Cases & Deals

R.J. Reynolds obtains 2nd Circuit reversal of class certification order predicated on aggregation of punitive damages

Clients R.J. Reynolds Tobacco Company

Jones Day represented R.J. Reynolds Tobacco Company and served as industry liaison and coordinating counsel in this multibillion dollar, highly novel putative nationwide class action aggregating all punitive damages to injured smokers. The plaintiffs filed suit against the companies, seeking punitive damages on a New York State law fraud theory, and sought certification of a nationwide class of smokers who had been diagnosed with lung cancer, heart disease, emphysema, or over a dozen other diseases since April 1993. The purpose of the action, under the so-called "limited punishment" theory, was to determine all of the punitive damages that could be awarded against the tobacco industry consistent with Due Process and then award those damages to the plaintiff class and public health institutions. The viability of non-opt-out "limited punishment" classes to determine and distribute punitive damages had been discussed in academic publications and appellate dicta for years, but Simon II was the first case at the federal appellate level to make a definitive determination of such cases' viability.

Jones Day represented R.J. Reynolds in challenging class certification in the district court and in the interlocutory appeal of that class certification ruling. We argued that the district court's class certification ruling exceeded the permissible scope of limited fund class certifications under the Supreme Court's decision in Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), and that the class certification ruling erred by abridging defendants' substantive rights.

On May 6, 2005, a three-judge panel of the U.S. Court of Appeals for the Second Circuit unanimously ruled that such classes cannot be maintained. This ruling will affect all companies threatened with mass torts or other repetitive litigation. The Second Circuit further held that punitive damages must relate to specific conduct against the specific plaintiffs, thereby barring the type of wide-ranging punitive damages trial envisaged by the district court.

In Re Simon Litigation II, 211 F.R.D. 86 (E.D.N.Y. 2002), Docket Nos. 03-7140, -7141 (2d Cir. 2005)