A. Nature and Purpose of Punitive Damages

• Library: South Carolina Damages (SCBar) (2009 Ed.)

A. Nature and Purpose of Punitive Damages

Damages are generally defined as "[a] pecuniary compensation or indemnity, which may be recovered in the courts by any person who has suffered loss .through the unlawful act or omission or negligence of another."¹ Punitive damages, also referred to as exemplary damages, "are damages on an increased scale, awarded to the plaintiff over and above what will barely compensate him for his property loss."² These damages are generally available in cases where a defendant is proven to have acted willfully, maliciously, or fraudulently.³

In order to fully understand and apply the principles of punitive damages, one must first explore its historical roots and purpose.

1. Historical roots of punitive damages

The law has long recognized that when tortfeasors engage in reckless, wanton, or intentional misconduct, justice requires them to do more than simply repay the injured for the harm they have caused.

The concept of punitive damages, originally in the form of multiple damages, can be traced back thousands of years.⁴ American punitive damages have their historical basis in England beginning in the Thirteenth Century.⁵ Amercements were an early civil penalty exacted from civil wrongdoers.⁶ These penalties could be imposed by peers of the wrongdoer or imposed arbitrarily at the discretion of a lord or the courts.⁷ Ultimately, the judiciary began to abuse the system of amercements, and, as a result, several provisions of the Magna Carta were crafted to address the imposition of them.⁸

By the Eighteenth Century the role of awarding punitive damages in England had been transferred from the judiciary to the jury.

[A] jury [shall] have it in their power to give damages for more than the injury received. Damages are designed not only as a satisfaction to the injured person, but likewise as a punishment to the guilty, to deter from any such proceeding for the future, and as a proof of the detestation of the jury to the action itself.⁹

South Carolina became the first American court, in 1784, to allow punitive damages.¹⁰ The defendant in the case was a physician who slipped a large quantity of the aphrodisiac "spanish fly" into another man's wine glass as a joke; however, the man became seriously ill.¹¹ The defendant attempted to characterize his actions as a "drunken frolic," but the court found them to be an "outrage."¹²

By the Nineteenth Century American law regarded punitive damages as "a well established principle of the common law."¹³ The court noted that punitive damages have "always been left to the discretion of the jury, as the degree of punishment inflicted must depend on the peculiar circumstances of each case."¹⁴

2. Goals of punitive damages

The general objectives of punitive damages have been identified by legal scholars as retribution, education, deterrence, compensation, and law enforcement.¹⁵ However, recently the United States Supreme Court cited deterrence and retribution as the only purposes served by punitive damages.¹⁶

In contrast, South Carolina, like many other states, cites punishment as the primary goal.¹⁷ Actually, the purpose of punitive damages in South Carolina has evolved into a tripartite goal.¹⁸ First, punitive damages serve the purpose of punishing the individual defendant.¹⁹ Second, punitive damages serve to deter both the wrongdoer and society as a whole from similar conduct.²⁰ Finally, punitive damages serve "as a vindication of private rights."²¹

a. Punishment

Punitive damages serve to punish defendants for reckless, willful, wanton, or malicious conduct.²² The punitive goal is so strong that our courts have refused to allow comparative negligence to reduce the amount of punitive damages because "any reduction in the defendant's punishment inflicts a corresponding amount of punishment on the plaintiff."²³ Our courts have reasoned that shifting a portion of the cost of the punitive award back to a plaintiff would punish him or her despite the fact that the plaintiff in no way contributed to the willful or reckless nature of the defendant.²⁴ One scholar explains the punitive aspect as follows:

When persons in the community agree to rules establishing the boundaries of their legal rights, they each surrender their freedom to violate other persons' boundaries in pursuit of their own personal objectives. . . . By punishing intentional law-breakers, society restores all its members to a position of equal worth, and reinforces the confidence of law-abiders in the basic fairness of the legal system and in the utility of their personal decisions to obey the law.²⁵

Therefore, in South Carolina when analyzing punitive damages the focus is solely on the defendant's acts.²⁶ "The central inquiry is whether the defendant's conduct was so reckless, willful, wanton, or malicious that the defendant should be punished."²⁷

b. Deterrence

Punitive damages also serve to deter defendants from future misconduct.²⁸ The wide discretion historically afforded to juries in determining the amount of punitive damages has been the very basis for its effectiveness as a deterrent to reprehensible conduct. This remedy stands as both a specter and a sword over the heads of the reckless and irresponsible, constantly reminding them that they must pay if they engage in errant behavior.

In over 80% of products liability cases that resulted in punitive damage awards, the manufacturer subsequently made a safety change.²⁹ In fact, 43% of the manufacturers took remedial steps even before the conclusion of the litigation.³⁰ Senator Ernest F. Hollings eloquently summed up the positive impact of product liability litigation on American society:

[W]e could spend an afternoon pointing out the good that product liability has done. We do not get blown up by that Pinto gas tank. Cars all have antilock brakes. That elevator is checked. The steps are marked. Little children do not burn up in flammable pajamas. The women of America are not threatened with Dalkon shields.³¹

The possibility of large punitive damage awards provides corporations with every incentive to make continual safety improvements. Both Congress and the State of South Carolina have expressly recognized and endorsed the effectiveness of punitive damages by promulgating numerous statutes which authorize such awards.³²

Despite overwhelming evidence of the efficacy of punitive damages, corporate America has mounted an unprecedented campaign to change, modify, or eliminate this integral part of our constitutional fabric.³³ Under the mantra of "tort reform," the business community has recruited academia, writers, legislators, and a plethora of media specialists, as well as dispatched its legal troops, to conduct an assault on this historic citadel of justice.³⁴

The efficacy of the deterrent effect of punitive damages can be described in a simple cost-benefit analysis. Punitive damages make a wrongdoer assess whether the price of getting caught, discounted by the risk thereof, exceeds the value of the ill-gotten gains.³⁵ One of the many...