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The Ninth Circuit Holds that 125,000 to 1 Is Maximum Punitive Damages Ratio Allowed by Due Process in Title VII Harassment Cases

In State of Arizona v. ASARCO LLC, the Ninth Circuit overturned a District Court ruling that permitted $300,000 in punitive damages based on a jury award of $1 in compensatory damages, ruling that the “ceiling” of due process was a ratio of 125,000 to 1.

Title 42 of the U.S. Code, section 1981A(b) provides caps for the total amount of punitive damages and compensatory damages for “future pecuniary losses, emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and other nonpecuniary losses” based on the size of the employer, as follows:

15 to 100 employees $50,000
101 to 200 employees $100,000
201 to 500 employees $200,000
501 employees or more $300,000

Employers with 15 or fewer employers are not subject to Title VII suits. 42 U.S.C. § 2000e(b) (“The term ‘employer’ means a person engaged in an industry affecting commerce who has fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year, and any agent of such a person . . . .”). California employers, however, should be aware that liability for unlawful discrimination or retaliation can arise from employment of five or more individuals (Cal. Gov’t Code § 12926(d).) Also, harassment can arise from employment of one or more employees (including independent contractors). (Cal. Gov’t Code § 12940(j)(4)(A).)

In ASARCO, the Equal Employment Opportunity Commission (EEOC) sued ASARCO, a large copper mining and refining company with a facility in Sahuarita, Arizona, about 30 miles south of Tucson. Angela Aguilar, who worked at the facility from December 19, 2005 until November 8, 2006, alleged a number of incidents of sexual harassment, including the following:

• That her supervisor asked her out “every day” and refused to train or help her when she rejected him;
• That when she did ask for help, he stood “right on top” of her and pressed up against her;
• That there was no women’s restroom in the facility, and when the company finally got a port-a-potty for her, it became filled with pornographic graffiti. A “replacement” port-a-potty was soon filled with graffiti as well.
• That when Aguilar was moved to a different position, her new supervisor warned her, “your ass is mine,” and told her that he would be spending more time with her than his “lady.”

Aguilar alleged that Human Resources did nothing to help her, and she was told to “handle it [herself].” She also complained to the mill manager, who testified that he threatened to discipline or fire the supervisor, but it does not appear that any actual discipline was taken. Aguilar finally quit.

The case went to a jury, which found ASARCO liable for sexual harassment. However, they did not find ASARCO liable for constructive discharge (i.e., “forcing” Aguilar to quit) or for retaliation. Therefore, they held that although the sexual harassment was severe or pervasive, she had not been financially damaged by it. Consequently, they awarded her one dollar in nominal damages, but $867,750 in punitive damages.

On ASARCO’s motion, the district court held that the punitive damages awarded were statutorily and unconstitutionally excessive and reduced the punitive damages to $300,000, which is the statutory maximum under Title VII for an employer with 501 or more employees.

ASARCO appealed that even $300,000 was excessive because it represented a ratio of 300,000 to 1. ASARCO argued that 10 to 1 was appropriate ratio, so that punitive damages in this case should not exceed $10, or at the outside limit 2,500 to 1 (representing an award of $2,500).
The Ninth Circuit agreed that the $300,000 award was unconstitutionally excessive and did not have a “reasonable relationship,” as required under the U.S. Supreme Court case of BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996).

However, the Ninth Circuit did not agree that 2,500 to 1 was the highest available ratio, especially given the high level of culpability implicit in the jury’s verdict. The court also applied the five “subfactors” set forth in the Supreme Court’s decision in State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419 (2003). In State Farm, the Supreme Court held that the reprehensibility of the employer’s can be assessed based on whether (1) the harm caused was physical as opposed to economic; (2) the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; (3) the target of the conduct had financial vulnerability; (4) the conduct involved repeated actions or was an isolated incident; and (5) the harm was the result of intentional malice, trickery, or deceit, or mere accident. Id. at 419.

The ASARCO court found that each of those factors favored Aguilar, and held that “[g]iven ASARCO’s highly reprehensible conduct and the presence of a comparable civil penalty in the form of the Title VII damages cap, we conclude that the Constitution does not bar the imposition of a substantial punitive award in this case.” The court found precedent for a higher ratio than 2,500 to 1 in Abner v. Kansas City S. R.R. Co., 513 F.3d 154, 164 (5th Cir. 2008), a race harassment claim in which the Fifth Circuit upheld a $125,000 punitive damages award where only $1 in nominal damages were awarded. Based on Abner, the panel noted that “no court in a discrimination case has ever upheld a ratio of punitive damages to compensatory damages greater than 125,000 to 1,” and that in fact smaller ratios have been declared unconstitutional.

“No bright line ratio has been set by the Supreme Court for cases which are “particularly egregious.” . . . Since nothing compels a particular dollar figure, we 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. . . . We think this is the highest award which maintains the required ‘reasonable relationship’ between compensatory and punitive damages. . . . This award is nonetheless on the order of the damages cap in Title VII and proportional to the reprehensibility of ASARCO’s conduct.”

The Ninth Circuit’s opinion can be found here: http://cdn.ca9.uscourts.gov/datastore/opinions/2013/10/24/11-17484.pdf. If you believe that you have been the subject of sexual harassment, or harassment based on race or ethnicity, disability, gender, sexual orientation, age, or any other protected characteristic, contact the Law Offices of Benjamin Davidson for a free consultation.

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