Punitive damages awards are intended to punish a defendant’s misconduct and deter future incidents of the same behavior. But over the years, plaintiffs’ lawyers have found ways to exploit the original intent of these awards for bigger paydays. A new ILR study, Unfinished Business: Curbing Excessive Punitive Damages Awards, examines how punitive damages have accelerated since the 1970s and have become increasingly large and disproportionate. Punitive damages awards have far outgrown their purpose, and the awards are often much larger than necessary to serve any legitimate interest in punishment and deterrence.
The study found alarming trends in the frequency of these massive verdicts between 2016 and 2022:
- The number of punitive damages awards over $25 million varied from 16 to 33 annually.
- The median punitive award increased from $35 million in 2017 to more than $87 million in 2022, with the mean topping $690 million that year.
There are hidden costs to rising punitive damages for consumers and businesses. Insurance becomes more expensive and harder to buy for businesses of all sizes, prices of goods and services increase for consumers as businesses pass along unexpected costs, and the added uncertainty of huge, arbitrary damages awards has a chilling effect on the market.
The study highlights many reasons behind this growing litigation trend. Plaintiffs’ attorneys use “reptile” courtroom tactics to target jurors’ emotions and propose astronomical damages awards to juries that become anchored in their minds—making smaller, but still huge verdicts seem reasonable. Plaintiffs’ attorneys often also use a defendant’s finances to convince juries to justify awards based on how much money a defendant might have, rather than focusing on the conduct at issue. And judges frequently fail to prevent excessive damages awards or meaningfully reduce them when they occur.
That is not to say that courts and state policymakers haven’t attempted to address the issue. Many states have imposed limits of various kinds on punitive damages, and some have been able to put a ceiling on out-of-control verdicts. But even in those cases, the ceiling is often very high. The U.S. Supreme Court has also ruled in a series of landmark decisions on punitive damages awards to provide reasonable limitations and guideposts on punitive damages. Still, these have had mixed results, as ILR’s research shows, and the Court has so far declined to define a bright-line rule or formula to identify a given punitive damages award as unconstitutionally excessive.
Fortunately, courts and state legislators can implement solutions to rein in excessive punitive damages awards. Some suggested reforms from the study include providing more guidance to jurors, increasing procedural safeguards, and banning certain tactics used to inflate awards.
If punitive damages are intended to serve a legitimate public interest in punishing and deterring reprehensible behavior, the current trajectory is unsustainable. It is time for courts and state policymakers to take the increase in the size of punitive damages seriously and enact reforms to right-size them. Businesses and consumers deserve a fairer, more stable, and more predictable civil justice system. Only plaintiffs’ lawyers benefit from the status quo.