$300,000 Punitive Damages Award in Title VII Case Awarding $1 Nominal Damages Was Not Unconstitutional: Ninth Circuit | Practical Law

$300,000 Punitive Damages Award in Title VII Case Awarding $1 Nominal Damages Was Not Unconstitutional: Ninth Circuit | Practical Law

In Arizona v. ASARCO LLC, a Title VII sexual harassment case, the United States Court of Appeals for the Ninth Circuit, ruling en banc, overruled a prior panel’s decision and held that a $300,000 punitive damages verdict where only $1 in nominal damages was awarded was not unconstitutionally excessive. The Ninth Circuit also found that the three guideposts articulated by the US Supreme Court in BMW of North America, Inc. v. Gore, which assessed the constitutionality of punitive damages awards, were inapplicable to the Title VII context.

$300,000 Punitive Damages Award in Title VII Case Awarding $1 Nominal Damages Was Not Unconstitutional: Ninth Circuit

by Practical Law Labor & Employment
Published on 17 Dec 2014 • USA (National/Federal)
In Arizona v. ASARCO LLC, a Title VII sexual harassment case, the United States Court of Appeals for the Ninth Circuit, ruling en banc, overruled a prior panel’s decision and held that a $300,000 punitive damages verdict where only $1 in nominal damages was awarded was not unconstitutionally excessive. The Ninth Circuit also found that the three guideposts articulated by the US Supreme Court in BMW of North America, Inc. v. Gore, which assessed the constitutionality of punitive damages awards, were inapplicable to the Title VII context.
On December 10, 2014, the United States Court of Appeals for the Ninth Circuit (Ninth Circuit) in Arizona v. ASARCO LLC (ASARCO), ruling en banc, overruled a prior panel's decision. The Ninth Circuit held that the three guideposts articulated by the US Supreme Court in BMW of North America, Inc. v. Gore (Gore), which assess the constitutionality of punitive damages awards, need not be applied when determining punitive damages under Title VII, as Title VII is a comprehensive statutory scheme that caps punitive damages and captures the purpose of Gore's three guideposts. (No. 11-17484, (9th Cir. Dec. 10, 2014)(en banc) .)

Background

Angela Aguilar alleged that during her employment at a mining company operated by ASARCO, she was subjected to:
  • Sexual harassment.
  • Retaliation.
  • Intentional infliction of emotional distress.
  • Constructive discharge from her employment.
The state of Arizona filed suit in state court against ASARCO on behalf of Aguilar under the Arizona Civil Rights Act alleging harassment, disparate treatment and retaliation. Subsequently, Aguilar filed her own law suit against ASARCO alleging violations of Title VII. The proceedings were consolidated and removed to the United States District Court for the District of Arizona.
Aguilar and the state of Arizona only won on the sexual harassment claim against ASARCO. The jury awarded no compensatory damages, but awarded nominal damages in the amount of $1 and punitive damages in the amount of $868,750.
The district court:
  • Denied ASARCO's motion for judgment as a matter of law, which argued, in part, that the punitive damages award was unconstitutionally excessive.
  • Rejected ASARCO's new trial motion.
  • Capped punitive damages at $300,000 pursuant to Section 1981a(b)(3)(D).
  • Granted Aguilar's request for injunctive relief, directing ASARCO to update its harassment policies.
  • Granted Aguilar's motion for attorneys' fees and costs, totaling $350,902.75.
ASARCO appealed, arguing that the district court erred by:
  • Refusing to reduce the punitive damages award.
  • Admitting evidence of other employees who witnessed pornographic graffiti.
  • Awarding attorneys' fees.
A three-judge panel for the Ninth Circuit affirmed the district court's decision about the evidence of other employees and the attorneys' fees, but vacated the $300,000 punitive damages award. Applying the three factors found in Gore, the panel majority found that the ratio between the punitive and nominal damages awards was excessive.
The Ninth Circuit agreed to rehear the case.

Outcome

On rehearing en banc, the Ninth Circuit:
  • Unanimously upheld the original $300,000 judgment.
  • Following a review of decisions from the Ninth and other circuit courts, held that a separate due process analysis was unnecessary in the Title VII context as Congress already decided the maximum allowable punitive damages award.
On rehearing, ASARCO argued that:
In Gore, the Supreme Court applied three guideposts, later summarized in State Farm Mutual Automobile Insurance Co. v. Campbell, to determine the constitutionality of a state common law punitive damages award:
  • The degree of reprehensibility of the defendant's misconduct.
  • The disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award.
  • The difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.
(517 U.S. 559, 575 (1996).)
In rejecting ASARCO's arguments, the Ninth Circuit noted that:
  • The district court did not err in granting $300,000 in punitive damages because:
    • although ASARCO had an anti-discrimination policy, management "did not provide prompt and effective remedial action" upon learning of Aguilar's complaints, but did little to investigate her claims or end the harassment;
    • failed to respond to instances of harassment against Aguilar; and
    • the evidence showed that ASARCO was "a serial violator of anti-discrimination laws" and the punitive award would discourage future misconduct by ASARCO.
  • Where a punitive damages award is granted pursuant to a statutory scheme like Title VII, application of the Gore guideposts are unnecessary because:
    • Congress has already established the award range; and
    • the court "need not search outside the statutory scheme Congress enacted for legislative guidance in other context."
  • Awards under Section 1981a comport with due process because the statute:
    • clearly delineates the type of conduct a defendant must have to be found liable for punitive damages;
    • sets a cap on certain types of compensatory and punitive damages;
    • puts the defendants on notice about what conduct makes them liable for damages and the extent of their liability; and
    • reduces any instance of random awards by articulating the degree of culpability a defendant must have to be subject to liability and caps damages awards at $300,000.
  • Title VII's statutory scheme already polices the interest enforced by Gore's three guideposts by:
    • imposing an intent requirement that ensures jurors understand that only certain conduct should be penalized;
    • providing the conduct that violates the statute; and
    • providing a cap on both compensatory and punitive damages.
  • Here, the nominal damages were capped, therefore where compensatory and nominal damages are subject to a cap, the three guideposts in Gore are inapplicable because the actual harm is not measured.
The Ninth Circuit also affirmed the district court's admission of supporting evidence and its award of attorneys' fees.

Practical Implications

In light of ASARCO, employers need to be aware that when sued under a comprehensive statutory scheme that includes a provision imposing a cap on punitive damages, like Title VII, the courts may not apply the three guideposts articulated in Gore to assess the constitutionality of punitive damages awards, especially if Congress has spoken explicitly on the appropriate scope of punitive damages.
Moreover, to mitigate the impact of punitive liability in Title VII cases, employers should consider creating or updating their anti-discrimination policies and ensure there is a systematic process for reporting, documenting and investigating complaints of discrimination.