INTRODUCTION :: In a series of cases over the last two decades, the Supreme Court has used the Due Process Clause to establish a procedural and substantive framework for awarding punitive damages. Initially, the substantive aspects of this framework were sufficiently flexible and clear that they required little change in the system and probably generated a helpful level of debate and uniformity as to some basic requirements for awards. However, starting with BMW of North America, Inc. v. Gore, the Court began an effort to micromanage the process of awarding punitive damages by imposing on the state courts its own substantive framework for determining the amount of punitive damages. This framework has made the process less fair and reliable because the Court’s decisions have shown a lack of clarity and consistency, an inadequate basis in terms of theory and policy, and an ad hoc approach to the application and construction of the framework.
The Court’s recent decision, Philip Morris USA v. Williams, illustrates these problems. The case requires states to instruct juries in terms of the following distinction: Juries may consider harm to third parties in determining the amount of punitive damages (because such harm is relevant to the degree of reprehensibility of a defendant’s conduct), but juries may not increase punitive damages awards to punish “directly” the defendant for this harm. The four dissenting Justices refer to this distinction as elusive and unclear. Their concern can be summarized by the following question, which the majority never addresses: If an additional amount of punishment is imposed because harm to a third party from similar conduct makes the conduct that harmed the plaintiff more reprehensible, then what is the nature and purpose of this additional amount if it is not punishment for the third-party harm? The Williams case requires states either to do something that is virtually impossible-i.e., craft an instruction that enables lay persons to follow a distinction that is unclear to four Supreme Court Justices-or to give jury instructions that are, at best, empty formalistic incantations about a meaningless and potentially confusing distinction. Thus Williams most clearly indicates that the Court’s ad hoc attempts to develop a “moral” framework to prevent “grossly excessive” awards of punitive damages may fall within Karl Llewellyn’s statement that “morals without technique is a mess.”
To place Williams in context, Part II of this Article summarizes the procedural and substantive aspects of the Supreme Court’s constitutional scheme. Part III critiques the substantive standard of “grossly excessive” punitive awards in terms of four concerns: precedent, clarity and consistency, novelty and utility, and theoretical basis. This discussion does not offer a “solution” to the problems raised by these concerns. Instead, it analyzes each concern in terms of its importance and, in some cases, intractability. Because of possible arguments that constitutional standards, even if vague, are needed, Part IV discusses the Court’s reason for imposing a necessarily vague standard in this area. This Article concludes in Part V by arguing that, because continuing the current approach to identifying grossly excessive awards is both unnecessary and likely to do more harm than good, the Court should be more deferential to state courts and legislatures, and more concerned with developing a coherent framework.
November 2014, Vol. 66, No. 6
Lily Kahng, The Taxation of Intellectual Capital