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AutoZone Gets Hit with $186 Million Jury Verdict for Pregnancy Discrimination

the job is “too much for you in your condition” or “I don’t think it’s right for you to be under this kind of pressure in your condition. You should step down.” In February 2006, Autozone demoted Juarez to the Parts Sales Manager position. In April 2006, Juarez filed a Charge of Discrimination with the California Depart-ment of Fair Employment and Housing (“DFEH”). In February 2007, the DFEH issued a right-to-sue notice to Juarez. AutoZone terminated Juarez on November 20, 2008; and in February 2009, Juarez filed a Com-plaint of Discrimination.

Juarez’s lawsuit alleged, among other things, claims of sex/pregnancy discrimination as well as claims for harassment/hostile work environment and retaliation under California’s Fair Employment and Housing Act (FEHA) concerning the demotion and termination.

Juarez presented additional direct evidence of dis-criminatory animus through comments made by the Regional Manager, Dan Merchant, one of the deci-sion makers in Juarez’s demotion. Specifically, during a 2003 or 2004 district managers meeting, Merchant allegedly instructed that women be fired and purpose-fully not hired, and stated that “women weren’t worth ‘shit’ to our business.”

On November 14, 2014, a California jury consisting of 5 men and only 2 women entered a unanimous verdict in favor of the Plaintiff, Rosario Juarez, for gender discrimination, harassment and retaliation based on pregnancy.1 The jury awarded the Plain-tiff $872,720.00 in compensatory damages for lost wages and emotional distress. The jury also award-ed a whopping $185 million in punitive damages, which is over 200 times the compensatory damages award. This may be the largest single plaintiff em-ployment discrimination verdict in history.

The FactsAccording the court’s order partially denying AutoZone’s motion for summary judgment, the facts are as follows:2 Juarez was hired by AutoZone in 2000 as a customer service representative near San Diego, California. In April 2001, Juarez was promoted to a Parts Sales Manager position, and was ultimately promoted to a Store Manager position in October 2004.

In September 2005, Juarez became pregnant and notified her manager (McFall) a month later. Soon after telling McFall she was pregnant, he more than doubled the length of her “to do” list items (unlike her male counterparts at other stores in worse condi-tions than hers) with impossibly short deadlines and would speak to her more “dismissive and sarcastic.” Juarez testified that she was required to complete her onerous “to do” lists timely, even when she told McFall that she could not complete the list and run the store within the hours she was allowed. Juarez also claimed that the “to do” lists contained unneces-sary busy work. McFall placed Juarez on an onerous Performance Improvement Plan outlining the areas where Juarez needed to improve or face demotion.

Over the next two to three months McFall also pres-sured Juarez to step down as the Store Manager due to her pregnant condition – making statements like,

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two weeks after her termination; (3) AutoZone did not discipline the other employee involved in the cash sweep; and (4) AutoZone trained its employees that investigative interviews are voluntary and AutoZone’s HR witness testified that managers “may not be termi-nated for failing to write out a Q&A statement,” but Juarez was supposedly terminated for her refusal to do so.

Additional evidence of retaliation was that Merchant knew about Juarez’s lawsuit prior to her termination, harbored a discriminatory animus toward women, and, played a role in her termination.

AutoZone’s HR witness (who had responsibilities over AutoZone’s DFEH claim files for years) testified that she was not aware of any AutoZone employee who filed a DFEH discrimination charge and was able to keep their job at AutoZone.

Lastly, at trial, a former AutoZone 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.”

The jury ruled that the harassment against Juarez was “severe and pervasive,” and found unanimously that she was discriminated against and later fired because of her pregnancy.

Will the Punitive Damages Award be Upheld?In BMW v. Gore3 the U.S. Supreme Court addressed the constitutionality of punitive damages awards that are significantly greater than the award for compensatory damages (for the first time) and held that State courts

have considerable flexibility in determining the lev-el of punitive damages that they will allow in

any particular case. However, the Due Pro-cess Clause of the Fourteenth Amend-ment prohibits a State from imposing a “grossly excessive” punishment on a tortfeasor.4

Most States that authorize punitive damages “afford the jury similar latitude,

requiring only that the damages awarded

With respect to her retaliation claim, Juarez alleged retaliation because she was fired six weeks after pro-viding her deposition testimony in the case, which the court held was sufficiently close in time to estab-lish retaliation.

AutoZone alleged that Juarez was terminated for a “policy violation” after an internal AutoZone investi-gation concluded that she was the manager on duty responsible for a “cash sweep” (taking the cash out of the register and putting it in a deposit envelope) that resulted in the loss of $400. Autozone claimed that Juarez was responsible because she “failed to follow cash handling procedures during the sweep.” In addi-tion, she refused to provide a written statement me-morializing her investigation interview (“Q&A state-ment”), despite being warned that her refusal could result in termination. AutoZone’s Regional HR Man-ager testified that this refusal violated AutoZone’s code of conduct and ethics requirement that manag-ers cooperate in internal investigations.

However, Juarez presented substantial additional evi-dence that the articulated reasons for her termina-tion were untrue and/or pretextual. In addition to the mere six week time frame between her deposition testimony and her termination, there was evidence that the cash sweep investigation was a sham be-cause: (1) AutoZone and its witnesses failed to point to a written policy that Juarez violated; (2) the only dated report of her investigation interview was gen-erated over a month after the investigation and over

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The proper inquiry is ‘whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant’s conduct as well

as the harm that actually has occurred.’

be reasonably necessary to vindicate the State’s le-gitimate interests in punishment and deterrence.” With that said, “only when an award can fairly be categorized as ‘grossly excessive’ in relation to these interests does it enter the zone of arbitrariness that violates the due process clause of the Fourteenth Amendment.” After mapping out these constitution-al standards, the Court set forth three guideposts for courts to consider when making this determination: 1. The degree of reprehensibility of the defendant’s conduct;

2. The disparity or ratio between the award and the actual or potential harm suffered by the plaintiff; and

3. How the award compares to other penalties for comparable conduct.

The most important of these being the degree of reprehensibility of the defendant’s conduct. With respect to the ratio between compensa-tory and punitive damages (which is the key is-

sue of concern with the AutoZone verdict), the Court explained: “The proper inquiry is ‘whether there is a reasonable relationship between the punitive damages award and the harm like-ly to result from the defendant’s conduct as well as the harm that actually has occurred.’”9

Historically, the U.S. Supreme Court has upheld puni-tive damages awards that were four times as much as the compensatory damages award, but held that this is very close to the unconstitutional line.10 In, State Farm v. Campbell, the Court refused to set a magic ratio, but held: “… few awards exceeding a single-digit ratio between punitive and compen-satory damages, to a significant degree, will sat-isfy due process.”11

But again, the Court cautioned that it is not impos-sible for a ratio exceeding single digits to be upheld, and “... ratios greater than those we have previ-ously upheld may comport with due process where ‘a particularly egregious act has resulted in only a small amount of economic damages.’”12

This notion is exemplified by the decision in TXO Productions Corp. v. Alliance Resources Corp., where the Supreme Court upheld the constitutionality of a punitive damages award that was 526 times the amount of compensatory damages, because the potential harm to the plaintiff would have been significant, had the defendant been successful in carrying out its illegal scheme.13

So, based on the facts in AutoZone, and consis-tent with the U.S. Supreme Court’s prior decisions, AutoZone’s punitive damages award could be reduced to as low as 4 or 9 times the amount of the com pensatory damages award; and this would be at least $3.5 to $8.0 million, which is still a hefty price to pay.

Interesting Facts to NoteThere are several interesting facts about this case that Employers should take note of, including: (1) this was not a class action lawsuit, it was a single plaintiff-em-ployee case; (2) the EEOC was not involved in this case at all; (3) this case involved the application of Cali-fornia’s pregnancy discrimination laws applying the federal standards used to enforce the Pregnancy Dis-crimination Act under Title VII; (4) a former AutoZone employee and AutoZone’s HR managers testified and provided direct evidence of pregnancy discrimination and retaliation and AutoZone’s failure to comply with its own policies; and (5), the jury was comprised of mostly men.

In addition, the facts in this case reveal several key

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employer missteps. First, one of AutoZone’s senior level managers made discriminatory statements about women in front of other managers, but Au-toZone failed to take any action at that time. Sec-ond, one of Autozone’s alleged non-discriminatory reasons for Juarez’s termination was not supported by any written policy and actually contradicted their own HR manager’s testimony about AutoZone’s pol-icy concerning Q & A statements. Third, AutoZone failed to discipline the other employee who engaged in the same conduct that served as the basis for Juarez’s termination. Fourth, AutoZone failed to pre-pare its investigation report and related documents in a timely fashion; and Fifth, Autozone allowed two managers who have expressed discriminatory animus

towards women and/or pregnancy to make take ad-verse employment actions against Juarez even after she filed a claim accusing them of discrimination.

Employer TakeawaysWith the new expanded definition of “disability” in the Americans with Disabilities Act (“ADA”), as a result of the ADA Amendments Act of 2008, pregnant employ-ees may also be classified as disabled, which means an Employer can be sued for both pregnancy discrimina-tion under Title VII and disability discrimination under the ADA, in addition to state law violations.

Employers should review the facts of the AutoZone case in detail, and the EEOC’s Enforcement Guidance on Pregnancy Discrimination. Employers should also take this time to create and/or review their anti-dis-crimination, harassment and retaliation policies, and revise them (if necessary) to ensure that all standards of unacceptable conduct are clearly identified in these policies, that they specifically prohibit pregnancy dis-crimination, harassment and retaliation, and map out the consequences for policy violations. Employers should also make sure that their employees know how to report, and feel comfortable reporting, discrimination, harassment and retaliation committed by their managers, so that the company can take steps to prevent and correct discrimination in the workplace before it gets to the level of the AutoZone lawsuit.

Employers should also ensure that their managers, especially those with the authority to make adverse employment decisions, are well trained on federal and state anti-discrimination laws, the company’s anti-discrimination, harassment and retaliation poli-cies, and the consequences for their violations. They should also be trained on how to properly in-vestigate allegations of discrimination, harassment and retaliation and how to determine the appro-priate disciplinary action for any policy violations.

Lastly, once an employee files a claim for discrimina-tion and/or harassment, an Employer should not take any adverse actions against that employee without ensuring that: (1) the adverse employment decision is made by someone that is neutral and not involved in

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________________________________Donyetta D. Bailey, Esq.

DBailey@Rendigs.com

the discrimination and/or harassment complaint to avoid the appearance of retaliation; (2) the adverse employment decisions is made in compliance with the Company’s written policies; (3) the basis for the adverse employment action is true, well supported, and documented; and (4) the discipline given to the complaining employee is the same as the discipline given to other similarly situated employees that have engaged in the same behavior.

While the amount of the AutoZone verdict is clearly an outlier, it does send a message to Employers about what a jury will do given the right set of facts. This case also demonstrates why it is important for Em-ployers to train their high level managers and get rid of all managers that have expressed open discrimina-tory animus towards employees that are members of a protected class, because it is the company that pays the price tag for their managers’ discriminatory ac-tions, not the managers.

1 There was a third female juror that was dismissed because she was observed hugging the Plaintiff and giving kind words.2 See Order Denying in Part and Granting in Part Defendant Autozone’s Motion for Summary Judgment; and Denying Plaintiff’s Cross Motion for Sum-mary Judgment, Case 3:08-cv-00417-WVG, Document 129, Filed 09/28/12 Page 1 - 16.3 BMW of North America, Inc. v. Gore, 517 U.S. 559, 568, 116 S.Ct. 1589 (1996).4 TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 454, 113 S.Ct. 2711, 2718, 125 L.Ed.2d 366 (1993) (and cases cited) (Emphasis added).5 BMW, 517 U.S. at 568 citing TXO, 509 U.S., at 456, 113 S.Ct., at 2719; Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 22, 111 S.Ct. 1032, 1045–1046, 113 L.Ed.2d 1 (1991). 6 BMW, 517 U.S. at 568 citing TXO, 509 U.S., at 456, 113 S.Ct., at 2719.7 Id. at 575.8 Id.9 Id. at 580.10 See Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 23-24, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991).11 State Farm v. Campbell, 538 U.S. 408, 410, 123 S.Ct. 1513, 1516 (2003).12 Id. at 425 citing BMW, 517 U.S. at 582.13 See TXO, at 509 U.S., at 462, 113 S.Ct., at 2723.

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