Limitations on Punitive Damages

Among all of the reasons offered for the popularity of
business torts over time, perhaps none has been more often
cited than the availability of punitive damages. With the
increased frequency and magnitude of punitive damages
claims, however, have come increased limitations upon
punitive awards, most notably by the U.S. Supreme Court,
including its most recent decision in State Farm Mutual
Automobile Insurance Co. v. Campbell. Legislative efforts at
tort reform both pre- and post-Campbell impose additional
limitations on punitive damages. This chapter examines the
important Supreme Court decisions on the issue of punitive
damages, as well as efforts by the lower federal courts, state
courts, and legislatures to define the standards under which
punitive damages may be imposed. – Eds.
A. Introduction
This Chapter reviews the historical forces that have influenced this
area of law and analyzes the various Supreme Court decisions and
significant state rulings and statutory responses that define the law of
punitive damages as it exists today.
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.”1 Punitive damages, by contrast, are
designed for deterrence and punishment.2
1. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416 (2003)
(internal quotations marks omitted), on remand at Campbell v. State Farm
200 Business Tort Law
As the concept of compensatory damages has evolved over the years
to include compensation for intangible injuries, the concept of punitive
damages has evolved as well. The English Courts of the 18th 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.3 As late as the middle of the 20th 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.4
Today, punitive damages are not required to compensate a litigant.
Because compensatory damages now redress intangible harms such as
pain and suffering, and intentional, or even negligent, infliction of
emotional distress,5 “it should be presumed a plaintiff has been made
whole for his injuries by compensatory damages.”6 “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) understanding.”7 Consequently, it is
now well-established that compensatory and punitive damages serve
distinct purposes.8 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.”9
Mut. Auto. Ins. Co., 98 P.3d 409 (Utah 2004); Cooper Indus., Inc. v.
Leatherman Tool Group, Inc., 532 U.S. 424, 432 (2001).
2. Campbell, 538 U.S. at 416.
3. Note, Exemplary Damages in the Law of Torts, 70 HARV. L. REV. 517,
519 (1957).
4. Id. at 520 and n.32.
5. Cf. Bogle v. McClure, 332 F.3d 1347, 1358-59 (11th Cir. 2003), cert.
dismissed, 124 S. Ct. 1168 (2004).
6. Campbell, 538 U.S. at 419.
7. Cooper Indus., Inc., 532 U.S. at 437 n.11.
8. Id. at 432.
9. Campbell, 538 U.S. at 416; Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1,
19 (1991); Cooper Indus., Inc., 532 U.S. at 432.
Limitations on Punitive Damages 201
C. Supreme Court Jurisprudence Before Campbell
1. Eighth Amendment
The Eighth Amendment provides that “[e]xcessive bail shall not be
required, nor excessive fines imposed, nor cruel and unusual
punishments inflicted.”10 However, while punitive damages are imposed
through the authority of courts, serve to advance governmental interests
in punishment and deterrence,11 and have been described as a quasi-
criminal punishment12 and a type of “private fine,”13 the Excessive Fines
Clause of the Eighth Amendment is not 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.14 In Kelco, a Vermont
waste-disposal company sued a national waste-disposal giant 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 violative 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.15 The Court explained that the primary
purpose of the Eighth Amendment is to prevent the government from
abusing its prosecutorial power, rather than to limit the amount of civil
damages or to prescribe the purposes for which they may be awarded.16
Noting that the history of the Eighth Amendment provides convincing
evidence that the Excessive Fines Clause was intended to limit only
10. U.S. CONST. amend. VIII.
11. Cooper Indus., Inc., 532 U.S. at 432; Browning-Ferris Indus. of Vt., Inc. v.
Kelco Disposal, Inc., 492 U.S. 257, 268, 275 (1989).
12. Haslip, 499 U.S. at 19.
13. Cooper Indus., Inc., 532 U.S. at 432.
14. 492 U.S. 257 (1989).
15. Id. at 266.
16. Id.

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