Kelly v. American Standard, Inc.

• Citation: 640 F.2d 974
• Decision Date: 23 April 1981
• Docket Number: Nos. 79-4005,79-4081,s. 79-4005
• Parties: 25 Fair Empl.Prac.Cas. 94, 25 Empl. Prac. Dec. P 31,612 Andrew P. KELLY, Plaintiff-Appellee, v. AMERICAN STANDARD, INC., a foreign Corporation, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 974

640 F.2d 974

25 Fair Empl.Prac.Cas. 94, 25 Empl. Prac.

Dec. P 31,612

Andrew P. KELLY, Plaintiff-Appellee, v. AMERICAN STANDARD, INC., a foreign Corporation, Defendant-Appellant.

Nos. 79-4005, 79-4081.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 6, 1980.

Decided Feb. 23, 1981.

Rehearing and Rehearing En Banc Denied April 23, 1981.

Michael J. Cronin, Spokane, Wash., for defendant-appellant.

Michael J. McMahon, and Michael J. Myers, Randall & Danskin, Spokane, Wash., for plaintiff-appellee.

Appeal from the United States District Court for the Eastern District of Washington.

Before VAN DUSEN ^*, Senior Circuit Judge, ANDERSON and BOOCHEVER, Circuit Judges.

BOOCHEVER, Circuit Judge.

This appeal involves the proper measures of damage recovery under the Age Discrimination in Employment Act of 1967, Pub.L. 90-202, 81 Stat. 602 (1967) (codified at 29 U.S.C. § 621 et seq.) (ADEA), as well an an evaluation of the district court's jury instructions. The jury awarded Kelly damages for lost wages and pension benefits, business start-up costs, and emotional distress resulting from discharge by his employer. The trial judge further awarded Kelly prejudgment interest and attorney fees, but denied liquidated damages. We have concluded that, with a minor modification to the business start-up award, the jury verdict was proper. Furthermore, the award of prejudgment interest was correct and is affirmed as modified in this opinion. We conclude, however, that the trial judge applied an incorrect standard in denying liquidated damages, and remand to the district court for a redetermination of "willfulness." We also find that Kelly is entitled to attorney fees for this successful appeal, and leave calculation of the recoverable amount to the district court.

FACTS:

Kelly was employed as a territory sales representative by the defendant-employer American Standard, Inc. (American) from 1954 until July 1, 1975. Because American sold its hydronics manufacturing plant, it decided to reduce its nationwide sales division personnel by forty employees, including one salesman from its Seattle sales district. Kelly was the Seattle salesman discharged. Kelly brought suit against American, alleging that his termination was a violation of the ADEA and the Washington State Law Against Discrimination (Wash.Rev.Code Ann. §§ 49.60; 49.60.180(2) (Supp.1980)). Kelly was 57 in 1975, and he contends that American terminated him because of his age, to make room for younger salesmen.

The case was tried by a jury. Kelly introduced statistical evidence tending to prove a pattern of age discrimination in American's nationwide discharge plan. Kelly also introduced evidence of American's discriminatory intent. He testified that American's district sales manager told him that American planned to retain a younger man in Kelly's position in Seattle, who would have "many years to offer the company." Kelly also testified that American's vice president in charge of sales told him that the average age of salesmen was "too high" and that "something had to be done about it." American's representatives denied that such statements were made, and testified that Kelly was terminated because he was the least effective member of the Seattle sales force. The jury was instructed on both the state and federal age discrimination legislation, and returned a verdict in favor of Kelly.

The jury awarded total damages of $48,500; including $25,000 for lost income, $2,000 for lost pension benefits, $6,500 for business start-up costs, and $15,000 for mental suffering. By agreement of the parties, the court rather than the jury determined the availability and amount of liquidated damages, prejudgment interest, and attorney fees. The court awarded prejudgment interest of 8% on $27,000, and attorney fees of $14,000. However, it denied Kelly's request for liquidated damages under the ADEA, finding that American had not acted "willfully" under 29 U.S.C. § 626(b), and further finding that the "good faith" defense of 29 U.S.C. § 260 applied.

American appeals the trial court's award of prejudgment interest to Kelly. American also appeals the jury verdict in favor of Kelly, contending that damages for emotional distress are not available under state or federal law, and that the jury instructions were erroneous or incomplete in several respects. Kelly cross-appeals, contending that liquidated damages were improperly denied, and that he is entitled to attorney fees on appeal. The issue of the ADEA violation itself is not directly raised on this appeal, except insofar as American challenges the district court jury instructions.

I. LIQUIDATED DAMAGES

A. ADEA Enforcement

The ADEA makes it unlawful for an employer "to discharge any individual or otherwise discriminate against any individual ... because of such individual's age." ¹ This proscription is enforced through express incorporation of the remedial rights and procedures of the Fair Labor Standards The jury awarded Kelly $27,000 in lost wages and pension benefits, but Judge Neill denied Kelly's request for liquidated damages in an equal amount because he found no evidence that American's violation was "willful," and because he concluded that the "good faith" defense of section 11 of the Portal-to-Portal Act, 29 U.S.C. § 260, applied to American's conduct. ⁴ It is first necessary to determine whether the trial court properly found that American did not act willfully.

Act (FLSA), rather than through independent ADEA remedies. Section 7(b) of the ADEA, 29 U.S.C. § 626(b), provides that its provisions "shall be enforced in accordance with the powers, remedies, and procedures provided in sections 11(b), 16 ... and 17 of the Fair Labor Standards Act of 1938, as amended ...." ² Pursuant to those statutes, an employer who violates the ADEA is liable for back wages and benefits, as well as "an additional equal amount as liquidated damages." ³

B. The Willfulness Standard

The apparently automatic provision for liquidated damages in 29 U.S.C. § 216(b) is modified by 29 U.S.C. § 626(b), providing that such damages will only be awarded "in cases of willful violations of this chapter ...." Neither the Act nor its legislative history defines "willful." Kelly contends that the test applied by the district court places too high a burden on ADEA plaintiffs.

The court below stated that for a willful violation, "there must be proof that defendant intentionally and knowingly fired plaintiff, with the knowledge that their acts had implications under the Age Discrimination in Employment Act." Because Kelly presented no evidence of American's knowledge of ADEA implications, liquidated damages were denied. The district court relied on Hays v. Republic Steel Corp., 531 F.2d 1307 (5th Cir. 1976), in support of the conclusion that a defendant must have knowledge of ADEA implications for a plaintiff to recover liquidated damages. ⁵

In fact, the Hays court did not consider or decide this question. The only reference to the issue in the court's opinion is a quote from the trial court which cited Coleman v. Jiffy June Farms, Inc., 458 F.2d 1139 (5th Cir.), cert. denied, 409 U.S. 948, 93 S.Ct. 292, 34 L.Ed.2d 219 (1972). Coleman required knowledge of implications under the FLSA to show willfulness. The Coleman court, however, was not interpreting the term "willful" in the liquidated damage provision of 29 U.S.C. § 626(b), but was concerned with 29 U.S.C. § 255(a), which establishes the statute of limitations for FLSA actions. The limitation period is two years unless the employer's actions are willful, in which case the limitation period is three years.

Coleman is not on point here. The statute of limitations interpreted in Coleman is designed to prevent an employer with knowledge of FLSA from delaying a lawsuit by misleading its employee as to his or her rights. See Brennan v. Heard, 491 F.2d 1, 3 (5th Cir. 1974). The employer would only have reason to mislead or delay an employee when it knew that its actions were possibly violative of an employment act. ⁶

In contrast the award of liquidated damages is in effect a substitution for punitive damages and is intended to deter intentional violations of the ADEA. Dean v. American Security Insurance Co., 559 F.2d 1036, 1039-40 (5th Cir. 1977), cert. denied, 434 U.S. 1066, 98 S.Ct. 1243, 55 L.Ed.2d 767 (1978); Douglas v. American Cyanamid Co., 472 F.Supp. 298, 303 (D.C.Conn.1979). Courts awarding liquidated damages have not required proof of an employer's knowledge of the Act, but have looked only to the knowing and voluntary nature of the violation. Buchholz v. Symons Manufacturing Co., 445 F.Supp. 706, 713 (E.D.Wis.1978) (willfulness found because violation was "intentional, knowing and voluntary"); Rogers v. Exxon Research & Engineering Co., 404 F.Supp. 324, 334 (D.N.J.1975), rev'd on other grounds, 550 F.2d 834 (3d Cir. 1977), cert. denied, 434 U.S. 1022, 98 S.Ct. 749, 54 L.Ed.2d 770 (1978) ("careless disregard" of whether employer had a right to act as it did).

A version of the "knowing and voluntary" standard was recently adopted in a well-reasoned opinion of the Third Circuit.

                Wehr v. Burroughs Corp., 619 F.2d 276 (3d Cir. 1980).  The Wehr court upheld an award of liquidated damages based on a jury instruction that the employer must act "deliberately, intentionally, and knowingly."  7 The court noted that "willful" is subject to many interpretations, and stressed the importance of a lower standard for civil, as opposed to criminal, statutes using the term. 619 F.2d at 282 (no specific intent should be required); accord Hodgson v. Hyatt, 318 F.Supp. 390 (N.D.Fla.1970)
                

American argues that a lower standard than that imposed by the trial court, such as the Wehr approach, would render liquidated damages automatic. ⁸ This argument ignores the fact that an employer's act may still violate the ADEA, and not be knowing and voluntary. See Walker v. Pettit Construction...