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Sexual Harassment Punitive-Damages Award Reduced

By Domenick Carmagnola and R. Shane Kagan  11/15/2013
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Due process does not permit a $300,000 punitive-damages award when the jury awarded no compensatory damages and only $1 in nominal damages, the 9th U.S. Circuit Court of Appeal ruled.  

Angela Aguilar worked for ASARCO, a large copper mining and refining company, from Dec. 19, 2005, to Nov. 8, 2006. Aguilar alleged that other employees subjected her to various forms of sexual harassment during her tenure. Specifically, she said her supervisor was romantically interested in her and “asked her out” every day. According to Aguilar, after she complained to human resources, department staff told her there was nothing the company could do and that she should handle the situation herself.

Aguilar also alleged that when the company rented a “porta-potty” solely for her use as a female employee, co-workers vandalized it with pornographic graffiti directed at her. Despite her complaints, the graffiti remained on the toilet well after she was terminated.

In June 2006, Aguilar switched positions. She worked with an ASARCO control system’s operator who, while not her supervisor, was the person she reported to and who had some control over her day-to-day duties. This individual immediately began making inappropriate comments to Aguilar, such as warning her, “Your a-- is mine,” and telling her that he would be spending more time with her than with his “lady.” Aguilar complained. Given the operator’s reputation as a “rude bully,” at least one company manager did not feel the need to act in response to Aguilar’s complaints. 

Aguilar ultimately filed suit and tried her case in the U.S. District Court for the District of Arizona. ASARCO argued that this individual’s behavior, while awful, was not motivated by Aguilar’s sex but by his “general boorishness.” The jury did not award any compensatory damages to Aguilar and only $1 in nominal damages. However, it awarded her $868,750 in punitive damages.

ASARCO argued that the damages awarded were statutorily and unconstitutionally excessive. Accordingly, the district court reduced the punitive-damages award to $300,000, the Title VII statutory maximum for a company of ASARCO’s size. The employer then appealed that ruling.

The appeals court turned to U.S. Supreme Court precedent for guidance and examined what it described as the most important indicator of the reasonableness of a punitive-damages award: “the reprehensibility of the company’s conduct.” Evidence supported Aguilar’s allegations concerning the supervisor’s daily advances, the targeted pornographic graffiti, the operator’s verbal abuse and the company’s repeated failure to remedy these issues, the circuit court found. The jury’s findings also revealed that “ASARCO’s conduct toward Aguilar was targeted, worse than reckless, and served no possible productive purpose.”  

The court noted that even “particularly egregious acts” are subject to the requirement of “reasonableness” and that the Supreme Court previously held that few punitive-damage awards exceeding a single-digit ratio between punitive and compensatory damages would satisfy due process. On the other hand, the Supreme Court emphasized that a higher ratio is justified when “a particularly egregious act has resulted in only a small amount of damages.”

Given “ASARCO’s highly reprehensible conduct,” the Constitution did not bar the imposition of a substantial punitive award, the 9th Circuit held. However, a 300,000-to-1 ratio of punitive damages to compensatory damages “raises our judicial eyebrows,” the court stated. No appeals court in a discrimination case has ever upheld a damages ratio greater than 125,000-to-1. Accordingly, the punitive-damages award of $300,000 violated due process; thus, the district court could order a new trial or Aguilar could accept a $125,000 punitive-damages award, the appeals court ruled.

Notably, one of the circuit judges dissented in part. “Rather than reduce the punitive damages award to $125,000, I would affirm the judgment below in its entirety because the award falls within the statutory cap on damages,” which obviates due-process concerns, the circuit judge wrote.

Arizona v. ASARCO LLC, 9th Cir., No. 11-17484, (Oct. 24, 2013).

Professional Pointer: In addition to the punitive damages, the jury awarded Aguilar $350,903 in attorney fees. Employers should be aware that harassment claims under Title VII or similar state law could result in significant monetary damages, even if a claimant has suffered little or no economic harm. Thus, employers should have effective policies and procedures in place so they can immediately respond to or investigate workplace harassment complaints. Such policies will help protect a company from liability generally. At the least, they will also serve to demonstrate that a company’s responsive actions were not “particularly egregious” or “willfully” harmful, which are elements of punitive-damages claims.

Domenick Carmagnola and R. Shane Kagan are attorneys at Carmagnola & Ritardi LLC, the Worklaw Network member firm in Morristown, N.J. 

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