Buffalo Creek and the Question of Punitive vs. Compensatory Damages
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Buffalo Creek and the question of punitive v. compensatory damages
Damages are a fundamental principle in the American legal system. However, a number of recent cases in the United States have sparked a debate on the issue, the most famous one being the “hot coffee lawsuit”1. In 1994, Stella Liebeck bought coffee at a McDonald’s restaurant, spilt it, and was severely burnt. She sued the McDonald’s company, received $160,000 in compensatory damages, and $2.9 million in punitive damages. A judge then reduced the punitive damages to $480,000. The final out-of-court settlement was of approximately $500,000. For many, this case is frivolous (meaning that the plaintiff’s prospects of being successful were low or inexistent), but it really highlights the question of excessive punitive damages compared to the damage suffered and its causes.
Damages in the United States include two categories. Compensatory damages are intended to compensate for the plaintiff’s loss. Punitive damages, on the contrary, are meant to punish the defendant .The punitive damages exceed the plaintiff’s loss, to dissuade the defendant from any further wrongdoings. For instance, having a company pay significant punitive damages may encourage it to greater caution. Another difference between the two categories is the money involved. If the damages are compensatory, the money usually goes entirely to the plaintiff, but if they are punitive, part of the money goes to the law firm and part to the plaintiff.
One may however ask the following questions. How are punitive damages actually allocated? And what is the current trend in the United States and in France in this area?
In order to answer these questions, we will first see how American lawyer Gerald M. Stern man...
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...ages was excessive compared to the damage suffered by the plaintiffs and the defendant’s “failures to fulfill contractual obligations”15. This decision could be a start in introducing punitive damages in France, though two conditions would need to be fulfilled for them to be allocated - proportionality both to the damage suffered, and to the defendant’s “failures to fulfill contractual obligations”.
Compensatory damages are apparently not an issue at the moment. However, the main problem with punitive damages in the US is their amount - often regarded as excessive. The issue is therefore of limiting their amount or restricting their allocation. In France, on the contrary, the question is whether they should be introduced and under which conditions. French judges seem willing to introduce such damages, and if so, France would be the first country in Europe to do it.