Opinion ID: 78615
Heading Depth: 1
Heading Rank: 7

Heading: Monetary Relief May Predominate With Respect to Plaintiffs' Bifurcated Punitive Damages Claims

Text: In determining whether appropriate final relief relates exclusively or predominantly to money damages, Fed.R.Civ.P. 23(b)(2), advisory committee's note to 1996 amends., 39 F.R.D. at 102, claims for punitive damages weigh against certification under Rule 23(b)(2) because punitive damages are, of course, neither injunctive nor declaratory relief. The view that punitive damages can never be awarded consistent with Rule 23(b)(2), however, has not been adopted by this circuit. [42] On the other hand, this court also has not approved class certification under Rule 23(b)(2) involving the potential for substantial punitive damages. To decide whether certification under Rule 23(b)(2) is appropriate, per the standard described in Part II, a district court must squarely face and resolve the question of whether the monetary damages sought by the plaintiff class predominate over the injunctive and declaratory relief. If so, then the court may either deny certification under Rule 23(b)(2) or bifurcate the proceedings by certifying a Rule 23(b)(2) class for equitable relief and a separate Rule 23(b)(3) class for damages. See Molski, 318 F.3d at 951 n. 16 (citing Jefferson v. Ingersoll Int'l Inc., 195 F.3d 894, 897-98 (7th Cir.1999)). [43] Here, the district court certified Plaintiffs' punitive damages claims as a separate class, but did so under Rule 23(b)(2) rather than Rule 23(b)(3), exercising its discretion to impose additional requirements for notice and the opportunity to opt-out of this separate Rule 23(b)(2) class. See Dukes, 222 F.R.D. at 173 ([N]otice and the opportunity to opt-out can be provided in a(b)(2) class action and shall be provided to the plaintiff class with respect to Plaintiffs' claim for punitive damages.). As the district court noted, its discretion to require notice and the opportunity to opt-out in a Rule 23(b)(2) class action is well established. Id. (citing In re Monumental Life Ins. Co., 365 F.3d at 417; Molski, 318 F.3d at 951 n. 16; Robinson, 267 F.3d at 165-67; Jefferson, 195 F.3d at 898-99). [44] Notwithstanding its decision to require notice and an opportunity for opt-out, the district court abused its discretion by certifying the punitive damages claims under Rule 23(b)(2) without first undertaking an analysis of whether certification of the claim for punitive damages (in addition to injunctive and declaratory relief as well as back pay) rendered the final relief predominantly related to monetary damages. See Fed.R.Civ.P. 23(b)(2), advisory committee's note to 1996 amends., 39 F.R.D. at 102. Although notice and an opportunity for Plaintiffs to opt-out of the punitive damages claims alleviated some of the concerns regarding cohesiveness and due process that substantial punitive damages claims potentially raise, requiring these procedures does not remove the district court's obligation to determine whether each of the requirements of certification under either Rule 23(b)(2) or (b)(3) is met. On remand, the district court must determine whether certification under Rule 23(b)(2) of the punitive damages claims would cause monetary relief to predominate. As discussed above, the district court should not limit its inquiry to the former Molski factors, but should also consider any other factors relevant to whether monetary relief predominates when determining if certification under Rule 23(b)(2) is appropriate. [45] We note at least four factors present in this case that are relevant to the question whether monetary relief predominates, but the district court need not limit its inquiry to these factors alone. First, the inclusion of a punitive damages request means that the key issue in this case, Wal-Mart's liability, will be decided by a jury, rather than a judge. This significant procedural change weighs in favor of finding that monetary relief would predominate if the punitive damages claims are certified, although it is not dispositive. [46] Second, Plaintiffs' request for punitive damages introduces a new and substantial factual issue. To recover punitive damages, Plaintiffs must show not only that Wal-Mart engaged in a pattern or practice of discrimination, but also that it did so with malice or with reckless indifference to the federally protected rights of Plaintiffs. 42 U.S.C. § 1981a(b)(1). This additional factual question will likely require the Plaintiffs to introduce significant evidence and legal argument that would not have otherwise been necessary; the need for such extra evidence and argument weighs in favor of a finding that monetary relief predominates. Third, the size of a potential punitive damages award, measured on an individual basis, could be quite significant. Title VII permits a punitive damage award of up to $300,000 per employee. See id. § 1981a(b)(3). Such a large potential award raises due process and manageability concerns. Although the district court's decision to provide notice and opt-out to class members alleviates some of these concerns, the size of the potential award per class member in this case militates in favor of a finding that monetary relief predominates, triggering the need for other safeguards applicable when a class is certified under Rule 23(b)(3), rather than Rule 23(b)(2). Finally, we note that, unlike in other punitive and compensatory damages cases, this case does not require individualized punitive damages determinations. Plaintiffs' theory of liability is a class-wide theory that is based on a company policy that allegedly affects all class members in a similar way. See Allison, 151 F.3d at 417(leaving open the possibility that a punitive damage class could be certified under 23(b)(2) where the plaintiffs challenge broad policies and practices and contend that each plaintiff was affected by th[o]se polices and practices in the same way). While this factor counsels against a finding that punitive damages predominate, it also is not necessarily dispositive. In sum, we hold that the district court abused its discretion when it certified a Rule 23(b)(2) class including punitive damages without first undertaking a comprehensive analysis of whether the inclusion of such damages in this case causes monetary relief to predominate. To allow for further pertinent fact-finding, we remand the certification of the bifurcated punitive damages claims to the district court to consider whether certification is proper under Rule 23(b)(2). We decline to prejudge the outcome of this determination because the question of whether monetary relief predominates should be answered by the district court in the first instance, consistent with the Federal Rules' intention to vest district courts with significant discretion. If the district court concludes that the punitive damage class in this action cannot be certified under Rule 23(b)(2), it should also consider whether class certification of the punitive damages claims is appropriate under Rule 23(b)(3). We and a number of other courts of appeals have endorsed such hybrid certification of Rule 23(b)(2) and Rule 23(b)(3) classes in one action, particularly in civil rights cases that may involve significant monetary damages. See, e.g., Molski, 318 F.3d at 951 n. 16; Jefferson, 195 F.3d at 898; Eubanks, 110 F.3d at 96. Under this hybrid approach, the highly cohesive Rule 23(b)(2) phase of the proceedings, including liability, can be adjudicated without the costly class notice and opt-out process required under Rule 23(b)(3). In order to protect the due process interests of absent class members, however, notice and opt-out is required for the Rule 23(b)(3) punitive damages proceedings. See Fed.R.Civ.P. 23(c)(2), advisory committee's note to 2003 amends. (If a Rule 23(b)(3) class is certified in conjunction with a(b)(2) class, the (c)(2)(B) notice requirements must be satisfied as to the (b)(3) class.  (emphasis added)); Eubanks, 110 F.3d at 96 ([Hybrid certification] effectively grant[s] (b)(3) protections ... at the monetary relief stage.); Diaz v. Hillsborough County Hosp. Auth., 165 F.R.D. 689, 695 (M.D.Fla.1996) (explaining that in Stage I, the court will resolve liability using Rule 23(b)(2) procedures and, if liability is established, adjudicate damages using opt out procedures in Rule 23(b)(3)). This procedure retains the benefits of Rule 23(b)(2) and Rule 23(b)(3) for all parties, and promotes both ease of administration and the underlying principles of Rule 23. See Williams v. Local No. 19, Sheet Metal Workers Int'l Ass'n, 59 F.R.D. 49, 56 (E.D.Pa.1973) (explaining that the liability issue will be litigated first and, if the plaintiffs are successful, notice will be given for the damages proceeding). We do not express a view on whether the punitive damages claims in this case meet the Rule 23(b)(3) requirements or, if so, how the district court should manage the class proceedings in order to comply with Seventh Amendment principles. We believe, however, that this might be a case in which [d]ivided certification also is worth consideration. Jefferson, 195 F.3d at 898.