September 12, 2008

Law Review Article: Punitive Damages and Class Actions

Francesco Parisi of the University of Minnesota Law School and Marta Cenini of the University of Milan have posted an article on SSRN entitled "Punitive Damages and Class Actions."

Here's the abstract:

Punitive damages and class actions can be viewed as sharing a common economic function - creating optimal deterrence. This is a function that these remedies can best pursue in different domains. When a tortfeasor causes harm that affects many victims, the preferred remedy is a class action. This is especially so when the amount of compensatory damages are high.There are scenarios, however, in which imposing punitive damages represents the best solution. We identify some of these scenarios to suggest the proper domains of these two remedies. Finally, we identify situations where a combined use of these two remedies is desirable. We suggest that when the amount of losses suffered by victims is so small as to preclude a class action due to transaction costs and inactivity, it may nevertheless be useful to combine punitive damages with a class action. Punitive damages should be awarded within a class action if and only if there are frictions that could prevent the injured party from taking legal action.
Law professors have been writing on this subject for decades, but unfortunately, the courts have yet to fashion any of these academic proposals into a generally accepted method for resolving punitive damages claims in mass tort cases.

Hat tip: Mass Tort Litigation Blog.