November 13, 2008

Has the Ninth Circuit Created a Circuit Split (or an Intra-Circuit Split) on the Appropriate Remedy for Excessive Punitive Damages?

My colleague Peder Batalden has raised an interesting question regarding the 9th Circuit's recent order in Southern Union v. Irvin. (See our recent post about that case here.) Peder notes that the 9th Circuit, after determining that any punitive damages award above $1.2 million would violate due process, remanded the case to the district court to give the plaintiff the option of accepting that amount or opting instead for a new trial.

The 9th Circuit's approach is inconsistent with the 11th Circuit's holding (followed in California) that plaintiffs have no right to a new trial when a court reduces a punitive damages award to the constitutional maximum:

Giving a plaintiff the option of a new trial rather than accepting the constitutional maximum for this case would be of no value. If, on a new trial, the plaintiff was awarded punitive damages less than the constitutional maximum, he would have lost. If the plaintiff obtained more than the constitutional maximum, the award could not be sustained. Thus, a new trial provides only a "heads the defendant wins; tails the plaintiff loses" option.
(Johansen v. Combustion Engineering (11th Cir. 1999) 170 F.3d 1320, 1332, fn. 19; see also Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1187-1188 [following Johansen].)

Peder asks whether the 9th Circuit's order in Southern Union (which did not cite Johansen or otherwise indicate that the court considered an alternate disposition) is consistent with the 9th Circuit's approach in other punitive damages cases, and if so, is there now a circuit split between the 9th Circuit and the 11th Circuit on this issue?

I took a look at the 9th Circuit's recent punitive damages and I found that the court has been inconsistent in its approach.

The court tackled this issue head-on back in 2002, when it decided Leatherman Tool Group, Inc. v. Cooper Industries, Inc. (9th Cir. 2002) 285 F.3d 1146, on remand from the Supreme Court. At that time, the 9th Circuit expressly followed the Johansen approach:
Absent clear authority or even argument from the parties to the contrary, we see no reason to disagree with the Eleventh Circuit's opinion in Johansen [citation], that an appellate court need not remand for a new trial in every case in which it finds that a punitive damages award exceeds the constitutional maximum. That conclusion usually follows from the fact that a plaintiff would not be entitled to any greater award on remand and therefore cannot be aggrieved.
Three years later, the court took the opposite approach in Planned Parenthood of Columbia/Willamette Inc. v. American Coalition of Life Activists (9th Cir. 2005) 422 F.3d 949. The court ordered a remittitur of the punitive damages to a nine-to-one ratio and gave the plaintiff the option of accepting the remittitur or opting for a new trial, without addressing Johansen or explaining why the court was departing from its earlier decision in Cooper.

The following year, the court changed its approach yet again, when it issued its third opinion in the Exxon Valdez litigation. In that opinion, the 9th Circuit ordered a reduction of the punitive damages to $2.5 billion without giving the plaintiff the option of a new trial. (See 472 F.3d 600.)

So it appears that there is not only a split within the 9th Circuit on this issue, but also a split between the 9th Circuit and 11th Circuit, at least to the extent that Southern Union and Planned Parenthood represent the law of the 9th Circuit.

In light of the conflicting opinions from prior panels, the panel in Southern Union probably should have called for en banc review. (See Atonio v. Wards Cove Packing Co., Inc. (9th Cir. 1987) 810 F.2d 1477, 1478-79 (en banc).) By failing to call for en banc review, the panel appears to have violated the en banc court's command in Atonio, but this panel was certainly not alone in doing so.