Court of Appeals Holds Standard for Punitive Damages Under NYCHRL is Willful or Wanton Negligence, Recklessness, or Conscious Disregard

The New York City Human Rights Law provides strong protections against discrimination in all of its forms.  To strengthen those protections, the NYCHRL makes punitive damages available to a prevailing plaintiff.  Its text, however, doesn’t provide the standard that the courts should apply when determining whether the plaintiff should be awarded punitives.  That’s a problem. Without a standard, the courts are left to interpret the statute and case law to come up with what the plaintiff must prove to that he or she is entitled to the extra award of damages to punish the discriminatory conduct.  And when discrimination cases are brought in federal court under both federal and state anti-discrimination laws, District Court judges tend to apply the federal standard to state law when state law is unclear.  That’s exactly what happened here.

In Chauca v Abraham (No. 113), which I previewed here, Veronica Chauca worked as a physical therapy aid before she went out on an approved maternity leave.  Her employer, however, never let her come back to work after her maternity leave had ended.  She was just told that her services were no longer necessary, and was unceremoniously fired.  If that sounds like blatant pregnancy discrimination, you’re right, it does.  And that’s exactly what a federal jury found, awarding Chauca $65,500 in damages for lost compensation and pain and suffering.

The U.S. District Court for the Eastern District of New York, however, declined to charge the jury on punitive damages.  The Court held instead that although the NYCHRL calls for liberal construction of its provisions, Chauca had not shown that her employer had intentionally discriminated with “malice” or “reckless indifference.”  The Court, thus, in effect applied the Title VII standard for punitive damages to the NYCHRL.

Chauca appealed the damages award to the Second Circuit, arguing that the District Court had improperly applied Title VII’s punitive damages standard to her NYCHRL claims.  The Second Circuit acknowledged that its prior decision in Farias v Instructional Systems, Inc. (259 F3d 91 [2001]) on the issue required the District Court to apply the Title VII standard, but noted that its decision has been called into question in the years after it was handed down. Particularly, the New York City Council has twice amended the NYCHRL to ensure that it it broadly construed, regardless of how similar state and federal statutes are interpreted. That, the Second Circuit reasoned, suggested that the Title VII standard for punitive damages might not be the right one.

Because, however, the New York courts have not yet addressed the question of what is the standard for punitive damage awards under the NYCHRL, the Second Circuit certified the question to the Court of Appeals.  At oral argument, the plaintiff’s counsel argued that because the NYCHRL provides no explicit standard for an award of punitive damages, the New York City Council must have intended that punitives be granted in every case where the plaintiff can establish that he or she was discriminated against.

Predictably rejecting the Plaintiffs’ rule of punitive damages in every case, the Court of Appeals held, to be awarded punitive damages under the NYCHRL, the plaintiff has to satisfy the New York common law rule for punitive damages under Home Ins. Co. v American Home Prods. Corp. (75 NY2d 196, 203-204 [1990]).  That is, the plaintiff must show that the discriminating defendant’s conduct “amount[s] to willful or wanton negligence, or recklessness, or . . . there is ‘a conscious disregard of the rights of others or conduct so reckless as to amount to such disregard'” (Opn, at 2, quoting Home Insurance Co., 75 NY2d at 203-204).

Because the text of the NYCHRL did not provide this standard, the Court relied instead on the generally accepted common law meaning of punitive damages as a legal term of art.  This interpretation was best, the Court held, because the City Council chose the term “punitive damages” knowing that it already had a well defined common law meaning that needed no further explanation.  Simple and straight forward.

The Court declined Plaintiff’s invitation to equate the standard for a compensatory damages award with a punitive damages one. As the Court put it,

Punitive damages differ conceptually from compensatory damages and are intended to address “gross misbehavior” or conduct that “willfully and wantonly causes hurt to another” (Thoreson v Penthouse Int’l, 80 NY2d 490, 497 [1992]). Indeed, this Court has noted that “[n]ot only do [punitive damages] differ in purpose and nature from compensatory damages, but they may only be awarded for exceptional misconduct which transgresses mere negligence” (Sharapata v Town of Islip, 56 NY2d 332, 335 [1982]). Punitive damages represent punishment for wrongful conduct that goes beyond mere negligence and are warranted only where aggravating factors demonstrate an additional level of wrongful conduct (see Home Ins. Co., 75 NY2d at 203-204). Accordingly, there must be some heightened standard for such an award.

The Court also, however, rejected the defendants’ assertions that the District Court properly applied the Title VII standard for punitive damages.  Title VII’s standard for a punitive damages award—requiring “intentional discrimination . . . with malice or with reckless indifference to the . . . protected rights of an aggrieved individual” (Koldstadt v American Dental Assn., 527 US 526, 529-530 [1999])—was too strict in light of the City Council’s recent amendments to the NYCHRL to ensure liberal construction of its anti-discrimination provisions to provide the utmost protection to discrimination victims. In contrast to the Title VII standard for punitive damages, the New York common law approach

requires neither a showing of malice or awareness of the violation of a protected right, representing the lowest threshold, and the least stringent form, for the state of mind required to impose punitive damages. By implementing a lower degree of culpability and eschewing the knowledge requirement, applying this standard adheres to the City Council’s liberal construction mandate while remaining consistent with the language of the statute.

Moreover, NYCHRL violations, by their very nature, inflict serious harm “to both the persons directly involved and the social fabric of the city as a whole” (Rep of Comm on Gen Welfare, Local Law No. 85 [2005], 2005 NY City Legis Ann, at 537). The standard for punitive damages articulated in Home Insurance, while requiring an appropriate showing of heightened culpability for punitive damages consistent with the language of the provision at issue, is nevertheless properly reflective of the serious and destructive nature of the underlying discriminatory conduct and the goal of deterring “future reprehensible conduct” (Ross, 8 NY3d at 489). Furthermore, subjecting NYCHRL defendants to punitive damages under this standard encourages nondiscriminatory behavior and the development and application of appropriate employment criteria. In sum, this approach is the most liberal construction of the statute that is “reasonably possible” and furthers the purpose of the NYCHRL.

Although I won’t spend much time on Judge Rowan Wilson’s dissent, in which he adopts Plaintiff’s rule of an automatic punitive damages award upon a finding of liability because, he argues, it is the most liberal construction of the statute, I have to say that I am continually impressed by his writings.  I finished the majority opinion sure that the correct decision had been reached, but Judge Wilson’s dissent, with its pithy takedowns of the majority’s reasoning, left me with more doubt about the holding than I expected.  And although I’m not ultimately convinced, he certainly makes a compelling case for finding the other way.  It’s worth a read.

The Court of Appeals’ opinion can be found here.

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