January 19, 2015

California Court of Appeal reinstates $1.2 million punitive damages award in sexual harassment case (Shank v. CRST Van Expedited)

The plaintiff in this case, a former employee of a trucking company, claimed that her supervisor repeatedly subjected her to unwanted sexual advances.  She obtained a jury verdict for $391,000 in compensatory damages, $1.17 million in punitive damages against her former employer, and $3,500 in punitive damages against her individual supervisor.

The employer filed post-trial motions to challenge the verdict.  The trial court agreed that the plaintiff failed to prove that the employer acted with malice, oppression, or fraud.  As a result, the court granted judgment notwithstanding the verdict (JNOV) on the issue of punitive damages against the employer, wiping out the jury's $1.17 million award.

The plaintiff appealed, arguing that the trial court erred in granting the JNOV motion.  The California Court of Appeal (Fourth Appellate District, Division Three) agreed with the plaintiff in this unpublished opinion.

The court began its analysis by noting that the supervisor unquestionably engaged in malice and oppression; throughout a 28-day training period, he made numerous unwanted sexual advances towards the plaintiff.

The question then became whether the employer could be punished for ratifying the supervisor's misconduct.  The Court of Appeal concluded that the company's human resources a director was a managing agent within the meaning of Civil Code section 3294, and that the human resources director ratified the supervisor's conduct by failing to investigate the plaintiff's complaints.  That failure to investigate was directly contrary to the company's written policies for responding to and preventing sexual harassment. 

The employer argued on appeal that the company did not need to investigate in this particular instance because because the plaintiff did not complain about the harassment until after she left the company.  The Court of Appeal rejected that argument, holding that "there is no applicable law or evidence that once an employee leaves an investigation is unnecessary."

The Court of Appeal then reversed the trial court's JNOV, reinstating the full amount of the jury's punitive damages award.  That will be a bitter pill for the corporation's board of directors, who probably thought they had protected the company from this type of award by adopting a policy that required a thorough investigation of any harassment claims.