PUNITIVE DAMAGES IN EMPLOYMENT CASES

WHAT THE JURY GIVETH, THE COURT MAY TAKETH AWAY

HARVEY A. SCHWARTZ, ESQ.

Rodgers, Powers & Schwartz

18 Tremont Street

Boston, Massachusetts 02108

(617) 742-7010

In 1763 agents of King George III arrested a fellow named Huckle, a journeyman printer, and detained him for six hours on a charge of publishing seditious statements about the king. Although the defendants treated the plaintiff rather well, feeding him "beef steakes and beer, so that he suffered very little or no damages," he sued the king's agents and the jury chose to punish the defendant by awarding Mr. Huckle 300 Pounds, an enormous sum almost 300 times the plaintiff's weekly wage. The defendant's lawyer requested a new trial, arguing that the jury's award was excessive. Plaintiff's counsel, on the other hand, argued that "in cases of tort ... the court will never interpose in setting aside verdicts for excessive damages." While the court denied the motion for new trial, the Chief Justice explicitly rejected plaintiff's absolute rule against review of punitive damages amounts. Instead, he noted that when the damages are "outrageous" and "all mankind at first blush must think so," a court may grant a new trial "for excessive damages." Exercising his judgment on behalf of "all mankind," the Chief Justice concluded that "[u]pon the whole I am of opinion the damages are not excessive." Huckle v. Money, 2 Wils. 205, 95 Eng.Rep. 768 (C.P.1763)

This rather ethereal standard for sustaining punitive damages is pretty much the state of the law today.

When are punitive damages available? Punitive damages are available for some forms of employment discrimination but not for others.

Title VII and Americans With Disabilities Act -

The Civil Rights Act of 1991 created limits on the amount of combined compensatory and punitive damages that a victim may recover for intentional discrimination under Title VII, the ADA, and §501 of the Rehabilitation Act. These limits vary with the size of the employer as follows:

• •$50,000 for employers with at least 15 but fewer than 101 employees in each of 20 or more calendar weeks in the current or preceding calendar year; 42 U.S.C. § 1981a(b)(3)(A).
• •$100,000 for employers with at least 101 but fewer than 201 employees during the relevant periods; 42 U.S.C. § 1981a(b)(3)(B).
• •$200,000 for employers with at least 201 but fewer than 501 employees during the relevant periods; 42 U.S.C. § 1981a(b)(3)(C) and
• •$300,000 for employers with 501 or more employees during the relevant periods. 42 UCS § 1981a(b)(3)(D).

Age Discrimination in Employment Act -

Courts in virtually every circuit have rejected punitive damages as a remedy under the ADEA, in light of the provision for statutory liquidated damages for "willful violations" of the act. A "willful" violation of the ADEA which justifies the grant of liquidated damages occurs when an employer showed a "reckless disregard" for whether its conduct was prohibited by the ADEA or knew that its conduct was unlawful. Hazen Paper Co. v Biggins, 507 US 604, 123 L Ed 2d 338, 113 S Ct 1701 (1993) This standard requires less than that the employer knew it was violating the Act and more than that the employer must only have known of the potential applicability of the ADEA. Generally, an employer who takes an action against an employee because of his or her age will have committed a willful violation if he or she knows that the ADEA applies to the situation. The question of willfulness is a question for the jury. Day v Liberty Nat'l Life Ins. Co., 122 F3d 1012 (11^thCir. 1997).

"Willfulness" has proven to be a slippery standard. In Hazen Paper, 507 U.S. at 614, the Supreme Court professed its surprise that the lower courts "continue to be confused about the meaning of the term "willful" in § 7(b) of the ADEA." The Court said "willful" means what it means elsewhere in the law: something more than negligent but not necessarily intentional, what the Court defined as "knowledge or reckless disregard." For example, the Court said, if an employer incorrectly but in good faith and nonrecklessly believes that the statute permits a particular age-based decision, then liquidated damages should not be imposed. On the other hand, if the plaintiff can show that "the employer either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute . . . the employee need not additionally demonstrate that the employer's conduct was outrageous, or provide direct evidence of the employer's motivation, or prove that age was the predominant, rather than a determinative, factor in the employment decision" in order to obtain liquidated damages. Id., 507 U.S. at 615.

Equal Pay Act -

Punitive damages are not recoverable under the Equal Pay Act, because the enforcement section of the EPA authorizes only the damages specifically set forth in the law, which are unpaid wages and liquidated damages. Hybki v Alexander & Alexander, Inc., 536 F Supp 483 (W.D. Mo. 1982). However, the EPA provision making legal as well as equitable relief available to victims of retaliation (29 UCS §216(b)) permits punitive damage awards.Soto v Adams Elevator Equipment Co., 941 F2d 543 (7^th Cir. 1991).

State statutes --

The cap on damages under Title VII imposed by Congress does not apply to the recovery of damages under state human rights statutes. A plaintiff who has recovered the full amount of damages available under Title VII is not barred from recovering additional amounts under a state statute.

Federal civil rights statutes, 42 §§ 1981 and 1983 -

Punitive damages are available under the federal civil rights statutes, 42 §§ 1981 and 1983, limited only by due process notions. The Civil Rights Act of 1991, however, prevents double recovery in cases brought under Title VII and §1981 by providing that punitive damages may not be recovered under Title VII if such damages are available to the claimant under §1981. 42 UCS § 1981a(a)(1).

Standards for awarding punitive damages

Courts have applied the same standards for awarding punitive damages under Title VII as under §§1981 and 1983: whether the defendant acted with malice, willfulness, or reckless disregard for the plaintiff's federally protected rights. (As noted, the standard for liquidated dames under the Age Discrimination in Employment Act, whether the conduct was "willful," differs from this punitive damages standard in that malice, arguably, is not a factor, although it would be difficult to conceive of a situation where a jury could find malice without finding willfulness). This standard was established in Smith v Wade, 461 U.S. 30 (1983), the source of present punitive damages standards for civil rights violations. Ironically, the Court there performed its frequent common law historical analysis to discover what was in the minds of the Congressmen who wrote the 1871 Civil Rights Act, which became 42 U.S.C. § 1983, in regard to punitive damages. The irony is that, of course, the inferred intent of the 1871 Congress has very little to do with the intent of the 1964 Congress that wrote Title VII or the 1991 Congress that amended it to allow punitive damages, but by the rules of legal evolution that 1871 tort standard has metamorphasized into the present punitive damages standard applied across the board (excepting age discrimination) to most forms of federal discrimination legislation. Because of that it is important to examine what the Supreme Court found to be the standard for awarding punitive damages.

The debate was between whether punitive damages could be awarded only when the bad acts were committed intentionally or whether a lesser standard of recklessness was sufficient to award punitives. In Smith v. Wade, written by Justice Brennan, the Court accepted the less strict standard, which is incorporated in the Restatement (Second) of Torts § 908(2), as follows:

"Punitive damages may be awarded for conduct that is outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others.

461 U.S. at 46-47 (emphasis added by the Court). The Court added that "[m]ost cases under state common law, although varying in their precise terminology, have adopted more or less the same rule, recognizing that punitive damages in tort cases may be awarded not only for actual intent to injure or evil motive, but also for recklessness, serious indifference to or disregard for the rights of others, or even gross negligence." 461 U.S. at 47-48.

Factors to be considered in determining the appropriate amount of a punitive damage award under 42 U.S.C. §1983 include:

• the relationship between punitive damages and the harm caused or likely to be caused by the conduct ; the size of the award should be reasonably related to the degree of harm;

(2) the reprehensibility of the defendant's conduct, as evident in its duration, the defendant's awareness of hazards caused or likely to be caused by the conduct, the defendant's concealment of the hazards, and the existence and frequency of similar past conduct;

(3) profit to the defendant resulting from the wrongful conduct; punitive damages should exceed the profit;

(4) the defendant's financial position; the award should have a large enough impact on the defendant's monetary resources to deter future misconduct without economically destroying the defendants;

(5) the costs of the litigation; the costs of the litigation should be included in the award to encourage plaintiffs to bring wrongdoers to trial;

(6) criminal sanctions imposed on the defendant; sanctions already imposed for the conduct complained of should be taken into account in mitigation of the punitive damages award; and

(7) other civil actions against the defendant; actions based on the same conduct should be taken into account in mitigation of the award.

Keenan v Philadelphia , 55 BNA FEP Cas 932, E.D. Pa. 1991). affd in part and revd in part, vacated, in part (3^rd Cir. 1991).

Similarly, the E.E.O.C. guidelines for determining whether punitive damages are appropriate - meaning, whether the discriminatory act was committed with malice of reckless disregard for federally protected rights - rely heavily on the Restatement (Second) of Torts, § 908(2) and include:

• •the nature and egregiousness of the misconduct--whether it is shocking or offends the conscience;

• •the nature, extent, and severity of the resulting harm;
• •the duration of the discriminatory conduct since "evidence that the respondent tolerated or condoned the discriminatory conduct over a period of time could constitute malice and/or reckless indifference; "
• •the existence and frequency of past discriminatory conduct by the respondent;
• •evidence that the respondent planned and/or attempted to conceal or cover-up the discriminatory conduct;
• •the respondent's actions after receiving notice of its employees' discriminatory conduct, since "an employer who has notice of discriminatory conduct and fails to take action could incur punitive damages"; and
• •"proof of threats or deliberate retaliatory action against complaining parties, for complaints to management or filing a charge normally will constitute malice."

E.E.O.C. Enforcement Guidance: Compensatory and Punitive Damages Available under § 102 of the Civil Rights Act of 1991. No. 915.002, 7/14/92 (available on the Internet at http://www.access.gpo.gov/eeoc/docs/damages.txt).

Is additional evidence needed to support a punitive damages award?

In many cases evidence that suffices to establish an intentional violation also may suffice to permit the jury to award punitive damages provided the jury, in its discretionary moral judgment, finds that the conduct merits a punitive award. Kolstad v American Dental Ass'n , 1997 WL 125741 (D.C. Cir. 1997). Therefore, no additional evidence of evil motive or intent or reckless or callous indifference for the plaintiff's federally protected rights is necessary. Barbour v Merrill 48 F3d 1270, (D.C. Cir. 1995).

In Smith v. Wade, 461 U.S. at 53-54, the Supreme Court acknowledged that in some sorts of cases the threshold for liability alone is sufficiently high to also serve as the threshold for punitive damages.

There has never been any general common law rule that the threshold for punitive damages must always be higher than that for compensatory liability. On the contrary, both the First and Second Restatements of Torts have pointed out that, in torts like malicious prosecution that require a particular antisocial state of mind, the improper motive of the tortfeasor is both a necessary element in the cause of action and a reason for awarding punitive damages. Accordingly, in situations where the standard for compensatory liability is as high as or higher than the usual threshold for punitive damages, most courts will permit awards of punitive damages without requiring any extra showing. Several courts have so held expressly. Many other courts, not directly addressing the congruence of compensatory and punitive thresholds, have held that punitive damages are available on the same showing of fault as is required by the underlying tort in, for example, intentional infliction of emotional distress, defamation of a public official or public figure, and defamation covered by a common law qualified immunity. This common law rule makes sense in terms of the purposes of punitive damages. Punitive damages are awarded in the jury's discretion "to punish [the defendant] for his outrageous conduct and to deter him and others like him from similar conduct in the future." Restatement (Second) of Torts § 908(1) (1979). The focus is on the character of the tortfeasor's conduct -- whether it is of the sort that calls for deterrence and punishment over and above that provided by compensatory awards. If it is of such a character, then it is appropriate to allow a jury to assess punitive damages. and that assessment does not become less appropriate simply because the plaintiff in the case faces a more demanding standard of actionability. To put it differently, society has an interest in deterring and punishing all intentional or reckless invasions of the rights.

The bottom line in Smith v. Wade, and in all considerations of punitive damages in civil rights actions, is that a jury may assess punitive damages "when the defendant's conduct is shown to be motivated by evil motive or intent, or when it involves reckless or callous indifference to the federally protected rights of others . . . even when the underlying standard of liability for compensatory damages is one of recklessness." Id. 461 U.S. at 56. This standard was reaffirmed as recently as this past April by the First Circuit in Dichner v. Liberty Travel, -- F.3d ----, 1998 WL 161137, *3 (1st Cir.1998).There the Court noted that "A jury need not find some special sort of malign purpose in order to exact punitive damages in a disparate treatment case because the 'intent' that is necessary to undergird an award of punitive damages in such a case is the same 'intent' that is required for a finding of discrimination in the first place." The Court said it "specifically rejected an assertion that 'something more than intentional discrimination [as proven via the McDonnell Douglas framework] is necessary," and said, instead, that "once intentional discrimination has been established, whether directly or by a McDonnell Douglas inference, the jury, in order to punish [the defendant] for his outrageous conduct and to deter him and others like him from similar conduct in the future, has the authority to award punitive damages in its discretionary moral judgment."

That language that no further evidence is needed to award punitive damages once liability has been established could be the basis for a powerful jury instruction, an instruction that makes an award of punitive damages almost inevitable if the jury finds for the plaintiff at all.

Limitations on punitive damages

Now for the "rest of the story." The two biggest risks in a large punitive damages award are (1) that the judge will take it away or substantially reduce it and (2) that it will be awarded against a defendant who can not pay it.

The latter fear comes up in situations where claims can be made against both the employer and the offending supervisor. While Title VII claims against supervisors are questionable, some state statutes permit such claims and individuals can be named in claims under 42 U.S.C. §§ 1981 and 1983. (In fact, punitive damages under § 1983 are only available against individual defendants, not against municipalities.See, Newport v. Fact Concerts, Inc., 453 U.S. 247, 266-267, 101 S.Ct. 2748, 2759-2760, 69 L.Ed.2d 616 (1981)). The risk is that the jury will vent its wrath on the supervisor, who may be judgment proof, and not award punitives against the employer, who may attempt to portray itself as just another victim of a bad employee. Even worse, state statutes may prohibit indemnification of employees for intentional, malicious civil rights violations, a standard similar to the threshold for punitive damages. For example, this is a major concern in actions against Massachusetts government employers, where the state's highest court has said, in effect, that the government is prohibited from indemnifying government employees at all -- even for compensatory awards -- if the jury awards punitive damages. Pinshaw v. Metropolitan District Commission, 402 Mass. 687, 524 N.E.2d 1351 (1988). Those concerns should be considered before trial. In some situations it may be the wiser course to either waive the claim for punitive damages altogether or to go forward only against the employer but not the supervisor.

Concerns about the trial judge reducing the amount of the punitive damages award are more difficult to address in advance, except in daydreams of your soon-to-come smashing victory. There are few legal standards for determining when a punitive damages award is just too great to survive. While most courts that address the issue declare that there is no mathematical formula to be applied to such decisions, most courts can't resist the temptation to compare the amount of the compensatory award with the amount of the punitive award.

The benchmark of such decisions is BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996), in which a dentist was awarded $4 million (reduced on appeal to $2 million) to punish BMW for not telling him it had repainted his new car before selling it to him. The Supreme Court granted certiorari in the case "because we believed that a review of this case would help to illuminate the character of the standard that will identify constitutionally excessive awards of punitive damages." It is important to keep in mind that the case professed to establish only the constitutional limits for excessiveness, as the Court found them to be required by the Due Process Clause. This constitutionally based limitation is a far cry from the discretion given to a trial judge to review a punitive damages award, what should be a lesser standard based on the sufficiency of the evidence.

Despite its initial promise that it was conducting a constitutionally-based review, the Court nonetheless weighed all the factors that a jury - and a trial judge on a motion to revise an award - would consider, factors such as "the enormity of the offense," the ratio between compensatory damages and punitive damages, whether there was evidence of "deliberate false statements, acts of affirmative misconduct or concealment of evidence of improper motive." Weighing all these factors the Court found that the award violated the Due Process Clause. Quoting from earlier punitive damages cases, the Court said,

We need not, and indeed we cannot, draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case. We can say, however, that [a] general concer[n] of reasonableness ... properly enter[s] into the constitutional calculus.' In most cases, the ratio will be within a constitutionally acceptable range, and remittitur will not be justified on this basis. When the ratio is a breathtaking 500 to 1, however, the award must surely "raise a suspicious judicial eyebrow."116 S.Ct. at 1603. The bright line constitutional standard established by the Supreme Court's most recent guidance on punitive damages is . . . there is no bright line. "We have consistently rejected the notion that the constitutional line is marked by a simple mathematical formula, even one that compares actual and potential damages to the punitive award," the Court said. 116 S. Ct. at 1602. The Court did establish what it called "three guideposts" to be considered in assessing punitive damage awards:

•the degree of reprehensibility of the [wrongful conduct];

•the disparity between the harm or potential harm suffered by [the plaintiff] and his punitive damages award; and

• •the difference between this remedy and the civil penalties authorized or imposed in comparable cases.

116 S. Ct. at 1598-99. These "guideposts" should be of some use in opposing motions to reduce punitive damage awards.

Earlier Supreme Court assaults on punitive damages had met with little success. In Honda Motor Co., Ltd. v. Oberg,.512 U.S. 415, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994), the Court struck down an Oregon law that placed severe restrictions on a judge's ability to reduce a punitive damages verdict. Finding that "[j]udicial review of the size of punitive damages awards has been a safeguard against excessive verdicts for as long as punitive damages have been awarded," the Court held that the statute violated the Fourteenth Amendment. The Court otherwise left standing standards setting a high burden for modifying a jury verdict.

This case does not pose the more difficult question of what standard of review is constitutionally required. Although courts adopting a more deferential approach use different verbal formulations, there may not be much practical difference between review that focuses on "passion and prejudice," "gross excessiveness," or whether the verdict was "against the great weight of the evidence." All of these may be rough equivalents of the standard this Court articulated in Jackson v. Virginia, 443 U.S. 307, 324, 99 S.Ct. 2781, 2791-2792, 61 L.Ed.2d 560 (1979) (whether "no rational trier of fact could have" reached the same verdict).

512 U.S. at 432, n. 10.

This decision continued the Supreme Court's reluctance to interfere in punitive damages, a course followed earlier in Browning-Ferris Industries of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 109 S.Ct. 2909, 106 L.Ed.2d 219 (1989). There, the defendant in an antitrust action appealed from a jury award of $6 million in punitive damages. The Supreme Court, in an opinion by Justice Blackmun, held that the Eighth Amendment's excessive fines clause does not apply to awards of punitive damages in cases between private parties, there is no federal common-law standard of excessiveness for reviewing a jury's award of punitive damages, and the standard on appeal is whether the trial judge abused her discretion concerning reducing a punitive damages award.

Application of this standard remains as uncertain and unpredictable today as when King George's agents arrested the poor printer. A most recent example of a jury receiving instructions that were as strict as could pass muster and still awarding punitive damages, only to have those damages taken away in their entirety by the Court of Appeals, is McMillan v. Massachusetts Society for the Prevention of Cruelty to Animals, --- F.3d ----, 1998 WL 110164 (1st Cir. 1998). In addition to substantial compensatory damages, the jury awarded $306,912.50 in punitive damages for paying a woman veterinarian less than her male counterparts. The judge instructed the jury that it could award punitive damages if it found defendants' conduct to have been "egregious and beyond the pale of tolerable," and that such damages are "intended to punish the defendants as a warning, both to them and other like-minded individuals, that society will not tolerate grievous discriminatory behavior." The district judge further stated that "[a]ny sum you award as punitive damages should be commensurate with your own conscience, the outrageousness of the conduct that you intend to punish, and the character of the MSPCA as both an employer and as a nonprofit enterprise." Those instructions are about as generous to a defendant as could be hoped for.

Nonetheless, the First Circuit Court of Appeals found the jury had gone beyond what was necessary in awarding punitive damages on top of substantial compensatory damages. "[E]ven in situations involving intentional misconduct, compensatory damages may provide sufficient punishment and deterrence," the court said. Because "the jury had to conduct a second inquiry to determine whether defendants' intentional conduct was egregious enough for an award of punitive damages. . . . [i]t follows, then, that just as we may review the record to determine whether a reasonable jury could have found that the defendants intentionally discriminated against Dr. McMillan, we may also review the record to determine whether a reasonable jury could have found defendants' conduct sufficiently worthy of condemnation and deterrence to justify exemplary damages." In what could well be viewed as simply substituting its own judgment for the jury's on what is more a matter of opinion than of fact, the court concluded that "[a]lthough we affirm the jury's finding of discrimination, we cannot say, on the basis of the record before us, that [the defendants'] intentional misconduct calls for punishment and deterrence beyond that secured by the compensatory award. Determining what conduct rises to the level at which an award of punitive damages is appropriate is a difficult task, but the evidence shows that the actions at issue in this case do not. We therefore hold that the district court abused its discretion in upholding the award of punitive damages, and that the award of punitive damages in this case constitutes a grossly excessive award of damages that shocks the conscience."

This case should stand as a warning for the fear that "What the jury giveth, the Court may taketh away."

Discovery of assets

Part of the foundation for a substantial punitive damages award is establishing the wealth of the defendant since the amount of the punitive damages awarded can be based, in part, on the defendant's financial status. EEOC v Klockner H & K Machs. (E.D. Wis. 1996) 168 FRD 233, 71 BNA FEP Cas 833. See, Rowlett v. Anheuser-Busch, Inc., 832 F.2d 194, 207 (1st Cir. 1987) ("[C]onsidering that Anheuser-Busch is a substantial company, any amount adjudged must be sufficient to deter it or any other rational employer from repeating such conduct in the future.") See also, City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 270 (1981)("evidence of a tortfeasor's wealth is traditionally admissible as a measure of the amount of punitive damages that should be awarded").

For the jury to make this determination the plaintiff must present some evidence of the defendant's "wealth." In order to present that evidence, the plaintiff must, in most cases, discover it from the defendant. Particularly for public corporations, much of that information is available from public sources. For private corporations and for individual defendants, however, the only source for that information is the defendant. Interrogatories and requests for production of documents should be served designed to elicit financial information. For example, in Bessier v. Precise Tool & Engineering Co., Inc., 778 F.Supp. 1509, 57 FEP Cases 1249 (W.D. Mo. 1991), the plaintiff was granted discovery of defendant's financial records to prepare a case on the issue of punitive damages. The order in that case is a good standard to use in discovery since it included discovery of:

• • financial statements;
• •income tax returns;
• •documents reflecting the defendant's gross income, net income, and expenditures;
• • bank statements and deposit records; and
• •general ledgers.

The defendant was also compelled to answer interrogatories as to its net worth.See also Heller v. Ebb Auto Co., 55 EPD Par. 40, 431, 53 FEP Cases 911 (D. Or. 1990) (Plaintiff may be entitled to defendant's profit and loss statements and balance statements after making a prima facie showing of entitlement to punitive damages).

Defendants hate providing this kind of information, especially individual defendants. Usually a confidentiality stipulation will be required and, in most cases, should be offered proactively. In some cases courts have stayed discovery of financial information until after the case has survived summary judgment.

There are no standards for what financial information is relevant to the punitive damages determination: should it be gross sales, net profits, assets? Arguably, the plaintiff should look for the largest number he can find and then let the defendant explain to the jury, if it dares, why a smaller number should be used.

The Equal Employment Opportunities Commission issued policy guidelines concerning the factors to be considered in assessing a punitive damages award. "E.E.O.C.: Policy Guide on Compensatory and Punitive Damages Under 1991 Civil Rights Act," July 7, 1992, Fair Employment Practices, pp. 405:7091 - 7102, Bureau of National Affairs. These guidelines can be used as the basis for discovery requests. The document requests, in fact, should specifically cite these guidelines as an authoritative source for compelling disclosure of this information. These guidelines are available on the Internet at http://www.access.gpo.gov/eeoc/docs/damages.txt.

Jury instructions on punitive damages

Jury instructions on punitive damages must include the "malice, willfulness, or reckless disregard for the plaintiff's federally protected rights" standard, with an explanation of what those terms mean. The instructions must inform the jury that punitive damages are optional and do not have to be awarded. Various form books and form jury instructions from different circuits provide standard punitive damages instructions.

A key to obtaining punitive damages awards, however, is in going beyond the standard jury instructions by using hot phrases that can be incorporated into closing arguments. The two concepts you should work to include in jury instructions are (1) that there should be a relationship between the defendant's wealth and the amount of punitive damages, and (2) that two purposes of punitive damages are to punish the defendant and to deter others from doing the same bad acts. These two themes combine to make a powerful closing argument.

The defendant's wealth

Unless your defendant is a small, unprofitable business, in which case you will probably have trouble collecting any huge punitive damages award anyway, you should try to get an instruction that links the defendant's wealth with the amount of the punitives award and lets the jury know that punitives have to be large enough to hurt. This instruction opens the door to such closing argument phrases as:

• •You can't hunt an elephant with a peashooter;
• •A freight train won't be stopped by a worm crossing the rails;
• •And of course, that old story about training a donkey by speaking to it softly and sweetly . . . but only after you whack him on the head with a 2 x 4 to get his attention.

Jury instructions concerning the defendant's wealth can be based on the following language:

• •Rowlett v. Anheuser-Busch, Inc., 832 F.2d 194, 207, 56 USLW 2194, 44 Fair Empl.Prac.Cas. (BNA) 1617, 44 Empl. Prac. Dec. P 37,428, 9 Fed.R.Serv.3d 321 (1st Cir. 1987)

"[C]onsidering that Anheuser-Busch is a substantial company, any amount adjudged must be sufficient to deter it or any other rational employer from repeating such conduct in the future."

"It has been held that to punish a defendant the award must be enough to 'smart.' See Brink's, Inc. v. City of New York, 546 F.Supp. 403, 413 (S.D.N.Y.1982), aff'd, 717 F.2d 700 (2d Cir.1983). Thus, a rich defendant may well be required to pay more than a poor one who committed the same wrong. See Bell v. City of Milwaukee, 746 F.2d 1205, 1267 (7th Cir.1984); Rest.2d (Torts) § 908(2) (1979).

Instruction given in the District Court and approved by the Court of Appeals:"Among the factors to be considered in determining an appropriate amount of punitive damages is the "financial position" of the defendant. Pacific Mut. Ins. Co. v. Haslip, U.S. , 111 S.Ct. 1032, 1045 (1991). The appropriate amount of punitive damages depends on the financial circumstances of the defendant: It has been held that to punish a defendant the award must be enough to "smart." Thus, a rich defendant may well be required to pay more than a poor one who committed the same wrong."

• •City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 270 (1981)

"Evidence of a tortfeasor's wealth is traditionally admissible as a measure of the amount of punitive damages that should be awarded."

• •Keenan v. City of Philadelphia, 55 FEP Cases at 944-45.

The award should be considered in the context of the respondent's monetary resources. The amount of punitive damages should "sting," but not "destroy" the respondent.

Punishment and deterrence

A jury instruction making it clear that one purpose of punitive damages is to punish the wrongdoer and to deter others from doing the same bad acts also opens the door to a powerful closing argument. This is the chance to appeal to the jury's sympathies and sense of justice. Especially in civil rights cases where -- assuming the jury has reached the point of deciding how much to award in punitive damages -- the jury can be expected to be pretty riled up over what was done to your client, linking your closing argument appeal for punitives to anticipated jury instructions about punishment and deterrence can be especially effective. Available arguments include such themes as:

• •"The judge will tell you that your verdict on punitive damages can send a message. There is only one way the law allows for you to send that message and that is by awarding money. The volume of that message depends on how many zeroes are in your punitive damages award. If you want to whisper your message that what was done here was wrong, the number should have just a few zeroes. If you want it heard across town, add a few more zeroes, across the state takes more zeroes than that. But if you want to send a message that will be heard from coast to coast, you have the power to do that, but such a powerful message will require you to award a number with lots and lots of zeroes. Go ahead, don't whisper your message, shout it till your throats are raw, award a number followed by lots and lots of zeros."

The jury instructions on this issue can be taken from the following cases:

• •The allowance of punitive damages involves an evaluation of the nature of the conduct in question, the wisdom of some form of monetary punishment, and the advisability of a deterrent. The imposition of punitive damages, and the size of the award are matters within the discretion of the trier of fact. EEOC v Gaddis, 733 F2d 1373 (10^th Cir. 1984).
• •"If you find that the conduct of [the defendant] was beyond the pale of the tolerable, you may award punitive damages to [the plaintiff]. These are damages not intended to compensate but to punish a defendant and to serve as a warning to other like-minded individuals or entities that society will not tolerate outrageous discriminatory behavior." Instruction given in McMillan v. Massachusetts Society for the Prevention of Cruelty to Animals, --- F.3d ----, 1998 WL 110164 (1st Cir. 1998).
• •"Any sum that you award should be commensurate with your own conscience, the degree of reprehensibility of the defendants' conduct as you find it, the ratio of any punitive damages to the actual damages that you find [the plaintiff] incurred and the likelihood of the award's having a deterrent effect on both this and other potential defendants." Jury instructions approved by the First Circuit in Dichner v. Liberty Travel, -- F.3d ----, 1998 WL 161137, *3 (1st Cir.1998).
• •"[O]nce intentional discrimination has been established, whether directly or by a McDonnell Douglas inference, the jury, in order " 'to punish [the defendant] for his outrageous conduct and to deter him and others like him from similar conduct in the future,' " has the authority to award punitive damages in "its 'discretionary moral judgment.' " Rowlett v. Anheuser-Busch, Inc., 832 F.2d 194, 205-206 (1st Cir.1987)(quoting Smith v. Wade, 461 U.S. at 52, 54).
• •"Punitive damages may properly be imposed to further a State's legitimate interests in punishing unlawful conduct and deterring its repetition." BMW of North America, Inc. v. Gore, 116 S.Ct. 1589, 1595, 517 U.S. 559, 134 L.Ed.2d 809 (1996).
• •You may consider an employer's size and financial standing in awarding punitive damages, since the amount must be sufficient to deter the employer from repeating such unlawful conduct. [H Rept No. 102-40, Part 1, 4/24/91, p. 73. ] The following factors are relevant in determining a respondent's financial position:

• the revenues and liabilities of the business;
• the fair market value of the respondent's assets;
• the amount of liquid assets on hand, including amounts the respondent can reasonably borrow;
• the respondent's projected earnings;
• the resale value of the business; and
• the respondent's affiliation or subsidiary relationship with a larger entity with additional financial resources.

Evidence of these factors may take the form of financial statements, income tax returns, documents reflecting gross and net income and expenditures, bank statements, bank deposit records, and general ledgers, as well as responses to interrogatories.

EEOC Enforcement Guidance on Damages under the Civil Rights Act of 1991.