Essay

Awards for Pain and Suffering: The Irrational Centerpiece of Our Tort System

When a petit jury in a civil tort action awards damages for pain and suffering, it does not award damages that compensate, or that indemnify, or that provide restitution to the injured party—the traditional functions of damage awards. Damages that are awarded for pain and suffering are probably intended as a pecuniary bonus or gift in an amount thought roughly to reference the pain suffered or expected to be suffered. But there seem to be no rational, predictable criteria for measuring these damages. For that reason, there are also no criteria for reviewing pain and suffering awards by the presiding judge or by an appellate court. Without rational criteria for measuring damages for pain and suffering, awarding such damages undermines the tort law’s rationality and predictability—two essential values of the rule of law. Yet it is this irrationality in awarding money for pain and suffering that provides the grist for the mill of our tort industry, which is now estimated to have grown to $200 billion. 

This Essay addresses the tension between the community’s desire, through the rule of law, to compensate injured victims for pain and suffering and the problems that have arisen in authorizing awards of damages that are irrationally quantified.

To address a problem that is so widely tolerated might be daunting, but I submit that the appropriate response need not be invented from scratch. There is a model from an analogous problem that can be explored and adopted in material respects. This model is shaped by the actions of the several States that have responded to the rise of punitive damages during the past fifty years. 

Judicial Sincerity

Although the idea that judges have a duty to be sincere or candid in their legal opinions is widely shared, critics have argued that a strong presumption in favor of candor threatens judicial legitimacy, deters positive strategic action on multi-member courts, reduces the clarity and coherence of doctrine, erodes collegiality, and promotes the proliferation of fractured opinions. Against these and other objections, I defend the view that judges have a duty to give sincere public justifications for their legal decisions. After distinguishing the concepts of sincerity and candor, I argue that the values of legal justification and publicity support a principle of judicial sincerity. This principle imposes weaker constraints than a general duty of judicial candor. But while candor may be desirable, judges who provide sincere justifications for their decisions satisfy the demands of legitimate adjudication. 

The Taxation of Carried Interests in Private Equity

This Essay analyzes the tax treatment of carried interests in private equity. It argues that there are two competing analogies: service income and investment income. Standard approaches are not able to resolve which of the competing analogies is better and often fail even to recognize that there are competing analogies. The best method for determining the proper treatment of carried interests is through direct examination of the effects of each of the possible treatments, known as the theory of line drawing in the tax law. Using this approach, it is clear that the better treatment of holders of carried interests is as investors. Key pieces of evidence include the longstanding policy premises behind partnership taxation and the complexity and avoidance problems with attempts to tax carried interests as service income. In particular, the longstanding policy behind partnership taxation is to tax partners as if they engaged in partnership activity directly. Current law, which gives carried interests holders capital gain follows this approach, and changing the law to tax carried interests as service income would require rejection of this historical trend. Because such an approach would mean taxing carried interests differently than if the partners engaged in the activity directly, it would be easily avoidable. Moreover, attempts to tax carried interest as service income will have to be able to distinguish service income from other types of income, a task which has proven to be difficult, complex, and avoidable.

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