CHAPTER 14 HOW ARE PUNITIVE DAMAGES CALCULATED?
| Jurisdiction | United States |
| Publication year | 2018 |
In addition to damages that make the plaintiff whole and indemnify the plaintiff for bodily injury or property damage, the law also allows an award for punitive damages, which are not meant to give the plaintiff something he or she lost due the tortious conduct of the defendant.
They are meant to punish the defendant for conduct that was especially outrageous.
[Extraordinary damages are assessed because the court believes that] the defendant needs to be punished in addition to the damages he or she pays as compensatory damages. Society as a whole [is expected to] learn that this type of conduct [that allows for the award of punitive damages] will not be accepted through publication of punitive damage awards.
Even though punitive damage awards are meant to punish the defendant and benefit society, not the plaintiff, they are paid to the plaintiff. Punitive damages awards have been characterized as a windfall for plaintiffs because they put the plaintiff in a much better position financially than they were before the accident.
Some states allow juries to award punitive damages in any amount that they feel is appropriate. With the right case, a plaintiff could receive a multimillion-dollar punitive damage award. Other states have severely limited punitive damage awards by limiting the types of cases where they can be awarded or placing statutory caps on how much money a jury or judge can award for punitive damages. For example, lawsuits against medical care providers for malpractice have punitive damage caps in some states. Plaintiffs may also receive punitive damage awards from insurance companies that deal in bad faith with their insureds and fail to treat their insureds fairly under the terms of the applicable insurance policy. 1
A. Jury Instructions
California's pattern jury instructions provide a method to calculate punitive damages in the Book of Approved Jury Instructions (BAJI) that instructs the jury to consider:
(1) The reprehensibility of the conduct of the defendant.
(2) The amount of punitive damages which will have a deterrent effect on the defendant in the light of defendant's financial condition.2
Additionally, a defendant can ask that the jury be instructed to consider:
(3) That the punitive damages must bear a reasonable relation to the injury, harm, or damage actually suffered by the plaintiff. 3
These proposed jury instructions include both subjective and objective components.
The first factor—the reprehensibility of defendant's conduct—is subjective in nature. The other two—defendant's financial condition and the relationship to actual damages—are objective measurements.
While in the ordinary action for damages information regarding the adversary's financial status is inadmissible, this is not so in an action for punitive damages. . . . The relevancy of such evidence lies in the fact that punitive damages are not awarded for the purpose of rewarding the plaintiff but to punish the defendant. Obviously, the trier of fact cannot measure the punishment without knowledge of defendant's ability to respond to a given award . Las Palmas Assocs. v. Las Palmas Ctr. Assocs., 235 Cal. App. 3d 1220, 1243, 1 Cal. Rptr. 2d 301(1991).
A defendant's financial condition has always been relevant to the amount of punitive damages allowed.
After the Norman conquest in 1066, there arose in English law a system of civil sanctions known as "amercements." Because of the sometimes-abusive nature of amercements, the Magna Carta prohibited those that were disproportionate to the offense or that would deprive the wrongdoer of his means of livelihood[.] Adams v. Murakami (1991) 54 Cal. 3d 105, 113, 284 Cal. Rptr. 318 (citing Magna Carta (1215) ch 20).
Because punitive damages are intended to punish the wrongdoer, a wealthy wrongdoer should face a higher punitive damages award than a less wealthy party since the function of deterrence will not be served if the wealth of the defendant allows him to absorb the award with little or no discomfort. Neal v. Farmers Ins. Exchange, 21 Cal. 3d 910, 928, 148 Cal. Rptr. 389 (1978).
In 1991, the California Supreme Court decided Adams v. Murakami, 54 Cal. 3d 105, 284 Cal. Rptr. 318 (1991), holding that "[a] reviewing court cannot make a fully informed determination of whether an award of punitive damages is excessive unless the record contains evidence of the defendant's financial condition." 4
The challenge is in calculating the financial condition of the defendant, since although figures may never lie, liars figure. Determining "the true financial condition of the defendant" is often difficult and on occasion impossible because numbers can be easily manipulated. "Absent glaring errors in the financial statement, parties must be wary of and question estimates of net worth based on the data provided."5 Careful analysis and the help of forensic accountants as expert witnesses must be utilized if there is any question about the net worth of the defendant.
The Ninth Circuit Court of Appeal set forth a proposed jury instruction, different from California's BAJI, as follows:
If you find for the plaintiff, you may, but are not required to, award punitive damages. The purposes of punitive damages are to punish a defendant and to deter similar acts in the future. Punitive damages may not be awarded to compensate a plaintiff.
The plaintiff has the burden of proving by [a preponderance of the evidence] [clear and convincing evidence] that punitive damages should be awarded and, if so, the amount of any such damages.
...You may award punitive damages only if you find that the defendant's conduct that harmed the plaintiff was malicious, oppressive or in reckless disregard of the plaintiff's rights. Conduct is malicious if it is accompanied by ill will, or spite, or if it is for the purpose of injuring the plaintiff. Conduct is in reckless disregard of the plaintiff's rights if, under the circumstances, it reflects complete indifference to the plaintiff's safety or rights, or if the defendant acts in the face of a perceived risk that its actions will violate the plaintiff's rights under federal law. An act or omission is oppressive if the defendant injures or damages or otherwise violates the rights of the plaintiff with unnecessary harshness or severity, such as by misusing or abusing authority or power or by taking
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