September 4, 2009

Should Corporations Be Immune from Punitive Damages?

Retired federal judge H. Lee Sarokin has posted this essay on the Huffington Post: "Do Corporate Fines and Punitive Damages Serve Their Purposes?" Judge Sarokin argues that the purposes of punitive damages - - punishment and deterrence - - are not accomplished when courts impose punitive damages against corporations. Judge Sarokin reasons that the company's innocent shareholders end up paying the price, while the corporate executives who committed the punishable acts (who are often long gone from the corporation by the time of any punitive damages judgment) get to keep their huge salaries and bonuses. Judge Sarakon argues that punitive damages should be imposed on the executives, not their companies.

Judge Sarokin's argument has a certain logic to it, but something tells me we won't see states outlawing punitive damages against corporations any time soon. It's not out of the question, however, that a court reviewing a punitive damages award against a corporation might take into consideration the fact that the wrongful conduct was committed long ago by people who are no longer involved with the company.