Applying deterrence theory in the context of corporate wrongdoing: Limitations on punitive damages

Punitive damages may be awarded in litigation of corporate misconduct in or der to punish the corporate offender and to deter wrongdoing in the future. In many states, amounts of punitive damages are determined by juries. Afte r years of trial and appellate proceedings, these awards may exceed actual (compensatory) damages to such an extent that the possibility of corporate bankruptcy becomes more likely than the possibility of payment. The primary theoretical justification for high punitive damages involves their capacit y to deter future misconduct. This article argues, however, that enormous p unitive awards levied against corporate offenders have little deterrent val ue. To sustain this argument, three areas were explored: (I) recent Supreme Court cases addressing the constitutionality of excessive punitive awards; (2) deterrence theory as conceived by Beccaria and developed by later crim inological theorists; and (3) the application of the principles of deterren ce theory to awards of punitive damages in civil litigation involving corpo rate misconduct. (C) 1999 Elsevier Science Ltd. All rights reserved.