Reduction of Punitive Damages for Employment Discrimination: Are Courts Ignoring Our Juries? - Stacy A. Hickox

• Publication year: 2003

Reduction of Punitive Damages for

Employment Discrimination: Are

Courts Ignoring our Juries?

Stacy A. Hickox^*

Employees who have been subjected to discrimination face numerous hurdles in recovering punitive damages under the federal acts adopted to protect them. After surviving motions for summary judgment and convincing juries that they have been injured, employees must convince juries that their employers acted with malice or reckless disregard of their statutory rights to recover punitive damages. Even then, these employees face yet another obstacle to actual recovery: the courts themselves. Despite the statutory right to a jury trial, trial and appellate courts are intent on reducing jury awards for punitive damages. Since Sec. 1981a of the Civil Rights Act¹ was amended in 1991 to allow for the recovery of compensatory and punitive damages under a statutory cap, the courts have eviscerated this right in many instances to deny claimants the damages that juries determined were due.

This Article will examine the adoption of Sec. 1981a of the Civil Rights Act of 1964 and its legislative purposes, the development of case law under which punitive damages were reviewed after the passage of Sec. 1981a, and the impact of the Supreme Court's decision to allow punitive damages without requiring a showing of egregious conduct by an employer. The Article then challenges the appropriateness of applying to federal employment claims, the Supreme Court's model for reviewing excessive punitive damages in state fraud cases.² First, application ofthat model to discrimination claims may be inappropriate because such claims do not raise the same due process concerns that justified the Supreme Court's model. Second, the courts that have applied the Supreme Court's model have done so without respect for the Court's emphasis on the reprehensibility of the defendant's actions, or without respect for juries' interpretations of the facts that justified the original punitive damage awards.

I. Right to Punitive Damages Under the Employment Discrimination Statutes

Punitive damages are recoverable under Sec. 1981a "if the complaining party demonstrates that the [employer] engaged in a discriminatory practice . . . with malice or with reckless indifference to the federally protected rights of an aggrieved individual."³ Punitive damages are designed to punish and to deter discriminatory conduct by employers.⁴ The 1991 Act creates a cap on a plaintiff's combined compensatory and punitive damages based on the size of the employer.⁵ Courts have applied this cap to all compensatory and punitive damages available in one plaintiff's action, rather than to each claim.⁶ in determining whether to award punitive damages, the jury is not informed about the statutory cap on damages.⁷

Congress's primary concern when enacting the revision allowing punitive damages was to reconcile the differences in the law covering various types of discrimination. Because punitive damages had previously been available under Sec. 1981, Congress expanded the availability of punitive damages to claims arising under Title Vii ⁸ of the Civil Rights Act of 1964 ("Title VII").⁹ Thus, courts have determined the propriety of punitive damage awards under Sec. 1981 and 1981a using the same criteria.¹⁰

Some states' statutes prohibiting employment discrimination also allow for punitive damages against discriminating employers.¹¹ At least twenty-two states have statutes that either expressly provide or have been interpreted to provide punitive damages.¹² Some of these statutes have incorporated limits on punitive damages for employment discrimination similar to the caps included in Sec. 1981a.¹³

A. Legislative History

In 1991 Congress provided for additional remedies, including punitive damages under the Civil Rights Act beyond the equitable reliefthat was available previously.¹⁴ The 1991 Act's requirements for punitive damages were based in large part on the Supreme Court's decision in Smith v. Wade,¹⁵ in which the Court allowed the award of punitive damages under 42 U.S.C. Sec. 1983.¹⁶ The Court in Smith allowed for punitive damages when the defendant's conduct was shown to be "motivated by evil motive or intent, or when it involve[d] reckless or callous indifference to the federally protected rights of others."¹⁷ The Age Discrimination in Employment Act of 1967 ("ADEA")¹⁸ also provides for damages that are "punitive in nature"¹⁹ when the employer "knew or showed reckless disregard for the matter ofwhether its conduct was prohibited by the statute."²⁰

In allowing punitive damages, Congress sought to expand the remedies available to victims of discrimination.²¹ Congress allowed punitive damages to punish employers for their unlawful conduct, to reinforce public policy against discrimination, and to deter future discrimina-tion.²² This provision confirms that punitive damages are proper to punish defendants for improper and illegal behavior.²³

A cap was included on the punitive and compensatory damage awards to be implemented by the trial court. The Senate Report suggests that the cap was adopted, at least in part, to deter frivolous lawsuits and to protect employers from financial ruin, which could result from excessive damage awards.²⁴ Yet the House Report suggests that the requirement of showing malice or reckless disregard would prevent disproportionate jury awards.²⁵ Regardless of the specific intent, there is no indication that the cap was intended to act as an endpoint of a scale on which courts could recalibrate jury awards.²⁶ Rather, the House Report states that "juries are fully capable of determining whether an award of damages is appropriate and ifso, how large it must be to compensate the plaintiff adequately and to deter future repetition of the prohibited conduct."²⁷ That Report did note, however, that judges could act as an additional check by reducing punitive damage awards that are disproportionate to the defendant's discriminatory conduct or the plaintiff's resulting loss.²⁸

B. Judicial Interpretation of Section 1981a

After Sec. 1981a was adopted in 1991, courts began to address whether punitive damages awarded under that section were excessive. The court in EEOC v. AIC Security Investigations, Ltd.²⁹ upheld a $150,000 punitive damage award after recognizing that "the primary responsibility for deciding the appropriate amounts ofsuch damages rests with the jury .... [The court] will set aside a jury's award of punitive damages only if[the court is] certain that [the amount] exceeds what is necessary to serve the objectives of deterrence and punishment."³⁰ After its decision in AIC, the Seventh Circuit revisited the punitive damages issue in Hennessy v. Penril DataComm Networks, Inc.³¹ while BMW ofNorth America, Inc. v. Gore ("BMW")³² was pending before the Supreme Court.³³ Although the evidence supported punitive damages against Penril, the Seventh Circuit Court of Appeals remanded the case to the trial court to determine the amount ofdamages because the conduct was not egregious enough to warrant the maximum award available under the statutory cap.³⁴

Since its adoption, courts have disputed whether the cap imposed by the 1991 Act was intended to give courts a free reign to reduce jury awards. Some courts use the statutory cap as a maximum award to be allowed only for the most reprehensible incidents of discrimination. The Seventh Circuit determined that the maximum award of $100,000 in punitive damages for small employers should be reserved for egregious cases.³⁵ This court compared the allowance of punitive damages to the Federal Sentencing Guidelines, which provide a range of sentences for a crime, with the most stringent sentences reserved for the most egregious offenses.³⁶ Thus, the court in Hennessy ordered the trial court to reduce the punitive damage award, even though the evidence of discrimination was sufficient to support an award of punitive damages because plaintiffalleged sexual harassment based on her dismissal soon after maternity leave, rather than a "quid pro quo" type of harass-ment.³⁷

Prior to the Supreme Court's decision in BMW, trial courts tended to adopt the same standard used to review punitive damage awards in other contexts. In Dickerson v. HBO & Co.,³⁸ the court looked at whether the award was "beyond all reason" or was "so great as to shock the conscience" and whether the verdict was "so inordinately large as obviously to exceed the maximum limit of a reasonable range within which the jury may properly operate."³⁹ With respect to punitive damages in particular, the court looked to the standard set by the District of Columbia Circuit Court in a Sec. 1983 assault and false arrest claim, requiring that punitive damages not be "grossly out ofproportion to the severity ofthe offense and have some understandable relationship to compensatory damages."⁴⁰ Similarly, the district court in Sassaman v. Heart City Toyota⁴¹ looked at whether the jury award in a sex discrimination claim was "monstrously excessive, born of passion and prejudice, or not rationally connected to the evidence."⁴²

In AIC the Seventh Circuit briefly compared the punitive damages awarded to past awards in breach of contract and libel claims.⁴³ Similarly, the court in Sassaman looked to punitive damage awards in similar cases to determine whether that award was "monstrously excessive."⁴⁴ Because the $20,000 award was less than two other awards approved by the Seventh Circuit for racial discrimination claims under Sec. 1981, the court concluded that the award was not excessive.⁴⁵ Similarly, the court in Dickerson compared the $300,000 award for the retaliation claim to the $75,000 award in another race and sex discrimination claim in that district, and compared it to the back pay award of $96,452 and $100,000 in compensatory damages; the court then reduced the $300,000 award to $100,000.⁴⁶ Both the court in Dickerson and the court in Shepherd v. American...