ABSTRACT
In torts, the damages required for full compensation of the victim and optimal deterrence of the injurer are normally the same. This correspondence is perfectly natural: if the injurer fully compensates the victim, then the injurer will completely internalize his externalities. Yet sometimes full compensation and optimal deterrence do not align. A well-known example is punitive damages, in which victims are purposely overcompensated to optimally deter injurers. What the literature has failed to acknowledge is that these torts mismatches – when full compensation of victims and optimal deterrence of injurers are incompatible – occur elsewhere and explain controversial and unresolved doctrinal areas of torts. When these mismatches occur, often the result is deep inconsistency on two levels. First, courts of different jurisdictions will disagree, leading to doctrinal ambiguities. Second, within a jurisdiction, tort law will at times and without explanation prioritize compensation, while it will at other times prioritize deterrence. For example, the United States Supreme Court has prioritized compensation when determining the implications of tax on tort damages, but has prioritized deterrence when crediting third-party tort settlements, all without any acknowledgment of the incoherence.
This Article offers a detailed exploration of torts mismatches. Descriptively, we show that such mismatches explain important areas of doctrinal controversy: for example, why courts persistently disagree on how tort damages should account for tax, depreciation, and the presence of third-party settlements. We identify four analytically distinct types of mismatches. We then investigate the implications of our account for courts and tort scholars. For courts, compensation-deterrence battles raise deep concerns about equity, the rule of law, and judicial transparency. Because they involve a conflict between two well-accepted, neutral principles, compensation and deterrence, courts become effectively unconstrained in such contexts, allowing ideological and other biases to influence decisionmaking. For tort scholars, these mismatches provide a more productive focal point beyond the well-worn debates about consequentialism versus corrective justice. Finally, the Article discusses some of the root causes of torts mismatches and investigates solutions for eliminating or ameliorating them.
Guttel, Ehud and Cheng, Edward K, Torts Mismatches (March 27, 2025), Vanderbilt Law Review (forthcoming, 2025).
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