Here’s a question fit for October 31: Can an employer be liable for over $100,000 in punitive damages in a Title VII action, despite a jury award to the plaintiff of zero compensatory damages and merely one dollar in nominal damages? In an opinion that should scare the daylights out of employers everywhere, the Ninth Circuit answered this question with a spine-chilling “Yes.”
This case has significant ramifications for the workplace class action world.
In State of Arizona v. ASARCO LLC, No. 11-17484 (9th Cir. Oct. 24, 2013), the Ninth Circuit considered whether the Constitution permits a six-figure punitive damage award in a sexual harassment suit where a jury found the plaintiff suffered one dollar in nominal damages. Defendant employer ASARCO, a large copper mining company, employed Plaintiff Angela Aguilar at a mill facility in Sauharita, Arizona beginning December 2005. During the eleven months she worked at the mill, Aguilar alleged she suffered repeated instances of sexual harassment by multiple successive supervisors and fellow co-workers, despite her complaints to ASARCO’s human resources department and at least one mill manager.
The District Court’s Punitive Award
After an eight day trial in the U.S. District Court for the District of Arizona, a jury found ASARCO liable on Aguilar’s sexual harassment claims, but not on her constructive discharge or retaliation claims. The jury did not find any compensable damages for Aguilar, instead awarding her one dollar in nominal damages for the sexual harassment claim and $868,750 in punitive damages. When ASARCO moved for judgment as a matter of law, the district court ordered that the punitive damages award be reduced to Title VII’s statutory maximum of $300,000, but held the damages were not constitutionally excessive.
The Ninth Circuit’s Holding On Appeal
On appeal, the Ninth Circuit evaluated the propriety of the punitive award through the lens of the U.S. Supreme Court’s three “guideposts” for determining unconstitutional excessiveness: (i) the degree of reprehensibility of the defendant’s conduct; (ii) the ratio of the punitive award to the actual harm inflicted on the plaintiff (i.e., the dollar value of compensatory and nominal damages awarded); and (iii) the existence of any civil or criminal penalties that could be imposed for comparable misconduct. BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996).
As to reprehensibility of ASARCO’s conduct, the Ninth Circuit held the minimal magnitude of harm actually inflicted on Aguilar had little bearing on whether ASARCO acted reprehensibly or with reckless disregard for Aguilar’s health and safety. Hauntingly, the Ninth Circuit declined to consider the degree of harm inflicted, and instead considered only the type of harm inflicted, holding intentional discrimination “high on the reprehensibility scale.” ASARCO, at 10. Similarly, the Ninth Circuit considered ASARCO’s disregard for risk to Aguilar sufficiently reprehensible to warrant high punitives, notwithstanding the fact that the specter of harm never actually materialized. Id.
As to the ratio of the punitive award to the actual harm inflicted, the Ninth Circuit acknowledged that the district court’s 300,000 to 1 ratio far exceeded the next highest ratio — a 125,000 to 1 award — that it could locate in its own survey of discrimination cases. ASARCO, at 14. Importantly, the Supreme Court has previously held “[punitive] damages must bear a reasonable relationship to compensatory damages,” Gore, 517 U.S. at 580, and “few awards exceeding a single-digit ratio between punitive and compensatory damages … will satisfy due process.” State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419 (2003). In light of these admonitions, the Ninth Circuit concluded a reduction of the punitive award was in order.
As to possible penalties for comparable misconduct, the Ninth Circuit held Title VII’s damages cap to be a “legislative judgment” appropriate for benchmarking the reasonableness of a punitive award, and weighing in favor of damages “at least on the order of the statutory cap.” ASARCO, at 16-17.
In a frightening turn, the Ninth Circuit then held “a 300,000 to 1 ratio raise[d] [its] judicial eyebrows,” but a 125,000 to 1 ratio — the highest prior ratio it could find — did not. The Ninth Circuit cited numerous cases striking down lesser punitive award ratios despite findings of actual harm, id. at 19-20, but nonetheless imposed the 125,000 to 1 ratio upon ASARCO, an employer that caused no actual harm.
The Ninth Circuit vacated the district court’s $300,000 punitive award, and remanded the case with the instruction that a new trial be ordered should the plaintiff reject a remittitur to $125,000. Id. at 21.
In a partial dissent, Justice Hurwitz took issue only with the majority’s decision to reduce the punitive award below Title VII’s statutory cap. Invoking Second and Fifth Circuit precedent, Justice Hurwitz explained “[a] defendant receiving a fine within the statutory limits could hardly complain of a due process violation because of the absence of notice.” Id. at 24.
ASARCO is truly scary precedent, as the Ninth Circuit has all but severed the relationship between the magnitude of actual harm suffered by a Title VII plaintiff and the defendant employer’s exposure to punitive damages.
After ASARCO, single-digit ratio analysis is no longer “a talisman in civil rights cases involving nominal damages.” ASARCO, at 23. Absent that protection, there now lurks the danger of significant punitive exposure in Title VII cases, even where no harm has occurred. Employers in the Ninth Circuit: Happy Halloween – Not!