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Connecticut's Punitive Damages Laws Are Outdated, Often Ineffective, and Should Be Changed

By Brendan Faulkner, Esq. and Mike A. D'Amico, Esq

Punitive damages may be imposed under either the common law or specific statutory provisions when the jury or court has found a defendant to have caused harm by its reckless, wanton, or willful conduct. The idea behind punitive damages is that when people or corporations engage in outrageous civil misconduct, they should be required to pay not only the actual damages their conduct causes, but an additional penalty imposed to punish their conduct, and to deter them and others from engaging in such conduct in the future. Punitive damages also often serve to correct the imbalance between the parties, to acknowledge the worth of the victim, and allow juries to be the voice of the community.

Sometimes punitive damages need to be large in order to be effective; for instance, where the defendant is a large corporation with such significant assets and revenue such that a punitive damage award of tens or even hundreds of thousands of dollars would be insignificant. This is where Connecticut's punitive damages laws fall short, and are in need of change.

Connecticut's Archaic Limitation on the Amount of Punitive Damages

Under Connecticut's common law, punitive damages are frequently inadequate because they are limited to the costs of litigation and attorney's fees. This derives from an antiquated (and misguided) conception in Connecticut's case law that punitive damages serve a limited compensatory purpose. This is at odds with the majority of the jurisprudence on punitive damages which holds that the functions are punishment and deterrence.

Connecticut's cap on punitive damages makes our law significantly more restrictive than that of much of the rest of the country. Twenty-two states have no limits on punitive damages. Another twenty-two states have some limit (i.e. a multiple of compensatory damages, or an amount indexed to the defendant's net worth), only three of which (Michigan's, Maine's, and Oklahoma's) are equally or nearly as restrictive as Connecticut's, which Justice Zarella has described as "indisputably one of the most conservative in the nation.1

The problem of too narrowly construing the function of punitive damages to be compensatory appears to date back to 1906 to the Supreme Court of Errors decision in Hanna v. Sweeny, 78 Conn. 492.2 In Hanna, the court purported, essentially by edict, to close the door on the type of punitive damages that, by Hanna's own acknowledgement, existed at common law.

The judicial edict of Hanna has continued to hold sway over Connecticut's punitive damages jurisprudence for more than 100 years...

In fact, Hanna recognized that, at common law, "in certain actions of tort, the jury were at liberty to award damages not only as a satisfaction to the injured person but likewise as a punishment to the guilty, to deter from any such proceeding for the future, and as proof of the detestation of the jury to the action itself.3 Chief Justice Torrance, writing for the Hanna court, also cited Dalton v. Beers, which had likewise clearly recognized the availability of exemplary damages in tort cases for injuries that were inflicted wantonly or maliciously.4 Hanna also cited a U.S. Supreme Court case that "clearly recognized the availability" of "damages, beyond compensation for the injury received, by way of punishing the guilty, and as an example to deter others from offending in like manner." Id. at 493, citing Dalton v. Beers, 38 Conn. 529 (Conn. 1871), and Lake Shore & M. S. R. Co. v. Prentice, 147 U.S. 101, 107 (1893). The U.S. Supreme Court had explained in Prentice that "exemplary, punitive or vindictive damages, sometimes called smart money" may be imposed "if the defendant has acted wantonly, or oppressively, or with such malice as implies a spirit of mischief or criminal indifference to civil obligations." Id.

Additionally, Hanna observed that many if not most of the states at that time had similar doctrines of punitive damages, and that "the amount of smart money" has always been left to the discretion of the jury, because the degree of punishment needed necessarily depends on the particular circumstances of each case. 78 Conn. at 493-94.

Yet, with no clear explanation or justification, Hanna simply closed the door on punitive damages intended to punish and deter:

In this State the common-law doctrine of punitive damages as above outlined, if it ever did prevail, prevails no longer. In certain actions of tort the jury here may award what are called punitive damages, because nominally not compensatory; but in fact and effect they are compensatory and their amount cannot exceed the amount of the plaintiff's expenses of litigation in the suit, less his taxable costs.

78 Conn. at 494 (citing Maisenbacker v. Society Concordia of Danbury, 71 Conn. 369, 378 (1899).

Much later, the Connecticut Supreme Court supplied the following (flawed) rationale for the rule announced in Hanna: that it strike a balance it provides for the payment of a victim's costs of litigation, which would otherwise be unavailable to him, while establishing a clear reference to guide the jury fairly in arriving at the amount, and fulfills the salutary purpose of fully compensating a victim for the harm inflicted on him while avoiding the potential for injustice which may result from the unfettered discretion by a jury. Waterbury Petroleum, 193 Conn. at 237-38.

The suggestion that the jury needs a guidepost for determining punitive damages is misguided, however. Juries effectively determine non-economic damages, a far more abstract concept, all the time with little more guidance than the words "fair, just, and reasonable." A cap, which in practice often renders punitive damages in Connecticut ineffective, creates a potential for injustice, not the absence of a punitive damage limitation. In fact, the purported concern for a jury's "unfettered discretion" ignores the powers a judge has with respect to any verdict as to damages including the ability to set it aside, or to order remittitur.

Nonetheless, the judicial edict of Hanna has continued to hold sway over Connecticut's punitive damages jurisprudence for more than 100 years.5 The time for change has come.

Punitive Damages under to Connecticut Statutory Law

In addition to common law claims, punitive damages are provided for under a number of Connecticut statutes (i.e. the Connecticut Product Liability Act, Connecticut Unfair Trade Practice Act, and Patients' Bill of Rights). Some state the measure of such damages, such as double or treble compensatory damages.6 Others, such as the product liability act, are silent on this issue.7

Courts in Connecticut product liability cases have applied the common-law limitation. This leaves Connecticut citizens who have been harmed by defective products and malicious conduct at a significant disadvantage when defendants capitalize on this shortcoming in settlement negotiations and cost-benefit assessments concerning trial.

Although undecided at the appellate level, two aspects of Connecticut statutory law, neither of which derives from the common law, do appear to provide for more effective punitive damages, CUTPA, and the Patients' Bill of Rights applicable to nursing home facilities.

No formula exists for calculating punitive damages in CUTPA cases, but courts have recognized that punishment and deterrence are the focus of a punitive damages assessment, and accordingly, that the financial standing of the party against whom damages are sought is relevant and material. As with the biblical widow's mite, the financial impact of an event on a party depends on financial circumstances. An amount that might deter a poor widow could seem trifling and leave undeterred a corporate entity with "large financial resources." Lenz v. CAN Assurance Co., 42 Conn. Supp. 514, 515 (1993).

...the financial impact of an event on a party depends on financial circumstances.

And in Ulrich v. Groth, 310 Conn. 375, 381 (2013), the court stated that punitive damages considerations should include the degree of reprehensibility of the defendant's misconduct. This factor, its "evilness" as Justice Breyer has described it, is the most important factor, to be judged by whether the harm caused was physical as opposed to economic, whether the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others, whether the target of the conduct had financial vulnerability, and whether the conduct involved repeated actions or was an isolated incident. Id.; see Bristol Technology, Inc. v. Microsoft Corp., 114 F. Supp. 2d 59, 80 (D. Conn. 2000) (Hall, J.), vacated on other grounds, 250 F.3d 152 (2d Cir. 2001) ([a] punitive damages award under CUTPA should take account of the financial status and size of the defendant to ensure that the damage award will have the deterrent effect on the defendant and others that it is designed to achieve.).

In Bristol Technology, the plaintiff claimed violations of CUTPA stemming from Microsoft's "bait-and-switch" in enticing reliance on its technology by representing that it would continue to be made available, but then later not allowing access. The jury found that Microsoft had committed a deceptive act or practice in violation of CUTPA, but awarded one dollar in compensatory damages. After the trial, the plaintiff sought punitive damages and a permanent injunction. The court found that the egregiously deceptive conduct rose to the level of reckless and wanton indifference to the harm it caused, and that Microsoft had engaged in repeated instances of misconduct. The court concluded that there were no cases in which courts awarded punitive damages under CUTPA that were comparable because of Microsoft's enormous wealth. The court then fashioned an award, $1M, designed to act as a deterrent, despite the jury award of nominal damages. The court also granted partial injunctive relief, and, in a separate order, awarded plaintiff approximately 2.9M in attorneys' fees and approximately $750,000 in costs.

The parties settled on appeal, as a condition to which the plaintiff agreed not to oppose Microsoft's continued efforts to have the order imposing punitive damages vacated. In a per curiam decision, the Second Circuit granted the motion to vacate, finding that it was unclear whether the district court had the power to reach the issue of punitive damages based on the jury's findings. The court of appeals also expressed concern that the amount of appropriate punitive damages was a fact issue implicating the right to a jury trial (notwithstanding the statute's provision that the "court may, in its discretion, award punitive damages). Bristol Technology is nevertheless instructive as to its emphasis on the deterrent effect of punitive damages and the need to take into account the defendant's financial status.

Many courts have followed the lead of the district court in Bailey Employment System v Hahn, 545 F. Supp. 62, 73 (D. Conn. 1982), aff'd, 723 F.2d 895 (2d Cir. 1983) in doubling the amount of compensatory damages to calculate punitive damages under CUTPA. In Bridgeport Harbour Place I, LLC v. Ganim, 131 Conn. App. 99, 169 (2011) the appellate court affirmed punitive damages of six times the compensatory damages ($210,039), although still limited to attorney's fees ($54,600) and costs ($155,439). In United Technologies Corp. v American Home Assurance Co., 118 F. Supp. 2d 174, 180 (D. Conn. 2000), the court imposed $ 16M in punitive damages against an insurer, which, for over a decade, engaged in an "intentional scheme" and deliberately stalled the processing of large claims, a practice that it "repeated nationwide." (The plaintiffs were awarded compensatory damages of $ 21M.)

Like CUTPA, the Patient's Bill of Rights applicable to nursing homes is a purely statutory creation. It provides that "where the deprivation of any such right or benefit is found to have been wilful or in reckless disregard of the rights of the patient, punitive damages may be assessed." Conn. Gen. Stat. 19a-550(e). Although the issue has not been decided at the appellate level, it appears that punitive damages under the nursing home Patient's Bill of Rights would be determined as they have been under CUTPA, as opposed to how they have been determined under the product liability statute (pursuant to the common law limitation).
Accordingly, these are the only two contexts, nursing home cases and claims for unfair trade practices, in which a Connecticut plaintiff may potentially have the recourse of meaningful punitive damages for egregious and harmful conduct by a wealthy defendant.

Significant Punitive Damages Are Sometimes Necessary to Punish and Deter

The trial court in Bristol Technology noted that other courts have observed that to have any deterrent effect a punitive damage award must be substantial enough that a defendant may not write it off as just a license fee or a "cost of doing business."

Izzarelli v. R.J. Reynolds Tobacco Co., 767 F. Supp. 2d 324 (D. Conn. 2010), provides a perfect illustration of the need for the availability of punitive damage awards sufficiently large to punish and deter. There, the defendant was the second largest tobacco company in the United States. The plaintiff had established that the defendant had manufactured Salem cigarettes to specifications intended to get non-smokers addicted to nicotine and to get addicted smokers to smoke more cigarettes without satiating their addiction, in order to increase the defendant's profits. The jury found liability under the Connecticut Product Liability Act, and that punitive damages should be assessed. The total amount of litigation costs and attorney's fees was less than one half of the compensatory damages determined by the jury. The plaintiff argued that the court could consider a multitude of factors in determining the punitive damages, subject to the statutory cap of twice the compensatory damages. The court disagreed and applied the "longstanding common-law principle that punitive damages are equal to litigation costs less taxable costs."8

The GM debacle that has recently come to light is another example of the need for punitive damages large enough to make a difference. As has been widely reported, GM has recalled millions of vehicles as a result of defective ignition systems that the company actively hid for years. GM documents disclosed to NHTSA and congressional representatives reveal that the company's engineers knew about the ignition defect since 2001.

In 2005, as complaints of stalling and reports of accidents accumulated, GM engineers proposed changing the design to prevent movement of the key (only a partial solution, but it would have prevented some accidents), but GM executives decided the 57-cent per vehicle cost was too high to be an "acceptable business case."

Instead, GM issued a technical service bulletin advising dealers to provide a key insert to customers who complained. Only about 500 out of the tens of thousands of eligible customers received the insert.

GM changed the ignition switch in 2006 but instructed the manufacturer to use the same part number to conceal the change. (The new switch was also below specifications). GM has acknowledged 13 deaths and 31 injuries, but reports have estimated that hundreds more may have died because of the defect.

The deterrent effect of punitive damages on this type of conduct is a critical function of our civil justice system, especially where history has shown that the agencies charged with protecting the public are often incapable (commonly due to inadequate resources or conflicts of interest) of doing so in a meaningful way. When it comes to punitive damages, there is no good reason the family of a Connecticut resident killed as a result of GM's decisions should not be on equal footing with the residents of most other states.

Change Is Needed

Because punitive damages are only awarded in cases where the defendant's conduct is particularly egregious, limiting punitive damages offers the greatest reward to the worst actors. There is no reason why the defendants who act most egregiously should receive the greatest shelter from liability. In a study detailed in the October 1992 Iowa Law Review, it was shown that businesses generally ignored continued complaints regarding product safety until they were forced to pay large punitive damage awards. After being assessed punitive damage however, 80% of manufacturers took remedial measures to increase product safety.

The deterrent effect of punitive damages is a critical function of our civil justice system, especially where history has shown that the agencies charged with protecting the public are often incapable of doing so (due to resources, conflicts of interest, or otherwise). Since corporations are making cost-benefit decisions and at times prioritize profits over people, the threat of meaningful punitive damages can be an effective deterrent to conduct that jeopardizes public safety.

Connecticut's common-law limitation essentially abolishes the deterrent and punishment function of punitive damages however. This problem needs to be addressed by judges, legislators, and lawyers alike because Connecticut citizens deserve an effective punitive damage scheme at least in line with the majority of jurisdictions across the country.

1 Connecticut is also the only state with the particular limitation of attorney's fees and costs, minus taxable costs (several states allow the jury to consider attorney's fees and costs as one factor in formulating the amount of the award).

2 See Waterbury Petroleum Products, Inc. v. Canaan Oil & Fuel Co., 193 Conn. 208, 236 (1983) (attributing the Connecticut common law limitation on punitive damages to Hanna).

3 78 Conn. at 493 (internal quotations omitted).

4 The Dalton case also stated that, in considering punitive damages, the expenses of the plaintiff in the prosecution of his suit, exceeding the taxable costs of the case, may be taken into consideration. See Hanna, 78 Conn. at 493.

5 See, i.e. Tedesco v. Maryland Casualty Co., 127 Conn. 533, 538 (1941) ("[u]nder our law the purpose of awarding so-called punitive damages is not to punish the defendant for his offense but to compensate the plaintiff for his injuries"; "we recognize that, under the common law of this state, compensation is the exclusive purpose of punitive damages"); Triangle Sheet Metal Works, Inc. v. Silver, 154 Conn. 116, 127 (1966); Vandersluis v. Weil, 176 Conn. 353, 358 (1978); Alaimo v. Royer, 188 Conn. 36, 42 (1982); Waterbury Petroleum Products, Inc., 193 Conn. 208, 234-238 (1983); Berry v. Loiseau, 223 Conn. 786, 789 (Conn. 1992); Bodner v. United Servs. Auto. Ass'n, 222 Conn. 480, 492 (1992); Label Systems Corp. v. Aghamohammadi, 270 Conn. 291 (2004); R.I. Pools, Inc. v. Paramount Concrete, Inc., 149 Conn. App. 839, 875-876 (Conn. App. Ct. 2014).
At the end of the 19th and beginning of the 20th century, it would have been difficult if not impossible for jurists to foresee the type of outrageous and dangerous conduct by hugely wealthy corporations that have become almost routine news stories these days. It seems that many of the punitive damages cases at the time of Hanna had involved either being kicked off of the train or kicked out of a dance.

6 See e.g., Conn. Gen. Stat. 14-295 (double or treble damages for reckless operation of a motor vehicle in violation of specific statutory provisions); Conn. Gen. Stat. 52-564 (mandatory treble damages if defendant stole property of another or knowingly received and concealed stolen property).

7 See e.g., Conn. Gen. Stat. 42-110g (Connecticut Unfair Trade Practices Act) (leaving the determination of punitive damages to the court's discretion); Conn. Gen. Stat. 52-240(b) (Connecticut Product Liability Act) (same, up to twice the compensatory damages); Conn. Gen. Stat. 19a-550 (Patients' Bill of Rights applicable to nursing home facilities; "punitive damages may be assessed").

8 Izzarelli v. R.J. Reynolds Tobacco Co., 767 F. Supp. 2d 324, 333 (D. Conn. 2010). The defendant thereafter appealed the denial of its renewed motion for judgment as a matter of law to the Second Circuit Court of Appeals, which, in turn, certified a questions to the Connecticut Supreme Court about whether evidence of adulteration or contamination is required for liability under Comment I to section 402A of the Restatement (Second) of Torts, which question has not yet been answered.