiplies the effect of that hostility. The Supreme Court has stated that "[punitive damages] are specifically designed to exact punishment in excess of actual harm to make clear that the defendant's misconduct was especially reprehensible."17 One scholar has explained that punitive damages "may have a retributive or expressive function, designed to embody social outrage at the actions of serious wrongdoers."18 The opportunity to impose punitive damages is an invitation to the jury to express "moral condemnation"19 of the (already-vulnerable) Vikings fan in Packers' territory.

Even when defendants are at home, however, it is still incongruous for a state court to impose punitive damages based on another state's substantive law. …

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