Photo of Bexis

One of our number – Bexis – has just returned from an extended vacation. Ordinarily we wouldn’t bother with that, but this was no ordinary vacation. Rather, Bexis went all the way to the Antipodes, New Zealand. As a result, he was pretty much out of touch. Since he got back, he’s shared some blog-related stuff that’s accumulated in his in box.

One of the reasons we like blogging, is that people send us things, both when we ask and (even more importantly) unsolicited. Bexis had a rather bulging in box when he returned. We play well together, so Bexis shared. We’re doing this in several posts – and not just because Herrmann needed to flatter Bexis to get him to come back from New Zealand. We’ve been blogging long enough, that it’s getting rather hard to remember all the stuff we’ve written. The short posts let us name things by topic. That way, maybe we can use the index of posts to find stuff, just like you, our readers, can.

Anyway, as regular readers know, we’re interested (appalled, is more like it) by punitive damages and especially attempts to impose such damages by class action. It’s been our opinion that the recent Supreme Court Philip Morris v. Williams case makes punitive damages class actions constitutionally improper.

In addition to the cases we cited in that prior post, a number of other more recent cases have agreed with us that the Supreme Court position on due process – that punitive damages must be determined solely with respect to specific plaintiffs as to whom the defendants have the right to raise all available defenses – precludes certification of punitive damages class actions. See Nelson v. Wal-Mart Stores, Inc., 245 F.R.D. 358, 376 (E.D. Ark. 2007); Buynie v. Airco, Inc., 2007 WL 2275013, at *8 (N.J. Super. A.D. Aug. 10, 2007); cf. EEOC v. International Profit Associates, Inc., 2007 WL 3120069, at *10 (N.D. Ill. Oct. 23, 2007) (for same reasons, punitive damages cannot be determined globally in joint action on behalf of more than 100 plaintiffs). For you non-lawyers, a “cf.” case citation means “it’s not exactly the same, but close.” But an opposing lawyer would define it as “they couldn’t find anything better.”

The lower courts seem to get it, but Bexis’ in box shows that certain appellate courts are still trying hard to dodge the issue and let plaintiffs use the threat of class-wide punitive damages to shake down defendants. Two recent cases, Dukes v. Wal-Mart, Inc., ___ F.3d ___ 2007 WL 4303055 (9th Cir. Dec. 11, 2007), and State ex Rel. Chemtall, Inc. v. Madden, ___ S.E.2d ___, 2007 WL 4098937 (W. Va. Nov. 15, 2007), considered class actions that had been certified for, among other things, punitive damages. Confronted with the PM v. Williams-based arguments, both courts took evasive action.

In Dukes the court actually backtracked. In a prior opinion – the case was on panel rehearing (that means just the judges who decided the case before, not the entire membership of the court) – the court had actually said classwide determination of punitive damages was OK under pre-Williams due process standards (which was pretty unique in its own right):

The defendant’s due process rights will not be violated if the district court applies a statistical formula to determine punitive damages. Aggregate computation of class monetary relief is lawful and proper. Campbell is readily distinguishable from this case, as it involved an action brought on behalf of one individual under state law. There is no danger in this case that defendant will be punished for conduct that is legal where it occurred, because Title VII is a federal law that applies everywhere in the United States.

Dukes v. Wal-Mart, Inc., 474 F.3d 1214, 1241 (9th Cir. 2007) (now withdrawn).

The same judges on rehearing took one look at Williams (see our prior post) and headed for the hills. In the new Dukes decision, the court (although affirming) in effect says, “maybe the district court will change its mind” about the punitive damages class:

At this pre-merits stage, we express no opinion regarding Wal-Mart’s objections to the district court’s tentative trial plan. . . , but simply note that, because there are a range of possibilities – which may or may not include the district court’s proposed course of action – that would allow this class action to proceed in a manner. . .in accordance with due process.

2007 WL 4303055, at *16. The dissent in Dukes calls the majority on this dodge, responding, “hey, you can’t just ignore an issue that was specifically appealed!”:

In its first opinion, the majority explicitly approved of the district court’s trial plan in the face of the Due Process deprivations. In this second opinion, the majority “express[es] no opinion regarding Wal-Mart’s objections to the district court’s” scheme and finds it sufficient to “note” that “there are a range of possibilities. . . .” Wal-Mart has appealed precisely the unconstitutionality in the district court’s order, so it is incumbent upon us to correct it.

2007 WL 4303055, at *22. Somehow we don’t think we’ve heard the last of this issue in Dukes.

In Chemtall, the court also punted, saying, “we don’t want to decide this, so let’s see if maybe the case will settle” (actually they said “wait until after trial,” but it’s the same thing):

The circuit court’s trial plan, on its face, is not a clear error of law because it does not guarantee a result at odds with Philip Morris. Significantly, there has not yet been a trial in this case. No evidence has been adduced, none of the defendants have been found liable for any tortious conduct, and punitive damages have not been assessed. Therefore, a decision on the constitutionality of punitive damages at this point would amount to nothing more than an exercise in speculation. Therefore, we believe the question of the constitutionality of punitive damages is best decided in light of a verdict based on a full development of the evidence at trial.

We can’t say we’re surprised by this result, but that doesn’t mean we like it. There aren’t that many defendants like Wal-Mart who are big enough to stand up to the extortionate effect of a certified punitive damages class action.

On a final punitive damages note, Bexis passed around a copy of Bennett v. Reynolds, ___ S.W.3d ___, 2007 WL 4462925 (Tex. App. Dec. 21, 2007), because the case affirmed some of the highest punitive-to-compensatory damages ratios we’ve seen survive since State Farm v. Campbell. The plaintiff recovered purely economic damages of $5,327.11, but the court also let him also keep punitive judgments of $250,000 against one defendant and $1 million against another defendant.

Those are eye-popping ratios of 47 to 1 and 188 to 1, respectively – way beyond anything that the Supreme Court even hinted was permissible in State Farm v. Campbell.

Whoa! And Texas isn’t even a particularly liberal jurisdiction anymore. So what’s going on? As Sgt. Friday would say “just the facts.” These defendants were found liable for “convert[ing] cattle owned by [plaintiff]. . .and that each committed felony theft.” 2007 WL 4462925, at *1. In other words, the defendants were cattle rustlers. I guess that there are still some things that just aren’t tolerated in Texas, no matter what.

We’ll be posting more from Bexis’ in box soon.