In July 2017, a jury in Poweshiek County, Iowa returned a verdict against Grinnell Regional Medical Center (GRMC) for $4.5 million in an age and disability discrimination lawsuit. The Grinnell Regional case was one of a trio of million dollar plus verdicts Iowa juries returned in the spring and summer of 2017 in employment discrimination cases. In all three cases, the lion’s share of the damages awarded was attributable to the employee’s emotional distress. In the GRMC case, 95% of the damage award ($4.28 million) was for emotional distress, with only 5% awarded for back pay. Not included in these numbers were amounts the court awarded post-trial, including front pay ($241,746) and attorney’s fees ($615,208), which were added to the verdict in later court rulings. In the end, the economic damages of the former employee constituted 10% of the total damages, with emotional distress constituting 90% of the award.
On June 7, 2019, the Iowa Supreme Court reversed the jury verdict and ordered a new trial (Hawkins. v. Grinnell Regional Medical Ctr. et al). While the ruling was obviously a big win for GRMC, unfortunately, the reversal was based upon very narrow grounds relating to the admission of an exhibit that contained inadmissible hearsay. The court chose not to address two issues GRMC raised that would have the most lasting impact on the employment litigation landscape. Those issues are: 1) whether the emotional distress award was excessive; and 2) whether plaintiff’s counsel’s use of the so-called “golden rule” argument during closing was improper because it provoked the jury to award damages based upon an emotional appeal rather than on the evidence. These same issues will continue to arise in future cases; indeed, they are likely to arise in the re-trial of the GRMC case. We can only speculate why the court ruled the way it did. But, in our view, the court missed an opportunity to provide meaningful precedent on an important issue facing Iowa employers.
The prospect of a potentially ruinous jury verdict arising out of an employment discrimination claim is the result of an anomaly in Iowa Civil Rights Act jurisprudence. It started in 1991 when Congress to amended Title VII and the ADA to allow compensatory damages (i.e. emotional distress), punitive damages, and jury trials. Before 1991, there was no right to a jury trial, and the only monetary relief available was back pay, front pay, and attorney’s fees. One of the legislative compromises in the 1991 amendments was to include caps on compensatory and punitive damages, depending upon the size of the employer. For small employers (less than 50 employees), the damages cap (which does not include back pay or front pay) is $50,000. The maximum compensatory and punitive damage award for the largest employers (500 plus employees) is $300,000. Thus, in exchange for the probability of more and larger jury awards, employers received a certainty of avoiding runaway verdicts for non-economic damages and punitive damages.
In contrast, the ICRA has no damages caps. But, for the first 14 years of the Title VII amendments it did not seem to matter very much because most discrimination cases alleged violations of federal law and were tried in federal court. Plaintiffs typically avoided state court because the Iowa Supreme Court ruled twice (in 1990 and again in 1996) that no jury trial was available under the ICRA. Iowa employers received the benefit of the statutory caps and were protected for the most part from runaway verdicts consisting primarily of non-economic damages.
Everything changed in 2005. In McElroy v. State the Iowa Supreme Court overruled its prior precedents, and held that a plaintiff alleging ICRA violations is entitled to a jury trial. Ironically, one of the reasons the court so ruled was to make the ICRA more like Title VII and the ADA after the 1991 amendments. But, in trying to level the playing field between the state and federal laws, the court actually made it uneven the other way, because the ICRA has no damages caps. McElroy effectively gave discrimination plaintiffs in Iowa state court the benefit of the employee’s bargain contained in the Title VII Amendments, but neglected to provide employers with their side of the deal: caps on compensatory damages. Iowa plaintiffs now had the best of both worlds: a jury trial under the ICRA, with no damages caps. Adding insult to injury, employers have a much lower probability of winning on summary judgment in state court. The result, not surprisingly, is that the vast majority of employment discrimination cases since 2005 have been filed in state court alleging only ICRA violations. It was only a matter of time before we ended up with runaway jury verdicts in which non-economic damages dwarfed any other relief
The most effective fix to this problem is a legislative one: amend the ICRA in a way that gives Iowa plaintiffs the same rights and remedies allowed under the federal anti-discrimination laws, including the caps on compensatory damages. Unfortunately for employers, the legislature has apparently not had the appetite to make this change in the law. The next best solution is for the Iowa Supreme Court to provide meaningful standards so as to prevent runaway emotional distress damages that dwarf a plaintiff’s economic harm. Since the court created this anomaly, it would have been fitting to use the GRMC case to impose some reasonable limits on emotional distress awards. Who knows when, if ever, the Court will be presented another such opportunity. Employers are trying fewer and fewer cases, perhaps paying more to settle because they don’t want to be the next victim of a runaway verdict.