The institution of civil punitive damages has been almost entirely ignored in the modernization of the concept and practice of rational punishment. Although there have been many empirical studies of punitive damages awards along with a lively debate concerning their magnitude and effect, there has been no serious effort to subject the institution of punitive damages to the same level of analysis and reform that has occurred with respect to other forms of punishment in American jurisprudence. As a consequence, the punitive damages debate has appeared to be merely a battle among interests, neglecting entirely the history and reform of punishment under the law, arguably Western legal systems' most notable modern achievement.

Although a civil remedy, punitive damages are surely an element of punishment. The ambition and justification of punitive damages in all jurisdictions is to punish and deter. As I shall explain, however, punitive damages are a very peculiar form of punishment. Most importantly, punitive damages are a punishment the severity of which is determined largely by a jury of laypersons with very limited constraints on the severity of punishment that the jury may determine. While all states are obliged to provide judicial and appellate review of a jury's punishment decision,1 there remains a strong ethic in this democratic country to defer to a jury's decision over a very large range. Even though the U.S. Supreme Court last year announced further due process limitations on punitive damages awards,2 the Court provided as the basis for judicial review concepts of such broad generality--degree of reprehensibility; proportionality to compensatory damages; relationship to criminal punishment--that the Court's opinion must be regarded as confirming the wide discretion afforded civil juries in determining the appropriate level of punishment.

Although this point has not been sufficiently emphasized, entrusting lay juries with the authority to determine levels of fines or punishment is archaic and is in conflict with 200 years of reform of the implementation of punishment under the law. Indeed, the movement away from jury determination of fines and punishment was complete in the federal courts at the founding of the Republic. From the beginning of the Republic, juries in federal courts were never allowed to set criminal fines or punishment; discretion was afforded solely to federal judges.3 This pattern of historical development has been true in the states as well. There remain a handful of states in which juries retain a limited role in criminal sentencing,4 but there are no examples, as with civil punitive damages, where a lay jury is empowered in the first instance to levy a fine or punishment of any imaginable number which can be levied in addition to any available criminal punishment.

The transfer of discretion to determine fines and punishments from juries to judges was only the initial step in punishment reform. The broader and more important reform achievement has been the establishment of maximum fines and punishments by statute by Congress and by the state legislatures. This punishment reform, too, is hardly modern. The 1st Congress enacted a statute setting a maximum fine for an offense even before it established the federal courts in 1789.5 And in the following year, the Crimes Act of 1790 set maximum fines and punishments for a large number of federal offenses.6 The pattern in the states was similar. Going further, at both the state and federal levels, the appropriate level of punishment--subject to the statutory maxima--has been shifted, not only from juries to judges, but also from judges to punishment experts who initially advise the judge through a sentencing report and subsequently are authorized to revise the judge's punishment ruling through the institution of parole.7 Thus, the broad direction of punishment reform in the U.S. (as well as in other Western nations) has been totally away from determination by lay jury to determination by punishment experts subject to legislatively determined statutory maxima.

Why are punitive damages different? How has the institution of civil punitive damages escaped these reform initiatives? There are no conceptual justifications for treating civil punitive damages differently from civil or criminal fines. Both punitive damages and fines seek to inflict financial punishment upon a wrongdoer in order to achieve the societal goals of punishment and deterrence. These goals of punishment and deterrence are not essentially different in the civil and criminal contexts. Surely, there is no difference that would justify largely unlimited fines, such as punitive damages, in the civil context and fines limited by statute and expert decision in the criminal context. If anything, the reverse.

The answer, I believe, is implicit in the empirical findings of the recent Rand Corporation study and of other studies8 that civil punitive damages were largely inconsequential through the 1960s and remain inconsequential in many states today. These studies show that civil punitive damages awards were infrequent in number and of very small magnitude until the broad expansion of civil liability in the 1970s and 1980s. Thus, as recently as two decades ago, the institution of civil punitive damages was a backwater and, in that position, was ignored entirely by the punishment reform movement.

Civil punitive damages, of course, are no longer a backwater. With the expansion of standards of civil liability, the restriction of defenses in civil tort actions and the increasing delegation of decisionmaking authority to juries (by a reduction in judgment on motions, such as summary judgment),9 punitive as well as compensatory damages verdicts have increased exponentially. Within the past two years, we have observed single juries of laypersons rendering punitive damages verdicts of $100 million, $167 million, $250 million. The Rand Corp. study shows that in financial injury cases from 1985-94, the average punitive damages verdict in California equalled $5.7 million and in Harris County, Texas, $6.7 million.10 My study of punitive damages verdicts in Alabama showed that in one small rural county, the average punitive damages verdict from 1989-96 equalled $12.9 million.11 These verdicts, of course, were subject to judicial review, but my study showed that the average punitive damages verdict affirmed by the Alabama Supreme Court from 1989-96 equalled more than $800,000.12

Verdicts of this magnitude must be a source of concern in any country committed to the rule of law. There are many social policy reasons to regard the modern punitive damages phenomenon as inimical: Punitive damages verdicts must be passed along in the prices of products and services, thus increasing costs to consumers and especially to low-income consumers. Such verdicts impair innovation. They are attended--as is any prospect of a windfall--by wasteful investments to achieve them and, however necessary, investments to resist them that are equally wasteful from society's view.

Punitive damages verdicts of this nature also impair interstate commerce. The incidence and effect of punitive damages is not limited internally to citizens of a state as is true of other features of our federal system. Most harmful is discrimination in the imposition of punitive damages as between in-state and out-of-state defendants. For example, my study of Alabama punitive damages verdicts showed that, over the period 1989-1996, the average trial jury punitive damages verdict against an Alabama defendant was $961,045, while the average verdict against an out-of-state defendant was $6,382,360, over 6.6 times as much. Again, jury verdicts are subject to appellate review in Alabama as elsewhere. Over the same period, however, the average punitive damages verdict affirmed by the Alabama Supreme Court against an out-of-state defendant was 8.75 times higher than against an Alabama defendant.13

The bill currently before this Committee--S. 1554--seeks to place some limit on the extent of punishment and deterrence in financial injury cases, most centrally a limit of the greater of three times compensatory damages or $250,000. Viewed in historical context, this limitation represents only a partial step in the movement toward punishment reform. As a partial step, the bill can be easily defended although, in the movement toward punishment reform, the bill most clearly resembles, say, the maximum fine set by the 1st Congress in 1789.

It must be emphasized, however, that this bill represents only a partial step toward punishment reform. First, it extends only to financial injury cases. (In my view, the reform should be extended generally to all civil litigation.) Secondly, the maximum set for punitive damages verdicts by the bill remains very high, certainly in comparison to criminal fines. A fine of $250,000 is very substantial, implying serious criminal dereliction. Of course, the bill does not establish the punitive damages verdict as an alternative to criminal prosecution, so existing criminal fines remain available beyond any punitive damages verdict.

Nevertheless, it is worthwhile and important for this Congress to begin the process of extending modern ideas about punishment and deterrence to the context of civil punitive damages. It may appear to be weak praise to complement a Congress for reaffirming a reform initiative first adopted in 1789. But the unfortunate effects on today's citizenry of our largely unconstrained civil punitive damages regime are real and significant. Any effort made to limit those unfortunate effects--as with the enactment of S. 1554--deserves serious support.