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Punitive Damages Case Analysis

In addition to the court’s holding for the first time that a defendant cannot raise a due process argument to a punitive damage award where Congress has set a statutory cap, the case is noteworthy for several significant discussions, although much of it is merely dicta.

First is the court’s renunciation of the “cat’s paw” theory of supervisor liability for employment discrimination. The court acknowledged that it is the one responsible for the theory, stating in Shager v. Upjohn Co., 913 F.2d 398, 404-405 (7th Cir. 1990) that, in order for a subordinate’s discriminatory motives to be imputed to a supervisor, the supervisor must be merely the “cat’s paw” of the subordinate.

Abandoning the “cat’s paw” language in favor of traditional causation terminology, the court wrote, “If Boulden [supervisor] would not have turned down Lust for the promotion had it not been for Penters’ [subordinate] 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 though a mere cat’s paw.”

Also noteworthy is a passage of dicta in which the court suggests that the spontaneous utterance exception to the hearsay rule should be abandoned.

The court wrote, “The rational for these exceptions is that spontaneous utterances, especially in emotional circumstances, are unlikely to be fabricated, because fabrication requires an opportunity for conscious reflection. As with much of the folk psychology of evidence, it is difficult to take this rationale entirely seriously, since people are entirely capable of spontaneous lies in emotional circumstances. ‘Old and new studies agree that less than one second is required to fabricate a lie.’ Douglas D. McFarland, ‘Present Sense Impressions Cannot Live in the Past,’ 28 Fla. St. U. .L. Rev. 907, 916 (2001). It is time the law began paying attention to such studies (cites omitted).”

While the court likely lacks authority to hold that the exception no longer applies in the Seventh Circuit, the discussion should be viewed as an invitation, in an appropriate case, to at least severely limit application of the rule as much as possible. In addition, the court’s statement, “as with much of the folk psychology of evidence,” suggests that there may be a host of other evidentiary rules that the court deems to be based on nothing more than unfounded assumption.

A discussion by the court of the methodology to be used when reducing damages to comply with a statutory cap is also instructive.

In the case at bar, the district court apportioned damages as follows: $27,000 in compensatory damages, and $273,000 in punitive damages, roughly consistent with the 1 to 10 ratio that the jury awarded in setting compensatories at $100,000 and punitives at $1 million.

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The court noted that it has upheld the method of apportionment when district courts have taken the entire cut out of punitives, and others that have taken the entire amount out of compensatory damages.

No party challenged the methodology in the case at bar, but the court suggested that the best method is none of the three: “Since in a normal suit punitive damages are something added on by the jury after it determines the plaintiffs’ compensatory damages, probably the sensible thing for the judge to do is not to make a pro rata reduction, as here, but instead to determine the maximum reasonable award of compensatory damages, subtract that from $300,000, and denote the difference punitive damages.”

Thus, besides holding that constitutional challenges to punitive damages may not be made in employment discrimination cases, and explicitly adopting traditional causation analysis in determining whether a subordinate’s discriminatory motives can be imputed to a superior decision maker, the case provides grounds for challenges to (at a minimum) the spontaneous utterance exception to the hearsay rule, and a suggested methodology for apportioning compensatory and punitive damages where a damage cap exists.

– David Ziemer

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David Ziemer can be reached by email.

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