Many chapters of this book discuss the theories and methods of calculating actual damages in order to compensate plaintiffs for their loss. Such calculations of actual damages focus on making plaintiffs whole and restoring them to the position they would have been in but for the defendant's wrongful acts. In contrast, punitive damages aim to punish reprehensible conduct and deter future wrongdoers by penalizing defendants; the courts accomplish this by levying amounts that exceed the actual damages of the plaintiff. Punitive damages, also referred to as exemplary or vindictive damages, therefore focus not on principles of economic loss but on the requisite amount to achieve punishment and deterrence without being excessive for that purpose.
No standard formula exists to quantify punitive damages and ascertain the appropriate level of punishment. Ironically, both the strength and weakness of this type of award lies in its unpredictability. On the one hand, if potential wrongdoers could predict the punitive damages amounts, they could include the cost of potential awards into the cost of doing business, which could result in a failure to deter harmful conduct.1 On the other hand, the lack of clear standards has led to some wildly unpredictable results, with punitive damages awards of more than 100 times the actual damages sustained. A number of important court cases ...