A prevailing employee in an action brought under Title VII of the Civil Rights Act of 1964 may recover damages for unlawful discrimination and harassment in employment on the basis of, among other things, sex or gender. In 2011, an Arizona federal jury found that an employee had been subjected to “reprehensible” sexual harassment on the job; however, it awarded her nothing in compensatory damages, and only $1 in nominal damages. Despite awarding only $1 in nominal damages, the jury awarded the plaintiff more than $800,000 in punitive damages. The district court reduced those damages to $300,000 (due to the applicable damages cap under Title VII, which limits a punitive damage award to no more than $300,000). Though the employer argued that $300,000 was still unconstitutionally excessive in light of the $1 nominal damages awarded, the district court nevertheless awarded this amount.
The employer appealed. The Ninth Circuit vacated [pdf] the punitive damage award. The panel explained that the ratio of $300,000 in punitive damages to $1 dollar in nominal damages violated the fairness guidelines established by the U.S. Supreme Court in its 1996 decision in BMW of North America, Inc. v. Gore. That decision held that punitive damage awards “must bear a reasonable relationship to compensatory damages.” Here, where the jury awarded no compensatory damages and only $1 in nominal damages, an award of $300,000 in punitive damages could not pass constitutional scrutiny. Instead, relying on decisions from other circuit courts of appeals, the Ninth Circuit concluded that the highest punitive damage award that could be supported in the case was $125,000, based on the highest ratio it could locate among other discrimination cases in other circuits. That ratio, it said, had a reasonable relationship to the other damages awarded, but was also proportional to the reprehensibility of the employer’s conduct.
The takeaway here is that although other circuits may set a higher acceptable ratio, the Ninth Circuit appears to have firmly set its maximum ratio for punitive damages in Title VII cases at 125,000:1.