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On Punitive Damages

This blog is written in the form of an overview of the policy behind punitive damages as well as an overview as to when punitives are or are not awarded in a personal injury case. This overview is based primarily from a brief reading of the Mathias v. Mathias case out of the United States Court of Appeals for the Seventh Circuit. The Opinion issued on the case comes from Circuit Judge Posner. Essentially, Plaintiffs brought a cause of action against Motel 6 based on the claim that the Motel had allowed guests to be attacked by bedbugs in a motel that was charging $100 a day for a room. The lower court determined that the conduct of the Motel amounted to "willful and wanton conduct". The Plaintiffs were each granted $186,000 in punitive damges. Defendant appealed arguing that $186,000 in punitives was excessive in light of the $5,000 compensatory damages award.

The facts of this case are such that the Motel was on notice of the bed bug issue. The motel had in fact advised its personel to advise guests who saw the bugs that the bed bugs were "ticks" somehow assuming that ticks would be less offensive to guests. Moreover, an extermination service recommended that the hotel spray every room, for wich it would charge the motel only $500; the motel refused this offer. Additinonally, the motel would not warn or advise its guests of the fact that it had a bug problem and would charge the guests full price for these bug infested rooms.

Judge Posner stated that in determining Punitives "the punishment should fit the crime". Posner went on to state this principle that the punshment should fit the crime could be modified when the likelihood of detection, as in this case, is very low. Posner went on to state that sanctions should be based on the wrong done rather than the status of the defendnat. What this means is that a deep pocketed corportation such as Motel 6 should not be punished excessively just because of its deep pockets. That being said, the Defendant's deep pockets should be considered in light of Defendant's ability to put on a strong defense which would thus be expensive for a Plaintiff to combat. For example, your standard Plaintiff's attorney is going to be reluctatnt to take a case with small damages and thus small potential compenstaion when he knows he will have to battle a corporation with a team of lawyers. In light of this, Punitive damages should be more available when the defendant has large resources, so as to not deter smaller plaintiffs such as those with bed bug bite cases.

Posner went on to talk about the probability of detection and the profits in which the motel could carry on from its fraudulant activity. Essentially the court Opined that a Defendant such as the Motel would carry on in its fruadulant activities if it thought that it only risked minimal damages of say $5,000. This is especiialy the case when the hotel can rent out say 1,000 rooms and thus realize a revenue of $100 on each of those 1,000 rooms for a total revenue of $100,000. Then among those 1,000 rooms rented maybe encounter one lawsuit with a total liability of $5,000. In other words, even if the motel gets sued occassionally, in this scenerio it will still continue on with its activities. On the other hand if the motel is aware that it may face punitive damages in the amount of $186,000 per incident it will likely be deterred from this behavior. Given that punitive damages are meant to be a deterant it makes sense that in these situations punitives go up. As a result Punitive damages limit the hotels ability to profit from its wrongful acts.

Categories: Personal Injury