Ct Slashes Jury’s Punitive Award

A decision by the U.S. Court of Appeals for the Ninth Circuit  this week raises questions about  the way courts calculate damage awards in discrimination cases.

A three-judge panel of the San Francisco-based court reduced what started out as a $868,750 jury award for punitive damages in a sexual harassment case to $125,000.

The defendant is the American Smelting and Refining Company (ASARCO),  a Sahuarita, Arizona company owned by Grupo Mexico Corp. that is the third largest copper producer in the US, with estimated earnings in excess of $800 million.

The appeals court agreed that ASARCO employee Angela Aguilar was the victim of “particularly egregious” sexual harassment while working for ASARCO from December 19, 2005 to November 8, 2006.  However, the court said it was required to lower the award because the ratio of punitive damages was excessive compared to the $1 the jury awarded Aguilar for compensatory damages .

Punitive damages are supposed to deter the defendant from engaging in future similar conduct. In other words, the punitive damages should be significant enough to get an employer’s attention so that it will change the illegal practices that led to the damages in the first place.   Will a $125,000 punitive damage award compel a billion dollar corporation to eliminate serious  sexual harassment at the Arizona plant? Not likely.

Statutory cap

The jury’s original punitive damage award was actually hit with a double whammy.

The lower court immediately reduced the $868,750 punitive damage assessment to $300,000 pursuant to a statutory cap placed on such awards by the U.S. Congress.  However, the  lower court refused to further reduce the punitive damage award because of the egregious nature of the harassment suffered by Aguilar.  ASARCO had argued the award should be reduced to $2,500.

The appeals court agreed that ASARCO’s conduct supported  a “very large punitive award” but said the U.S. Supreme Court ruled in 1996 that punitive damages must bear a “reasonable relationship”  to compensatory damages under the due process clause of the U.S. Constitution.  If left to stand, the appeals court said, the ratio of $300,000 in punitive damages to $1 in compensatory damages would be among the highest (if not the highest) ratio since 1996.

“The Supreme Court has repeatedly emphasized the importance of the ratio inquiry and we cannot set it aside … [W]e conclude that the highest punitive award supportable under due process is $125,000, in accord with the highest ratio we could locate among discrimination cases.”

One member of the three-judge appellate panel, Judge Andrew D. Hurwitz, issued a partial concurrence/dissent, arguing the court should affirm the earlier $300,000 judgment because it fell within the statutory cap on damages in Title VII cases.

The Harassment

Here’s a very abbreviated account of what Aguilar experienced while working  at ASARCO:

• Her supervisor, a very large man, asked her out every day and refused to train her or help her when she rejected him. When she asked for help, he would press up against her. She was afraid he might rape her. ASARCO’s HR Department and said there was nothing it could do.  She transferred to another unit.

• There was no functioning women’s restroom in the building so the company rented a “porta-potty” for Aguilar’s use.  It was vandalized repeatedly with pornographic graffiti directed at her. She reported it to HR and the mill supervisor in 2006 but photos showed that visible pornographic graffiti remained on the toilet in 2007.

• Another supervisor told Aguilar “your ass is mine” and often gave her conflicting orders, snapping his fingers at her, telling her to watch herself, yelling at her and threatening her with termination.  Needless to say, management did nothing when Aguilar complained. ASARCO maintained in the litigation that the supervisor’s behavior was not motivated by sex but instead by his general boorishness toward everyone.

Aguilar finally quit.

The case, State of Arizona v. ASARCO, was initially filed by Arizona on behalf of Aguilar and the state. Aguilar subsequently filed her own lawsuit.