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In a significant victory for employment discrimination plaintiffs, the 3rd U.S. Circuit Court of Appeals has ruled that the federal caps on damages should be applied in a way that maximizes a verdict-winning plaintiff’s recovery by assigning as much of the jury’s award as possible to claims brought under state statute with no caps. In Gagliardo v. Connaught Laboratories Inc., a unanimous three-judge panel found that when Congress passed the federal caps in the Civil Rights Act of 1991, it also explicitly prohibited using the law to impose limits on state remedies. “Subjecting such state law claims to the federal cap would effectively limit a state’s ability to provide for greater recovery than allowed under the corresponding federal law,” visiting Judge Paul R. Michel of the U.S. Court of Appeals for the Federal Circuit wrote. “Imposing such a limitation would violate the federal law’s prohibition on limiting state remedies,” Michel wrote in an opinion joined by 3rd Circuit Judges Richard L. Nygaard and Leonard I. Garth. As a result, the appeals court found that U.S. District Judge Yvette Kane of the Middle District of Pennsylvania chose the correct path when she held that a jury’s unapportioned verdict of $2.5 million in a suit under the Americans with Disabilities Act and the Pennsylvania Human Relations Act should be apportioned by the court “so that the verdict winner gets the maximum amount of the jury award that is legally available.” The jury awarded Jane Gagliardo $2 million in compensatory damages and $500,000 in punitive damages but made no decision about how to apportion the award. Kane found that since the PHRA does not allow punitives, that entire punitive portion of the award should be assigned to the ADA claim. Then, imposing the federal cap, Kane reduced the punitive award to $300,000 — the maximum allowable in a suit against an employer the size of Connaught. Kane then assigned the entire $2 million compensatory award to the PHRA claim. In their appeal, Connaught’s lawyers argued that Kane’s apportionment of the verdict was reversible error because the federal damage caps apply to all similar claims in a single lawsuit. As a result, they said, the entire verdict should have been reduced to $300,000. The 3rd Circuit disagreed, saying that the federal cap “does not prevent a claimant from recovering greater damages under a state law claim that is virtually identical to a capped federal claim.” Michel found that the issue was one of first impression in the 3rd Circuit but that two other circuits — the 9th and the District of Columbia — had held that federal caps should not be imposed in a way that limits available state law remedies. According to court papers, Gagliardo began working for Connaught in 1987 and was promoted five years later to customer account representative. By 1994, Gagliardo was diagnosed with multiple sclerosis and began suffering symptoms that included muscle spasms, fatigue, and numbness in her hands, back and legs. The most severe of the symptoms was the fatigue that began to affect Gagliardo’s ability to think, focus and remember, according to the suit. In 1995, Gagliardo began to make mistakes at work, the suit said, and she asked supervisors to consider relieving her of the duty of handling military orders. But Connaught never reduced or changed her duties, the suit said, and Gagliardo was soon receiving oral and written warnings about her poor job performance. Gagliardo said she met with Christine Kirby, the manager of Connaught’s human resources department, and explained that her job performance problems were directly related to her illness. Kirby, herself an MS sufferer, later acknowledged that removal of the military project would have been a reasonable accommodation and that Connaught had not provided that accommodation. In May 1996, Gagliardo was fired because of her continued errors and failure to follow procedures. Gagliardo filed suit under both the ADA and the PHRA, and the case was tried to a jury in September 2000. The jury returned a verdict in favor of Gagliardo on both the ADA and the PHRA claims in awarding her $2 million in compensatory damages and $500,000 in punitive damages. Kane later reduced the verdict to $2.3 million after imposing on the punitive award the $300,000 federal cap. In the appeal, however, Connaught lawyer Carl J. Greco of Scranton, Pa., argued that Gagliardo offered no proof she was substantially limited in any major life activity. The 3rd Circuit disagreed, saying Gagliardo had evidence she was limited in the major life activities of concentrating and remembering. Judge Michel found that the evidence was strong enough to show a “substantial” limitation. A doctor testified that Gagliardo’s fatigue impaired her ability to think and learn, Michel noted, and Gagliardo also showed that her supervisor recognized her memory and concentration problems. Greco also argued that there was insufficient evidence relevant to punitive damages to submit the question to the jury and that the jury failed to follow the instruction in awarding such damages. Michel disagreed, saying that punitive damages are available under the ADA when “the complaining party demonstrates that the respondent engaged in a discriminatory practice … with malice or with reckless indifference.” “These terms focus on the employer’s state of mind,” Michel wrote, and require proof that an employer discriminated “in the face of a perceived risk that its actions will violate federal law.” Michel found that Gagliardo met the test by showing that Connaught’s management was aware that she was suffering from MS and had discussed her illness before she was fired and that Gagliardo herself had advised the company of the limitations her condition imposed on her ability to perform her job. “In addition, Gagliardo produced evidence that she had requested accommodation on multiple occasions and that [Connaught] refused to act on any of those requests,” Michel wrote. Greco also argued that the jury’s award for emotional damages was excessive. But Michel found that Gagliardo’s expert testified that her economic loss was $450,000 and that, as a result, the remaining $1.55 million of the jury’s verdict must have been for pain and suffering. To recover emotional damages, Michel said, a plaintiff must show “a reasonable probability rather than a mere possibility that damages due to emotional distress were in fact incurred.” Judge Kane found that Gagliardo met the standard by producing evidence from her co-workers and family demonstrating the effects her problems with Connaught had on her life. Michel agreed, saying the testimony had tied Gagliardo’s pain and suffering to her early employment problems after she was diagnosed with MS and detailed their subsequent worsening effect on her life. “The testimony demonstrated the effects of the mental trauma, transforming Gagliardo from a happy and confident person to one who was withdrawn and indecisive,” Michel wrote. Gagliardo was represented by attorney Patrick J. Reilly of Gross, McGinley, LaBarre & Eaton in Allentown, Pa.

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