Corporate Counsel News - Trends and Developments,$185M punitive damages verdict for AutoZone employee after legal department cast as perpetrator

By Pamela Wolf, J.D.

Just in case corporate legal departments are unclear about the magnitude of the role they play in potential litigation against the companies they serve, a recent jury verdict adds some frightening clarity. The plaintiff’s attorneys in the case put the corporate legal department on trial and the jurors apparently did not at all like what they saw.

The Southern District of California jury came in with a record-breaking $185M punitive damages verdict for a former AutoZone Stores employee on her California Fair Employment and Housing Act claims of gender/pregnancy discrimination and harassment; retaliation; and failure to prevent harassment. The lead plaintiff’s attorney, Lawrance Bohm (Bohm Law Group), said the verdict broke the previous record for a single employee—$167M—the one he had held. The case, Juarez v. AutoZone Stores, Inc, incorporated a strategy that cast AutoZone’s legal department as both a managing agent of the company and a perpetrator. Attorney Charles Moore (Law Offices of Charles Moore) is plaintiff’s co-counsel in the litigation.

The employee’s complaint tells a rather egregious story of sex discrimination that permeated the work environment and kept women from effectively moving up the management ladder at AutoZone. A one point, a purported headquarters-level instruction to eliminate/reduce investigations into unlawful discrimination was allegedly disseminated to the division where the employee worked.

Sex discrimination in action. The employee began her employment with the company in December 1999, Bohm pointed out to Employment Law Daily. After a promotion to part sales manager, the employee hit a glass ceiling. Following her complaint that women were underrepresented, she was promoted to store manager in late 2004, according to her attorney. But she quickly realized that new male store managers were treated more favorably. Her boss, a district manager for about 10 stores, repeatedly commented that she could not handle the job.

When, in November 2005, the employee disclosed to the district manager that she was pregnant, his response was less than enthusiastic, including the comment, "I feel sorry for you." Bohm said that after she disclosed her pregnancy, the district manager "became more aggressive, mean and critical" of the employee, acting as though nothing she did was done correctly. "Yelling criticisms and public humiliation were followed closely by a Performance Improvement Plan," Bohm explained, adding that during all the time she was on the PIP, the employee and her sales team met or exceeded the sales targets set by the company. But AutoZone falsely claimed the employee failed to improve, according to Bohm. The employee was demoted in February 2006 and placed in a different store, losing her bonus and overtime pay. She worked until her ninth month of pregnancy and "was put out on maternity leave," Bohm said.

Fired after taking legal action. While on leave, the employee filed a discrimination charge with the California Department of Fair Employment and Housing (DFEH). After she returned to work, she filed a lawsuit in state court challenging her demotion as gender-based discrimination. The employee was deposed in October 2008 and then fired the next month, reportedly because she was untrustworthy. Bohm said that while the reasons for the employee’s termination were allegedly "unknown," AutoZone also attempted to claim the employee had caused the misplacement of $400. "The jury obviously disagreed," Bohm observed.

Jury sides with employee. The court docket shows that on November 14, after a nine-day trial, the jury rendered a verdict for damages totaling $872,720.52, which included past wages of $393,749.52; future wages of $228,960; and non-economic damages (emotional distress) of $250,000. The jury also found that the plaintiff had proven by clear and convincing evidence that the discriminatory conduct was committed with malice, oppression or fraud that could be attributed to AutoZone.

The judge continued the case for the jury to determine punitive damages on Monday, November 17. On that day, the jury returned a verdict for $185M in punitive damages to the sole plaintiff in the case. Bohm pointed out that the punitive damages "represents only nine weeks of the extra cash accumulated by AutoZone’s operations." He said that an expert economist had testified that the company earns $20 million a week in excess capital after operational expenses and costs. The expert also said that AutoZone could pay $100 million in four weeks, according to Bohm.

Unusual strategy worked. According Bohm, the case was interesting because it included a strategy to target AutoZone’s legal department as the managing agent that either perpetrated or ratified the conduct. The strategy was successful because the federal district court held that the company’s legal department was a managing agent. In the punitive damages phase, Bohm said he "stressed the reprehensibility of the conduct because it was committed by the legal department, which was responsible for guiding operations around the world." He asked the jury for at least $160 million to make sure that AutoZone’s Board of Directors would take a "hard look at their legal department and ‘clean house.’"

Company letter. Bohm also pointed to a key fact in the case: a letter from AutoZone’s legal department to the DFEH in response to the employee’s discrimination complaint about her demotion from store manager. AutoZone claimed to have "thoroughly investigated" the employee’s complaint and found no problem, Bohm said. But at trial, a different story emerged— "the evidence clearly demonstrated AutoZone never spoke to any of the obvious witnesses to the conduct," Bohm said.

Message stands, at least for now. While Bohm expects AutoZone to challenge every aspect of the verdict through post-trial motions, he noted that until those motions are heard by the court and decided, "the verdict stands and so does the message." Legal departments of large corporations must be held accountable when they design and/or approve the violation of a person’s civil rights, he said.

Published Date: 

Tuesday, November 25, 2014