Monday, April 25, 2005

Bains LLC v. ARCO (9th Cir. - April 19, 2005)

This is a good, well-written opinion by Judge Kleinfeld. It also involves some chilling facts regarding alleged discrimination against Sikhs. So it's definitely worth reading. Even though I think Judge Kleinfeld makes at least a couple of fairly critical mistakes.

First, the good part. Style aside (and, as I said, I think the writing is excellent), on the merits, Judge Kleinfeld gets the inconsistent verdict part exactly right. Which is no small task. This is a complicated area, one about which I've written a little bit in my academic work and argued in the Ninth Circuit. (Blatant tooting-my-own-horn alert: My reference at the end there was to the $3.2 million verdict thrown out for inconsistency that I convinced the Ninth Circuit to reinstate in Duk v. MGM.) Notwithstanding the difficulty of the relevant area, Judge Kleinfeld correctly -- and cogently -- explains why the jury's liability finding (and $1 verdict) on the Section 1981 claim wasn't internally inconsistent. Great job. So I agree with pretty much everything that Judge Kleinfeld says in the first 20 pages of the opinion and his resolution of the vast majority of the issues raised by ARCO on the appeal.

But then there's the not-so-good part. Those darn last four pages. Which is where Judge Kleinfeld starts to fade.

This is the part of the opinion where he addresses the sad fact that the jury awarded $5 million in punitive damages on the Section 1981 claim but awarded only $1 in compensatory damages. That's excessive. Which Judge Kleinfeld gets right. But his analysis is a bit off, and these errors substantially affect the result. First he concludes that the appropriate compensatory damage figure upon which to apply the State Farm "punitive damages single-digit multiplier" test is really $50,000 -- the amount the jury awarded on the separate state law breach of contract claim -- rather than the $1 they awarded on the Section 1981 claim. But that's wrong. He says that the $50,000 figure is the right one since the jury could have concluded that the contract would not have been terminated but for the discrimination. But the jury clearly rejected such a finding by awarding only $1 rather than the $50,000 in damages they found on the contract claim. So you can't use that figure. Which in turn means that you've got to do the tougher job of figuring out the appropriate (and constitutional) punitive damage award on a $1 judgment in a case such as this rather than simply multiplying $50,000 by some single-digit figure. Sorry, but that's just what you gotta do. You can't replace the $1 awarded on this cause of action with $50,000 awarded on a different cause of action. You just can't.

Plus, even if you could, Judge Kleinfeld would still err by concluding the opinion as he did. He remands to the district court to enter a judgment somewhere between $300,000 -- the improper $50,000 figure times six -- and $450,000 (the same figure times nine). But that's wrong too. The district court should have discretion to order a lower figure. Or to order a new trial rather than a specific remittitur. There's nothing at all in Judge Kleinfeld's opinion that attempts to justify a 6x minimum; indeed, the $300,000 limit in Title VII cases that he mentions would suggest a 6x maximum. In any event, the district court clearly has discretion to order a new trial on this issue rather than unilaterally impose a figure alongside a conditional new trial. When a jury uses a wild (and constitutionally excessive) multiplier, the district court surely can order a new trial rather than merely impose the highest possible constitutionally permissible figure. So too on remand.

So Judge Kleinfeld starts extremely strong, but ends fairly weak. I understand why he wants to reach the result he does and to award $300,000-450,000 in punitives. But that's not his role. What he orders on remand is not the appropriate remedy for the errors that he (correctly and cogently) isolates.