Punitive Damages in the U.S.: Theoretical Contradictions in Legal Doctrine and Supreme Court Rulings

This is not the first time punitive damages have been discussed in this forum. As Professor Thais Pascoaloto Venturi aptly noted, this legal concept was gradually incorporated into U.S. law, having been established by Supreme Court decisions as early as 1851, and has since spread to nearly all states, always with the aim of punishing and deterring or preventing conduct that proves to be particularly malicious, oppressive, or cruel.

American theories on punitive damages are divided into three approaches regarding their function: to punish the wrongdoer, to compensate the victim, or a hybrid of both. The U.S. Supreme Court itself has discussed the purpose of punitive damages on several occasions, reaching different conclusions.¹ In fact, in its well-known trilogy regarding the limits of the due process clause, SCOTUS simultaneously affirmed, on the one hand, that the purpose of punitive damages is to “punish wrongful conduct and deter its recurrence” and, on the other hand, that compensation for damages depends on and is closely connected to the punitive award.² Ultimately, the Supreme Court appears unable to decide whether punitive damages are intended for the wrongdoer or the victims.

The term “punitive damages” is key to understanding the two most prominent explanations for the purpose of this legal remedy in the U.S.: punishment and compensation. If they are “punitive,” the objective is to punish the wrongdoers, emphasizing deterrence and retribution; however, if they are “damages,” the purpose is to compensate the victims for a private tort, providing them with redress. If punitive damages serve both purposes, as the Supreme Court ruled in 2020,³ the challenge will be to reconcile their functions in each case.

Most scholars believe that the purpose of punitive damages is to punish wrongdoers, discourage undesirable behavior (deterrence), and establish merit (desert)—“desert” in the sense that the defendant deserves punishment.⁴ There are nuances to these terms, but there is something unsettling about the idea that the most influential justifications for punitive damages are based not on civil remedies but on criminal punishments.⁵

In fact, punitive damages are traditionally awarded for two purposes: retribution (punishment) and deterrence. Retribution requires that the conduct reveal extreme social reprehensibility —malice, evidenced by the defendant’s intent or gross negligence—combined with deterrence, in the sense of directing the penalty to afflict the offender, thereby inducing them not to repeat similar antisocial and outrageous behaviors. While U.S. and Canadian courts use the term “punitive damages,” other jurisdictions—such as the United Kingdom and Australia—opt for “exemplary damages.” It cannot be said that these terms have identical meanings, as the choice of one over the other has implications for the systemic framework. The term “punitive” emphasizes a focus on punishment; conversely, the use of the term “exemplary” indicates that the primary purpose is to serve as a deterrent that wards off the possibility of repeating the same conduct.

Among the best-known theorists on the deterrent function of punitive damages, Mitchell Polinsky and Steven Shavell argue that punitive damages should only be imposed on defendants to the extent that they are able to evade liability for the full extent of the damages they have caused, in order to adequately deter these defendants and others who might consider committing similar unlawful conduct in the future.⁶ For example, in a well-known case decided by Judge Richard Posner, a motel that repeatedly rented rooms to guests knowing that the rooms were infested with bedbugs (systematically lying and strategically moving its guests from one infested room to the next) was correctly awarded punitive damages, since the compensatory damages that any plaintiff could recover would be insufficient to “limit the defendant’s ability to profit from its fraud by evading private prosecution.”⁷ In this vein, Polinsky and Shavell argue that the moral reprehensibility of the defendant’s conduct is “irrelevant” to the appropriateness of punitive damages: “the focus in determining punitive damages lies on the likelihood that the wrongdoer will escape liability.”⁸ However, a deterrent approach to punitive damages has been constrained in practice by various constitutional limitations that often restrict the amount of punitive damages to levels of deterrence that fall short of the ideal.⁹

And there are other practical problems with a purely deterrent approach to punitive damages. In fact, several states incorporate deterrence-based principles into their punitive damages regimes, although none of them has adopted deterrence exclusively. The fact is that several empirical studies show that optimizing deterrence is not the primary reason why judges and juries award punitive damages.¹⁰ The trend is for punitive damages to be awarded in proportion to compensatory damages, primarily as a moral condemnation of the defendant’s conduct rather than for deterrent purposes. Anthony Sebok asserts that the incompatibility between punitive damages under deterrence theory and punitive damages in practice demonstrates that the pattern is more consistent with the traditional view, which emphasizes the retributive component, than with the “law and economics” perspective, which emphasizes efficient deterrence.¹¹

The other conventional punitive justification for punitive damages concerns the agent’s merit (desert)—a version tailored to civil liability of the retributive function of punishment in criminal law.¹² Often, merit is simply assumed to be at work, but the precise contours of the retributivism in question—its nature, which rights are being asserted, the nature of the social interest at stake—are not well explained. One of the most careful retributivist accounts is that of Dan Markel, who argued that retributivism in criminal law consists of “communicating to the offender that we are respecting him by holding him accountable as a moral agent capable of choosing to act unlawfully and, therefore, blameworthy.”¹³ Various egalitarian commitments, such as “equal liberty under law” and “democratic self-defense,” contribute to Markel’s view of retributivism as a communicative act by the liberal democratic regime toward the guilty agent. However, the main actors in the theory are the offender and the state, not the victim. Markel applies this explanation to the context of punitive damages: damages that can be sought by any government official (not just the victim) to advance public interests, with the state (not the victim) receiving the lion’s share of the punitive damages award.

Markel’s approach has the merit of drawing on criminal law to understand the nature of the tort that gives rise to punitive damages. But the justification of “desert” leads to a controversial and highly biased conception of retributive justice in criminal law, applied indiscriminately to civil liability. Even if we are persuaded by the argument that a direct and powerful message from the community to the wrongdoer is an appropriate function of private law,¹⁴ the plaintiff is almost invisible in this theoretical description of punitive damages.

Consequently, one of the most serious problems with both punitive models of the function of punitive damages is that they do not consider them to be compensation. Both rely excessively on criminological justifications and are oriented toward the collective good. Markel, for example, would allow people who were not victims of wrongdoing to file independent claims for punitive damages—something likely prohibited by the Supreme Court in Philip Morris v. Williams.¹⁵ And most of the compensation would go to the government, suggesting that punitive damages are not compensation per se, but rather serve some other socially beneficial function.¹⁶

What seems to be missing from these theories of punitive damages—whether motivated by deterrence or merit—is an approach capable of explaining their nature and function as compensation resulting from a “sense of outrage,” which is the real and overriding reason for their award.¹⁷ Punitive damages depend, for their very existence, on the finding of harm and are directly proportional to the amount of prior compensation awarded as compensatory damages. However, punitive theories do not consider punitive damages to be compensatory or separate from compensation for civil liability. What is needed, therefore, is an explanation of the meaning of the “sense of outrage” that motivates the application of punitive damages in specific cases, rather than any theoretical justifications, as well as the connection between punitive damages and compensation for the victim.

Furthermore, another account of the function of punitive damages maintains that they provide redress to victims who have suffered a particularly serious tort. Civil liability acts as a system of private redress for private torts, and punitive damages fit within this framework as a civil remedy for particularly serious torts. The “civil recourse” theory situates punitive damages within a broader view of civil liability, emphasizing redress for the tort and prioritizing the idea of fair compensation over full compensation as the primary remedy in the civil liability model.¹⁸ This model reserves a place for punitive damages as a form of compensation for a specific category of wrongdoing.

By way of illustration, John Goldberg argues that punitive damages become “quite intelligible if understood as a type of payment for damages reserved for victims of a particular type of serious wrongdoing, which, in turn, grants them the right to a particular kind of response.”¹⁹ What is at stake in punitive damages, Goldberg emphasizes in another passage, is not the state’s interest in obtaining retribution on behalf of citizens or in deterring deceptive market practices, but rather the plaintiffs’ interest in asserting their rights not to be mistreated in the manner in which they were.²⁰ Similarly, Thomas Colby emphasizes a historical function of punitive damages, concerning redress for an insult to the victim’s honor or dignity²¹, which depends in part on the plaintiff’s status. Benjamin Zipursky emphasizes that punitive damages have a “civil aspect,” reflecting the plaintiff’s right to punish—a right that exists because of the manner in which the plaintiff was wronged—deliberately or maliciously. The so-called “right to be punitive” is the privilege of seeking redress for a distinct type of private wrongdoing.²²

In fact, by conceptualizing punitive damages as a specific type of aggravation of a preexisting injury that results in the need for distinct compensation, the “civil recourse” theory provides a rationale for the requirement of a prior compensatory award and for the proportionality between compensatory damages and punitive damages. The civil recourse theory is superior to other approaches to punitive damages, as it integrates them into the civil liability system. However, like punitive theories, “civil recourse” offers no guidance on what should be considered a serious wrong, so the basis for punitive damages remains unclear. The theory of civil recourse could resolve this problem with a comprehensive normative explanation of wrongfulness that addresses the purpose of punitive damages.

Michael Moreland and Jeffrey Pojanowski explain that the “civil recourse” theory is reluctant to offer normative criteria for what would be considered a wrongful act.²³ Often, its account of wrongfulness seems motivated by common intuitions about wrongfulness: something “widely shared,” though unspecified. In the specific area of punitive damages, while the civil recourse theory holds that plaintiffs are entitled to redress for “flagrant wrongs” or “misconduct,” theorists avoid describing the nature of the “mistreatment,” “outrage,” or other behaviors that justify punitive damages. In fact, there are so many terminological variables (“ill will,” “outrage,” “wantonness,” “fraud,” “abuse of power,” “willfulness,” “evil motive”) that it is not entirely clear what purpose punitive damages serve. The reasons for awarding punitive damages have not been thoroughly examined, even though their objectives have been widely theorized. This is unfortunate, as greater attention to the nature of the wrongs that give rise to punitive damages would clarify their function, whether within the framework of “civil recourse” or in other theories.

In our next column, we will discuss the unique aspects of punitive damages in England. At first glance, to a Brazilian civil law practitioner or one from another civil law jurisdiction, such a statement may seem surprising, insofar as we tend to view the common law as a unified whole when, in reality, the specific characteristics of each jurisdiction are strikingly distinct.

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1. One need only compare the following three cases: Opati v. Republic of Sudan, 590 U.S. (2020) (punitive damages as a hybrid of punishment and compensation) with Cooper Industries, Inc. v. Leatherman Tool, Inc., 532 U.S. 424, 432 (2001) (describing punitive damages as “private fines” imposed by juries) and also with Exxon Shipping Co. v. Baker, 554 U.S. 471, 492 (2008) (holding that punitive damages are not intended to provide compensation, but primarily to serve as retribution to deter harmful conduct).
2. BMW of North America v. Gore, 517 U.S. 559, 568, 575 (1996); State Farm Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417-19 (2003); Philip Morris, USA v. Williams, 549 U.S. 346, 352-53 (2007).
3. Opati v. Republic of Sudan, 140 S. Ct. 1601, 1609 (2020). As Justice Gorusch emphasized: “It’s true that punitive damages aren’t merely a form of compensation but a form of punishment, and we don’t doubt that applying new punishments to completed conduct can raise serious constitutional questions.” Opati was a case involving the Foreign Sovereign Immunities Act as amended in 2008, the issue of which was whether plaintiffs in lawsuits against foreign states could seek punitive damages retroactively for claims predating 2008, with the specific case dealing with victims and their families of a terrorist attack in Sudan in 2008. In May 2020, the Supreme Court unanimously ruled that punitive damages could be claimed against foreign nations prior to the enactment of the amendment.
4. Cass Sunstein argues that “the explicit goals of punitive damages are to deter and punish,” and describes these objectives as “a mixture of civil and criminal law traditions.” In Punitive Damages: How Juries Decide. By Cass R. Sunstein, Reid Hastie, John W. Payne, See, 78 (2002).
5. Martin H. Redish & Andrew L. Mathews, Why Punitive Damages Are Unconstitutional, 53 EMORY L.J. 1, 3–4 (2004) (the authors describe punitive damages as “anomalous” and “uncivilized”).
6. Polinsky & Shavell: punitive damages. An economic analysis. Harvard Law review. V. 111, n. 4, February 1998.
7. Mathias v. Accor Economy Lodging, Inc, 347 F.3d 672 (7th Cir. 2003).
8. Polinsky & Shavell: punitive damages. An economic analysis. Harvard Law review. V. 111, n. 4, February 1998.
9. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003) (holding that the Due Process Clause of the 14th Amendment prohibits, in most cases, a ratio of punitive damages to compensatory damages of 4:1 or greater).
10. "People appear to reject the view, widespread in economic analysis, that punishment should be increased beyond compensation where the probability of detection is low, and that compensation is adequate where the probability of detection is 100%". In Punitive Damages: How Juries Decide. Cass R. Sunstein, Reid Hastie, John W. Payne,See, 78 (2002).
11. Sebok, Anthony J., Punitive Damages: From Myth to Theory. Iowa Law Review, Vol. 92, 2007, Brooklyn Law School, Legal Studies Paper No. 59, Princeton Law and Public Affairs Working Paper No. 06-015, Available at SSRN.
12. Geistfeld, Mark, Punitive Damages, Retribution, and Due Process (October 2007). Southern California Law Review, Vol. 81, No. 2, pp. 263-309, 2008, NYU Law and Economics Research Paper No. 07-39, NYU Law School, Public Law Research Paper No. 07-18, Available at SSRN.
13. Dan Markel, Retributive Damages: A Theory of Punitive Damages as Intermediate Sanction, 94 Cornell L. Rev. 239 (2009). Available at.
14. David G. Owen, In response to Dan Markel, How Should Punitive Damages Work? 157 U. PA. L. REV. 1383 (2009).Response, Aggravating Punitive Damages, 158 U. PA. L. REV. PENNUMBRA 167 (2010).
15. 549 U.S. 346 (2007), 556 U.S. 178 (2009). SCOTUS decision holding that the due process clause of the 14th Amendment limits punitive damages. The decision prohibited the use of punitive damages against the defendant to enforce the rights of third parties.
16. For an elegant discussion of punitive damages as a form of social compensation, see Catherine M. Sharkey, “Punitive Damages Transformed Into Societal Damages,” 113 Yale L.J. (2003). Available at.
17. The Restatement of the Law classifies punitive damages as damages, rather than as a separate category of monetary sanctions. Restatement (Second) of Torts § 908 (1), 1979: “Punitive damages are damages, other than compensatory or nominal damages, awarded against a defendant to punish him or her for outrageous conduct and to deter the defendant or others similarly situated from engaging in such conduct in the future.”
18. All in all, we recommend the most recent work by John Goldberg & Benjamin Zipursky, Recognizing Wrongs, Belknap Press of Harvard University, Cambridge/London 2020. explain the distinctive and important role that tort law plays in our legal system: it defines injurious wrongs and provides victims with the power to respond to those wrongs civilly. The central idea of “civil recourse” is to understand that civil liability is based on a fundamental principle: A person who has been wronged by another in a manner unjustified by law has the right to a civil remedy against the wrongdoer.
19. John C. Goldberg, The Constitutional Status of Tort Law: Due Process and the Right to a Law for the Redress of Wrongs, 115 Yale L.J. (2005). Available at.
20. Goldberg, John C. P., Tort Law for Federalists (and the Rest of Us): Private Law in Disguise. Available at SSRN.
21. Colby, Thomas, Beyond the Multiple Punishment Problem: Punitive Damages as Punishment for Individual, Private Wrongs. Minnesota Law Review, Vol. 87, p. 583, 2003, GWU Legal Studies Research Paper No. 244, GWU Law School Public Law Research Paper No. 244, Available at SSRN.
22. "Punitive damages have a double aspect, corresponding to two senses of 'punitive'. Insofar as they pertain to the state's goal of imposing a punishment upon a defendant who merits deterrence or retribution, they have a criminal aspect. Insofar as they pertain to the plaintiff's 'right to be punitive' they have a civil aspect" Benjamin C. Zipursky, Theory of Punitive Damages, 84 Tex. L. Rev. 105 (2005).
23. Moreland, Michael P. and Pojanowski, Jeffrey A., The Moral of Torts (June 3, 2020). The Moral of Torts, in Christianity and Private Law, eds. Robert F. Cochran, Jr. and Michael P. Moreland, Routledge, Forthcoming, Available at SSRN.