Saturday, October 24, 2009

California District Court Denies Motion to Decertify Punitive Damages Class in Iorio v. Allianz Life Ins. Co..

On October 21, 2009, a California District Court judge denied a motion to decertify a punitive damages class in Iorio v. Allianz Life Ins. Co. of N. Am., 2009 U.S. Dist. LEXIS 97657 (S.D. Cal., Oct. 21, 2009). The plaintiff’s case – certified on behalf of a class of California senior citizens who purchased deferred annuities from Allianz Life Insurance Company of North America – alleges that Allianz employed false and misleading statements to promote the sale of its annuities. In seeking decertification, the defendant asserted that recent U.S. Supreme Court punitive damage decisions precluded class adjudication of punitive damage claims as a matter of law. The district court disagreed, reasoning as follows:

First, the court concluded that adjudication of punitive damages using the class mechanism is not precluded by Philip Morris USA v. Williams, 549 U.S. 346 (2007). The court reasoned that unlike Williams, which held that the “Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury that inflicts upon those who are, essentially, strangers to the litigation” [Williams, 549 U.S. at 353], “the non-representative class members who received notice and did not opt out are parties to the litigation.” See Iorio, 2009 U.S. Dist. LEXIS 97657, at 11-14. The court further reasoned that “even though Williams suggests that the Defendant should have the opportunity to present the defenses of reliance and knowledge for each member [], this Court has already found that such individual examination is not necessary because every class member received the same alleged misrepresentation and relied on those misrepresentations.” See id., at 15.

Second, the court disagreed that evaluation of the proportionality of the punitive award to each class member's compensatory damages would require individualized hearings for each class member. See Iorio, 2009 U.S. Dist. LEXIS 97657, at 17-22. As reasoned by the court, “compensatory damages will be calculated depending on the group in the class where each member falls” and “[a]fter compensatory damages have been assessed, a ratio between punitive and compensatory damages can be calculated based on the factors set forth in Campbell.” See id., at 17-18.

Finally, the court concluded that the defendant did not have a due process right to assert an individualized defense against each class member to rebut their reliance and knowledge where all class members were presented with the same alleged misrepresentations by defendant. See Iorio, 2009 U.S. Dist. LEXIS 97657, at 22-24 (“[i]n light of the uniform written misrepresentations and the well-established presumption of reliance created by California law, the Court finds [the due process] argument to lack merit.”).

However, as the court properly notes, this very issue is currently pending before the Ninth Circuit in Dukes v. Wal-Mart, Inc. Thus, whether such analysis ultimately survives remains to be seen.

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