Balancing Deterrence and Cost Using an Inverse Multiplier: A Modification of the Polinsky-Shavell Model for Punitive Damages.ExpressO (2011)
AbstractStates have been dividing punitive damage awards between the government and the plaintiff since the 1980s. However, there has been an academic debate over whether this method of preventing a windfall reduces costs at the expense of deterrence. Polinsky and Che have argued that dividing punitive damages reduces litigation costs by increasing deterrence while decreasing the incentive to bring a suit. Sanchirico and Choi have responded that reducing the recovery of the plaintiff reduces deterrence be discouraging plaintiffs from putting the same effort into lawsuits that defendants do. The effect observed by Sanchirico and Choi can be moderated combining a division of punitive damages between the plaintiff and the state with Polinsky and Shavell’s model of determining the amount of punitive damages based on the likelihood of the defendant escaping liability. After finding the multiplier under Polinsky and Shavell’s model to determine the amount of punitive damages, we can then use an inverted multiplier to determine what percentage of the damages go to the state. The end result is that as the amount of punitive damages goes up, the take home award of the plaintiff increases while the percentage of the award the plaintiff wins actually decreases. This preserves deterrence while preventing a windfall for the plaintiff and reducing litigation costs. This process is meant to apply to a class action lawsuit. I propose that it be used at the third stage of a trifurcated trial based on the trial proposed by Judge Jack Weinstein in the case In Re Simon. The first stage would use sampling to determine compensatory damages, which would be distributed according to severity of injury by an insurance fund. The second stage would determine whether a punitive damage award will be awarded based on the reprehensibility of the defendant’s actions. This stage exists to satisfy the substantive due process limits put on punitive damages outlined in BMW v. Gore. Attorney fees will be awarded pro-rata and multiple juries will be used in the course of a trial. A model jury instruction is attached at the end.
- Inverse Multiplier
Publication DateAugust 20, 2011
Citation InformationJohn F Willems. "Balancing Deterrence and Cost Using an Inverse Multiplier: A Modification of the Polinsky-Shavell Model for Punitive Damages." ExpressO (2011)
Available at: http://works.bepress.com/john_willems/1/