Most American states permit the award of extra-compensatory punitive damages to tort plaintiffs if the defendant’s conduct was especially culpable. The conventional rationales for this practice are the value of punishing such conduct and the special need to deter it. Yet these rationales are focused entirely on the defendant: they explain why a defendant should pay more than compensatory damages but do not explain why that additional punitive award should be transferred to the plaintiff. And indeed, many states, under “split recovery” schemes, require that a specified proportion of a punitive damage award be paid to the state, not to the plaintiff. But critics of punitive damage awards are not satisfied by this response: they believe that transferring any nontrivial1 portion of a large punitive damage award to a plaintiff gives that plaintiff an unjust and undeserved “windfall.”
Can the practice of awarding substantial punitive damages to plaintiffs be justified? The literature on the propriety of punitive damages in tort law is enormous, but that literature has paid little attention to the “windfall” objection. The objection is not especially troubling to consequentialist or law and economics scholars: punitive damage awards help incentivize plaintiffs’ lawyers to fully investigate serious wrongdoing and may offer useful additional deterrence of especially culpable conduct. But corrective justice and civil recourse theories cannot so readily overcome the windfall objection, insofar as they emphasize the close bipolar relationship between defendant’s wrong and plaintiff’s injury, and between defendant’s duty to pay damages and plaintiff’s right to receive those damages.
In this sophisticated and insightful article, Professor Erik Encarnacion offers a provocative and novel solution, a solution that he believes is consistent with nonconsequentialist justifications of tort law. He suggests reconceptualizing punitive damages as a particular form of retributive justice: a plaintiff has the right to demand that a highly culpable defendant satisfy the plaintiff’s “resilience interests,” and this requires the wrongdoer to make the plaintiff better off than the plaintiff would have been absent defendant’s wrongful conduct. After briefly reviewing Encarnacion’s criticisms of existing justifications of punitive damages, I will explain in more detail his own original solution.
Encarnacion persuasively argues that many supposed justifications for punitive damages are inconsistent with the usual doctrinal requirements for awarding such damages. He notes that courts require proof of some form of ill will or especially culpable behavior before awarding punitive damages, a requirement for which economic explanations of punitive damages cannot easily account And insofar as retribution is asserted as a justification, he points out that transferring punitive damages to the state to finance the state’s criminal justice system might better serve retributive objectives, at least as “retribution” is ordinarily understood.
Further, Encarnacion identifies difficulties with treating punitive damages as either a form of revenge or as a civil avenue for revenge. To be sure, these approaches have the structural advantage of not exclusively focusing on the wrongdoer to the exclusion of the victim. But, he argues, seeking revenge might be a normatively undesirable interest for the state to pursue. And the alternative of providing a civil remedy as a substitute for revenge (or in order to avoid civil unrest) is still troublesome insofar as it does not explain why tort law awards punitive damages to the plaintiff.
Encarnacion also notes and critiques two other strategies for dissolving the problem. The first approach justifies punitive damages as properly awarding compensation for intangible and dignitary injuries that compensatory damage criteria sometimes undercompensate. The second justifies punitive damages when the defendant has inflicted social harms on the community beyond the harm to the plaintiff. But, Encarnacion persuasively replies, these approaches ignore the genuinely “punitive” feature of punitive damage awards: these awards are available only for especially egregious conduct that deserves punishment.
What is Encarnacion’s solution? In his words:
Punitive damages empower victims to act punitively against their oppressors by requiring them to finance those victims’ resilience interests—i.e., their interests in bouncing back better than before the wrongdoing—if they so demand. (P. 25.)
Encarnacion uses the term resilience, not in the popular sense of a character trait of persistence in the face of adversity, but in the sense of the victim actively responding to a setback by “mak[ing] oneself better off, in some meaningful sense, than before [the] setback.” (P. 29.) Encarnacion builds his approach on philosopher Jean Hampton’s account of retributive justice. Hampton viewed retributive punishment as defeating the wrongdoer and countering the wrongdoer’s message that the victim is subordinate to the wrongdoer. But, Encarnacion argues, “[r]esilience … complements the retributive message by communicating that not only has the wrongdoer been defeated, the victim has emerged victorious, as demonstrated by becoming better off (in some sense) than before.” (P. 34; emphasis in original.) Creating this “counterstory” signals to others how the victim should be treated and demonstrates to victims their agency and dignity. By contrast, merely restoring the victim to the status quo ante is inadequate (P. 36.) Punitive damages enable plaintiffs to make themselves better off by securing justice against their wrongdoers, in effect “transforming their malefactors into benefactors” (page 1). Criminal law theorists have recently offered potent criticisms of retributive justice theories: they justify cruel and destructive punishment practices and legitimize the problematic view that causing wrongdoers to suffer is intrinsically good. By contrast, Encarnacion believes that his account shows how retributive justice can be a constructive rather than destructive practice.
Encarnacion concludes his largely theoretical analysis by identifying two practical implications of his approach. First, he would sharply distinguish “retributive damages” from “deterrence damages”: although the plaintiff is entitled to the former, the latter could be shared with the state in order to avoid unjust windfalls to plaintiffs. Second, he would revise the list of factors that juries are instructed to consider when awarding the retributive type of punitive damages: juries should consider culpability-related factors, but should not consider incentives on plaintiffs to bring claims or deterrence of would-be wrongdoers. The wealth of the defendant (which is typically considered under existing law) could also be relevant, “since a $1,000 punitive damages award may not qualify as genuinely punitive to a multi-billionaire because it will fail to signal the plaintiff’s victory unambiguously” (P. 48), insofar as a larger punitive award against a wealthy defendant is needed in order to express plaintiff’s resilience interests. Provocatively, Encarnacion suggests that the victim’s wealth should also be a relevant consideration when the defendant is relatively impecunious, militating against a punitive damage award, because making a wealthy plaintiff better off in this situation would conflict with the principle that the punishment must be proportionate.
This is a well-reasoned and impressive article, demonstrating theoretical sophistication and containing insightful analysis of tort doctrine, tort theory, and punishment theory. Not surprisingly, Encarnacion’s highly original perspective raises a number of questions, questions that I hope he addresses in future work:
- Why does resilience entail that the victim be made financially better off via punitive damages? Suppose P’s life goes much better after (and because) P suffers harm from D’s tort. (P writes a successful book about the experience, or P meets the love of his life in the hospital while recovering from his injuries.) Should such a P be denied punitive damages?
- How do we resolve the tension between imposing an amount of punitive damages that is proportional to defendant’s wrong and empowering the victim to be better off than if the victim had not been wronged? Put differently, how much better off should the victim be? If punitive damages are ten or one hundred times compensatory damages, is that excessive? If they are only 10% more than compensatory, is that inadequate?
- What if the direct victim of the tort has died? Should family members or the victim’s estate be entitled to punitive damages? Isn’t the expressive value of recognizing the victim’s resilience weaker in this situation? Yet it would be problematic not to permit punitive damage awards in death cases.
- Does criminal punishment itself satisfy Encarnacion’s criteria of retributive justice? How does inflicting punishment on criminal wrongdoers make victims better off than before they were victimized?
The article would also benefit from additional concrete examples, especially of punitive damage awards against corporate wrongdoers.
Despite these questions, Encarnacion’s article is intriguing, creative, and ambitious, thoughtfully addressing fundamental questions in both tort theory and punishment theory. It should be of great interest to academics in both fields.
- I add the qualification “nontrivial” portion because critics of punitive damage awards might be willing to accept punitive awards as consistent with a compensatory rationale if those awards are modest. For example, if the victorious plaintiff must pay 1/3 of the compensatory damage award to his lawyer, the compensatory award arguably should be increased proportionately (in this case, by ½) so that the net award to the plaintiff provides full compensation for his injury.