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Jul 28, 2015

The Missouri Court of Appeals Upholds a Significant Award of Punitive Damages in an Employment Discrimination Case

In Ellison v. O’Reilly Automotive Stores, Inc., 2015 Mo. App. Lexis 318, the Missouri Court of Appeals, Western District, upheld a $2 million punitive damages award against an employer in a disability discrimination case brought under the Missouri Human Rights Act. Plaintiff sued O’Reilly Automotive Stores, Inc. as a result of a demotion from Store Manager to Parts Specialist.   Plaintiff claimed his disability, myotonic dystrophy, was a contributing factor in the demotion.  

After 11 years with O’Reilly, Plaintiff was promoted to Store Manager, a position he held for two years. During that time, Plaintiff’s store produced strong sales numbers and Plaintiff achieved a passing score on an annual audit geared towards evaluating a store manager’s operational leadership.

Nonetheless, Plaintiff received a performance review from his district manager with an overall rating of “needs improvement.” Plaintiff was subsequently disciplined several times including being issued a letter of concern and being placed on a 90-day probation period.  The stated reasons for the negative review and subsequent disciplinary actions varied, but included concerns in areas like team member appearance, goal achievement, leadership, commercial sales, employee training compliance, customer service, and store appearance.

Among complaints that the District Manager made about perceived flaws in Plaintiff’s job performance, he also discussed Plaintiff’s disability. He noted that Plaintiff has been falling down in the store and customers have complained that they cannot understand Plaintiff’s speech. Thereafter, Plaintiff’s performance and “medical issues” were discussed between upper-level managers and with human resource personnel.

Plaintiff was ultimately demoted to a parts specialist position in October 2010. After the demotion, Plaintiff took a Fitness for Duty medical test and was cleared to perform any tasks that needed to be done in the store. Plaintiff filed suit and was awarded $200,000 in compensatory damages and $2 million in punitive damages. O’Reilly appealed. 

The first issue on appeal was whether Plaintiff made a submissible case for punitive damages. Noting that to make a submissible case for punitive damages, a claimant is required to establish clear and convincing evidence of an intentional act with wanton, willful, or outrageous conduct, or with reckless disregard for the consequences of the act, the court found that Plaintiff met his burden. The court found it persuasive that each O’Reilly representative involved in the decision to demote Plaintiff knew of Plaintiff’s disability and considered it during discussions surrounding Plaintiff’s discipline and subsequent demotion. During trial, representatives of O’Reilly testified that they knew it was illegal to treat disabled employees differently regarding the terms or condition of their employment and that Plaintiff’s disability did not prevent him from performing his job duties as store manager. In fact, the position of a parts specialist was more physically demanding than the position of a store manager.

The court further held that O’Reilly’s stated reason for demotion being performance related was pretext, citing the employer’s changing reasons for taking action almost each time Plaintiff was disciplined, his store’s good sales results, and the fact that Plaintiff’s performance reviews were similar to the reviews of other store managers who were not demoted. 

The second issue on appeal was whether the trial court erred in denying O’Reilly’s motion for a new trial. The trial in this case was bifurcated. In the first stage, the jury was to determine the liability for and amount of compensatory damages as well as whether liability existed for punitive damages. If the jury determined that liability existed for punitive damages in the first stage, then in the second stage, the jury would have to determine the amount of punitive damages. 

The trial court instructed the jury that nine or more jurors must agree to return a verdict. Verdict A awarding compensatory damages and finding liability for punitive damages was signed by ten of the twelve jurors. Verdict B assessing the amount of punitive damages was signed by nine of the twelve jurors. However, two of the nine jurors who signed Verdict B did not sign Verdict A. O’Reilly argued that only seven of the jurors agreed both on the whether liability for punitive damages existed and the amount. For that reason, O’Reilly moved for a new trial arguing that nine jurors did not agree on both liability and damages.

The court rejected this contention, holding that in a bifurcated trial, if at least nine jurors agree on the liability and amount of compensatory damages as well as the existence of punitive damages, then in the second stage, any nine jurors can agree on the amount of the punitive damages. If this were not the rule, a juror who did not agree with liability cannot deliberate on the amount of damages, which would deprive litigants the right to a jury of twelve on all issues.

The last issue on appeal was the amount of punitive damages. O’Reilly argued that $2 million in punitive damages, which was 10 times the compensatory damages award, was excessive. The Court disagreed, citing the “outrageous” nature of the employer’s conduct.

Conclusion: This case serves as a reminder to employers that their exposure in employment cases can be remarkably high. Here, the court upheld a punitive damages verdict of 10 times the actual damages (the rule-of-thumb outer limit set by the U.S. Supreme Court in the State Farm and Gore v. BMW cases), in a case that involved a demotion, not a discharge. And in addition, prevailing plaintiffs in MHRA cases are entitled to an award of attorney’s fees.