Court Opinion

ID: 6985818
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:06:34.420912+00
Date Added: 2024-06-11T16:09:26.703836
License: Public Domain

CALABRESI, Circuit Judge,
concurring:
Although the result the court reaches today is compelled by Supreme Court precedent, I respectfully suggest that the policies behind punitive damages and the purpose of § 1983 would be better furthered by a different outcome. I write separately to explain why I believe this to be so. Cf. Abbate v. United States, 359 U.S. 187, 196, 79 S.Ct. 666, 3 L.Ed.2d 729 (1959) (Brennan, J., concurring in his own majority opinion).
I
The purpose of § 1983 is “not only to provide compensation to the victims of past abuses, but to serve as a deterrent against future constitutional deprivations, as well.” Owen v. City of Independence, 445 U.S. 622, 651, 100 S.Ct. 1398, 63 L.Ed.2d 673 (1980). Indeed, the Court in Newport recognized that punitive damages serve the dual purpose of deterrence and retribution. See Newport, 453 U.S. at 266-67, 101 S.Ct. 2748. Nevertheless, and as discussed above, the Court concluded that “the deterrence rationale of § 1983 does not justify making punitive damages available against municipalities,” id. at 268, *243101 S.Ct. 2748, because (1) it was unclear that municipal officials would be deterred by the prospect of damages borne by the taxpayers; (2) voters would still be likely to vote wrongdoing officials out of office absent punitive damages, both because they had done wrong and because of the possibility of compensatory damages; (8) punitive damages assessed directly against the offending officials would be a more effective means of deterrence; and (4) punitive damages could “create a serious risk to the financial integrity” of cities. Id. at 270, 101 S.Ct. 2748; see id. at 268-70, 101 S.Ct. 2748.
The Court’s analysis, however, neglected at least one aspect of the deterrence function of punitive damages — an aspect underscored by this case. Punitive damages can ensure that a wrongdoer bears all the costs of its actions, and is thus appropriately deterred from causing harm, in those categories of cases in which compensatory damages alone result in systematic under-assessment of costs, and hence in systematic underdeterrence.
It is easy to show'why this is so. A rational actor1 will undertake an activity when the benefits of doing so exceed the costs. In doing so, it will make some sort of formal or informal, spoken or unspoken, cost-benefit analysis, based on the information it possesses, to determine if a particular activity is worth its price. Such an analysis cannot be even roughly accurate unless approximately all the costs of the activity are borne by the actor. When the perceived benefits of an activity accrue to the actor, but some significant part of the costs is borne by others, the cost-benefit analysis will necessarily be distorted. In such a case, the actor will have an incentive to undertake activities whose social costs exceed their social benefits. In other words, the actor will not be adequately deterred from undesirable activities. And society will suffer.2
One goal of the tort system, therefore, is to ensure that actors bear the costs of their activities. See, e.g., Calabresi, supra note 4. And that is also a goal of § 1983, which, as the Supreme Court has noted, was designed to deter constitutional torts by making the tortfeasors liable in damages to their victims. See Newport, 453 U.S. at 258, 101 S.Ct. 2748; Owen, 445 U.S. at 651, 100 S.Ct. 1398.
In some circumstances, compensátory damages alone will be enough to promote an adequate cost-benefit analysis. In other cases, however, compensatory damages will not come close to equaling all the costs properly attributable to the activity. Costs may not be sufficiently reflected in compensatory damages for several reasons, most of which go to-the fact that not all injured parties are in fact compensated by the responsible injurer. For example, a victim may not realize that she has been harmed by a particular actor’s conduct, or may not be able to identify the person or entity who has injured her. See, e.g., Polinsky & Shavell, supra note 4, at 888. Where the injurer makes active efforts to conceal the harm, this problem is of course exacerbated. Moreover, even if a victim is aware of her injury and is able to identify its cause, she may not bring suit. A person will be unlikely to sue if the costs of doing so — including the time, effort, and stress associated with bringing a lawsuit— outweigh the compensation she can expect *244to receive. A victim is especially unlikely to sue, therefore, in cases where the probable compensatory damages are relatively low. See id. As a result, a harm that affects many people, but each only to a limited degree, will generally be given inadequate weight if only compensatory damages are assessed.
In addition, some victims will not sue even if the damages they could expect to receive would exceed the costs of suing. Victims will differ greatly in their knowledge of and access to the legal process, and those who are relatively poor and unsophisticated, as a practical matter, are frequently unable to bring suit to redress their injuries even if those injuries are grave. A harm that disproportionately affects such victims, therefore, is also particularly likely not to be accurately reflected in compensatory damages.
For these and other like reasons, com- - pensatory damages are, in wide categories of cases, an inaccurate measure of the true harm caused by an activity, and, as a result, making an injurer bear only such damages does not provide adequate deterrence against socially harmful acts. In such circumstances, additional damages, assessed in the cases that are brought, may be an appropriate way of making the injurer bear all the costs associated with its activities.
This idea is far from new. Many years ago, in an influential article that was in part responsible for his receipt of the Nobel Memorial Prize in economics, Professor Becker pointed out that charging a thief the cost of what he had stolen would not adequately deter theft unless the thief was caught every time. Since thieves will not always be caught, they must be penalized by more than the cost of the items stolen on the occasions on which they are caught. This “multiplier” is essential to render theft unprofitable and properly to deter it. See Becker, supra note 4. More recently, scholars have recognized that punitive damages can serve the same function in tort law. See, e.g., Thomas C. Galligan, Jr., Augmented Awards: The Efficient Evolution of Punitive Damages, 51 La. L.Rev. 3 (1990); Polinsky & Shavell, supra note 4.
Professors Polinsky and Shavell, for example, have argued that punitive damages should be assessed whenever a tortfeasor has a significant likelihood of escaping liability, and have even suggested a formula (simpler to state than to apply) for calculating such damages: total damages should equal the amount of loss in a particular ease, multiplied by the inverse of the probability that the injurer will be found liable.3 See id. at 889. Thus, if the injurer causes harm of $10,000, but will be found liable only one-fifth of the time, total damages— according to Polinsky and Shavell — should equal $50,000 ($10,000 in compensatory damages and $40,000 in punitive damages). See id. Use of such a multiplier, they argue, will cause damages to equal the total harm caused, forcing the. injurer to take into account all the costs of its activity and thus decreasing the likelihood that socially harmful activities will persist.4 See id.
*245Such a conception of punitive damages, again, is not new, and it has been recognized by courts as well as scholars. In- • deed, the Supreme Court, considering punitive damages in a quite different context from that in Newport, acknowledged that in determining such punitive damages, it is proper to consider the extent to which the tortfeasor might otherwise escape liability. See BMW of North America, Inc. v. Gore, 517 U.S. 559, 582, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996) (noting that “[a] higher ratio” of punitive to compensatory damages “may :.. be justified in cases in which the injury is hard to detect”); see also id. at 592-94, 116 S.Ct. 1589 (Breyer, J., concurring) (suggesting that “punitive damages awards that, as a whole, would take from a wrongdoer the total cost of the harm caused” might constrain potential arbitrariness and “counsel[] more deferential review” by appellate courts). In addition, the Seventh Circuit, in a § 1983 suit against an individual defendant, has- explicitly endorsed the multiplier function of punitive damages. See Kemezy v. Peters, 79 F.3d 33, 35 (7th Cir.1996) (Posner, J.) (pointing out that “[w]hen a tortious act is concealable, a judgment equal to the harm done by the act will underdeter” because the tortfeasor “will not be confronted by the full social cost of his activity”). Finally, Judge Goldberg, in his concurrence in Webster, offered a powerful critique of Newport’s treatment of punitive damages and suggested that deterrence would be furthered by the assessment, of punitive damages against municipalities in § 1983 actions where the municipal policy at issue is one .that tends toward concealment of wrongdoing. See Webster, 689 F.2d at 1235-38 (Goldberg, J., concurring).
Although widely accepted by economists and acknowledged by some courts, the multiplier function of punitive damages has nonetheless been applied haphazardly at best. One reason this is so is that the twin goals of deterrence and retribution are often conflated, rather than recognized as analytically distinct objectives. The term “punitive damages” itself contributes greatly to the confusion. For punitive damages, the term traditionally used for damages beyond what is needed to compensate the individual plaintiff, improperly emphasizes the retributive function of such extracompensatory damages at the expense of their multiplier-deterrent function. It also fails totally to explain the not unusual use of such damages in situations in which the injurer, though liable, was not intentionally or wantonly wrongful.5 A more appropriate name for extracompen-satory damages assessed in order to avoid underdeterrence might be “socially compensatory damages.” For, while traditional compensatory damages are assessed to make the individual victim whole, socially compensatory damages are, in a sense, designed to make society whole by seeking to ensure that all of the costs of harmful acts are placed on the hable actor.6
*246Indeed, it would not be inappropriate to disaggregate the retributive and deterrent functions of extracompensatory damages altogether and allow separate awards to further the two separate goals. In such a system, socially compensatory damages might be permitted in cases in which all the costs of a defendant’s actions were not before the court, whether or not the defendant’s conduct was particularly blameworthy.7 But a separate award of punitive damages would be allowed only in cases where the defendant’s conduct was sufficiently reprehensible to deserve punishment apart from whatever assessment was required to compensate the individual victim or society as a whole.8
The majority in Newport raised the objection that “punitive damages ... are in effect a windfall to a fully compensated plaintiff.” Newport, 453 U.S. at 267, 101 S.Ct. 2748. It is likely that a feeling that such “windfalls” are not warranted — and are distributed arbitrarily among plaintiffs — lies, and properly so, behind much of the current distaste for punitive damages. Of course, socially compensatory damages will have an equivalent deterrent effect on the injurer no matter whom they are paid to. As one commentator put it, “[a]n efficient windfall is still efficient.” Galligan, supra, at 58; see also Webster, 689 F.2d at 1237 n. 7 (Goldberg, J., concurring). Nevertheless, the existence of such potential windfalls may well induce undesirable behavior on the part of victims and of their lawyers. And there is no good reason why socially compensatory damages should be *247paid to the individual plaintiff, at least beyond a relatively small part sufficient to induce the victim to undertake the expense of pleading and proving them.
In fact, in order to achieve the goal of social compensation, as well as the goal of optimal deterrence, it would be preferable if such damages were paid into a fund that could then be applied to remedy some of the unredressed social harm stemming from the defendant’s conduct. And some states have explicitly recognized this socially compensatory function by mandating that at least a portion of punitive damages awards should go not to the plaintiff, but to the state treasury or to a specified fund. See BMW, 517 U.S. at 616-18, 116 S.Ct. 1589 (Ginsburg, /., dissenting) (collecting state laws providing for allocation of punitive damages to state agencies). A similar mechanism could be employed in the case of socially compensatory damages assessed against municipalities.9
II
As Judge Posner suggested in Kemezy, socially compensatory damages are anything but foreign to the goals of § 1988. And the rationale for socially compensatory damages in the case of an individual defendant holds equally true where the defendant is a municipality. Indeed, the case before us shows especially vividly the possible utility of such socially compensatory damages. Here, the City of New York adopted a strip-search policy that it knew or clearly should have known was unconstitutional. Counsel for the City estimated at trial that about 65,000 people arrested for misdemeanors had been subjected to strip searches under the policy. Under ordinary circumstances, very few of those 65,000 victims would have been likely to sue, both because the compensatory damages they would have received would have been relatively low and because they were no doubt, in the main, relatively poor and unsophisticated.
As one scholar has noted:
[T]he conditions of constitutional tort litigation for harm caused by law enforcement officials are ones in which the deterrent effect is likely to be on the low side. The potential plaintiffs, after all, are individuals who are in contact with the criminal justice system, generally as suspects or defendants. Many are unlikely to bring suit for harm suffered, whether because of ignorance of their rights, poverty, fear of police reprisals, or the burdens of incarceration. Moreover, in many cases the harm suffered by individuals from the constitutional violation itself may be small, widely dispersed, and intangible, providing little incentive for potential plaintiffs to sue, especially given the lack of sympathy *248that this group of plaintiffs can expect from the trier of fact.
Daniel J. Meltzer, Deterring Constitutional Violations by Law Enforcement Officials: Plaintiffs and Defendants as Private Attorneys General, 88 Colum. L.Rev. 247, 284 (1988) (footnotes omitted). In such circumstances — which are epitomized in the case before us — socially compensatory damages may well be necessary if, consistent with the goals of § 1983, constitutional violations are to be deterred adequately.
Socially compensatory damages are, of course, not the only possible means of deterrence in such situations. Two other approaches come readily to mind. Neither, however, is likely to suffice to achieve the purposes of § 1983.
First, one might think that an injunction, and the possibility of contempt sanctions for flouting it, would deter municipalities from engaging in repeated constitutional violations. Standing doctrine, however, generally precludes a § 1983 plaintiff from obtaining injunctive relief unless she can demonstrate that she is likely to be subjected to the same conduct in the future, a showing that can be very difficult to make. See City of Los Angeles v. Lyons, 461 U.S. 95, 105-06, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983) (holding that a plaintiff injured on one occasion by a police chokehold has no standing to seek an injunction against such chokeholds).
Second, it is possible that where many people suffer a relatively small harm, they could bring a class action and obtain damages that would approximate the total harm caused by the constitutional violation. And, in fact, a class action has been brought against the City by the victims of the strip-search policy. See Benjamin Weiser, Strip-Search Case Leaves City Facing a Bigger Liability, N.Y. Times, May 12, 1999, at Al. But class actions have their own limitations. For one thing, there are many situations in which the likelihood of escaping liability stems not from the high number of victims of an unconstitutional wrong, but from the municipal defendant’s attempts to conceal that wrong. See Webster, 689 F.2d at 1235-38 (Goldberg, J., concurring). It may be, therefore, that a municipal defendant has a significant chance of escaping liability and yet the number of potential plaintiffs is not great enough to satisfy the numerosity requirement of Rule 23. See Fed.R.Civ.P. 23(a)(1). Moreover, use of the class mechanism can result in compromising plaintiffs’ autonomy and ignoring conflicts among class members. Finally, like individual plaintiffs, class-action plaintiffs face costs that might dissuade them from bringing suit, including the added cost of managing the class, and these may well offset the economies of scale achieved through a class action. All in all, there is little reason to think that class actions can, or should, be the sole or even the principal vehicle for dealing with underdeterrence.
Once it is recognized that remedying underdeterrence is an appropriate function of extracompensatory damages against a municipality, and that it is a goal that can be separated from punishment, Newport’s objections to punitive damages under § 1983 lose much of their force. First, the kind of socially compensatory damages I have been discussing would not punish “blameless or unknowing taxpayers,” Newport, 453 U.S. at 267, 101 S.Ct. 2748, for they would not be punishment at all. Second, if deterrence is viewed not as an incidental byproduct of punishment, but as deriving instead from the placement of the relevant costs of a city policy on the city in order to encourage a more rational deci-sionmaking process, Newport’s arguments that extracompensatory damages would not be likely to deter cities also fall.
Thus, the Newport Court contended that it was unclear that municipal officials would be deterred by the prospect of damages borne by the taxpayers. See id. at 268-69, 101 S.Ct. 2748. But ah analogous argument was long ago refuted with respect to corporations and to not-for-profit *249institutions.10 It is no more valid for governmental ones. Assuming that a city is at least minimally rational in its decision-making, it will be better able to assess the relative social costs and benefits of a particular municipal policy if it knows that it will bear all, rather than only some, of the costs of that policy. Both a city’s power to tax and its officials’ ability to stay in office are limited by political considerations, and when taxpayers must pay more and get less in return they — like charitable donors or buyers of goods — will make their displeasure known.
Second, the Court argued that voters would be likely to vote wrongdoing officials out of office even absent punitive damages, both because the officials had done wrong and because of the possibility of compensatory damages. See id. at 269, 101 S.Ct. 2748. But, again, damages that are equal to the harm caused by a particular muñid-pal policy would presumably encourage voters to call their elected representatives to account more often than would damages that by definition represent only a small fraction of that harm.
Third, the Court contended that punitive damages assessed directly against the offending officials would be a more effective means of deterrence. See id. at 269-70, 101 S.Ct. 2748. But, in the case of a municipal policy for which no one official is primarily responsible, damages premised on individual guilt are unlikely to be efficacious. See Webster, 689 F.2d at 1236-37 (Goldberg, /., concurring) (“[A]t whom do we point the finger of guilt in the case of tragic collective apathy?”). Moreover, the incapacity of individual offending officials to pay significant damage awards inevitably limits such officials’ responsiveness to the threat of suits.11
*250Fourth, and finally, the Newport majority evinced concern that punitive damages could “create a serious risk to the financial integrity” of cities, in part because “the unlimited taxing power of a municipality may have a prejudicial impact on the jury, in effect encouraging it to impose a sizable award.” Newport, 453 U.S. at 270, 101 S.Ct. 2748. I am not insensitive to the possibility that a very large award of damages could affect a city’s finances. And it is for that very reason — contrary to the Newport Court’s first argument — that socially compensatory damages would be likely to prove an effective deterrent. See Webster, 689 F.2d at 1237 (Goldberg, J., concurring) (“It is necessary that the threatened damages cause some deprivation for the populace so that they will be nudged out of their blissful ignorance....”). Nevertheless, I emphasize that, in assessing the kind of damages that I have been discussing (in contrast to traditional punitive damages), it would not be proper for a trier of fact to take the city’s taxing power into account. The basis for socially compensatory damages is the multiplier effect, that is, the probability that the city would otherwise escape liability for damages it actually caused, and not the depth of its pockets. And this basis should be strictly enforced by the court in reviewing damage awards.
Because the Court in Newport focused on the difficulty with furthering the retributive goals of punitive damages in the case of a municipality, and envisioned deterrence as an ancillary consequence of retribution, it did not examine the possibility that socially compensatory, as opposed to traditional punitive, damages might comport both with Congress’s original intent and with the policies behind § 1983. As a lower court bound by Newport, it is not for us to decide this question. Nevertheless, I respectfully suggest that the purpose of § 1983, to protect federal constitutional rights against infringement by state actors, is not served when — as in the case before us — the prospect of damages awarded pursuant to the statute manifestly fails to deter a municipality from adopting a policy that it clearly knows or. should know violates the Fourth Amendment.

. A municipality is unlikely always to act rationally. Nevertheless, it is fair to assume that its behavior will be influenced by the extent to which it is made to bear the costs associated with its behavior. Indeed, § 1983, and Newport itself, are premised on that very principle. See Newport, 453 U.S. at 266, 101 S.Ct. 2748; Owen, 445 U.S. at 651-52, 100 S.Ct. 1398.

. These basic principles of the economic theory of deterrence are widely accepted, and have been .applied to both tort and criminal law. See generally, e.g., Gary S. Becker, Crime and Punishment: An Economic Approach, 76 J. Pol. Econ. 169 (1968); see also Guido Calabresi, The Costs of Accidents (1970); A. Mitchell Polinsky & Steven Shavell, Punitive Damages: An Economic Analysis, 111 Harv. L.Rev. 870 (1998).

. The formula is not unique to Professors Polinsky and Shavell. For a very similar analysis, see Robert Cooter & Thomas Ulen, Law and Economics 311-15 (2d ed.1997). I note that I express no opinion as to the conclusions reached by Professors Polinsky and Shavell regarding the availability of punitive damages in specific cases.

. It is possible that, in some circumstances, use of a multiplier formula might overdeter socially useful conduct. Litigation costs borne by the defendant themselves have a deterrent effect that may not be taken into account by a simple multiplier formula. And, although in a legal system that works efficiently, litigation costs would generally be a part of the social cost attributable to the harm caused by the defendant, unnecessary costs of administering such a system may properly be viewed as beyond the actual harm caused. Where a defendant is forced to bear such excess administrative costs, the multiplier formula might overdeter. Despite such failings, however, it seems likely that, in many instances, use of a multiplier will produce more *245accurate cost allocation than currently occurs.

. Punitive damages have frequently been awarded in strict products liability cases in which the premise for liability is the design and distribution of a defective product, rather than fault. See, e.g., Grimshaw v. Ford Motor Co., 119 Cal.App.3d 757, 174 Cal.Rptr. 348, 383 (1981) (upholding a jury award of punitive damages against Ford for its manufacture of the Pinto, and holding that ".punitive damages are recoverable in a nondeliberate or unintentional tort where the defendant's conduct constitutes a conscious disregard of the probability of injury to others”); Fischer v. Johns-Manville Corp., 103 N.J. 643, 512 A.2d 466, 480 (1986) (upholding a jury award of punitive damages against an asbestos manufacturer on a failure to warn theory, and holding that punitive damages were available in strict products liability actions when a manufacturer is "culpably indifferent to an ' unnecessary risk of injury” and "refuses to take steps to reduce that danger to an acceptable level”).

. Cf. Polinsky & Shavell, supra note 4, at 890-91 ("[T]he adjective 'punitive' may sometimes be misleading.... [Ejxtracompensatory damages may be needed for deterrence purposes in circumstances in which the behavior of the defendant would not call for punishment.”)-, see also Galligan, supra, at 13 (preferring the term "augmented awards” for pu*246nitive damages based solely on considerations ■of deterrence).

. In order tq award such socially compensatory damages, the jury would have to calculate the probability that the defendant would otherwise evade full liability for its act. Such a calculation would rarely be precise. A rough estimate, however, would not be more unlikely than many other estimates that courts currently ask juries to make. Thus, juries are routinely required to estimate the monetary value of a plaintiff's pairi and suffering, or of the loss sustained by a family as a result of a wrongful death, a sum that "defies any precise mathematical computation." Feldman v. Allegheny Airlines, Inc., 524 F.2d 384, 386 (2d Cir.1975) (quoting Floyd v. Fruit Indus., Inc., 144 Conn. 659, 136 A.2d 918, 927 (1957)) (internal quotation marks omitted); see also id. at 392 (Friendly, concurring dubitante) .(noting the difficulties of making such an estimate). The dangers that might attach to letting fact-finders assess socially compensatory damages could be mitigated by permitting closer judicial control over these damages and by placing the burden on the party seeking such damages to introduce evidence as to the likelihood of escaping liability — for example, proof that the defendant has tried to conceal its.act, or evidence of the number of times a particular wrongful act has occurred and the number of lawsuits brought against the defendant. The case before us shows that, at least in some circumstances, it will be readily possible to ascertain how often a particular violation has taken place. Here, records were kept that allowed the City to estimate that about 65,000 arrestees were subjected to the strip-search policy.

. One could argue that allowing both socially compensatory and punitive awards runs the risk of overdeterrence. But, once the goals of social compensation and punishment are disaggregated, allowing a separate award of punitive damages could represent a societal judgment that, for certain conduct, a cost-benefit analysis is inappropriate. That might be the case, for example, if the "benefit” resulting from the defendant’s conduct is socially illicit — perhaps because it consists of pleasure in the victim's pain. This function of punitive damages renders them analogous to criminal penalties that seek not to achieve a socially optimal level of activity, but to discourage or even eliminate a particular activity altogether. See Becker, supra note 4, at 191.
Of course, to the extent that punitive awards were permitted in order to further this quasi-criminal function, it would be appropriate to reconsider the procedural protections that should attach before such an award can be made. Cf., e.g., Bloom v. Illinois, 391 U.S. 194, 88 S.Ct. 1477, 20 L.Ed.2d 522 (1968) (distinguishing between civil and criminal contempt and holding that the Seventh Amendment required a jury trial for serious criminal contempt). Indeed, one disadvantage of the current system, which conflates punitive and social deterrence goals, is that what are actually punitive damages rather than socially compensatory damages can be awarded without adequate procedural safeguards and imposed on defendants who are not intentionally wrongful. Cf. cases cited supra note 7.

. In the case of constitutional torts by municipalities, socially compensatory damages could appropriately be paid into a federally administered fund. In other suits against municipalities, however, it would not make much sense to require that the extracompensatory damages be placed into the general state treasury. For the deterrence function would then be diluted, since some of the monies would likely return to the city. Rather, in order to preserve the desired deterrent effect, the damages would more properly be paid to a specific fund whose purpose, at least in theory, would be to attenuate the harm borne by those victims who did not receive compensatory damages. Thus, in cases of environmental damage, the fund might serve environmental purposes, and in auto injury cases, road safety. Such a fund might also be used to compensate victims whose damages had already been assessed to the defendant as a result of the multiplier and who, nevertheless, successfully sued later.
In establishing and controlling the use of such "limited purpose” funds, one should keep in mind the possible undesirability of having a significant part of general government revenues derive not from taxation, but from tort judgments. This problem is not, however, limited to or even primarily connected with awards of extracompensatory damages. See, e.g., Hanoch Dagan & James J. White, Governments, Citizens, and Injurious Industries, 75 N.Y.U. L.Rev. 354, 364-77 (2000) (discussing the settlement between the states and tobacco products manufacturers, which will require the payment of over $200 billion to the states in the next twenty-five years). It therefore must be addressed, if at all, at a more general level.

. This argument is, in effect, the obverse of the Newport Court’s assertion that punitive damages imposed on municipalities punish "blameless or unknowing taxpayers.” Newport, 453 U.S. at 267, 101 S.Ct. 2748. Both contentions depend on an assumption that the municipality and the taxpayers who compose it are wholly distinct entities — an assumption that, as courts have recognized in the case of corporations, cannot withstand close scrutiny. Thus, in Fischer v. Johns-Manville, the New Jersey Supreme Court, upholding an award of punitive damages against an asbestos manufacturer, rejected defendant’s argument that punitive damages "unfairly punish[ed] innocent shareholders” and declined its invitation to draw a distinction between a corporation and its shareholders, pointing out that shareholders have the power to affect corporate action:
It is the corporation, not the individual shareholders, that is recognized as an ongoing legal entity.... True, payment of punitive damage claims will deplete corporate assets, which will possibly produce a reduction in net worth and thereby result in a reduction in the value of individual shares. But the same is true of compensatory damages. Both are possible legal consequences of the commission of harmful acts in the course of doing business. To the same extent that damages claims may affect shareholders adversely, so do profitable sales of harmful products redound to their benefit (at least temporarily). These are the risks
and rewards that await investors. Also, we would not consider it harmful were shareholders to be encouraged by decisions such as this to give close scrutiny to corporate practices in making investment decisions.
Fischer, 512 A.2d at 476.
State courts rejected the doctrine of charitable immunity on similar grounds. See, e.g., Flagiello v. Pennsylvania Hosp., 417 Pa. 486, 208 A.2d 193, 204 (1965) (repudiating charitable immunity as "inconsistent with the principle that 'liability should fall upon the party best situated to adopt preventive measures and thereby reduce the likelihood of injury’ ”) (quoting Italia Societa per Azioni di Navigazione v. Oregon Stevedoring Co., 376 U.S. 315, 324, 84 S.Ct. 748, 11 L.Ed.2d 732 (1964)).

. The Supreme Court has held that punitive damages are properly assessed against individual defendants in § 1983 actions even for some unintentional violations of constitutional rights. See Smith v. Wade, 461 U.S. 30, 41, 51, 103 S.Ct. 1625, 75 L.Ed.2d 632 (1983) (holding that punitive damages can be obtained against individual defendants in § 1983 cases "without a showing of actual ill will, spite, or intent to injure” where the defendant has exhibited "reckless or callous disregard for plaintiff's rights”). I note that, to the extent that municipalities indemnify their officials against such awards of punitive damages, the distinction drawn by the Newport Court between cities and individual city officials inevitably collapses.