MARCH 2006

II. JUDICIAL UPDATES

Appellate Court Reduces Punitive Damages Award

Gober v. Ralphs Grocery Store has been the subject of previous updates. In this sexual harassment case, juries have twice awarded the plaintiffs substantial punitive damages. Each time, the award was appealed. During the most recent round of appeals, the Court of Appeal for the Fourth Appellate District (sitting in San Diego) held that the amount of punitive damages previously awarded was constitutionally excessive and that the maximum award consistent with constitutional principles and the facts of the case is a ratio between punitive and compensatory damages set at six to one.

In 1995, six employees (“Plaintiffs”) sued Ralphs Grocery Store (“Ralphs”) for the actions of their supervisor, Roger Misiolek (“Misiolek”). They alleged that Misiolek engaged in inappropriate touching, used profanity, made inappropriate comments regarding Plaintiffs’ sex lives, and threw various objects at some of Plaintiffs. Plaintiffs sued Misiolek and Ralphs, but ultimately settled with Misiolek. During the first trial, the jury awarded Plaintiffs a total of $550,000 in compensatory damages, and a total of $3,300,000 in punitive damages. The trial court granted Ralphs’ motion for a new trial regarding the amount of punitive damages based on alleged jury misconduct during the deliberations. On retrial, a second jury awarded each of the six Plaintiffs $5,000,000 in punitive damages.

Prior federal and state cases have held that because punitive damages do not compensate a plaintiff for actual harm suffered, they must bear a reasonable relationship, and be proportionate, to compensatory damages. In State Farm Mutual Auto Insurance Co. v. Campbell (2003) 538 U.S. 408, the U.S. Supreme Court refused to draw a bright line regarding the proper ratio of compensatory to punitive damages, but suggested that a ratio should generally be no higher than four to one and almost never more than nine to one.

In determining what limits should be placed on punitive damages awards, a court is to consider the following:

1. The degree of reprehensibility of the defendant’s misconduct;
   
2. The disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and
   
3. The difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.

After reviewing Misiolek’s alleged conduct, what Ralphs knew or should have known regarding Misiolek’s propensity to engage in such conduct, and Ralphs’ conduct following the employees’ complaint about Misiolek (Misiolek was counseled, warned, and transferred to another location), the Court of Appeal found that Ralphs acted with only a “modest degree of reprehensibility.” The court found that “this case does not contain any of the factors justifying more than a single-digit ratio between punitive and compensatory damages. Ralphs did not act with extreme reprehensibility and the damages were not unusually small, hard-to-detect, or hard-to-measure.” The court concluded that a 6 to 1 ratio of punitive to compensatory damages is sufficient to punish Ralphs and deter it and others from similar conduct in the future.

If you would like to discuss these or any other employment law matters, please do not hesitate to contact any member of Klinedinst's Employment Law Department.