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Damage cap bars constitutional challenge

Posner

“When Congress sets a limit, and a low one on the total amount of damages that may be awarded, the ratio of punitive to compensatory damages in a particular award ceases to be an issue of constitutional dignity, though in particular cases it may be higher than the evidence warrants.”

Hon. Richard A. Posner
7th Circuit Court of Appeals

When Congress places a cap on damages, a defendant cannot challenge an award of that amount as unconstitutional, the Seventh Circuit held on Sept. 7. However, the court did hold that the amount may still be reduced as excessive.

Tracey Lust was a sales representative who has been employed in the Madison office of Sealy, Inc., since 1992. Her supervisor was Scott Penters. In 2000 an opportunity opened up for promotion to “Key Account Manager” in Chicago, the key account being a mattress retailer called Bedding Experts.

The appointment would have represented a significant promotion for Lust, who had repeatedly expressed to Penters her avid desire to become a Key Account Manager. Instead the job went to a young man.

Two months later, after Lust filed a sex discrimination claim with the EEOC, Sealy offered, and Lust accepted, a Key Account Manager’s position in the Madison office. The earlier promotion was made not by Penters, but his superior, Al Boulden. However, it was Penters who recommended Lust’s competitor, rather than Lust.

Lust sued Sealy for sex discrimination in violation of Title VII. At trial, Penters admitted he didn’t consider recommending Lust for the Chicago position because she had children and he didn’t think she’d want to relocate her family, even though she had never told him that.

Instead, the evidence showed that she had told him repeatedly that she wanted to be promoted, even though there was no indication that a Key Account Manager’s position would open up in Madison. Boulden testified that he passed over Lust for the Chicago position because he thought her deficient in interpersonal skills and unlikely to want to move to Chicago.

Another reason provided for not giving the promotion to Lust was that the staff at the key account “consisted of foul-mouthed animals,” and Lust had once had an account reassigned to a male sales rep because of the customer’s vulgarity.

The jury found that Sealy had discriminated against Lust because of her sex, and awarded $100,000 in compensatory damages, and $1 million in punitive damages.

Pursuant to 42 U.S.C. 1981a(b)(3)(D), which caps damages in an employment discrimination case at $300,000, U.S. District Judge Barbara B. Crabb reduced the damage award to that amount, plus $1,500 in back pay that is not included in the meaning of “damages.”

Sealy appealed, but the Seventh Circuit affirmed on all issues, in an opinion by Judge Richard A. Posner, save for the amount of damages, which it reduced from $300,000 to $150,000.

Sufficiency of Evidence

The court first held that the evidence was sufficient to support the jury’s finding of discrimination. The court noted that Penters had a history of making sexist remarks to Lust, such as “oh, isn’t that just like a woman to say something like that,” or “you’re being a blonde again today,” or “it’s a blonde thing.”

In addition, on one occasion when Lust expressed an interest in a promotion, Penters asked her “why Jerry [her husband] wasn’t going to take care of” her.

Most important, however, was Penters’ admission that he didn’t think Lust would want to relocate, because she had children. The court remarked, “Realism requires acknowledgment that the average mother is more sensitive than the average father to the possibly disruptive effect on children of moving to another city, but the antidiscrimination laws entitle individuals to be evaluated as individuals rather than as members of groups having certain average characteristics. It would have been easy enough for Penters to ask Lust whether she was willing to move to Chicago rather than assume she was not and by so assuming prevent her from obtaining a promotion that she would have snapped up had it been offered to her (cites omitted).”

The court also found it irrelevant that the promotion decision was made by Boulden, rather than Penters, reasoning, “If Boulden would not have turned down Lust for the promotion had it not been for Penters’ recommendation, a recommendation that the jury could reasonably find was motivated by sexist attitudes, then Penters’ sexism was a cause of Lust’s injury, whether or not Boulden could reasonably be thought a mere cat’s paw.”

The court also found that Boulden’s motivations were suspect, because he did promote her two months later, but said he would not have given her the Chicago promotion because of weak interpersonal skills. The court found it proper for the jury to find the quick promotion inconsistent with a genuine belief that she lacked good personal skills.

As for the assumption that the account in Chicago would have been difficult for Lust because the staff were “foul-mouthed animals,” the court concluded, “One possible inference is that Lust is too prissy for Sealy’s roughest customers. But another is that Sealy merely assumes that women can’t deal with foul-talking men; and that is an impermissible assumption, another example of stereotypical thinking.”

What the court held

Case: Tracey Lust v. Sealy, Inc.
, No. 03-3496.

Issue: Can a defendant raise a due process challenge to an award of punitive damages, when the damages fall within a statutory cap set by Congress?

Holding: No. When Congress sets a limit on the total amount of damages, the amount of punitive damages ceases to be a constitutional issue.

Counsel: Robert J. Gingras, Madison, for plaintiff; Lauri D. Morris, Madison, for defendant.

Evidentiary Issues

Turning to evidentiary issues, the court held that it was proper for the trial court to admit Penters’ earlier sexist comments.

The court acknowledged that the statements could not be actionable in themselves because of the statute of limitations, and because they are too trivial to constitute sexual harassment. Nevertheless, the court found that it was reasonable for the lower court to conclude that the statements were relevant to cast light on Penters’ mindset, and were therefore admissible.

The court also upheld the trial court’s exclusion of three memos that Boulden wrote after Lust complained to him that she had been passed over for promotion for discriminatory reasons.

Finding the memos to be hearsay, the court remarked, “There is no more facile a method of creating favorable evidence than writing a self-exculpatory note. Such notes have no warrants of reliability and allowing them to be placed in evidence would operate merely as a subsidy to the forest-products industry.”

The court found that the notes do not fit into any exception to the hearsay rule, finding them neither spontaneous utterances, nor business records. As for the former exception, the court observed, “Boulden was hardly under emotional pressure when he was writing these memos, and their length, lucidity, and self-congratulatory tone all refute any inference of spontaneity.”

With respect to the latter exception, the court wrote, “They were business records in the literal sense … of being documents created for a business purpose — namely to create evidence of nonliability! They were not the kind of business record to which the business-records exception to the hearsay rule refers. … Their only purpose was to create evidence for use in Lust’s anticipated lawsuit, and that purpose disqualifies them from admission as business records.”

Damages

Turning to the issue of damages, the court held that Sealy could not challenge the punitive damage award as a violation of due process.

Citing cases from the First and Tenth Circuits, the court concluded, “when Congress sets a limit, and a low one on the total amount of damages that may be awarded, the ratio of punitive to compensatory damages in a particular award ceases to be an issue of constitutional dignity, though in particular cases it may be higher than the evidence warrants.”

Noting, “The purpose of placing a constitutional ceiling on punitive damages is to protect defendants against outlandish awards,” the court concluded, “That purpose falls out of the picture when the legislature has placed a tight cap on total, including punitive, damages and the courts honor the cap.”

Related Links

7th Circuit Court of Appeals

Related Article

Case Analysis

Nevertheless, the court reduced the punitive damage award, as excessive, concluding that permitting the maximum award under the statute would “impair marginal deterrence.”

The court reasoned, “If Sealy must pay the maximum damages for a relatively minor discriminatory act, it has no monetary disincentive (setting aside liability for back pay) to escalate minor into major discrimination. It’s as if the punishment for robbery were death; then a robber would be more inclined to kill his victim in order to eliminate a witness and thus reduce the probability of being caught and punished, because if the murdering robber were caught he wouldn’t be punished any more severely than if he had spared his victim.”

Because Sealy quickly rectified the discrimination by making Lust a key account manager two months after the promotion about which she complained, the court reduced the award in half to $150,000, with instructions on remand that Sealy is entitled to a new trial, unless Lust accepts the remittitur.

Click here for Case Analysis.

David Ziemer can be reached by email.

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