The Fifth Circuit Court of Appeals has reduced a $366 million verdict from a Texas jury to $284,619 in a race discrimination and retaliation case against FedEx Corporate Services, Inc. (FedEx). Why and how did this happen?

In August 2019, Jennifer Harris reported her manager for discrimination and retaliation because the manager had not assigned a certain customer to her.  A written warning from the manager about Harris’ performance followed the next month.  Harris said FedEx subsequently conducted a sham investigation of her claims and terminated her in January 2020.  Harris filed the suit in May 2021 alleging that FedEx discriminated against her for being African American and fired her for opposing discrimination in the workplace, violating both Title VII of the 1964 Civil Rights Act and 42 USC §1981.  According to the complaint, the only difference between Harris and her colleagues was Harris’s race.

The Texas jury found that FedEx retaliated against Harris and awarded her $365 million in punitive damages, $120,000 for past pain and suffering, and $1.04 million for future mental anguish. As we previously reported, the jury was apparently more disturbed about retaliation for reporting racial discrimination than the alleged discrimination, itself, finding no discrimination had occurred.

The Fifth Circuit found that Harris had presented enough evidence to support her retaliation claim.  She offered sufficient evidence to show she was treated less favorably than similarly situated employees and showed evidence of a temporal relationship between her discrimination complaints and the subsequent disciplinary actions imposed by her supervisor.

In one fell swoop, however, the Fifth Circuit vacated all but $300,000 of the jury award.  It did so by dismissing Harris’s §1981 claim which, in the court’s opinion, had “outsized importance” on the jury award. Unlike Title VII which has a damage cap $300,000 inclusive of punitive damages, §1981 does not have any damage caps. By dismissing the §1981 claims, all that remained was the capped Title VII claim.

The basis for the court finding that Harris’s §1981 claims were barred was a 6-month limitation provision in Harris’s employment contract requiring Harris to bring legal action against FedEx “within the time prescribed by law or 6 months from the date of the event forming the basis of [her] lawsuit, whichever expires first.”  Harris filed suit 16 months after she was terminated. The court found the limitation provision enforceable for three reasons: (1) Harris knowingly and voluntarily signed the contract and accepted the provision; (2) the provision was broad enough to encompass retaliation and discrimination claims; and (3) the 6 month limitation period was not unreasonable because such a period has been found to be reasonable by other courts within the Fifth Circuit.

Without her §1981 claim, Harris was left with her capped Title VII claim.  In evaluating whether Harris was entitled to the full $300,000, the court looked to the “maximum recovery rule”. That rule requires the court to look to its other published decisions involving comparable facts to determine the whether the amount of damages is “excessive”.  Notably, the court stated that Harris sought medical treatment, testified to physical symptoms resulting from her emotional distress, and had other witnesses corroborate her testimony, entitling Harris to recover “more than nominal damages”. However, the court also held that Harris’s symptoms did not warrant a $300,000 compensatory damage award, but using the maximum recovery rule, only $100,000. Adjusted for inflation, the award was equal to $165,746.38 at the time the jury rendered its verdict. In a phrase that drips with irony, “[t]o avoid substituting our judgment for that of the jury,” the court multiplied the inflation adjusted number by 150%, entitling Harris to $248,619.57 in compensatory damages.

The court also found that Harris failed to meet the burden required for punitive damages under Title VII in that she did not show FedEx acted with malice or reckless indifference when retaliating against her.  According to the court, even if Harris’s direct supervisor had acted with malice or reckless indifference, Harris would still not be eligible for punitive damages as FedEx made good-faith efforts to comply with Title VII when investigating the discrimination complaints.

The Fifth Circuit’s decision demonstrates once again the checks and balances that appellate courts are providing for nuclear verdicts at the trial court level. Although the court likely substituted its judgment for that of the jury, Harris’s reduced damage award more closely aligns with other damage awards for Title VII cases in jurisdictions bound by rulings of the Fifth Circuit, including Texas.

The attorneys in our Austin and Dallas offices are available to answer your employment questions.  Please contact us at info@gstexlaw.com.

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