THE BLOG
07/31/2015 01:01 pm ET Updated Jul 31, 2016

What You Should Know About AutoZone's $185 Million Pregnancy Discrimination Case

Rosario Juarez says she was demoted from store manager at auto parts retailer AutoZone when she became pregnant and then fired because she filed a pregnancy discrimination lawsuit. Earlier this year, a jury agreed with her.

The jury then found that AutoZone should have to pay $185 million in punitive damages, a record-breaking amount for a pregnancy discrimination case.

This month, Juarez and AutoZone came to a settlement that is likely far below those damages but which closes off the possibility of any further appeals. Regardless, the jury's decision and the punitive damages it awarded have lessons for Corporate America and pregnant workers.

There's a lot to learn from the jury trial that ended with the largest-ever verdict to a single plaintiff in an employment case, especially if you're an employer.

Here's a thorough look at the lessons from the AutoZone case:

Juarez sued AutoZone in 2008, claiming, among other things, that the company discriminated against her when it demoted her from a store manager after she became pregnant and then fired her when she filed a pregnancy discrimination lawsuit.

In January 2015, after an eight-day trial, a jury of five men and three women returned a verdict finding that AutoZone had in fact discriminated against Juarez and awarded her $870,000, which included back wages--the money she would have earned had she not been demoted and fired--and for emotional distress.

It was during this time that the seeds for a huge headache for Juarez's attorneys began. A woman on the jury approached Juarez and told her that she would "hug her later." While the juror was certainly just trying to be nice, contact between a juror and any party in a trial--including the lawyers--is a big no-no. The judge dismissed the juror from the trial.

The defense moved for a mistrial, claiming that one of Juarez's attorneys was seen talking to the juror in the hallway both before and after she was dismissed. The judge declined to grant a mistrial, finding that no other members of the jury had been prejudiced in favor of Juarez by the actions of one juror.

The judge then continued the trial, asking the jury to consider Juarez's argument that AutoZone should be punished by an award of punitive damages--that is, a monetary award not necessarily tied to actual damages caused by the defendant. After deliberating for approximately five hours, the jury delivered the headline-making verdict, finding that AutoZone's action so outrageous that it should be punished by having to write a check for $185 million.

But the fun didn't stop there. According to the attorney for AutoZone, Juarez's attorney talked to the jury after the verdict, told them not to talk to defense counsel, and even physically blocked defense counsel from approaching the jurors. AutoZone has claimed that a paralegal for the Juarez team invited the entire jury out for drinks.

Not long after the ink had dried on the verdict form, AutoZone filed post-trial motions, asking for a new trial and, alternatively, asking the court to throw out the punitive damage verdict as excessive.

Before the trial court could hear the case, which could take months, AutoZone dropped its appeal on July 20 as part of a settlement agreement.

What this means for pregnancy discrimination in general:

I'll get into some of the nitty-gritty below about the proceedings in this case, but first I want to discuss what this case might mean for a pregnant woman today experiencing discrimination at work.

Juries care about these cases.
The biggest takeaway from this case is the message the jury sent with its astounding verdict. As discussed below, Juarez has not just walked away with $185 million dollars. But the fact remains that this predominantly male jury was really upset with AutoZone. Of course, not every pregnancy discrimination case will have a story as bad as this one, and not all cases will have seven-figure damages. Still, this should give a pregnant woman today facing discrimination hope that she too can find justice. On the flip side, employers should read this case as a cautionary tale and adjust management training and practices accordingly.

Where you live matters.
Juarez did not bring her case under the federal pregnancy discrimination law, even though she could have, but rather California's Fair Housing and Employment Act, which bars workplace discrimination. Her attorneys made that decision because federal pregnancy discrimination law limits the amount of punitive and emotional distress damages a defendant can be forced to pay. For businesses with 501 employees or more, the total cap is $300,000. The California law, in contrast, has no caps. That means the dollar figures that can force a major company to sit up and take notice vary from state to state. If Juarez's case had been heard in Virginia, which doesn't have a significant state anti-discrimination law, she would have had to sue under federal law. That would have reduced that $185 million reward to just $300,000 plus lost wages.

Pregnant workers can't rely on administrative bodies.
Many anti-discrimination laws, like the Pregnancy Discrimination Act, requires workers to first file a charge with an administrative agency like the Equal Employment Opportunities Commission, or a similar state agency, before going to court. The idea is that these agencies will do an investigation and potentially resolve the case before the dispute lands in court. In rare cases, the EEOC will itself take the issue to trial.

In Juarez's case, she first filed her charge with the California Department of Fair Employment and Housing. That agency did not resolve the case or litigate it for Juarez. It sent the case away by issuing a right-to-sue. That means the agency charged with enforcing the anti-discrimination law basically did nothing on a case that a jury found was egregious enough to award $185 million verdict. To be fair, it's possible that Juarez asked for the right to sue. But the point remains that administrative agencies routinely turn away good cases.

While many of these agencies have hard-working attorneys and staff trying to achieve some measure of justice, the reality is that most agencies are underfunded and understaffed. That means that many, many strong cases never get fully investigated and end with the agency simply spitting out a form "right-to-sue" letter, often leaving the pregnant employee with as little as 90 days to file in federal court.

For employees lucky enough to have an attorney, that's not the end of the case. The attorney can file a claim in federal court to keep the case going. But many women lack those resources, or even worse, come away with the mistaken belief that they don't have a good case and give up.

Defendants will fight even strong cases.
While some employers will do the right thing and settle early when a pregnant employee brings forward a strong case, it is also the case that they'll fight them tooth and nail, especially if they're a big company with deep pockets. (Again, it's possible that Juarez declined a good-faith effort to settle the case, but that's unlikely.) At least one attorney associated with the case, who litigates frequently against AutoZone said, "This large corporation and their counsel align to run a 'scorched earth' and 'deny everything' defense in almost every case." Defendants sometimes prefer to pay their attorneys to fight a case rather than settle, even when the employee is willing to settle for a low figure so that she can put an end to the matter and move along with her life. But pregnant workers shouldn't be discouraged from pursuing their claims. There are many steps you can take short of heading straight to federal court.

So why did AutoZone drop its appeal?

AutoZone dropped its appeal because both sides settled the case before the court could rule on post-trial motions. This is very common. Even though Juarez just won a huge verdict, the company doesn't have to pay immediately, since it can then appeal to reduce or overturn a jury verdict. Both sides have a strong incentive at this point to just call it a day.

Here are some common reasons a court will modify, or sometimes even overturn a jury verdict:

The jury got it wrong.
Sometimes a judge will overturn a jury verdict in a process called Judgment Notwithstanding the Verdict, or JNOV, and send the case back for a new trial if he or she finds that the jury just got it plain wrong. This does not mean that the judge simply disagrees with the verdict. (In fact, it can't be the reason for overturning.) Instead, the verdict must be considered well outside of a reasonable finding based on the evidence presented. This was not really at issue in AutoZone. There was plenty of evidence that AutoZone intentionally discriminated against Juarez and then retaliated against her when she tried to stand up for herself.

The jury awarded an excessive verdict.
This argument is very common and was the strongest one in favor of AutoZone. Note that, even if it succeed on its argument, the judge would not overturn the verdict. The verdict would remain intact, but the judge would simply lower the dollar figure. In 2008, the Supreme Court issued an opinion in the case Exxon Shipping Co. vs. Baker. In that case, the judge in a post-trial hearing much criticized opinion, held that punitive damages, at least under maritime law, should not only be related to the underlying compensatory damages, but they should not exceed a 1:1 ratio. The majority also indicated, without deciding, that it would be a rare case in which the facts justified a ratio of punitive to compensatory damages award of more than 9:1. Exxon dealt with federal law and thus does not limit punitive damages under state law, but many courts have used the reasoning in Exxon to limit punitive damages in other contexts. In AutoZone, the judge in a post-trial hearing indicated that he was likely to lower the award to nine times the underlying award of $870,000. In doing so he was expressing a vote of confidence in the verdict by going to the highest of the suggested 9:1 ratio. Nevertheless, if he went with the 9:1 ratio, awarding approximately $7.8 million, that would clearly be a long way from $185 million.

Problems with jury deliberations or juror misconduct.
Juries are intended to do their work in a carefully controlled environment. Jurors are to review only the evidence introduced at trial and, after receiving instructions from the judge on the law, reach a verdict after a reasoned deliberation. In most cases, some version of that happens, even if imperfectly. But it is not entirely uncommon for something to go wrong, or at least for the losing side to claim something went wrong. For instance, there was a high profile murder trial in D.C. in which the judge had to declare a mistrial when the jurors, believing they were being helpful, organized a trip to the murder scene. In AutoZone, the company argued that it was entitled to mistrial because it argued a member of Juarez's trial team had improper contact with a juror who herself had indicated some bias (even if her heart was in the right place) when she told Juarez that she would "hug her later." AutoZone claimed that Juarez's attorney spoke to this juror before the court dismissed her. The court declined that motion, finding that dismissing the juror was the proper remedy to ensure a just verdict. An issue that AutoZone could raise on appeal was that the court got this wrong and thus an appellate court should order a new trial. Chances are that AutoZone would have lost this argument. Appellate courts give trial courts wide latitude in dealing with these issues. But there was no guarantee. (Note that contact with the jurors and the attorney and other parties during a case is improper. After trial, however, it's very helpful for the advocate to talk to willing jurors. Judges sometimes encourage jurors to stay after trial in the jury room to talk to the attorneys and explain what jurors found effective and what they did not. This is enormously helpful for lawyers as an advocate often does not, beyond guesswork, understand why their side won or lost.)

So what happened in the AutoZone case? We don't know for sure. And we will never know as the terms of the settlement are confidential. But here's what the playing field looked like. For Juarez, there was a pretty good indication that the court was going to dramatically reduce the amount of her jury verdict. There was also a possibility, however remote, that the court could grant a mistrial finding that juror contact with her attorney made the entire verdict unreliable or at least that the court failed to eliminate that possibility when AutoZone raised the issue.

And both sides were looking at a long road ahead. Both sides had already been litigating the case for almost seven years. Taking it through post-trial motions and then the appellate stage could have taken years more, and required a lot of work for attorneys as they continued to argue the issues. During this time, Juarez, and her attorneys would get nothing.

A settlement offered both sides something they could not get otherwise: control over the amount paid and a quick result. So, the conversation could have gone something like this:

Juarez: We beat you at trial and now you have a $185 million dollar verdict hanging over your head. We may not get all of it, but you heard the judge, we're still likely to get $7.8. And we haven't even submitted our attorneys' fees petition for $4.5 million - and that's not even including what you'll pay when we beat you on appeal. I figure you're looking at writing a check for $12.3 million. Tell you what, let's end this whole thing now. We'll accept an even $12 million.

AutoZone: The trial judge is going to drop your verdict like a stone, you may get lower than the 9:1 ratio. And even if you get 9:1, we have a great argument that the facts don't support even that award. I'm more than comfortable taking that issue up. On top of that, we've got improper contact with jury. That can't be a fun issue for you. We have a chance we'll get the entire thing tossed. Still, my client and I are ready to be done with this case. We'll offer you $5 million.

Juarez: "I disagree, but in the interest of cutting this short, I have authority to accept $10.5. But no more."

AutoZone: "Best I can do is $10, and I don't think I can talk my client into anything more."

Juarez: "I just talked to my client. She'll take 10.2 and will sign a nondisclosure."

AutoZone: "Done. I'll draw up the paperwork and send it over."

That was a gross oversimplification, at least for a case of this size. This deal likely took days and the involvement of the court, a professional mediator, and an accountant or two. But this essentially is how it probably worked. Parties reached a deal. Non-disclosures and other contracts were signed. AutoZone delivered a check (or likely checks). As part of the deal, AutoZone dismissed its challenge to the verdict. Juarez's attorneys probably got 40 percent. Juarez, as is typical in these cases, had to pay costs out of her share. Juarez then got the rest, after paying taxes, of course. Forty percent of $10 million is $4 million. That leaves Juarez with $6 million. Costs for expert witnesses, transcripts, court reporters, etc., I would guess ran in the ballpark of $500,000, leaving Juarez with a gross payout of $5.5 million. Again, that's only an educated guess. She well may have gotten an even better settlement.

And that's how the case in which a jury awarded the largest-ever verdict to a single plaintiff in an employment case ended. Juarez may not have ultimately been able to buy a castle with her portion and she'll never get back those years she lost, but she did okay. And the rest of the country got a good lesson in why pregnancy discrimination can be a costly mistake for employers.

Tom Spiggle is author of the new book "You're Pregnant? You're Fired: Protecting Mothers, Fathers, and Other Caregivers in the Workplace," now available on Amazon. He is founder of the Spiggle Law Firm based in Arlington, Va., where he focuses on workplace law specializing in helping clients facing discrimination due to pregnancy or other family-care issues, such as caring for a sick child or elderly parent. This is Spiggle's first book. To learn more, visit: www.yourepregnantyourefired.com.