OPINION: Punitive damages aren’t a windfall —they’re a safeguard 

During this year’s legislative session, there has been discussion about “punitive damages.” As a consumer protection lawyer who helps people defrauded by big corporations, I know the proposed changes would be an enormous mistake.

Punitive damages are misunderstood. They are not a jackpot for plaintiffs or a giveaway to lawyers. Punitive damages are one of the only effective tools consumers have to stop serious fraud and abuse by businesses — especially when individual losses are small but the harm to the public is immense. 

Even the most serious consumer fraud may cause relatively small “actual damages” — losses to any individual. A credit error that takes months to fix. A bogus landlord fee of a few hundred dollars per tenant. A fraudulent credit card charge the bank won’t pay back. But when these practices are repeated thousands of times, they become both profitable and dangerous.

Punitive damages are money a jury can award above actual damages, if it finds very serious misconduct that cannot be stopped by actual damages alone. If the law weakens punitive damages, dishonest companies can treat fraud as a cost of doing business — because the worst consequence is being forced to give back what they should never have taken in the first place.

Punitive damages exist to change that math. They deter repeat misconduct when actual damages are too small to matter to large companies. They protect public safety, not just pocketbooks.

They level the playing field for honest New Mexico businesses that play by the rules. And they are already limited and carefully reviewed by judges, juries and appellate courts.

Weakening punitive damages shifts the cost and risk of fraud onto New Mexico families, seniors and small businesses — while rewarding the worst actors in the marketplace.

When New Mexicans are defrauded, there are surprisingly few places to turn. Federal agencies have effectively ceased their enforcement of consumer protection laws. Law enforcement is busy protecting the public and rarely brings criminal cases for consumer fraud. The attorney general can bring enforcement actions on behalf of the state but cannot represent individual victims. The only realistic option is a civil lawsuit. But there’s a catch: Most consumer fraud cases involve relatively small individual losses — often hundreds or a few thousand dollars — even though the overall harm to the public is much greater. Without punitive damages, these cases cannot stop the misconduct.

Actual damages are meant to repay what was lost. They are not designed to punish or deter. If a company can cheat 1,000 people, and only a handful ever sue, and the worst outcome is paying back those few customers — then cheating makes financial sense.

Punitive damages change that calculation. They send a clear message: You will not profit from misconduct.

This is not theoretical. Consumer protection attorneys across the state see the same abuses again and again.

Families unknowingly buy previously wrecked vehicles that were never disclosed as unsafe. The car may look fine, but it puts children at risk — yet the “actual damages” may only be the difference in resale value.

Out-of-state door-to-door solar companies target seniors and non-English speakers with forged or misrepresented 20-year contracts. Systems don’t work, roofs are damaged and homeowners are left with crushing debt. Without punitive damages, these companies simply move on to the next neighborhood.

Incorrect credit reporting blocks people from renting apartments, costs them jobs and raises interest rates. Debt collectors threaten arrest or lawsuits over debts that are expired, false or already paid — often targeting seniors, veterans and low-income families. Banks refuse to reimburse clear fraud, knowing a single refund means nothing to their bottom line.

In these cases, actual damages alone do not reflect the seriousness of the misconduct or force systemic change. Punitive damages do.

Contrary to popular belief, punitive damages are not automatic. A plaintiff must prove more than negligence or even outright fraud. The conduct must be willful, reckless, fraudulent, malicious or in bad faith. Judges can dismiss punitive claims before trial. Juries can reject them. Trial courts can reduce awards. Appellate courts routinely review and reverse excessive verdicts. Constitutional limits already apply.

There are safeguards at every stage.

Raising the standard or capping punitive damages would have fewer consumer cases brought at all, cheaper fraud, more targeting of New Mexico by bad actors and honest local businesses undercut by those willing to cheat.

The result wouldn’t be fewer lawsuits — it would be more fraud.

Punitive damages aren’t decided by lawyers or judges alone. They are decided by New Mexico juries — people applying community standards to real facts.

Punitive damages are not extreme. They are essential.

Nicholas H. Mattison is a partner with Feferman, Warren & Mattison.