Earlier this month, our colleague Evan Tager posted about Arizona v. ASARCO, in which the Ninth Circuit granted rehearing en banc to consider how courts should review punitive damages for excessiveness in Title VII cases.  Evan’s prior posts on the case are here and here.  On June 18, the en banc panel heard oral argument.

In a lively 72-minute session led by Chief Judge Kozinski, the panel grappled with a host of interesting issues—including the role of the Due Process Clause in limiting punitive damages in the face of a legislatively imposed cap, the relevance of the ratio guidepost when the jury has awarded nominal damages, and the complexities presented by a single cap that limits punitive and certain compensatory damages.  Our takeaway from the argument (recording available here) is that the Ninth Circuit panel was skeptical of ASARCO’s contention that the punitive award should be reduced beyond the $125,000 that the original panel majority deemed appropriate.  In fact, there is a real possibility that the court may reinstate the district court’s punitive award of $300,000—the maximum permitted under Title VII.

Several members of the panel seemed inclined to the view that the Constitution does not come into play at all when Congress has established a cap on punitive damages—at least when the cap is low enough to impose a meaningful limit.  Indeed, Chief Judge Kozinski—echoed by other judges on the panel—suggested that the Due Process Clause is relevant only when there is no other upper limit on punitive damages.  He asked why the courts should, in his words, not simply “check out” instead of further reviewing punishments for excessiveness when Congress has set a statutory maximum.

That suggestion strikes us as backwards.  As the Second Circuit recently observed in the Payne case mentioned in one of Evan Tager’s previous posts, a federal trial court reviewing a jury award for excessiveness and a federal appellate court reviewing a district court’s determination on that question have “considerably more supervisory authority than the Supreme Court has over the decisions of the highest courts of a State” under the Due Process Clause, and, in the exercise of that authority, “bear the responsibility to ensure that judgments as to punitive damages . . . are not excessive.” Abdication of that responsibility merely because Congress has enacted a statutory ceiling would thus ignore the courts’ general obligation under federal common law to police excessive awards.

The hands-off approach suggested by Chief Judge Kozinski would also be inconsistent with the Seventh Circuit’s analysis in the Hennessy case discussed in Evan’s previous posts, in which the court observed that Congress “did not want Title VII awards, especially of punitive damages, to be excessive as they can be in other areas of the law.”  Because the mere enactment of a cap hardly means that Congress would approve of every Title VII punitive award that is at the statutory maximum, the courts still have a fundamental role to play in reviewing awards within the range permitted by Title VII for excessiveness.  Indeed, counsel for Arizona acknowledged during the argument that courts have the authority to lower Title VII punitive damages awards below the statutory cap.

Concept_Financial Pressure_Money in Vise_2649262LargeIn Hennessy, the Seventh Circuit emphasized that the maximum permissible award available under Title VII “should be reserved for egregious cases.”  Counsel for ASARCO ran with this point, explaining that because Congress has set $300,000 as the maximum punishment, the court should reduce the punitive damages below the cap—and sometimes substantially below it—when the defendant’s conduct is not at the high end of the reprehensibility spectrum.  Chief Judge Kozinski dubbed this approach a “compression regime”—because the maximum punishment for the very worst conduct is set at $300,000 (or less if the jury has awarded compensatory damages), and the effective cap for less terrible conduct is proportionately lower.

The Chief Judge contrasted that scenario to a “non-compression regime” in which courts would apply the $300,000 cap “on the back end”—meaning that they would first determine whether a punitive award is excessive without any reference to the cap, reduce the award accordingly, and then simply lop off any remaining amount above the cap.  As Chief Judge Kozinski undoubtedly recognized, because juries in Title VII cases commonly award more than $300,000 in combined compensatory and punitive damages, the “non-compression” approach would cluster punitive damages awards for conduct that varies widely in reprehensibility at the maximum permitted by statute, instead of reserving higher amounts of punitive damages for cases involving more abhorrent conduct.  Thus, although the Chief Judge seemed quite skeptical of the “compression regime” when he questioned ASARCO’s counsel about it, he also challenged plaintiff’s counsel to explain why it would not be sensible for courts to ensure that any punishment imposed under Title VII is proportionate to the reprehensibility of the misconduct as compared to other cases.

Questioning whether any effort to ensure such proportionality was workable, Judge Berzon and others referred repeatedly to what they deemed the “inverse” relationship between compensatory and punitive damages under Title VII.  Because Title VII idiosyncratically caps the combined total award of both compensatory and punitive damages, these judges observed that the more harmful a defendant’s conduct (and therefore the higher the amount of compensatory damages), the lower the punitive damages available to a plaintiff.  This perplexing feature of the Title VII cap, they implied, indicates that a reviewing court should simply ensure that the combined compensatory and punitive damages do not exceed $300,000 (or the lower cap applicable to smaller employers), and leave it at that.

But the statutory scheme is not as irrational as that line of questioning would suggest; nor does it authorize reviewing courts to abstain from exercising judgment.  As counsel for the EEOC pointed out, the cap applies only to compensatory damages that are difficult to quantify, such as emotional-distress damages.  And as the Supreme Court explained in State Farm, compensatory damages of this nature already contain a “punitive element.”

It is thus entirely sensible for courts to evaluate whether all elements of damages under the Title VII cap—particularly the emotional-distress damages that juries have so little experience quantifying—are excessive in light of the harm to the plaintiff and the reprehensibility of the conduct at issue.  As the Seventh Circuit pointed out in Hennessy, in most employment-discrimination cases, an appropriate total combined award of compensatory and punitive damages will be far less than the statutory maximum.  In other words, the $300,000 ceiling does not represent a pool of money merely to be allocated between compensatory and punitive damages for any prevailing Title VII plaintiff.

One last note:  Towards the close of argument, counsel for ASARCO urged that, because the jury awarded compensatory damages of $1, any award of punitive damages should be less than $2,500—the same ratio of 2500-to-1 that was approved of in a prior Ninth Circuit decision involving an award of nominal compensatory damages.  Our take from the argument is that ASARCO is unlikely to be so lucky.  The court seems poised to downplay the relevance of the precise ratio between compensatory and punitive damages in Title VII cases, at least in cases in which compensatory damages are minimal.  Nonetheless, some of the judges on the panel appeared to recognize that some measure of proportionality is still required in Title VII punitive damages awards, and for the reasons we’ve discussed in our previous posts on the case, the Ninth Circuit should hold that the panel majority’s award of $125,000 was excessive as a matter of federal common law.

As always, stay tuned—we will report on the Ninth Circuit’s decision once it is issued.