Litigation: Challenging class actions that involve potentially massive aggregate statutory damages

Defendants should argue against certification on the grounds of due process and Rule 23(b)(3)

This article is the fifth in a six-part series on challenging class certification. Read parts one, two, three and four.

For certain causes of action, Congress and state legislatures authorize the recovery of a specified amount of damages set by statute, rather than requiring the plaintiff to prove actual damages. A legislature typically chooses this route to incentivize individual plaintiffs to bring claims, either because actual damages are relatively small or difficult to show. But the availability of such statutory damages in the class-action setting may create a risk of staggeringly large awards—often for technical or inadvertent violations of a statute. The possibility of such awards may violate the Constitution’s prohibition, embodied in principles of due process, on imposing “grossly excessive” punitive damages. Relatedly, defendants have argued that because of the enormous settlement pressures in these cases, when the accumulation of statutory damages not only far exceeds any injury, but also could potentially annihilate the defendant, “a class action is [not] superior to other available methods for fairly and efficiently adjudicating the controversy” as required by Federal Rule of Civil Procedure 23(b)(3). These arguments have met with modest success in the courts.

Courts are divided over the exact role that due process plays in deciding class certification. Some courts, such as the 9th Circuit in Bateman v. American Multi-Cinema, Inc., have suggested that these considerations are irrelevant until after a large aggregated damages award has been rendered (See also Murray v. GMAC Mortg. Corp.). If Congress chose not to enact an express bar or cap on statutory damages in the class-action setting, these courts believe that they should not second-guess that silence.

Other courts, however, have recognized the fallacy (in our view) of that approach. Deferring the due-process inquiry until after an adverse class-wide verdict of millions or perhaps even billions of dollars will, in most cases, amount to rejecting the inquiry for all time, because the certification of a class seeking enormous aggregated damages creates intense pressure on the defendant to settle, regardless of the merits of the underlying claims. Accordingly, when damages would be “enormous and completely out of proportion to any harm”––as the 11th Circuit noted in London v. Wal-Mart Stores––some courts have concluded that the scale of the requested statutory damages should be considered in determining whether the putative class is superior to other forms of adjudication as required by Rule 23(b). Due process concerns are critical to that analysis. As Judge Wilkinson of the 4th Circuit advised in a concurring opinion in Stillmock v. Weis Markets, “[r]ather than considering annihilative damages as they bear on due process, it is preferable for a district court to address them in the context of Rule 23(b)(3)’s superiority requirement [because] doing so gives the district court discretion to avoid a serious constitutional problem.”

Contributing Author

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Archis Parasharami

Archis Parasharami is a co-chair of Mayer Brown LLP’s Consumer Litigation & Class Actions practice. He is also a co-editor of the firm’s

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Contributing Author

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Kevin Ranlett

Kevin Ranlett is a partner in Mayer Brown LLP’s Consumer Litigation & Class Actions practice. He is also a co-editor of the firm's

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Phillip Dupré

Phillip Dupré is an associate in Mayer Brown’s litigation practice. 

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