December 11, 2014

En banc Ninth Circuit: due process limits on punitive damages have "limited applicability" in Title VII cases (Arizona v. Asarco)

Yesterday, the Ninth Circuit issued its en banc opinion in Arizona v. Asarco.  As our readers may recall, that's the sexual harassment case in which a jury awarded the plaintiff no compensatory damages, $1 in nominal damages, and nearly $900,000 in punitive damages.

The district court reduced the punitive damages to $300,000 under Title VII's statutory cap on punitive and non-economic damages.  A three-judge panel of the Ninth Circuit then ruled, in a 2-1 decision, that the punitive damages were still excessive and should be further reduced to $125,000.

Both parties sought en banc review.  The plaintiffs argued that they are entitled to the full $300,000 permitted by the cap, because an award within the cap cannot be unconstitutional.  The defendant argued that the 125,000 ratio permitted by the three-judge panel was still excessive.  Both parties got what they wanted---the court agreed to rehear the case en banc.  But the result isn't quite what the defendant envisioned.  It's a unanimous 11-0 win for the plaintiffs.

The en banc opinion starts by discussing the due process test for evaluating the excessiveness of a punitive damages award, as laid out in BMW v. Gore and State Farm v. Campbell.  The opinion then states that the due process standards are "of some relevance"in Title VII cases.  In other words, it is theoretically possible that punitive damages awarded under a carefully crafted statutory scheme could nonetheless violate due process.

But the opinion goes on to say that, when punitive damages are awarded under a "robust" statutory scheme, a "rigid application of the Gore guideposts is less necessary or appropriate." Following that logic, the court concludes that a punitive damages award under Title VII can never really violate due process, because the statute clearly states the state of mind necessary for imposition of punitive damages, and provides fair notice of the possible amount of the punitive damages (i.e., up to $300,000).

While it's clear that the en banc court has no problem with 300,000 to 1 ratios in Title VII cases, it's not at all clear how the court's analysis would translate to other statutory schemes.  How is a district court supposed to determine which statutes are sufficiently robust and carefully crafted, such that a vigorous due process analysis becomes unnecessary?  And when a statute qualifies as robust and carefully crafted, how exactly does a district court perform the relaxed and non-rigid version of the BMW and Campbell analysis that this opinion seems to require?

Given the murkiness of the court's analysis, it is a bit surprising to see that this was a unanimous opinion.  The Ninth Circuit is known as a court whose members have a wide diversity of viewpoints and aren't afraid to share them.  And this 11-member panel includes some judges whom we'd ordinarily expect to have some discomfort with an opinion holding that lower courts can, under circumstances that are not clearly defined, choose to disregard a due process analysis mandated by the U.S. Supreme Court.

So long as the analysis of this opinion is limited to Title VII cases, it's impact will be limited.  Because the $300,000 cap is a modest one, the Ninth Circuit wouldn't be striking down many punitive damages awards as excessive under the BMW standards anyway, even if the court had not excepted Title VII cases from the usual BMW analysis.  But this opinion could end up being quite significant if its analysis spreads to other areas, or if the Title VII cap ever gets raised.

As a side note, nowhere in this opinion does the court ever suggest that it might have a common-law duty to analyze the punitive damages award for excessiveness, apart from whatever the constitution requires.  As our friends over at Guideposts have pointed out, other circuits have held that in cases involving claims under federal law, federal courts have supervisory authority to ensure that those awards are not excessive, and should scrutinize them more closely under that common law authority than they would under the Due Process Clause.  Most likely, the parties did not make that argument here.

 Related posts:

New punitive damages blog analyzes case pending before en banc Ninth Circuit (Arizona v. ASARCO)

Ninth Circuit reduces $300,000 punitive damages award to $125,000 in Title VII harassment case (Arizona v. ASARCO)

Ninth Circuit grants en banc rehearing to decide excessiveness of punitive damages in Title VII case (Arizona v. ASARCO)

9th Circuit hears oral arguments in punitive damages case where jury awarded no compensatory damages