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Jury Awards $185 Million in Punitive Damages Against AutoZone in Gender/Pregnancy Discrimination

A federal jury in San Diego recently awarded $185 million in punitive damages to a former employee of the AutoZone, who had sued AutoZone for sex discrimination and retaliation in violation of California state law. The jury also awarded $872,000 in compensatory damages to the plaintiff, Rosario Juarez. [Juarez v. AutoZone; Case No. 3:08-CV-00417] After two weeks of testimony, the jury unanimously found AutoZone liable for gender/pregnancy discrimination, retaliation and failure to prevent harassment.

Ms. Juarez was hired at AutoZone in 2000 and was promoted to store manager in 2004 after making discrimination complaints. When she became pregnant in 2005, she alleged that the company started treating her differently, complaining about her performance and demoting her. When she told her manager she was pregnant he said: “Congratulations ... I guess. I feel sorry for you.” A former district manager testified that an AutoZone vice president berated him for having so many women in management positions, saying: “What are we running here, a boutique? Get rid of those women.” After her demotion, Juarez waited the required year before reapplying for her former job as a Sales Manager. Her application was denied and she was terminated in 2008.

AutoZone argued at trial that the plaintiff was demoted for displaying “managerial disloyalty” and getting a poor performance review. AutoZone also argued that the plaintiff was ultimately terminated after she allowed $400 in cash to go missing from the register one night. However, plaintiff alleged that the company devised a scheme to bring about her termination whereby a customer service representative intentionally misplaced the money from the cash register and blamed the plaintiff. A store loss prevention officer, who led the investigation for AutoZone, testified at trial that she never suspected Juarez of wrongdoing and thought the company was targeting her. The jury concluded that was retaliation for her complaints.

The trial judge also ruled that AutoZone’s legal department could be found by a jury to be an officer, director, or managing agent of the company that committed, authorized, or ratified the actions taken against Ms. Juarez and therefore, AutoZone could be held liable for punitive damages.

There are several lessons to be learned from this ruling. First, bad facts result in bad verdicts for employers. Given the damaging testimony by corporate officers and supervisors, there was certainly a strong potential for an adverse verdict against AutoZone in this case, as it demonstrated the necessary discriminatory motive and intent by the employer to support a claim for employment discrimination and retaliation.

Second, damaging testimony from corporate officers and supervisors can make a jury angry at the company, which may counteract any attempts by the employer to adhere to state anti- discrimination laws. This juror anger can lead to a significant punitive damages award. The vast majority of punitive damages awards are the result of juror anger, intentional employer misconduct, or lack of sympathy by the employer, or some combination of these facts.

Third, the substantial punitive damages award is extremely unlikely to withstand constitutional scrutiny under the United States Supreme Court case State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408, 416. This decision and its progeny essentially limits punitive damages awards to a ratio of 10:1 based on any compensatory damages award.

On a related note, the U.S. Supreme Court is expected to rule in another case involving pregnancy discrimination. The Court is scheduled to hear oral arguments in the case of Young v. United Parcel Service on December 3, 2014. The Young case involves whether pregnant employees are entitled to reasonable accommodations, such as light duty, for work restrictions under the Pregnancy Discrimination Act (PDA), similar to those that employers must provide to disabled employees under the Americans with Disabilities Act (ADA). Unlike the ADA, the PDA does not directly address accommodations to pregnant workers, but the question might be resolved by the Supreme Court in Young. At issue in the case is whether the company violated the PDA in its treatment of Peggy Young, a delivery driver who said she was required to go on unpaid maternity leave, rather than transfer to a position that was less strenuous, as her doctors advised.

Joseph J. (J.J.) Minioza is a partner in the Oakland office. He can be reached at 510.832.7770 or at .