Module 6: Damages

A signal feature of the tort law system is its view that money damages can compensate victims for some amount of their pain and suffering, beyond merely repairing them by reimbursing them for actual expenses incurred and injuries suffered through the torts of others. The idea is compensatory in nature of course, but also aimed at achieving fairness and efficiency through risk allocation, loss distribution and identifying “deep pockets” (who can best pay and/or internalize the costs). While damages undoubtedly deter unreasonable behavior to some extent, the force of deterrence may be different in the civil law context of torts. The reason defendants fear liability is not the same as it would be in the criminal context where they may face financial penalties but also risk social judgment, impact on employment prospects, potential loss of suffrage and of course loss of liberty through imprisonment. Typically, in torts it’s the fact and size of money damages that strikes fear or maybe just caution in the hearts of industry actors.

In a small category of cases, say professional malpractice, where significant reputational harms attach, beyond and discrete from the financial burden imposed by money damages. In many cases, corporations and businesses treat tort liability as a cost of doing business, and they don’t really care how tort liability makes them look to the public. To invoke (and again paraphrase) Judge Richard Posner’s point, perhaps some accidents aren’t worth the cost of avoiding, or of taking precautions to avoid. Some risk is cheaper to assume than to prevent. The negligence calculus (or “Hand formula”) reflects this logic in specifying that a defendant has not breached a duty when the precautions exceed the likelihood of meaningful harm. Another way of putting this is that the defendant has acted reasonably from an economic perspective. Finally, in a smaller number of cases, plaintiffs aren’t seeking money damages, they’re seeking some form of injunctive relief, more like a property remedy. They may wish to stop their neighbor from using part of their land for some objectionable purpose or they may wish to force a company to stop polluting a community’s work water source. But in most cases, the remedy at hand is money.

Most trials bifurcate into separate liability and damages phases and, as with so many parts of tort law, the jury plays a significant role in determinations of damages.

Several kinds of damages exist. Nominal damages are largely symbolic and awarded by a judge to clarify parties’ positions or vindicate an interest even where money damages do not attach or additional harms have not been proven (as you saw in battery and trespass). The court may order $1 or instruct the losing part to pay court costs, for example. The purpose of nominal damages is to clarify the parties respective interests and/or show that the defendant committed the tort, which will presumably cause a change in behaviors going forward.

Compensatory damages exist to repay the plaintiff for the expenses they have incurred as a result of the tortfeasor’s conduct. These awards, when made for expenses associated with physical injuries, are not usually treated as taxable income but rather like a reimbursement of expenses that would not have been incurred but for the defendant’s breach of due care. Thought to be the best approximation of what the P actually suffered, that is, the means of “making the plaintiff whole again.” These are by far the most common kind of damages encountered in tort litigation. They include both pecuniary and non-pecuniary losses. Pecuniary losses may include damage to property and the costs to repair or replace (as well as costs associated with temporary substitution such as a rental car or home during the pendency of repairs). Pecuniary losses may also include the costs associated with personal injury damages including present and relevant future medical expenses; lost wages and/or future diminished earning capacity as well as any other economic costs associated with the physical injury, including any other economic expenses incurred because of the injury (think of transportation; maybe the plaintiff can no longer drive and will require buses, taxis, or a specially outfitted vehicle). When lost wages are awarded, they are ordinarily taxed in the way that employment compensation would have been. Other exceptions apply and the rules are both complex and liable to change with various tax reforms. However, it can be a helpful dividing line conceptually for students to think of compensatory damages as being the amount that plaintiffs proved they had spent for their suffering or persuaded the trier of fact that their suffering was “worth.” Punitive damages differ in being additional to that baseline amount.

All of those pecuniary losses are sometimes called “special damages” and distinguished from “general damages” which are awarded in connection with pain and suffering. These are sometimes harder to quantify but they are unquestionably available and not controversial when allocated in connection with physical injury. Some jurisdictions have created statutory caps on damages and those that do may cap general damages in particular. They are associated with potentially arbitrary and excessive awards because they may lack the specific and trackable character of special damages. Note that the defendant’s conduct does not control the amount of the plaintiff’s compensatory damages. The damages are based on the plaintiff’s injury because these damage awards aim to restore the plaintiff to a pre-accident state. In that sense, compensatory damages reflect the commitments underlying the eggshell plaintiff doctrine.

By contrast, punitive damages exist only in extraordinary cases and the plaintiff must prove that the defendant’s conduct was not merely unreasonable (which was established in the liability phase of the trial) but also included something like “malice” or “wanton or willful violence” (the precise standard varies by jurisdiction). These are damages intended to deter and punish egregious conduct. Unlike compensatory damages, punitive damages are taxable by default because they are considered to be extra compensation, beyond the remuneration the plaintiff needs to be whole again. They are sometimes used for amounts that might not otherwise be recoverable such as attorney’s fees or time lost litigating (especially in bitter litigation with a vindictive or trivial aspect to it). Most often awards of punitive damages go straight to the plaintiff. However, in some states, because these awarding of punitive damages is thought to be similar in purpose to criminal punishment and the plaintiff does not need them, awards of punitive damages may go to the state. These damages are always permissive, not mandatory—that is, they are discretionary for the jury and never awarded automatically. In some instances, such as in cases of vicarious liability in claims arising under the FTCA, punitive damages are unavailable.

Questions or Areas of Focus for the Reading

  • Are damages truly intended to “make P whole again”? Is this a subjective standard?
  • If so, why are juries told to make “fair and reasonable” awards?
  • Should the language of “wholeness” be abandoned?
  • Are statutory caps on damages (which have been ruled constitutional) undercutting the compensation principle?
  • Where do awards for pain and suffering fit in?
  • Should punitive damages be subject to the same or different rules and limitations?
  • Why does the system require proof of harm in some cases, and not others?
  • Why does the system take some kinds of harm more seriously than others?

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