Employment Law Alert: Ninth Circuit Limits Punitive Damages in Sexual Harassment Lawsuit

In State of Arizona v. ASARCO (Aguilar), No. 11-17484, published October 24, 2013 (Acuna), the Ninth Circuit Court of Appeals reversed an award of punitive damages in a sexual harassment lawsuit filed under Title VII.

Plaintiff Aguilar worked for ASARCO and alleged multiple examples of persistent sexual harassment, which included unlawful statements and conduct by male co-workers. After an eight day trial, the jury found ASARCO liable for sexual harassment. However, it did not find in favor of Aguilar on her constructive discharge and retaliation claims. The jury awarded one dollar in nominal damages for the sexual harassment claim and $868,750 in punitive damages (subsequently reduced to $300,000 by the trial court).

On appeal, ASARCO argued the award of punitive damages was excessive given the amount of compensatory damages awarded. Applying the multi-factor “Gore Test,” the court analyzed (1) the degree of reprehensibility of the defendant’s conduct; (2) the ratio to the actual harm inflicted on the plaintiff; and (3) civil or criminal penalties that could be imposed for comparable conduct. After concluding that the conduct alleged was sufficiently reprehensible based on the jury’s finding of “malice” or “reckless indifference” toward plaintiff, the court addressed the issue of whether a punitive damage ratio of 300,000 to one is constitutionally permissible. Analyzing case law on this issue, the court noted the highest ratio expressly authorized by case law was 125,000 to one. After determining that the $300,000 statutory cap on Title VII damages could be used to assess the constitutionality of a punitive damage award, it concluded the highest punitive damage award supportable under due process based on the jury’s findings was $125,000. Thus, the court remanded the action, indicating the trial judge could order a new trial if the plaintiff would not accept $125,000 on remittitur.

While the Ninth Circuit did reduce the amount of punitive damages imposed by the trial court, the decision expressly approves a punitive damage ratio of 125,000 to one as an acceptable restraint in Title VII cases where the actual damages are nominal. Thus, even where a plaintiff’s claim for compensatory damages is nominal, employers remain exposed to significant punitive damage awards.

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October 28, 2013