DAMAGES
Monetary compensation that is awarded by a
court in a civil action to an individual who has
been injured through the wrongful conduct of
another party.
Damages attempt to measure in financial
terms the extent of harm a plaintiff has suffered
because of a defendant’s actions. Damages are
distinguishable from costs, which are the
expenses incurred as a result of bringing a lawsuit
and which the court may order the losing
party to pay. Damages also differ from the verdict,
which is the final decision issued by a jury.
The purpose of damages is to restore an
injured party to the position the party was in
before being harmed. As a result, damages are
generally regarded as remedial rather than preventive
or punitive. However, PUNITIVE DAMAGES
may be awarded for particular types of
wrongful conduct. Before an individual can
recover damages, the injury suffered must be
one recognized by law as warranting redress,
and must have actually been sustained by the
individual.
The law recognizes three major categories of
damages: COMPENSATORY DAMAGES, which are
intended to restore what a plaintiff has lost as a
result of a defendant’s wrongful conduct; nominal
damages, which consist of a small sum
awarded to a plaintiff who has suffered no substantial
loss or injury but has nevertheless experienced
an invasion of rights; and punitive
damages, which are awarded not to compensate
a plaintiff for injury suffered but to penalize a
defendant for particularly egregious, wrongful
conduct. In specific situations, two other forms
of damages may be awarded: treble and liquidated.
Compensatory Damages
With respect to compensatory damages, a
defendant is liable to a plaintiff for all the natural
and direct consequences of the defendant’s
wrongful act. Remote consequences of a defendant’s
act or omission cannot form the basis for
an award of compensatory damages.
Consequential damages, a type of compensatory
damages, may be awarded when the loss
suffered by a plaintiff is not caused directly or
immediately by the wrongful conduct of a
defendant, but results from the defendant’s
action instead. For example, if a defendant carried
a ladder and negligently walked into a
plaintiff who was a professional model, injuring
the plaintiff ’s face, the plaintiff could recover
consequential damages for the loss of income
resulting from the injury. These consequential
damages are based on the resulting harm to the
plaintiff ’s career. They are not based on the
injury itself, which was the direct result of the
defendant’s conduct.
The measure of compensatory damages
must be real and tangible, although it can be difficult
to fix the amount with certainty, especially
in cases involving claims such as pain and suffering
or emotional distress. In assessing the
amount of compensatory damages to be
awarded, a trier of fact (the jury or, if no jury
exists, the judge) must exercise good judgment
and common sense, based on general experience
and knowledge of economics and social affairs.
Within these broad guidelines, the jury or judge
has wide discretion to award damages in whatever
amount is deemed appropriate, so long as
the amount is supported by the evidence in the
case.
A plaintiff can recover damages for a number
of different injuries suffered as a result of
another person’s wrongful conduct. The plaintiff
can recover for a physical impairment if it
results directly from a harm caused by the
defendant. The jury, in determining damages,
considers the present as well as long-range
effects of the disease or injury on the physical
well-being of the plaintiff, who must demonstrate
the disability with reasonable certainty.
Compensatory damages can be awarded for
mental impairment, such as a loss of memory or
a reduction in intellectual capacity suffered as a
result of a defendant’s wrongful conduct.
A plaintiff may recover compensatory damages
for both present and future physical pain
and suffering. Compensation for future pain is
permitted when there is a reasonable likelihood
that the plaintiff will experience it; the plaintiff
is not permitted to recover for future pain and suffering that is speculative. The jury has broad
discretion to award damages for pain and suffering,
and its judgment will be overturned only if
it appears that the jury abused its discretion in
reaching the decision.
Mental pain and suffering can be considered
in assessing compensatory damages. Mental
pain and suffering includes fright, nervousness,
grief, emotional trauma, anxiety, humiliation,
and indignity. Historically, a plaintiff could not
recover damages for mental pain and suffering
without an accompanying physical injury.
Today, most jurisdictions have modified this
rule, allowing recovery for mental anguish alone
where the act precipitating the anguish was willful
or intentional, or done with extreme carelessness
or recklessness. Ordinarily, mental
distress brought on by sympathy for the injury
of another will not warrant an award of damages,
although some jurisdictions may allow
recovery if the injury was caused by the willful
or malicious conduct of the defendant. For
instance, if an individual wrongfully and intentionally
injures a child in the presence of the
child’s mother, and the mother suffers psychological
trauma as a result, the defendant can be
liable for the mother’s mental suffering. In some
jurisdictions, a bystander can recover damages
for mental distress caused by observing an event
in which another person negligently, but not
intentionally, causes harm to a family member.
Compensatory damages of an economic
nature may also be recovered by an injured
party.A plaintiff may recover for loss of earnings
resulting from an injury. The measure of lost
earnings is the amount of money that the plaintiff
might reasonably have earned by working in
her or his profession during the time the plaintiff
was incapacitated because of the injury. In
the case of a permanent disability, this amount
can be determined by calculating the earnings
that the injured party actually lost and multiplying
that figure out to the age of retirement—
with adjustments. If the amount of earnings
actually lost cannot be determined with certainty,
as in the case of a salesperson paid by
commission, the plaintiff ’s average earnings or
general qualities and qualifications for the occupation
in which she or he has been employed are
considered. Evidence of past earnings can also
be used to determine loss of future earnings. As
a general rule, lost earnings that are speculative
are not recoverable, although each case must be
examined individually to determine whether
damages can be established with reasonable certainty.
For example, a plaintiff who bought a
restaurant immediately before suffering an
injury could not recover damages for the profits
he might have made running it, because such
profits would be speculative. A plaintiff who is
unable to accept a promotion to another job
because of an injury would stand a better chance
of recovering damages for loss of earnings,
because the amount lost could be established
with more certainty.
Individuals injured by the wrongful conduct
of another may also recover damages for impairment
of earning capacity, so long as that impairment
is a direct and foreseeable consequence of
a disabling injury of a permanent or lingering
nature. The amount of damages is determined
by calculating the difference between the amount
of money the injured person had the capacity to
earn prior to the injury and the amount he or
she is capable of earning after the injury, in view
of his or her life expectancy.
Loss of profit is another element of compensatory
damages, allowing an individual to
recover if such a loss can be established with sufficient
certainty and is a direct and probable
result of the defendant’s wrongful actions.
Expected profits that are uncertain or contingent
upon fluctuating conditions would not be
recoverable, nor would they be awarded if no
evidence existed from which they could be reasonably
determined.
A plaintiff can recover all reasonable and
necessary expenses brought about by an injury
caused by the wrongful acts of a defendant. In a
contract action, for example, the party who has
been injured by another’s breach can recover
compensatory damages that include the reasonable
expenses that result from reliance on the
contract, such as the cost of transporting perishable
goods wrongfully refused by the other contracting
party. In other actions, expenses
awarded as part of compensatory damages may
include medical, nursing, and prescription drug
costs; the costs of future medical treatment, if
necessary; or the costs of restoring a damaged
vehicle and of renting another vehicle while
repairs are performed.
Interest can be awarded to compensate an
injured party for money wrongfully withheld
from her or him, as when an individual defaults
on an obligation to pay money owed under a
contract. Interest is ordinarily awarded from the
date of default, which is set by the time stated in the contract for payment, the date a demand for
payment is made, or the date the lawsuit alleging
the breach of the contract is initiated.
Nominal Damages
Nominal damages are generally recoverable
by a plaintiff who successfully establishes that he
or she has suffered an injury caused by the
wrongful conduct of a defendant, but cannot
offer proof of a loss that can be compensated.
For example, an injured plaintiff who proves
that a defendant’s actions caused the injury but
fails to submit medical records to show the
extent of the injury may be awarded only nominal
damages. The amount awarded is generally a
small, symbolic sum, such as one dollar,
although in some jurisdictions it may equal the
costs of bringing the lawsuit.
Punitive Damages
Punitive damages, also known as exemplary
damages, may be awarded to a plaintiff in addition
to compensatory damages when a defendant’s
conduct is particularly willful, wanton,
malicious, vindictive, or oppressive. Punitive
damages are awarded not as compensation, but
to punish the wrongdoer and to act as a deterrent
to others who might engage in similar conduct.
The amount of punitive damages to be
awarded lies within the discretion of the trier of
fact, which must consider the nature of the
wrongdoer’s behavior, the extent of the plaintiff
’s loss or injury, and the degree to which the
defendant’s conduct is repugnant to a societal
sense of justice and decency. An award of punitive
damages will usually not be disturbed on
the grounds that it is excessive, unless it can be
shown that the jury or judge was influenced by
prejudice, bias, passion, partiality, or corruption.
In the late twentieth century, the constitutionality
of punitive damages has been considered
in several U.S. Supreme Court decisions. In
1989, the Court held that large punitive damages
awards did not violate the EIGHTH AMENDMENT
prohibition against the imposition of excessive
fines (Browning-Ferris Industries of Vermont v.
Kelco Disposal, 492 U.S. 257, 109 S. Ct. 2909, 106
L. Ed. 2d 219). Later, in Pacific Mutual Life Insurance
Co. v. Haslip, 499 U.S. 1, 111 S. Ct. 1032, 113
L. Ed. 2d 1 (1991), the Court held that unlimited
jury discretion in awarding punitive damages is
not “so inherently unfair” as to be unconstitutional
under the DUE PROCESS CLAUSE of the
FOURTEENTH AMENDMENT to the U.S. Constitution.
And in TXO Production Corp. v. Alliance
Resources Corp., 509 U.S. 443, 113 S. Ct. 2711,
125 L. Ed. 2d 366 (1993), the Court ruled that a
punitive damages award that was 526 times the
compensatory award did not violate due
process. Both Haslip and TXO Production disappointed
observers who hoped that the Court
would place limits on large and increasingly
common punitive damages awards. In a 1994
decision, the Court did strike down an amendment
to the Oregon Constitution that prohibited
JUDICIAL REVIEW of punitive damages
awards, on the ground that it violated due
process (Honda Motor Co. v. Oberg, 512 U.S. 415,
114 S. Ct. 2331, 129 L. Ed. 2d 336).
In a jury proceeding, the court may review
the award, although the amount of damages to
be awarded is an issue for the jury. If the court
determines that the verdict is excessive in view of
the particular circumstances of the case, it can
order REMITTITUR, which is a procedural
process in which the jury verdict is reduced. The
opposite process, known as ADDITUR, occurs
when the court deems the jury’s award of damages
to be inadequate and orders the defendant
to pay a greater sum. Both remittitur and additur
are used at the discretion of the trial judge, and
are designed to remedy a blatantly inaccurate
damages award by the jury without the necessity
of a new trial or an appeal.
Treble Damages
In some situations, where provided by
statute, treble damages may be awarded. In such
situations, a statute will authorize a judge to
multiply the amount of monetary damages
awarded by a jury by three, and to order that a
plaintiff receive the tripled amount. The CLAYTON
ACT of 1914 (15 U.S.C.A. §§ 12 et seq.), for
example, directs that treble damages be awarded
for violations of federal ANTITRUST LAWS.
Liquidated Damages
LIQUIDATED DAMAGES constitute compensation
agreed upon by the parties entering into a
contract, to be paid by a party who breaches the
contract to a nonbreaching party. Liquidated
damages may be used when it would be difficult
to prove the actual harm or loss caused by a
breach. The amount of liquidated damages must
represent a reasonable estimate of the actual
damages that a breach would cause. A contract
term fixing unreasonably large or disproportionate liquidated damages may be void because
it constitutes a penalty, or punishment for
default. Furthermore, if it appears that the parties
have made no attempt to calculate the
amount of actual damages that might be sustained
in the event of a breach, a liquidated
damages provision will be deemed unenforceable.
In determining whether a particular contract
provision constitutes liquidated damages
or an unenforceable penalty, a court will look to
the intention of the parties, even if the terms liquidated
damages and penalty are specifically
used and defined in the contract.
Appellate Review of Damages
When reviewing a trial court’s award of
damages, an appellate court generally examines
all of the evidence from the trial to determine
whether the evidence supports the award.When
reviewing awards for compensatory damages, an
appellate court determines from the lower
court’s record whether the trial judge abused his
or her discretion in allowing a jury’s damage
award to stand or in making his or her own
damage award, called a bench award. A bench
award by a judge is typically subject to closer
scrutiny than an award by a jury.
An appellate court may determine that a
damage award is excessive or inadequate. If the
court of appeals determines that the damages
are excessive or inadequate, and can determine
the proper amount with reasonable certainty,
the court may adjust the award so that it corresponds
with the evidence. One common
method for altering an award is through the use
of remittitur, whereby the judge directs the
plaintiff either to accept a lower award or face a
new trial. On the other hand, if the appellate
court cannot determine the proper amount of
the award based upon the evidence, the court
may order a new trial. A court of appeals will
also review a trial court’s decision whether to
admit or to exclude evidence that supports the
damage award, such as the decision whether to
admit or exclude testimony regarding SCIENTIFIC
EVIDENCE. Appellate courts typically
review the trial court’s decision with respect to
admission or exclusion of evidence under the
ABUSE OF DISCRETION standard.
Courts review awards of punitive damages
differently than other types of damage awards.
Several federal courts of appeals are engaged in
an ongoing struggle over what standard of
review should be applied to punitive damages at
the appellate court level. In Cooper Industries,
Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424,
121 S. Ct. 1678, 149 L. Ed. 2d 674 (2001), the
U.S. Supreme Court ruled that appellate courts
must conduct de novo review rather than apply
an abuse of discretion standards. This ruling
means that federal appellate courts have great
freedom to review and reduce punitive damages
based on previous U.S. Supreme Court standards.
The decision is one more example of the
Court expressing its desire to control excessive
punitive damage awards.
Cooper Industries, Inc. involved a suit for
TRADEMARK infringement, where Cooper
Industries was accused of using photographs of
a knife manufactured by Leatherman Tool
Group. A jury awarded Leatherman $50,000 in
general damages and $4.5 million in punitive
damages. On appeal, the U.S. Court of Appeals
for the Ninth Circuit upheld the trial court, basing
its analysis on the abuse of discretion standard.
This standard is very deferential to the trial
court’s actions, allowing the appeals courts to
overturn a decision only if the trial judge clearly
abused his or her authority. By comparison, de
novo review empowers the appeals court to
review all of the evidence on punitive damages
without regard to the trial court’s decision.
The U.S. Supreme Court agreed to hear
Cooper’s appeal to resolve the division among
the federal circuits over the appropriate standard
of review for punitive damages. The Court,
in an 8–1 decision, determined that the federal
courts should apply de novo review. Justice
JOHN PAUL STEVENS, writing for the majority,
concluded that the nature of punitive damages
demanded that appeals courts conduct a fresh
inquiry. He noted the similarities of punitive
damages to criminal fines and cited various
criminal cases that addressed the proportionality
of sentences that relied on de novo review.
Moreover, Stevens rejected the idea that when a
jury awards punitive damages, it makes a finding
of fact that could not be disturbed by an appeals
court unless it was clearly erroneous.
FURTHER READINGS
Gibeaut, John. 2003. “Pruning Punitives: High Court
Stresses Guidelines for Deciding Damages.” ABA Journal
89 (June).
Kagehiro, Dorothy K., and Robert D. Minick. 2002. “How
Juries Determine Damages Awards.” For the Defense 44
(July).
Reis, John W. 2002. “Measure of Damages in Property Loss
Cases.” Florida Bar Journal 76 (October).
Shaw, Robert Ward. 2003. “Punitive Damages in Medical
Malpractice: an Economic Evaluation.” North Carolina
Law Review 81 (September).
