The Disappearing Opt-Out Right in Punitive Damages Class Actions

Abstract

One of the most pressing issues in punitive damages law today is how to protect defendants from multiple punitive damages awards for a single course of conduct, while still ensuring that wronged plaintiffs can recover punitive damages. Numerous commentators have proposed non-opt-out class actions for punitive damages as the best solution to the multiple punishment problem because they subject defendants to a single collective punitive damages award that can be distributed equitably across all injured plaintiffs. This Article takes a contrary view. It argues that mandatory classes improperly deprive class plaintiffs of their right to opt out and pursue their own individual claims while allowing defendants to self-servingly cap their punitive damages liability at an artificially low level that thwarts the punishment and deterrence purposes of punitive damages.

First, this Article explains that because the Supreme Court has held that an individual plaintiff can collect punitive damages only for harm done to that plaintiff, allowing plaintiffs to opt out and pursue their own claims creates no risk of imposing duplicative punishment on defendants. Second, this Article suggests that mandatory classes are particularly inappropriate for class action settlements because settlements are not punitive in nature. In a class settlement, parties have incentives to manipulate the settlement fund’s allocation of punitive damages in ways that bear no connection to wrongdoing or punishment, and that allow defendants to significantly reduce their punitive damages exposure. Instead, preserving class members’ right to opt out best protects plaintiff autonomy and helps ensure that defendants pay an appropriate amount of punitive damages.

Keywords: Civil Law, Civil Rights, Constitutional Law, Consumer Protection Law, General Law, Practice and Procedure, Torts