Jury Verdict Cut Down To Size

Normally, when I write regarding employment and or commercial matters, my focus is on the New York courts, and rightfully so. The decisions in these cases are either controlling and/or extremely persuasive and this is where I practice. However, sometimes cases from across the country with interesting outcomes have some relevance to New York businesses. One such case was recently decided by the Fifth Circuit in the matter of Harris v. FedEx Corp. In that case, a FedEx employee received a jury verdict of $1,120,000 for pain and suffering and $365 million in punitive damages in connection with her retaliation claims. A lot of money to be sure, but happily for FedEx, the Fifth Circuit Court of Appeals determined that the most the plaintiff could recover in damages under her Title VII claim was $300,000 which it upheld.

What is interesting is this, the Fifth Circuit determined that the District Court erred by permitting Harris’ 42 U.S.C §1981 claims to proceed to trial. For those of you who know, a claim under 42 U.S.C. § 1981 prohibits discrimination in the formation and enforcement of contracts. A whole article can be based upon exactly what a “contract” is for purposes of a §1981 action, but I digress. What is significant in this case is that the Fifth Circuit determined that the plaintiff’s allegations under § 1981 were brought outside of the sixth month statute of limitations which was set forth in the plaintiff’s employment agreement. Her employment agreement provides, in pertinent part, that “[t]his agreement constitutes the entire and final agreement between the parties and all other prior agreements, arrangements, or understandings, oral or written, are merged into and superseded by the terms of this agreement. I understand that should any part of this agreement be held unenforceable; the enforceability of the remaining provisions shall not be impaired. To the extent the law allows an employee to bring legal action against the Company, I agree to bring that complaint within the time prescribed by law or 6 months from the date of the event forming the basis of my lawsuit, whichever expires first.”

Thus, this was a very big deal for FedEx and potentially for other employers across the country. You see, under Title VII there is a limit of $300,000 for compensatory damages. There is no such limit under § 1981. As for the punitive damages, while the court did determine there was sufficient evidence to support a claim for compensatory damages in the amount of $248,619, the court further held there was not enough evidence to support an award of punitive damages. It should be noted that the dismissal of the § 1981 claim also impacted the plaintiff’s claim for punitive damages under 42 U.S.C. § 1981a(a)(1) as punitive damages under Title VII are permitted “provided that the complaining party cannot recover under section 1981” and even then, they are capped.

The takeaway here, which would require further research and discussion, is that FedEx was able to limit the time an employee could file a § 1981 claim, which is normally three years (at least in New York) to six months and since the complaint was not filed until sixteen months after the claim had accrued, the § 1981 claim was barred. In support, The Fifth Circuit cited The Supreme Court’s decision in United Com. Travelers of Am. v. Wolfe, 331 U.S. 586, 608 (1947) where the Court held that “it is well established that . . . a provision in a contract may validly limit . . . the time for bringing an action on such contract to a period less than that prescribed in the general statute of limitations, provided that the shorter period itself shall be a reasonable period.” The Fifth Circuit further concluded six months was reasonable citing a plethora of case law. This raises interesting questions as to what an employer might be able to lawfully do insofar as affecting a statute of limitations by lowering it under the terms of the contract than the time period the plaintiff would have normally had under the law. And, by the way, here in New York, in Hunt v. Raymour & Flanagan, 105 A.D.3d 1005 (2d Dept. 2014), the Second Department upheld the dismissal of an employee’s complaint holding that the plaintiff's contentions therein “that the shortened limitations period set forth in the employment application was not applicable or was unenforceable are without merit” and this decision has been followed by the First Department in Ortegas v. G4S Secure Solutions (USA) Inc., 156 A.D.3d 580 (1st Dept. 2017), just so we close the loop on New York Court’s take on this.