Punitive Damage Award Upheld By SJC

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Punitive Damage Award Upheld By SJC: Haddad v. Wal-Mart Stores, 455 Mass. 91 (2009)

In Haddad v. Wal-Mart Stores, the Supreme Judicial Court reinstated a one million dollar punitive damages award and established new standards for awarding punitive damages in discrimination cases brought under Massachusetts’ Anti-Discrimination Law, M.G.L. c. 151B, §§ 1, et. seq. Cynthia Haddad, who was employed as a pharmacist manager at Wal-Mart, complained that her salary was lower than all of the male pharmacist managers. Soon after Haddad lodged internal complaints, district managers questioned Haddad about two allegedly fraudulent prescriptions that a pharmacy technician had filled at Haddad’s store. Haddad denied having any knowledge about the prescriptions, but acknowledged that one of them might have been filled when she left the pharmacy briefly to purchase a soda, use the restroom, talk to customers, eat lunch or count narcotics. Wal-Mart terminated Haddad’s employment immediately, citing her alleged failure to secure the pharmacy. This above-described incident, however, occurred eighteen months before Haddad was fired.

Haddad brought suit in the Berkshire Superior Court for gender discrimination under M.G.L. c. 151B, § 4(1), and presented evidence that other male pharmacists had been on duty when thefts of other controlled drugs had occurred. Those pharmacists had not been disciplined by the company. During the trial, a human resources expert who had studied Wal-Mart’s Pharmacy Operations Manual testified that Wal-Mart had failed to equally enforce its policies and to update employees when policies had changed. Haddad also alleged that she was entitled to the same pay as other pharmacy managers even though she served as pharmacy manager on a temporary – rather than a permanent – basis for thirteen months. Since the “manager” title was not official, Wal-Mart contended that she was not entitled to the extra one dollar per hour that the other managers, all of whom were male, received. 

After trial, a jury awarded Haddad compensatory damages, plus one million dollars in punitive damages. Wal-Mart filed a post-trial motion to vacate the punitive damages award, which the Superior Court granted. On appeal, the SJC (Cowin, J.) concluded that the Superior Court erred in vacating the punitive damages award, and articulated new requirements for such awards under Chapter 151B. More specifically: “An award of punitive damages requires a heightened finding beyond mere liability and also beyond a knowing violation of the statute. Punitive damages may be awarded only where the defendant’s conduct is outrageous or egregious” and “where the conduct is so offen­sive that it justifies punishment and not merely compensation.” Similarly, in making an award of punitive damages, the SJC held that a fact finder should determine that “the award is needed to deter such behavior toward the class of which plaintiff is a member, or that the defendant’s behav ior is so egregious that it warrants public condemnation and punishment.”

In determining whether a defendant’s conduct rises to this level, the Court further stated that the fact-finder should consider all of the circumstances surrounding the wrongful conduct, including: (1) whether there was a conscious effort to demean; (2) whether the defendant was aware that its conduct would cause harm, or recklessly disregarded the likelihood of harm; (3) the actual harm to the plaintiff; (4) the defendant’s actions after learning that the conduct would likely cause harm; (5) the duration of the wrongful conduct; and (6) whether the defendant made any attempt to conceal the conduct.

In the  Haddad case, the SJC found sufficient evidence of misconduct to support an award of punitive damages, particularly because Wal-Mart paid Haddad less than her male counterparts and provided conflicting explanations regarding the reason for her termination. The SJC also found it compelling that Wal-Mart terminated Haddad for a single infraction, but did not investigate or discipline her male co-workers for similar or more serious infractions. This ruling provides employers with clearer guidance about the type of conduct that could warrant punitive damages in a discrimination case. Furthermore, it reminds all employers that the failure to prevent unlawful discrimination may result in substantial punitive damages awards.