California Punitives by Horvitz & Levy

  • New punitive damages blog analyzes case pending before en banc Ninth Circuit (Arizona v. Asarco)

    Our friends at Mayer Brown have launched their own punitive damages blog, aptly titled Guideposts.  Mayer Brown has a deep bench of brilliant lawyers with extensive knowledge of punitive damages issues.  We’ve had the pleasure of collaborating with them on a number of punitive damages appeals in California and elsewhere. Welcome to the blogosphere!

    Guideposts currently features a two-part series of posts addressing Arizona v. Asarco, which the Ninth Circuit has decided to review en banc.  In the first post, blogger Evan Tager argues that the Ninth Circuit should be analyzing the Title VII punitive damages award in that case under federal common law, not constitutional law (as the original three-judge panel did).  And he notes that federal appellate courts have considerably greater authority to regulate punitive damages under federal common law than they do under the Due Process Clause of the Constitution. 

    In the second post, he argues that the Ninth Circuit should reduce the Asarco award to something in the mid-five-figure range, to reflect that the defendant’s conduct in that case was far less reprehensible than the acts of other defendants in other employment cases.  He argues that awards at the statutory maximum of $300,000 should be reserved for only the most egregious wrongdoing.
     
    Related posts:

    Ninth Circuit grants en banc rehearing to decide excessiveness of punitive damages in Title VII case (Arizona v. Asarco)

    Ninth Circuit reduces $300,000 punitive damages award to $125,000 in Title VII harassment case (Arizona v. ASARCO) 

     

  • Ninth Circuit grants en banc rehearing to decide excessiveness of punitive damages in Title VII case (Arizona v. Asarco)

    The Ninth Circuit has ordered en banc rehearing in Arizona v. Asarco, a Title VII sexual harassment case in which a jury awarded the plaintiff no actual damages, $1 in nominal damages, and $868,750 in punitive damages. 

    The original panel decision, described in an earlier post, was split 2-1.  Judge O’Scannlain, writing for the majority, reduced the punitive damages to $125,000. Judge Hurwitz dissented, arguing that the award should be affirmed in full. 

    Hat tip: Howard Bashman via Rick Hasen.

  • Credit card late fees and over-limit fees are not punitive damages, according to the Ninth Circuit (Pinon v. Bank of America)

    This published Ninth Circuit opinion is quite an entertaining read.

    The plaintiffs in the case are a class of consumers who hold credit cards with major banks.  They filed a complaint alleging that the defendants charged them fees ranging from $15 to $39 for missing payments and for exceeding their borrowing limits. The plaintiffs conceded that the penalties were authorized by their borrowing agreements, but they alleged that the amount of the fees are unconstitutionally excessive under the due process principles set forth BMW v. Gore and State Farm v. Campbell.  The district court dismissed their complaint for failure to state an actionable claim.

    The Ninth Circuit affirmed, agreeing that due process principles do not prevent enforcement of excessive penalty clauses in private contracts. But that’s not the entertaining part.  The entertaining part is Judge Reinhardt’s concurring opinion.  The concurrence, dripping with sarcasm, explains that the Supreme Court has “recently discovered” constitutional limitations on punitive damages, and should consider extending those limitations for the benefit of not just corporate evildoers, but ordinary consumers as well.  Here’s the full introduction to Judge Reinhardt’s concurrence:

    I concur, reluctantly. The Supreme Court has recently discovered that the Constitution prevents courts from imposing disproportionate punitive damages in tort cases. If the Court continues to adhere to its newfound view, it would be well advised to apply the same rule to prevent disproportionate penalties from being imposed on consumers when they breach contracts of adhesion. Consumers must frequently enter into such one-sided contracts if they are to obtain many of the practical necessities of modern life, such as credit cards, cellular phones, utilities, and other vital consumer goods. Applied to such contracts, the Court’s most recent substantive due process rule—which has to date served primarily to protect wealthy corporations from liability for repeated wrongdoing—would also protect ordinary consumers from paying excessive court-enforced damages for minimal breaches of contract. These excessive penalties are currently paid to large national business entities which, each year, collect billions of dollars in late fees alone. They reflect a compensatory to penalty damages ratio higher than 1 to 100, which far exceeds the ratio of non-punitive to punitive damages that the Court has held to be prohibited by the Constitution in tort cases. In sum, if due process is violated when courts award disproportionate punitive damages in the tort context, due process is equally violated when courts enforce the punitive and substantially more disproportionate penalty clauses in contracts of adhesion.

    I ultimately agree with the opinion of the court, however, that the Constitution has not yet been so interpreted. Thus, I cannot disagree with the ultimate decision. I do believe, however, that the proposition I discuss deserves further exploration and analysis, and  that, should the new Supreme Court doctrine continue in effect, the extension of that doctrine as requested by Cardholders should eventually become the law under the Due Process Clause.

    The full concurring opinion is worth a read and is only about seven pages long.

  • Ninth Circuit reduces $300,000 punitive damages award to $125,000 in Title VII harassment case (Arizona v. ASARCO)

    The Ninth Circuit rarely issues published opinions on punitive damages, but they issued an interesting one yesterday. 

    The jury in this sexual harassment case awarded the plaintiff no actual damages, $1 in nominal damages, and $868,750 in punitive damages against ASARCO, a copper mining outfit.  The trial court reduced the punitive damages award to $300,000, the statutory maximum under Title VII for an employee of ASARCO’s size.  ASARCO appealed the award as reduced.

    Judge O’Scannlain, writing for the majority, framed the issue as follows: 

    We must decide whether the Constitution permits a six-figure punitive damages award in a sexual harassment suit where the jury awarded no compensatory damages and only one dollar in nominal damages.

    To answer that question, the court began by evaluating the first BMW guidepost – the reprehensibility of the defendant’s conduct.  The court concluded that the defendant’s conduct was highly reprehensible, implicating all five of the State Farm reprehensibility factors.  I’m a little surprised the court thought the defendant’s conduct implicated the “physical harm” factor, since the plaintiff did not apparently suffer any physical harm.  But the court dealt with this issue by saying intentional discrimination is a “serious affront to personal liberty” and therefore more reprehensible than other conduct that causes only economic harm.

    The court turned next to the ratio between the punitive damages and the $1 nominal award.  The court concluded that a ratio of 300,000 to 1 is constitutionally excessive, even in the face of highly reprehensible conduct.  That left the court with a dilemma of choosing a smaller award that would not be excessive, but would still have some deterrent effect.  The court settled on $125,000, only because 125,000 to 1 was the highest ratio that had been affirmed in any other published discrimination case: Abner v. Kan City S. R.R. Co., 513 F.3d 154, 157 (5th Cir. 2008).

    Judge Hurwitz dissented, arguing that the award should be affirmed and that Abner, although correctly decided on its facts, should not operate as a ceiling for punitive damages awards in harassment cases.

  • DRI amicus brief on extraterritorial punishment in Oregon national guard case

    We previously reported on the $75 million punitive damages award to former Oregon national guardsmen against defense contractor KBR.  DRI – the Voice of the Defense Bar has submitted an amicus brief in that case, arguing that the Constitution prohibits imposition of punitive damages under state law for conduct that occurred solely in a foreign country, especially when the foreign country does not allow punitive damages and when the defendant’s conduct was in furtherance of an important federal interest.

    Full disclosure: Horvitz & Levy prepared the DRI brief.

  • 9th Circuit hears oral arguments in punitive damages case where jury awarded no compensatory damages

    Today’s Recorder has a story on an interesting punitive damages case pending before the Ninth Circuit.

    In a sexual harassment case (Aguilar v. ASARCO), the jury awarded $0 in compensatory damages, $1 in nominal damages, and $868,750 in punitive damages.  The district court reduced the punitive damages to $300,000 and the defendant appealed, challenging that amount as excessive.  Oral argument was held on Wednesday.  As Scott Graham of the Recorder reports, Judges O’Scannlain and Hurwitz jousted with counsel over how to apply the single-digit-ratio rubric of BMW and State Farm to the facts of this case.  Stay tuned.  This is the sort of case in which the losing side might seek certiorari.

  • Ninth Circuit affirms order reducing $10M punitive damages award to $2.4M

    The Ninth Circuit’s unpublished decision in Dawe v. Corrections USA is terse, as they usually are.  It contains no statement of facts and skimpy analysis, so it’s difficult to tell exactly what the case is all about.  But the opinion contains two holdings of note:

    1.  As to one defendant, the court affirmed a combined compensatory and punitive damages award that exceeded the defendant’s net worth by a factor of four.  The court said “There is no constitutional prohibition of awards in excess of a party’s net worth.”  That’s a little surprising, because the opinion elsewhere seems to apply California law, which does prohibit punitive damages that exceed the defendant’s ability to pay.

    2.  The court affirmed the district court’s reduction of the total punitive damages from $10,085,000 to $2,368,406, resulting in a roughly one-to-one ratio of punitive damages to compensatory damages.  The court cited State Farm‘s holding that a one-to-one ratio can “reach the outermost limits of the due process guarantee” when compensatory damages are substantial. The court said that even though the defendant acted with malice and the plaintiff was financially vulnerable, the constitution would not permit a ratio in excess of one to one.

  • Ninth Circuit wipes out $80 million punitive damages award in Bratz litigation

    In 2011 we reported on the massive judgment against Mattel in its battle with rival toymaker MGA over the Bratz line of dolls and accessories.  The judgment included $80+ million in compensatory damages, $80+ million in punitive damages, and $140 million in attorneys’ fees.

    With a judgment like that, you might expect the appeal to result in a lengthy opinion.  Nope.  The Ninth Circuit needed only nine pages to completely vacate the compensatory and punitive damages and a portion of the fee award. 

  • Ninth Circuit allows punitive damages under the Trafficking Victims Protection Act (Ditullio v. Boehm)

    This Ninth Circuit opinion addresses the question whether a plaintiff may recover punitive damages under the Trafficking Victims Protection Act, which allows the victims of human trafficking to sue for “damages and reasonable attorneys fees.”

    The majority opinion, authored by Judge Fletcher, holds that punitive damages are available under the TVPA because it creates a tort claim, and the common law generally permits punitive damages for tort claims.  The opinion relies heavily on the U.S. Supreme Court’s decision in Smith v. Wade, which held that punitive damages are available for section 1983 claims.  Judge Callahan’s dissenting opinion states that the legislative history of the TVPA shows that Congress deliberately decided not to authorize recovery of punitive damages under that statute.  The Ninth Circuit appears to be the first federal circuit court to weigh in on this issue.  If another circuit adopts Judge Callahan’s point of view, the issue may end up in the U.S. Supreme Court. 

  • Ninth Circuit calls on district court to consider whether punitive damages claims can be certified for class treatment in light of Wal-Mart v. Dukes

    When the U.S. Supreme Court decided Wal-Mart v. Dukes back in June, we observed that the Court’s interpretation of Federal Rule of Civil Procedure 23(b)(2) might lead federal courts to conclude that claims for punitive damages cannot be certified for class treatment under this rule. Late last week, the Ninth Circuit instructed a federal district court to consider this very question in Ellis v. Costco Wholesale Corp.

    Rule 23(b)(2) allows for class treatment only when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” In Wal-Mart, the Supreme Court assessed whether this rule justified class certification where the class sought not only declaratory and injunctive relief but backpay as well. The Court held that Rule 23(b)(2) does not authorize class certification where, as with claims for backpay, each class member would be entitled to an individualized award of monetary damages.

    As we explained at that time, the Supreme Court has previously held that any punitive damages award must be tied to the harm suffered by a plaintiff. (See, e.g., State Farm Mutual Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408, 422-423.) We therefore noted that, in the future, courts may well conclude that claims for punitive damages, like claims for backpay, are claims for an individualized award of monetary damages that cannot be certified for class treatment under Rule 23(b)(2). Since then, several federal district courts have reached precisely that conclusion. (See, e.g., Morrow v. Washington (E.D. Tex. Aug. 29, 2011) 2011 WL 3847985, at *30 [claims for punitive damages “are not appropriate for Rule 23(b)(2) certification” because they “would require an individualized, factual determination for each claim”]; Altier v. Worley Catastrophe Response, LLC (E.D. La. July 26, 2011) 2011 WL 3205229, at *13 [denying class certification under Rule 23(b)(2) with respect to punitive damages claim because such a claim “requires a focus on individualized issues to comply with constitutional protections”].)

    This issue also came up in Ellis. There, the Ninth Circuit vacated a district court’s order granting class certification and remanded to the district court to consider whether class certification should be granted pursuant to the legal standards established in Wal-Mart. In doing so, the Ninth Circuit “highlight[ed] several factors for the district court to consider” on remand. Among those factors, the Ninth Circuit—rather than deciding the issue itself—said the district court may consider on remand whether plaintiffs’ claim for punitive damages could be certified in accordance with Wal-Mart‘s interpretation of Rule 23(b)(2).

    Of course, it’s possible the district court may sidestep this Rule 23(b)(2) issue since the Ninth Circuit also indicated the district court could consider whether to certify the punitive damages claim pursuant to Rule 23(b)(3). But there is no guarantee the district court would do so. As we’ve previously pointed out, although some courts have certified punitive damages claims for class treatment, several federal courts have declined to do so because the necessity of assessing an award of punitive damages in light of the defendant’s conduct toward a particular plaintiff requires individualized inquiries that prevent a plaintiff from satisfying Rule 23(b)(3)’s predominance requirement.