Betts v. Costco Wholesale Corp., Nos. 07-2103/2217 (6th Cir. Mar. 5, 2009); Dotson v. Pfizer, Inc., No. 07-1920 (4th Cir. Mar. 4, 2009)

| Mar 4, 2009 | Daily Developments in EEO Law |

Two cases today on damages following successful jury trials: (1) in the Sixth Circuit, a pyrrhic victory for three plaintiffs who hold on to their liability findings (for racial harassment under the Michigan Elliott-Larsen civil rights act), but lose all but nominal damages on appeal; and (2) in the Fourth Circuit, an FMLA plaintiff keeps all he won at trial and wins a remand for more relief.

Betts v. Costco Wholesale Corp., Nos. 07-2103/2217 (6th Cir. Mar. 5, 2009):  After two trials (the first ending in deadlock) three out of six plaintiffs prevailed in their claims that they suffered a racially hostile work environment because of their manager in Costco’s Warehouse 390 in Livonia, Michigan.  Two plaintiffs are awarded emotional distress damages and all receive back pay.  The district court denies motions for judgment as a matter of law, but zeroes out the lost-pay claims because the jury found for Costco on the discriminatory termination claims.

Applying Michigan law, the panel affirms liability, affirms denial of back pay and vacates the compensatory awards, leaving the three successful plaintiffs with nominal damages on remand. Regarding liability, it rejects Costco’s argument that under Michigan law only the harassment expressly directed at each employee could be considered in determining whether the harassment was severe or pervasive as to each.  The panel observes that there were two stories painted at trial: 

“Under the first scenario, [the manager] Sullivan’s tendency to make racially insensitive remarks is indicative of poor taste and a bad sense of humor, but the remarks were not intended to create, nor in fact created, a hostile atmosphere for black employees. . . .  But there is a second scenario that also fits the facts. Several black employees voiced similar complaints about Sullivan’s systematic racial bias. Sullivan compared Warehouse 390 to a plantation on two separate occasions. These comments reveal Sullivan’s managerial philosophy with respect to his black employees: they were second-class citizens and would be treated accordingly.”

The court also affirms the finding that the harassment could be imputed to Costco, because at least one executive (a VP) had been informed of the harassment allegations.

A majority of the panel vacates emotional distress damages for the two plaintiffs. It held that there was insufficient evidence of distress caused by the harassment at Warehouse 390:

“There is no material evidence in the record regarding any emotional distress that Lewis suffered as a result of Costco’s hostile work environment. Her distress flowed instead from the financial difficulties she faced after her nondiscriminatory discharge. Nor does Lewis provide any authority that would allow her to recover on the basis of emotional distress caused by her lawful termination. The district court therefore erred as a matter of law in upholding the jury’s award compensating Lewis for her emotional distress.

“Thomas, in contrast, provided generalized testimony about the distress that she
suffered before she was terminated. She said that she was “upset” because she  ‘felt
something wasn’t right,’ and that her treatment at Costco was a ‘smack in the face.’ The
question regarding Thomas is therefore not whether at least part of her distress flowed from
the hostile work environment, but instead whether her testimony was legally sufficient to
justify emotional-distress damages.”

*   *   *   *

“The closest Thomas comes to providing ‘specific and definite evidence’ of her emotional distress is the assertion that she moved to another position within Warehouse 390 to escape the hostile work environment that she had experienced as a front-end cashier. . . .This evidence, however, is severely undermined by Thomas’s concession that she did not feel harassed. At best, Thomas’s decision to change positions demonstrated a high level of concern about the racially hostile environment that she experienced as a front-end cashier.”

Finally, the panel affirms that under Michigan law (which tracks federal Title VII law), there can be no award of lost-wages associated with harassment alone.  The Sixth Circuit thus joins “several federal courts” including the Third and Tenth Circuits in holding “the nonavailability of lost wages as damages in the context of a meritorious hostile-work-environment claim without a finding of wrongful termination.”

In a partial dissent, Judge Cole criticizes the majority’s second-guessing of the emotional distress award for Thomas.  “[A] plaintiff need only show that she suffered emotional distress. The frequency of racial harassment and the various ways in which it impacts a plaintiff may affect the size of an award, but such factors should not preclude an award. . . . Here, Thomas was awarded only $10,000 for her emotional distress. No matter the amount of the award, the evidence is unmistakably clear that Thomas was upset by the racial discrimination in her workplace, especially given that we view the evidence and all inferences in a light most favorable to her, as we must do.”

Dotson v. Pfizer, Inc., No. 07-1920 (4th Cir. Mar. 5, 2009):  The jury in this case found Pfizer liable for interference and retaliation under FLSA, for frustrating leave to — and ultimately firing — an employee who sought leave time to complete an overseas adoption. 

As a drug salesman, Dotson had access to sample packs of his company’s offerings known in the industry as “starters.” The company alleged that he improperly diverted starters to an orphanage in Russia during the adoption process.  Plaintiff contended that “the starter issue was used as a pretext to fire him and that the ‘policy’ against his use of the starters was unknown to anyone outside the group that made the decision to terminate him.”

The jury awarded Dotson $1,876.00 on his FMLA interference claim and $331,429.25 on his retaliation claim. The district court awarded Dotson $333,305.25 in statutory liquidated damages, $375,000.00 in attorneys’ fees, and $14,264.88 in costs.  The district court, on the other hand, denied any award for front pay or pre-judgment interest.

On appeal, the panel affirms liability, in particular holding:

1.  That there was sufficient evidence to support a finding that the company manifested consent by implication under 29 U.S.C. § 2612(b)(1) for intermittent leave “[b]ecause of the placement of a son or daughter with the employee for adoption or foster care.” 29 U.S.C. § 2612(a)(1)(B). 

2. That the employee need not specifically invoke rights under the FMLA by name to have standing under the interference/retaliation sections (splitting with the Eleventh Circuit on this issue).

3. That there was sufficient evidence of pretext for the termination (e.g., that the starter policy was vague and not widely known, that others who cooperated in the alleged violation were not fired or otherwise punished).

4. That he suffered an actual injury because of interference (i.e., lost a day’s paid vacation).

As to relief, the court denies the cross-appeal on front pay, finding that the employee’s $8 million demand (for front pay through retirement at age 58) was unreasonable, and affirms that the district court judge did not abuse his discretion denying a three-year award (until the plaintiff was rehired by another firm) because the plaintiff was adequately compensated by the liquidated damage award. But the panel reverses the denial of pre-judgment interest under 29 U.S.C. § 2617(a)(1)(A)(i)-(ii):  “We reverse the district court’s decision because prejudgment interest on FMLA damages is mandatory rather than discretionary. Pre-judgment interest also does not constitute the kind of ‘addition al’ relief that requires briefing – unlike other FMLA remedies like front pay and liquidated damages, which the district court has the discretion to reduce or deny outright. Pre-judgment interest automatically becomes part of the damages award under the plain terms of the statute.” Finally, the panel remands the case to recalculate the liquidated damages (and attorney’s fees) in light of the success on the pre-judgment interest.

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