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When is a cap not a cap? That is the question answered by the 3rd U.S. Circuit Court of Appeals in its recent decision Gagliardo v. Connaught Laboratories, in which the court found that the cap on compensatory and punitive damages for federal employment discrimination cases could be circumvented by apportioning such damages to uncapped state law claims. EMPLOYER FAILED TO ACCOMMODATE Jane Gagliardo began working for Connaught Laboratories in 1987 and was a customer account representative from 1992 to 1996. In 1995 her work suffered as the result of multiple sclerosis, which had been diagnosed a few years earlier. Primarily she began to make mistakes at work while taking orders. She told her supervisor and a human resource manager (who also had MS) that she thought that her work would improve if she was no longer required to process orders from the military. This particular task was a special project for which she was responsible in addition to her other work. While the human resource manager testified at trial that removing the military orders would have been a reasonable accommodation, it was never done. Instead, Gagliardo’s supervisor began a disciplinary process that resulted in a written warning, probation and ultimately, termination. JURY AWARDS $2.5 MILLION Gagliardo brought suit under the ADA and the Pennsylvania Human Relations Act and, at the conclusion of the trial, the jury returned a verdict in her favor and awarded her $2,000,000 in compensatory damages and $500,000 in punitive damages. Following post-trial motions, the punitive damages award was reduced to $300,000, the full extent of the federal damages cap, as the PHRA does not allow for punitive damages. The remainder of the jury’s award was allowed to stand. Connaught appealed both substantively and on the grounds that the jury’s verdict exceeded the compensatory and punitive damages cap established by 42 U.S.C. � 1981a. The principal substantive issue was whether Gagliardo had established that she was substantially limited in a major life activity. While MS, in and of itself, does not automatically qualify its victim as being substantially limited in a major life activity, Gagliardo was able to prove that she was limited in the activities of concentrating and remembering. While the 3rd Circuit has held that “cognitive functions” are “major life activities,” this is not a universally held position among the circuit courts. DAMAGES MAXIMIZED The court then addressed the question of whether the $2.5 million verdict should have been reduced to $300,000 under the federal compensatory and punitive damages cap, 42 U.S.C. � 1981a, or whether, because the jury did not distinguish between the damages awarded for the federal (capped) and state (uncapped) claims, it was up to the court to apportion the award to maximize Gagliardo’s recovery. Both the ADA and Title VII state that the federal law does not prevent a state from providing equal or greater remedies to punish discrimination. The court thus concluded that “� 1981a does not prevent a claimant from recovering greater damages under a state law claim that is virtually identical to a capped federal claim.” The fact that the PHRA, the state law anti-discrimination statute corresponding to the ADA, does not contain a damages cap led the court to conclude that “it was intended to provide a remedy beyond its federal counterpart.” The court affirmed the lower court’s decision to apportion all $2 million of the compensatory damages claim to the Pennsylvania anti-discrimination law and, since the PHRA does not provide for punitive damages, the $500,000 punitive damages award was reduced to $300,000 and apportioned to the ADA. The 3rd Circuit thus aligned itself with the 9th Circuit and D.C. Circuit in finding that “were we not to treat damages under federal and local law as fungible where the standards of liability are the same, we would effectively limit the local jurisdiction’s prerogative to provide greater remedies for employment discrimination than Congress has afforded . …” Martini v. Fannie Mae, 178 F.3d 1336 (D.C. Cir. 1999). DISMISS ANY STATE CLAIM POSSIBLE This case highlights that defense counsel should look to distinguish the federal and state law claims throughout litigation. The problem for Connaught in this case was that the jury only decided whether discrimination had occurred and rendered an overall verdict. While the respective burdens of proof under the Pennsylvania law and federal law are virtually identical, this may vary from state to state. Additionally, there are variations between the federal and state laws such as administrative filing deadlines, that may allow permit dismissal of the state claim(s). Given the damages floodgates that can be opened by state law claims, any opportunity to dismiss such claims should be explored and utilized. Sidney R. Steinberg is a shareholder in the business law and litigation department of Post & Schell, (www.postschell.com). He concentrates his national litigation and consulting practice in the field of employment and employee relations law and may be reached at [email protected].

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