Eleventh Circuit Confirms Waiver of Damages Cap in Title VII Case

Quick Hits

• In Khatabi v. Car Auto Holdings LLC, the Eleventh Circuit recently held that an auto dealership failed to plead the statutory damages cap under Title VII of the Civil Rights Act of 1964, so it waived its right to the cap.
• The Eleventh Circuit reversed a federal district court’s ruling that applied the statutory damages cap to the sexual harassment claim.
• Sexual harassment claims cannot be sent to arbitration, so they are more likely to result in a jury trial.

Under Title VII, the employee-headcount damages cap is $50,000 for employers with 15 to 100 employees; $100,000 for employers with 101 to 200 employees; $200,000 for employers with 201 to 500 employees; and $300,000 for employers with more than 500 employees.

The Eleventh Circuit held that the statutory damages cap is a waivable affirmative defense in a Title VII case. However, in this case, Car Auto Holdings, a car dealership in Miami, failed to preserve the application of the cap in its pleadings—or even raise it at any time before the trial—and was therefore not entitled to it.

Under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFFA), employers cannot compel arbitration of a sexual assault or sexual harassment claim. In the Eleventh Circuit (a jurisdiction composed of federal courts in Alabama, Florida, and Georgia), if a Title VII case goes to a trial before a jury, the potential punitive damages in a jury verdict can be as much as $300,000, unless the applicable employee-headcount cap on damages is applied.

Background and Court Rulings

The plaintiff worked at Car Auto Holdings, a dealership with about twenty employees, for about four months. She claimed her supervisor and colleagues frequently sexually harassed her, including calling her “hot for an 18-year-old,” suggesting she should hand out business cards in a bikini, and asking her to “use her good looks” while accompanying male customers on test drives to persuade them to buy cars. She claimed her supervisor and other managers touched her backside, massaged her shoulders, and grabbed and kissed her in the parking lot after work. The plaintiff resigned and sued the dealership for unpaid minimum wages under the Fair Labor Standards Act and sex discrimination under Title VII and the Florida Civil Rights Act (FCRA).

In an unallocated verdict under Title VII and the FCRA, a jury awarded the plaintiff $81,028 in compensatory damages and $750,000.00 in punitive damages for her sex discrimination claims, for a total of $831,028. The U.S. District Court for the Southern District of Florida, however, ruled that the applicable damages cap should apply and that the plaintiff was entitled to recover maximum punitive damages ($100,000) under the FCRA alone (“the larger of the two caps”), thereby reducing the sex-discrimination damages from $831,028 to $181,028. The plaintiff appealed the decision and judgment.

Reviewing the record on appeal, the Eleventh Circuit Court of Appeals held that the statutory damages cap had never been raised as an affirmative defense (and thus was never preserved) and that the district court had miscalculated the damages award. Because the benefit of the Title VII specific headcount damages cap had not been preserved, and because the jury had not aligned the damages with each statute, the Eleventh Circuit held that the maximum caps on damages available under each statute should apply: $300,000 under Title VII (i.e., Title VII’s uppermost limit) and $100,000 under the FCRA. Because the FCRA doesn’t limit compensatory damages (but does limit punitive damages), the Eleventh Circuit calculated that the correct damages amount should have been $481,028 ($81,028 in compensatory damages + $100,000 in FCRA damages + $300,000 in Title VII damages).

Next Steps

To be safe and effectively utilize the damage caps, employers must plead a statutory damages cap as an affirmative defense in an answer to a Title VII lawsuit and include it in pretrial stipulations. Courts may deem the applicable statutory damages cap waived if an employer waits until after a jury verdict to raise it. Dual-filed claims, such as this one under Title VII and the FCRA, may result in stacked maximum damage caps if a jury awards unallocated damages for violations of both statutes.

Employers may wish to train managers and employees on state and federal laws prohibiting sexual harassment and sex discrimination in the workplace, investigate internal reports of harassment or discrimination, and take the appropriate steps to prevent any harassment or discrimination from continuing.

Ogletree Deakins will continue to monitor developments and will provide updates on the Employment Law and State Developments blogs as additional information becomes available.

William E. Grob is a shareholder in Ogletree Deakins’ Tampa office.

Gretchen M. Lehman is a shareholder in Ogletree Deakins’ Tampa office.

James M. Paul is a shareholder in Ogletree Deakins’ St. Louis office and Tampa office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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