Thursday, January 8, 2015

Circuit examines million dollar verdict in racial harassment case

Damages awards are still a mystery to most of us. The jury gets almost no guidance on how much money (if any) to give the plaintiff, and lawyers and the courts spend the next two years scrutinizing what the jury did. In this case, the jury awarded the racial harassment plaintiff $1.32 million in pain and suffering and $24 million in punitive damages, which the trial court reduced to $5 million. The Court of Appeals sustains the $1.32 million but says the punitives were too high.

The case is Turley v. ISG Lackawanna, Inc., decided on December 17. The Court of Appeals (Sack, Katzmann and Rakoff [D.J.]) uses this case as a vehicle to clarify when it will reduce large damages awards.

We are required to police closely the size of awards rendered in the trial courts within our Circuit. In recent opinions, we have addressed at length the individual and social harms associated with excessive awards of  compensatory and punitive damages, many of which are relevant to this case. A juryʹs assessment of damages based on intangibles such as emotional harm or the need for punishment injects an additional element of the immeasurable and subjective into the proceedings, which trial and appellate courts are expected to oversee with care. Excessive punitive damages also implicate a defendantʹs constitutional due process rights insofar as they impose a substantial punishment without the safeguards, constitutional or otherwise, that attend criminal proceedings. Pursuant to these concerns, we scrutinize awards for fairness, consistency, proportionality, and, in the case of punitive damages, constitutionality.
On compensatory damages, while the jury has wide discretion to set an amount and the court will not reduce it unless is "shocks the judicial conscience," there are limits. A large jury award cannot be sustained lightly, but the Court of Appeals says the $1.32 million award for pain and suffering will stand. "The case before us appears to be unique, combining years of grotesque psychological abuse leading to a marked decline in Turleyʹs mental health and well‐being. He was hospitalized and diagnosed with, inter alia, post‐traumatic stress disorder, depression, and panic disorder as a result of the harassment that he suffered." In a 2012 student harassment case (that I litigated), the Court notes, the plaintiff won $1 million in pain and suffering without any medical treatment. The Court also cites other employment harassment cases with large verdicts that involved comparable or less severe conduct. "Under the exceptional and egregious facts of this case, we conclude that the $1.32 million compensatory award was fair and reasonable. Recognizing also the deference that we owe to the district court, which was 'closer to the evidence, and [] therefore in a better position to determine whether a particular award is excessive,' we will not disturb that award."

The punitive damages are another story. The Second Circuit will more closely scrutinize the punitive damages award than it does compensatory damages to satisfy due process principles and "to ensure that such damages are fair, reasonable, predictable and proportionate, to avoid extensive and burdensome social costs, and to reflect the fact that punitive awards are imposed without the protections of criminal trials."

While the harassment in this case was outrageous, that does not end the analysis. The $5 million punitive damages award gives us a 4:1 punitives/compensatory ratio. This is close to the line, the Second Circuit says. "Where the compensatory award is particularly high, as the one in this case assuredly was, a four‐to‐one ratio of punishment to compensation, in our view, serves neither predictability nor proportionality. As noted, this is particularly so where the underlying compensation is, as it is in this case, for intangible—and therefore immeasurable—emotional damages." The $5 million also seems to high in light of comparable cases. "It appears that punitive awards for workplace discrimination rarely exceed $1.5 million." The Court concludes that "a roughly 2:1 ratio of punitive damages to what, by its nature, is necessarily a largely arbitrary compensatory award, constitutes the maximum allowable in these circumstances."

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