Punitive Damages and the Rule of Law: The Role of Defendant’s Wealth
Until recently, the rules governing punitive damages occupied a dark corner of the law. With the upsurge in product liability and other mass tort litigation, and increased "bad-faith" claims against insurance companies, these rules have been exposed to the brighter light of legal controversy. Yet one feature of the law of punitive damages remains unexamined: the long-standing rule that the defendant's wealth is relevant in determining punitive awards. In this article, we examine this position and the arguments that support it. We find them unpersuasive. In our view, the defen- dant's wealth is irrelevant to the goal of deterring socially undesirable conduct and is an improper consideration in assessing the basis for retribution. The law should be changed, and evidence of the defendant's wealth should be made inadmissible in private actions for punitive damages.
Underlying our arguments on both deterrence and retribution is our belief that evidence of the defendant's wealth threatens norms linked to the rule of law. Most obviously, it invites punishment based on status- on who the defendant is, rather than on what the defendant has done. Considerations of that sort may be impossible to squeeze out of the system entirely, but that is no reason to tolerate them unnecessarily. More subtly, and more dangerously, evidence of the defendant's wealth invites the jury to speculate about conduct not proved in court. For a wealthy defendant with recurrent business affairs, the assumption too easily can be made that this instance is only the tip of the iceberg. The jury that is satisfied with the proof of one specific instance of misconduct too readily may conclude that similar, undetected incidents have occurred as well. Punishment may then be based on undisciplined speculation about what lies below the surface. Admitting evidence of the defendant's wealth invites conjecture of this sort, as well as judgments based on mere status, and is for that reason doubly objectionable.