August 2, 2011

Thomas v. iStar Financial, Inc.: $1.6 million punitive damages award in retaliatory discharge case is excessive

An opinion from the U.S. Court of Appeals for the Second Circuit last week affirms a trial court ruling that a jury's $1.6 million punitive damages award, on top of a compensatory award of about $280,000 (a 5.7:1 ratio between punitive and compensatory damages), was excessive, in violation of federal due process principles.

The appellate court noted that the tort (termination of plaintiff's employment in retaliation for complaints of workplace discrimination) was apparently part of a pattern of corporate conduct, but (1) the conduct reflected a "moderate level of reprehensibility; (2) the tort did not result in physical injury; (3) the punitive award was on top of a "substantial" compensatory award; and (4) the punitive damages far exceeded a potential statutory fine of up to $250,000 for malicious discriminatory practices. Accordingly, the Court of Appeals affirmed the district judge's order reducing the punitive award to $190,000 (less than a 1:1 ratio).

This result seems to be consistent with the conclusion reached by University of Iowa College of Law professor N. William Hines (see article discussed in our recent post) that trial court and appellate court judges are, in the professor's words, "faithfully implementing the evolving due process guideposts to catch and correct excessive punitive damages awards. "