by Jeffrey L. Needle
It is uniquely the function of punitive damages to punish the defendant, and to deter future misconduct by the defendant and others similarly situated. Especially for large corporations, relatively insubstantial compensatory damages don't begin to measure the enormity of the defendant's wrongful behavior, and have no deterrent effect. It is for that reason that punitive damages should be an essential ingredient in all civil rights litigation.
In the context of civil rights litigation, the availability of punitive damages affords juries the opportunity to enhance the quality of equal opportunity and\or constitutional freedoms, not just for the litigants before the court, but in the community at large. The challenge to trial lawyers is to communicate to juries the broad and compelling social justification for a punitive damages award. This requires a special focus on social issues which transcend a monetary award from a particular defendant to a particular plaintiff. In order to achieve the intended purpose, it must be clearly explained to the jury that an award of punitive damages doesn't represent what the plaintiff deserves, but what the defendant deserves for its reckless disregard of federally protected rights.
Almost all Americans are extremely passionate about the Bill of Rights and the right to equal opportunity. The eloquence to convince them that these are ideals which need to be perpetuated can be legitimately borrowed from Thomas Jefferson, James Madison, or legendary civil rights leaders such as Martin Luther King, Jr. or Susan B. Anthony. A brief historical review of the struggle for equal opportunity is appropriate to communicate to the jury their role in a continuing effort. Comparisons to the system of apartheid in South Africa or other societies where ethnic minorities and women are subjugated may serve to illustrate that the principles the jury is being asked to vindicate are the ideals that distinguish our country as a free society. Punitive damages affords juries the opportunity to give contemporary meaning and vitality to the universal ideals reflected in the Bill of Rights and the quest for civil rights generally. It remains a necessary and integral part of the civil justice system.
In virtually every civil rights case tried, the quality of freedom for the plaintiff and the community at large is directly on the line. The ability of trial lawyers to communicate not only the monetary stakes but the philosophical stakes is directly proportional to a successful outcome.
In Kolstad v. American Dental Association, 119 S.Ct. 2118 (1999), the Court ruled that the controlling standard required Plaintiff to prove that the defendant acted with malice or with reckless indifference to the federally protected rights of an aggrieved individual. The Court rejected the egregious conduct standard acknowledged by the Court of Appeals.
The Court in Kolstad also established a standard for imputing punitive damages liability to a corporate wrongdoer. Without briefing, the Court adopted the Restatement (Second) of Agency, but declined to allow vicarious liability "for the discriminatory employment decisions of managerial agents where these decisions are contrary to the employer's good faith efforts to comply with Title VII." As discussed below, the Court has created many more questions than it answered.
Punitive Damages Standard - Pre Kolstad
Title 42 U.S.C. Section 1981a(b)(1) provides as follows:
A complaining party may recover punitive damages under this section against a respondent (other than a government, government agency or political subdivision) if the complaining party demonstrates that the respondent engaged in a discriminatory practice or discriminatory practices with malice or with reckless indifference to the federally protected rights of an aggrieved individual.( Emphasis added).Adopting a heightened standard for punitive damages, the Court in Ngo v. Reno Hilton Resort Corp., 140 F.3d 1299 (9th Cir. 1998) held that it was not "egregious conduct," but a mental state that was the necessary prerequisite for a finding of punitive damages.
Under the heightened standard adopted in these cases, intentional acts of discrimination giving rise to section 1981 liability do not warrant punitive damages unless they evince "malice or reckless or callous indifference of an egregious character," Beauford v. Sisters of Mercy-Province of Detroit, 816 F.2d 1104, 1109 (6th Cir.1987), or a comparably reprehensible intent. Id. at 1302-03 (emphasis added). The Ninth Circuit adopted the "almost certainly knew" standard; "thus, to be entitled to an award of punitive damages, the plaintiff must demonstrate that the defendant almost certainly knew that what he was doing was wrongful and subject to punishment." Id. at 1304. This mental state standard is entirely consistent with Kolstad.
In EEOC v. Wal Mart Stores, 156 F.3d 989 (9th Cir. 1998), the Ninth Circuit applied that same standard to reverse a district court's refusal of a punitive damages instruction. In Wal-Mart Stores, a jury returned a verdict in favor of appellant EEOC, finding that the defendant intentionally discriminated against a job applicant based on her pregnancy, in violation of Title VII. The District Court refused the EEOC's request for an instruction to the jury on the issue of punitive damages, ruling that a heightened standard is required. Id. at 990.
In reversing the District Court, the Ninth Circuit in Wal Mart acknowledge its recent ruling in Ngo v. Reno Hilton Resort Corp., supra, that "to be entitled to an award of punitive damages, the plaintiff must demonstrate that the defendant 'almost certainly knew that what he was doing was wrongful and subject to punishment.'" Id. at 992. The Court ruled that even this so called heightened standard was satisfied by evidence that "Wal-Mart's decision-makers deliberately rejected [the employee] because of her pregnancy and conspired to cover up their unlawful discrimination by fabricating an interview that never took place." Id. The Ninth Circuit distinguished Ngo on the basis that there existed more than "negligent decision making" and "poor communications among managers." Id. The EEOC's evidence of discriminatory intent was sufficient to support an instruction on the subject of punitive damages. Under these circumstances, the defendant "almost certainly knew that [its] conduct was wrongful." Id. (1)
In Fuller v. City of Oakland, Cal., 47 F.3d 1522 (9th Cir 1995) the court considered a sexual harassment claim. In relevant part, the court considered glaring deficiencies in the investigation, the delays in investigation, a failure to meet with or credit the testimony of witnesses supporting the Plaintiff, an attempt to close the investigation without even speaking with the harasser, and a one-sided resolution of disputes of fact. Id. at 1535. Viewing the evidence in light most favorable to Plaintiff, the Court concluded that "[i]t is therefore conceivable that a jury could reasonably infer that the underlying investigation was performed in a sexually-biased fashion." Id. In addition, the Court concluded that if the Chief of Police had reviewed the file, "a case file arguably revealing a grossly inadequate investigation--and nevertheless approved the thoroughness of the investigation, then a jury could find that Hart acted with reckless disregard of Fuller's constitutional right not to have her investigation handled in a sexually-biased fashion." Id.
Kolstad v. American Dental Association
In Kolstad v. American Dental Association, 119 S.Ct. 2118 (1999), the Plaintiff alleged a violation of the Civil Rights Act of 1964, Title VII, as amended, arising from the failure to promote because of her gender. The District Court refused to instruct the jury on the issue of punitive damages. The jury returned a verdict in favor of Petitioner awarding compensatory damages, and the District Court denied a post trial motion for judgment as a matter of law on the issue of liability.
The Court of Appeals granted en banc review on the question "whether the standard of evidence for punitive damages under Title VII is, in all but a narrow range of cases, no higher than the standard of liability." Having thus framed the issue, the Court ruled that "punitive damages in a Title VII case may be imposed only on a showing of egregious conduct." The Court of Appeals ruled that every "garden-variety disparate treatment case" does not qualify for punitive damages.
The United States Supreme Court reversed. The court rejected the "egregious standard" and adopted mental state as the appropriate standard. "Applying this standard in the context of § 1981a, an employer must at least discriminate in the face of a perceived risk that its actions will violate federal law to be liable in punitive damages." Id. at ____.
Although the issue was never briefed by the parties, the Court also addressed the issue of vicarious liability for punitive damages. Subject to an exception, the Court adopted the Restatement (Second) of Agency standard.
The Restatement, for example, provides that the principal may be liable for punitive damages if it authorizes or ratifies the agent's tortious act, or if it acts recklessly in employing the malfeasing agent. The Restatement also contemplates liability for punitive awards where an employee serving in a "managerial capacity" committed the wrong while "acting in the scope of employment." Restatement (Second) of Agency, supra, § 217C; see also Restatement (Second) of Torts, supra, § 909 (same). "Unfortunately, no good definition of what constitutes a `managerial capacity' has been found," 2 Ghiardi, supra, § 24.05 at 14, and determining whether an employee meets this description requires a fact-intensive inquiry, id., § 24.05; 1 L. Schlueter & K. Redden, Punitive Damages, § 4.4(B)(2)(a), p. 182 (3d ed. 1995). In making this determination, the court should review the type of authority that the employer has given to the employee, the amount of discretion that the employee has in what is done and how it is accomplished. Id., § 4.4(B)(2)(a) at 181.
Suffice it to say here that the examples provided in the Restatement of Torts suggest that an employee must be "important," but perhaps need not be the employer's "top management, officers, or directors," to be acting "in a managerial capacity." Ibid.; see also 2 Ghiardi, supra, § 24.05 at 14; Restatement (Second) of Torts, § 909 at 468, Comment b and Illus. 3. Id. at ___. Punitive damages liability is not imputed for all levels of managerial authority. The "employee must be 'important,' but perhaps need not be the employer's 'top management, officers, or directors,' to be acting 'in a managerial capacity.'" Id. at 2127. As an exception to the Restatement, the Court declined to allow vicarious liability "for the discriminatory employment decisions of managerial agents where these decisions are contrary to the employer's "good faith efforts to comply with Title VII." Id. at ___.
In virtually every case, the defendant will therefore attempt to convince the jury of their general good faith efforts to prevent discrimination, even in the face of the most outrageous conduct by individual managers. This will require close scrutiny and additional litigation concerning the corporation's employment policies and practices. See EEOC v. Wal-Mart, 187 F.3d 1241 (10th Cir. 1999)(a generalized policy of equality and respect for the individual was not sufficient to demonstrate an implemented good faith policy of educating employees ); Defenbaugh v. Wal-Mart Stores, 188 F.3d 278, 286 (5th Cir. 1999)(evidence that the Defendant encouraged employees to contact higher management with grievances was insufficient to establish the Defendant's good faith in requiring its managers to obey Title VII); Lowery v. Circuit City Stores, 206 F.3d 431, 446 (4th Cir. 2000) ("employer's institution of a written policy against race discrimination . . . is not automatically a bar to the imposition of punitive damages").
Level of Managerial Authority Necessary for Vicarious Liability
The Court in Kolstad ruled that in order to impute liability for punitive damages the employee "need not be the employer's 'top management' officers, or directors. . . " Id. at 2127. "[D]etermining whether an employee meets this description [managerial capacity] requires a fact-intensive inquiry. . . ." Id.
In EEOC v. Wal-Mart, supra the Tenth Circuit considered, in light of Kolstad, "the evidentiary showing required to recover punitive damages under a vicarious liability theory against an employer accused of violating the American with Disabilities Act." Id. at 1243. In relevant part, the Defendant argued that the supervisors did not have sufficient corporate control as agents for the purpose of punitive damages, and even if they did, their conduct was contrary to company policy and hence provides no ground for vicarious liability.
In considering whether the corporate supervisors occupied managerial positions, the Court considered the "type of authority" that the Defendant gave the employees, and "the amount of discretion" they had in making the decisions they made." Id. at 1247. The supervisor testified that she had independent authority to suspend her subordinates and make hiring and firing recommendations. The store manager testified that he had hiring and firing authority. Id. Citing Ninth Circuit authority, the Court found that both the supervisor and the store manager had sufficient authority to bind the corporation for punitive damages. Id. The Court acknowledged that "authority to 'hire, fire, discipline or promote, or at least to participate in or recommend such actions,' is an indicium of supervisory or managerial capacity." Id. (emphasis added).
The recovery of punitive damages requires a strong emphasis on the nature of the harasser's or decision maker's managerial authority. When possible, employees or their counsel should put the highest level decision makers on notice about allegations of harassment or other illegal behavior.
Good Faith Compliance
In the context of punitive damages, an employer may not be liable for the discriminatory employment decisions of management-level employees where these acts are contrary to good-faith efforts on the part of the employer to comply with Title VII. See Kolstad, 119 S. Ct. at 2129. The existence of a written anti-harassment policy, however, does not constitute good faith compliance with Title VII. There must be a good faith effort to implement the anti-harassment policy.
As Kolstad makes clear, even if the defendant shows that the relevant actors were merely managerial, it can escape punitive damages only if it has undertaken sufficient "good faith efforts at Title VII compliance." Kolstad, 119 S.Ct. at 2129. Although the purpose of Title VII is served by rewarding employers who adopt anti-discrimination policies, see id ., it would be undermined if those policies were not implemented, and were allowed instead to serve only as a device to allow employers to escape punitive damages for the discriminatory activities of their managerial employees. Thus, to avail itself of a Burlington defense, an employer must show not only that it has adopted an anti-discrimination policy, but that it has implemented it in good faith. Passantino v. Johnson & Johnson, 2000 WL 276017 at *18 (9th Cir.Wash)(emphasis added). The Court in Wal-Mart, supra, also considered Kolstad's exemption from punitive damages where the employers engage in good faith efforts to comply with civil rights statutes. Id. at ___. The Court rejected the Defendant's assertion that generalized policy of equality and respect for the individual was sufficient to demonstrate "an implemented good faith policy of educating employees . . . . Id. at ___. The Court concluded:
The evidence demonstrates a broad failure on the part of Wal-Mart to educate its employees, especially its supervisors, on the requirement of the ADA, and to prevent discrimination in the work place. We therefore conclude that given the facts of this case, Wal-Mart enjoys no protection from vicarious punitive liability for the conduct of its managerial agents against [Plaintiff].Id. at ____.(2) See also Lowery v. Circuit City Stores, 206 F.3d 431, 446 (4th Cir. 2000) ("employer's institution of a written policy against race discrimination . . . is not automatically a bar to the imposition of punitive damages"); Defenbaugh v. Wal-Mart Stores, 188 F.3d 278, 286 (5th Cir. 1999) (On the issue of good faith, the Court concluded that evidence that the Defendant encouraged employees to contact higher management with grievances was insufficient to establish the Defendant's good faith in requiring its managers to obey Title VII).
Knowledge of Federal Law
"Malice" and "reckless indifference" in this context refers not to the egregiousness of the employer's conduct, but rather to the employer's knowledge that it may be acting in violation of federal law. Kolstad at 2124. This implies that must know that the discrimination or conduct violated federal law, otherwise punitive damages are not available. But if the employer did not know that the discrimination was in violation of federal law, that is the epitome of reckless indifference. It seems incomprehensible that a defendant could avoid punitive damages by testifying that it didn't know the substance of federal law. At the very least, it should be reasonably inferred that supervisors or managers with any training would know the scope of federal law.
Ratification by Failing to Discipline
The failure of the Defendant to take any disciplinary action against Pat Stewart or any other employee in connection with the racially hostile work environment constitutes a ratification of the conduct sufficient to impute liability to the corporation for the purpose of punitive damages. CfMcRorie v. Shimoda, 795 F.2d 780, 784 (9th Cir. 1986)(policy or custom may be inferred if prison officials took no steps to reprimand or discharge guards, or if they otherwise failed to admit that the guards` conduct was error); Hopkins v. Andaya, 29 F.3d 632, 632 (9th Cir. 1994)("The Ninth Circuit has joined other circuits in stating that a 'jury properly could find ... policy or custom from the failure of [a police chief] to take any remedial steps after the violations.'"); Gillette v. Delmore, 979 F.2d 1342, 1349 (9th Cir. 1992)("A section 1983 plaintiff may attempt to prove the existence of a custom or informal policy with evidence of repeated constitutional violations for which the errant municipal officials were not discharged or reprimanded."); Larez v. City of Los Angeles, 946 F.2d 630, 647 (9th Cir. 1991)("The jury properly could find such policy or custom from the failure of [Chief of Police] Gates to take any remedial steps after the violations."); Granstaff v. City of Borger, Texas, 767 F.2d 161, 171 (5th Cir. 1985) (Subsequent acceptance of this dangerous recklessness by policy makers tends to prove his pre-existing disposition and policy).
Federal Caps on Punitive Damages
Title VII applies a graduated level on caps, which applies to both compensatory and punitive damages. [cite]. Section 102 of the Civil Rights Act of 1991 creates upper limits (caps) on the combined amount of compensatory and punitive damages available to a given complaining party. The applicable limit ranges from $50,000 to $300,000 depending upon the number of employees employed by the defendant: (A) $50,000 for employers employing more than 14 and fewer than 101 employees in each of 20 or more calendar weeks in the current or preceding calendar year, (B) $100,000 for employers employing more than 100 and fewer than 201 employees, (C) $200,000 for employers employing more than 200 and fewer than 501 employees, and (D) $300,000 for employers employing more than 500 employees. Under Section 1981 - limited to racial discrimination - there are no caps. Under many state statutes, there are no caps.
A. Caps apply per claimant and not per claim.
The courts of appeals have addressed the issue have ruled that the caps are per claimant and not per claim. (3)
In Hudson v. Reno, 130 F.3d 1193, 1199-1201 (6th Cir.), held that the caps on damages in Section 102 of the Civil Rights Act of 1991 apply to each plaintiff, not to each distinct claim of that plaintiff. There, the plaintiff had asserted three claims-promotional discrimination, retaliation, and constructive discharge-in two different lawsuits that were consolidated. The court relied on what it saw as the plain language of the Act, and found no reason to resort to legislative history. The court stated:
Under the plain language of the statute, the cap on compensatory damages applies to each complaining party in an "action". An "action" is simply a "lawsuit brought in court." Black's Law Dictionary at 18 (6th ed. 1991). Similarly, the Federal Rules of Civil Procedure use the term "action" or "civil action" to describe all claims for relief alleged in a single lawsuit. See Fed.R.Civ.P. 2 and 3. Put simply, the Section 1981a caps apply to each party in an action, not to each claim, and there is nothing in the language of the statute to indicate otherwise. The face of the statute is conclusive and this is the reading of it that the Court must apply. Id. at 1200. The court also examined the legislative history, including the President's veto statement in connection with the 1990 bill but excluding Rep. Edwards' post-passage statement, and found that it did not support plaintiff's claim. Id. at 1200-01. The court also considered and rejected plaintiff's argument that affirmance would simply lead to the fragmentation of lawsuits:
Plaintiff's final argument is that if the Court adopts a per lawsuit cap, it will simply encourage plaintiffs to file multiple lawsuits in order to circumvent the caps. But, as Defendants observe, the consolidation of actions under the Federal Rules of Civil Procedure and doctrines such as res judicata prevent such multiplicity. Moreover, Defendants argue that Hudson really only has one Title VII claim here based on the same core facts, and that to split her case into three different claims for the purposes of applying the damage caps ignores this reality.
Id. at 1201.
Smith v. Chicago School Reform Board of Trustees, 165 F.3d 1142, 1149-50, 79 FEP Cases 288 (7th Cir. 1999), reversed and remanded the $2 million judgment for the plaintiff on other grounds, but clarified the issues on remand. The court rejected the plaintiff's contention that she was entitled to one $300,000 cap for each of the three schools at which she was harassed, for a total of $900,000. The court followed Hudson, stating: "The language in question well serves the end of permitting each class member to receive compensatory damages up to the single-party limit; but it also sets a single-party limit rather than a single-claim limit. The unit of accounting is the litigant, not the legal theory, which not even deconstructionists could deny." Id. at 1150 (emphases in original). The court cautioned against splitting claims among different cases in order to obtain multiple caps:
Now this approach could lead victims of discrimination to file multiple suits, asserting that in light of our holding the more suits the greater the maximum recovery. Nothing in Section 1981a(b)(3) interdicts this strategy-but the law of claim preclusion may do so. Litigants may not split into multiple packages different claims arising out of the same transaction. As a rule, the first to go to judgment also is the last. Sometimes it will be hard to determine just what falls within the bounds of a single "transaction" and therefore must be pursued in a single suit . . . but usually the boundaries are clear enough. Multiple discriminatory transactions or episodes may be pursued in multiple suits and yield cumulative recoveries; but multiple claims in a single suit (even if based on multiple transactions) may not. That's somewhat awkward, but it makes sense of the statutory language and discourages efforts to evade the ceiling (for these efforts may lead to complete failure of all suits after the first). Permitting cumulative awards in a single suit, by contrast, would induce creative pleading; the legal mind can depict even an auto accident as a violation of RICO in addition to a tort (rare is the civil pleading that does not contain four or five "claims" or "counts" that boil down to slightly different characterizations of the same events). Is each racial slur a "claim" that can support its own $300,000 award? If so, the cap is ineffectual; but if not, where shall the line be drawn? The same - transaction rule developed in the law of preclusion holds out more prospect of giving a practical answer to that question than does any other approach we can envisage. It permits persons who have been victimized multiple times (and separately injured by each discriminatory episode) to recover more than persons who have suffered only once, which is as it should be; but it also recognizes that a single discriminatory "transaction" may include many nasty events (a single slur is not even actionable under Title VII).
Id. at 1150-51.
Baty v. Willamette Industries, Inc., 172 F.3d 1232, 1245-46, 79 FEP Cases 1451 (10th Cir. 1999), affirmed the lower court's reduction of the damages award to a single $300,000 capped amount under Section 1981a, and rejected the plaintiff's argument that the cap should apply per claim rather than per plaintiff. The court held that the statute was unambiguous in tying the cap to each complaining party, and that there was therefore no need to defer to the EEOC's interpretation of the 1991 Act.
The Supreme Court stated that the following considerations are relevant to a determination of whether a punitive damages award is excessive or inadequate:(4)
(a) whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant's conduct as well as the harm that actually has occurred; (b) the degree of reprehensibility of the defendant's conduct, the duration of that conduct, the defendant's awareness, any concealment, and the existence and frequency of similar past conduct; (c) the profitability to the defendant of the wrongful conduct and the desirability of removing that profit and of having the defendant also sustain a loss; (d) the "financial position" of the defendant; (e) all the costs of litigation; (f) the imposition of criminal sanctions on the defendant for its conduct, these to be taken in mitigation; and (g) the existence of other civil awards against the defendant for the same conduct, these also to be taken in mitigation.Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 21-22, 111 S.Ct. 1032, 1045-1046, 113 L.Ed.2d 1 (1991). See also TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 113 S.Ct. 2711, 2720, 125 L.Ed.2d 366 (1993) (plurality)(the Court opined that punitive damages awards are "the product of numerous, and sometimes intangible, factors; a jury imposing a punitive damages award must make a qualitative assessment based on a host of facts and circumstances unique to the particular case before it"); BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589 (1996); Hilao v. Estate of Marcos, 103 F.3d 767, 780 (9th Cir.1996)(" The BMW Court identified three "guideposts" for measuring gross excessiveness: "the degree of reprehensibility [of defendant's conduct]; the disparity between the harm or potential harm suffered by [the plaintiff] and his punitive damages award; and the difference between this remedy and the civil penalties authorized or imposed in comparable cases").
In BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589 (1996), the Plaintiff purchased a BMW automobile and eventually determined that the car had been repainted. Plaintiff sued alleging fraud under Alabama law. He recovered $4,000 in compensatory damages and $4,000,000 in punitive damages. Id. at 565. The Alabama Supreme Court remitted the amount to $2,000,000. Id. at 567. The U.S. Supreme Court reviewed to establish the standard for constitutionally excessive awards of punitive damages.
A. Degree of reprehensibility.
"Perhaps the most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct." BMW at 1599. In sustaining the punitive damages award the Court held that the reprehensibility concerning an auto paint job in BMW could not be compared to intentional racial discrimination and the ratios failed to shock the conscious.
of 18 to 1 and 11 to 1 are not so high as to shock the judicial conscience,
especially considering that the compensatory damages awarded are relatively
low. Second, the seriousness and reprehensibility of intentional race
discrimination in the workplace far outweighs a simple complaint that a
new car was repainted before sale. In fact, there is no conceivable method
for comparing the two situations. Finally, punitive damages of any
lesser amount would have a "very meager deterrent effect" on Circuit City
and other similarly situated corporations.
Mcknight v. Circuit City Stores, 1997 WL 328638 at *7, 73 FEP Cases 841 (E.D. Va)(emphasis added).
Some defendants argue that non-discriminatory actions after filing a lawsuit are admissible to show lack of reprehensibility and that punitive damages are not necessary to induce future compliance. A strong argument exists that such evidence is inadmissible. (5)
B. Ratio of harm suffered and amount awarded.
It is explicitly clear that in considering this issue that the Supreme Court has "consistently rejected the notion that the constitutional line is marked by a simple mathematical formula, even one that compares actual and potential damages to the punitive award." BMW, 517 U.S. at 582 (emphasis original). "Indeed, low awards of compensatory damages may properly support a higher ratio than high compensatory awards...." Id. "A higher ratio may also be justified in cases in which the injury is hard to detect or the monetary value of non-economic harm might have been difficult to determine." Id. (6) "In most cases, the ratio will be within a constitutionally acceptable range, and remittitur will not be justified on this basis." Id. (emphasis added).(7) Indeed, punitive damages may be awarded where the jury awards only nominal damages. E.g., Hennessy v. Penril Datacommm Networks, Inc., 69 F.3d 1344, 1352 (7th Cir. 1995)("the jury's consideration of the issue of punitive damages was appropriate, even though it did not award compensatory damages");( Larez v. City of Los Angeles, 946 F.2d 630, 639 (9th Cir. 1991); Ninth Circuit Model Instruction 7.05.
Every civil rights case is different and needs to be considered as a whole. As stated repeatedly by the Supreme Court, there is no mathematical bright line. "Only when an award can fairly be categorized as "grossly excessive" in relation to these interests [punishment and deterrence] does it enter the zone of arbitrariness that violates the Due Process Clause." BMW, supra at 568.
C. Sanctions for comparable misconduct.
The third prong of the BMW test has nothing to do with comparing other cases where punitive damages were awarded or remitted. The third prong of the test involves comparing the amount awarded with "civil or criminal penalties that could be imposed for comparable misconduct...." BMW, supra at 583. In its analysis, the Court in BMW considered exclusively criminal penalties and/or the civil penalties created by the legislature for the wrongful conduct at issue. That analysis has no applicability to the case at bar. (8)
D. Evidence of wealth.
Where punitive damages are at issue, a defendant's financial status is relevant because "evidence of a tortfeasor's wealth is traditionally admissible as a measure of the amount of punitive damages that should be awarded." City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 270, 101 S.Ct. 2748, 2761 (1981); Fountila v. Carter, 571 F.2d 487, 492 (9th Cir. 1978)(a defendant's wealth is an "important factor" in determining punitive damages).
1. Discovery issues.
Punitive damages are intended to punish defendants for wrongful actions and deter such conduct in the future. It is self-evident that a punitive damages award, to fulfill this purpose, must be related to what the defendant can afford to pay. In order to be punitive, the award must be sufficient to deter future civil rights deprivations. Hypothetically, an award of $25,000 may be sufficient to deter an individual defendant, but would be insufficient to deter a corporate defendant with annual earnings of hundreds of millions of dollars.
It was not necessary, however, for the total wealth of the defendant to be assessed prior to an award of punitive damages against him. The award may be proper in the absence of evidence showing the likelihood that the specified amount would destroy defendant financially. El Rancho, Inc. v. First National Bank, 406 F.2d 1205, 1218-1219 (9th Cir. 1968). The burden is upon the defendant to introduce financial evidence which militates against a large punitive damages award. Nienstadt v. Wetzel, 651 P.2d 876, 885 (Ariz.App.1982)("In any event, a defendant may not complain of the absence of evidence of his wealth when he has made no effort to introduce such evidence").
Generally, Plaintiff will seek to introduce evidence of wealth. Where the defendant is a publically held corporation, obtaining relevant financial information should not be a problem. More often than not, the defendant will provide without objection copies of annual reports for the last five years. For publically held corporations, this information and much more can be obtained off the Internet.
In privately held corporations, discovery of financial information may be vigorously contested. An appropriately worded protective order should suffice to overcome the defendant's objections. Where punitive damages are claimed, it has generally been held that defendant's financial condition is a proper subject of pre-trial discovery. The overwhelming weight of authority supports this position. Luria Brothers & Co., Inc. v. Allen, 469 F.Supp. 575, 579-80 (1979); 27 A.L.R. 3rd 1375. See also Vucinich v. Paine, Webber, Jackson & Curtis, Inc., 803 F.2d 454, 462 (9th Cir.1986)(Plaintiff "is also entitled to have access to the annual reports of Paine, Webber for the purpose of assessing punitive damages"); Mihara v. Dean Witter & Co., Inc., 619 F.2d 814, 824 (9th Cir. 1980)("The annual reports (though they reflect the income of the parent corporation, Dean Witter Organization, rather than Dean Witter & Company) and Gracis' tax returns, were clearly relevant for the determination of punitive damages").
2. Punitive damages not recoverable against a municipality
In a §1983 suit, a municipality may not be held liable for punitive damages unless expressly authorized by statute. See Newport v. Fact Concerts, Inc., 453 U.S. 247, 260 n. 21, 101 S.Ct. 2748, 69 L.Ed.2d 616 (1981); Mitchell v. Dupnik, 75 F.3d 517, 527 (9th Cir.1996)(same). Informing the jury of indemnification has been rejected on the grounds that such information would provide a windfall to plaintiffs at taxpayers' expense, with little appreciable increase in deterrence. Larez v. Holcomb, 16 F.3d 1513, 1521 (9th Cir. 1994).
1. Consistent with the Ninth Circuit's decisions in Wal Mart and Ngo punitive damages should be available where Plaintiff can prove conduct motivated by bigotry. See Harris v. L & L Wings Inc., 132 F.3d 978, 982 (4th Cir. 1997)(affirming a punitive damages award based on evidence of reckless indifference to federally protected rights where the employer completely failed to address repeated complaints of pervasive sexual harassment); Luciano v. Olsten Corp., 110 F.3d 210, 220 22 (2d Cir. 1997)(affirming a punitive damages award where the employer drew up an impossible job description for a female employee designed to ensure that her performance would be unsatisfactory, and then terminated her); Merriweather v. Family Dollar Stores of Indiana, Inc., 103 F.3d 576, 582 (7th Cir. 1996) (affirming the district court's award of punitive damages where the defendant had terminated the plaintiff's employment for refusing to withdraw her discrimination claim, and gave false reasons for terminating her); Emmel v. Coca-Cola Bottling Co. of Chicago, 95 F.3d 627, 637 (7th Cir. 1996)(affirming a punitive damages award based on evidence of at least reckless indifference where the owner of the defendant corporation and other high-level executives had a stated policy against women holding positions in upper-level management); Yarborough v. Tower Oldsmobile, Inc., 789 F.2d 508, 514 (7th Cir. 1986)(affirming a punitive damages award where the defendant's "ill will against the plaintiff, or callous indifference to his federally protected rights" was evidenced by the defendant's failure to respond to complaints by the African-American plaintiff that he was assigned by a manager to an inferior work area, to do less lucrative work, based on his race).
2. The Court was unconvinced that the Defendant "made a good faith effort to educate its employees about the ADA's prohibitions." Id. In reaching this conclusion, the court acknowledge that the supervisor only became aware of the ADA prohibitions three years after the discriminatory act, and that he received no training about disability discrimination. Id. at ___. In addition, the Personnel Manager testified that she had never discussed the ADA with any of the employees under her supervision. Id. at ____.
3. The following briefing concerning the issue of caps on damages has been reprinted with permission from Richard T. Seymour and Barbara Berish Brown, Equal Employment Law Update, Spring 1999 edition (Bureau of National Affairs, Washington, D.C., 1999) copyright American Bar Association, 1999 (for copies, contact BNA at 1-800-960-1220).
4. Whether federal standards will be applied to a claim in state courts under federal law is entirely unclear. The Seventh Amendment does not govern claims in state court. Sofie v. Fibreboard, 112 Wn.2d 636, 644, 771 P.2d 711 (1989). The right to jury trial in civil proceedings is protected solely by the Washington Constitution in article 1, section 21. Id. See also Gasperini v. Center for Humanities, 518 U.S. 415 (1996).
5. See Lam v. University of Hawai'i, 40 F.3d 1551, 1567 fn 17 (9th Cir. 1994)("Given the obvious incentive in such circumstances for an employer to take corrective action in an attempt to shield itself from liability, it is clear that nondiscriminatory employer actions occurring subsequent to the filing of a discrimination complaint will rarely even be relevant as circumstantial evidence in favor of the employer"); Bouman v. Block, 940 F.2d 1211, 1227 (9th Cir. 1991)("We have recognized that '[l]ooking at the [employer's] record of performance after the courts have been asked to intervene is irrelevant to the merits of a discrimination claim and can be highly misleading'"); Gonzales v. Police Dept., City of San Jose, Cal., 901 F.2d 758, 761-62 (9th Cir. 1990)( "In a long line of Title VII cases, other circuits have recognized that the fact that improvements or advancements undertaken after lawsuits have been initiated drastically reduces the probative value of such evidence . . . Such actions in the face of litigation are equivocal in purpose, motive and permanence");Rowe v. General Motors Corp., 457 F.2d 348, 359 (5th Cir.1972)("protestations or repentance and reform timed to anticipate or blunt the force of a lawsuit offer insufficient assurance that the practices sought to be enjoined will not be repeated").
6. Cooper v. Case, 97 F.3d 914, 916 (7th Cir.1996)("the smaller the compensatory damages, the higher the ratio of punitive to compensatory damages has to be in order to fulfill the objectives of awarding punitive damages").
7. E.g., TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 113 S.Ct. 2711, 2722-23, 125 L.Ed.2d 366 (1993) (where actual damages were $19,000 and punitive damages awarded were $10 million, the punitive damages award is not grossly excessive "in light of the amount of money potentially at stake, the bad faith of petitioner, the fact that the scheme employed in this case was part of a larger pattern of fraud, trickery and deceit, and petitioner's wealth").
8. Mattschei v. United States, 600 F.2d 205, 209 (9th Cir.1979)(while courts seek to maintain some degree of uniformity of damage awards, the awards turn on the facts of each case); United States v. English, 521 F.2d 63, 72 (9th Cir.1975)("While analogies to, and comparisons with, other cases may be helpful on many types of issues, their usefulness on questions of damages is extremely limited").