Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 90 C 669--John D. Tinder, Judge.
Before POSNER, Chief Judge, and ESCHBACH and DIANE P. WOOD, Circuit Judges.
Jeffrey Kemezy sued a Muncie, Indiana policeman named James Peters under 42 U.S.C. sec. 1983, claiming that Peters had wantonly beaten him with the officer's nightstick in an altercation in a bowling alley where Peters was moonlighting as a security guard. The jury awarded Kemezy $10,000 in compensatory damages and $20,000 in punitive damages. Peters' appeal challenges only the award of punitive damages, and that on the narrowest of grounds: that it was the plaintiff's burden to introduce evidence concerning the defendant's net worth for purposes of equipping the jury with information essential to a just measurement of punitive damages.
Two courts have adopted the position that Peters advocates. Adams v. Murakami, 813 P.2d 1348, 1357-60 (Cal. 1991); Adel v. Parkhurst, 681 P.2d 886, 892 (Wyo. 1984); and see the dissent in Keenan v. City of Philadelphia, 983 F.2d 459, 483-84 (3d Cir. 1992). But the majority view is opposed, as noted in Hutchinson v. Stuckey, 952 F.2d 1418, 1422 n. 4 (D.C. Cir. 1992); see, e.g., Smith v. Lightning Bolt Productions, Inc., 861 F.2d 363, 373 (2d Cir. 1988); Fishman v. Clancy, 763 F.2d 485, 490 (1st Cir. 1985); Woods-Drake v. Lundy, 667 F.2d 1198, 1203 n. 9 (5th Cir. 1982). Our decision in Littlefield v. McGuffey, 954 F.2d 1337, 1349 (7th Cir. 1992), can be read as aligning us with the majority, although as Peters points out the plaintiff there had presented some evidence of the defendant's net worth and it is possible (though not necessary) to read our opinion as placing some minimal burden of production on the plaintiff. See id. at 1349-50. But we think the majority rule, which places no burden of production on the plaintiff, is sound, and we take this opportunity to make clear that it is indeed the law of this circuit.
The standard judicial formulation of the purpose of punitive damages is that it is to punish the defendant for reprehensible conduct and to deter him and others from engaging in similar conduct. E.g., Memphis Community School District v. Stachura, 477 U.S. 299, 307 n. 9 (1986); Smith v. Wade, 461 U.S. 30, 54 (1983); City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 266-67 (1981); Gertz v. Robert Welch, Inc., 418 U.S. 323, 350 (1974). This formulation is cryptic, since deterrence is a purpose of punishment, rather than, as the formulation implies, a parallel purpose, along with punishment itself, for imposing the specific form of punishment that is punitive damages. An extensive academic literature, however, elaborates on the cryptic judicial formula, offering a number of reasons for awards of punitive damages. See, e.g., Symposium: Punitive Damages, 40 Ala. L. Rev. 687 (1989); Symposium: Punitive Damages, 56 S. Cal. L. Rev. 1 (1982); 1 Dan B. Dobbs, Law of Remedies: Damages-Equity-Restitution sec. 3.11(3) (2d ed. 1993); William M. Landes & Richard A. Posner, The Economic Structure of Tort Law, ch. 6 (1987); W. Page Keeton et al., Prosser and Keeton on the Law of Torts sec. 2, pp. 9, 11-12 (5th ed. 1984). Some of these reasons are mentioned in our cases. See, e.g., Zazu Designs v. L'Oreal, S.A., 979 F.2d 499, 508 (7th Cir. 1992); Fortino v. Quasar Co., 950 F.2d 389, 398 (7th Cir. 1991); FDIC v. W.R. Grace & Co., 877 F.2d 614, 623 (7th Cir. 1989). A review of the reasons will point us toward a sound choice between the majority and minority views.
1. Compensatory damages do not always compensate fully. Because courts insist that an award of compensatory damages have an objective basis in evidence, such awards are likely to fall short in some cases, especially when the injury is of an elusive or intangible character. If you spit upon another person in anger, you inflict a real injury but one exceedingly difficult to quantify. If the court is confident that the injurious conduct had no redeeming social value, so that "overdeterring" such conduct by an "excessive" award of damages is not a concern, a generous award of punitive damages will assure full compensation without impeding socially valuable conduct.
2. By the same token, punitive damages are necessary in such cases in order to make sure that tortious conduct is not underdeterred, as it might be if compensatory damages fell short of the actual injury inflicted by the tort.
These two points bring out the close relation between the compensatory and deterrent objectives of tort law, or, more precisely perhaps, its rectificatory and regulatory purposes. Knowing that he will have to pay compensation for harm inflicted, the potential injurer will be deterred from inflicting that harm unless the benefits to him are greater. If we do not want him to balance costs and benefits in this fashion, we can add a dollop of punitive damages to make the costs greater.
3. Punitive damages are necessary in some cases to make sure that people channel transactions through the market when the costs of voluntary transactions are low. We do not want a person to be able to take his neighbor's car and when the neighbor complains tell him to go sue for its value. Guido Calabresi & A. Douglas Melamed, "Property Rules, Liability Rules, and Inalienability: One View of the Cathedral," 85 Harv. L. Rev. 1089, 1124-27 (1972). We want to make such expropriations valueless to the expropriator and we can do this by adding a punitive exaction to the judgment for the market value of what is taken. This function of punitive damages is particularly important in areas such as defamation and sexual assault, where the tortfeasor may, if the only price of the tort is having to compensate his victim, commit the tort because he derives greater pleasure from the act than the victim incurs pain.
4. When a tortious act is concealable, a judgment equal to the harm done by the act will underdeter. Suppose a person who goes around assaulting other people is caught only half the time. Then in comparing the costs, in the form of anticipated damages, of the assaults with the benefits to him, he will discount the costs (but not the benefits, because they are realized in every assault) by 50 percent, and so in deciding whether to commit the next assault he will not be confronted by the full social cost of his activity.
5. An award of punitive damages expresses the community's abhorrence at the defendant's act. We understand that otherwise upright, decent, law-abiding people are sometimes careless and that their carelessness can result in unintentional injury for which compensation should be required. We react far more strongly to the deliberate or reckless wrongdoer, and an award of punitive damages commutes our indignation into a kind of civil fine, civil punishment.
Some of these functions are also performed by the criminal justice system. Many legal systems do not permit awards of punitive damages at all, believing that such awards anomalously intrude the principles of criminal justice into civil cases. Even our cousins the English allow punitive damages only in an excruciatingly narrow category of cases. See, e.g., AB v. South West Water Services Ltd.,  1 All E.R. 609 (Ct. App. 1992). But whether because the American legal and political cultures are unique, or because the criminal justice system in this country is overloaded and some of its functions have devolved upon the tort system, punitive damages are a regular feature of ...