Wednesday, April 18, 2007
A new SSRN posting from Alexandra Klass (Minnesota) (forthcoming Minnesota Law Review) addresses valuing harm (i.e., the denominator in the 9:1 punitives: compensatory ratio) under State Farm and its progeny. The abstract:
In 2003, the Supreme Court created a presumption that only single-digit ratios of punitive damages to compensatory damages would satisfy substantive due process limits. The exception to this presumption is when the defendant's misconduct results in only a small amount of compensatory damages or when harm is difficult to value. This Article proposes that while lower courts have properly departed from single-digit ratios where the compensatory damage are small, they have had more difficulty doing so when harm is difficult to value. As a result, lower courts are mechanically applying a single-digit ratio in cases where the Court's current framework and the purposes of punitive damages justify departure from that ratio. This Article uses actions involving intentional torts on the one hand and private party actions involving environmental harm on the other to illustrate how lower courts have failed to fully implement the exception to single-digit ratios. This Article proposes that in conducting a due process analysis of punitive damages, courts should focus on the existence of uncompensated harm to either depart from single digit ratios or, in the alternative, calculate punitive damages based on the full amount of harm even if that exceeds the compensatory damage award. To avoid “windfalls” to plaintiffs in cases involving harm to public natural resources, state legislatures or state courts should utilize a “split-recovery” approach to direct a significant portion of punitive damages based on public harm to governmental or nonprofit coffers for environmental remediation. Such an approach is consistent with due process while still fulfilling the purposes of punitive damages.