Courts in the U.S. have widely recognized that punitive damages can be justified on grounds of either deterrence or retribution. As conventionally justified, however, the deterrence rationale for punitive damages apparently violates the federal constitutional requirement of due process for reasons that are likely to be of concern for any jurisdiction that justifies punitive damages in this manner. To promote the objective of general deterrence, tort law must subject risky actors to liability for the full cost of the injuries that they have tortiously inflicted on others. Liability for compensatory damages can achieve this outcome, but in many cases the tortious actor is not sued by the full set of victims. The ensuing liability shortfall can be offset by the award of punitive damages to those victims who successfully sue and recover compensatory damages. These punitive awards, however, are based on nonparty harms for which the defendant has otherwise avoided liability. Consequently, if harms to nonparties are excluded from the damages calculation as a matter of due process, then it would seem to follow that courts are prevented from formulating punitive damages to further the social interest in general deterrence.
The limitation of punitive damages to the amount required to vindicate the plaintiff’s tort right, however, does not prevent these awards from furthering the social interest in general deterrence. In a mass market, the rights-violation suffered by the plaintiff/consumer (e.g., physical harm caused by the defectively designed product) is no different from the violations faced by a large number of similarly situated rightholders (other consumers in the market exposed to the defective product). Due to the interdependence of rights-violations in mass markets, a punitive award that fully vindicates the plaintiff’s tort right will necessarily account for the manner in which the defendant failed to adequately account for the interests of similarly situated rightholders. Punitive damages can further the social interest in general deterrence, even though the fundamental requirement of due process limits a defendant’s tort liability to the amount of damages that vindicate the plaintiff’s individual tort right.
Geistfeld, Mark, Due Process and the Deterrence Rationale for Punitive Damages (October 26, 2011). THE POWER OF PUNITIVE DAMAGES, R.C. Meurkens, E. Nordin, eds., IUS Commune Europaeum Series, 2011; NYU School of Law, Public Law Research Paper No. 11-76; NYU Law and Economics Research Paper No. 11-38.