How should punitive damages work?

• Author: Markel, Dan

In a companion article, I argued that the purpose of punitive damages should be to advance--in part--the public's interest in retributive justice. These "retributive damages" should be an expressly intermediate sanction, independent of other remedial or penal options. The companion article provided the basic structure of these retributive damages; however, the theoretical nature of the proposal did no more than touch on how they would operate in practice.

This Article addresses the next question: how should punitive damages, including retributive damages, work? This question is especially timely in light of the Supreme Court's recent decision in Philip Morris USA v. Williams, which held that juries may not consider the harms to nonparties in determining punitive damages awards.

To make punitive damages work, we must first separate retributive damages from other extracompensatory damages meant to achieve cost internalization or to vindicate the victim's dignity interests. Because these three purposes are distinct, conflating them carries the danger of both under- and overprotection of various defendants. Once we understand these purposes and the distinctions between them, we should be able to map them on to our existing institutional design for civil damages. This Article begins that important task, first, by explaining why and how defendants should enjoy certain procedural protections depending on which purpose the damages serve, and second, by addressing two critical implementation issues associated with this pluralistic scheme of extracompensatory damages: insurance and settlement.

INTRODUCTION I. THE ACTION IN PUNITIVE DAMAGES A. Recent Developments in Punitive Damages Law and Scholarship 1. The Law 2. The Normative Scholarship B. The Basic Structure of Retributive Damages: A Recap II. PLURALISM ABOUT PURPOSES A. Cost Internalization and Deterrence Damages 1. Overview 2. Deterrence Damages After Philip Morris 3. Standard of Review for Deterrence Damages 4. Who Receives Deterrence Damages 5. Reconciling Deterrence Damages with Retributive Damages B. Aggravated Damages for Victim Vindication 1. Overview 2. Possible Limits on Aggravated Damages 3. Reconciling Aggravated Damages and Retributive Damages 4. Reconciling Aggravated Damages and Deterrence Damages 5. Standard of Review for Aggravated Damages C. A Pluralistic Extracompensatory Damages Scheme: Applications III. PROCEDURAL PROTECTIONS, PLURALISM, AND PUNITIVE DAMAGES A. The Debate over Punitive Damages and Procedural Safeguards 1. Some Background 2. Pluralism and Procedural Safeguards a. Aggravated Damages and Deterrence Damages b. Retributive Damages i. Colby's Error ii. Galanter and Luban's Errors iii. Why an Intermediate Compromise? B. Retributive Damages as Intermediate Sanction: Applying the Logic to Procedural Safeguards 1. Standard of Proof 2. Availability and Standard of Appellate Review 3. Is a Unanimous Jury Required? a. Judges or Juries b. Unanimity 4. Procedural Bifurcation 5. Confrontation of Adverse Witnesses and Compulsory Process 6. Access to Counsel 7. Privilege Against Self-Incrimination 8. Duplicative Punishment Concerns in Simple Litigation Contexts a. Double Jeopardy Doctrine and Punitive Damages b. The Duplicative Punishment Problem c. Solving the Overkill Problem in the Simple Context i. Should Retributive Damages Follow Criminal Prosecution? ii. Should Criminal Prosecution Follow Retributive Damages? iii. Can Retributive Damages Coincide with Criminal Prosecution? 9. Excessiveness Review Under the Eighth Amendment IV. IMPLEMENTING EXTRACOMPENSATORY DAMAGES A. Should Insurance Be Available--If So, When ? 1. Insurance for Insurable Reckless Risks 2. Does Access to Insurance Blunt the Retributive Condemnation? B. Settlement, Transparency, and Accountability 1. The Danger of Sweetheart Deals to Retributive Damages 2. Settlement, Insurance, and the Public Interest CONCLUSION APPENDIX: INSTRUCTIONS FOR ASSESSING EXTRACOMPENSATORY DAMAGES A. Retributive Damages B. Aggravated Damages for Repairing Personal Dignity Harms C. Deterrence Damages INTRODUCTION

What are punitive damages for? In a recent article, I argued that states should understand and restructure punitive damages, in part, to advance the public's interest in retributive justice. (1) For clarity's sake, I called such damages "retributive damages" to distinguish them from extracompensatory damages designed to pursue other goals, such as cost internalization or victim vindication. Although that article explained the normative rationale and basic structure for retributive damages as an intermediate sanction and why society should want that sanction independent of other remedial or penal options, the theoretical nature of the proposal merely scratched the surface of how such damages should operate in practice.

This Article, the second in a series, addresses the next logical question: how should punitive damages work? Both questions are especially timely in light of the Supreme Court's recent decision in Philip Morris USA v. Williams. (2) This Article focuses on a range of important implementation issues left previously unaddressed--e.g., are any procedural safeguards for defendants facing punitive damages necessary and, if so, which ones and why? How should such damages interact with criminal prosecutions? Should an insurance market be permitted? How should settlement be regulated?

A discussion of these implementation issues, however, should only occur after explaining why "punitive damages" should be relabeled "extracompensatory damages," as well as why extracompensatory damages should treat retributive damages separately from damages meant to pursue nonretributive goals, such as compensating the injury to a victim's dignity or facilitating the pursuit of cost internalization to the extent permitted after Philip Morris. Because these purposes are distinct, a jurisdiction that conflates them risks both under-and overprotecting various defendants. Once we correctly understand these distinctive purposes, our institutional design should map them appropriately. This Article begins that task, so that states can build a pluralistic framework that is both attractive from a policy perspective and compatible with constitutional values and doctrine.

Unfolding in four Parts, the Article begins in Part I by furnishing some background to the recent law and scholarship on the purposes of punitive damages. Readers of the earlier companion article may profitably skim that Part, the role of which is primarily to set the stage for the discussion in this Article. Part II offers a structure that tries to disaggregate the distinct purposes of extracompensatory damages in a manner that is both constitutionally feasible and attractive from a policy perspective. Rather than argue that retributive damages should play an exclusive or primary role, (3) I urge a pluralistic approach for state legislatures to consider. Under such a legislative framework, extracompensatory damages would be available separately, if necessary, for retributive, cost internalization, and personal dignity repair (or what I more frequently call victim vindication) purposes. Correspondingly, there would be three kinds of extracompensatory damages permitted under the relevant statutes: retributive, deterrence, and aggravated damages. (4) Much work has already been performed on the conceptualization and implementation of deterrence and aggravated damages. (5) While this Article builds on those achievements, its comparative advantage and its focus are on the procedural safeguards and mechanisms necessary to implement the public interest in retributive justice, a point that has been demonstrably underexamined in the existing literature. (6) States should employ a damages scheme that sharpens juries' and judges' decision making by disaggregating the retributive and nonretributive functions that are normally conflated in awards of punitive damages.

Part III turns to the issue of which procedural safeguards should be in place when awarding these types of extracompensatory damages. A number of scholars have argued that punitive damages, insofar as they serve public retributive goals, are unconstitutional because civil defendants lack procedural safeguards such as those provided in criminal cases. (7) The problem with this claim is that it mistakenly suggests that criminal procedural safeguards apply like a binary switch that toggles between "on" and "off." In fact, the extent of protection provided by many procedural safeguards operates on a continuum marked by the severity of the punishment imposed. (8) The same logic should inform the design of safeguards for defendants facing retributive damages--or so I argue.

After introducing the debate over this issue, Part III examines which safeguards, if any, would be necessary, from a constitutional point of view, for aggravated and deterrence damages. When defendants are facing nonretributive damages, the same precautionary measures do not necessarily apply; however, certain measures might still be warranted to ensure fidelity to federalism principles and basic procedural fairness. More importantly, if states adopt a retributive damages regime, they should, if they have not already done so, also add some heightened procedural safeguards for defendants facing retributive damages.

As explained in Part III, the extent of such protections should fall roughly between the kind of protection we confer upon defendants in cases involving compensatory damages and the kind of protection we confer upon defendants in criminal cases involving modest sanctions such as criminal fines. But consistency with constitutional mandates is not the only goal--the level of procedural protections should also be faithful to the basic values underlying retributive justice. These organizing principles are applied, albeit in a preliminary fashion, to matters such as exposure to duplicative punishment for the...