Opinion ID: 767813
Heading Depth: 1
Heading Rank: 1

Heading: the conflict between lindsey and tapscott regarding aggregation of punitive damages

Text: 6 To avoid adding confusion to conflict, we first explain why referring to the aggregation of punitive damages in the context of a class action can be a bit misleading. In this case, as in Lindsey and Tapscott, the punitive damages claim is a single claim on behalf of the entire class; it is not the sum total of 39,000 individual punitive damages claims. Because each class member could have sought punitive damages in individual suits, courts sometimes phrase the question as whether a class claim for punitive damages can be aggregated to satisfy the jurisdictional amount in controversy requirement for a class. The question, however, is not whether distinct punitive damages claims can be added together, but instead it is whether the single punitive damage claim on behalf of the class can be attributed in toto to each and every class member so they can individually satisfy the requisite amount in controversy, a requirement mandated by Zahn v. International Paper Co., 414 U.S. 291, 94 S. Ct. 505 (1973). 2 If the single punitive damages claim cannot be attributed as a whole to each class member, it must be allocated or divided pro rata among the class members, and after that is done the total amount of relief sought by each plaintiff must satisfy the jurisdictional amount. With that clarification of the question, we turn to the conflicting answers of Lindsey and Tapscott. 3 7 Lindsey involved a state law class action suit against two telephone companies alleged to have unlawfully extracted excessive cash deposits from the class. See Lindsey, 576 F.2d at 593. The defendants removed the case to federal court on diversity grounds. See id. at 593-94. The complaint, as construed by the Court, sought: (1) $2,000 compensatory damages for Lindsey, (2) an unspecified sum of compensatory damages for the class, which contained an unspecified number of plaintiffs, and (3) $1,000,000 punitive damages on behalf of the class. See id. at 595. 8 The Lindsey Court began its analysis by citing Snyder v. Harris, 394 U.S. 332, 89 S. Ct. 1053 (1969), for the broad proposition that multiple plaintiffs suing in a class may not aggregate any claims for the purpose of satisfying the amount in controversy requirement of diversity jurisdiction. Lindsey, 576 F.2d at 594. The Court then noted that each member of a class must individually satisfy the jurisdictional amount to avoid being dismissed from the class suit. See id. (citing Zahn, 414 U.S. at 300, 94 S. Ct. at 511). Because the Lindsey plaintiff had failed to plead a specific number of class members, the Court explained that it could not determine what dollar amount represent[ed]the 'amount in controversy' for each member of the class. Id. at 595 (emphasis added). Noting that the grounds for removal jurisdiction must be found in the plaintiff's complaint itself, the Court explained that it was not open for [the] defendants to attempt to show that the class was small enough that the claims on its behalf exceeded the sum of $10,000 per capita, id., which was the amount in controversy requirement at that time, see id. at 593. 9 Because it could not tell from the complaint the number of class members, the Lindsey Court could not determine whether each member's claim satisfied the jurisdictional amount, and it therefore held that the total specified damage claim for the class - $1,002,000 - had not been shown to satisfy the amount in controversy requirement. See id. at 595. A necessary part of Lindsey's reasoning is the holding that for amount in controversy purposes a class punitive damages claim must be allocated pro rata to each class member. Otherwise, the result in that case would have been different. If the Lindsey Court had concluded that a class claim for punitive damages could be attributed in toto to each class member, i.e., considered in the aggregate, for amount in controversy purposes, the $1,000,000 punitive damages claim clearly would have sufficed, regardless of whether the number of class members in Lindsey had been two or two million. The number of class members would have been irrelevant, instead of the critical factor in the decision. Thus, Lindsey inescapably stands for the proposition that a federal court cannot exercise diversity jurisdiction over a class action - even with completely diverse parties - solely because the total punitive damages claim on behalf of the entire class exceeds the jurisdictional amount in controversy. Instead, under Lindsey, the punitive damages claim for the class must be assigned on a pro rata basis to each class member for amount in controversy purposes. See id. 10 Three years after Lindsey, we split from the Fifth Circuit but retained its decisional law as our own, see Bonner, 661 F.2d at 1207, and fifteen years after the split, this Court decided Tapscott v. MS Dealer Serv. Corp. In that case, we faced another attempt to base diversity jurisdiction on a class claim for punitive damages, but we mistakenly considered the matter as one of first impression. 4 See Tapscott, 77 F.3d at 1358. The plaintiffs in Tapscott brought a state law class action, alleging a class of over 10,000 members. See id. at 1355 n.2. The class sought statutory damages, injunctive relief, and an unspecified amount of compensatory and punitive damages, based on the defendant's allegedly fraudulent conduct in the sale of extended service contracts. See id. at 1355. The defendants removed the case to federal court on diversity jurisdiction grounds. See id. The plaintiffs contested the removal with affidavits attesting that the individual recovery for each plaintiff would not exceed $50,000, the amount in controversy required for diversity jurisdiction at the time. See id. The defendants responded that, for jurisdictional purposes, the class claim for punitive damages should be considered in the aggregate. See id. at 1357-59. We agreed and upheld the removal of the case to federal court. See id. at 1359. 11 In Tapscott, this Court pointed to the Supreme Court's discussion in Snyder, which indicated that multiple plaintiffs may aggregate claims if they have a single title or right in which they have a common and undivided interest. Id. at 1357 (quoting Snyder, 394 U.S. at 335, 89 S. Ct. at 1056). We then considered the nature of punitive damages under Alabama law, finding that Alabama awards punitive damages to plaintiffs not as a matter of right, but rather as a means to punish and deter wrongful conduct. See id. at 1358. Because punitive damages were intended to serve the collective good, we reasoned that the class had a common and undivided interest in the punitive damages claim. See id. at 1358-59. That is why this Court in Tapscott permitted the punitive damages claim to be used to satisfy the requisite amount in controversy for the entire class; in effect, we let the whole amount of the punitive damages claim be used by each class member for that purpose, a result inconsistent with the decision in Lindsey almost twenty years earlier. See id. at 1359. 12 Attempting to distinguish Tapscott from Lindsey, Cohen points to the analysis in Tapscott addressing whether the punitive damages claim constituted a single collective right in which [the class members had] a common and undivided interest. Id. She contends that the common and undivided interest issue was never presented to us in Lindsey, and thus, there is no real conflict between our Lindsey and Tapscott decisions. Cohen's contention misconstrues the operation of our prior panel precedent rule. The issue in Tapscott was the same as that in Lindsey: whether a class claim for punitive damages can be considered in the aggregate in order to establish diversity jurisdiction over all potential members of a class, or must instead be attributed pro rata to each class member. 13 Common and undivided interest is simply the standard used to decide which, if any, claims by multiple plaintiffs may be considered in the aggregate for jurisdictional purposes, and which must be divided among the class members. See Snyder, 394 U.S. at 335, 89 S. Ct. at 1056. But we had already decided in Lindsey that a class claim for punitive damages could not be considered in the aggregate for each class member, or at least that such a claim arising under Alabama law could not be. Our conclusion to the contrary in Tapscott, which also involved Alabama punitive damages law, is inconsistent with the result in Lindsey. Because the same state law governed punitive damages in each case, there can be no difference between the two cases insofar as the common and undivided interest analysis is concerned. 5 14 The fact that this case involves a Florida law punitive damages claim does not distinguish it from Lindsey, because as we concluded in our prior panel opinion in this case, the nature of punitive damages is the same under Florida law as under Alabama law. See Cohen I, 184 F.3d at 1295. We explained that both states award punitive damages to serve the collective good, noting particularly that Florida law, like Alabama law, provides that 'punitive damages are warranted only where the egregious wrongdoing of the defendant ... constitutes a public wrong.' Id. (citation omitted). Consequently, there can be no difference between this case and Lindsey stemming from a common and undivided interest analysis of state punitive damages law. 6 15 Cohen's real argument is that the result and holding of Lindsey are wrong because we failed to apply a common and undivided interest analysis - she says it was not even considered. Even if we thought Lindsey wrong, the prior panel precedent rule is not dependent upon a subsequent panel's appraisal of the initial decision's correctness. Nor is the operation of the rule dependent upon the skill of the attorneys or wisdom of the judges involved with the prior decision - upon what was argued or considered. Unless and until the holding of a prior decision is overruled by the Supreme Court or by the en banc court, that holding is the law of this Circuit regardless of what might have happened had other arguments been made to the panel that decided the issue first. 16 Lindsey held that, for purposes of deciding whether the amount in controversy requirement had been satisfied, the amount of an Alabama punitive damages claim was to be divided by the number of class members and the result attributed to each member of the class. Tapscott decided to the contrary. Because Lindsey predates Tapscott, we must follow Lindsey as the precedent of this Court. See Steele, 147 F.3d at 1318; Dailey, 24 F.3d at 1327. 17 Accordingly, we rescind that part of our prior opinion in this case that relied upon Tapscott to hold that the $10,000,000 punitive damages claim on behalf of Cohen's proposed class satisfied the amountin controversy requirement for diversity jurisdiction over this case. See Cohen I, 184 F.3d at 1294-95. The punitive damages claim does not satisfy the amount in controversy requirement, because when the $10,000,000 class claim for punitive damages is divided among the alleged 39,000 class members, as Lindsey requires for amount in controversy purposes, each member's share of the claim is approximately $256. 18 We now address Cohen's other two grounds for satisfying the requisite amount-in-controversy: (1) the value of the requested injunctive relief, and (2) the amount of attorney fees due if the class prevails. 19