Limitations on Punitive Damages

Like treble da mages in private antitrust litigation, punitive
damages raise the stakes in business tort litigation. Unlike treble
damages, however, punitive da mages historically have neither
been automatic nor fixed in a strict ratio to actual damages.
With the ascent of so-called tort reform have come efforts by
courts and legislatures to limit the availability and the amount of
punitive damages awards. This chapter examines the leading
Supreme Court decisions involving punitive damages, as well a s
efforts by the lower federa l courts, state courts, and legislatures
to define the standards under which punitive da mages may be
imposed. Eds.
A. Introduction
The case law surrounding punitive damages was, for many years,
rapidly developing, with major Supreme Court decisions being issued
almost annually. In the past few years, the law surrounding punitive
damages, particularly in the business tort context, has matured. This
Chapter reviews the historical forces that have influenced this area of law
and analyzes the various decisions and significant state rulings and
statutory responses that define the current law of punitive damages.
B. The Nature and Purpose of Punitive Damages
The Supreme Court’s jurisprudence in this area is driven by the
fundamental difference between compensatory and punitive damages.
Whether cast as general or special, compensatory damages “are intended
to redress the concrete loss that the plaintiff has suffered by reason of the
defendant’s wrongful conduct.”
Punitive damages, by contrast, are
designed for deterrence and punishment.
As the concept of compensatory damages has evolved over the years
to include compensation for intangible injuries, the concept of punitive
. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 41 6 (2003)
(internal quotations marks and citations omitted); Cooper Indus. v.
Leatherman Tool Grp., 532 U.S. 424, 432 (2001).
. Campbell, 538 U.S. at 416.
230 Business Torts and Unfair Competition Hand book
damages has evolved as well. The English Courts of the eighteenth
century resorted to the doctrine of exemplary (or punitive) damages to
authorize monetary awards exceeding a party’s tangible harm, explaining
that such awards were justified as compensation for mental suffering,
wounded dignity, and injured feelings.
As late as the middle of the
twentieth century, several American states still viewed punitive damages
as a means of compensating a party for intangible injury not accounted
for in the legal measure of compensatory damages.
Until there were
separate awards for intangible injuries, punitive damages were a useful
device to make an injured party whole.
Today, punitive damages are no longer viewed as providing
compensation for a litigant. Because compensatory damages now redress
intangible harms such as pain and suffering, and intentional, or even
negligent, infliction of emotional distress,
“it should be presumed a
plaintiff has been made whole for his injuries by compensatory
“As the types of compensatory damages available to
plaintiffs have broadened, . . . the theory behind punitive damages has
shifted toward a more purely punitive (and therefore less factual)
Consequently, it is now well-established that
compensatory and punitive damages serve distinct purposes.
Rather than
serving as a determination of intangible harm suffered by a party,
“[p]unitive damages serve a broader function; they are aimed at
deterrence and retribution.”
C. Supreme Court Jurisprudence Before
Eighth Amendment
The Eighth Amendment provides that “[e]xcessive bail shall not be
required, nor excessive fines imposed, nor cruel and unusual
punishments inflicted.”
However, while punitive damages are imposed
through the authority of courts, serve to advance governmental interests
. Note, Exemplar y Da mages in the Law of Torts , 70 H ARV. L. REV. 517 ,
519 (1957).
. Id. at 520 & n.32.
. See Bogle v. McClure, 332 F.3d 1347, 1358-59 (11th Cir. 2003).
. Campbell, 538 U.S. at 419.
. Cooper Indus. v. Leatherman Tool Grp., 532 U.S. 424, 437 n.11 (2001) .
. Id. at 432.
. Campbell, 538 U.S. at 416; see also Pacific Mut. Life Ins. Co. v. Haslip,
499 U.S. 1, 19 (1991); Cooper Ind us., 532 U.S. at 432.
. U.S. CONST. amend. VIII.
Limitations on Punitive Damages 231
in punishment and deterrence,
and have been described as a quasi-
criminal punishment
and a type of “private fine,”
the Excessive Fines
Clause of the Eighth Amendment has never acted as a meaningful
restraint on either the availability or amount of punitive damages.
The Supreme Court addressed this issue in Browning-Ferris
Industries of Vermont, Inc. v. Kelco Disposal, Inc.
In Kelco, a Vermont
waste-disposal company sued a large national waste-disposal firm in
federal district court, alleging attempted monopolization in violation of
the Sherman Act and interference with contract under Vermont common
law. The jury found in favor of the plaintiff on both claims and awarded
$51,146 in compensatory damages and $6 million in punitive damages.
On appeal, the defendant challenged the punitive award as constituting a
violation of the Excessive Fines Clause. The Second Circuit rejected this
argument, and the Supreme Court agreed.
The Court unanimously held that the Excessive Fines Clause does
not apply to awards of punitive damages in cases between private parties
where the government has neither prosecuted the action nor has any right
to receive a share of the award.
The Court explained that the primary
purpose of the Eighth Amendment is to prevent the government from
abusing prosecutorial power, rather than to limit the amount of civil
damages or to prescribe the purposes for which they may be awarded.
Noting that the history of the Eighth Amendment provides convincing
evidence that the Excessive Fines Clause was intended to limit only
those fines directly imposed by, and payable to, the government, the
Court concluded that the fact that punitive damages are imposed through
the authority of courts and serve to advance governmental interests in
punishment and deterrence is insufficient to support the application of
the Excessive Fines Clause to a case involving private parties.
Notwithstanding Kelco, however, there may be circumstances under
which the Excessive Fines Clause will limit punitive damages awards.
As discussed later in this chapter, several states now require by statute
that a portion of certain punitive damages awards be remitted to the state,
and there are cases in which the government, as a plaintiff, seeks the
. Cooper Indus., 532 U.S. at 432; Browning-Ferris Indus. o f Vt. v. Kelco
Disposal, Inc., 492 U.S. 257, 268, 275 (1989).
. Haslip, 499 U.S. at 19.
. Cooper Indus., 532 U.S. at 432.
. 492 U.S. 257 (1989).
. Id. at 266-68.
. Id.
. Id. at 268, 275.

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