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COMPLEX LITIGATION
PUNITIVE DAMAGES CLASS II

The National Law Journal, March 6, 2000

by Elizabeth J. Cabraser and Thomas M. Sobol

 
We agree with Professor Linda S. Mullenix's choice of punitive damages class actions as a topical subject for her recent article (NLJ, Jan. 24).
The concept of a punitive damages class is, as she says, "simple, logical and compelling." A punitive damages class accomplishes distributive justice among class members that individual adjudication never will, and it achieves certainty for defendants, avoiding "the problem of successive punitive damage awards against the defendant."
The increasing importance of class-based litigation for punitive damages claims flows from our global economy, in which the vast array of consumer and business products and services is increasingly concentrated in fewer business entities. Sporadic, unpredictable and inconsistent individual punitive damages awards create havoc for business, even though the isolated awards may accomplish little, in the long run, for consumers as a whole.  The use of the class mechanism to determine and distribute punitive damages brings rationality and proportionality to the process.
A parting of the ways when it comes to analysis
We part company with Prof. Mullenix's views, however, when it comes to an analysis of the law.  Where she may see barriers to punitive damages classes, we see rigorous but simple lessons to be learned in shaping a viable class framework.
Under Rule 23(b), parties can seek certification of a mandatory punitive damages class when seriatim litigation "would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests."
One example, the "limited fund" theory, received extensive treatment by the U.S. Supreme Court last summer in Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999).  Three lessons emerge.
First, the court held that the parties had "failed to demonstrate that the fund was limited except by the agreement of the parties." Fibreboard, 527 U.S. at 2316. Settling parties, under Rule 23(b)(1)(B), "must present not only their agreement, but evidence on which the district court may ascertain the limit and the insufficiency of the fund, with support in findings of fact following a proceeding in which the evidence is subject to challenge." Id. Although, as to the sale value of Fibreboard, the district court had heard evidence and made independent findings, "[t]he same, however, [could not] be said for the value of the disputed insurance." Id. at 2317.
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