Petition for Writ of Certiorari — BP West Coast Products, LLC, Petitioner v. Steven Scharfstein, Individually and on Behalf of All Others Similarly Situated, et al.

Supreme Court briefMar 28, 2019

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IN THE

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_______________

BP WEST COAST PRODUCTS, LLC,

Petitioner,

STEVEN SCHARFSTEIN ET AL.,

Respondents.

_______________

On Petition For A Writ Of Certiorari

To The Oregon Court Of Appeals

_______________

PETITION FOR A WRIT OF CERTIORARI

_______________

WILLIAM F. GARY

SHARON A. RUDNICK

SUSAN MARMADUKE

HARRANG LONG GARY

RUDNICK P.C.

1050 SW Sixth Avenue

16th Floor

Portland, OR 97204

(503) 242-0000

THEODORE B. OLSON

Counsel of Record

AMIR C. TAYRANI

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 955-8500

tolson@gibsondunn.com

ROBERT E. DUNN

DANIEL NOWICKI

GIBSON, DUNN & CRUTCHER LLP

1881 Page Mill Road

Palo Alto, CA 94304

(650) 849-5384

Counsel for Petitioner

QUESTION PRESENTED

In this class action, the Oregon courts upheld an

aggregated statutory-damages award of $409 million

based on petitioner’s failure to disclose a $0.35 debitcard fee on service-station street signs, even though

the class claimed a total expenditure on those fees of

only $716,000, the jury did not find that any of the two

million class members was actually misled or that punitive damages were warranted, and there was no evidence that petitioner—which disclosed the fee on

other service-station signage—intentionally violated

Oregon’s signage laws. In reaching that decision, the

Oregon courts held that the due-process standard governing the imposition of punitive damages is inapplicable to statutory damages and declined to decertify

the class.

The question presented is whether the aggregated

$409 million statutory-damages award to the class

members, class counsel, and cy pres beneficiaries violates due process and, if so, whether decertification of

the class is required.

PARTIES TO THE PROCEEDING

AND RULE 29.6 STATEMENT

Petitioner BP West Coast Products, LLC was the

defendant in the proceeding below. Respondent Steven Scharfstein was the plaintiff and representative

of the class of individuals who purchased fuel using a

debit card at ARCO-branded stations in Oregon between January 1, 2011, and August 31, 2013. Because

certain class members could not be identified during

the claims process, the trial court awarded 50 percent

of the unclaimed portion of the judgment to the Oregon State Bar (“OSB”) to fund legal services for indigent Oregonians and 50 percent to the Oregon Community Foundation (“OCF”) to fund a charitable entity established by the trial court. The OSB and OCF

are therefore judgment creditors and respondents in

this Court.

Pursuant to this Court’s Rule 29.6, petitioner

states that it is a wholly owned indirect subsidiary of

BP p.l.c. No intermediate parent of petitioner is a

publicly traded corporation. BP p.l.c., a publicly

traded corporation organized under the laws of England and Wales, has no parent corporation, and there

is no publicly held corporation that owns 10% or more

of BP p.l.c.’s stock.

iii

TABLE OF CONTENTS

Page

QUESTION PRESENTED...........................................i

PARTIES TO THE PROCEEDING AND

RULE 29.6 STATEMENT .......................................... ii

TABLE OF APPENDICES ........................................ iv

TABLE OF AUTHORITIES ........................................ v

OPINIONS BELOW .................................................... 1

JURISDICTION .......................................................... 1

CONSTITUTIONAL, STATUTORY, AND

REGULATORY PROVISIONS INVOLVED .............. 1

STATEMENT .............................................................. 1

REASONS FOR GRANTING THE PETITION ....... 15

LOWER COURTS ARE DIVIDED OVER

THE DUE-PROCESS STANDARD APPLICABLE TO STATUTORY DAMAGES .................... 16

II. THE OREGON COURTS APPLIED THE

WRONG DUE-PROCESS STANDARD AND

UPHELD AN UNCONSTITUTIONAL

STATUTORY PENALTY .................................... 25

A. Gore’s Due-Process Standard

Applies With Equal Force To

Statutory Damages ............................... 25

B. The $409 Million StatutoryDamages Award Violates

Due Process ........................................... 27

III. THIS CASE REPRESENTS A RARE

OPPORTUNITY TO ADDRESS THIS

IMPORTANT CONSTITUTIONAL ISSUE............. 31

CONCLUSION .......................................................... 34

TABLE OF APPENDICES

Page

APPENDIX A: Panel Opinion of the Court

of Appeals of Oregon (May 31, 2018) ................. 1a

APPENDIX B: Excerpts of Transcript of

Hearing and Oral Order of the Circuit

Court of Oregon Denying Motion to Strike

and Motion to Decertify the Class

(June 26, 2014) .................................................. 45a

APPENDIX C: Order of the Supreme Court

of Oregon Denying Review (Nov. 8, 2018) ....... 68a

APPENDIX D: Constitutional, Statutory,

Regulatory, and Rule Provisions Involved ....... 70a

Fourteenth Amendment to the Constitution of the United States, Section 1 ....... 70a

Or. Laws 1985, Ch. 751, § 1 ....................... 71a

Or. Rev. Stat. 646.638 ................................ 73a

Or. Rev. Stat. 646.930 ................................ 74a

Or. Admin. R. 137-020-0150 ...................... 76a

Or. Admin. R. 137-020-0160 ...................... 80a

Or. R. Civ. P. 32 .......................................... 81a

APPENDIX E: Excerpts of Defendant’s Motion

to Strike and Motion to Decertify the Class

(Apr. 24, 2014) ................................................... 84a

APPENDIX F: Excerpts of Defendant’s

Opening Brief in the Oregon Court of

Appeals (Nov. 15, 2016) .................................. 103a

APPENDIX G: Excerpts of Defendant’s

Petition for Review to the Supreme Court

of Oregon (Aug. 16, 2018) ............................... 116a

TABLE OF AUTHORITIES

Page(s)

Cases

Ake v. Oklahoma,

470 U.S. 68 (1985) ................................................ 33

Anderson v. Capital One Bank,

224 F.R.D. 444 (W.D. Wis. 2004) ......................... 24

Arcilla v. Adidas Promotional Retail

Operations, Inc.,

488 F. Supp. 2d 965 (C.D. Cal. 2007) .................. 32

Azoiani v. Love’s Travel Stops &

Country Stores, Inc.,

2007 WL 4811627

(C.D. Cal. Dec. 18, 2007) ...................................... 23

Bateman v. Am. Multi-Cinema, Inc.,

623 F.3d 708 (9th Cir. 2010) .................... 21, 24, 32

BMW of N. Am., Inc. v. Gore,

517 U.S. 559 (1996) ................ 15, 18, 19, 21, 27, 28

Browning-Ferris Indus. of Vt., Inc. v.

Kelco Disposal, Inc.,

492 U.S. 257 (1989) .............................................. 17

Capitol Records, Inc. v. Thomas-Rasset,

692 F.3d 899 (8th Cir. 2012) .................... 19, 20, 27

Centerline Equip. Corp. v. Banner Pers.

Serv., Inc.,

545 F. Supp. 2d 768 (N.D. Ill. 2008) .................... 32

Comm. to Elect Dan Forest v. Emps.

Political Action Comm. (EMPAC),

817 S.E.2d 738 (N.C. Ct. App. 2018) ................... 22

Cooper Indus., Inc. v. Leatherman Tool

Group., Inc.,

532 U.S. 424 (2001) ........................................ 25, 26

Dami Hosp., LLC v. Indus. Claim

Appeals Office,

2017 WL 710497

(Colo. App. Feb. 23, 2017) .................................... 21

Espinoza v. Evergreen Helicopters, Inc.,

337 P.3d 169 (Or. Ct. App. 2014) ......................... 33

Flores v. Millennium Interests, Ltd.,

185 S.W.3d 427 (Tex. 2005) ................................. 22

Foster v. Chatman,

136 S. Ct. 1737 (2016) .......................................... 33

Harris v. Reed,

489 U.S. 255 (1989) .............................................. 33

In re Marriage of Chen & Ulner,

820 N.E.2d 1136 (Ill. App. Ct. 2004) ................... 22

Mo. Pac. Ry. v. Tucker,

230 U.S. 340 (1913) .............................................. 17

Murray v. GMAC Mortg. Corp.,

434 F.3d 948 (7th Cir. 2006) .................... 21, 23, 32

Parker v. Time Warner Entm’t Co., L.P.,

331 F.3d 13 (2d Cir. 2003) ................. 20, 21, 23, 32

Pirian v. In-N-Out Burgers,

2007 WL 1040864

(C.D. Cal. Apr. 5, 2007) ........................................ 23

Rhodes v. AIG Domestic Claims, Inc.,

961 N.E.2d 1067 (Mass. 2012) ............................. 22

Seaboard Air Line Ry. v. Seegers,

207 U.S. 73 (1907) .......................................... 17, 26

vii

Sony BMG Music Entm’t v. Tenenbaum,

719 F.3d 67 (1st Cir. 2013) ............................ 19, 20

St. Louis, Iron Mountain & S. Ry. Co. v.

Williams,

251 U.S. 63 (1919) ...... 11, 16, 17, 18, 19, 26, 27, 31

Standard Oil Co. of Ind. v. Missouri,

224 U.S. 270 (1912) ........................................ 17, 26

State Farm Mut. Auto. Ins. Co. v.

Campbell,

538 U.S. 408 (2003) .................................. 18, 21, 29

Stillmock v. Weis Mkts., Inc.,

385 F. App’x 267 (4th Cir. 2010) ......................... 32

Sw. Tel. & Tel. Co. v. Danaher,

238 U.S. 482 (1915) ........................................ 17, 26

In re Trans Union Corp. Privacy Litig.,

211 F.R.D. 328 (N.D. Ill. 2002) ............................ 24

TXO Prod. Corp. v. Alliance Res. Corp.,

509 U.S. 443 (1993) .................................. 17, 18, 26

Vanderbilt Mortg. & Fin., Inc. v. Cole,

740 S.E.2d 562 (W. Va. 2013) .............................. 22

Vanderbilt Mortg. & Fin., Inc. v. Flores,

692 F.3d 358 (5th Cir. 2012) .......................... 19, 20

Waters-Pierce Oil Co. v. Texas,

212 U.S. 86 (1909) .......................................... 16, 26

Watkins v. Simmons & Clark, Inc.,

618 F.2d 398 (6th Cir. 1980) ................................ 30

Yazzie v. Gurley Motor Co.,

2015 WL 10818834

(D.N.M. Oct. 30, 2015) ......................................... 23

viii

Zink v. City of Mesa,

419 P.3d 847 (Wash. Ct. App. 2018) .................... 22

Zomba Enters., Inc. v. Panorama

Records, Inc.,

491 F.3d 574 (6th Cir. 2007) .......................... 19, 20

Statutes

12 U.S.C. § 4010(a)(2)(B)(ii) ...................................... 30

12 U.S.C. § 4907(a)(2)(B) .......................................... 30

15 U.S.C. § 1640(a)(1)(B) .......................................... 30

15 U.S.C. § 1692k(a)(2)(B) ........................................ 30

Colo. Rev. Stat. Ann. § 6-1-112 (1)(a) ....................... 30

Or. Laws 1985, Ch. 751, § 1 ........................................ 3

Or. Rev. Stat. 646.608(1)(u) ........................................ 4

Or. Rev. Stat. 646.608(4) ............................................. 4

Or. Rev. Stat. 646.638(8)(a) .................................... 7, 8

Or. Rev. Stat. 646.875 ................................................. 3

Or. Rev. Stat. 646.930 ................................................. 3

Or. Rev. Stat. 646.930(1) ....................................... 6, 29

Or. Rev. Stat. 646.930(1)(b) ........................................ 6

Or. Rev. Stat. 646.930(2)(b) ........................................ 6

Rules

Or. Admin. R. 137-020-0150(1)(b)......................... 6, 28

Or. Admin. R. 137-020-0150(3)(d)............................... 3

Or. Admin. R. 137-020-0150(3)(d)(a) .......................... 6

Or. Admin. R. 137-020-0160(3) ................................... 4

Or. R. Civ. P. 32(O).................................................... 13

Other Authorities

Blaine Evanson, Due Process in

Statutory Damages, 3 Geo. J.L. &

Pub. Pol’y 601 (2005) ........................................... 26

Pamela Samuelson & Tara Wheatland,

Statutory Damages in Copyright

Law: A Remedy in Need of Reform,

51 Wm. & Mary L. Rev. 439 (2009) ............... 26, 27

PETITION FOR A WRIT OF CERTIORARI

Petitioner BP West Coast Products, LLC respectfully petitions for a writ of certiorari to review the

judgment of the Oregon Court of Appeals.

OPINIONS BELOW

The opinion of the Oregon Court of Appeals is reported at 423 P.3d 757. App.1. The order of the Oregon Supreme Court denying review is unreported.

App.68. The trial court’s order denying petitioner’s

motion to decertify the class is also unreported.

App.66-67.

JURISDICTION

The Oregon Supreme Court denied review on November 8, 2018. App.68. This Court has jurisdiction

under 28 U.S.C. § 1257.

CONSTITUTIONAL, STATUTORY, AND

REGULATORY PROVISIONS INVOLVED

The Due Process Clause of the Fourteenth

Amendment, relevant provisions of the Oregon Unlawful Trade Practices Act (“UTPA”) and accompanying regulations, and Oregon’s class-action rule are reproduced in the appendix to this petition.

STATEMENT

This case presents a rare opportunity for the

Court to clarify an issue that has deeply divided the

lower courts: whether the constitutionality of statutory-damages awards must be evaluated under the

same due-process standard as punitive damages.

That issue has particular salience where, as in this

case, the class-action procedure is used to multiply

statutory damages many times over, generating an

award vastly disproportionate to the alleged reprehensibility of the defendant’s conduct and the actual

harm to the class members.

In this consumer class action, the Oregon courts

upheld a $409 million statutory-damages award that

was imposed based on petitioner’s failure to post signage about a $0.35 debit-card fee in the correct locations at ARCO-branded gas stations. When the likely

magnitude of the award became apparent, petitioner

moved to decertify the class, arguing that a class action is not a constitutionally permissible procedural

device if, as here, it would produce an unconstitutionally excessive statutory-damages award. In denying

petitioner’s motion, the trial court concluded that this

Court’s due-process precedents governing punitive

damages do not apply to statutory damages. And the

court held that the $409 million award was not unconstitutionally excessive even though the class members

claimed a total expenditure on the debit-card fee of

only $716,000 (an astronomical ratio of 571:1); the

jury did not find that any customer, much less every

one of the two million class members, was actually

misled into paying the $0.35 fee or that punitive damages were warranted; and petitioner disclosed the

$0.35 fee in other locations at ARCO stations and had

ample reason to believe that it was in compliance with

the law. The Oregon Court of Appeals affirmed, holding that the trial court’s ruling was not an abuse of

discretion.

This Court should grant review to make clear that

statutory damages are subject to the same due-process constraints as punitive damages and to ensure

that class-action defendants facing potentially devastating liability in cases aggregating millions of indi-

vidual statutory-damages claims are afforded meaningful constitutional protections against excessive

penalties.

A. Statutory And Regulatory Background

1. Gasoline retailers in Oregon are subject to various statutory and regulatory requirements regarding

the pricing information displayed on their street

signs. Since 1985, Oregon law has provided that “[i]f

a cash price displayed on a sign is available only under

some conditions, the sign and the dispensing device

must clearly state the conditions.” Or. Laws 1985, Ch.

751, § 1, codified at former Or. Rev. Stat. 646.875 (renumbered as Or. Rev. Stat. 646.930). Thus, if a retailer requires a customer to purchase a car wash, for

example, as a condition to obtaining the lowest posted

cash price, the retailer is required to disclose that condition on its street signs. Pursuant to this statute, the

Oregon Attorney General adopted the Gasoline Price

Advertising Rule in 1986, which incorporated the

same requirement. Or. Admin. R. 137-020-0150(3)(d).

ARCO-branded service stations—which are operated by a network of independent franchisees who also

operate related am/pm minimarts—have retailed

gasoline in Oregon subject to the Attorney General’s

advertising rules for more than 30 years. ARCO began accepting debit cards in 1988. Debit-card transactions entail certain costs because banks and other

financial intermediaries charge fees to process debitcard payments. Retailers typically pass along the

costs of these transactions to their customers in the

form of higher per-gallon fuel prices.

ARCO took a different approach. Instead of raising fuel prices, ARCO decided to charge a flat fee for

each debit-card payment to offset the associated

transaction costs. Between 1988 and 2014, the debitcard fee at ARCO stations fluctuated between $0.25

and $0.45, depending primarily on the fees that banks

charged to process debit-card payments. ARCO stations and am/pm minimarts charged the fee whenever a customer used a debit card to make a purchase

of any product or service; the fee was not limited to

purchases of fuel.

2. The Oregon UTPA provides that the Attorney

General may identify by rule conduct that constitutes

“unfair or deceptive conduct” actionable in a civil suit.

Or. Rev. Stat. 646.608(1)(u), (4). The Attorney General has made a violation of the Gasoline Price Advertising Rule actionable under the UTPA. See Or. Admin. R. 137-020-0160(3).

In 2000, the same attorney representing the class

in this case filed a UTPA class action, Dobson v. Atlantic Richfield, on behalf of consumers who purchased ARCO-branded gasoline with a debit card and

incurred the then-applicable fee of $0.25. Although

ARCO stations notified customers of the fee before

they completed the transaction—thereby giving them

an opportunity to avoid the fee by paying with cash—

the complaint alleged that ARCO “franchisees do not

advise gasoline consumers . . . of the $.25 debit card

processing fee until after the consumer has committed

to purchase gasoline,” thereby “affirmatively misrepresent[ing] the prices they charge debit card users.”

Trial Ex.363 ¶ 7.

ARCO denied that it had violated the law, but in

2002 the parties reached a settlement in which ARCO

agreed to post new signage disclosing the fee in locations visible to customers as they “approache[d] the

gas island, and/or when parked at the pump for fuel-

ing.” Trial Ex.363 ¶ 8.b.ii. The settlement did not require ARCO stations to post the fee on their street

signs.

To obtain court approval of the class-action settlement, plaintiff’s counsel attested that “[b]y obtaining

signage, plaintiff stopped potential future economic injury to Oregon consumers” and that “the change in

signage prevented unwarranted injury to consumers

who were subject to the under-publicized charge.” Tr.

Ex.369 ¶ 13 (emphasis added). ARCO installed the

agreed-upon signage and continued to display it

throughout the class period in this case.

3. In 2000, petitioner’s parent company acquired

Atlantic Richfield Company and the ARCO brand.

Following the acquisition, petitioner sold fuel wholesale and provided advertising and payment-processing services to the roughly 50 independent franchisees authorized to use the ARCO brand and trademarks in Oregon. Reporter’s Transcript on Appeal

(“Tr.”) at 1559; Defendant’s Motion for Summary

Judgment (“MSJ”) at 2 (Mar. 11, 2013).

To enable the franchisees to accept debit cards, petitioner contracted with FirstData Merchant Services

Corporation (“FirstData”) to process debit-card payments. MSJ at 7. First Data retained the $0.35 debitcard fee as compensation for its processing services as

well as to offset the various fees that financial institutions assess in connection with debit-card transactions. Id. After those amounts were subtracted from

the fees collected each month, FirstData remitted any

remaining funds to petitioner. Id. at 7-8. During the

two-and-a-half-year class period in this case, petitioner netted only $58,000 from the debit-card fee,

even though ARCO stations processed hundreds of

thousands of debit-card transactions each month.

App.94.

4. In 2010, the Oregon legislature became concerned that gasoline-station street signs were cluttered with too much information, distracting drivers

and creating unsafe driving conditions. Tr.2195-97.

The legislature thus eliminated the statutory requirement that street signs display the lowest cash price

for every grade of fuel and revised the statute to require instead that street signs display only the lowest

cash price for the lowest grade of fuel sold. Or. Rev.

Stat. 646.930(1)(b). The statute continued to require

that “[i]f a cash price displayed on a sign is available

only under some conditions, the sign . . . must clearly

state the conditions.” Or. Rev. Stat. 646.930(2)(b).

The Attorney General subsequently amended the

Gasoline Price Advertising Rule to provide that “[i]f

the lowest cash prices are available only under some

conditions . . . [t]he retailer must clearly and conspicuously display all conditions on each street sign, price

sign and dispensing device (e.g., cash only, mini

serve).” Or. Admin. R. 137-020-0150(3)(d)(a). The Attorney General also added a definition of “condition,”

which the rule defined as “any payment method (e.g.,

credit), service level (e.g., full service or mini service),

or any other modifying circumstance affecting the

price per unit of measurement of motor vehicle fuel

from the lowest cash price.” Or. Admin. R. 137-0200150(1)(b).

Although petitioner was aware of the new rule, it

did not believe that the rule required any change to

its practices. Tr.2066-67. The statute under which

the rule was promulgated applies to “[a] person who

operates a service station, business or other place for

the purpose of retailing and delivering gasoline.” Or.

Rev. Stat. 646.930(1). Petitioner did not believe that

it was a retailer covered by the statute because it sold

fuel in Oregon exclusively on a wholesale basis.

Tr.2066-67. Nor did petitioner understand the rule to

apply to a flat debit-card fee. Petitioner considered

the debit-card fee to be compensation for a separate

service—namely, offering customers the convenience

of using a debit card to purchase products (including

non-fuel products) at ARCO stations—and therefore

did not believe that the fee affected the price of “motor

vehicle fuel” under the rule. Trial Ex.512. And, as a

flat, per-transaction fee, the debit-card fee did not, in

petitioner’s view, affect the “price per unit” of fuel. Id.

Petitioner’s understanding was bolstered by the

fact that ARCO stations had been charging the debitcard fee for more than 25 years without displaying the

fee on street signs. Petitioner did not suspect that a

statutory revision designed to reduce the amount of

information on street signs might actually be interpreted by the Attorney General to require ARCO stations to add more information to their signs.

B. Proceedings Below

1. The Attorney General’s newly amended Gasoline Price Advertising Rule went into effect on January 1, 2011. In December 2011, respondent Steven

Scharfstein filed a class-action complaint in Oregon

state court alleging that petitioner had violated the

new rule in several ways, including by failing to disclose the $0.35 debit-card fee on ARCO station street

signs. Respondent sought statutory damages of $200

per class member under the UTPA based upon each

member’s first debit-card purchase during the class

period. See Or. Rev. Stat. 646.638(8)(a).

Scharfstein moved to certify a class of consumers

who, between January 1, 2011, and August 30, 2013,

bought BP-branded gasoline, including gasoline plus

additional items, at Oregon ARCO stations or Oregon

am/pm minimarkets, who paid with a debit card, and

who were charged a debit-card fee. Because the debitcard fee had been charged for many years and was

posted at various locations at the stations, many or

even most consumers who paid with a debit card during the class period would have known about the fee

before deciding to use a debit card. Petitioner therefore argued that class certification was improper because each class member would be individually required to prove reliance by showing that the failure to

post the fee on street signs caused the class member

to use a debit card and incur the fee. The trial court

nevertheless certified the class, ruling that “reliance

and consumer knowledge are not required elements of

proof based on the claims that have been made.”

Tr.436.

The court thus allowed the case to be tried without

requiring respondents to prove that any consumer was

actually misled by the nondisclosure of the debit-card

fee on ARCO street signs. In addition, the court ruled

as a matter of law that a debit-card fee is a “condition

. . . affecting the price per unit” of fuel within the

meaning of the Gasoline Price Advertising Rule. Am.

Order Granting Pl.’s Mot. in Limine No.2. As a result

of these rulings, the two-week trial focused on only

two questions: (1) whether petitioner is a retailer subject to the rule, and (2) whether petitioner’s failure to

display the debit-card fee was “reckless.”1

Although the UTPA authorizes statutory damages in class

actions where the defendant acted knowingly or recklessly, Or.

The trial court excluded much of petitioner’s evidence disputing the allegation that it had acted recklessly in failing to post the fee on street signs. For

example, the court allowed respondents’ expert to testify that the earlier Dobson case constituted a “warning” that “something wasn’t being done properly and

that some correction needed to be made,” Tr.1452, but

it excluded petitioner’s evidence of the terms of the

Dobson settlement, which memorialized ARCO’s

agreement to add signage regarding the debit-card fee

and class counsel’s statements that the signage would

protect Oregon consumers from being misled,

Tr.1506-08. The court also excluded petitioner’s evidence that the Executive Director of the Oregon Petroleum Association, who had helped draft the rule,

sent petitioner copies of his newsletter opining that

debit-card fees do not need to be posted on street

signs, Tr.2103, 2186, 2197-98; Trial Ex.512, as well as

testimony from a 25-year employee of the Oregon Department of Agriculture’s Weights and Measures Division that the agency had never taken any enforcement action against ARCO or petitioner related to the

debit-card fee, Tr.544.2

Rev. Stat. 646.638(8)(a), respondents introduced no evidence

that petitioner knew it was violating the Gasoline Price Advertising Rule.

The jury instructions also unfairly prejudiced petitioner. At

trial, respondents’ expert witnesses testified that petitioner had

failed to take adequate steps to ensure preservation of the debitcard transaction data. Tr.1460-62. But that data had no relevance to whether petitioner had recklessly violated the Gasoline

Price Advertising Rule by failing to post the debit-card fee on

street signs. The trial court nevertheless instructed the jury that

“if you find that one party caused or allowed evidence to be destroyed you may draw an adverse inference from the destruction

of evidence relevant to this case. In this case, the class contends

After hearing the truncated evidentiary presentation, the jury found petitioner liable under the UTPA

for recklessly or knowingly violating the Gasoline

Price Advertising Rule by failing to post the debit-card

fee on street signs. The court then conducted a separate punitive-damages phase and allowed petitioner

to present some of the probative evidence that had

been excluded at the liability phase, including that petitioner charged the debit-card fee to offset processing

costs and keep prices low for cash-paying customers,

not to generate a profit. Tr.3700-18. The jury declined to award punitive damages, finding that respondents had failed to prove by “clear and convincing

evidence that [petitioner] acted with malice.”

2. Throughout the litigation, both parties understood that the court would use an opt-in claims process in which petitioner would mail a claim form to all

members of the class and any class member returning

the form would be entitled to $200 in statutory damages. But after the verdict, the court decided, over petitioner’s objection, to use a reverse claims process—

i.e., an opt-out process. Because the average rate of

collection for a reverse claims process is much higher

than for an opt-in claims process, this ruling massively expanded petitioner’s liability.

Respondents’ damages expert estimated that the

class included nearly three million members and calculated that statutory damages would amount to more

that defendant allowed evidence in the form of transaction records to be destroyed.” Jury Instr. No. 7. The jury was thus led

to believe that it could find the “reckless” element satisfied on

the basis of purported misconduct that had nothing to do with

the alleged violation. And as it turned out, the data were all ultimately recovered in time to be used in the notice-and-claims

process, as the parties later stipulated. Jt. Stip. (Sept. 8, 2014).

than $593 million. Petitioner subsequently moved to

strike the request for statutory damages or, in the alternative, to decertify the class because a statutorydamages award to the entire class would be unconstitutionally excessive. App.84.

Petitioner’s motion explained that “the Due Process Clause restricts a grossly excessive award of statutory damages” and argued that “[t]he constitutional

limitations stated in [BMW of North America, Inc. v.]

Gore[, 517 U.S. 559 (1996)] and reaffirmed in State

Farm v Campbell, 538 US 408 (2003) supply [the]

standard” for due-process review. App.85-86; see also

App.86-87 (“Nothing in State Farm or BMW states or

implies that the Due Process Clause only limits a

jury’s discretion in awarding punitive damages for violations of common law torts, and not statutory damages”).

In response, respondents argued that petitioner

was “incorrect that Gore applies to statutory damages.” Pl.’s Opp. at 12. Respondents contended instead that “[t]he United States Supreme Court applies

the factors in [St. Louis, Iron Mountain & Southern

Railway Co. v.] Williams[, 251 U.S. 63 (1919)]” when

assessing constitutional challenges to statutory-damages awards. Id. at 15. Respondents asserted that,

under Williams, the statutory damages were “well

within the constitutional limits” because they were

not “‘so severe and oppressive’ as to be wholly disproportionate to the offence.” Id. at 14 (quoting Williams,

251 U.S. at 67).

With respect to the motion to decertify, respondents argued that class certification was consistent

with due process because petitioner “could present no

evidence at this stage, that whether this is a $50 million or $590 million case (presuming a 100% claim

rate), it would suffer annihilating punishment.” Pl.’s

Opp. at 17-18; see also id. at 19 (“BP will not be put

out of business by this case, however the aggregate

damages resolve.”).

The trial court declined to strike the statutorydamages request or decertify the class. The court

ruled that the motion to strike was untimely because

petitioner did not raise it before the verdict (an inexplicable ruling given that the jury was not asked to

consider damages). App.64-65. The court also agreed

with respondents that “the standards that apply for

the constitutional review of punitive damages” do not

“apply to the review of statutory damages.” App.65;

see also App.66 (ruling that the “developing law on punitive damages . . . does not apply to statutory penalties”).

The court concluded that the motion to decertify,

unlike the motion to strike, was timely. See App.67;

see also App.57 (THE COURT: “I think anybody can

always ask to decertify a class.”). The court nevertheless rejected the motion as not “meritorious.” App.67.

Even though it appeared at that time that class certification would result in a statutory-damages award of

nearly $600 million, the court concluded that “class

treatment of these claims is superior to other available methods for the fair and efficient adjudication of

the controversy.” App.67. Thus, “for the reasons set

forth in plaintiff’s argument in opposition to defendant’s Motion No. 2”—including that a statutory penalty on behalf of the class would not violate due process because it would not result in “annihilating punishment” or put petitioner out of business—the court

denied the motion to decertify on the merits. App.67.

The court then conducted an initial claims process

and determined that there were 2,046,500 people in

the class, each of whom was entitled to $200 in statutory damages for their first use of a debit card within

the class period, resulting in statutory damages of

$409,300,000. It seemed likely, however, that a substantial portion of the total award would go unclaimed

due to an inability to locate all of the class members.

Under Oregon’s then-existing rules of civil procedure,

petitioner would have retained the unclaimed portion

of the award. But in response to the verdict and the

potential for an enormous statutory penalty, the Oregon legislature revised the rules of civil procedure to

provide that if any amount awarded as damages is not

claimed within the time specified by the court, at least

50% of the amount must go to the Oregon State Bar to

fund indigent legal services and the remainder can be

paid to any public-interest organization selected by

the court. See Or. R. Civ. P. 32(O). The legislature

made the new rule applicable to all cases in which a

final judgment had not yet been entered, confirming

that this amendment was specifically targeted at petitioner.

Following that amendment, the trial court conducted a second claims process and determined that

the amount of statutory penalties owed to the identified class members was $343,250,000. Am. Final

Judgment. The court awarded $60 million of that

amount to class counsel—reducing each class member’s award from $200 to $165—along with nearly $2

million in additional attorney’s fees under the applicable fee-shifting statute. Id. The trial court also determined that $66 million of the damages award was

“unclaimed,” and it divided that amount between the

two cy pres beneficiaries. Id.

3. Petitioner appealed, arguing that the trial court

committed numerous errors of law, including by denying both the motion to strike and the motion to decertify. App.106-14. Petitioner urged the Oregon Court

of Appeals to apply the three-part due-process framework this Court established in Gore to its constitutional challenge to the statutory-damages award.

App.108-11. And it argued that “[g]iven the facts of

this case, an aggregate penalty of $409 million is

grossly excessive and violates due process.” App.112.

The Oregon Court of Appeals affirmed. The court

agreed with the trial court that the motion to strike

was untimely, reasoning that petitioner could have

raised its constitutional challenge to statutory damages either through a motion for directed verdict or a

motion to strike made before the jury’s discharge

(even though the jury had no role in assessing the

statutory-damages award). App.38-39.

The court of appeals also held that the trial court

did not abuse its discretion in denying the motion to

decertify. App.42. The court “question[ed] whether

[petitioner] could challenge the statutory damages

award through a motion to decertify” given the untimeliness of the motion to strike, App.42, but it did

not rule that the motion to decertify was untimely or

otherwise procedurally improper. Rather, the court

concluded that “the trial court did not abuse its discretion in denying petitioner’s post-verdict challenge

to the class certification on the ground that the statutory damages award was excessive.” App.42-43.

Petitioner sought review in the Oregon Supreme

Court, asking the court to review, among other issues,

the court of appeals’ affirmance of the trial court’s denial of petitioner’s motion to decertify. App.117-25.

The petition urged the court to examine the constitutionality of the statutory-damages award under the

Gore guideposts, arguing that this “Court’s modern

excessiveness cases are controlling.” App.123. The

Oregon Supreme Court denied review without comment. App.68.

REASONS FOR GRANTING THE PETITION

The lower courts are deeply divided about

whether the standard this Court endorsed in BMW of

North America, Inc. v. Gore, 517 U.S. 559 (1996), for

assessing due-process challenges to punitive-damages

awards also applies to statutory damages. Two circuits and at least one state appellate court have held

that Gore applies to statutory-damages awards, but

four other circuits—as well as several other state appellate courts—have refused to apply Gore to statutory damages, instead fashioning a variety of inconsistent tests that are united only by the near-absolute

deference they afford to statutory-damages awards.

That division is particularly acute in the class-action

setting, where courts have struggled to reconcile legislatures’ authorization of statutory damages—which

are typically enacted to make individual claims financially viable—with the potentially devastating liability that can result from the aggregation of millions of

individual statutory-damages claims in a single case.

The Oregon courts exacerbated that confusion in

this case by refusing to apply the Gore due-process

framework when evaluating the constitutionality of

the $409 million statutory-damages award—an

amount 571 times larger than the class’s claimed expenditure on the debit-card fee—which was imposed

even though the jury did not find that any class member was actually misled by petitioner’s failure to post

the $0.35 fee on street signs or that petitioner’s conduct warranted punitive damages. In upholding that

award, the Oregon courts not only deepened the lower

courts’ disarray on the constitutional question but

also contravened this Court’s precedent, which

demonstrates that Gore’s punitive-damages standard

applies with equal force to statutory damages and

other types of civil penalties. Indeed, Gore explicitly

built on doctrinal foundations first established in

cases addressing statutory-damages awards.

Although class actions seeking to aggregate millions of statutory-damages claims are increasingly

common, those cases rarely culminate in a final appealable judgment because the in terrorem effect of

the enormous potential penalties almost invariably

compels defendants to settle. This case is an exception and provides the Court with a valuable opportunity to make clear that defendants who are assessed

excessive, irrational, and arbitrary statutory-damages awards possess the same due-process rights as

defendants in punitive-damages cases.

LOWER COURTS ARE DIVIDED OVER THE DUEPROCESS

STANDARD

APPLICABLE

STATUTORY DAMAGES.

A. This Court first established that the Due Process Clause restrains “grossly excessive” punishments

in a series of early-twentieth-century cases. WatersPierce Oil Co. v. Texas, 212 U.S. 86, 111 (1909). That

line of cases—each of which involved the assessment

of statutory damages—culminated in St. Louis, Iron

Mountain & Southern Railway Co. v. Williams, 251

U.S. 63 (1919), which held that a statutory penalty is

unconstitutional if it “is so severe and oppressive as to

be wholly disproportioned to the offense and obviously

unreasonable.” Id. at 66-67.3

After those early decisions, the Court’s jurisprudence regarding the due-process limits on civil damages lay dormant for seventy years. In the late 1980s,

however, the Court began to reinvigorate those dueprocess protections by suggesting, and ultimately

holding, that due process provides protections against

arbitrary and excessive punitive-damages awards.

In Browning-Ferris Industries of Vermont, Inc. v.

Kelco Disposal, Inc., 492 U.S. 257 (1989), the Court

cited the seventy-year-old Williams decision to illustrate that “[t]here is some authority in our opinions

for the view that the Due Process Clause places outer

limits on the size of a civil damages award made pursuant to a statutory scheme.” Id. at 276. But the

Court declined to address the question whether those

“limits” were exceeded by the punitive-damages

award in that case because the due-process challenge

had not been preserved. Id. And in TXO Production

Corp. v. Alliance Resources Corp., 509 U.S. 443 (1993),

a plurality of the Court rejected an attempt to “denigrate” Williams and the other early twentieth-century

See also Seaboard Air Line Ry. v. Seegers, 207 U.S. 73, 78

(1907) (due process imposes substantive limits “beyond which

penalties may not go”); Standard Oil Co. of Ind. v. Missouri, 224

U.S. 270, 286 (1912) (the power to assess statutory damages “is

limited by the obligation to administer justice, and to no more

assess excessive damages than to impose excessive fines”); Mo.

Pac. Ry. v. Tucker, 230 U.S. 340, 351 (1913) (statutory-damages

award was “not only grossly out of proportion to the possible actual damages, but [was] so arbitrary and oppressive that its enforcement would be nothing short of the taking of property without due process of law”); Sw. Tel. & Tel. Co. v. Danaher, 238 U.S.

482, 491 (1915) (statutory-damages award “was so plainly arbitrary and oppressive” as to be unconstitutional).

statutory-damages cases “as ‘Lochner-era precedents’”

and reaffirmed that due process places limits on civildamages awards. Id. at 455 (plurality opinion). The

plurality declined, however, to define the exact contours of those limits. Id.

Finally, in BMW of North America, Inc. v. Gore,

517 U.S. 559 (1996), this Court articulated a threepart test for assessing due-process challenges to punitive-damages awards. See id. at 575. Under that test,

courts consider (1) the degree of the defendant’s reprehensibility or culpability; (2) the relationship between the penalty and the actual harm to the victim

caused by the defendant’s actions; and (3) sanctions

imposed in other cases for comparable misconduct. Id.

at 574-75. In establishing this due-process framework, the Court explicitly drew upon its earlier statutory-damage decisions. See id. at 575 (citing Williams, 251 U.S. at 66-67, to demonstrate the relevance

of reprehensibility to the constitutional inquiry).

The Court has clarified and refined the Gore

framework in subsequent cases. Most notably, in

State Farm Mutual Automobile Insurance Co. v.

Campbell, 538 U.S. 408 (2003), the Court reaffirmed

Gore and made clear that “few awards exceeding a single-digit ratio between punitive and compensatory

damages, to a significant degree, will satisfy due process.” Id. at 425.

B. Although Gore explicitly drew upon this

Court’s earlier statutory-damages decisions—and this

Court has never suggested that the tests for determining the constitutionality of punitive damages and statutory damages are different—lower courts are deeply

divided over whether the Gore due-process framework

should be applied when evaluating constitutional

challenges to statutory damages.

1. The First, Fifth, Sixth, and Eighth Circuits

have all rejected application of the Gore framework to

statutory-damages awards and concluded that statutory damages are subject to far more deferential review than punitive damages.

In Zomba Enterprises., Inc. v. Panorama Records,

Inc., 491 F.3d 574 (6th Cir. 2007), the Sixth Circuit

declared that there is “uncertainty regarding the application of Gore and [State Farm] to statutory-damage awards,” and refused to apply that three-part dueprocess standard to a statutory-damages award that

was 44 times larger than the plaintiff’s losses. Id. at

587. The court instead examined the constitutionality

of the award under an “extraordinarily deferential”

standard that it purported to distill from this Court’s

early Williams decision, asking only whether the

award was “‘so severe and oppressive as to be wholly

disproportioned to the offense and obviously unreasonable.’” Id. at 587-88 (quoting Williams, 251 U.S. at

67). Because Williams had upheld “a 113:1 ratio” of

actual to statutory damages, the Sixth Circuit concluded that the lesser ratio of 44:1 was constitutional.

Id. at 588.

The First, Fifth, and Eighth Circuits have likewise rejected application of Gore in statutory-damages

cases. See Sony BMG Music Entm’t v. Tenenbaum,

719 F.3d 67, 70 (1st Cir. 2013) (“Williams applies to

awards of statutory damages, . . . while Gore applies

to awards of punitive damages”); Vanderbilt Mortg. &

Fin., Inc. v. Flores, 692 F.3d 358, 374 (5th Cir. 2012)

(Gore and State Farm “are inapplicable, because they

concern discretionary jury awards of punitive damages”); Capitol Records, Inc. v. Thomas-Rasset, 692

F.3d 899, 907 (8th Cir. 2012) (refusing to apply Gore

because “[t]he Supreme Court never has held that the

punitive damages guideposts are applicable in the

context of statutory damages”).

While those four circuits agree that the Gore

framework is inapplicable to statutory-damages

awards, they disagree about how the constitutionality

of statutory damages should be assessed. According

to the Sixth Circuit, Williams requires a ratio-based

comparison of statutory damages to actual damages

but countenances ratios in excess of 100:1. Zomba,

491 F.3d at 587. The Eighth Circuit, however, does

not believe that Williams requires any ratio-based

“comparison of an award of statutory damages to actual damages” and instead requires courts to look to

the “absolute amount of the award.” Capitol Records,

692 F.3d at 909-10. The First Circuit has adopted yetanother approach, holding that any award is constitutional under Williams if it serves a valid statutory

“purpose.” Sony BMG, 719 F.3d at 71. And the Fifth

Circuit does not appear to believe that there are any

due-process limits on statutory damages as long as

the legislature establishes a “fixed statutory-damage

provision.” Vanderbilt Mortg., 692 F.3d at 374.

2. In contrast, the Second and Seventh Circuits

have held that Gore does apply to statutory-damages

awards. In Parker v. Time Warner Entertainment Co.,

L.P., 331 F.3d 13 (2d Cir. 2003), the Second Circuit

vacated a district court’s decision not to certify a class

of millions of cable subscribers seeking statutory damages for alleged privacy-law violations. Id. at 22. The

court nevertheless explained that, while “the potential for a devastatingly large damages award” was not

a basis for denying certification, “in a sufficiently serious case the due process clause might be invoked,

not to prevent certification, but to nullify that effect

and reduce the aggregate damage award” under Gore

and State Farm. Id. (citing Gore, 517 U.S. at 580;

State Farm, 538 U.S. at 416).

The Seventh Circuit reached a similar conclusion

in Murray v. GMAC Mortgage Corp., 434 F.3d 948 (7th

Cir. 2006), where the court held that “[a]n award [of

statutory damages] that would be unconstitutionally

excessive may be reduced,” id. at 954 (citing State

Farm, 538 U.S. at 416), but held that the possibility of

an unconstitutional award was not a basis for denying

certification of a class seeking statutory damages under the Fair Credit Reporting Act (“FCRA”), id.

“[C]onstitutional limits are best applied,” the court

emphasized, “after a class has been certified.” Id.; cf.

Bateman v. Am. Multi-Cinema, Inc., 623 F.3d 708, 723

(9th Cir. 2010) (holding that it is “not appropriate to

evaluate the excessiveness” of a potential statutorydamages award at the class-certification stage but

“reserv[ing] judgment as to whether, if [the plaintiff]

prevails at trial, the district court may be entitled to

reduce the award as constitutionally excessive” (citing

State Farm, 538 U.S. at 416; Murray, 434 F.3d at

954)).

3. State courts have also split over the proper

due-process standard to use when reviewing statutory

damages. At least one state court has applied Gore’s

framework to statutory damages4; another has created

See Dami Hosp., LLC v. Indus. Claim Appeals Office, 2017

WL 710497, at *12 (Colo. App. Feb. 23, 2017) (“Although Gore

and Cooper addressed only punitive damages, the factors have

been more broadly applied. . . . Not surprisingly, [the Colorado

Court of Appeals] adopted the Gore factors and applied them to

statutory penalties and civil fines.”), cert. granted sub nom. Colo.

Dep’t of Labor & Emp’t, Div. of Workers’ Comp. v. Dami Hosp.,

LLC, 2017 WL 3977989, at *1 (Colo. Sept. 11, 2017) (granting

a hybrid Gore-Williams standard 5 ; several have rejected Gore in the statutory-damages context 6 ; and

others have suggested that Gore might apply, although in the context of cases where the question was

not yet ripe.7

The Oregon courts deepened this already-pervasive confusion among the lower courts by ruling that

“the standards that apply for the constitutional review of punitive damages” do not “apply to the review

of statutory damages” and upholding the $409 million

award without any consideration of the three constitutional guideposts established by this Court in Gore.

App.65-67; see also App.42-43.

C. The lower courts’ disagreement about the dueprocess limits on statutory damages is particularly

certiorari to consider “[w]hether the court of appeals applied the

correct test to determine the constitutionality of a civil fine”).

See Vanderbilt Mortg. & Fin., Inc. v. Cole, 740 S.E.2d 562,

570 (W. Va. 2013) (relying on Williams to hold that statutory

damages may be appropriate in the absence of harm and relying

on State Farm to hold that the award must still be “abstractly

fair”).

See Comm. to Elect Dan Forest v. Emps. Political Action

Comm. (EMPAC), 817 S.E.2d 738, 744 (N.C. Ct. App. 2018); Zink

v. City of Mesa, 419 P.3d 847, 856 (Wash. Ct. App. 2018); In re

Marriage of Chen & Ulner, 820 N.E.2d 1136, 1152 (Ill. App. Ct.

2004).

See Rhodes v. AIG Domestic Claims, Inc., 961 N.E.2d 1067,

1081 (Mass. 2012) (“Nonetheless, there is no need to decide

whether the Campbell-Gore guideposts govern multiple awards

of damages”); Flores v. Millennium Interests, Ltd., 185 S.W.3d

427, 436-37 (Tex. 2005) (Wainwright, J., concurring) (“Reasonableness and proportionality are required in setting the amount

of these [statutory] awards,” but “it is not necessary to address

limits on the amount of the civil penalties in this case.”).

acute—and especially problematic—in the class-action setting, where, as in this case, modest statutory

penalties can be aggregated on behalf of thousands, or

even millions, of class members to give rise to truly

staggering and disproportionate statutory-damages

awards.

Several courts have recognized “legitimate concern[s] that the potential for a devastatingly large

damages award, out of all reasonable proportion to the

actual harm suffered by members of the plaintiff

class, may raise due process issues.” Parker, 331 F.3d

at 22; see also, e.g., Azoiani v. Love’s Travel Stops &

Country Stores, Inc., 2007 WL 4811627, at *4 (C.D.

Cal. Dec. 18, 2007) (“allowing statutory damages between $423 million and $4 billion without proof of actual harm” to the individual class members would “violate[ ] principles of due process”).

These courts have struggled, however, with how

to ameliorate the due-process problems that arise

from aggregation of individual statutory-damages

claims. Most courts that have confronted the issue

have held that these constitutional deficiencies do not

foreclose class certification and can be remedied after

trial by remitting or striking the statutory-damages

award, even though such a reduction would presumably result in each class member’s receiving less than

he or she would have received in an individual action.

See, e.g., Parker, 331 F.3d at 22; Murray, 434 F.3d at

954; see also Yazzie v. Gurley Motor Co., 2015 WL

10818834, at *7 (D.N.M. Oct. 30, 2015) (“The potential

for an unconstitutionally high class damages award

does not undermine the advantages of class certification as compared to individual litigation.”); Pirian v.

In-N-Out Burgers, 2007 WL 1040864, at *5 (C.D. Cal.

Apr. 5, 2007) (“[T]he constitutional guidelines regarding the excessiveness of a damage award cannot be

properly applied before the amount of damages has

been determined.”).

Other courts have declined to certify class actions

where the potential for an unconstitutional statutorydamages award was apparent at the time of the certification ruling. See, e.g., Anderson v. Capital One

Bank, 224 F.R.D. 444, 453 (W.D. Wis. 2004) (denying

certification of FCRA statutory-damages class where

“[t]he potential damages for such a class are wholly

out of proportion to the harm done to any of the class

members or to all of them together”); In re Trans Union Corp. Privacy Litig., 211 F.R.D. 328, 351 (N.D. Ill.

2002) (“Although certification should not be denied

solely because of the possible financial impact it would

have on a defendant, consideration of the financial impact is proper when based on the disproportionality of

a damage award that has little relation to the harm

actually suffered by the class, and on the due process

concerns attended upon such an impact.”).

These divergent approaches have profound practical consequences. If this case had been tried in a

federal court in the Second or Seventh Circuits—or,

potentially, if it had been removed to a federal court

in the Ninth Circuit, see Bateman, 623 F.3d at 723—

the courts would have applied Gore’s due-process

guideposts to determine whether to remit or strike the

statutory-damages award after trial. And, if this case

had been tried in a jurisdiction where the possibility

of an unconstitutionally excessive award is sufficient

to deny class certification at the outset of the case, the

class may never have been certified at all—or, at a

minimum, may have been decertified after trial. But

because this case was tried in the Oregon state courts,

petitioner is faced with the prospect of paying a $409

million statutory-damages award that has never been

subjected to meaningful constitutional scrutiny—either before or after trial.

This Court should grant review to ensure that the

due-process rights of defendants in statutory-damages cases do not vary based on the plaintiff’s selection

of the venue in which to file suit.

II. THE OREGON COURTS APPLIED THE WRONG

DUE-PROCESS STANDARD AND UPHELD AN

UNCONSTITUTIONAL STATUTORY PENALTY.

Review is also warranted because the Oregon

courts’ refusal to examine the statutory-damages

award under the Gore guideposts conflicts with this

Court’s due-process precedent and resulted in the affirmance of an unconstitutionally excessive award

that is dramatically disproportionate to petitioner’s

conduct, the alleged harm, and comparable penalties

imposed by other jurisdictions.

A. Gore’s Due-Process Standard Applies

With Equal Force To Statutory Damages.

This Court’s precedent demonstrates that statutory damages are subject to the same due-process restrictions as punitive damages.

The three Gore guideposts are not specific to the

punitive-damages setting but instead reflect the limitations that due process places on the ability of the

government to impose any form of punishment. In

Cooper Industries, Inc. v. Leatherman Tool Group.,

Inc., 532 U.S. 424 (2001), the Court made clear that

the same due-process standard applies regardless of

whether punishment is prescribed by a jury or a legislature. Id. at 435. As the Court explained, “the

same general criteria” of “reprehensibility,” “relationship between the penalty and the harm,” and “the

sanctions imposed in other cases for comparable misconduct” apply to a wide variety of cases—including

those involving statutory forfeiture, statutory penalties for criminal conduct, and punitive damages. Id.

(collecting cases); see also Pamela Samuelson & Tara

Wheatland, Statutory Damages in Copyright Law: A

Remedy in Need of Reform, 51 Wm. & Mary L. Rev.

439, 492 (2009) (“[T]he Supreme Court has applied

due process excessiveness reviews to a wide variety of

sanctions—not just to punitive damages, but also to

civil fines, forfeitures, criminal penalties, and other

deprivations of liberty or property.”).

Given that the same three factors are relevant to

such widely varied forms of punishment—most of

which are established by legislatures, not juries—

there is no reason that those factors would not also

apply to statutory damages. See Blaine Evanson, Due

Process in Statutory Damages, 3 Geo. J.L. & Pub. Pol’y

601, 623 (2005) (“[T]o accord only ‘substantial deference’ review to statutory damages within a given

range is to place the award beyond the level of review

accorded any other penalty under our legal system.”).

This conclusion is reinforced by the fact that this

Court’s early statutory-damages cases provided the

doctrinal foundation for this Court’s later recognition

that “the Due Process Clause of the Fourteenth

Amendment imposes substantive limits ‘beyond

which penalties may not go.’” TXO, 509 U.S. at 45354 (quoting Seaboard, 207 U.S. at 78); see also id. (citing Williams, 251 U.S. at 66-67; Standard Oil, 224

U.S. at 286; Danaher, 238 U.S. at 482; Waters-Pierce

Oil Co., 212 U.S. at 111). Gore merely articulated a

specific set of factors that give effect to those

longstanding constitutional principles in light of intervening doctrinal developments in this Court’s dueprocess jurisprudence. See Gore, 517 U.S. at 575 (citing Williams, 251 U.S. at 66-67, for the proposition

that a “punitive award may not be ‘wholly disproportioned to the offense’”).

Nor are there practical barriers to applying Gore’s

three guideposts to statutory damages. The first two

guideposts—the degree of reprehensibility and ratio

between penalty and actual harm—can be analyzed in

the same manner in both statutory- and punitivedamages cases. See Samuelson & Wheatland, supra,

at 472 (noting that applying the first two “guideposts”

to statutory damages “is relatively straightforward”).

And while some courts have reasoned that the third

guidepost—comparable civil penalties—cannot be applied in the statutory-damages setting because it

would require comparing the statutory penalty to itself, see, e.g., Capitol Records, 692 F.3d at 908, the

statutory penalty can readily be compared with penalties imposed in other jurisdictions for similar conduct. In fact, the Court undertook just such a crossjurisdictional comparison in Gore. See 517 U.S. at 584

& n.40.

The Oregon courts’ ruling that the “developing

law on punitive damages . . . does not apply to statutory penalties” is therefore impossible to reconcile

with this Court’s modern due-process precedent and

its doctrinal origins in statutory-damages jurisprudence. App.66.

B. The $409 Million Statutory-Damages

Award Violates Due Process.

When examined under the correct constitutional

standard—Gore’s three-part due-process test—the

$409 million award in this case is manifestly unconstitutional.

Degree of Reprehensibility: As reflected in the

jury’s decision not to award punitive damages, none of

the aggravating features associated with particularly

reprehensible conduct is present in this case. The

harm was “purely economic in nature,” Gore, 517 U.S.

at 576, and petitioner’s conduct “evinced no indifference to or reckless disregard for the health and safety

of others,” id. Nor was there evidence that petitioner

intended to deceive consumers or a finding that anyone was actually deceived. To the contrary, petitioner

posted information about the debit-card fee in the very

locations that respondents’ counsel previously attested would be sufficient to “stop[ ] potential future

economic injury to Oregon consumers.” Trial Ex.369

¶ 13. In short, as in Gore, “the record in this case discloses no deliberate false statements, acts of affirmative misconduct, or concealment of evidence of improper motive.” 517 U.S. at 579.

Moreover, given the text and history of the relevant statutory and regulatory provisions, “a corporate

executive could reasonably interpret the disclosure requirements” as inapplicable to petitioner. Gore, 517

U.S. at 578; see also id. at 580 (little reprehensibility

“when there is a good-faith basis for believing that no

duty to disclose exists”). A flat fee for the convenience

of using a debit card can reasonably be understood to

be a charge for a separate service, rather than a “condition . . . affecting the price per unit of measurement

of motor vehicle fuel.” Or. Admin. R. 137-0200150(1)(b). And it was equally reasonable for petitioner to conclude that the statute under which the

rule was promulgated did not apply to it because petitioner sold fuel in Oregon exclusively on a wholesale

basis and the statute applies only to persons who operate a business “for the purpose of retailing and delivering gasoline.” Or. Rev. Stat. 646.930(1).

In addition, petitioner used the debit-card fee to

offset its transaction costs—not as a source of profit.

After paying the banks their transaction fees and compensating FirstData, petitioner was left with a total of

$58,000 over the entire two-and-a-half year class period.

Ratio: The ratio of statutory damages to any harm

the class may have suffered starkly underscores the

award’s unconstitutionality. The trial court awarded

$200 for each class member’s first payment of the

debit-card fee during the class period. The total aggregate class expenditure for these payments

amounted to only $716,000. The $409 million statutory-damages award is more than 571 times that total

expenditure—an extraordinary ratio that is plainly

incompatible with due process. As this Court has emphasized, “few awards exceeding a single-digit ratio

between punitive and compensatory damages, to a

significant degree, will satisfy due process.” State

Farm, 538 U.S. at 425.

In fact, the ratio of statutory damages to actual

damages is much higher than 571 to 1 because, in

light of the other signage disclosing the debit-card fee

and the fact that many (if not most) class members

were repeat ARCO customers, most of the class members already knew about the debit-card fee and thus

were not misled by petitioner’s failure to display the

fee on street signs. And even those class members

whose purchasing decisions may have been influenced

by the absence of a street-sign disclosure received a

concrete benefit in return for paying the fee: the convenience of using a debit card. In other words, no

class member was actually injured even in the full

amount of $0.35—and most were not injured at all.

Sanctions for Comparable Misconduct: The $409

million award is also grossly disproportionate to the

maximum penalties imposed for similar technical violations of disclosure laws. In the Truth in Lending

Act, for example, Congress limited the “total recovery”

in a class action to “the lesser of $1,000,000 or 1 per

centum of the net worth of the [defendant].” 15 U.S.C.

§ 1640(a)(1)(B) (emphasis added). Congress adopted

this statutory cap in order to address the same concerns at issue here: a technical violation of a disclosure statute leading to massive aggregated damages.

See Watkins v. Simmons & Clark, Inc., 618 F.2d 398,

400 n.6 (6th Cir. 1980) (noting that the Senate Banking Committee’s report explained that “[a] problem

has arisen in applying (the applicable individual

suits’) minimum liability provisions in class action

suits involving millions of consumers”).

To guard against unconstitutionally excessive aggregate damages, Congress has likewise established

that a class award for violations of the Fair Debt Collection Practices Act is “not to exceed the lesser of

$500,000 or 1 per centum of the net worth of the debt

collector.” 15 U.S.C. § 1692k(a)(2)(B); see also 12

U.S.C. § 4907(a)(2)(B) (same $500,000 limitation under

the

Homeowners

Protection

Act);

id.

§ 4010(a)(2)(B)(ii) (same limitation for class actions

based on violation of banking laws); see also, e.g., Colo.

Rev. Stat. Ann. § 6-1-112 (1)(a) (limiting statutory

damages that may be imposed “for any related series

of violations” of state false advertising law to “five

hundred thousand dollars”). That comparison leaves

no doubt that the $409 million award in this case is

not even in the constitutional ballpark.

Accordingly, all three due-process guideposts

demonstrate that the Oregon courts violated due process by imposing a $409 million statutory penalty

based on an unintentional regulatory violation that

was not found to have misled anyone and that, at

most, resulted in $716,000 in class-wide expenditures.8

III. THIS

CASE

REPRESENTS

RARE

OPPORTUNITY TO ADDRESS THIS IMPORTANT

CONSTITUTIONAL ISSUE.

This Court has had few occasions to resolve the

lower courts’ disagreement about the due-process

standards governing statutory damages because cases

that could result in the sort of draconian award imposed here almost invariably settle shortly after class

certification. This case thus presents the Court with

a rare opportunity to provide a definitive answer to a

constitutional question that has divided both the state

and federal courts.

While many courts have been presented with the

question whether a potential statutory-damages

award in favor of a newly-certified class could violate

due process, nearly all of those courts have deferred

Given the absence of any reprehensible conduct and the enormous disparity between any actual injury and the statutorydamages award, the award would also be unconstitutional under

the test articulated in Williams because it is “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” 251 U.S. at 66.

resolution of the issue until after damages are actually awarded. 9 Those awards are almost never reviewed on appeal, however, because the cases settle

before trial. See Parker, 331 F.3d at 22 (acknowledging that statutory-damages classes “could create a potentially enormous aggregate recovery for plaintiffs,

and thus an in terrorem effect on defendants, which

may induce unfair settlements”). “[O]nce a class is

certified, a statutory damages defendant faces a betthe-company proposition and likely will settle rather

than risk shareholder reaction to theoretical billions

in exposure even if the company believes the claim

lacks merit.” Stillmock v. Weis Mkts., Inc., 385 F.

App’x 267, 281 (4th Cir. 2010) (Wilkinson, J., concurring specially) (alteration in original; internal quotation marks omitted).

As a result, even though the due-process question

presented in this case arises with some frequency, it

typically evades this Court’s review. This case is the

exception because petitioner decided to defend itself

at trial. This petition therefore presents the Court

with a rare chance to decide this important due-process question.

This case is a good vehicle for doing so because the

trial court denied petitioner’s motion to decertify on

the merits after concluding that “the standards that

apply for the constitutional review of punitive damages” do not “apply to the review of statutory damages.” App.65. The court of appeals also decided the

See, e.g., Bateman, 623 F.3d at 723; Murray, 434 F.3d at 954;

Parker, 331 F.3d at 22; Centerline Equip. Corp. v. Banner Pers.

Serv., Inc., 545 F. Supp. 2d 768, 778 n.6 (N.D. Ill. 2008); Arcilla

v. Adidas Promotional Retail Operations, Inc., 488 F. Supp. 2d

965, 973 (C.D. Cal. 2007).

constitutional issue on the merits. Rejecting petitioner’s argument that the award was unconstitutionally excessive under Gore, the court of appeals concluded that “the trial court did not abuse its discretion

in denying petitioner’s post-verdict challenge to the

class certification on the ground that the statutory

damages award was excessive.” App.42 (emphasis

added). In Oregon, as in most jurisdictions, an exercise of discretion cannot be founded on legal error. See

Espinoza v. Evergreen Helicopters, Inc., 337 P.3d 169,

184 (Or. Ct. App. 2014) (“a trial court abuses its discretion if it relies on an erroneous view of the law”).

Thus, by affirming the trial court’s exercise of discretion in denying decertification of the class, the court

of appeals necessarily affirmed the predicate legal decisions that informed that exercise of discretion—including the trial court’s rejection of the Gore standard

and its ruling that the $409 million award comports

with due process.

Because the court of appeals’ holding that the trial

court did not abuse its discretion was “dependent on”

the conclusion that the trial court correctly rejected

petitioner’s federal due-process challenge, the constitutionality of that award is squarely presented for this

Court’s review. Foster v. Chatman, 136 S. Ct. 1737,

1747 n.4 (2016); see also Ake v. Oklahoma, 470 U.S.

68, 75 (1985) (this Court possessed jurisdiction

whether a state court passed “either explicitly or implicitly . . . on the merits of the constitutional question”). Indeed, there can be no doubt about this

Court’s jurisdiction because the court of appeals did

not “clearly and expressly state[ ] that its judgment

rest[ed] on a state procedural bar.” Harris v. Reed,

489 U.S. 255, 263 (1989) (internal quotation marks

omitted).

The Court should seize this valuable opportunity

to clarify and reinforce the due-process safeguards

against arbitrary and excessive statutory-damages

awards.

CONCLUSION

This case exemplifies the profound due-process

shortcomings that often accompany the aggregation of

individual statutory-damages claims. The Oregon

courts facilitated class-wide treatment of two million

inherently individualized claims by relieving class

members of their burden of proving reliance and then

awarded each class member statutory damages in the

absence of any finding that anyone had actually been

misled, without any evidence of intentional wrongdoing, and without undertaking any meaningful review

of whether the resulting $409 million award—an

amount 571 times larger than the class’s total expenditure—was compatible with due process. This

oppressive, inequitable, and irrational award cannot

survive the due-process scrutiny mandated by this

Court’s precedent.

The petition for a writ of certiorari should be

granted.

Respectfully submitted.

WILLIAM F. GARY

SHARON A. RUDNICK

SUSAN MARMADUKE

HARRANG LONG GARY

RUDNICK P.C.

1050 SW Sixth Avenue

16th Floor

Portland, OR 97204

(503) 242-0000

THEODORE B. OLSON

Counsel of Record

AMIR C. TAYRANI

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 955-8500

tolson@gibsondunn.com

ROBERT E. DUNN

DANIEL NOWICKI

GIBSON, DUNN & CRUTCHER LLP

1881 Page Mill Road

Palo Alto, CA 94304

(650) 849-5384

Counsel for Petitioner

March 28, 2019

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.