Tag Archives: punitive damages

Just a Cost of Doing Business

The Indiana Supreme Court has issued yet another unanimous ruling in a case that legal observers considered–at the very least–a close call.

A few weeks ago, the Court upheld the use of the state’s educational voucher program to pay parochial school tuition, despite language in the Indiana Constitution that prohibits the payment of state dollars “for the benefit of” any religious organization or institution. ¬†Unlike courts in other states with similar constitutional provisions (sometimes referred to as “Blaine Amendments”), the Indiana Supremes ruled that parents, not schools, benefitted from the program.

Like vouchers or not, the notion that parochial schools do not benefit from this new source of income is–well, let’s just say it’s quaint.

Now, the Court has unanimously ruled that Indiana’s cap on punitive damages is constitutionally fine and dandy, overturning a widely-praised lower court ruling by Judge David Dreyer to the contrary. Dreyer had ruled that the arbitrary ceiling on such awards violated both separation of powers and the right to trial by jury. This week, the Indiana Supreme Court ruled that the imposition of caps on such awards was constitutionally permissible.

Let’s accept the Court’s ruling on the law. (We have no choice.) What about the policy implications? After all, even if caps are constitutional, they certainly aren’t constitutionally required.

The whole point of punitive damages (which, by the way, are rarely awarded) is to teach a lesson to a defendant that has engaged in egregiously bad behavior. These damages aren’t meant to compensate a plaintiff for injury; they are meant to punish wrongdoing and deter similar behavior by others. When a corporation or other well-capitalized institution is responsible for the bad behavior in question, the amount awarded is supposed to be high enough to hurt the perpetrator’s bottom line. That’s the whole point.

In Indiana, punitive damages are capped at three times the amount of actual damages, or 50,000, whichever is higher.

For most large and medium-sized businesses in today’s economy, $50,000 is chicken feed. In cases where a company is profiting handsomely from the misbehavior in question, that fifty thousand dollars can be considered part of the cost of doing business.

In rescuing the cap, the Court has effectively erased the utility of punitive damage awards in such cases. We will undoubtedly hear that this ruling reinforces Indiana’s “business-friendly” legal climate. Count me as one who is less than thrilled that we are hanging out the welcome sign to businesses eager to control the costs of their own reprehensible practices.

With the departure of Randy Shepard, Frank Sullivan and Ted Boehm, Hoosiers are left with Mitch Daniels’ Supreme Court. It is a much-diminished body.