5th Cir. - Two Punitive Damage Caps, Lower Award Applies

Sometimes the 5th Circuit gets the chance to answer a question of first impression under Texas law, and today that question was how to apply the two punitive damage caps that come into play when there is a discrimination claim under the Texas Commission on Human Rights Act. In Arismendez v. Nightingale Home Health Care, Inc. (5th Cir. 7/23/07) [pdf] the Court held that you look at both damage caps and apply the one that provides the lowest amount of punitive damages.

A federal jury found Arismendez was terminated because of her pregnancy and awarded her approximately $25,000 in back pay, $10,000 in mental anguish and $1,000,000 in punitive damages. It was the question of liability and the amount of the punitive damage award that led to the 5th Circuit.

There were two possible punitive damage caps, the general one passed as part of tort reform found in the Civil Practice and Remedies Code and the one tied to the number of employees in the Labor Code.

The general punitive damage cap, § 41.008 of the Texas Civil Practice and Remedies Code, can only be determined after the jury award. As applied to to Ms. Arismendez it would permit punitive damages in the amount of two times the economic damages awarded ($26,150) plus the amount awarded in compensatory damages ($10,000) up to $750,000. Since that amount ($52,300) is less than the statutory minimum of $200,000, that would be the amount if § 41.008. Since the defendant had more than 500 employees, the exemplary/punitive damage cap under the TCHRA, Texas Labor Code §21.2585, would be $300,000. The 5th Circuit held both apply, and it is the lower which is to be awarded.

That was a come down from the jury award of $1,000,000 in punitive damages. Still it was definitely better than what had happened in the trial court where the judge granted the defendant's motion to set aside the jury verdict as unsupported by the evidence.

The 5th Circuit reversed, reaffirming that it subscribes to the cat's paw theory of discrimination. It held that even if Arismendez' supervisor did not make the termination decision, she had influenced it. The supervisor's comment that she "knew it was illegal to fire [Arismendez] because she was pregnant, [but that she] had a “business to run” and “could not take having a pregnant woman in the office," was enough to taint the decision and support the jury's verdict.

The Court also held that in this case the defendant had not waived the defense of the statutory cap even though it was not pled, since it was raised in the pretrial order. It did not resolve the question of whether it was an affirmative defense, citing two Texas courts of appeal which had gone the other way.

If nothing else, Ms. Asmendariz got to experience the highs and lows of litigation just with respect to the punitive damage award —

• from a jury verdict of $1,000,000 in punitive damages,
• to the trial judge setting that aside so she gets nothing,
• to the appeal where her chances ranged from $1,000,000 [if judge reversed and cap defense waived]; $300,000 [if judge reversed and TCHRA cap applies] or $200,000 [if judge reversed and Civil Practice and Remedies Code cap applies]
• to the ultimate 5th Circuit ruling, $200,000

And of course there's rehearing, en banc and application for cert. that are still possible.