Ninth Circuit Finds Punitive Damages Award Doesn't Violate Employer's Due Process Right

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By Kevin McGowan

Dec. 11 — A $300,000 punitive damages award under Title VII of the 1964 Civil Rights Act when the prevailing plaintiff recovered only $1 in nominal damages on her sexual harassment claim doesn't violate the employer's due process rights, the full U.S. Court of Appeals for the Ninth Circuit unanimously ruled Dec. 10.

Affirming a district court decision against ASARCO LLC, the court said the due process analysis for evaluating damages awards set out in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), must be modified in the Title VII context. That's because Congress in the 1991 Civil Rights Act gave fair notice to employers about the conduct that warrants punitive awards and set specific damages caps based on the employer's size, it said.

Under Gore, courts consider:

• the degree of reprehensibility of the defendant's misconduct;

• the disparity between the actual or potential harm to the plaintiff and the punitive damages awarded; and

• the difference between the punitive damages award and civil penalties authorized or imposed in comparable cases.

ASARCO argued the punitive damages award violated due process primarily based on the second Gore factor, given the vast disparity between $300,000 and the $1 nominal damages award.

But the Ninth Circuit said it would make little sense to apply the Gore factor comparing the size of the punitive damages award to other damages awarded when Congress in Title VII already has set a $300,000 cap on combined compensatory and punitive damages for employers such as ASARCO that have 500 or more employees.

The court therefore affirmed the district court's award of $300,000 in punitive damages to former ASARCO employee Angela Aguilar, plus $350,903 in attorneys' fees and costs.

‘Ratio Analysis' Inapposite

In a 2-1 decision, a Ninth Circuit panel in 2013 had ruled the punitive damages award violated due process under Gore because of the 300,000-to-1 ratio between the punitive and nominal damages awards. But the full Ninth Circuit vacated the panel decision when it granted review, and it now reaches the opposite conclusion.

Gore's ratio analysis has little applicability in the Title VII context because [42 U.S.C.] § 1981a governs punitive damages,” Judge Sidney R. Thomas wrote. “When a statute narrowly describes the type of conduct subject to punitive liability, and reasonably caps that liability, it makes little sense to formalistically apply a ratio analysis devised for unrestricted state common law damages awards.”

That logic particularly applies because Title VII places “a consolidated cap” on both compensatory and punitive damages, the court said.

The district court also didn't err in finding punitive damages were justified under Title VII in Aguilar's case, the court said.

Aguilar, who formerly worked at an ASARCO copper mine and mill in Sahuarita, Ariz., alleged she was sexually harassed, retaliated against for complaining and ultimately constructively discharged in November 2006. The state of Arizona sued ASARCO on Aguilar's behalf under the Arizona Civil Rights Act in state court. Aguilar subsequently sued separately, adding claims under Title VII, and the two lawsuits were consolidated and removed to federal district court in Arizona.

Following trial, the jury found ASARCO liable under Title VII for sexual harassment but not constructive discharge. The jury awarded no compensatory damages, nominal damages of $1 and $868,750 in punitive damages. Ruling on ASARCO's post-trial motions, the district court said the punitive damages award wasn't unconstitutional under Gore but must be reduced to the $300,000 Title VII cap. The court also awarded Aguilar $350,903 in attorneys' costs and fees.

ASARCO argued on appeal that even if the company properly was held liable under Title VII, it didn't act with the malice or recklessness the statute requires for a punitive damages award.

But the Ninth Circuit noted the district court found ASARCO had no anti-discrimination policy in force when Aguilar was allegedly harassed and evidence showed ASARCO management didn't take “prompt and effective remedial action” when Aguilar complained. Instead, the district court found the evidence indicated ASARCO “treated Aguilar's claims dismissively, did nothing to investigate Aguilar's claims, or took steps that were not reasonably calculated to and did not stop the harassment.” The trial court also said ASARCO was “a serial violator” of anti-discrimination laws, as the evidence included sexually explicit graffiti targeting other employees in addition to Aguilar.

“Our review of the record confirms that the district court did not err in its assessment of the facts,” the Ninth Circuit said.

To contact the reporter on this story: Kevin McGowan in Washington at kmcgowan@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

The opinion is at http://www.bloomberglaw.com/public/document/Ariz_v_Asarco_Llc_No_1117484_2014_BL_346185_9th_Cir_Dec_10_2014_C.