Friday, January 4, 2008

Federal court upholds punitive verdict with no compensatory damages

It has long been the law in Ohio that a jury cannot award punitive damages without also making a corresponding award of actual, compensatory damages. Further, since the United States Supreme Court decided State Farm Mut. Automobile Ins. Co. v. Campbell several years ago, it has also been the law that for a punitive verdict to satisfy due process, there cannot be an excessive disparity between the actual harm suffered by the plaintiff and the punitive damages award. The Supreme Court, albeit in dicta, suggested that "few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process."

A case earlier this week out of the 5th Federal Circuit, however, casts serious doubt on both of these long-held principles. In Abner v. The Kansas City So. RR, a racial harassment case, the court of appeals upheld a $125,000 punitive damage jury verdict with a mere grant of $1 in nominal damages by the court. Abner involved allegations of racial graffiti, a noose hanging outside a door, racially derogatory comments, and a company that failed to correct this improper behavior.

In reaching its conclusion, the court relied heavily on the statutory damage caps put in place by the Civil Rights Act of 1991. The court found that under the plain language of Title VII and Section 1981, an award of punitive damages need not be accompanied by any compensatory damages. The statutory damages cap takes care of any potential runaway jury verdicts. Also because of the statutory cap, the court was unconcerned with the 125,000-1 ratio between the punitive and nominal damages. If the plaintiff was not harmed by the alleged harassing conduct, how could he have been sufficiently subjectively offended by the conduct to sustain the harassment claim in the first place? The gap in common sense in allowing this punitive verdict to stand for an uninjured plaintiff is astounding. Civil lawsuits are supposed to compensate for harm suffered, not to punish for the sake of punishment. If there is no harm to remedy, then the law has no role in doling out punishment.

Let me also point out that the conduct that led to a $125,000 verdict in Abner is eerily similar to the same conduct over which the EEOC settled with Lockheed Martin for $2.5 million earlier this week. I can't wait until the next time I'm asked to evaluate a racial harassment case and have to provide a range of $125,000 and $2.5 million as the potential exposure. Does this disparity make any sense at all?

Hat tip to John Phillips at The Word on Employment Law and Ross Runkel's Employment Law Blog.