Back when Philip Morris USA v. Williams, 549 U.S. 346 (2007), had just come down, we put up a post about the case being a death knell for the prosecution of punitive damages through class actions. We explained that the handwriting had been on the wall since State Farm Mutual Auto Insurance Co. v. Campbell, 538 U.S. 408, 416-417 (2003). Since Campbell there had been only a couple of outlier cases, one of those being Dukes v. Wal-Mart, Inc., 474 F.3d 1214, 1239 (9th Cir. 2007).

Last week we pointed out that the Ninth Circuit – taking its own sweet time about it – had agreed to rehear the Dukes decision en banc, something that’s pretty rare, especially in that circuit. Since even the Dukes panel had been uncomfortable with the class action-punitive damages issue, we could have the outliers whittled down to one, that being the West Virginia Supreme Court’s ducking the issue in State v. Madden, 655 S.E.2d 161, 167 (W. Va. 2007) (refusing to address question before there is a trial). Come to think of it, having the West Virginia Supreme Court duck an issue isn’t the worst thing in the world.

With the reargument in Dukes, we think this would be a good time to go over the constitutional reasons why class actions and punitive damages can’t mix, since the defense side could be close to closing out this particular abuse of class actions for good – very good.

Going back to Campbell, the Supreme Court found constitutional error in allowing a punitive damages award made under a single state’s law to be based upon evidence of the defendant’s supposed sins all over the country. The conduct giving rise to punitive damages “must have a nexus to the specific harm suffered by the plaintiff,” which this sort of blunderbuss approach lacked. 538 U.S. at 422.

A defendant’s dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages. A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business. Due process does not permit courts, in the calculation of punitive damages, to adjudicate the merits of other parties’ hypothetical claims against a defendant under the guise of the reprehensibility analysis.

Id. at 422-23. Since class actions, by definition, aggregate the claims of a large number of plaintiffs, they necessarily muddle the constitutionally-mandated “nexus” that the Supreme Court found essential in Campbell.

A class action approach to punitive damages was also at odds with the considerations in Campbell’s second prong – the ratio between a plaintiff’s compensatory and punitive damages. The constitutionally permissible ratio isn’t a fixed number, but rather a range that varies in any given case depending upon factors such as: if “a particularly egregious act has resulted in only a small amount of economic damages,” “the injury is hard to detect,” or “the monetary value of noneconomic harm might have been difficult to determine.” 538 U.S. at 425. Thus, as to the ratio factor, it’s determination “must be based upon the facts and circumstances of the defendant’s conduct and the harm to the plaintiff.” Id. This factor as well doesn’t seem at all amenable to the one-size-fits-all approach inherent in class actions.

Thus Campbell alone was enough to kill quite a few punitive damages class actions: In re Simon II Litigation, 407 F.3d 125, 139 (2d Cir. 2005) (Campbell requires decertification of punitive damages class); Johnson v. Ford Motor Co., 113 P.3d 82, 94-95 (Cal. 2005) (applying Campbell to reject “aggregate disgorgement”); Engle v. Liggett Group, Inc., 945 So.2d 1246, 1265 (Fla. 2006) (Campbell requires decertification of punitive damages class and reversal of $145 billion verdict); EEOC v. International Profit Associates, Inc., 2007 WL 3120069, at *10 (N.D. Ill. Oct. 23, 2007) (applying Campbell to bar mass actions, as well as class actions, for punitive damages); Colindres v. QuitFlex Manufacturing, 235 F.R.D. 347, 378 (S.D. Tex. 2006); O’Neal, v. Wackenhut Services, Inc., 2006 WL 1469348, at *22 (E.D. Tenn. May 25, 2006).

But Campbell wasn’t enough to deter the district court in Dukes from certifying a punitive damages class in an employment discrimination case – and a whopper of a class it was, including more than a million people. Dukes, 474 F.3d at 1237. Not only that, the certification order explicitly precluded individual injury hearings, adopting instead a “formula approach” that permitted awards to both “potential victims” and “actual victims.” Dukes v. Wal-Mart, Inc., 222 F.R.D. 137, 184-185 (N.D. Cal. 2004). All this was just fine with the original Ninth Circuit panel:

Relying on [Campbell], [defendant] argues that a punitive damages award in the absence of individualized hearings would violate its due process rights because it might punish legal conduct and award damages to non-victims. However, [Campbell] is readily distinguishable from this case. [Campbell] involved an action brought on behalf of one individual under state law. Moreover,. . .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 [uniform] federal law. . . . Caselaw supports the district court’s findings that substantive law does not mandate individualized hearings and that [defendant’s] Constitutional rights will not be violated if statistical formulas are employed to fashion the appropriate remedy.

Dukes, 474 F.3d at 1242.

Then along comes Williams, which establishes outright that punitive damages cannot be based on anything other than the defendant’s conduct towards a particular plaintiff. “We did not previously hold explicitly that a jury may not punish for the harm caused others. But we do so hold now.” Williams, 549 U.S. at 356-57. Thus, a class-wide determination of everybody’s punitive damages all a once is is precisely what Due Process prohibits. Indeed, while Williams did not itself involve a class action, the Supreme Court specifically held that punitive damages could not constitutionally be awarded on a “represent[ative]” basis:

[T]he Constitution’s Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties or those whom they directly represent, i.e., injury that it inflicts upon those who are, essentially, strangers to the litigation.

Williams, 549 U.S. at 343 (emphasis added).

Furthermore, Williams recognized a proposition that seems to shock the other side – that defendants have the right, a constitutional right, to defend themselves. “[T]the Due Process Clause prohibits a State from punishing an individual without first providing that individual with an opportunity to present every available defense.” Id. And it’s clear from the Williams opinion that these constitutionally protected defenses include individualized inquiries such as a plaintiff’s knowledge (“knew that smoking was dangerous”) and reliance (“did not rely upon. . .defendant[]”). Id. In short, what the Due Process Clause requires for punitive damages cannot be squared with the “common issues” necessary to maintain a class action.

And there’s more. Classwide punitive awards encompassing absent class members who never appear in court to pursue their claims are necessarily “standardless” and “speculative” in violation of Due Process:

To permit punishment for injuring a nonparty victim would add a near standardless dimension to the punitive damages equation. How many such victims are there? How seriously were they injured? Under what circumstances did injury occur? . . .The jury will be left to speculate. And the fundamental due process concerns to which our punitive damages cases refer – risks of arbitrariness, uncertainty, and lack of notice – will be magnified.

Id. (citations omitted). A jury therefore may not punish a defendant for harm to others – to the absent class members. Id. at 1064 (“a jury may not go further. . .and use a punitive damages verdict to punish a defendant directly on account of harms it is alleged to have visited on nonparties”).

Because class actions are inherently the sort of “representative” litigation that Williams holds cannot constitutionally be employed to pursue punitive damages, the defendant’s first motion for reargument in Dukes included the position that intervening Supreme Court authority required decertification of the punitive damages class. A slam dunk, right?


The panel granted reargument, but it’s replacement opinion backpedaled furiously on the punitive damages aspects of the class, now perceiving only “possibilities” that were not concrete enough to bother discussing at all:

[T]he district court outlined a trial plan based, in large part, on how other courts have handled similarly large and complex class action suits. [Defendant] contend[s] that at least some aspects of this trial plan violate [its] due process rights. . . . At this pre-merits stage, we express no opinion regarding [defendant’s] objections to the district court’s tentative trial plan (or that trial plan itself), 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 that is both manageable and in accordance with due process, manageability concerns present no bar to class certification here.

Dukes v. Wal-Mart, Inc., 509 F.3d 1168, 1190-91 (9th Cir. 2007) (footnote omitted) (emphasis added). Fortunately, the dissent called out the majority for dodging the issue:

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 [defendant’s] objections. . .and finds it sufficient to “note” that “there are a range of possibilities. . . .” [Defendant] has appealed precisely the unconstitutionality in the district court’s order, so it is incumbent upon
us to correct it.

Id. at 1198 (dissenting opinion).

That was the state of play in Dukes before last week’s grant of en banc reargument. Given the panel’s reaction – trying to duck the Due Process issue in the face of Williams – they didn’t have a good answer to Williams back then. It’s unlikely that there’s any better answer now, since the only post-Williams precedent on whether punitive damages class actions may constitutionally be certified are two more holdings that such class actions are unconstitutional. In re Conagra Peanut Butter Products Liability Litigation, 251 F.R.D. 689, 701-02 (N.D. Ga. 2008); Nelson v. Wal-Mart Stores, Inc., 245 F.R.D. 358, 376 (E.D. Ark. 2007), although we note Cook v. Rockwell International Corp., 564 F. Supp.2d 1189 (D. Colo. 2008), in which class certification wasn’t the issue.

We’re old enough to remember the way drug and device litigation was before the decisions in Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997), and Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), essentially slammed the door on product liability/personal injury class actions. Before that, it was distressingly common for plaintiffs’ counsel to try to extort settlements with extravagant class actions, including demands for classwide punitive damages.

Those are not fond memories, so we’d like to see the stake driven firmly through the heart of the idea of punitive damages class actions once and for all. Thus, we offer these arguments to our colleagues on the defense side and recommend that they use and expand upon them whenever any plaintiff, in any kind of case, makes class action allegations that encompass a demand for punitive damages. If you win, let us know.

We’ll be make it a point to let you know how Dukes turns out.

  • Anonymous

    Two very good posts in a week (the other was ‘Trans-substantivism’). Nice.

  • Anonymous

    Are you aware of any scholarly articles that have fleshed out this argument that punitive damages and class actions do not mix? Thanks.

  • “…that defendants have the right, a constitutional right, to defend themselves.”

  • It’s not hard to find the articles. Just go to Westlaw or Lexis and search for “punitive damages,” “class action,” and “due process” all in the same paragraph and you’ll find them, although you’ll have to sift through a couple of hundred hits. We just did that, and the first really thorough article we found is Sheila B. Scheuerman, “Two Worlds Collide: How The Supreme Court’s Recent Punitive Damages Decisions Affect Class Actions,” 60 Baylor L. Rev. 880 (Fall 2008). There are undoubtedly many others, but they’re probably cited in this one.