An Ordinary Economic Rationale for Extraordinary Legal Sanctions

Legal scholars have typically viewed the set of extraordinary legal sanctions (that is, remedies that systematically overor undercompensate plaintiffs) as logically independent and often inefficient. In this Article, the authors offer a single, generally applicable model that predicts and explains the role extraordinary sanctions play in an efficient legal system. Starting with punitive damages, the authors show that extraordinary sanctions are necessary in those situations in which the expected imposition of liability rules, which seek to make the plaintiff whole, would encourage a defendant wrongly to take a plaintiff's property rather that negotiate for it. The authors distinguish their model from two others, the court-error model and the illicit-benefits model. They then extend their model to account for many other controversial and seemingly unrelated extraordinary legal remedies: injunctions, stipulated damages, collateral source recoveries, wrongful death awards, and criminal sanctions.