On The Road to Recovery
by John Gause, Esq.
Published: Maine LAWYERS REVIEW, July 2, 2009
Congratulations, you won your case. The corner office denied it, but the jury found that your client was fired because of his Arab descent. The verdict: $1.1 million in compensatory damages and $500,000 in punitive damages. But how much of that does your client get to keep?
Side bar: “Your honor, defendant renews its motion for a directed verdict on damages. There has been no evidence that plaintiff exhausted administrative remedies with the Maine Human Rights Commission, which means he cannot recover compensatory damages, punitive damages, or attorney’s fees.”
This is an easy one, right? Everyone knows that you need to go through the Commission before going to court, which is why you did that. “We did file with the Maine Human Rights Commission, your honor. Defendant’s attorney knows that—she was there.”
Defense counsel: “The Act plainly states that monetary damages and attorney’s fees may not be awarded to plaintiff unless he alleges and establishes that, prior to filing in court, he exhausted administrative remedies. Plaintiff’s complaint was silent on the issue, and there was no proof at trial. Plaintiff cannot recover under the Act.”
Out comes the statute, and, sure enough, section 4622 seems to say exactly that. It is not enough to simply go through the Commission process before going to court. You have to “allege and establish” that you did so. But is it possible that a technicality like this could really prevent the recovery of damages? In Walton v. Nalco Chemical Co., the United States Court of Appeals for the First Circuit held that a complaint that sought damages under the Act was sufficient because it implicitly alleged compliance with section 4622, and it affirmed the lower court’s decision that defendant cannot thereafter “ambush” plaintiff after the close of evidence at trial. Still, without a Law Court decision on point, the Superior Court takes the issue under advisement.
Defense counsel is just getting started. “Your honor, the entire damages award must be stricken for another reason. Plaintiff’s only claim here is under the Maine Human Rights Act. The Act conditions recovery of compensatory and punitive damages on plaintiff being unable to recover under a different law, 42 U.S.C. § 1981. Plaintiff could easily have recovered all of the relief he got here under § 1981, but he chose not to bring a 1981 claim. Accordingly, no damages may be awarded under the Maine Human Rights Act.”
That cannot be right. You have the red book in hand, so you check the statute again. Sure enough, buried in middle of the damages section, 4613, you find, “if the complaining party can not recover under 42 United States Code, Section 1981 (1994), the complaining party may recover compensatory and punitive damages as allowed in this subparagraph.” But does that really mean that if plaintiff could have recovered under § 1981 she cannot recover under the Maine Human Rights Act? The United States District Court for the District of Maine essentially answered that question “no” in Bradshaw v. University of Maine System, which interpreted a similar provision in Title VII of the Civil Rights Act of 1964. The court held that the reference to § 1981 was only meant to prevent double recovery under § 1981 and Title VII.
But you do not have time to find Bradshaw. You know that § 1981 is the federal statute that prohibits racial discrimination in making contracts, and you remember that it was amended to cover employment discrimination cases, but yours never struck you as involving racial discrimination. Racial discrimination means discriminating against someone because she is African American. “This isn’t a race discrimination case, your honor. This case involved discrimination against someone because he was Arabian. This is ancestry discrimination, and no relief was available under § 1981.”
Defense counsel: “The United States Supreme Court decided over twenty years ago in Saint Francis College v. Al-Khazraji that it violates § 1981 to discriminate against someone because he is Arabian. Plaintiff’s award must be stricken.”
You start to daydream. You know that § 1981 has no cap on damages, unlike the Maine Human Rights Act and Title VII. If it is true that § 1981 applies to discrimination against someone because he was born an Arab, like your client, then could you really have had unlimited recovery if you had brought a § 1981 claim? In fact, the Supreme Court has interpreted § 1981 broadly to cover “identifiable classes of persons who are subjected to intentional discrimination solely because of their ancestry or ethnic characteristics.” “Race” includes, for example, someone being Mexican American, Jewish, Puerto Rican, or Indian.
You snap out of it. Defense counsel is talking about something else. “Plaintiff’s entire claim for punitive damages must also be stricken, your honor, because there was no evidence at trial that plaintiff’s supervisor, who decided to fire plaintiff, knew that it was illegal to fire someone because he is Arabian. Pursuant to the Supreme Court’s holding in Kolstad v. American Dental Association, plaintiff had to show that defendant knew that what it was doing was illegal.”
“That is ridiculous,” you say. “This is 2009. Everyone knows that is illegal to fire someone because of his ancestry. Moreover, the evidence at trial showed that the supervisor received training in equal employment practices. That alone is sufficient to support an inference that she knew that what she did was illegal.” You cite several cases from the First Circuit that support your position precisely.
“I agree, your honor,” says defense counsel, “that decisions under Title VII have been very generous to plaintiffs. But plaintiff’s claim is under the Maine Human Rights Act, not Title VII. Pursuant to the Law Court’s decision in Batchelder v. Realty Resources Hospitality, LLC, the standard of proof for punitive damages under the Maine Act is clear and convincing evidence, not the preponderance standard under Title VII. While there may have been enough under Title VII to infer the supervisor’s knowledge, given the fact that we do not even know what she was told in the training, it is far from ‘clear and convincing’ evidence that she knew it was illegal to fire someone because he was Arabian. Plaintiff could easily have asked the supervisor what she did and did not know was illegal, but he chose not to do that. Plaintiff’s punitive damages claim must fail.” The court takes another issue under advisement.
Defense counsel is wrapping up. “Your honor, in the unlikely event that you decide to allow plaintiff to keep some portion of the award, it cannot exceed the statutory cap. Here, admittedly, defendant is a huge corporation, so the cap is $500,000, meaning the compensatory and punitive damage awards combined cannot exceed $500,000.”
“Well,” you say, “the cap does not apply to the amount of the award that is attributed to lost wages. Here, we agreed that the jury and not the court would decide lost wages, and $800,000 of the $1.1 million compensatory damage award was for back pay and front pay. Plaintiff’s economist testified that he lost $300,000 in back pay and $500,000 in front pay.”
Defense counsel: “The jury was not asked to separate out compensatory damages here, your honor. There was a single line on the verdict form that simply asked the jury the amount of compensatory damages. We have disputed all along plaintiff’s entitlement to any lost wages. It is our position that the entire award was for emotional distress and none was wages. Of course, without knowing how the jury apportioned the damages, the cap applies to everything.” The court indicates that it is inclined to agree with defendant.
When you explain the judge’s likely ruling to your client, he asks, “well, if none of it is wages, at least I won’t have to pay taxes on it, right?”
“I’m sorry,” you say, “but you will have to pay taxes on everything. It does not matter if the award was for lost wages or for compensatory damages. The tax is the same for both.”
“Oh, man,” your client says. “That means that I am going to take a huge hit. I’ll be in a higher tax bracket because I will be getting all this money in the same year. If I had spread it out over the years I would have been working, my taxes would have been less because my yearly income would have been less. There is no way to take that into account?”
Actually, there was. A recent decision of the United States Court of Appeals for the Third Circuit, Eshelman v. Agere Systems, Inc., held that a court may award a prevailing plaintiff an additional sum to compensate him for the adverse tax consequences of receiving his lost wages in a lump sum. The court held that the extra award was appropriate as a part of making plaintiff whole. But, unfortunately, you have to ask for it to get it.