Opinion
Case No. 2:05-cv-0859.
April 27, 2007
OPINION AND ORDER
On April 20, 2007, following five days of trial, the jury returned a verdict in this case finding that defendants Refco, Inc., and Robert Maloy retaliated against plaintiff Lisa Rainer for making a complaint about sex discrimination by terminating her employment on February 17, 2005. In addition to awarding her back pay in the amount of $83,698.00, the jury found that Ms. Rainer (now Lisa Hagerty) demonstrated an entitlement to punitive damages under federal law (but not state law). It then assessed punitive damages in the amount of $1,000.00 against Refco, Inc. and in the amount of $14,000.00 against Mr. Maloy.
On April 24, 2007, the Court conducted a conference with counsel to discuss the question of whether the punitive damages award against Mr. Maloy could stand. All parties agreed that because Mr. Maloy cannot be held liable individually under federal law for employment discrimination, he cannot personally be assessed punitive damages. The parties disagreed, however, as to whether the award of $14,000.00 in punitive damages against Mr. Maloy should be imputed to Refco. For the following reasons, the Court concludes that it should.
I.
The Court notes, as an initial matter, that it did not submit a special verdict question to the jury asking specifically whether Mr. Maloy acted in the course and scope of his employment with respect to the actions he took which led to the termination of Ms. Hagerty's employment. However, Fed.R.Civ.P. 49 permits the Court to make findings on any such omitted issue unless the parties have specifically requested the issue to be submitted to the jury before it retires. That did not occur here. In any event, it is entirely consistent with the jury's finding that both Mr. Maloy and Refco were liable to Ms. Hagerty under state law to conclude that the jury believed Mr. Maloy was acting within the course and scope of his employment when he took the actions which damaged Ms. Hagerty. Even had the jury not reached that conclusion, the Court would make that finding on the basis of the evidence presented at trial. Thus, the Court begins the inquiry with the premise that Mr. Maloy acted within the course and scope of his consulting duties when he became involved in the events that led to the termination of Ms. Hagerty's employment. The question, then, is the significance of such a finding to the question of whether the punitive damage award against Mr. Maloy can be assessed against Refco.
II.
In Kalstad v. American Dental Association, 527 U.S. 526 (1999), the United States Supreme Court addressed the question of when a corporate employer may be held liable for punitive damages based upon the actions of individual supervisors or other management employees. In answering that question, the Court held that agency principles should apply, including, among others, the principle that a corporation may be held liable for punitive damages when those damages are awarded based upon the acts of a managerial employee acting within the course and scope of employment. The Court noted, however, that this specific agency principle was tempered by the need to create an exception in Title VII cases for employers which have otherwise made a good-faith effort to comply with Title VII. Thus, "even in situations where a managerial employee acts with malice or a reckless indifference to the rights of others, liability for punitive damages may not be imputed to an employer who makes a good-faith effort to prevent discrimination and comply with Title VII." Lopez v. Aramark Uniform and Career Apparel, 426 F.Supp.2d 914, 956 (N.D. Iowa 2006); see also Romano v. U-Haul International, 233 F.3d 655 (1st Cir. 2000). When the good-faith exception does not apply, any punitive damage award based upon the conduct of a manager or employee is imputed to the corporate employer. See generally Tisdale v. Federal Express Corp., 415 F.3d 516 (6th Cir. 2005).
Here, as noted above, the Court has no difficulty concluding that the evidence supports a finding that Mr. Maloy was acting within the course and scope of his duties, as given to him by Mr. Lucas on behalf of Refco, when he set into motion the chain of events that led to the termination of Ms. Hagerty's employment. He was asked to investigate the situation at the plant and took it upon himself, with the clear concurrence of Mr. Lucas, not only to report factual information but to make specific recommendations about employment, including the recommendation that Ms. Hagerty be fired. Further, it is clear to the Court that the jury believed this to be true when it found both that Refco was liable for retaliation and that Mr. Maloy, under state law, had individual liability for the same action. Consequently, unless the exception identified in Kalstad applies here, Refco is liable for the punitive damage award made against Mr. Maloy.
The Court does not believe that the exception applies. First, Refco never argued that even if the jury found that the actions of either of the individual defendants would otherwise lead to the imposition of punitive damages against Refco, Refco should not be held liable for such damages because it had made a good-faith effort to comply with Title VII. Further, the jury specifically found in this case not only that Refco did not comply with Title VII but that it acted with reckless indifference to Ms. Hagerty's legal rights. That is the only explanation for the $1,000.00 punitive damage award made directly against Refco. Under these circumstances, it would be inconsistent with the jury's specific findings to conclude that Refco nevertheless made a good-faith effort to comply with Title VII and therefore cannot be held liable for punitive damages based upon the acts of Mr. Maloy.
III.
Based upon the foregoing analysis, the Court concludes that the award of punitive damages against Mr. Maloy made by the jury in response to Special Verdict Question No. 12 is, as a matter of law, an award of punitive damages against Refco. That being so, the Clerk is directed to enter a judgment in this case in accordance with the jury's special verdict as follows: in favor of plaintiff, Lisa Rainer, and against Refco, Inc. and Mr. Maloy jointly and severally, for $83,698.00, and against Refco, Inc. only for an additional $15,000.00. The case shall be closed upon entry of the judgment.