FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS OCT 18 2022 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
TIMOTHY G. RILEY, No. 20-15882
Plaintiff-Appellant, D.C. No. 3:17-cv-02897-CRB
v. OPINION VOLKSWAGEN GROUP OF AMERICA, INC., DBA Volkswagen of America, Inc., a New Jersey corporation; VOLKSWAGEN AG,
Defendants-Appellees.
LUKE G. SANWICK; KATHRYN No. 20-15884 SANWICK, D.C. No. 3:17-cv-03032-CRB Plaintiffs-Appellants,
v.
VOLKSWAGEN GROUP OF AMERICA, INC., DBA Volkswagen of America, Inc., a New Jersey corporation; VOLKSWAGEN AG,
RICHARD V. ORTIZ; VIRGINIA TORRES No. 20-15885 ORTIZ, D.C. No. 3:18-cv-06951-CRB Plaintiffs-Appellants, v.
VOLKSWAGEN GROUP OF AMERICA, INC., DBA Volkswagen of America, Inc., a New Jersey corporation; VOLKSWAGEN AG,
JULIA ROBERTSON, No. 20-15886
Plaintiff-Appellant, D.C. No. 3:18-cv-06956-CRB
VOLKSWAGEN GROUP OF AMERICA, INC., DBA Volkswagen of America, Inc., a New Jersey corporation; VOLKSWAGEN AG,
BYRON CLENDENEN, No. 20-15887
Plaintiff-Appellant, D.C. No. 3:18-cv-07040-CRB
VOLKSWAGEN GROUP OF AMERICA, INC., DBA Volkswagen of America, Inc., a New Jersey corporation; VOLKSWAGEN AG,
SCOTT SALZER, No. 20-15889
2 Plaintiff-Appellant, D.C. No. 3:18-cv-07050-CRB
VOLKSWAGEN GROUP OF AMERICA, INC., DBA Volkswagen of America, Inc., a New Jersey corporation; VOLKSWAGEN AG,
KENNETH J. COON; MARIA E. COON, No. 20-15890
Plaintiffs-Appellants, D.C. No. 3:18-cv-06966-CRB
VOLKSWAGEN GROUP OF AMERICA, INC., DBA Volkswagen of America, Inc., a New Jersey corporation; VOLKSWAGEN AG,
Appeal from the United States District Court for the Northern District of California Charles R. Breyer, District Judge, Presiding
Argued and Submitted December 10, 2021 San Francisco, California
Before: Ronald M. Gould and Daniel P. Collins, Circuit Judges, and David A. Ezra,* District Judge. Opinion by Judge Gould
* The Honorable David A. Ezra, United States District Judge for the District of Hawaii, sitting by designation.
3 SUMMARY **
Punitive Damages
In appeals stemming from the nationwide Volkswagen litigation related to emissions defeat devices installed in certain Volkswagen and Audi vehicles, the panel vacated punitive damages awards to appellants (who are plaintiffs who opted out of the class action), and remanded with instructions that the district court recalculate punitive damages.
Appellants are individuals who bought or leased a vehicle with an emissions defeat device, and they filed individual suits that were consolidated before the same judge who presided over the multidistrict litigation and class action settlements. The jury awarded four of the appellants various amounts in compensatory damages and $25,000 each in punitive damages. The district court reduced the punitive damages award to exactly four times the amount of the compensatory damages suffered by each plaintiff.
The panel held that the district court erred by holding that a punitive damages ratio calculation of four times the value of the compensatory damages award was the maximum punitive damages award permitted by the Constitution’s Due Process Clause. The Supreme Court in BMW of North America, Inc. v. Gore, 517 U.S. 559, 575 (1996), established three guidelines governing whether punitive damages awards comply with due process. First, concerning the reprehensibility of the defendant’s conduct, the panel held that Volkswagen’s actions were highly reprehensible where it engaged in intentional deceit for years. In addition to the economic harm, evidenced by the compensatory damages, the deceit frustrated the fuel-economy, and reduced emissions objectives of those customers who bought their Volkswagens and Audi vehicles. The panel concluded that this was a paradigm case where high reprehensibility coupled with relatively low compensatory damages could support a higher multiplier for punitive damages consistent with due process. Second, concerning the proportionality between the harm, or potential harm, suffered by the claimant and his punitive damages, the panel held this case warrants a single digit multiplier greater than four times that of the compensatory
** This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader. award, and in that respect, the district court erred. Here, the jury ratio for the punitive damages awarded varied from a low of 8 to 1 to a high of 43 to 1. The case did not support a multiplier above a single digit ratio because the damages were not insignificant. The panel concluded that here, a punitive damages award of approximately 8 times that of the compensatory damages award fairly comported with due process requirements under the Supreme Court’s guidelines. The panel applied this ratio to all the appellants, despite the different ratios employed by the jury, where the defendant’s conduct was the same towards each appellant and there was no meaningful difference in the type of harm experienced by each appellant. Third, concerning sanctions for similar misconduct in comparable cases, the panel held that the civil penalties in the California Unfair Competition Law (“UCL”), the Fair Advertising Law (“FAL”), and California Legal Remedies Act were not directly analogous. Thus, this factor did not require the panel to reduce the single digit multiplier punitive damages determined by the jury. The district court erred in concluding that a 4 to 1 ratio was the highest allowed in this case partially because under the UCL and FAL, the maximum civil penalty was $2,550 per violation.
Because the panel concluded that the district court erred in applying the Gore factors, the panel next considered what award of punitive damages comported with due process for each party. The panel held that the jury’s multiple of eight times the actual compensatory damages award in the case of appellants Luke and Kathryn Sanwick was constitutionally permissible because a multiplier greater than four was appropriate in this case. The panel also concluded that it would be arbitrary and incorrect to set a different ratio between punitive damages and actual compensatory damages as to each of the plaintiffs under the circumstances of this case. The panel therefore vacated the punitive damages awards to each appellant and remanded with instructions that the district court recalculate punitive damages in an amount equal to eight times the actual compensatory damages determination.
The panel addressed additional issues presented by the case in a separately filed memorandum disposition filed simultaneously with this opinion. COUNSEL
Jeffrey B. Gurrola (argued), Cynthia E. Tobisman, and Joseph V. Bui; Greines, Martin, Stein & Richland LLP, Los Angeles, California; Bryan C. Altman, Altman Law Group, Los Angeles, California; Steve B. Mikhov, Knight Law Group LLP, Los Angeles, California; Scot D. Wilson, Call & Jensen APC, Newport Beach, California; Robert S. Peck, Center of Constitutional Litigation, Washington, D.C.; Hallen D. Rosner and Arlyn L. Escalante; Rosner, Barry & Babbitt LLP, San Diego, California; for Plaintiff-Appellant.
Robert J. Giuffra, Jr. (argued), Sharon L. Nelles, William B. Monahan, Suhana Han, Elizabeth N. Olsen, and William H. Wagener, Sullivan & Cromwell LLP, New York, New York; Sverker K. Hogberg and Laura K. Oswell, Sullivan & Cromwell LLP, Palo Alto, California; Michael Steinberg, Sullivan & Cromwell LLP, Los Angeles, California; for Defendants-Appellees. GOULD, Circuit Judge:
These appeals stem from the nationwide Volkswagen litigation related to the
emissions defeat devices installed in certain Volkswagen and Audi vehicles.
Appellants are plaintiffs who opted-out of the class action, preferring to pursue their
claims individually (“opt-out Plaintiffs”). After a three-phase trial, the district court
awarded Appellants damages, but reduced the award of punitive damages to conform
with constitutional standards established by the United States Supreme Court for
punitive damages awards. Appellants challenge the district court’s punitive damages
calculations. 1
In 2015, researchers discovered that Volkswagen had installed emissions
defeat devices in some of its vehicles. The vehicles with the defeat devices produced
emissions up to 40 times the maximum permitted by the legal standard, except that
the emissions were diminished when the vehicles were undergoing emissions
testing. The district court found that there was no evidence at trial that plaintiffs
suffered any personal injury resulting from the defeat devices in their cars, nor did
they bring a personal injury claim. In a press release in 2019, the EPA said that the
1 Appellants also challenged the district court’s rulings on Plaintiffs’ claims under the Song- Beverly Act and the California Legal Remedies Act (“CLRA”). We address those state law issues, and other issues presented by the case, in a separate memorandum disposition filed simultaneously with this opinion.
4 increased emissions did not present a safety hazard to those who owned and operated
the affected vehicles.
After the discovery of the defeat devices, the owners of affected cars filed
thousands of lawsuits. These individual suits were sent to multi-district litigation,
where the plaintiffs received the option of opting-in to a class settlement based on
the type of affected vehicle that they owned. The cases of the plaintiffs who opted-
in were consolidated into two classes for settlement, one for 2.0 liter vehicle owners
and another for 3.0 liter vehicle owners.
Appellants Timothy Riley, Luke and Kathryn Sanwick, Richard and Virginia
Ortiz, Julia Robertson, Byron Clendenen, Scott Salzer, and Kenneth and Maria Coon
(collectively “Appellants”) are individuals who bought or leased a vehicle with an
emissions defeat device and opted-out of the class action settlements. Appellants
filed individual suits that were consolidated before the same judge who presided
over the multidistrict litigation and class action settlements. The jury awarded four
of the appellants various amounts in compensatory damages and $25,000 each in
punitive damages. 2 In a conscientious effort to comply with due process, the district
2 Compensatory damages awards by Appellant were: Riley ($1,080); Robertson ($952); Salzer ($582); and the Sanwicks ($3,133). While the jury found that all seven Appellants had been economically harmed, the jury found that only four Appellants had proven economic damages.
5 court reduced the punitive damages award to exactly four times the amount of the
compensatory damages suffered by each plaintiff. 3
Appellants argue that the district court erred by holding that a punitive
damages ratio calculation of four times the value of the compensatory damages
award is the maximum punitive damages award permitted by the Constitution’s Due
Process Clause. We agree there was error in determining this limit.
We review the application of applicable constitutional guidelines de novo.
State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003). The Supreme
Court in BMW of North America, Inc. v. Gore established three guidelines governing
whether punitive damage awards comply with due process: (1) the reprehensibility
of the defendant’s conduct; (2) the disparity between the harm or potential harm
suffered by the claimant and his punitive damages; and (3) the difference between
the punitive damages and any civil penalties authorized or imposed in comparable
cases. 517 U.S. 559, 575 (1996).
A. Reprehensibility
Reprehensibility of the alleged conduct is “the most important indicium of the
reasonableness” of punitive damages. State Farm, 538 U.S. at 419. To assess
reprehensibility, we consider whether
3 Punitive damages awards by Appellant were: Riley ($4320); Robertson ($3808); Salzer ($2328); and the Sanwicks ($12,532). These punitive damages amounts are exactly four times that of the individual compensatory damage awards.
6 the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident.
Id.
We have held that “trickery or deceit [is] more reprehensible than negligence.”
Planned Parenthood of Columbia/Willamette Inc. v. Am. Coal. of Life Activists, 422
F.3d 949, 954 (9th Cir. 2005). Further, “infliction of economic injury, especially
when done intentionally through affirmative acts of misconduct . . . can warrant a
substantial penalty.” Gore, 517 U.S. at 576 (citation omitted). While punitive
damages cannot be used to punish a defendant for the harms to a third party,
“[e]vidence of actual harm to nonparties can help to show that the conduct that
harmed the plaintiff also posed a substantial risk of harm to the general public, and
so was particularly reprehensible.” Philip Morris USA v. Williams, 549 U.S. 346,
355 (2007).
Volkswagen’s actions were highly reprehensible. Although Volkswagen’s
calculated deceit did not physically harm its vehicle customers, it engaged in
intentional deceit for years. In addition to the economic harm, evidenced by the
compensatory damages, the deceit frustrated the fuel-economy, and reduced
emissions objectives of those customers who bought their Volkswagen and Audi
vehicles. Appellants doubtless expected vehicles that met mandatory regulatory
7 standards for emissions. But they got vehicles that grievously understated noxious
emissions whenever emissions were tested. Not only did those vehicles fail to
comply with health-based emissions standards, they also were advertised as eco-
friendly vehicles. In selling these cars, Volkswagen continued to make
misrepresentations to consumers, preying upon those who sought eco-friendly
vehicles. All of this directly contradicted the plaintiffs’ contractual expectations.
The uncovering of this fraudulent scheme revealed Volkswagen’s deliberate
indifference to compliance with mandatory emissions standards—Volkswagen
intentionally and fraudulently hid their vehicles’ true emissions to the detriment of
their customers and the public at large. Had Volkswagen’s abhorrent behavior not
been discovered by a third party, Volkswagen would have continued to defraud its
customers and allow vehicles spewing noxious emissions well above EPA’s health-
based standards to operate undetected. Such regulatory standards are not a mere
formality but rather represent the conscious safeguarding of community interests by
a Congressionally-designated federal agency. See 42 U.S.C. § 7521(a)(1).
The EPA released a statement saying that the increased emissions in affected
vehicles were forty times higher than normal. Although there was no proof that the
increased emissions were physically harmful to the individual drivers and occupants,
increased nitrous oxide (NOx) emissions have been shown to cause serious public
8 health problems.4 Volkswagen’s flagrant disregard of environmental standards
fashioned by the EPA shows deliberate indifference to the public welfare and to
welfare of all those who could be harmed by the excessive NOx levels that the
vehicles emitted.
A high level of reprehensibility is present here. Volkswagen’s actions were
the result of intentional trickery and deceit, not accident or negligence. On the factor
of reprehensibility, this is a paradigm case where high reprehensibility coupled with
relatively low compensatory damages can support a higher multiplier for punitive
damages consistent with due process.
B. Proportionality
Turning next to the proportionality issue, the question raised by this factor is
whether the punitive damages awards by the jury were proportional to the harm
caused by Volkswagen’s scheme. This requires assessing “the disparity between the
actual or potential harm suffered by the [Appellants] and the punitive damages
award.” State Farm, 538 U.S. at 419. The proportionality of punitive damages must
4 In a joint statement, EPA and CARB said “NOx pollution contributes to nitrogen dioxide, ground-level ozone, and fine particulate matter. Exposure to these pollutants have been linked with a range of serious health impacts, including asthma attacks and other respiratory illnesses that can be serious enough to send people to the hospital. Exposure to ozone and particulate matter have also been associated with premature death due to respiratory-related or cardiovascular related effects. Children, the elderly, and people with pre-existing respiratory disease are particularly at risk for health effects of these pollutants.” Press Release, CARB & EPA, EPA, California Notify Volkswagen of Clean Air Act Violations (September 18, 2015.); Further, the district court found that Appellants “presented evidence of the egregiousness of Volkswagen’s misconduct, including expert testimony that increased NOx emissions increase the risk of harm to human health.”
9 be assessed on a case-by-case basis; “there are no rigid benchmarks that a punitive
damages award may not surpass.” Id. at 425.
In State Farm, the Supreme Court explained that “[s]ingle-digit multipliers
are more likely to comport with due process, while still achieving the State’s goals
of deterrence and retribution.” Id. While leaving the option for higher damages
ratios open, the Supreme Court suggested that a punitive damages award of “more
than four times the amount of compensatory damages might be close to the line of
constitutional impropriety.” Id. (internal citation omitted). The Supreme Court also
said that minimal actual damages coupled with high reprehensibility could allow due
process to permit a multiple beyond four times actual damages. See Gore, 517 U.S.
at 582. In fact, “low awards of compensatory damages may properly support a
higher ratio than high compensatory awards, if, for example, a particularly egregious
act has resulted in only a small amount of economic damages.” Id.; see also State
Farm, 538 U.S. at 425.
We have limited punitive damages to a 4 to 1 ratio “where there are significant
economic damages . . . but behavior is not particularly egregious.” Planned
Parenthood of Columbia/Willamette Inc., 422 F.3d at 962. However, we will
consider a single digit multiplier above 4 to 1 “[i]n cases with significant economic
10 damages and more egregious behavior.”5 Id. (emphasis added). We have upheld
punitive damages ranging from six to nine times compensatory damages in such
cases. See Planned Parenthood of Columbia/Willamette Inc., 422 F.3d at 962
(holding a 9 to 1 ratio was constitutional); Bains LLC v. Arco Products Co., 405 F.3d
764, 776–77 (9th Cir. 2005) (indicating that ratio between 6 to 1 and 9 to 1 would
be constitutional); Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020, 1044 (9th Cir.
2003) (upholding a roughly 7 to 1 ratio).
The district court relied on Ramirez v. TransUnion LLC, where we rejected a
ratio of 6.75 to 1, and instead applied a ratio of 4 to 1 where the “compensatory
award was substantial” and at the high end of the statutory damages. 951 F.3d 1008,
1037 (9th Cir. 2020), rev'd and remanded on other grounds, 141 S. Ct. 2190 (2021).
In that case, the class members’ statutory damages were $8 million and the punitive
damages were $52 million. Id. However, we reiterate that there is no bright line
rule for punitive damages.
Because we conclude that Volkswagen’s reprehensibility was especially high
and the compensatory awards were relatively low, although not negligible, we
conclude that this case warrants a single digit multiple greater than four times that
of the compensatory award, see State Farm, 538 U.S. at 425, and in that respect the
5 We have also upheld multipliers above a single digit ratio “in cases where there are insignificant economic damages but the behavior was particularly egregious.” Planned Parenthood of Columbia/Willamette Inc., 422 F.3d at 962.
11 district court erred. We hold that the punitive damages award here should have been
greater than four times that of the compensatory award.
We next assess the ratios used by the jury. The jury awarded each party
$25,000 in punitive damages, despite the fact that these plaintiffs each had differing
compensatory damages. The ratios for the punitive damages awarded varied from
about a low of 8 to 1 to a high of 43 to 1.6 The 8 to 1 ratio was the only single digit
multiplier used by the jury.
This case does not support a punitive damages multiplier above a single digit
ratio because the damages were not insignificant. See Planned Parenthood of
Columbia/Willamette Inc., 422 F.3d at 962. Thus, we will consider whether the 8 to
1 ratio comports with due process in this case.
We conclude that in the circumstances here, a punitive damages award of
approximately 8 times that of the compensatory damages award fairly comports with
due process requirements under the Supreme Court’s Gore and State Farm
guidelines. State Farm, 538 U.S. at 425 (“Single-digit multipliers are more likely to
comport with due process, while still achieving the State's goals of deterrence and
retribution, than awards with ratios in range of 500 to 1 or, in this case, of 145 to 1.”
(internal citations omitted)).
6 Punitive damages to compensatory damages award ratios: 23.15 to 1 (Riley); 26.26 to 1 (Robertson); 42.96 to 1 (Salzer); and 7.98 to 1 (Sanwicks).
12 Further, we apply this ratio to all the Appellants, despite the different ratios
employed by the jury. In determining punitive damage ratios, we must consider
whether the jury had a permissible, non-arbitrary basis for applying different ratios
to the different plaintiffs. See, e.g. Planned Parenthood of Columbia/Willamette Inc.
at 961–62 (endorsing a defendant-by-defendant and plaintiff-by-plaintiff approach
to punitive damages ratios where the defendants’ conduct and the harm to each
plaintiff differed).
The defendant’s conduct was the same towards each plaintiff and there is no
meaningful difference in the type of harm experienced by each plaintiff. 7 Moreover,
as noted in the next section, the uniform amount that the jury awarded to each
plaintiff was well above the maximum civil penalty that could have been imposed
uniformly for each separate violation under the most closely analogous statute that
provides for fixed penalties. 8 In these circumstances, the jury’s application of
different ratios in a quest to award the same exact dollar amount to each plaintiff
was arbitrary and ignored the requirement of a reasonable relationship between a
particular plaintiff’s punitive award and that plaintiff’s compensatory award. The
jury applied the different ratios arbitrarily, so we apply to all Appellants the lowest
7 Volkswagen and Audi presumably marketed their cars to all the plaintiffs by the same or similar means, and Volkswagen and Audi installed in all vehicles bought by appellants the same or similar defeat devices to show reduced emissions on testing. 8 We thus do not address whether, had the jury imposed a uniform punitive damage amount comparable to the statutory civil penalty amount, equalization of awards would have complied with the Gore factors, despite the disparity in ratios.
13 ratio selected by the jury—an 8 to 1 ratio—in determining the maximum punitive
damages permitted.
C. Sanctions for Comparable Misconduct
For the third guidepost, the court looks at the disparity “between the punitive
damages award and the ‘civil penalties authorized or imposed in comparable
cases.’” State Farm, 538 U.S. at 428 (quoting Gore, 517 U.S. at 575). The district
court concluded that a 4 to 1 ratio was the highest allowed in this case partially
because under the California Unfair Competition Law (UCL) and the Fair
Advertising Law (FAL), the maximum civil penalty is $2,500 per violation.
Appellants argue that while the CLRA does not itself have civil penalties, the fact
that it does not have a limit on punitive damages means that Volkswagen was on
notice that it would be exposed to significant penalties for its actions. See, e.g.
Planned Parenthood of Columbia/Willamette Inc., 422 F.3d at 963. They also
point out, correctly, that the UCL and the FAL are not directly analogous, because
they may also be invoked to punish much less reprehensible behavior.
Although this factor may weigh slightly against higher punitive damages,
Volkswagen’s actions were extremely reprehensible, and the civil penalties in
these statutes are not directly analogous. Thus, this factor does not require us to
reduce the single digit multiplier punitive damages determined by the jury.
14 D. Calculating the maximum punitive damages allowed by due process in this case
Because we hold that the district court erred in applying the Gore factors, we
now consider what award of punitive damages comports with due process for each
party. Rather than remanding for further assessment of the punitive damages limit,
we think there is a value to parties and to the public in bringing this case to a
conclusion. Because the district court specified both actual damages to Appellants
and what it thought was a permissible punitive damages award in reduction of the
higher award made by the jury, and because our review is de novo, we can assess the
maximum constitutional limit for punitive damages in this case.
We conclude that the jury’s multiple of eight times the actual compensatory
damages award in the case of the Sanwicks is constitutionally permissible because,
as explained above, a multiplier greater than four is appropriate in this case. We also
conclude that, for the reasons explained earlier, it would be arbitrary and incorrect
to set a different ratio between punitive damages and actual compensatory damages
as to each of the plaintiffs under the circumstances of this case.
We therefore vacate and remand the punitive damages awards to each
appellant with instructions that the district court recalculate punitive damages in an
amount equal to eight times the actual compensatory damages determination.