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.
Punitive damages and class actions / F. Parisi, M. Cenini (New horizons in law and economics). - In: The law and economics of class actions in Europe : lessons from America / [a cura di] J.G. Backhaus, A. Cassone, G.B. Ramello. - Cheltenham : Elgar, 2012. - ISBN 9781847208033. - pp. 131-146 [10.4337/9781847208033.00015]
Punitive damages and class actions
M. CeniniUltimo
2012
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.File | Dimensione | Formato | |
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