The Boucher Appeal: Wal-Mart Wins (Mostly)

In October 2012, I posted about the case of Boucher v. Wal-Mart, where a constructively dismissed assistant manager at Wal-Mart was awarded approximately $1.4 million.  It was a huge award, and a no-brainer that Wal-Mart would appeal.  The appeal decision was released yesterday, and involved a huge reduction of Ms. Boucher's damages.

Background

One of the challenges when looking at jury awards is that detailed reasons aren't released, and so my earlier entry relied on media reports for the facts.  The appeal decision contains some more precise details.

Ms. Boucher started with Wal-Mart in 1999; in 2008, she was promoted to an assistant manager position, and she had a falling-out with her manager, Pinnock, in May 2009 when she refused an instruction to falsify a temperature log, after which Pinnock "became abusive towards her."  She complained about the abusive treatment, and Wal-Mart concluded that her complaints were unsubstantiated and "that she would be held accountable for making them."  A few days later, Pinnock "again humiliated Boucher in front of other employees", so she quit.

The jury concluded that she was constructively dismissed, and awarded damages as follows:

1. 20 weeks' pay in lieu of notice, as specified in her employment contract;
2. $200,000 aggravated damages against Wal-Mart for the manner in which she was dismissed;
3. $1,000,000 against Wal-Mart in punitive damages;
4. $100,000 against Pinnock for intentional infliction of mental suffering (the "tort award"), and
5. $150,000 against Pinnock in punitive damages.

In the media reporting after the trial, a $10,000 award for assault was noted.  There's no reference to this in the appeal decision.  On the other hand, I commented earlier that I couldn't find any reference in the media to pay in lieu of notice, but observed that it would be dwarfed by the rest of the award anyways.

In my previous post, while I noted that the findings of liability were unlikely to be challenged on appeal, I expressed a few opinions about the damage award as reported:

Firstly, I felt that there appeared to be some analytical dissonance and possible double-recovery in the tort award and the aggravated damages award.  Basically, I felt that Wal-Mart should be vicariously liable for Pinnock's tortious conduct, and that - while it might make sense for Wal-Mart to have some liability for aggravated damages over and above Pinnock's own liability, arising from their own conduct that was independent of Pinnock's misconduct, it didn't make sense on the facts that she suffered $100,000 worth of damages at Pinnock's hands and another $200,000 worth of damages at Wal-Mart's.  (As it turns out, Wal-Mart was vicariously liable for the awards against Pinnock.  Still, there seems to be something wonky in the numbers on the facts.)

Secondly, the punitive damage award against Wal-Mart was unprecedented, but on the facts might be warranted, and wasn't inherently disproportionate to the amount of the compensatory award.

Thirdly, I considered the punitive damage award against Pinnock to be unlikely to stand on appeal.  Simply put, the point of punitive damages is to send a message, and a $150,000 award against a Wal-Mart manager...well, it's a little more than necessary to send a message.  I projected a significant reduction in that award.

The Appeal Decision

Wal-Mart made the 'double-recovery' argument I raised, but the majority of the Court of Appeal rejected it, finding that the aggravated damages for manner of dismissal are conceptually discrete from the tort damages against Pinnock.  The majority of the court regarded both the tort award and the aggravated damage award to be very high, but within the realm of reasonableness as reflecting the jury's "strong disapproval" of Wal-Mart's conduct.

The million dollar punitive damage award against Wal-Mart, however, was reduced to $100,000, and the award against Pinnock was reduced to $10,000.  In both cases, it was on the basis that "in light of the significant compensatory awards against each appellant, those amounts are all that is rationally required to punish Pinnock and Wal-Mart and to denounce and deter their conduct."

Wal-Mart argued that the "independent actionable wrong" element (which is required for punitive damages in breach of contract cases) wasn't made out for them.  The Court of Appeal accepted that the trial judge erred in instructing the jury that Pinnock's tort could be considered an independent actionable wrong by the employer.  (I have some difficulty with this, given Pinnock's managerial role.  It is not simply a matter of vicarious liability, but Pinnock's dealings with Boucher carried the full weight of the employer's authority.)  However, the Court of Appeal gave no effect to the error:  The jury's award illustrated a finding that Wal-Mart breached its duty of good faith and fair dealing, which is an independent actionable wrong for the purpose of punitive damages.  (This has long been established in personal injury law, but arises relatively seldom in employment contexts.)

Boucher cross-appealed, arguing based on expert evidence that her lifetime earning capacity was significantly reduced by the determination - after the dismissal, she was required to 'start over' in entry level work, taking a significant pay cut.  The Court of Appeal rightly rejected this argument:  That's a loss that flows from the fact of dismissal itself, which is only a breach of contract to the extent that it was without contractual notice.  The 20 weeks' pay in lieu of notice is full compensation for the fact of the dismissal.

Justice Hoy dissented on the double-recovery issue, expressing concerns similar to my own:  It simply doesn't make sense that Pinnock's egregious misconduct caused $100,000 worth of damages, and that Wal-Mart's (relatively limited) conduct over and above Pinnock's own caused an additional $200,000 (or even an additional $100,000) of damages.  Justice Hoy would have reduced the aggravated damage award against Wal-Mart to $25,000.

Commentary

It seems to me that the majority decision makes a bit of a trade-off between punitive and aggravated damages.  It grants the $300,000 in tort and aggravated damages in place as reflecting the jury's disapproval of the defendants' conduct (which is more appropriately considered for punitive damages), but then significantly reduces the punitive damage award on the basis that "the defendants have paid enough".

Nonetheless, I'm still a little surprised by the scale of the reduction of Wal-Mart's punitive damages.  All things considered, the judgment against it remains quite substantial (including the Pinnock award and trial costs, it comes to something to the effect of close to six hundred thousand dollars), but for the sake of perspective, that's a fraction of a Wal-Mart's executive salary.  A hundred thousand dollar punitive damage award against a company like Wal-Mart doesn't say much of the blameworthiness of the conduct.  Wal-Mart employs large numbers of vulnerable employees, and makes a boatload of money doing it, and the jury award implies a finding that Wal-Mart not only failed to properly investigate Boucher's complaints, but chose to protect its manager to the detriment of its staff.  Is this award enough to prompt Wal-Mart to take the necessary steps, on an organizational level, to ensure that it doesn't happen again?

As well, taking the costs award into account when determining the necessary punitive damage award...seems backward, firstly because punitive damages will factor into costs, and secondly because it actually discourages settlement, and encourages employers facing punitive damages to drive up the employee's costs, since they'll get credited for their share of those costs in the form of a reduction in the punitive damage award.  Completely irrational, in my view.

The reality is that these cases are very difficult, in many ways.  Simply establishing dismissal, in a conventional wrongful dismissal or constructive dismissal sense, would have put Boucher's claim - despite being an assistant manager with 10 years of service - within the Small Claims Court jurisdiction.  The tort/aggravated/punitive damages are quite exceptional in employment law, and high risk.  Had Boucher lost, she would probably have been hit with a six digit costs award for her trouble.  It's very high stakes for the employee.  So even though Wal-Mart was very successful on the appeal, what Boucher is left with is still quite an impressive success.

*****

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The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.