California Punitives by Horvitz & Levy

  • Ninth Circuit’s Dukes v. Wal-Mart Decision Addresses Class Certification of Punitive Damages Claims

    Today, the Ninth Circuit issued its long awaited en banc decision in Dukes v. Wal-Mart Stores, Inc., the case in which plaintiffs filed a class action alleging that Wal-Mart discriminates against women in violation of Title VII.

    As we noted in prior posts, one of the (many) legal questions at issue in Dukes is the propriety of a classwide determination of punitive damages for Title VII claims. The federal district court held that a class estimated to include more than 1.5 million women—including their requests for back pay and punitive damages—could be certified. A divided panel of the Ninth Circuit subsequently affirmed the certification of the requests for back pay and punitive damages but the court later granted rehearing en banc.

    Today, in a 6 to 5 decision, a divided en banc panel affirmed the certification of the requests for back pay under Rule 23(b)(2) of the Federal Rules of Civil Procedure but reversed the certification of the requests for punitive damages under that rule.

    In doing so, the majority opinion exacerbated an existing split amongst the federal appellate courts over the proper standard for determining when class certification is appropriate under Rule 23(b)(2). The en banc Dukes majority held that, “[t]o be certified under Rule 23(b)(2), . . . a class must seek only monetary damages that are not ‘superior [in] strength, influence, or authority’ to injunctive and declaratory relief.” In contrast, the Second Circuit’s Rule 23(b)(2) test assesses a plaintiff’s subjective intent in bringing a lawsuit to determine whether monetary relief predominates over declaratory and injunctive relief. And several other federal appellate courts hold that a class action seeking monetary relief may be certified under Rule 23(b)(2) only if the monetary relief is “incidental” to the other forms of requested relief.

    The majority opinion held that, under its new test, a district court must “consider, on a case-by-case basis, the objective ‘effect of the relief sought’ on the litigation.” The majority explained that the following factors would be relevant to this legal analysis: (1) “whether the monetary relief sought determines the key procedures that will be used”; (2) “whether it introduces new and significant legal and factual issues”; (3) “whether it requires individualized hearings”; and (4) “whether its size and nature—as measured by recovery per class member—raise particular due process and manageability concerns.”

    Applying this newly announced test to the Dukes case, the majority opinion concluded that the requests for back pay could be certified for class treatment under Rule 23(b)(2). But the majority determined that the district court abused its discretion by certifying the requests for punitive damages because the court did not undertake an analysis of whether certification of these requests rendered the final relief sought by the class “predominantly ‘related to money damages.’”

    The majority, however, did not hold that claims seeking punitive damages can never be certified or could not be certified in the Dukes case. Instead, the majority opinion remanded the case for the district court to determine whether certification of the requests for punitive damages would be appropriate under Rule 23(b)(2) and, even if such certification were inappropriate, whether “hybrid certification”—certification of a portion of the case pursuant to Rule 23(b)(2) and the requests for punitive damage under the separate class certification standard set by Rule 23(b)(3)—would nonetheless be proper.

    In remanding the punitive damages portion of the case, the majority opinion noted that several factors from its new test counseled against certification of the requests for punitive damages under Rule 23(b)(2). However, the majority also noted that one factor—whether individualized hearings were necessary—weighed against a finding that punitive damages predominate over declaratory and injunctive relief. According to the majority, the Dukes case “does not require individualized punitive damages determinations” because the plaintiffs’ “theory of the liability is a class-wide theory that is based on a company policy that allegedly affects all class members in a similar way.”

    Five judges on the en banc panel dissented for a wide variety of reasons. The dissenting judges explained that the majority’s new test for class certification under Rule 23(b)(2) was “essentially unusable” and “aggravate[d] the already-existing inconsistency between the circuits.” The dissent also faulted the majority for concluding, in an “unprecedented holding,” that “punitive damages do not require individualized determinations because the plaintiffs allege[d] that Wal-Mart’s policy ‘affects all class members in a similar way.’” The dissent explained that this remarkable determination, “made with virtually no analysis, is wrong both as a matter of law and fact.”

    Absent an unprecedented “super” rehearing en banc by the full Ninth Circuit, the Dukes saga in the Ninth Circuit is now over. Next up: whether Wal-Mart files a petition for a writ of certiorari with the U.S. Supreme Court and, if so, whether the high court agrees to step into the fray over what some have reported to be the largest class action in history.

  • Devlin v. Foot & Ankle Doctors: $142,500 in Punitive Damages Affirmed

    Nothing earth-shattering here. The California Court of Appeal (Second District, Division Four) concludes in an unpublished opinion that a $142,500 punitive damages is not excessive in relation to a $57,000 compensatory damages award (ratio of 2.5 to one).

  • Another Punitive Damages Award in Florida Tobacco Litigation

    BusinessWeek reports that a Florida jury has awarded $10 million in compensatory damages and $80 million in punitive damages to a smoker’s widow in a lawsuit against R.J. Reynolds, as part of the ongoing series of post-Engle trials in that state.

    The jury allocated 49% of the fault to the smoker. As a result, the Florida trial judge reduced the total award against R.J. Reynolds, including the punitive damages, by 49 percent. The net result was a judgment of $46.3 million.

    I have never seen a California defendant ask a judge to reduce a punitive damages by the percentage of fault allocated to the plaintiff. I have seen many cases in which a defendant argues that the issue of excessiveness should be evaluated in light of the compensatory damages as reduced by the allocation of fault. But aside from arguments on excessiveness, I haven’t seen anyone argue that the allocation of fault should result in a direct, corresponding reduction in the punitive damages. Although I haven’t researched this extensively, I’m not aware of any California law directly on point. When the California Supreme Court adopted the doctrine of comparative negligence in Yi v. Yellow Cab, the court expressly declined to address the effect of that rule on punitive damages, saying only that “[t]he law of punitive damages remains a separate consideration.”

    Related posts:

    Florida Jury Awards $20 Million in Punitive Damages to Smoker’s Widow

    Smoker’s Widow Wins $12.5 Million in Punitive Damages

    Florida Trial Judge Cuts $244 Million Punitive Damages Award

    Florida Jury Awards $25 Million in Punitive Damages to Smoker’s Widow

    “Smokers, tobacco, both winners in early Engle cases”

    Jury Rules For Plaintiff in First Phase of Retrial After Reversal of $145 Billion Punitive Damages Award

    After Reversal of $145 Billion Class Action Punitive Damages Award, Florida Smokers Seek Punitive Damages in Individual Suits

    Plaintiffs’ Attorneys Win $218 Million Fee Award for Helping Obtain a Punitive Damages Verdict that Was Reversed on Appeal

  • Oregon Jury Awards $18.5 Million in Punitive Damages Against Boy Scouts

    The New York Times reports that an Oregon jury has awarded $1.4 million in compensatory damages and $18.5 million in punitive damages (a ratio over 13 to one) against Boy Scouts of America. The plaintiff alleged that he was molested by an assistant scoutmaster in the 1980s, and that the Boy Scouts allowed the perpetrator to participate in scouting events even after he admitted to a Scouts official that he had previously molested boys.

    The Boy Scouts say they plan to appeal. It will be interesting to see how this plays out. The ratio is quite high, but Oregon appellate courts have historically been hostile to defendants challenging punitive damages awards. In addition, Oregon has a split-recovery statute that entitles the state to 60 percent of any punitive damages award. That makes these cases hard to settle, because regardless of what the parties want to do, Oregon will insist on getting its 60 percent of the punitive damages award (as it did in the cases described here, here, and here).

  • Another Law Review Note Criticizes the Supreme Court’s Opinion in Exxon Shipping

    We previously blogged about a student note suggesting that pro-business bias may have played a role in the majority opinion in Exxon Shipping. Here’s another note criticizing that opinion: “Oil and Water: How the Polluted Wake of the Exxon Valdez has Endangered the Essence of Punitive Damages” (2010) 43 Suffolk U. L. Rev. 475.

    The note uses some colorful language; it compares the Supreme Court’s opinion to the Exxon Valdez itself, threatening to further pollute the already tainted waters of punitive damages law:

    Beyond the perpetual ineffectiveness of the Court’s chosen path, however, there exist deeper flaws that have caused the Court to effectively disregard the fundamental objectives of punitive damages: punishment and deterrence. Nonetheless, if the Court continues to treat the punitive-to-compensatory ratio
    as the barometer of constitutional due process, then fixed ratios and mathematical bright lines to cap punitive damage awards could soon become the norm. Accordingly, the flaws of this paradigm must be realized and a new standard must emerge so that the hull confining the Exxon holding to maritime law does not fracture, allowing it to seep into other areas of law and further pollute a doctrine that is already overdue for a cleanup effort.

  • Wyeth v. Scroggin Cert. Petition: Are Partial Retrials On Punitive Damages Unconstitutional?

    We previously blogged about Wyeth v. Scroggin, in which a jury awarded $27 million in punitive damages—the Eighth Circuit found evidentiary error occurred during the punitive damages phase of the trial, and ordered a partial new trial limited to the issue of punitive damages. Wyeth (now owned by Pfizer) has filed a petition for certiorari, asking the U.S. Supreme Court to decide whether a new trial limited to punitive damages violates the Seventh Amendment. (See the Supreme Court’s on-line docket for this petition.)

    This is an issue that is near and dear to our hearts. As appellate lawyers who routinely handle appeals involving punitive damages, we have often had occasion to explain that appellate courts should order a complete new trial if the court finds error that affected a punitive damages award, because partial new trials limited to punitive damages are usually unfair.

    Case law holds that limited new trials are appropriate only in limited circumstances. For example, the U.S. Supreme Court held in Gasoline Products Co. v. Champlin Refining Co. (1931) 283 U.S. 494, 500, that courts should not order retrials limited to a single issue unless “it clearly appears that the issue to be retried is so distinct and separable from the others that a trial of it alone may be had without injustice.” Similarly, the California Supreme Court held in Torres v. Automobile Club of So. California (1997) 15 Cal.4th 771, 776 that appellate courts should not order a limited retrial on punitive damages unless punitive damages “can be separately tried without such confusion or uncertainty as would amount to denial of a fair trial.”

    In practice, new trials limited to the issue of punitive damages are unworkable in most cases. A jury must base its punitive damages award on the same conduct that supported liability and supported a finding of malice, oppression or fraud; otherwise, the defendant will be improperly punished for conduct that was not tortious. Typically, the plaintiff points to a variety of conduct by the defendant to establish a tort, but the verdict form does not break down the jury’s findings in a way that shows which particular acts occurred, and which satisfied the elements of the claimed tort. Thus,there is no way for a jury in a limited retrial to know what conduct the first jury found to be tortious and/or malicious. If the second jury is told to assume that the first jury resolved every factual dispute in favor of the plaintiff’s arguments, a limited retrial creates a real risk that the second jury will impose punishment for a subset of conduct that the first jury did not find to be tortious or malicious. To avoid this unfairness, courts should resist the temptation to order limited retrials except in the rare circumstance where it can be determined from the first trial exactly what conduct the second jury should be punishing.

    We’ll keep an eye on this petition and the Supreme Court’s ruling on it. We don’t yet have a link to the cert. petition, but here’s a link to an amicus brief in support of the petition, filed by The Defense Research Institute (DRI).

  • Arkansas Jury Awards $42 Million in Punitive Damages in Litigation Over Genetically Modified Rice

    We haven’t seen many media reports of big punitive damages awards lately, in California or elsewhere. But here’s a report from the Associated Press (via the Columbia Daily Tribune) that a jury in Arkansas has awarded $5.9 million in compensatory damages and $42 million in punitive damages against Bayer CropScience. The plaintiffs, a dozen farmers, alleged that Bayer allowed genetically modified herbicide-resistant rice into the American rice market, causing some nations to ban American rice, which thereby depressed prices.

  • Justice Stevens, Pro-Business Activist?

    In the wake of Justice Stevens’ announcement that he will retire from the Supreme Court, a wide array of commentators (Jan Crawford, Dahlia Lithwick, Ilya Shapiro) are writing about his legacy. Most of the commentary focuses on his status as the most liberal justice on the current Court. Erwin Chemerinsky’s profile of Justice Stevens in today’s Daily Journal (subscription required) contains a nice summary of Justice Stevens’ greatest hits from a liberal perspective.

    I won’t take issue with the characterization of Justice Stevens as the Court’s most reliable liberal in most areas, but it’s worth noting that Justice Stevens was also the author of one of the most business-friendly decisions issued by the Supreme Court in the past few decades: BMW v. Gore. That was the case in which the Supreme Court first recognized a federal constitutional limitation on excessive punitive damages. Justice Stevens also joined the majority when the Supreme Court further developed those limitations in State Farm v. Campbell. As readers of this blog are aware, the application of those two opinions in the lower courts has saved American businesses billions of dollars. The Court’s most conservative justices, Justices Scalia and Thomas, dissented from those opinions and criticized them as unprincipled judicial lawmaking (or, to use a hackneyed political buzzword, judicial “activism”).

    Looking solely at the Supreme Court’s punitive damages cases, one could say that when Justice Stevens retires, the Court will lose its most prominent pro-business “activist.”

  • Cupps v. Mendelson: Trial Court Properly Vacated $160,000 Punitive Damages Award Because Plaintiff Failed to Prove Defendant’s Financial Condition

    Here’s another case in which a plaintiff forfeited his right to punitive damages because he failed to present meaningful evidence of the defendant’s financial condition.

    The plaintiff won a verdict for $288,000 in compensatory damages and $160,000 in punitive damages. The trial court granted the defendant’s motion for partial JNOV and eliminated the punitive damages award, on the ground that the plaintiff had failed to introduce meaningful evidence of the defendant’s financial condition.

    The California Court of Appeal (Fourth District, Division One) affirmed. The plaintiff apparently conceded on appeal that he presented no direct evidence of the defendant’s financial condition, but he tried to prop up the punitive damages award by pointing to expert testimony regarding the value of a business partly owned by the defendant. The Court of Appeal determined that the expert never directly opined about the value of the business, and was not even qualified to do so.

    The plaintiff also tried to rely on Cummings Medical Corp. v. Occupational Medical Corp. (1992) 10 Cal.App.4th 1292 for the proposition that a plaintiff need not introduce evidence of the defendant’s financial condition, and can rely instead on the amount of profit the defendant gained from the misconduct at issue. The Court of Appeal noted that it had previously rejected that reasoning in Kenly v. Ukegawa (1993) 16 Cal.App.4th 49, which held that an award cannot be based solely on the alleged “profit” gained by the defendant, “without examining the liabilities side of the balance sheet.”

  • Proposal to Cap Punitive Damages in California is Still Alive

    A few weeks ago we reported that a proposed bill to cap punitive damages in California (AB X8 40) was dead. As it turns out, the reports of that proposal’s death were greatly exaggerated.

    That particular bill is indeed dead, but the substance of it has been added to another pending bill (AB 2740) through a gut-and-amend procedure, by which the contents of one bill are stripped out and replaced with something new. The original version of AB 2740 dealt with benefits for National Guard veterans, but now it contains three entirely different proposals: (1) cap punitive damages to three times compensatory damages, (2) prohibit punitive damages against product manufacturers who comply with federal or state regulations, and (3) limit non-economic damages in negligence cases to $250,000. We will continue to follow the status of this bill as it moves through the legislative process.