The Failure of Punitive Damages in Employment Discrimination Cases: A Call for Change

Beginning of article

ABSTRACT

Punitive damages were described by one early court as "an unsightly and an unhealthy excrescense." Although views toward punitive relief have changed over the years, the debate over the availability of exemplary damages in the judicial system has remained controversial. No place is that controversy more aptly demonstrated than in employment discrimination law, where punitive damages first became available in an amendment to Title VII of the Civil Rights Act of 1964 after a bitter congressional debate. Almost a decade ago, in Kolstad v. American Dental Association, the Supreme Court provided guidance on how punitive damages should be applied in discrimination cases brought under Title VII. Kolstad has only generated more confusion concerning the proper standard for exemplary relief, and recent district and appellate court decisions reflect this uncertainty.

Attempting to determine the impact of punitive damages in Title VII cases after Kolstad, I performed an analysis o fall federal district court decisions during the calendar years of 2004 and 2005. The study examined over six hundred district court opinions issued during this timeframe. Of these cases, there were only twenty-four district court decisions either awarding punitive damages under Title VII or upholding a jury's award of punitive relief. An additional study further revealed that slightly less than 18 percent of those Title VII cases that went to a jury resulted in a punitive damage award by the jury, and approximately 29 percent of those juries that found in favor of the plaintiff also awarded punitive damages.

This Article explores the basic foundations of punitive damages in the American judicial system, and examines the goals of providing this form of relief in employment discrimination cases. The Article further examines a study performed on the effectiveness of punitive damages in Title VII cases. After analyzing this data, this Article suggests one alternative way of better achieving the original deterrent purpose behind the addition of punitive damages to Title VII. The Article proposes a three-part framework for analyzing all cases of intentional discrimination and recommends adopting a new scheme for remedial relief under Title VII. The Article then explores the implications of adopting the proposed approach and examines how the proposal fits within the contours of the academic scholarship. The Article concludes by urging that the congressional intent of deterring unlawful discrimination can more properly be achieved through the proposed form of relief.

TABLE OF CONTENTS

INTRODUCTION
  I. THE HISTORY OF PUNITIVE DAMAGES AND THE LAW
     A. Evolution of Doctrine in American Law
     B. Purpose of Punitive Damages
 II. PUNITIVE DAMAGES IN EMPLOYMENT
     DISCRIMINATION CASES
     A. Legislative History of the Civil Rights
        Act of 1991
     B. The Revised Statute
III. THE SUPREME COURT ADDRESSES PUNITIVE
     DAMAGES UNDER TITLE VII
     A. Kolstad v. American Dental Association
     B. Interpreting Kolstad
 IV. THE FALSE PROMISE OF PUNITIVE DAMAGES:
     AN EXAMINATION OF DISTRICT COURT CASES
     A. Methodology
     B. Results of Study
     C. Weaknesses of Analysis
     D. Analysis Conducted in a Different Database
        1. Jury Verdict Research Methodology
        2. Results of Jury Verdict Research's Analysis
        3. Rationale for Differences in Results
     E. District Courts Erect Additional Barriers to
        Punitive Relief
        1. District Courts Vacate Awards
        2. Courts Refuse To Give Punitive Damage
           Question to Jury
     F. Conclusions of Analysis
  V. A CALL FOR CHANGE
     A. Liquidated Damages Proposal for Title VII
        1. Actual Damages Doubled
        2. Abandon the Malice or Reckless
           Indifference Standard
        3. Eliminate the Statutory Cap for
           Liquidated Damages
        4. Good Faith Defense
     B. Liquidated Damages Proposal Summary
 VI. IMPLICATIONS OF LIQUIDATED DAMAGES PROPOSAL
CONCLUSION

"A billion dollars to them is chump change."--Member of jury that awarded $11.8 billion in punitive damages in case brought against Exxon Mobil Corporation. (1)

INTRODUCTION

"[M]onstrous heresy." (2) This is how one early court described the role of punitive damages in civil litigation. (3) Though punitive damages can be seen as "an unsightly and an unhealthy excrescense, deforming the symmetry of the body of the law," (4) there can be little doubt that one of the primary purposes of such relief is to help deter unlawful conduct. (5)

Before passage of the Civil Rights Act of 1991 (6) (1991 CRA), punitive damages were not one of the resources plaintiffs had at their disposal to fight employment discrimination. (7) That would change, however, when Congress passed the 1991 CRA with the express purpose of helping to "combat the persistence of employment discrimination." (8) Through the addition of compensatory and punitive damages to Title VII of the Civil Rights Act of 1964, the 1991 CRA was designed "to effectuate a greater level of deterrence." (9) In many respects, Title VII was a "toothless tiger" prior to the 1991 amendments, which gave litigants the ability to obtain significant monetary relief. (10) Rather than simply making the plaintiff whole, the addition of punitive damages to Title VII gave courts and juries a way to punish employers for their illegal conduct. (11) Indeed, Congress hoped that imposing additional damages on those employers that violate Title VII would help to prevent such discriminatory conduct, and the public certainly perceives that punitive damage awards are instrumental in eradicating unlawful employment practices. (12) Even the mention of punitive damages strikes a certain fear in the hearts of executives of large and small corporations alike--though the current statutory caps do provide some level of comfort to employers. (13) Punitive damages are thus widely regarded as one of the single greatest motivators in preventing employers from discriminating against their workers. (14)

Against this backdrop, I embarked on a study of recent employment discrimination cases in which punitive damages had been awarded. My goal was to generate enough data to identify trends in punitive damage awards in cases brought pursuant to Title VII. I was particularly interested in determining whether Kolstad v. American Dental Ass'n, (15) the seminal Supreme Court decision that outlined the standards to be applied to Title VII punitive damages cases, changed in any fundamental fashion the way the lower courts approached their analyses in these cases. I am aware of no substantive empirical studies examining the impact of the Kolstad decision in the context of Title VII punitive damages. (16)

The results of my analysis were surprising. In 2004 and 2005, 36,676 employment law cases were filed in all of the federal district courts in the United States. (17) A search of all published federal district court decisions for the calendar years of 2004 and 2005 that referenced both Title VII and punitive damages resulted in 676 cases. (18) After analyzing each of these cases, I concluded that only twenty-four decisions included cases where a district court either awarded punitive damages under Title VII or upheld a jury's award of punitive relief. (19) This is hardly the kind of raw data that can lead to any reasoned analysis of trends or patterns of remedies in employment discrimination cases.

Moreover, the results of additional research demonstrated some reluctance on the part of juries to award punitive relief. Slightly less than 18 percent of those Title VII cases that went to a jury during 2004 and 2005 resulted in a punitive damage award by the jury, and approximately 29 percent of those juries that found in favor of the plaintiff also awarded punitive damages. (20) There are many reasons why plaintiffs have been unsuccessful in obtaining punitive relief in employment discrimination cases, and these reasons are explored in greater detail in this Article. (21) Regardless of the rationale, however, without more published decisions imposing punitive awards, their deterrent effect will likely begin to wane. It is for this reason that reform in this area of the law is necessary.

Part I of this Article examines the history of punitive damages generally, and their role in the American legal framework and court system. Part II of this Article further examines the passage of the 1991 CRA and explores why Congress and legal theorists believed punitive damages were a critical component missing from Title VII. Part III discusses the Supreme Court's review of Title VII punitive damages in Kolstad v. American Dental Ass'n. Part IV then explores the data uncovered through an examination of all published federal district court decisions during 2004 and 2005, setting forth the methodology of this study. Part V concludes by explaining the necessity for reform in the application of punitive damages to Title VII cases. The Article proposes an alternative approach to the remedial provisions of Title VII which would bring the statute more in line with other areas of employment law. Part VI of the Article then explains how the proposed three-part framework for examining all cases of intentional discrimination fits within the contours of existing academic scholarship.

I. THE HISTORY OF PUNITIVE DAMAGES AND THE LAW

A. Evolution of Doctrine in American Law

Punitive (or "exemplary") damages are not a recent phenomenon, (22) and have been described as an "ancient curiosity." (23) Indeed, these damages date back over four millennia to 2000 B.C. and the Code of Hammurabi, and evolved as part of the common law. (24) Pursuant to the Code, for example, a man who stole an ox, sheep, or pig from a temple or palace would be required to pay damages thirtyfold the worth of the animal. (25)

The theory of punitive damages persisted through the following centuries. (26) For example, the Magna Carta contains three chapters on the system of amercements, that, in many respects, operated in a similar manner to punitive damages under the current U.S. legal system. (27) The amercement system allowed wrongdoers to buy back their "grace under the law" through payments to the Crown. (28) A jury, rather than a judge, determined the amount of the payments, and was instructed to consider "[t]he gravity of the offense and the wealth of the wrongdoer" in reaching an appropriate award. (29)

Over time, punitive damages came to satisfy the particular requirements of society, including "punishment and deterrence of wrongdoers, and [also] as a substitute for revenge." (30) Under English common law, punitive damages "appeared discreetly ... overshadowed by the legal and moral issues" of the cases in which they were awarded. (31) Like in the American legal system, punitive damages in England have been the subject of controversy over the years, and these damages "practically were abolished" in the country in 1964. (32) Punitive damages in the American legal system can be traced to English common law. (33) In 1784, in Genay v. Norris, (34) an American state court adopted the theory of punitive relief enunciated by the English courts in a case in which the plaintiff became sick after drinking wine that the defendant had spiked with Spanish Fly. (35) The court awarded "exemplary damages" to the plaintiff. (36) Moreover, in 1791, a New Jersey court granted punitive relief for the explicit purpose of making an "example[ ]" of the defendant in an action which involved the breach of a promise to marry. (37)

By the mid-nineteenth century, punitive damages were well established in the United States. (38) In Day v. Woodworth, (39) the U.S. Supreme Court resolved any question on the availability of punitive relief, stating that it was settled that "a jury may inflict what are called exemplary, punitive, or vindictive damages upon a defendant." (40) The Court acknowledged that "the propriety of this doctrine has been questioned," but noted that "repeated judicial decisions" would support the view that punitive damages were appropriate, depending upon the particular circumstances and the "degree of moral turpitude or atrocity of the defendant's conduct." (41)

Punitive damages are presently a widely accepted form of relief under American law. It has been well established in the United States for "over a century that punitive damages are noncompensatory in character." (42) Almost all states allow some form of punitive relief upon a specified showing of proof. (43) Punitive damages are, and have been for decades, a "fixture in American law." (44) Nonetheless, the debate over punitive damages persists. Many scholars evaluating punitive damages have agreed that this form of relief is "a necessary component in an efficient civil justice system." (45) Punitive awards, however, are also seen as "an anomaly" in the justice system that "should be abolished except where specifically authorized by statute." (46)

B. Purpose of Punitive Damages

Punitive damages are those damages that are "awarded in addition to actual damages when the defendant acted with recklessness, malice, or deceit." (47) The purpose of this type of relief is much more difficult to capture. For the most part, exemplary damages have been justified by three different rationales: retribution, deterrence, and education. (48)

First, punitive relief is a form of retribution or revenge. (49) As one of the primary purposes of exemplary damages, this relief is viewed as a way of punishing the wrongdoer. (50) The retribution function serves not only the need of the individual victims, but society as a whole. (51) Justice Oliver Wendell Holmes summarized the benefit of allowing the law, rather than individuals, to achieve some form of retribution when a wrong has been suffered, stating that "[i]f people would gratify the passion of revenge outside of the law, if the law did not help them, the law has no choice but to satisfy the craving itself, and thus avoid the greater evil of private retribution." (52) Perhaps an antiquated theory in support of punitive relief, revenge "seems incompatible with our modern conception of the judicial system." (53) Still, retribution is often cited as one of the primary bases for awarding punitive relief. (54) Justice Sandra Day O'Connor has even described exemplary damages as "quasi-criminal" relief that is "specifically designed to exact punishment in excess of actual harm to make clear that the defendant's misconduct was especially reprehensible." (55)

Second, punitive damages are a way to deter the wrongdoer (or potential wrongdoers) from engaging in repeat conduct against the plaintiff. (56) This function of exemplary relief is premised on the economic theory that a wrongdoer who is required to pay a victim above and beyond the harm actually suffered will be less likely to engage in the wrongful conduct in the future. (57) By deterring future misconduct, punitive relief serves to "enforce desirable social norms" and results in a "positive gain to society." (58) Additionally, to the extent that not every victim decides to seek relief for a particular wrong, courts are able to deter defendants from continuing their conduct by increasing the awards of those plaintiffs that choose to litigate, thereby "forc[ing] defendants in the aggregate to internalize [the victim's] harm fully." (59) This function of punitive damages is also directly tied to the revenge function, as exemplary relief also serves to deter victims from seeking their own revenge against a defendant. (60)

Finally, punitive damages are a way of educating the wrongdoer and society as a whole. (61) In this regard, exemplary relief affirms both the "protected right" of the plaintiff and the "correlative legal duty" of the defendant to respect the plaintiff's right. (62) And punitive damages demonstrate the disapproval "society attaches to [the] flagrant invasion [of a right] by the kind of conduct engaged in by the defendant." (63)

Though deterrence, retribution, and education are the primary rationales in support of punitive damages, this form of relief also serves to compensate victims where traditional compensatory awards are insufficient. (64) Additionally, punitive damages have also been said to serve a procedural law-enforcement mechanism, whereby they encourage "reluctant victims to press their claims and enforce the rules of law." (65)

II. PUNITIVE DAMAGES IN EMPLOYMENT DISCRIMINATION CASES

At the time of the passage of Title VII of the Civil Rights Act of 1964, victims of employment discrimination were limited to obtaining relief that was primarily equitable in nature. (66) When Title VII was passed, the statute contained no provision for aggrieved individuals to obtain either compensatory or punitive damages. (67) Though Title VII was extremely effective in helping to vindicate the rights of those individuals that had been discriminated against, the lack of compensatory or punitive relief in the statute was problematic. (68) As one commentator noted less than a decade after the passage of Title VII, "[d]iscrimination is so obnoxious to our ideals and so injurious to the nation as a whole that this form of punishment and deterrence [in allowing punitive damages] is justified." (69) At the time, some believed that the lack of punitive damages in Title VII undermined the statute's ability to deter wrongful conduct. (70) The addition of punitive damages, they argued, was necessary to help effectuate the enforcement of the statute, as this relief would encourage victims of discrimination to bring suit. (71) Under the original statutory scheme of Title VII, a successful plaintiff could expect to obtain relief that was "hardly enough to inspire such a plaintiff to stand up for her rights." (72) Others argued that Congress had originally intended for courts to be able to provide any type of relief that they deemed necessary, so adding punitive damages to Title VII would therefore "restore the statute to its originally intended role." (73)

A. Legislative History of the Civil Rights Act of 1991

In 1991, Congress passed the 1991 CRA. Among other significant changes to Title VII, the 1991 CRA provided for compensatory and punitive damages. (74) The legislative history of this amendment to Title VII demonstrates that Congress understood the need for adding punitive damages as a weapon for fighting employment discrimination. (75) A House Report on the 1991 CRA explains that the summary and purpose of the amendment was to "strengthen existing protections and remedies available under federal civil rights laws to provide more effective deterrence and adequate compensation for victims of discrimination." (76)

In considering the 1991 CRA, Congress thus believed that the "existing protections and remedies" in the statute were not "adequate to deter unlawful discrimination or to compensate victims of intentional discrimination," and that the addition of exemplary relief was therefore necessary. (77) Congress further explained that it had heard significant testimony revealing that punitive damages were necessary to deter employment discrimination:

   Numerous courts, commentators, and witnesses before the
   Committee underscored that Title VII's exclusive remedy is
   inadequate.... [One corporate witness explained] that under
   Title VII's current remedial scheme ... "It]he big impact of
   [adding damages to Title VII would] be what employers do in the
   way of prevention." ...

   [O]ne of the foremost experts on the sexual harassment in the
   workplace and a consultant to leading corporations [further
   testified that]: "Measures such as those proposed in the bill will,
   I believe, encourage employers to design and implement complaint
   structures which encourage victims to come forward...." (78)

In considering the legislation, Congress was thus dear that, based on the testimony before it, the addition of new remedial relief to Title VII was a critical component of deterring future wrongful conduct and encouraging "private enforcement" of the statute. (79) This "compelling need" for new relief would lead to the passage of the 1991 CRA, which amended Title VII of the Civil Rights Act of 1964 to add punitive damages and compensatory relief. (80)

B. The Revised Statute

After two years of "often rancorous debate," Congress passed, and President George H.W. Bush signed into law, the 1991 CRA. (81) The addition of punitive damages to Title VII would "fundamentally" alter the 'legal model underlying federal employment discrimination laws," shifting the focus of the statute from conciliation and employer change to a model similar to tort law that was targeted more at obtaining monetary relief. (82) It was argued that the amendments were "among the most sweeping civil rights legislation to be passed by Congress," and that the act provided exemplary damages that were "sorely lacking from previous legislation." (83)

Under the revised statute, a plaintiff is now entitled to pursue punitive damages if that individual can show that the defendant "engaged in a discriminatory practice" with "malice or with reckless indifference to the federally protected rights of an aggrieved individual." (84) As part of a compromise, the statute also contains limitations (or statutory caps) on the size of the potential award. (85) Maximum award amounts vary depending upon the size of the employer, with a maximum potential liability of $300,000 for companies with 500 or more employees. (86) In addition to the statutory cap, plaintiffs can also obtain back pay, front pay, and certain interest. (87)

III. THE SUPREME COURT ADDRESSES PUNITIVE DAMAGES UNDER TITLE VII

A. Kolstad v. American Dental Association

Nearly a decade ago, the Supreme Court provided the seminal case on punitive damages in Title VII employment discrimination matters in Kolstad v. American Dental Ass' n. (88) In Kolstad, the Court considered whether the appellate court had erred in upholding a district court's decision to preclude the issue of punitive damages from going to a jury in a gender discrimination matter. (89) The defendant, the American Dental Association, had denied the plaintiff, Carole Kolstad, a promotion in favor of a male employee. (90) Kolstad alleged that the defendant had "preselect[ed]" the male employee for the position, and that the acting head of the organization had told sexually offensive jokes and used derogatory language in reference to women. (91) Kolstad further maintained that the acting head of the association had refused to even meet with her about the open position for several weeks. (92) After a jury trial on the issue of gender discrimination, Kolstad was awarded $52,718 in back pay. (93) The district court did not allow the issue of punitive damages to go to the jury. (94) In a post judgment decision, the district court was clear that "it had not been persuaded" that the defendant made the promotion decision on the basis of sex. (95) Sitting en banc, the Court of Appeals for the D.C. Circuit affirmed the district court, holding that '"before the question of punitive damages can go to the jury, the evidence of the defendant's culpability must exceed what is needed to show intentional discrimination."' (96) The appellate court further concluded that there must be a showing of "'egregious'" wrongdoing on the part of the defendant for a punitive damage award to be warranted. (97) The appellate court ruled that the plaintiff had failed to present sufficient evidence to make this showing of egregiousness. (98) The Supreme Court granted certiorari in the case to resolve a split in the circuits over whether a showing of egregious conduct is necessary for a punitive damage claim to go to the jury. (99) In analyzing the damages provision of Title VII, the Court noted that the Civil Rights Act of 1991 limits punitive awards to cases …