award. This amount is fully recovered by an award of prejudgment interest.
III. Punitive Damages
"An individual who establishes a cause of action under § 1981 is entitled to both equitable and legal relief and, under certain circumstances, punitive damages." Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 460, 95 S. Ct. 1716, 1720, 44 L. Ed. 2d 295 (1975). The Supreme Court has stated that "in the absence of any persuasive arguments to the contrary based on the policies of [42 U.S.C.] § 1983, we are content to adopt the policy judgment of the common law -- that reckless or callous disregard for the plaintiffs rights, as well as intentional violations of federal law, should be sufficient to trigger a jury's consideration of the appropriateness of punitive damages." Smith v. Wade, 461 U.S. 30, 51, 103 S. Ct. 1625, 1637, 75 L. Ed. 2d 632 (1983). In Special Master Order No. 26 ("SMO 26"), Master Meites applied the Smith v. Wade standard to this case, and determined that punitive damages were appropriate.
In SMO 26, Master Meites acknowledged that neither this Court nor the court of appeals had ever made a finding of reckless or callous disregard for the plaintiffs rights.
Master Meites, therefore, reviewed the evidence presented at trial and to him at the shortfall hearing in order to determine whether punitive damages would be available. In reviewing the evidence, Master Meites emphasized an incident at ICG's hiring office in March, 1979, and the subsequent EEOC investigation.
On March 27, 1979, Capitol Employment Agency in East St. Louis, Illinois, assembled a group of between 125 and 175 applicants, most of whom were black, to send to apply for a job with ICG. These applicants were sent by bus to the defendant's hiring office in Carbondale. The employment agency had notified the defendant that it was planning to send down a large group of applicants, although Mary Annette Lane, the clerk in charge of the hiring office, testified that the employment agency indicated that many of these applicants would not show up. In any event, there is no dispute that the number of applicants that arrived in Carbondale on March 27, 1979, was unusually large.
When the busloads of applicants sent by Capitol Employment Agency arrived in Carbondale, they were given applications and told to fill them out. None of the applicants were interviewed, although several other people at the hiring office (mostly white) were given interviews or physical examinations. These people had applied earlier and had been scheduled back for interviews and examinations. None of the applicants sent by Capitol Employment Agency were ever offered a job with ICG.
Later that day or on the following day, a representative of the Capitol Employment Agency received a telephone call from Ms. Lane. She told the representative that the railroad had only five or six openings, and that in her experience the applicants from East St. Louis were unreliable.
The representative also received a phone call from a person who identified himself as a supervisor with ICG. The supervisor (who did not identify himself by name) asked the representative if he were responsible for sending "the minorities" to the Carbondale hiring office. When the representative answered affirmatively, the supervisor stated that the agency was not to contact the railroad again.
At no time did any railroad employee let the employment agency or any of the applicants know that it was accepting applications for employment in East St. Louis on Wednesday afternoons.
As a result of the events of March 27, 1979, a complaint was filed with the EEOC by the class representative, Mister. In response to a questionnaire from the EEOC, ICG indicated that during March, 1979, it was hiring laborers to work in Fulton, Kentucky, approximately 225 miles from East St. Louis. ICG further stated that it could not determine the number of applicants hired by race from the applications received. Both of these statements were not true. During the spring of 1979, ICG was hiring for positions located throughout its system, including East St. Louis. Moreover, while the applications taken by ICG did not reveal the race of the applicant, the defendant kept those statistics separately in documents titled Monthly Employment Activity Reports.
Based on these facts, Master Meites determined that the defendant acted in callous disregard of the plaintiffs rights on March 27, 1979, in Carbondale. Master Meites relied on a combination of factors in reaching this conclusion: not one of the applicants from East St. Louis was ever offered a job with the defendant; white applicants were given interviews and physical examinations, with no explanation given to the black applicants; several employees of the defendant contacted the employment agency that same day or the following day, and made statements which could be read as disparaging to blacks. Master Meites also concluded that the defendant acted intentionally and purposefully to obstruct the EEOC investigation.
In objecting to these conclusions, the defendant argues that Master Meites used the wrong standard for deciding if punitive damages are warranted in this case. The defendant argues that the Smith v. Wade standard is designed for cases brought under § 1983, in which the plaintiff needs to overcome the defense of qualified immunity. For its part, plaintiff contends that this Court is obliged to accept the conclusions of the Special Master unless "clearly erroneous" under Federal Rule of Civil Procedure 53(e)(2). With regard to the legal basis for an award of punitive damages in this case, both these contentions are wrong.
Federal Rule of Civil Procedure 53(e)(2) states that "the court shall accept the master's findings of fact unless clearly erroneous." Fed. R. Civ. P. 53(e)(2) [emphasis supplied]. The standard for determining if punitive damages are available is a question of law. It is emphatically the Court's province to determine what the law is in a given case. To the extent that the plaintiff is contending that a district court cannot overturn a special master's conclusions of law unless they are clearly erroneous, the plaintiff's contention must be rejected. If the special master applied the wrong law, it is this Court's duty to reject his findings and clarify the point of law.
In this case, however, Master Meites was entirely correct in applying the Smith v. Wade standard to a § 1981 claim. In arguing that Smith v. Wade does not provide the proper standard, the defendant relies on the following statement by the Seventh Circuit:
Smith v. Wade suggests that any conduct violating § 1983 may support an award of punitive damages. This is deceiving, however, because the Court also observed that the plaintiff under § 1983 must also surmount the defense of official immunity (461 U.S. at 55, 103 S. Ct. at 1639 ). The complete rule applicable to a defendant without the benefit of immunity may be that intentional, illegal conduct may support an award of punitive damages when the application of the law to the facts at hand was so clear at the time of the act that reasonably competent people would have agreed on its application. See Soderberck v. Burnett County, 752 F.2d 285, 289-91 (7th Cir. 1985) (punitive damages usually depend on specific intent to violate a known right). Cf. Colaizzi v. Walker, 812 F.2d 304, 308 (7th Cir. 1987). An approach of this character still supports the submission of the question to the jury, given the clarity of the rule against racial discrimination in employment.
Williamson v. Handy Button Machine Company, 817 F.2d 1290, 1296 (7th Cir. 1987).
The defendant seizes upon the omission of reckless disregard in Williamson discussion of the interplay of qualified immunity and punitive damages, and argues that the appropriate standard for an award of punitive damages is a showing of intentional conduct Williamson itself cites Smith v. Wade with the notation that it is "a case decided under § 1983, but equally applicable under § 1981". Id. Defendant thus ignores the explicit recognition by the Seventh Circuit that Smith v. Wade has currency in the context of a § 1981 action. This Court believes that the application of Smith v. Wade to a § 1981 claim requires recognition of the possibility that reckless disregard for plaintiff's rights may be a basis for punitive damages. More relevant to this case is the last sentence quoted above: "An approach of this character still supports the submission of the question to the jury, given the clarity of the rule against racial discrimination in employment." Whatever concerns the Seventh Circuit harbors over the absence of qualified immunity in actions against private actors under § 1981 appear to be satisfied in straightforward employment discrimination claims, since the law is clear that race cannot be a factor in hiring decisions.
Having determined that the Special Master applied the correct standard, the next step in the inquiry is whether the Master reached the right conclusion. The Special Master was engaged to compute the amount of damages on a class-wide basis. The findings of fact necessary to determine the amount of damages must be accepted unless clearly erroneous. Fed. R. Civ. P. 53(e)(2). However, a unique feature of punitive damages is that they are awarded as a matter of discretion, not as a matter of right. "'If the plaintiff proves sufficiently serious misconduct on the defendant's part, the question whether to award punitive damages is left to the jury, which may or may not make such an award'" Smith v. Wade, 461 U.S. at 51, 103 S. Ct. at 1638, quoting D. Dobbs, Law of Remedies 204 (1973). While the Special Master may make a finding on the amount of punitive damages the class may receive, the discretion to award the punitive damages remains with the Court. Nothing in the Order of Reference or the Order of Protocol suggests otherwise.
A review of the events of March 27, 1979, and the subsequent EEOC investigation lead to the conclusion that punitive damages would not serve a purpose in this case. The events of March 27, 1979, are unique. The defendant (through its hiring clerk, Ms. Lane) were overwhelmed by the number of applicants who appeared at the Carbondale hiring office. The number far outstripped the capability to process the applicants. Moreover, it would be unusual for so many black applicants to apply in the future on the same day. While the reaction of Ms. Lane and the defendant are blameworthy,
in the context of the events of March 27, 1979, her reaction does not support an award of punitive damages.
Moreover, the Special Master should not have considered the defendant's conduct during the EEOC investigation. The Court is inclined to agree that the defendant's conduct amounted to purposeful deception of the EEOC investigators, and will accept the Master's finding of fact on this point. This conduct, however, related only to the EEOC investigation of the claim of class representative Mister. Mister's individual claim was dismissed by this Court; the dismissal was upheld by the Seventh Circuit. Punitive damages (particularly in a class action context) may be supported by a pattern of conduct beyond the activities which support the allegations of a lawsuit. In this case, however, the misleading statements made to the EEOC in the course of one investigation (in a claim ultimately found without merit by this Court and the Seventh Circuit) do not establish a pattern of conduct sufficient to support punitive damages. Since no pattern of conduct has been established, punitive damages should not be awarded to the class based on ICG's actions relating to a claim which has been adjudged without merit.
For these reasons, punitive damages are not recoverable in this case. The Court's decision not to award punitive damages in this case should not be taken to mean that the Court condones the conduct of ICG. Racial discrimination, in all its forms, is repugnant and should be deterred. Moreover, the actions of ICG during the EEOC investigation of Mister's claim should not be tolerated. The events of March 27, 1979, are unique and are unlikely to be repeated; for this reason, punitive damages would not serve a deterrent purpose. However, if ICG were placed in the same situation in the future and reacted similarly, punitive damages would be particularly appropriate under these facts.
IV. Motion to Disqualify
The motion to disqualify the Special Master consisted of two prongs. The first prong was that the Master should be disqualified because of his conflict of interest with the defendant's expert witness. That conflict of interest is now moot, since defendant's expert witness will not be testifying in the case in which the Special Master is counsel. The second prong of the motion was that the Master had a bias in this case due to his representation of other plaintiffs in employment discrimination lawsuits. The specific areas of bias have been addressed in this memorandum, either explicitly or implicitly.
Therefore, since all the issues raised by the motion have been resolved, the motion to disqualify ought to be denied as moot.
Moreover, at this point the stay imposed on this case ought to be lifted. The parties may proceed with discovery and the Special Master should proceed with his work on a final report. The parties are not to engage in any discovery without an order by the Special Master. In conducting discovery and preparing the final report, the Special Master should conduct proceedings consistent with this memorandum.
The motion to disqualify is DENIED; the motion to lift stay is GRANTED. The Special Master is requested to meet with the parties at the earliest practical time to determine how he wishes to proceed with preparation of a final report and to schedule further discovery consistent with this memorandum.
IT IS SO ORDERED.
DATED: March 26, 1992
James L. Foreman