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A Primer on Bringing and Defeating Motions for Punitive Damages in Employment Cases

A decision last week by U.S. Magistrate Judge Janie Mayeron offers an excellent analysis of the appropriate standards used in evaluating a claim for punitive damages in an employment case in federal court.

Defendant SMS provided housekeeping services to Ridgedale Mall. Defendant Gonzalez was employed by SMS as a facility manager for SMS, and in this role he was responsible for
supervising SMS employees at Ridgedale. Zuniga was hired by Gonzalez as a housekeeper there.

Zuniga resigned her employment with SMS in October 2007 without having reported any misconduct by Gonzalez. In March 2008, however, she filed a sworn Charge of Discrimination with the EEOC in which she alleged that Gonzalez had raped her four different times at work. Once SMS learned of these allegations, it sent a letter to Zuniga’s attorney asking for a statement regarding her allegations so that they could be investigated.

Eventually, Zuniga sued both Gonzalez and SMS under Title VII and the Minnesota Human Rights Act; she also asserted common law claims of assault and battery against Gonzalez and respondeat superior against SMS. She later moved to amend her Complaint to include claims for punitive damages against both Gonzalez and SMS.

Judge Mayeron first reminds us that in federal court, “the pleading of punitive damage claims under causes of action premised upon the law of the State of Minnesota must generally conform to the requirements of Minn. Stat. §§ 549.191 and 549.120.” In other words, a plaintiff may not seek punitive damages in her initial complaint, but must do so later by bringing a motion to amend, and then showing by “clear and convincing evidence that the acts of the defendant show deliberate disregard for the rights or safety of others.” To be “clear and convincing”, there must be “more than a preponderance of the evidence, but less than proof beyond a reasonable doubt.”

Significantly, when reviewing such evidence, the Court makes no credibility rulings, nor does it consider any challenges by cross-examination or otherwise to the plaintiff’s proof. The Court’s only task at this stage is to determine whether there is prima facie evidence that the defendant acted with deliberate disregard.

Ultimately, Judge Mayeron granted the motion against Gonzalez, but denied it against SMS. (In considering the claim against Gonzalez, she also has an interesting review of exceptions to the hearsay rule, but that is beyond the scope of this post). The analysis of the claim against SMS is the most interesting, because it involves consideration of whether SMS “implicitly ratified” Gonzalez’s conduct as required by Minn. Stat. § 549.20, subd. 2. This in turn requires an inquiry into whether SMS “knew or should have known” about Gonzalez’s conduct.

Implied ratification occurs where a principal fails to repudiate an agent’s act as soon as it is fully informed of what the agent has done. The Court provides a very thorough analysis of two seminal Minnesota cases on this topic, Baufield v. Safelite Glass Corp. and Wirig v. Kinney Shoe Corp., before concluding that SMS did not ratify Gonzalez’s behavior (even though it offered him a new position in Texas after it learned of Zuniga’s allegations). More important to Judge Mayeron’s analysis was the fact that SMS had attempted to investigate those allegations; “even if it is determined that the investigation by SMS was cursory, biased and inadequate, SMS’s investigation of her post-termination complaint does not rise to an implicit ratification of Gonzalez’s alleged assaults of Zuniga, nor does it amount to clear and convincing evidence that SMS deliberately disregarded the rights and safety of Zuniga.”

The Court also rejected Zuniga’s contention that SMS had failed to properly monitor the workplace by leaving that task to Gonzalez because SMS had mechanisms in place to ensure that its policies on sexual harassment were being followed. “Whether these policies were adequate or inadequate, or whether SMS staff should have or could have done a better job in ensuring that site supervisors were following the rules, does not lead to the conclusion that SMS knew or should have known that Gonzalez was assaulting Zuniga. At best, any breakdown in SMS’s procedures may be evidence of negligence or gross negligence, but it does not rise to the level of willful indifference on the part of SMS.”

Aside from being a terrific primer on the procedure and standards for bringing motions for punitive damages in federal court, this case also provides a reminder to employers of the importance of having anti-harassment policies and mechanisms in place, and investigating all allegations of alleged harassment, even if the complaining employee has already left the workplace.

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