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Turley v. ISG Lackawanna, Inc., No 13-561 (2d Cir. Dec. 17, 2014)

For anyone under a misimpression that our nation has totally vanquished racial discrimination in employment, the Second Circuit today affirms a $1.32 million compensatory award by a jury to an African-American employee subjected to scarifying harassment at a steel plant. It also upholds a punitive-damage verdict, though it orders a remittitur of the award of no more than a 2:1 ratio with compensatory damages (about $2.65 million).

Turley v. ISG Lackawanna, Inc., No 13-561 (2d Cir. Dec. 17, 2014): Turley was a long time steelworker who was hired "in 1995, and remained in this job despite intense racial harassment until his employment was terminated when the plant closed its doors in 2009." He worked in the "pickler" department.

Beginning in 2005, when Turley complained about a manager in his department (Jaworski) allegedly engaged in racial discrimination, his life at work became "hell":

"Turleyʹs co‐workers frequently subjected him to racist epithets, degrading treatment, and, from time to time, outright threats. Co‐workers declined to speak to him or interact with him socially on the job, by, for example, joining him for lunch. Jaworski, Turley testified, continually referred to him as 'boy.'ʺ

Some 30% of employees referred to Turley by the N-word. He received death threats. He was subjected to graffiti ("dancing gorilla, ʺKing Kong,ʺ "KKK") and co-workers making monkey sounds. One day, upon arriving at his car "Turley found, dangling from his side‐view mirror, a stuffed toy monkey with a noose around its neck."

Turley complained regularly to the employer, and occasionally got a constructive response, but the harassment continued unabated. Indeed, management at times "appeared to encourage some of the behavior," such as managers by standing by while harassment occurred right in front of them. The company did not cooperate with law enforcement when they sought to investigate criminal behavior against Turley.

Harassment even continued during the course of the lawsuit. One manager named Sampsell "surreptitiously installed two cameras trained on Turleyʹs workstation" and then denied placing the cameras there when discovered. Sampsell also placed a private investigator on Turley, allegedly looking for possible criminal activity.

Turley brought claims under 42 U.S.C. § 1981, Title VII, and the New York Human Rights Law (NYHRL), N.Y. Exec. Law § 291 et seq., as well as a New York tort common‐law claim for intentional infliction of emotional distress. Claims under section 1981 and New York law were brought against individual harassers and managers as well as the employer.

The jury found liability after a three-week trial. "Following a two‐day trial on damages, the jury awarded a total of $1,320,000 in compensatory and $24,005,000 in punitive damages against the defendants, broken down by defendant." The district court ordered "the punitive damages award to be reduced to a total of $5 million on remittitur," which the plaintiff accepted. Finally, the "district court also awarded the plaintiff attorneyʹs fees of $437,323.30 and costs of $32,711.42."

The Second Circuit substantially affirms the judgment. It rejects all of the employer's grounds for tossing the liability verdict:

1. The jury charge did not mislead the jurors into believing that a single manager's failure to respond to the complaints of harassment could result in liability for the employer. The charge uses "the phrase 'employerʹs response' five times, and explicitly states that the jury must consider the totality of the circumstances ... It employs phrases, such as 'the employerʹs resources,' ... , that would make little sense unless the jury was being asked to consider the employerʹs response as a whole." Were there any error, though, the panel holds that it would be harmless, because the individual managers charged with protecting Turley from harassment, the jury found, were liable for harassment themselves.

2. The jury could find, based on substantial evidence, that there was a single-employer relationship between Turley's parent and subsidiary employers with respect to managing the racial harassment: 

"[T]here was some evidence that the parent company was directly and necessarily involved in decisions relating to the plaintiffʹs employment and to the course of harassment. It negotiated and entered into the collective bargaining agreement with the union, and it was this agreement that governed the plantʹs response to Turleyʹs complaints. A 2007 harassment training seminar explained that all complaints must be reported to the corporate human resources department, and that any settlement that changes anyoneʹs terms of employment must be approved by the corporate office. Employees were directed to report harassment to the 'Alertline,' a nationwide 'hotline.' Plant managers repeatedly stated that they were required to check with the corporate legal department in Chicago before providing information to assist police investigations concerning threats against Turley. And Turleyʹs employment ended when the parent company shut down the Lackawanna plant and sold its assets."

3. Because the employer waived its argument in the district court that a tort claim for intentional infliction of emotional distress (IIED) was precluded by the NYHRA, the liability verdict on that claim and associated damages are upheld. But the panel evinces considerable doubt on whether such claims should be allowed, noting that some state courts have held that "plaintiffs may not bring claims for IIED when the conduct and injuries alleged give rise to a statutory claim for workplace discrimination."

The panel holds that the record of conduct was otherwise serious enough to support IIED liability against Sampsell:

"Sampsell was a personal witness to the ongoing and severe indignity, humiliation, and torment to which the plaintiff was subjected over a substantial period of time - and he was in a position to do something about it. Instead, he continuously failed to respond for more than three years, blocking othersʹ efforts to investigate serious threats, and, at times, seeming to encourage further harassment."

The panel also upholds liability against the company, noting that Samsell's "actions and omissions fell within Sampsellʹs assigned role in the company, and may fairly be imputed to his employer."

4. The panel affirms the $1.32 million compensatory award. It notes that the award is at the very top of the range of awards previously awarded or upheld by courts in the circuit, citing a few cases where compensatory damages topped seven figures. "We thus acknowledge that the juryʹs compensatory award tests the boundaries of proportionality and predictability. But under the exceptional and egregious facts of this case, we conclude that the $1.32 million compensatory award was fair and reasonable."

5. Finally, the panel holds that a $5 million punitive award was excessive under federal common law. Originally, "[t]he jury assessed $20 million in punitive damages against all of the corporate defendants on the harassment claim, $4 million against Lackawanna on the IIED claim, and $5,000 against Sampsell on the IIED claim. The district court subsequently granted remittitur, which the plaintiff accepted, reducing the awards to $4 million, $998,750, and $1,250, respectively."

That panel holds that the 4:1 ratio with compensatory damages allowed by the district court's remittitur was excessive as a matter of federal common law, applying the three guideposts of BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996) - degree of reprehensibility, proportionality to the harm, and predictability measured by penalties in comparable cases.

Holds the panel:

"Where the compensatory award is particularly high, as the one in this case assuredly was, a four‐to‐one ratio of punishment to compensation, in our view, serves neither predictability nor proportionality. As noted, this particularly so where the underlying compensation is, as it is in this case, for intangible-and therefore immeasurable-emotional damages. Imposing extensive punitive damages on top of such an award stacks one attempt to monetize highly offensive behavior, which effort is necessarily to some extent visceral, upon another."

Reviewing other cases involving comparable awards, the panel holds that a 2:1 ratio of compensatory and punitive damages would be the outside tolerable range, and that a 2:1 ratio would otherwise accord with constitutional due process. The panel remands the case back to the district court to determine the amount.

In closing, the panel suggests that it would be open to an argument in the future that a U.S. Court of Appeals may simply order entry of a reduced punitive award, rather than remanding to the district court for a remittitur. Such an argument, though, would potentially run headlong into Hetzel v. Prince William County, 523 U.S. 208 (1998), which holds that such a mandate conflicts with the Seventh Amendment jury right when reversal is based on a federal common law finding of excessiveness. While there continues to be an open issue about whether punitive damage awards held to violate constitutional due process may be reduced by court order without remittitur, per Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424 (2001), the failure to cite Hetzel here is surprising.

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