Compensatory Damages, Punitive Damages and Remittitur under federal, NY State and NY City Law (Continued)

Compensatory Damages, Punitive Damages and Remittitur under federal, NY State and NY City Law (First Part)

Large Awards for Emotional Distress Under the City Law are Surviving Judicial Review

The City Law and the Restoration Act are unlike any other remedial statutes. The legislative history of both acts makes plain that the City Council expressly chose to give plaintiffs more generous compensation for injuries than state or federal law. See, e.g., A Return to Eyes on the Prize: Litigating Under the Restored New York City Human Rights Law,” 33 Fordham Urb. L.J. 255 (2006)(The City Human Rights Law’s purposes are said to be not only uniquely broad, they are uniquely broad and remedial.” One of the core principles intended by the Council to guide decision makers is that “victims of discrimination suffer serious injuries, for which they ought to receive full compensation.” (quoting the 2005 Committee Report at 5))

Since the Restoration Act was passed in October 2005, two of the three courts sustaining large emotional distress award expressly relied on the intent of the City Council in passing the Restoration Act, in denying remititur motions.

A $ 2 million compensatory damages award was sustained in Jordan v. Bates Advertising Holdings, Inc., 11 Misc.3d 764, 770-771, 2006 N.Y. Slip Op. 26046, 4 - 5 (NY,2006), reversed on other grounds, 46 A.D.3d 440, 848 N.Y.S.2d 127, 2007 WL 4531803 (N.Y.A.D. 1 Dept.), expressly in reliance on the liberal policies behind the City Law and the Restoration Act. Justice Acosta, a former Commissioner of the NYCCHR, explained that:

[I]n enacting the more protective Human Rights Law, the New York City Council has exercised a clear policy choice which this court is bound to honor. The Administrative Code's legislative history clearly contemplates that the New York City Human Rights Law be liberally and independently construed with the aim of making it the most progressive in the nation. Thus, the case law that has developed in interpreting both the state Human Rights Law and title VII of the Civil Rights Act of 1964 should merely serve as a base for the New York City Human Rights Law, not its ceiling. (See also Local Law No. 85 [2005] of City of New York § 1 [Local Civil Rights Restoration Act of 2005]; Council Report of Governmental Affairs Div, Comm. on General Welfare, Aug. 17, 2005.) In the present case, although plaintiff has clearly established her claims under the more restrictive state and federal standards, when possible, the court will conduct its analysis under the New York City Human Rights Law.

In Sorrenti, supra, the defendants objected to the $491,706 as excessive and an alleged product of judicial bias evidenced by the court’s instruction to the jury under the City Law. The court found that the defendants' reliance on the instruction was misplaced, because the allegedly biased liberal language was in the statute itself. In its opinion the court credited plaintiff's position that: the court properly instructed the jury with the proper statutory standard ( see New York City Human Rights Law [“HRL”] § 8-107[7] ) to apply when considering whether defendants retaliated against plaintiffs by subjecting them to adverse employment actions after they engaged in protected activity. . . . See N.Y.C. Adm.Code § 8-107 et seq., as amended by the Local Civil Rights Restoration Act of 2005 (“LCRRA”). Sorrenti v. City of New York 2007 WL 2772308, 3 (N.Y. Sup.,2007)

In denying remittitur of a $4 million award for compensatory damages in Osorio v. Source Enterprises, Inc., 2007 WL 683985 (S.D.N.Y.) (S.D.N.Y.,2007) Judge Rakoff did not expressly cite the legislative history of the City Law, but it is unlikely an award of this size would have been sustained under State or Federal law standards of review. See infra for a discussion of State and Federal remittitur standards.

In 2004, prior to the passage of the Restoration Act, the court granted remittitur of a $2 million jury award for emotional distress to $1.1 million under State and City Law, in Gallegos v. Elite Model Mgmt. Corp., 1 Misc.3d 907(A) (N.Y. Sup. Ct. 2004), vacated on other grounds, 28 A.D.3d 50 (N.Y. App. Div. 2005)(empanelling alternate jurors after deliberations began required new trial on damages). In explaining the emotional distress award the court stated, "The repeated failure to observe the non-smoking law in the light of petitioner's [asthma] and the tolerance of cruel practical jokes evinced a reckless disregard for the plaintiff's physical health and was reprehensible." 2004 N.Y. Slip Op. 50000(U) at 5. The court sustained an award of $2.6 million for punitive damages without reduction. Id.

Also under the City Law, the First Department held that a victim of extremely crude sexual harassment was entitled to approximately $600,000 for emotional distress. McIntyre v. Manhattan Ford, Lincoln-Mercury, Inc., 256 A.D.2d 269, 271, 682 N.Y.S.2d 167 (1^st Dep’t 1998). Plaintiff saw a psychiatrist who testified at trial. McIntyre v. Manhattan Ford, Lincoln-Mercury, Inc., 175 Misc.2d 795, 800, 669 N.Y.S.2d 122, 127 (N.Y.Sup.,1997). The jury initially awarded $1.6 million in compensatory damages and $5 million in punitive damages. The lower court granted remittitur to $650,000 and $3 million in punitive damages. The First Department reduced the punitive damages to $1.5 million but allowed the plaintiff to keep all but $50,000 of the compensatory award.

See also Katt v. City of New York, 151 F.Supp.2d 313, 369 (S.D.N.Y.,2001)(denying remittitur of $400,000 under the City Law).

Statutory State of Mind Requirement

In Kolstad v American Dental Assn. (527 US 526, 529-530 [1999]), the Court held that "punitive damages [under Title VII] are limited . . . to cases in which the employer has engaged in intentional discrimination and has done so 'with malice or reckless indifference to federally protected rights of an aggrieved individual.'" According to the Court, "malice and reckless indifference" refer to "the employer's knowledge that it may be acting in violation of federal law, not its awareness that it is engaging in discrimination." (Id. at 535.) As the court held in Hill v Airborne Frgt. Corp. (212 F Supp 2d 59, 76 [ED NY 2002]), it is reasonable for juries to infer that employers have acted in violation of the law "simply by virtue of the well-established Supreme Court case law on discrimination and retaliation, the long standing statutory scheme proscribing such conduct, the size of [the employer defendant] and the common knowledge in today's society that employment discrimination is impermissible."

As a practical matter this standard will ordinarily not be difficult for plaintiffs to meet.

There is case law which holds (without explanation) that the state of mind requirement under Title VII and the City Law for the imposition of punitive damage is the same. As Justice Acosta held in Jordan v. Bates Advertising Holdings, Inc., 11 Misc.3d 764, 776, 2006 N.Y. Slip Op. 26046, 9 (NY Sup. 2006) reversed on other grounds, 46 A.D.3d 440, 848 N.Y.S.2d 127, 2007 WL 4531803 (N.Y.A.D. 1 Dept.), plaintiff must prove the employer's knowledge that it may be acting in violation of law:

In analyzing whether to sustain an award of punitive damages under the New York City Human Rights Law, state courts apply the same framework used by the federal courts in actions brought pursuant to title VII of the Civil Rights Act of 1964. (Farias v Instructional Sys., Inc., 259 F3d 91, 101-102 [2d Cir 2001].)

Justice Acosta provided no explanation for his conclusion that Title VII case law should be imported to construe the more liberal City Law, and the case he cited for support, a pre-Restoration Act case, clearly misstates the law. See Farias v. Instructional Systems, Inc., 259 F.3d 91, 101 (C.A.2 (N.Y.),2001)(“discrimination claims brought under the Administrative Code are generally analyzed within the same framework as Title VII claims”).

As one commentator noted:

Given the City Human Rights Law’s overriding concern that covered entities be made to recognize the seriousness with which they must take their obligations, advocates will likely question why a defendant who recklessly disregards the risk that its conduct will harm the plaintiff should not, as a matter of local law, be liable for punitive damages. Such conduct is blameworthy regardless of whether the defendant is disregarding, as required by Kolstad, a known risk of violating the law.

A Return to Eyes on the Prize: Litigating Under the Restored New York City Human Rights Law, 33 Fordham Urb. L.J. 255, 318 (2006).

However, as a practical matter, the standard will virtually always be met when the plaintiff proves intentional discrimination.

Affirmative Defenses

In Kolstad the Supreme Court also created an affirmative defense to liability for punitive damages under Title VII when the defendant can show that "the discriminatory employment decisions of managerial agents . . . are contrary to the employer's “good-faith efforts to comply with Title VII.” Kolstad v. American Dental Ass'n, 527 U.S. 526, 545, 119 S.Ct. 2118, 2129 (U.S.,1999).

As Justice Acosta explained in Jordan, this safe harbor is unavailable as a defense to liability for punitive damages under the City Law because the City Law expressly allows only mitigation of the amount of punitive damages; it does not permit the defendant to avoid liability for punitive damages entirely:

"the New York City Human Rights Law has made good faith compliance procedures only a factor to be considered in mitigation of punitive damages, rather than a complete defense." (Thompson v American Eagle Airlines, Inc., 2000 WL 1505972, *11, 2000 US Dist LEXIS 14932, *33 [2000]; Administrative Code § 8- 107 [13] [e].) These safe harbor provisions allow an employer to plead and prove various factors where liability for discriminatory conduct is based "solely on the conduct of an employee, agent, or independent contractor." (§ 8-107 [13] [d].) Among the factors that can be pleaded is a "meaningful and responsive procedure for investigating complaints" and a "firm policy against such practices which is effectively communicated." (See Administrative Code § 8-107 [13] [d] [1] [i], [ii].) An employer, however, cannot mitigate damages simply by having a responsive procedure in writing. As the statute clearly and logically states, the procedure must be "meaningful."

Jordan, supra, 11 Misc.3d at 777-778.

Justice Acosta also explained why the defendant in Jordan was unable to rely on the mitigation factors to reduce the $500,000 award of punitive damages:

although defendant had a nondiscriminatory policy in place, Bennett, the EEO compliance officer in this large and sophisticated national corporation, took no steps to discipline or otherwise counsel two supervisory personnel (one of whom plaintiff testified was Fidoten) whom he heard call plaintiff a "cripple."

Jordan, supra, 11 Misc.3d at 778.

The entire set of factors on which the jury must be instructed under the City Law are:

4. Where liability of an employer has been established pursuant to this section and is based solely on the conduct of an employee, agent, or independent contractor, the employer shall be permitted to plead and prove that prior to the discriminatory conduct for which it was found liable it had:
   1. Established and complied with policies, programs and procedures for the prevention and detection of unlawful discriminatory practices by employees, agents and persons employed as independent contractors, including but not limited to:
      1. A meaningful and responsive procedure for investigating complaints of discriminatory practices by employees, agents and persons employed as independent contractors and for taking appropriate action against those persons who are found to have engaged in such practices;
      2. A firm policy against such practices which is effectively communicated to employees, agents and persons employed as independent contractors;
      3. A program to educate employees and agents about unlawful discriminatory practices under local, state and federal law; and
      4. Procedures for the supervision of employees and agents and for the oversight of persons employed as independent contractors specifically directed at the prevention and detection of such practices; and
   2. A record of no, or relatively few, prior incidents of discriminatory conduct by such employee, agent or person employed as an independent contractor or other employees, agents or persons employed as independent contractors.

These factors taken as a whole create a far greater burden of proof on the employer in order to mitigate a punitive damages award than the "good-faith efforts" standard created by the Court in Kolstad. In addition, they are unavailable when the defendant is directly liable, as opposed to vicariously liable, for the actions of its employees.

The Constitutional Standard for Punitive Damages: Due Process

Reprehensibility and the ratio of compensatory to punitive damages are the constitutional factors most likely to be fought over by the parties in post-trial motions. However, as a practical matter, during mediation, the salient point is that even in fairly mundane cases punitive damages operate as a damages multiplier, and in a strong case, with extremely bad facts, they can easily produce a significant and defensible award in excess of policy limits.

Judge Lynch recently summarized the due process standard as follows:

In BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), the Supreme Court identified three “guideposts” for determining whether a punitive damage award is excessive: (1) the degree of reprehensibility of the defendant’s conduct; (2) the disparity between the harm or potential harm and the punitive damages award, or in other words, the proportion or ratio of punitive damages to compensatory damages; and (3) the difference between the remedy and the civil penalties authorized or imposed in comparable cases. Id. at 574-75.

Tse v. UBS Financial Services, Inc., 2008 WL 463719, 25 (S.D.N.Y. 2008).

As Judge Lynch noted, “Gore instructs that the Court should first consider the ratio of the punitive damages award to compensatory damages, including back pay.” Id. at 29

In State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425, 123 S.Ct. 1513, 1524 (U.S.,2003), the Court helpfully added that:

We decline again to impose a bright-line ratio which a punitive damages award cannot exceed. Our jurisprudence and the principles it has now established demonstrate, however, that, in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process. In Haslip, in upholding a punitive damages award, we concluded that an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety.

As a practical matter, most judges in NY are going to be leery of a jury award of punitive damages in excess of a multiple of four times compensatory plus economic damages, in the absence of conduct which is extremely reprehensible. However, as discussed below, there are cases which have upheld awards of close to the maximum of a ten-to-one ratio.

Tse, supra, is an example of how punitive damages act as a multiplier in a disparate treatment case based on circumstantial evidence; the type of case which is less likely to produce severe psychological injury.

The court reduced a $500,000 economic damages award to $45,000. Adding the $56,000 the jury had awarded for emotional distress to the reduced $45,000 for a total "compensatory" damage amount of $101,000, the court reduced the punitive damages award from $3 million to $300,000, which it now found comported with due process and State Farm. The plaintiff took $401,000, which is an astounding accomplishment by her counsel, if you read the facts of this case carefully.

A case which involves a seriously abusive hostile work environment can produce a constitutionally permissible seven figure punitive damages award for a single plaintiff.

In Gallegos v. Elite Model Mgmt. Corp., 781 N.Y.S.2d 624, 2004 WL 51604, 2004 N.Y. Slip Op. 50000(U), 5 (N.Y.Sup. 2004), the trial court sustained a $2.6 million punitive damages award. The court explained:

The evidence adduced at trial was certainly sufficient to justify an award of punitive damages. Under State Farm v. Campbell, 538 US 408, 155 L.Ed2d 585 [2003], due process considerations make it necessary to consider the fairness of the awards. The most important consideration is the reprehensibility of the conduct. The repeated failure to observe the non-smoking law in the light of petitioner's [asthma] and the tolerance of cruel practical jokes evinced a reckless disregard for the plaintiff's physical health and was reprehensible. We are also instructed to consider the disparity between the harm endured by plaintiff and the difference between the punitive damages awards and the civil damages awards in similar cases. The Court holds that the reprehensibility of the defendants' conduct, combined with a $2.6 million award for punitive damages as compared to a $1.1 million dollar award for pain and suffering fully satisfied due process.

In McIntyre v. Manhattan Ford, Lincoln-Mercury, Inc., 256 A.D.2d 269, 271 (1st Dep't 1998), where the operative compensatory damages award was about $600,000, the First Department found that the $2.5 million of punitive damages awarded by the jury met the reasonable relationship standard, "10 to 1 as an outside ratio," but nonetheless reduced the punitive damages award to $1.5 million, about a 3 to 1 ratio.

The highest ratio of punitive to compensatory (including economic damages) found in a NY case in the Second Circuit was about 3.75 to 1 in Greenbaum v. Handelsbanken, 67 F.Supp.2d 228, 270-71 (S.D.N.Y.,1999).

In state court the highest ratio was close to 10 to 1, in Bell v. Helmsley, 2003 WL 1453108, 6 (N.Y.Sup.) (N.Y.Sup.,2003), where the compensatory damages were $54,000 and the Justice reduced the jury $10 million expression of contempt for the Queen of Mean to $500,000. In the court's analysis:

Finally, this Court must consider the requirement that the punitive damages bear a reasonable relationship to the amount of compensatory damages. This Court notes that in BMW v. Gore, supra (517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809), the Supreme Court of the United States suggested 10:1 as the outside ratio of punitive to compensatory damages. This Court deems this ratio appropriate in the instant matter given the nature of defendants' reprehensible conduct, the plaintiff's sustainable compensatory damages, the defendants' financial condition, and the likelihood that defendants will also bear the responsibility of a significant award of attorney's fees. The compensatory damages in this matter total some $54,000 and under the circumstances the court deems $500,000 to be the outer permissible limits on punitive exemplary damages and accordingly, reduces the award to that amount. Id. at 6.

The court provided this additional explanation: “Punitive damages, are not a game of Lotto and more particularly to the matter at hand, Mrs. Helmsley is not a 4 Billion Dollar piñata for every John, Patrick or Charlie to poke a stick at in the hopes of hitting the jackpot.”

Remittitur is a procedure whereby a court offers the plaintiff the option of accepting a reduced damage award set by the court as an alternative to a new trial. It is applied when the court finds that the jury's award of damages was excessive. Ramirez v. New York City Off-Track Betting Corp., 112 F.3d 38, 40 (2d Cir. 1997). As described more fully below, the standard of what constitutes excessive varies depending on whether the cause of action arises under federal, state or city law.

Remittitur is not an option when the court finds that the verdict on damages was infected by "fundamental error," id., such as where the jury erroneously awards damages for a claim which was time barred.

Remittitur of Emotional Distress Awards under Federal Law

The standard of review of jury verdicts rendered under federal laws, such as Section 1981 and Section 1983 (which do not cap damages), as well as Title VII, is that remittitur should be granted only if the verdict "shocks the conscience of the court." E.g. Consorti v. Armstrong World Indus., Inc., 72 F.3d 1003, 1011 (2d Cir. 1995).

If a district court finds the verdict warrants remittitur, it may reduce the award “'only to the maximum amount that does not shock the conscience' to ensure that the jury's decision will be disturbed as little as possible. Trademark Research Corp. v. Maxwell Online, Inc., 995 F.2d 326, 337 (2d Cir. 1993)." Ramirez v. New York City Off-Track Betting Corp. 1996 WL 210001, * 5 (S.D.N.Y.) (S.D.N.Y.,1996)

As the US Supreme Court explained, appellate review of the district court's decision on remittitur is extremely deferential, and it makes no difference whether the appellate court reviews the district court's application of the federal “shocks the conscience” standard, or the appropriate NY State or NY City Law standard (see infra). "[P]ractical reasons combine with Seventh Amendment constraints to lodge in the district court, not the court of appeals, primary responsibility for application of [the correct standard]. Trial judges have the “unique opportunity to consider the evidence in the living courtroom context, while appellate judges see only the cold paper record. Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 438, 116 S.Ct. 2211, 2225 (U.S. 1996)(citations and quotes omitted)

Remittitur of Emotional Distress Awards under NY Executive Law § 296

We found no NY Court of Appeals decision determining the standard of review of Emotional Distress Awards under NY Executive Law § 296 from a jury verdict. The NY Court of Appeals announced the standard of review of an award of the Commissioner in Division of Human Rights in NYC Transit Authority v. State Div. of Human Rights, 78 N.Y.2d 207, 216-219 (N.Y. 1991), as (1) the existence of a compensable mental injury reasonably related to the wrongdoing, (2) whether the award was supported by some evidence of the magnitude of the injury, and (3) how the award compared with other awards for similar injuries.

The Second Circuit has now clarified that the Transit Authority standard should also be applied to review remittitur motions arising from a jury verdict. Brady v. Wal-Mart Stores, Inc., 455 F.Supp.2d 157, 190 (E.D.N.Y. 2006), aff’d, sort of, Brady v. Wal-Mart Stores, Inc., 2008 WL 2597936, 9 (2d Cir. 2008)(“either the district court correctly applied the Transit Authority standard, or it erred in a way that harmed Appellee-by applying the “deviates materially” standard-but Appellee has not protested”).

Various courts have used different remittitur standards in reviewing emotional distress awards under the City Law, so the precise standard is not clear. What is clear is that it is a very generous and deferential standard.

The Restoration Act's focus was the "sense of the [City] Council that New York City's Human Rights Law has been construed too narrowly to ensure protection of the civil rights of all persons covered by the law" (Restoration Act § 1). The Restoration Act specifically amended Section 8-130 of the Human Rights Law (the section that provides direction as to how to interpret the law) in two key respects: first, to characterize the purposes of the law as " uniquely broad and remedial," and, second, to direct that the provisions of the law be interpreted liberally to accomplish those purposes, regardless of whether counterpart state and federal provisions have been likewise liberally construed. There is no carve out for the damages provisions of the law, which are further reaching than the comparable federal and state laws. As such, any judge must exercise caution before acting as though the limitations in damage awards under state or federal law were applicable in the City Law context.

Finally, a warning against reflexively reducing verdicts is explicitly included in the legislative history. The Committee Report states, "Under the bill’s provisions, a number of principles should guide decision makers when they analyze claims asserting violations of rights protected under the City’s human rights law: discrimination should not play a role in decisions made by employers, landlords and providers of public accommodations; traditional methods and principles of law enforcement ought to be applied in the civil rights context; and victims of discrimination suffer serious injuries, for which they ought to receive full compensation."

The Council, therefore, had the protection of full compensation listed as one of the core principles that decision makers must always consider—a powerful indicator that the Council was more concerned about under compensation than about over-compensation. Also, since the Council saw every discrimination injury (even "garden variety" injuries) as serious, the term "full compensation" must mean just that and it includes redress for relatively minor discrimination injuries. As discussed supra, there is evidence which suggests that state and federal courts are heeding to the Restoration Act and the dictate to award full compensation.

In addition, the City Law creates a mechanism whereby an employer can mitigate (but not avoid liability for) punitive damages, however, it is completely silent regarding a mechanism for mitigation of compensatory damages. This, too, is a legislative counterweight to reduction of compensatory damages verdicts.

In two cases denying remittitur under the City Law, the courts determined that the evidence on compensatory damages was sufficient to survive a motion for a new trial, and denied the remittitur motion as well, without comparing the size of the verdict with other awards.

In Jordan v. Bates Advertising Holdings, Inc., 11 Misc.3d 764, 776, 816 N.Y.S.2d 310, 321-322 (N.Y.Sup. 2006), reversed on other grounds, 46 A.D.3d 440, 848 N.Y.S.2d 127, 2007 N.Y. Slip Op. 10465 (N.Y.A.D. 1 Dept. Dec 27, 2007), Justice and former NYCCHR Commissioner Acosta refused to reduce a $2 million jury award for compensatory damages because there was adequate evidence in the record that the plaintiff had suffered the loss for which the award was made--unrebutted expert testimony. He went on to analyze the $500,000 punitive damages award under the factors spelled out in the statute.

In Osorio v. Source Enterprises, Inc., 2007 WL 683985 (S.D.N.Y.,2007), Judge Rakoff denied remittitur of a $4 million compensatory damage award under NY City and State law. For evidentiary support, Judge Rakoff relied on the fact that the jury was entitled to credit plaintiff's testimony that defendant's termination of her employment in retaliation for complaining about sexual harassment, and concomitant loss of reputation, caused her significant emotional distress. 2007 WL 683985, 5.

Unfortunately, neither of these courts explained why they had chosen the standard of review they used, and the First Department reversed on liability in Jordan, so it did not have a chance to comment on the standard of review under the City Law of a jury verdict.

The First Department applied the three part test set forth by the Court of Appeals in Transit Authority, discussed infra, in denying remittitur of a $100,000 emotional distress award of the Commissioner of the NYC CHR, in 119-121 East 97th Street Corp. v. New York City Com'n on Human Rights, 220 A.D.2d 79, 87, 642 N.Y.S.2d 638, 643 (1st Dep't 1996).

In Sorrenti v. City of New York, 2007 WL 2772308, 8 (N.Y.Sup. 2007), the court noted that trial courts may apply the "material deviation standard" but should exercise their discretion sparingly, and "undertake this review and analysis with caution not to rigidly adhere to precedents (because fact patterns and injuries in cases are never identical) and/or substitute the court's judgment for that of the jurors whose primary function is to assess damages," in denying remittitur of a $491,706 emotional distress award.