Ninth Circuit SealIt’s not often that federal courts of appeals agree to decide punitive damages cases en banc, so Arizona v. ASARCO, which the Ninth Circuit will rehear en banc on June 18, strikes us as worthy of attention.  In fact, because the case potentially implicates a number of very important issues in the law of punitive damages, my colleagues and I plan to do a series of posts on the case.

So as not to bury the lead, let me say at the outset that I think that the parties and the original Ninth Circuit panel are looking at the issues in this case through the wrong lens.  I’ll explain what I mean later in the post.

The facts of the case are fairly straightforward.  Angela Aguilar worked in a variety of capacities at an ASARCO mining facility for a few months in 2006.  She alleges that during her time there, she was subjected to a sexually hostile environment as a result of three unrelated series of incidents.

First, she alleges that she was subjected to unwanted advances by a fellow employee over the course of the roughly one-month period during which they worked together.  Second, she alleges that she was the target of pornographic graffiti in a portable toilet that had been installed for her use because the facility lacked a bathroom for women.  Third, she contends that a supervisor, who was known for being boorish toward all subordinates, was harsher to her than he was to male employees.

Aguilar and the State of Arizona each filed actions against ASARCO alleging hostile environment, retaliation, and constructive discharge.  A jury rejected the retaliation and constructive-discharge claims, but found ASARCO liable under Title VII for creating a hostile environment.  The jury found that Aguilar suffered no actual damages, however, so it awarded $1 in nominal damages, plus punitive damages of $868,750.

ASARCO filed post-trial motions, contending among other things that, even if reduced to the maximum permitted under Title VII—$300,000—the punitive award was unconstitutionally excessive.  The district court concluded that the amount awarded by the jury was not unconstitutionally excessive, and accordingly simply reduced the punitive damages to $300,000.  On appeal, a divided panel of the Ninth Circuit held that a $300,000 punishment is unconstitutionally excessive, principally because of the 300,000:1 ratio of punitive to compensatory damages.  The majority ordered a remittitur of the punitive damages to $125,000, the highest amount that any court had previously approved in a case in which the compensatory damages were $1.

Both sides sought rehearing en banc—ASARCO contending that a ratio of 125,000:1 remains unconstitutionally excessive, and Aguilar and Arizona contending that a punishment at the cap can’t be unconstitutionally excessive.

As alluded to above, I think that the parties, the district court, and the Ninth Circuit panel all have missed the analytical mark.  That is because the Constitution comes into play in a case governed by federal law only if Congress constrained the courts’ common-law authority to reduce a punitive award to an amount the court considers not to be excessive, which Congress did not do in Title VII.

As the Second Circuit has recently observed, at least insofar as claims governed by federal law are concerned, there is no need to invoke the Constitution because federal courts have supervisory authority to ensure that punitive damages awards are not excessive—“considerably more supervisory authority than the Supreme Court has over the decisions of the highest courts of a state” under the Due Process Clause.  “It therefore follows that a degree of excessiveness less extreme than ‘grossly excessive’ will justify a finding that supports imposing a remittitur” in cases brought under federal law—including cases that may be subject to a cap.

In other words, because this case arises under federal law—i.e., Title VII—the focus shouldn’t be on the Constitution, but on whether the punitive award against ASARCO is excessive under federal common law.  Indeed, the Seventh Circuit employed just such an approach in a Title VII case that predated the Supreme Court’s articulation of the constitutional excessiveness guideposts.  As the court explained in ruling that the Title VII cap does not limit the power of federal courts to reduce awards to amounts below the cap:

When Congress permitted, for the first time, awards of compensatory and punitive damages in Title VII cases, it was concerned with keeping those damages under reasonable control.  It did not want Title VII awards, especially of punitive damages, to be excessive as they can be in other areas of the law.

It follows, the court reasoned, that not every punitive award that is 100% of the statutory ceiling is insulated from reduction under the statute.  “It would seem logical,” instead, “that the maximum permissible award . . . should be reserved for egregious cases.”

In other words, courts confronted with the question “whether 100 percent of the available damages [under Title VII] can be soaked up by a punitive damage award” must place the defendant’s conduct on a spectrum.  If the conduct is among the worst covered by the statute, a punishment at or near the cap would be appropriate.

But conduct that is not at the high end of the range of punishable conduct cannot support a punitive exaction at or near the cap.  In the case before the Seventh Circuit panel, for example, a punitive award at the cap could not be justified, “given the much more egregious nature of some sex discrimination cases”—for example, the legion of ‘quid pro quo’ sexual harassment cases.”

Notice that this approach does not require courts to track through the five reprehensibility factors identified in State Farm, however inapt they may be for employment cases.  Instead, the focus is on comparing the conduct in the case before the court to other conduct punishable under the statute.  Using the facts of Arizona v. ASARCO, I will illustrate what I mean in a forthcoming post.