Judicial Notebook

In recent years, large punitive damage awards have received a great deal of scrutiny from courts and jury researchers. In its latest decision regarding punitive damages, the U.S. Supreme Court earlier this year reversed an Oregon jury's $79.5 million punitive damage award (Philip Morris USA v. Williams, 127 S. Ct. 1057, 2007). Though not the decisive issue in Philip Morris, a common criticism regarding punitive damages is that they provide a windfall for plaintiffs, which is contrary to their primary purpose of punishing the defendant. For example, in his dissenting opinion in Smith v. Wade (461 U.S. 30), Justice William Rehnquist observed that "even assuming that a punitive 'fine' should be imposed after a civil trial, the penalty should go to the State, not to the plaintiff--who by hypothesis is fully compensated."

Splitting the bounty

In response to these critiques, some states have adopted "split-recovery" systems (sometimes referred to as "restricted recovery" or "alternative distribution" plans), which take a portion of the plaintiff's punitive damage award and put it toward some cause intended to benefit society as a whole. Since 1985, at least 12 states have adopted split-recovery statutes (although they have since been repealed in a handful of states). In all of these states, a portion of the punitive award goes to the state, but there is a great deal of variety in how the state allocates the money. The systems vary both in the percentage that does not go the plaintiff and in where that share goes. Where mandated by statute, the nonplaintiff share ranges from 50 percent in Missouri to 75 percent in Georgia. Elsewhere, such as in Illinois, the judge retains discretion over how to apportion the money. Some states allocate a portion of the award to the general state treasury, whereas others assign it to a special fund, such as the Public Medical Assistance Trust Fund in Florida, or the Tort Victims Compensation Fund in Missouri. All of the states adopting this measure, however, seem to recognize that the punishment should benefit society as a whole.

A relatively new extension of the split-recovery scheme is the idea of "curative damages." Conceptually similar to split recovery, curative damages disburse the money to some charity rather than a state cause. For example, in an Ohio case, the plaintiffs were allowed to inform the jury that they would donate all of any punitive award that they received to promoting railroad crossing safety (one of their sons had died when his car collided with a train due to inadequate crossing warnings; Moore v. Consolidated Rail Corp., 1995-CV-01196, 1995). More recently, the Ohio Supreme Court, on its own initiative, split the plaintiff's punitive damage award between him and a research fund named in memory of his wife, who had died from cancer owing to the defendant insurance company's bad faith (Dardinger v. Anthem Blue Cross, 781 N.E.2d 121, 2002). The court ruled that, after giving the plaintiff, Robert Dardinger, his share and paying appropriate legal fees, the portion "remaining after the prescribed payments should go to a place that will achieve a societal good, a good that can rationally offset the harm done by the defendants in this case."

What can psychologists do?

Split-recovery systems offer intriguing questions for two related areas of research: jury decision-making and distributive justice. With regard to jury decision making, researchers could explore how limiting the plaintiff's recovery in this fashion would affect jury verdicts. Empirical research has demonstrated that placing a cap on punitive damages--a related reform effort--can have unintended consequences, such as serving as a monetary anchor or leading to higher compensatory damages. If juries are aware that the plaintiff will not receive the total punitive damage award, they might simply award more in punitive damages than they would otherwise, or transfer the balance to the compensatory damage award.

The logic underlying split-recovery schemes is that it is somehow "unfair" for the plaintiff to benefit from the defendant's financial punishment, and that it would be fairer to allocate a portion of that money elsewhere. Distributive justice researchers could test this assumption by surveying people's attitudes about split recovery in general, and about the many variations on the theme in particular. For example, is it perceived as more fair if the non-plaintiff portion goes to the state's general fund, a designated fund related in some way to civil wrongs (for example, a tort victims' compensation fund), or to charity? Does it matter on whose initiative the splitting is done (such as whether it is mandated by statute, the result of judicial discretion or proposed by the plaintiff)? As with other proposals for legal reform, psychological scientists have much to offer.

"Judicial Notebook" is a project of APA's Div. 9 (Society for the Psychological Study of Social Issues).