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Morgan v. New York Life Insurance Co., No. 07-4186 (6th Cir. Mar. 12, 2009)


The Sixth Circuit affirms a blow-out victory in an Ohio state-law age discrimination case, including a $6 million back-pay/compensatory award. But the court remands for an order of remittitur on a $10 million punitive award, holding that the highest number that would comport with due process is a 1:1 ratio with the compensatory award.

Morgan v. New York Life Insurance Co., No. 07-4186 (6th Cir. Mar. 12, 2009):  Plaintiff was a 45-year-old employee of NYL.  "As managing partner, Morgan was the senior executive in charge of the Cleveland office and was responsible for achieving the performance goals set by the company for the office and its sales agent force. . . . During his tenure as managing partner, Morgan earned between $500,000 and $1,000,000 per year." 

Morgan was terminated from his job when, according to NYL, he failed to meet his goals under a Performance Improvement Plan (PIP).  The PIP required Morgan to increase his sales staff to 99.  Though on the books he made that goal, "four of the agents reported as part of the manpower increase (Zeno, Abbott, Kumahor, and Chorak) met the $500 commission revenue requirement only by splitting commissions with other agents already in the office manpower count. . . . [T]he corporate vice-president for agency standards, Christopher Tebeau, determined that four of the manpower triggers were based on splits that 'were not consistent with NYL's rules.' Tebeau stated that three of the splits appeared to be gifts and the explanation as to the fourth was a lie."

After weighing disputed issues of fact and credibility, the jury came back with a mixed verdict, denying a race discrimination claim but finding age discrimination.  The jury "awarded him $1,000,000 in past and $4,500,000 in future economic compensatory damages, $500,000 in non-economic compensatory damages, and $10,000,000 in punitive damages." The defendant on appeal challenged evidentiary rulings, the instructions, the denial of judgment as a matter of law and the damages. 

First, the Sixth Circuit affirms the admission of discriminatory statements, summarized here:

"An August 31, 2005 email from Hildebrand announced various management changes and referred to 'a new generation of managerial talent.' However, New York Life points out that three of the five managers referenced in that memorandum as receiving better jobs (Ray (55), McKinley (51), and Willson (51)) were Morgan's age or older. Thus, New York Life claims no inference of age bias can be drawn. Moreover, the company notes that a statement several years earlier (in a 2001 letter) that 'time has passed him by' related to Jim Torrell. New York Life further contends that Morgan also relied upon a three-year-old statement made in an October 15, 2002 letter of Morris regarding the hiring of an entry-level sales employee, which stated 'we need to bring young people like this through our system.' Morris testified that New York Life needed a 'balance of ages' for its employees. NYL asserts these statements were either not relevant or were too remote in time. O'Neill acknowledged the performance reviews that Morris did are 'littered with age-related references.'"

It holds that there was no error in admitting the statements ("[a]lthough most of the statements were thus not particularly probative of discrimination, there was little risk of prejudice in admitting them").  It also holds that no jury instruction was required to direct jurors how to evaluate this evidence.  "New York Life was free to argue its theory of the case-that the remarks were vague or were not related to the employment decision. Thus, the proposed instruction was substantially covered by the other instructions and the failure to give it did not seriously impair New York Life's theory of the case."

The panel also finds no error in the district court's denial of JOML.  The court points to the evidence of procedural irregularities and inconsistent treatment of younger managing partners. Particularly telling was the disputed evidence that Morgan's firing was discussed well ahead of the actual reason given for his discharge:

"The promotability index prepared by New York Life entitled 'Managing Partner Selection Process' listed candidates for Morgan's position and was dated September 2, 2005, which was before the company determined that he had missed the manpower count. Although New York Life alleged that the date was on the document because it was a continuously updated list, the jury was entitled to believe otherwise. As the district court noted, '[T]he jury received evidence that, if believed, supported a finding that New York Life decided to fire Morgan before the employment target ever became an issue.' The jury may have also credited O'Neill's statement that Morgan's termination was first discussed in August 2004, though O'Neill also suggests they were simply discussing his 'evaluation and his performance status.'"

Moving on to the punitive award, though, the plaintiff gets snagged by a nap in the carpet.  The panel agrees that the jury had sufficient evidence to award state-law punitive damages, which requires proof of actual malice by clear and convincing evidence.  "The record includes evidence that New York Life consciously disregarded Morgan's right to be free from age discrimination. While New York Life correctly argues that courts should not second guess a company's business decisions, the record establishes quite clearly that the company found extenuating circumstances in certain instances when a younger managing partner had performance issues. This was not the case with Morgan (or other older managing partners)."  The court also agrees that under Ohio state-law standards, a $10 million award was otherwise permissible.

But turning to the federal constitutional due process challenge, the employer prevails (in part):

"The three 'guideposts' courts look to in evaluating the constitutionality of a punitive damages award are (1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the harm to the plaintiff and the award; and (3) the comparison between the award and civil penalties in comparable cases. See  Bridgeport Music, Inc. v. Justin Combs Pub., 507 F.3d 470, 486 (6th Cir. 2007) (citing State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418 (2003)). . . .

"Based on the salary Morgan received at New York Life and the $6,000,000 compensatory damages award, however, it would seem to be a stretch to describe him as financially vulnerable.

"When this factor is applied, it would appear that at leasta reduction of the award is appropriate, even if New York Life should be punished to some extent. New York Life correctly points out that this case does not involve a nationwide policy of discrimination. However, it does include repeated misconduct, though the district court found the references to the circumstances of other managing partners to be 'minor.' Although there is little evidence of a policy of treating older workers more harshly, the record shows that at least three other managing partners were either encouraged to retire or held to different standards than younger workers. Although this case could be said to involve the repeated misconduct of at least some company officials, the conduct of a few New York Life executives in this case would not appear to be so reprehensible as to justify a high punitive damages award, especially given Morgan's apparent financial status."

Looking at the third factor, the panel finds the 1.67:1 ratio to be out of proportion to prior awards.  It concludes:

"The first two factors in the due process analysis favor a reduction of the $10,000,000 punitive damages award. Accordingly, we will vacate the award and remand the case to the district court for an order of remittitur that will set the punitive damages in an amount that it determines is compatible with due process, not to exceed the amount of compensatory damages. See Campbell, 538 U.S. at 425."

The district court on remand is thus given license to award up to $6 million.  While the panel does not describe how it reached this bottom-line figure, the 1:1 ratio imposed here mimics the liquidated (double) damage award allowed under the federal Age Discrimination in Employment Act for "willful" violations.

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