Got Malice? Think Again—Fifth Circuit Slashes Damages Award in Race Bias Verdict

In an opinion of great legal significance to all employers, the Fifth Circuit Court of Appeals recently overturned a jury verdict that awarded $366 million dollars to a Houston-based FedEx employee who sued FedEx for race discrimination and retaliation.

Jennifer Harris, a district sales manager in Texas, filed an internal race discrimination complaint against her supervisor.  Shortly after Human Resources concluded its investigation, the supervisor placed Harris on a performance improvement plan.  A few months later, the supervisor placed Harris on a second performance improvement plan and, a few months after that, recommended the termination of her employment.  Harris argued that the timing of her supervisor’s actions demonstrated pretext.  Harris also presented evidence that similarly situated white employees were not placed on performance improvement plans or terminated.

A jury found in favor of Harris on her retaliation claims and awarded her $1,160,000.00 in compensatory damages and $365,000,000.00 in punitive damages.  FedEx appealed.

The Fifth Circuit affirmed the jury’s finding that FedEx retaliated against Harris, but it agreed with FedEx that Harris failed to prove malice or reckless indifference as required to recover punitive damages under Title VII.  The court held that Harris did not meet the “heavy burden” of showing that FedEx retaliated against her “in the face of a perceived risk” that its actions would violate her federally protected rights.  Noting that it is the employer’s subjective intent that matters for punitive damages, the court relied on “uncontroverted evidence” that Harris’s supervisor believed that Harris should be disciplined for insubordination, and therefore did not “subjectively perceive a risk of violation of federal law” when retaliating against her by placing her on performance improvement plans and recommending the termination of her employment.

The court also held that, even if Harris’s supervisor had acted with malice or reckless indifference when retaliating against her, FedEx still would not be liable for punitive damages because FedEx made good faith efforts to comply with Title VII by investigating Harris’s discrimination and retaliation complaints and by prohibiting the supervisor from disciplining Harris while the investigations were pending.  The court explained that “FedEx’s actions in this case are unlike other cases where the court has found companies vicariously liable for punitive damages because they ignored the plaintiff’s complaints.”

Finally, despite affirming the jury’s finding of illegal retaliation, the Fifth Circuit also significantly reduced the jury’s award of $1.16 million in compensatory damages for past and future pain and suffering and mental anguish.  The court first found that Harris’s claim under Section 1981 (which contains no cap on damages) was time-barred.  It then found that awarding Harris $300,000.00 in compensatory damages (the maximum amount available under Title VII) would be excessive, and  therefore cut the award of compensatory damages to $248,620.00.

Harris v. FexEx Corporate Services, Inc. serves as an important reminder of the legal risks surrounding potential retaliation claims, as well as the long-term benefits of promptly investigating and addressing discrimination and retaliation complaints as they arise in the workplace.