On February 28, 2012, the US Court of Appeals for the Eighth Circuit issued its decision in Sanders v. Lee County School District, reversing and remanding the district court's decision granting, in part, defendants' motion to set aside the jury's verdicts in a race discrimination case. The key litigated issues were whether the district court properly vacated the jury's verdicts:

Plaintiff Sharon Sanders was one of only two Caucasian employees holding administrative positions in the Lee County School District, in which employees were primarily African American. In 2007, the members of the district's predominantly African American Board of Education demoted both Caucasian employees. Sanders was demoted from finance coordinator to food services assistant.

Shortly after the demotion, Sanders went on sick leave for nearly a year. During that time, she repeatedly requested the Board to send her a new employment contract and a job description for the new position. The Board informed Sanders that an employment contract would be waiting for her when she returned to work, but it did not send her an actual copy of the contract or a job description. Sanders was cleared to return to work, but she resigned her employment and subsequently filed suit.

Sanders's lawsuit against the Board and four of its individual members alleged:

The hostile work environment claim was dismissed at summary judgment. The jury found in favor of Sanders on her race discrimination and constructive discharge claims and awarded Sanders:

The Board and individual defendants filed a motion under Rule 50 of the Federal Rules of Civil Procedure to set aside all of the jury's verdicts. The district court granted the motion on the constructive discharge and punitive damage awards, but it preserved the jury's verdict on race discrimination and compensatory damages. Sanders appealed to the Eighth Circuit.

The Eighth Circuit reversed and remanded the district court's decision, finding that, among other things:

In reviewing the district court's decision on the punitive damages award, the Eighth Circuit emphasized the standard set forth in Kolstad v. American Dental Association, which requires an employee to show not only that the employer acted with "malice or reckless indifference" to an individual's federally protected rights but also that the employer had "knowledge it may be acting in violation of federal law" (527 U.S. 526, 535 (1999)). The Eighth Circuit adopted the US Court of Appeals for the Third Circuit's interpretation of this requirement, holding that because it is "common knowledge that race discrimination violates federal law," a court may presume the employer's knowledge unless that employer affirmatively proves ignorance of the law (Alexander v. Riga, 208 F.3d 419, 432 (3d Cir. 2000)).

The Eighth Circuit applied this standard and found that, while the evidence presented in the jury trial could show that the Board members acted "with callous indifference" to whether their decisions violated federal discrimination law, the jury was not instructed to consider whether the Board members affirmatively proved ignorance of federal law. Because of this, the Eighth Circuit remanded the issue to the district court to allow Sanders to prove her claim for punitive damages.

The Eighth Circuit also reversed the district court's decision on the constructive discharge claim. In doing so, the Eighth Circuit acknowledged that it was a close case, but in giving the required deference to the jury's verdict, it could not say there were no probative facts to support the verdict.

Employers should be aware of the trend towards a heightened standard for avoiding punitive damages in a Title VII case. To avoid punitive damages, a defendant employer must affirmatively prove that it was ignorant of federal discrimination law when making employment decisions, which may be difficult to do.