case study

CASE QUESTIONS

1. What were the legal issues in this case? What did the  court decide?

2. What are compensatory damages? Why did the  appeals court uphold the compensatory damages  awarded to the plaintiff?

3. What are punitive damages? Why did the appeals  court uphold the awarding of punitive damages in  this case? Why was the amount of punitive damages  deemed not constitutionally excessive?

4. What is injunctive relief? What was the employer  ordered to do? Why was the first injunction  “remanded” to the trial court?

5. Overall, do the damages awarded to the plaintiff in  this case seem “just”? Why or why not?

OPINION BY CIRCUIT JUDGE MANION: The Equal Employment Opportunity Commission filed this
employment discrimination case on behalf of John Shepherd, a former employee of AutoZone, and
alleged that AutoZone had violated the Americans with Disabilities Act. * * * [A] jury returned a verdict
in Shepherd’s favor. The magistrate judge then approved $100,000 in compensatory damages,
$200,000 in punitive damages, $115,000 in back pay, [and] an injunction on AutoZone’s
antidiscrimination practices…. AutoZone appeals the… remedies. We affirm… except for a provision in
the injunction, which we remand for further proceedings. Shepherd started working for AutoZone in
1998. He initially worked as a sales clerk—a nonsupervisory position—but was promoted to parts sales
manager a year later. * * * Shepherd averaged the highest sales per customer among the employees at
his store in 2003. Although Shepherd received several reprimands at work, he won the AutoZone Extra
Miler award, which AutoZone characterized as a “prestigious honor,” and AutoZone even asked
Shepherd to train new employees. But Shepherd suffered from a chronic back injury. In 1996, Shepherd
had been permanently injured while working for a different employer, and he sought help from his
neurologist, Dr. Marc Katchen. Dr. Katchen determined that Shepherd had impairments to his trapezius
and rhomboid muscles of the upper-left side of his back, a degenerative-disc disease of the cervical
vertebrae, and a herniated disc of the cervical vertebrae. As a result, Shepherd could rotate his torso,
but repetitive twisting aggravated his condition and caused “flare-ups,” which brought on severe pain
in his neck and back. About 80% of Shepherd’s work at AutoZone was devoted to sales and customer
service, and these activities did not affect his health. However, soon after starting work at AutoZone,
Shepherd began to experience severe flare-ups that caused his back and neck to swell, and would
cause pain with the slightest of movements. * * * Dr. Katchen determined that these flare-ups were
caused by the repetitive motions involved in mopping AutoZone’s floors, which was one of Shepherd’s
job requirements. Shepherd asked his store manager, Larry Gray, if he could be released from
mopping, and Gray informally allowed Shepherd to perform other tasks instead. But when the district
manager, Steven Smith, found out that Shepherd was no longer mopping the floors, he directed Gray
to have Shepherd resume mopping. Gray complied. After Shepherd transferred to another AutoZone
store in Smith’s district, he again sought to avoid mopping the floors. The store manager, Terry Wilmot,
was willing to accommodate Shepherd’s back injury, but when one of Shepherd’s coworkers
complained about Shepherd’s special treatment, Smith again insisted that Shepherd should mop the
floors. Although Wilmot allowed Shepherd to avoid mopping duties when Smith was not around, Smith
demoted Wilmot in July 2002, and replaced him with a new store manager, Steven Thompson. * * *
Shepherd testified that Thompson and Smith still required him to mop the floors. He stated that he had
sent a myriad of health and medical forms—some produced in conjunction with Dr. Katchen—to
AutoZone officials, but he never received an accommodation. In March 2003, Shepherd took a medical
leave of absence because his mopping duties had caused his condition to worsen. He returned to work
in April, and… was still compelled to mop the floors. As a result, he suffered from flare-ups four or five
times a week and was unable to perform basic tasks of his daily routine. Shepherd’s wife, Susan, had to
help Shepherd get dressed, wash his body, and engage in other activities around the house. Shepherd
began to suffer from depression and Dr. Katchen prescribed an antidepressant. Shepherd continued to
seek an accommodation that would allow him to stop mopping the floors. Shepherd contacted a
number of corporate officials at AutoZone and was quite insistent that he needed an accommodation.
Among other corporate officials, Shepherd frequently contacted Jackie Moore, the lead disability
coordinator who worked at AutoZone’s corporate benefits department in Memphis, Tennessee. On
September 12, 2003, Shepherd was wringing out a mop when he felt a sharp pain. He tried to continue
his work, but the pain persisted, and he suffered a disabling flare-up that left him unable to return to
work for the rest of the year. Three days after this flare-up, Smith sent Shepherd a written letter that
relieved Shepherd of his mopping duties because of his back condition. Over the next few months,
Shepherd received extensive treatments from Dr. Katchen, including heat treatment, physical therapy,
medications, deep tissue massage, ultrasound, antidepressants, and sleep inducers. When Shepherd
tried to return to work in January 2004, he learned that AutoZone would not allow him to return.
Instead, AutoZone kept Shepherd on involuntary medical leave until February 2005, when it terminated
his employment with AutoZone. * * * [W]e must now address AutoZone’s arguments about the
remedies that resulted from that trial. AutoZone raises issues relating to (1) the compensatory
damages; (2) the punitive damages; [and] (3) the injunction. 1. Compensatory Damages AutoZone first
argues that the compensatory damages are excessive and should be remitted from $100,000 to
$10,000. The jury awarded compensatory damages of $100,000 for the “physical, emotional and/or
mental pain [Shepherd] experienced… as a result of AutoZone’s failure to provide him with reasonable
accommodation.” * * * To determine whether an award of compensatory damages is excessive, we
consider whether the damages awarded (1) were monstrously excessive; (2) had no rational connection
between the award and the evidence; and (3) were roughly comparable to awards made in similar
cases. We agree with the magistrate judge that the EEOC provided sufficient evidence to support the
award of compensatory damages. First, Shepherd testified about the symptoms of his back condition
and the details of his disabling September 12, 2003, back injury. Additionally, evidence from Shepherd’s
wife provided a detailed account of the effect that Shepherd’s injuries had on his daily life while
working at AutoZone. Finally, Dr. Katchen testified in great detail about his diagnosis and treatment of
Shepherd’s myofascial pain. This evidence provides a basis for concluding that the compensatory
damages were not monstrously excessive, but were instead rationally connected to Shepherd’s pain.
Additionally, the magistrate judge accurately observed that the compensatory damages in this case are
approximately the same value as the compensatory damages awarded in comparable cases. In fact,
Shepherd’s case is more extreme than some of these cases because Shepherd experienced near-daily
pain that left him incapable of performing common activities, such as putting on his clothes and taking a
shower. We have recognized that cases that include even the slightest “physical element” are often
associated with more substantial compensatory-damages awards. We conclude that all three factors
used to determine whether compensatory damages are excessive weigh in Copyright 2019 Cengage
Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN favor
of the EEOC. The magistrate judge therefore did not abuse his discretion when he upheld the award of
$100,000 in compensatory damages for Shepherd’s pain and suffering. 2. Punitive Damages The jury
awarded $500,000 in punitive damages against AutoZone, but the magistrate judge reduced the
punitive damages to $200,000 to comply with a statutory cap. AutoZone first asks us to vacate the
punitive damages for insufficient evidence. If we decline to do so, AutoZone alternatively asks us to
remit punitive damages under the Due Process Clause to no more than $10,000. * * * Punitive
damages are available to the EEOC if it can demonstrate that AutoZone engaged in intentional
discrimination “with malice or with reckless indifference to the federally protected rights of an
aggrieved individual.” [T]he Supreme Court [has] established a threepart framework to determine
whether punitive damages are proper…. First, the plaintiff must show that the employer acted with
“malice” or “reckless indifference” toward the employee’s rights under federal law. A plaintiff “may
satisfy this element by demonstrating that the relevant individuals knew of or were familiar with the
anti-discrimination laws” but nonetheless ignored them or lied about their discriminatory activities. The
plaintiff has the burden of proving “malice” or “reckless indifference” by a preponderance of the
evidence. Second, the plaintiff must establish a basis for imputing liability to the employer based on
agency principles. Employers can be liable for the acts of their agents when the employer authorizes or
ratifies a discriminatory act, the employer recklessly employs an unfit agent, or the agent commits a
discriminatory act while “employed in a managerial capacity and… acting in the scope of employment.”
Third, when a plaintiff imputes liability to the employer through an agent working in a “managerial
capacity… in the scope of employment,” the employer has the opportunity to avoid liability for punitive
damages by showing that it engaged in good-faith efforts to implement an anti-discrimination policy.
This is a factintensive analysis, and “although the implementation of a written or formal antidiscrimination policy is relevant to evaluating an employer’s good faith efforts…, it is not sufficient in
and of itself to insulate an employer from a punitive damages award.” * * * First, a rational jury could
have found that AutoZone acted with “reckless indifference” to Shepherd’s federal employment rights.
AutoZone stipulated that Thompson, Smith, and Moore had all received ADA training. Furthermore,
Teresa James, the benefits manager for AutoZone and Moore’s supervisor, testified about AutoZone’s
established procedure for handling employees’ accommodation requests. If an AutoZone employee
made an accommodation request, the benefits department would obtain the employee’s medical
documentation, such as a physician’s report, then coordinate with AutoZone’s legal department to
“ensure that there is a consensus on what the request is.” The benefits department would then review
the physical demands of the employee’s position and coordinate with a human resources manager in
the field to determine whether AutoZone could accommodate the employee’s disability. * * * Although
Moore was aware of Shepherd’s situation, her testimony revealed that she did not address Shepherd’s
disability through AutoZone’s typical procedures. Instead, when asked whether she could “recall having
considered any potential accommodations that would address [Shepherd’s] limitation,”… Moore
testified about what she hypothetically “would” do in Shepherd’s case—not what she actually did. * * *
Moore eventually did take concrete action to address Shepherd’s situation. She coordinated with Smith
and instructed him to type up a letter for Shepherd. This letter informed Shepherd that he should not
engage in any activities that affected his medical condition. But this letter was dated September 15,
2003—three days after Shepherd suffered his disabling back injury, and the day that Dr. Katchen placed
Shepherd on medical leave. A jury could easily conclude that this letter was delivered too late to affect
Shepherd’s work requirements. A jury might even conclude that this letter was nothing more than
AutoZone’s attempt to cover up its prior failure to accommodate Shepherd’s disability. AutoZone
argues that its mistakes—if any—were not the result of reckless disregard for Shepherd’s rights, but
were caused by mere negligence, which is not sufficient to support punitive damages…. * * * AutoZone,
however, understood that Shepherd had a back injury and regarded it as a disability. Thompson, Smith,
and Moore did not deny Shepherd an accommodation because they doubted the veracity of Dr.
Katchen’s medical reports or because they were relying on another doctor’s analysis…. Instead, a
rational jury could have concluded that they failed to accommodate Shepherd’s disability because they
ignored AutoZone’s established procedures for handling accommodation requests. Failing to follow up
on an accommodation request might only be negligence if it occurs infrequently, but an employer’s
response sinks from negligence to reckless indifference when it repeatedly fails to accommodate an
employee’s disability. Because Shepherd repeatedly asked Moore for an accommodation, and asked for
an accommodation so often that Moore became frustrated by his persistence, a rational jury could have
decided that AutoZone’s response was not mere negligence, but reckless indifference. Second, a
rational jury could have imputed liability to AutoZone through a manager acting in the scope of
employment at AutoZone. * * * Moore was the lead disability coordinator in AutoZone’s benefits
department and was responsible for coordinating employees’ accommodations. * * * Because Moore
had the authority and discretion to make decisions about employees’ accommodations, a rational jury
could have concluded that Moore was acting in a managerial capacity in the scope of her employment
when she authorized accommodations for AutoZone employees. Therefore, a rational jury could have
imputed liability to AutoZone based on the evidence presented at trial. Third, a rational jury could have
concluded that AutoZone did not engage in good-faith efforts to enforce an anti-discrimination policy.
AutoZone did not introduce a written anti-discrimination policy into evidence, but instead relied on
James, AutoZone’s benefits manager, to explain AutoZone’s procedures for handling disability
accommodations in her testimony. Although the employer is not required to present a written or
formal anti-discrimination policy, “it is difficult to ascertain the contours of this policy without physical
evidence of its existence.” Nor did AutoZone present evidence that an antidiscrimination policy was
properly enforced in Shepherd’s case. We have held that an employer is unable to establish good-faith
efforts when “top management officials” disregard the company’s anti-discrimination policy. * * * [A]
rational jury could have concluded that Moore exhibited reckless indifference to Shepherd’s federal
employment rights, and a rational jury could also have concluded that she disregarded AutoZone’s
antidiscrimination procedures. … [W]e conclude that the magistrate judge correctly ruled that a rational
jury had sufficient evidence to impose punitive damages. We therefore decline to vacate the punitive
damages. Because we find sufficient evidence for a rational jury to impose punitive damages, we must
next consider whether the punitive damages in this case are so grossly excessive that they offend the
Due Process Clause of the Fourteenth Amendment. We analyze the punitive-damages award of
$200,000 under the framework the Supreme Court established in BMW of North America, Inc. v. Gore.
In Gore, the Supreme Court observed that punitive damages “may properly be imposed to further a
State’s legitimate interests in punishing unlawful conduct and deterring its repetition,” but punitive
damages violate the Due Process Clause “[o]nly when an award can fairly be categorized as ‘grossly
excessive’ in relation to these interests.” The Supreme Court then instructed courts to consider three
guideposts: “(1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between
the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the
difference between the punitive damages awarded by the jury and the civil penalties authorized or
imposed in comparable cases.” The first guidepost requires us to consider the reprehensibility of the
defendant’s conduct and is “[p]erhaps the most important indicium of the reasonableness of a punitive
damages award.” * * * These five factors weigh against AutoZone. First, Shepherd suffered physical—
not just economic—harm. Mopping the floors aggravated Shepherd’s back condition, and Shepherd
suffered severe, and ultimately disabling, pain as a result. Second, AutoZone’s conduct demonstrated a
reckless disregard for Shepherd’s health. AutoZone was aware that Shepherd suffered from a back
injury but did not adequately accommodate his disability and required him to mop the floors anyway.
Third, Shepherd was financially vulnerable. When Shepherd was asked at trial why he continued to mop
the floors even though it caused him pain, he stated he could not afford to lose his job because he had
a wife and children. Fourth, AutoZone’s dismissiveness of Shepherd’s health concerns occurred on
multiple occasions and was not an isolated incident. Indeed, Shepherd had contacted Moore so often
that she expressed frustration with Shepherd’s persistence. The fifth factor considers whether the
harm was caused intentionally or accidentally. Shepherd’s flare-ups were not the result of a mere
accident, but were instead the result of AutoZone’s reckless indifference. Therefore, when we consider
these factors as a whole, we conclude that AutoZone’s conduct was sufficiently reprehensible to justify
imposing punitive damages. The second guidepost requires us to examine the ratio between punitive
damages and “the actual harm inflicted on the plaintiff.” The Supreme Court has repeatedly declined to
set a fixed ratio to limit punitive damages based on constitutional grounds, but it has recognized that in
practice, “few awards exceeding a singledigit ratio between punitive and compensatory damages … will
satisfy due process.” * * * The jury awarded the EEOC $100,000 in compensatory damages, $500,000 in
punitive damages, and $115,000 in back pay. The magistrate judge later remitted the punitive damages
to $200,000. This is a two-to-one ratio between punitive and compensatory damages, and if back pay is
added to the compensatory damages, the value of the punitive damages is actually less than the value
of the back pay and compensatory damages by $15,000. We conclude that these ratios are well within
the range of constitutionally acceptable values. The third guidepost requires us to compare the punitive
damages in this case to the “civil or criminal penalties that could be imposed for comparable
misconduct.” * * * Thankfully, we need not look far to determine the legislature’s judgment concerning
the appropriate level of damages in this case: Congress has already defined the statutory cap for the
sum of punitive and compensatory damages at $300,000 for this case. We recognize that this statutory
cap suggests that an award of damages at the capped maximum is not outlandish. Because all three of
the Gore guideposts favor the EEOC, we conclude that the punitive-damages award of $200,000 does
not violate due process. We therefore decline to further remit the punitive damages. 3. Injunction
AutoZone also argues that the magistrate judge’s injunction was unwarranted and should be vacated.
District courts have wide discretion “to fashion a complete remedy, which may include injunctive relief,
in order to make whole victims of employment discrimination.” * * * [T]he magistrate judge entered an
injunction that… required AutoZone to (1) comply with the reasonable-accommodations requirement
of the ADA for employees in the Central District of Illinois; (2) to notify the EEOC of any employee who
requests an accommodation during the next three years in the Central District of Illinois; and (3) to
maintain complete records of its responses to such accommodation requests. * * * i. First Provision of
the Injunction AutoZone challenges the first provision of the injunction, which, more specifically, states
as follows: “AutoZone shall make reasonable accommodations to the known physical limitations of any
qualified employee with a disability who is working at an AutoZone retail store within the Central
District of Illinois and who requests an accommodation or whose need for an accommodation is
otherwise known to AutoZone.” Unlike the second and third provisions of the injunction, this provision
has no time limit. In essence, the magistrate judge permanently ordered AutoZone to comply with the
ADA’s accommodation requirement. The order is enforceable via contempt motion, bypassing the
normal administrative and adjudicative processes for ADA accommodation claims. AutoZone argues
that this part of the judge’s order amounts to an impermissible “obey the law” injunction. An injunction
that does no more than order a defeated litigant to obey the law raises several concerns. One is
overbreadth. An obey-the-law injunction departs from the traditional equitable principle that
injunctions should prohibit no more than the violation established in the litigation or similar conduct
reasonably related to the violation. * * * [T]his means that a request for an obey-the-law injunction
must be evaluated with great care; this type of injunction will be an “appropriate” form of equitable
relief only where the evidence suggests that the proven illegal conduct may be resumed. * * *
Although the judge did not explicitly discuss the factors that we have said might support the limited use
of an obey-the-law injunction, AutoZone’s inaction over eight years was sufficient to convince the
judge that compliance with the law will not be forthcoming without an obey-the-law injunction. As the
district court emphasized: [T]he conduct of the Defendant’s managerial employees at the highest level
was clearly an intentional violation of the ADA. The evidence showed that these employees knew of
Shepherd’s back problems, knew that he was under a physician’s care for those problems, and knew
that the problems were exacerbated by mopping. Despite that knowledge, those managers insisted for
no good reason at all that Shepherd continue to mop. In light of the evidence showing AutoZone’s
intransigence at quite senior levels of management, we are satisfied that the district court did not abuse
its discretion in ordering AutoZone to comply with the ADA’s reasonable accommodation requirement
in the Central District of Illinois. Nonetheless, even though the judge limited the geographic reach of
the EEOC’s proposed obey-the-law injunction, the order has no temporal limit. It is permanent, which
would permit any ADA accommodation claim arising at an AutoZone store in the Central District to be
raised via contempt motion no matter how remote in time or different from the violation proven in this
case. This would indefinitely deny AutoZone the protections of the normal administrative and
adjudicative processes in that region. AutoZone has earned this treatment for at least a reasonable time,
or at least that the district court did not abuse its discretion in so finding, but we must remand to the
district court with instructions to modify the injunction to impose a reasonable time limit on the first
provision requiring compliance with the ADA. ii. Second and Third Provisions of the Injunction
AutoZone further argues that the second and third provisions of the injunction are unwarranted
because AutoZone’s 2011 employee manual contains an ADA policy against disability discrimination.
But a mere policy statement in an employee manual would not have been sufficient to remedy
Shepherd’s situation. Shepherd’s requests for an accommodation were left unresolved because of a
systemic failure to properly implement AutoZone’s established procedures. AutoZone asserts that the
facts of this case cannot justify the injunction because eight years have passed since Shepherd’s
disabling accident and many of the individuals in this case no longer work for AutoZone, but the
passage of time and changes in management personnel do not guarantee the enforcement of
AutoZone’s antidiscrimination procedures. By requiring AutoZone to notify the EEOC of employees
seeking accommodations and to record its responses to these requests in writing, the injunction
ensures that AutoZone will implement the anti-discrimination procedure it purports to follow. Finally,
AutoZone asserts that the injunction is too broad because it applies to all stores throughout the Central
District of Illinois, but the magistrate judge appropriately crafted the scope of the injunction because
AutoZone’s problem was not limited to just Shepherd’s store. Overall, the first provision of the
injunction should have a reasonable time limit, which the second and third provisions already contain.
Therefore, we remand the first provision of the injunction but affirm the second and third provisions. *