Tommy Morgan v. New York Life Insurance Company

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 09a0096p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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TOMMY G. MORGAN,
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Plaintiff-Appellee,
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No. 07-4186
v.
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NEW YORK LIFE INSURANCE CO.,
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Defendant-Appellant.
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Appeal from the United States District Court
for the Northern District of Ohio at Cleveland.
No. 05-02872—James S. Gwin, District Judge.
Argued: September 17, 2008
Decided and Filed: March 12, 2009
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Before: COLE and GILMAN, Circuit Judges; MILLS, District Judge.
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COUNSEL
ARGUED: Thomas M. Peterson, MORGAN, LEWIS & BOCKIUS, San Francisco,
California, for Appellant. Erwin Chemerinsky, DUKE UNIVERSITY SCHOOL OF
LAW, Durham, North Carolina, for Appellee. ON BRIEF: Thomas M. Peterson,
MORGAN, LEWIS & BOCKIUS, San Francisco, California, Michael L. Banks,
MORGAN, LEWIS & BOCKIUS, Philadelphia, Pennsylvania, Gregory V. Mersol,
Thomas D. Warren, BAKER & HOSTETLER, Cleveland, Ohio, for Appellant. Erwin
Chemerinsky, DUKE UNIVERSITY SCHOOL OF LAW, Durham, North Carolina,
Christopher P. Thorman, Daniel P. Petrov, Peter S. Hardin-Levine, THORMAN &
HARDIN-LEVINE, Cleveland, Ohio, Jonathan S. Massey, Bethesda, Maryland,
Anthony Z. Roisman, NATIONAL LEGAL SCHOLARS LAW FIRM, Lyme, New
Hampshire, for Appellee.
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The Honorable Richard Mills, United States District Judge for the Central District of Illinois,
sitting by designation.
1
No. 07-4186 Morgan v. New York Life Ins. Co. Page 2
_________________
OPINION
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RICHARD MILLS, District Judge. Tommy G. Morgan was terminated as a
managing partner with New York Life.
He brought an age discrimination action under the Ohio Civil Rights Act, R.C.
§ 4112.
The jury found in his favor.
The jury awarded him $6,000,000 in compensatory damages and $10,000,000 in
punitive damages.
New York Life raises several issues on appeal: (1) that the district court erred in
denying New York Life’s motion for judgment as a matter of law and abused its
discretion in denying New York Life’s motion for a new trial despite its alleged
legitimate business justifications for Morgan’s termination; (2) that the district court
abused its discretion in admitting statements of alleged age animus that were unrelated
to Morgan and were not proximate in time to his termination; (3) that the district court
abused its discretion in declining to give New York Life’s proposed jury instruction
relating to statements of alleged age animus; and (4) that the district court improperly
upheld the punitive damages award because the amount is excessive and does not
comport with due process.
For the reasons that follow, we find no error in the district court’s decision to
deny New York Life’s motion for judgment as a matter of law and motion for a new
trial. Moreover, the district court did not abuse its discretion in admitting statements of
alleged age animus or in declining to give New York Life’s proposed jury instructions.
Thus, we affirm its judgment as to the compensatory damages award.
However, we vacate the punitive damages award and remand the case to the
district court with instructions to enter an order of remittitur reducing the award.
No. 07-4186 Morgan v. New York Life Ins. Co. Page 3
I. BACKGROUND
(A)
On January 1, 2000, Tommy Morgan, who at the time was 45 years old, was
appointed managing partner of New York Life Insurance Company’s Northern Ohio
office. New York Life conducts a nationwide business selling from its local offices life
insurance, annuities, and related products and services. As managing partner, Morgan
was the senior executive in charge of the Cleveland office and was responsible for
achieving the performance goals set by the company for the office and its sales agent
force. The company has approximately 120 “general offices” that are organized into
four zones, each with 30 to 35 general offices. Previously, Morgan had worked four
years as managing partner of New York Life’s smaller Corpus Christi office. The
Cleveland office is in the South Central Zone.
An office’s success is determined largely by sales revenue and manpower. The
two interact in that sales are made by agents and managing partners such as Morgan
recruited new agents, trained and retained existing agents, and selected and trained other
managers who would also recruit agents. According to Phil Hildebrand, who was co-
head and executive vice-president of insurance operations, manpower growth “represents
everything” including future sales and the future management of the company. Thus,
the growth of the company from within was integral to its success. The managing
partner also ensured that his office adhered to company and regulatory standards.
During his tenure as managing partner, Morgan earned between $500,000 and
$1,000,000 per year. The pay of any managing partner is based on objective criteria.
Managing partners receive a base pay that will increase or decrease depending on sales
and manpower performance. Robert O’Neill, the chief operating officer of the South
Central Zone, testified that if manpower grows faster than the assigned goal, the
managing partner can earn up to 25% more. If it drops, managing partner pay may fall
as much as 20%.
No. 07-4186 Morgan v. New York Life Ins. Co. Page 4
Prior to Morgan’s arrival, the Cleveland office was performing well under the
leadership of Eric Campbell. Early in his tenure, Morgan was given and agreed to a
series of performance benchmarks for his position. Other managing partners received
similar benchmarks. Manpower growth was an important component. Morgan was to
personally recruit at least eight new agents each year, assure that office recruiters meet
their new-agent enlistment goals each year and cultivate retention of existing agents.
The parties dispute how well Morgan performed.
(B)
New York Life notes Morgan’s year-end 2001 evaluation shows that he fell
below office performance targets in each of the several categories, including actual
office results versus goal revenue, new organization growth, life production, paid life
growth, manpower and retention. The company uses an index that it calls Growth
Profitably and Accountability (“GPA”) as one means of measuring a manager’s
performance. Managing partners are periodically given a GPA score, ranging from 0 to
4.0+, based upon several performance criteria. Morgan’s 2001 final adjusted GPA was
2.25. According to the mid-2002 evaluation, Morgan failed to meet all but one of the
seven targets set for his office. He exceeded his goal for manpower growth. Morgan’s
mid-2002 GPA was 1.71. Morgan’s year-end 2002 evaluation showed significant
improvement in many areas; New York Life notes, however, that actual results were
more than 14% below goals and life production growth was minus 10.8%, rather than
the target of plus 10%. Morgan met or exceeded his goals in the other categories. His
GPA was 2.57. Morgan’s year-end 2003 evaluation shows that he again failed to meet
several goals, including manpower growth. The number of agents in the Cleveland
office fell from 139 to 127. Morgan was told to focus on recruiting, manpower
development and retention.
Morgan alleges that he consistently surpassed the performance criteria set for
him. Consequently, he earned higher-than-expected income each year from 2000 to
2003. Moreover, the average in first-year commissions was significantly higher during
Morgan’s tenure than it was in the five years before he arrived. According to Morgan,
No. 07-4186 Morgan v. New York Life Ins. Co. Page 5
however, a series of events which were beyond his control plagued the office. In 2000,
Barrett Weinberger was ranked second in the nation among all agents. He soon became
disabled and “his production went from about $600,000 to zero.” Another agent, John
Tijanich, embezzled over $5 million from New York Life clients. New York Life
stipulated that Morgan was not at fault in any way. Jack Guttman, a veteran agent who
predated Morgan’s arrival, was involved in some “wrong dealings, completely unrelated
to the insurance industry, and NYL terminated his contract.”
According to New York Life’s Manual for managing partners, a written
Performance Improvement Program should be established if the GPA is less than 1.5.
It further provides that a “Performance Warning” should be issued if the GPA is less
than 1.5, or performance shows a continuous decline, even if the Overall Rating is
acceptable. New York Life’s internal evaluation and accountability system includes
various cautionary directives that can be given to managing partners: performance alert,
written performance warning, final notice and termination. These are typically
progressive steps. According to New York Life, Morgan’s July 2004 performance
warning was based on multi-year downward trends. He first received a warning rather
than an alert because, according to Robert O’Neill, Morgan “really wasn’t eligible for
an alert.” New York Life set performance requirements for Morgan to meet by
December 31: a GPA of 2.0 or more; 10% increase in new organization first-year
commissions; and a three-year “pro-active” agent retention rate of 23%.
At the time of Morgan’s performance warning, New York Life calculated his
GPA as 1.5, a number Morgan disputed, claiming it should have been 1.71. According
to Brad Willson, who succeeded Paul Morris1 as Senior Vice-President of the South
Central Zone, the GPA played only a small part in Morgan’s performance warning.
Downward office trends were the primary consideration. Willson stated that any GPA
discrepancy would not have affected the decision. At the time, Morgan acknowledged
that improvement was needed in several areas.
1
Morris was promoted to Senior Vice-President in charge of Agency and moved to New York
Life’s headquarters.
No. 07-4186 Morgan v. New York Life Ins. Co. Page 6
When Morgan’s performance did not improve after being placed on performance
warning, he was placed on final notice. It was Willson’s decision to place Morgan on
this status. According to New York Life’s manual, “A Performance Notice (or final
Notice) is issued in those situations where prior actions have not produced satisfactory
results or where performance has deteriorated so rapidly that urgent action is required.”
“At the end of the performance or final notice period, if the Managing Partner has not
reached the objective specified in the improvement plan, his or her Managing Partner’s
contract should be terminated.”
Morgan’s final written notice stated that he would be removed as managing
partner if he did not meet seven specified requirements by June 30, 2005. One
requirement was a five percent growth in manpower, which meant increasing the number
of agents to 99. By June 30, 2005, it looked as though Morgan had satisfied each
requirement, including the five percent manpower increase. He reported exceeding his
goal of 99 agents by three. According to Morris, four of the agents reported as part of
the manpower increase (Zeno, Abbott, Kumahor, and Chorak) met the $500 commission
revenue requirement only by splitting commissions with other agents already in the
office manpower count. Morris explained that a proper commission split occurs when
two agents work together to secure business and agree to share the commission earned
by their combined efforts. New York Life sought to avoid having poorly qualified
recruits count in manpower because experience taught that these agents were often
unsuccessful. Manipulation of first-year commissions was against company policy.
After an investigation, the corporate vice-president for agency standards,
Christopher Tebeau, determined that four of the manpower triggers were based on splits
that “were not consistent with NYL’s rules.” Tebeau stated that three of the splits
appeared to be gifts and the explanation as to the fourth was a lie. New York Life
alleges that when those four commission splits were deducted from Morgan’s Cleveland
manpower count, he fell below the manpower count given to him as part of his final
notice. Morgan states that he was told by O’Neill in August 2005 that although a few
of the splits were questionable and would not be allowed, the rest were acceptable and
No. 07-4186 Morgan v. New York Life Ins. Co. Page 7
that he met his requirement. On September 18, O’Neill called again and told Morgan
that a fourth commission split (involving Zeno) was in doubt. Morgan acknowledged
that Zeno did no work on the sale of the annuity for which he received a 95% split.
On September 19, 2005, Morgan met with Willson and O’Neill. They informed
Morgan that his employment was terminated because he failed to meet the manpower
requirements, as provided in New York Life’s written manual. Willson testified that he
consulted with O’Neill in deciding to discharge Morgan. Morgan was replaced by Mo
Abdou, the 40-year old manager of New York Life’s Orlando office.
According to Morgan, New York Life’s decision to replace Morgan with Abdou
is revealed in a document entitled “Managing Partner Selection Process,” which
specifically referred to the Cleveland office. The document contains the notation,
“Update of 09/02/05,” and listed the candidates for replacing the Cleveland managing
partner. The date listed appears to show that Abdou had been selected for the position
on or before September 2, 2005, a date before New York Life had determined that
Morgan failed to meet the manpower requirement. A New York Life witness testified
that only a portion of the continuously-updated list was created on September 2 and the
remainder was created on September 21.
(C)
Morgan filed suit against NYL. The district court granted New York Life’s
summary judgment motion as to Morgan’s sex discrimination and defamation claims.
Morgan’s claim for age discrimination under Ohio law and his claim for reverse race
discrimination proceeded to trial. New York Life moved in limine to exclude certain
statements that Morgan proposed to offer as evidence of alleged animus toward older
workers. The trial court denied the motion. New York Life proposed a jury instruction
to guide the jury in evaluating any age-related statements attributed to it and admitted
into evidence. The court declined to give the instruction. New York Life moved for a
directed verdict on the age discrimination claim, which the court denied.
No. 07-4186 Morgan v. New York Life Ins. Co. Page 8
The jury found in favor of Morgan on his age discrimination claim and awarded
him $1,000,000 in past and $4,500,000 in future economic compensatory damages,
$500,000 in non-economic compensatory damages, and $10,000,000 in punitive
damages. It found in favor of New York Life on Morgan’s race discrimination claim.
Judgment was entered and the court denied New York Life’s reserved directed verdict
motion as to punitive damages. New York Life filed various post-trial motions, which
were denied by the district court on August 16, 2007. New York Life filed its timely
notice of appeal on September 12, 2007.
II. ANALYSIS
A. Admission of Age-related Statements without a Jury Instruction
(1)
We will first consider whether the district court erred in admitting what Morgan
claims are age-related statements made by Senior Vice-President Morris and Executive
Vice-President Hildebrand, and whether the district court should have given New York
Life’s proposed jury instruction if the statements were admitted. A district court’s
evidentiary rulings, including its refusal to give a proposed jury instruction, are reviewed
for abuse of discretion. See Taylor v. TECO Barge Line, Inc., 517 F.3d 372, 378, 387
(6th Cir. 2008).
New York Life claims the district court improperly admitted certain prejudicial
age-related statements, thus requiring a new trial. New York Life contends that such
remarks carry with them a high risk of prejudice in an age discrimination case because,
if there is no other evidence of discrimination, the statements add “an emotional element
that was otherwise lacking as a basis for a verdict.” See Schrand v. Federal Pacific Elec.
Co., 851 F.2d 152, 156 (6th Cir. 1988). According to the company, therefore, the
statements should be excluded under Federal Rule of Evidence 403.
Courts examine several factors in determining whether an employer’s age-related
statements evince bias. These include “(1) whether the statements were made by a
decision-maker or by an agent within the scope of his employment; (2) whether the
No. 07-4186 Morgan v. New York Life Ins. Co. Page 9
statements were related to the decision-making process; (3) whether the statements were
more than merely vague, ambiguous or isolated remarks; and (4) whether they were
made proximate in time to the act of termination.” Peters v. Lincoln Elec. Co., 285 F.3d
456, 478 (6th Cir. 2002). Statements such as a company is a “young, vibrant, sales
organization” and “it is time for the next generation” are alone not enough to establish
direct evidence of age discrimination when they are not said to or made about the
plaintiff.2 See Smith v. E.G. Baldwin & Assoc., Inc., 695 N.E.2d 349, 353 (Ohio App.
1997).
(2)
An August 31, 2005 email from Hildebrand announced various management
changes and referred to “a new generation of managerial talent.” However, New York
Life points out that three of the five managers referenced in that memorandum as
receiving better jobs (Ray (55), McKinley (51), and Willson (51)) were Morgan’s age
or older. Thus, New York Life claims no inference of age bias can be drawn. Moreover,
the company notes that a statement several years earlier (in a 2001 letter) that “time has
passed him by” related to Jim Torrell. New York Life further contends that Morgan also
relied upon a three-year-old statement made in an October 15, 2002 letter of Morris
regarding the hiring of an entry-level sales employee, which stated “we need to bring
young people like this through our system.” Morris testified that New York Life needed
a “balance of ages” for its employees. NYL asserts these statements were either not
relevant or were too remote in time. O’Neill acknowledged the performance reviews
that Morris did are “littered with age-related references.”
At trial, substantial evidence of age discrimination was presented by Morgan.
Although many of these statements are not particularly relevant to the employment
decision at issue, we are unable to conclude that there was a significant risk of prejudice
2
New York Life cites pages 3, 19 and 21 of the district court’s order in arguing that it erred in
treating the alleged ageist comments as direct evidence of discrimination. It does appear that the court
erred in describing this evidence as “direct.” See Srail v. RJF Internat’l. Corp., 711 N.E2d 264, 271 (Ohio
App. 1998) (noting that statements which are remote in time and do not relate to discriminatory acts are
not direct evidence of discrimination).
No. 07-4186 Morgan v. New York Life Ins. Co. Page 10
based on the district court’s admission of them. New York Life also emphasizes the
district court’s erroneous classification of certain statements–those statements made by
Morgan’s superiors about someone else–as direct evidence. However, this error was
made in the district court’s post-judgment rulings, not in any statement to a jury.
Accordingly, there was no risk of prejudice based on the court’s description of the
evidence.
New York Life suggests that this classification distorted the relevancy analysis
of this circumstantial evidence under Rules 401 and 403 of the Federal Rules of
Evidence. Some of the comments were vague or isolated remarks and were not
proximate in time to Morgan’s termination. Others were fairly innocuous. It is therefore
doubtful that the jury relied significantly on the statements in reaching its verdict.
Although most of the statements were thus not particularly probative of discrimination,
there was little risk of prejudice in admitting them. Therefore, the admission of the
statements was not an abuse of the district court’s discretion.
(3)
New York Life next alleges that if the age-related statements were properly
before the jury, then the district court should have instructed the jurors on how to
evaluate them. New York Life’s proposed instruction read as follows:
A plaintiff may prove age bias, either directly or indirectly, by
offering evidence of remarks that are:
1. age related;
2. close in time to the employment decision at issue;
3. made by an individual with authority over the employment
decision at issue; and
4. related to the employment decision at issue.
If the remarks are ambiguous, not close in time or related to the
employment decision, and are not made by the decision maker, you
should not rely on them as proof of age discrimination.
The district court found that New York Life “offers no authority whatsoever in support
of its argument that such an instruction was required, let alone sufficient evidence that
No. 07-4186 Morgan v. New York Life Ins. Co. Page 11
the Court’s refusal to instruct the jury in this manner produced a ‘seriously erroneous
result.’”
The Court “reviews jury instructions as a whole to determine whether they fairly
and adequately submitted the issues and applicable law to the jury.” Arban v. West Pub.
Corp., 345 F.3d 390, 404 (6th Cir. 2003). A new trial is not required “unless the
instructions, taken as a whole, are misleading or give an inadequate understanding of the
law.” Id. “A district court’s refusal to give a jury instruction constitutes reversible error
if (1) the omitted instruction is a correct statement of the law, (2) the instruction is not
substantially covered by other delivered charges, and (3) the failure to give the
instruction impairs the requesting party’s theory of the case.” Taylor, 517 F.3d at 387.
While such an instruction would not have been inappropriate, the district court
did not abuse its discretion in declining to give it. Morgan correctly points out the jury
was properly instructed that it was to determine solely whether the termination was
discriminatory and it was not to be swayed by sympathy or emotion. Moreover, New
York Life was free to argue its theory of the case–that the remarks were vague or were
not related to the employment decision. Thus, the proposed instruction was substantially
covered by the other instructions and the failure to give it did not seriously impair New
York Life’s theory of the case. We find, therefore, that the district court did not abuse
its discretion in declining to give New York Life’s requested jury instruction.
B. NYL’s Motion for judgment as a matter of law or new trial
(1)
We review de novo the denial of a party’s motion or renewed motion for
judgment as a matter of law. See Barnes v. City of Cincinnati, 401 F.3d 729, 736 (6th
Cir. 2005). “Judgment as a matter of law may only be granted if, when viewing the
evidence in a light most favorable to the non-moving party, giving that party the benefit
of all reasonable inferences, there is no genuine issue of material fact for the jury, and
reasonable minds could come to but one conclusion in favor of the moving party.” Id.
“In reviewing the district court’s decision, we may not weigh the evidence, pass on the
No. 07-4186 Morgan v. New York Life Ins. Co. Page 12
credibility of witnesses, or substitute [our] judgment for that of the jury.” Imwalle v.
Reliance Medical Products, Inc., 515 F.3d 531, 543 (6th Cir. 2008) (internal quotation
marks and citations omitted).
We review the denial of a party’s motion for a new trial for abuse of discretion.
See Barnes v. Owens-Corning Fiberglas Corp., 201 F.3d 815, 820 (6th Cir. 2000)
(citation omitted). Reversal is warranted only if the court has “a definite and firm
conviction that the trial court committed a clear error of judgment.” Id. (internal
quotation marks omitted).
(2)
New York Life claims that the district court erred in denying its motion for
judgment as a matter of law or new trial on Morgan’s age discrimination claim. Under
Ohio law, an employer may not discriminate on the basis of age. See Ohio Rev. Code
§ 4112.02(A).
The same evidentiary framework used in analyzing claims under the federal law
is also applied to age discrimination claims under Ohio law. See Campbell v. PMI Food
Equipment Group, Inc., 509 F.3d 776, 785 (6th Cir. 2007) (citation omitted). A plaintiff
must show that age was a “determining factor” in the employer’s decision. See id. “The
McDonnell Douglas test requires a plaintiff to first establish a prima facie case of age
discrimination by showing that the plaintiff (1) was a member of a protected class of
persons (i.e., a person age 40 or over), (2) was discharged, (3) was qualified for the
position held, and, lastly, (4) was replaced by someone outside of the protected class.”
Id.
If the plaintiff meets his prima facie case, the burden then shifts to the employer
to produce evidence of a legitimate, nondiscriminatory reason for the challenged
employment action. See Imwalle, 515 F.3d at 544. If the employer meets its burden of
production, the plaintiff must then show by a preponderance of the evidence that the
legitimate reason proffered by the employer was not the true reason, but instead was a
pretext for discrimination. Id. We have held that “the reasonableness of an employer’s
No. 07-4186 Morgan v. New York Life Ins. Co. Page 13
decision may be considered to the extent that such an inquiry sheds light on whether the
employer’s proffered reason for the employment action was its actual motivation.”
Wexler v. White’s Fine Furniture, Inc., 317 F.3d 564, 576 (6th Cir. 2003). “An
employer’s business judgment . . . is not an absolute defense to unlawful discrimination.”
Id.
After a trial on the merits, this Court no longer considers whether a plaintiff has
established a prima facie case. “Both the Supreme Court and this court . . . have held
that a party framing its argument on appeal in prima facie terms, after a jury trial on the
merits, has unnecessarily evaded the ultimate question of discrimination vel non.”
Imwalle, 515 F.3d at 545 (internal quotation marks and citations omitted). A court’s
duty at this stage is to determine the ultimate question: whether a plaintiff has produced
sufficient evidence to support a jury’s verdict that the employer discriminated against
him on the basis of age. See id. at 545-46. However, courts review “all of the evidence
in the record,” including evidence supporting the plaintiff’s prima facie case. See id. at
546 (quoting Reeves v. Sanderson Plumbing Prod., Inc., 530 U.S. 133, 150 (2000)).
The Supreme Court has stated that “it is permissible for the trier of fact to infer
the ultimate fact of discrimination from the falsity of the employer’s explanation.”
Reeves, 530 U.S. at 147 (emphasis in original). “Proof that the defendant’s explanation
is unworthy of credence is simply one form of circumstantial evidence that is probative
of intentional discrimination, and it may be quite persuasive.” Id.
(3)
Morgan alleged that New York Life was determined to fire him because of his
age. The company claims that it had business justifications for terminating Morgan. He
himself admitted that both revenue and manpower had fallen. New York Life contends
that although the district court found that Morgan’s performance had improved in certain
areas, that does not alter the undisputed evidence of downward revenue or manpower
trends. Moreover, Robert O’Neill testified that because the Cleveland office was among
the 20 largest in the country, he would expect it to be one of the top performing offices.
No. 07-4186 Morgan v. New York Life Ins. Co. Page 14
New York Life further alleges that the combined annual growth rate (“CAGR”)
analysis, which it sometimes used because of the fluctuation inherent in GPA, showed
that Morgan’s office was spiraling downward. However, Morgan contends that because
New York Life used a four-year CAGR instead of the usual five, he did not receive
proper credit for the growth that took place in his first year as managing partner in
Cleveland. New York Life states that a four-year analysis was used because Morgan did
not run the office before 2000.3 Additionally, New York Life claims there is no basis
to dispute the conclusion of its auditor, Christopher Tebeau, that four of the commission
splits used to satisfy Cleveland manpower growth were inconsistent with company
policies. New York Life also asserts that the evidence is disputed that Mo Abdou’s
name was selected from a list of managing partner candidates “updated 09/02/05,”
meaning that the list of available candidates was updated then, not that the decision to
terminate Morgan’s employment was made then, instead of a date later in September.
New York Life further asserts that the evidence does not support a finding of age
discrimination against Morgan based on disparate treatment of other managing partners.
The district court’s comparison of Abdou with Morgan is misplaced according to New
York Life because, despite Abdou’s GPA scores of 1.71 and 1.93 in 2004 and 2005, it
would have been contrary to policies to place him into remedial performance status.4
Such action is authorized only when the GPA is below 1.5 or, as in Morgan’s case, key
office performance trends are down. New York Life claims this was not true as to
Abdou. Paul Morris stated that Abdou’s office “had one of the better growth patterns
in the zone during the years that [he] was in Atlanta.” Additionally, New York Life
asserts that regarding the other managing partners the court addressed, there is no
foundational basis to compare them with Morgan, even if the company occasionally
3
Morgan’s employment as the Managing Partner of the Cleveland office commenced on January
1, 2000. Because he ran the office for the entire year, New York Life’s explanation as to why 2000 was
not included in the CAGR analysis in assessing Morgan’s performance appears to make little sense.
4
New York Life claims that the district court misread Abdou’s GPA. At the end of 2004, his
GPA was 3.07, not the 1.71 stated by the district court. His June 2005 GPA was 2.14, not the 1.93 that
the court attributes. It appears that Abdou had a 1.71 GPA at the end of 2003. Moreover, Abdou’s GPAs
from February through June 2005 were 1.79, 1.00, 0.93, 1.07 and 2.14. However, New York Life states
that an individual’s monthly GPA scores are not used for performance-related action.
No. 07-4186 Morgan v. New York Life Ins. Co. Page 15
exercised its discretion to deviate from its normal rules for others under dissimilar
circumstances. New York Life notes, moreover, that Morgan was not placed into any
performance program after his star agent, Weinberger, became disabled in 2001. He was
not given a warning until downward trends continued.
Morgan points to several examples of when New York Life appears to have
deviated from its normal rules. In 2001, Ken Savoie, who is younger than Morgan and
was the managing partner of the Roanoke office, had an unadjusted GPA of 0.57, and
an adjusted GPA of 1.57. Savoie was placed on “performance alert” and New York Life
determined he would be brought in for training “with several young Managing Partners
who are in need of direction.” New York Life claims that Savoie was not placed on
performance warning because, under its policy, new managing partners receive an
automatic adjustment to GPA, which resulted in Savoie’s being increased from 0.57 to
1.57. Morgan states that no training like that which Savoie received was provided to
older managing partners. By 2003, Savoie’s GPA was 1.93. In July 2004, Willson
noted that Savoie’s GPA had been below 1.50 every month that year and he would
therefore be placed on “performance warning.” In March 2005, New York Life
informed Savoie that he had “missed two of his targets, manpower growth and
percentage of plan.” Savoie was told his employment would be terminated if he failed
to meet five new objectives. Savoie did not meet each objective. Instead of increasing
critical “New Organization” production by the 5% criterion, Savoie’s production fell
31%. His employment was not terminated.
Morgan also notes that in June 2004, the same month he was placed on
performance warning, Randy Cox was ranked 66 out of 69 partners and had a GPA of
1.22. O’Neill testified that although New York Life’s policy is that individuals with
GPAs below 1.5 are ineligible for promotion, the 39-year old Cox was promoted.
In June 2005, Amy Scott was the managing partner in Columbus, Ohio. At the
time, she was 36 years old and had a GPA of 1.50. Despite the relatively low GPA,
Scott was promoted. O’Neill noted that Scott’s maternity leave was an extenuating
circumstance in assessing her performance.
No. 07-4186 Morgan v. New York Life Ins. Co. Page 16
Morgan notes that Jeff Slattery was a substantially younger managing partner in
Memphis. Although Slattery’s GPA in 2001 was a mere 1.25, he was praised by Morris
as a “great young talent.” Slattery was told that he needed to emphasize recruiting and
“increase activity and selection.” New York Life did not place him on performance alert
or performance warning.
Morgan claims older employees were not treated as favorably. Managing Partner
Don Helms, who was over 50 years old, headed the Atlanta office and was placed on
performance alert in December 2004 when his GPA was 2.07. Helms resigned while
under performance warning. In 2005, Paul Morris commended Brad Willson for
“show[ing] leadership and handl[ing] a difficult situation in Tampa” by “helping MP
Bartlett come to a retirement decision.” Bartlett was a 58-year old managing partner
who had a GPA of 1.79 and had been placed on warning.
In a September 24, 2001 letter to Phil Hildebrand, Morris noted that 64-year old
Managing Partner Jim Torrell had done an “outstanding job for a long time,” especially
in the previous three years which had been the best of his career. Morris observed,
however, that Torrell is “a manager from the past” and “not a manager for the future.”
Although “time ha[d] passed Jim by”, it was “very important to [Morris] that Jim Torrell
be treated fairly.” Torrell, who had been a managing partner for 37 years, was told that
his position at the Fairfax, Virginia office was being eliminated as the result of a merger
and he did not have a choice in the matter. Torrell testified that although he had never
discussed retirement plans with New York Life and had no desire to retire, company
officials picked his “retirement” date.
(4)
Morgan also notes that O’Neill testified that he first discussed with Hildebrand
Morgan’s possible termination as early as August 2004.5 He further claims that various
events were part of a deliberate scheme to terminate him. These include:
5
O’Neill also states he does not believe they were discussing Morgan’s termination at that time.
Rather, they were discussing his “evaluation and performance status.”
No. 07-4186 Morgan v. New York Life Ins. Co. Page 17
(1) intentionally misstating Morgan’s GPA as 1.5 when it was actually 1.71; (2) skipping
the first step of performance “alert” and moving directly to performance “warning;”
(3) setting unrealistic objectives and then telling Morgan that his numbers “didn’t
matter” because he was in the home office’s “si[ghts];” (4) creating a false impression
of a downward trend by improperly using a four-year CAGR instead of the standard
five-year CAGR; and (5) pre-identifying a younger replacement, Abdou, before Morgan
was terminated. Thus, Morgan asserts that ample evidence supported the jury’s verdict.
Morgan further alleges that New York Life has presented shifting explanations
that provide additional evidence of discrimination. Morris and Willson apparently
falsely told Hildebrand that Morgan signed a confession that he had forged or
fraudulently misrepresented a commission transfer form.6 O’Neill and Morris later
testified that the sole reason Morgan was terminated was that he failed to meet the
manpower requirement by one agent, in that he had 98 agents at the end of June 2005
instead of the 99 called for in his performance plan. Moreover, there was some
confusion about precisely when company officials learned about the problems with the
Zeno commission split. Morgan further notes that after initially denying he had a role
in the termination decision, Morris eventually acknowledged that the decision ultimately
was his. Additionally, although Morris testified that Morgan declined New York Life’s
offer of another job, he acknowledged there was no document that indicated an offer was
made. Morgan testified that he had talked to O’Neill and Willson in early 2005 about
transferring, but this apparently was not discussed around the time of his termination.
Morgan contends that New York Life’s shifting explanations alone are enough
to show discrimination. New York Life claims it has consistently maintained the reason
that Morgan was terminated in September 2005 was because he did not meet the
performance criteria noted in his final warning: specifically the required manpower
count of 99 agents. According to New York Life, the sole reason for Morgan’s
6
New York Life notes Hildebrand’s testimony that although he did not see such forms in
Morgan’s file, Morris and Willson told him that Morgan falsely signed a “commission transfer form.”
No. 07-4186 Morgan v. New York Life Ins. Co. Page 18
discharge was that he did not meet the manpower goal which followed a continuous
downward trend.
Morgan contends that New York Life’s statements pertaining to older employees
were confirmed by its practices. In 2004 and 2005, six managing partners over the age
of 50 either retired or were terminated, while thirteen under 50 were hired. Additionally,
Morgan alleges that younger workers received preferential treatment and that
performance ratings were manipulated. Morgan asserts that he has presented
overwhelming evidence satisfying each and every method of proof, including age-related
comments by supervisors, preferential treatment for younger workers, shifting
explanations, manipulation of performance warnings and violations of New York Life
policy and practice.
(5)
We conclude that there was sufficient evidence for the jury to find that, in
terminating Morgan, New York Life discriminated against him on the basis of age.
Some of the evidence on which Morgan relies is not particularly strong. As we have
noted, most of the age-related comments are somewhat vague in that they do not relate
to and were not made close in time to Morgan’s termination. Other evidence is stronger.
The promotability index prepared by New York Life entitled “Managing Partner
Selection Process” listed candidates for Morgan’s position and was dated September 2,
2005, which was before the company determined that he had missed the manpower
count. Although New York Life alleged that the date was on the document because it
was a continuously updated list, the jury was entitled to believe otherwise. As the
district court noted, “[T]he jury received evidence that, if believed, supported a finding
that New York Life decided to fire Morgan before the employment target ever became
an issue.” The jury may have also credited O’Neill’s statement that Morgan’s
termination was first discussed in August 2004, though O’Neill also suggests they were
simply discussing his “evaluation and his performance status.”
Although it is inappropriate for a court to second guess a company’s business
judgment, New York Life acknowledges deviating from its normal practices in certain
No. 07-4186 Morgan v. New York Life Ins. Co. Page 19
circumstances. New York Life maintains that these were dissimilar circumstances. This
is true in at least one respect. Savoie, Cox, Scott, Bravada and Slattery were all younger
than Morgan when New York Life departed from its normal practices. All of these
individuals received lesser sanctions and in some case cases even favorable treatment
despite performance issues. The record supports the district court’s finding that New
York Life appeared to be much more willing to consider extenuating circumstances in
some instances (such as Scott’s pregnancy) than it was in evaluating Morgan’s
performance (such as when Northern Ohio employee John Tijanich embezzled millions
of dollars). The district court also contrasted the treatment that the younger managing
partners received with that of older managing partners such as Helms and Bartlett, the
latter of whom Willson helped to reach a retirement decision, and Torrell, who was not
a “manager of the future” because “time has passed Jim by.”
We have no trouble concluding that, when the evidence is viewed in a light most
favorable to Morgan, a jury could have concluded that Morgan’s age was the reason that
New York Life did not deviate from its normal practice when he failed to meet his
manpower requirement by one agent. Although the evidence may not be overwhelming,
we conclude that there is a substantial amount of evidence tending to show that Morgan
was terminated because of his age. This evidence was sufficient for the a jury to find
that age was a motivating factor in New York Life’s employment decision. Accordingly,
the district court did not err in denying New York Life’s motion for judgment as a matter
of law or new trial.
C. Punitive damages award
(1)
New York Life next alleges that the award of punitive damages must be reversed
because this is not an outrageous case where such an award would be appropriate. The
case involves no actual malice and the $10 million award violates due process, according
to the company. Morgan asserts the award is consistent with Ohio law and comports
with due process.
No. 07-4186 Morgan v. New York Life Ins. Co. Page 20
Punitive damages are awarded in order to punish the defendant for wrongful
conduct and deter such future conduct. See Ahern v. Ameritech, 739 N.E.2d 1184, 1199
(Ohio App. 2000). In Ohio, such damages are awarded only upon a showing of actual
malice. Rice v. CertainTeed Corp., 704 N.E.2d 1217, 1220 (Ohio, 1999). “[A]ctual
malice, necessary for an award of punitive damages, is (1) that state of mind under which
a person’s conduct is characterized by hatred, ill will or a spirit of revenge, or (2) a
conscious disregard for the rights and safety of other persons that has a great probability
of causing substantial harm.” Preston v. Murty, 512 N.E.2d 1174, 1176 (Ohio, 1987).
The district court instructed on only the latter definition of actual malice. In Ohio, a
plaintiff must show by clear and convincing evidence that he is entitled to punitive
damages. See Cabe v. Lunich, 640 N.E.2d 159, 162 (Ohio, 1994). Ohio courts have
found the presence of actual malice in employment discrimination cases. See Ahern, 739
N.E.2d at 1199-1200; Srail v. RJF Internat’l Corp., 711 N.E.2d 264, 274 (Ohio, 1998);
Atkinson v. Internat’l Technegroup, Inc., 666 N.E.2d 257, 266-67 (Ohio App. 1995).
In denying New York Life’s motion for judgment as a matter of law and motion
for a new trial, the district court found that Morgan “has shown clear and convincing
evidence that Defendant acted with a conscious disregard for his rights, and that this
conscious disregard had a great probability of causing substantial harm.” It determined,
moreover, that New York Life “willfully disregarded [Morgan’s] right to be free from
the discriminatory actions of his employer taken on the basis of [his] age.”
The district court further observed:
Notably, Plaintiff offered evidence that each of Defendant’s four
decisionmakers in the instant case began engaging in conversations
concerning his employment status and potential termination as early as
August 2004. Rather than placing Plaintiff on a less-serious
“performance alert,” Defendant skipped this usual cautionary phase and
placed Plaintiff on “performance warning” when his GPA allegedly met,
but did not fall below the company’s benchmark of 1.50. In any case,
Defendant admits that Plaintiff’s actual GPA never dipped below 1.71;
yet, Defendant refused to correct its mistake in the company’s records
even after Plaintiff notified Defendant of its error. Similarly, Defendant
mistakenly understated Plaintiff’s performance by employing a four-year
history to calculate Plaintiff’s combined annual growth rate instead of the
No. 07-4186 Morgan v. New York Life Ins. Co. Page 21
traditional five-year history, thus depriving Plaintiff of any credit for the
substantial growth that occurred during his first year of leadership and
also increasing the benchmark against which future growth would be
measured.
The district court went on to note the more favorable treatment received by younger
managing partners such as Savoie, Slattery, Bravada, Scott and Cox. It observed,
moreover, that the company record is littered with age-related references. The court
found that it was probable that Morgan would be substantially harmed because of New
York Life’s actions. It noted that if Morgan had been allowed to work another 3.5 years,
his pension plan would have become fully vested, resulting in an additional $125,000
of annual retirement benefits. On this basis, the court found the necessary “actual
malice” justifying an award of punitive damages.
We are unable to conclude that a punitive damages award in this case violates
Ohio law. The record includes evidence that New York Life consciously disregarded
Morgan’s right to be free from age discrimination. While New York Life correctly
argues that courts should not second guess a company’s business decisions, the record
establishes quite clearly that the company found extenuating circumstances in certain
instances when a younger managing partner had performance issues. This was not the
case with Morgan (or other older managing partners).
We are mindful that Morgan received a relatively large compensatory damages
award. Although we find that Morgan has established by clear and convincing evidence
that New York Life consciously disregarded his rights, the issue of whether Morgan
presented sufficient evidence that the conscious disregard had a great probability of
causing substantial harm is more difficult. It appears, however, that Ohio courts are
reluctant to disturb a jury’s finding that substantial harm ensued. See Ahern, 739 N.E.2d
at 1199-1200 (noting that the investigation of plaintiff that resulted in termination thus
allowing company to retain the younger manager who fit into the casual atmosphere
encouraged by supervisor demonstrated malice); Srail, 711 N.E.2d at 274 (finding that
actual malice existed because while “plaintiffs were being told that no suitable positions
were available, [the defendant] was pursuing an aggressive hiring campaign for technical
No. 07-4186 Morgan v. New York Life Ins. Co. Page 22
and engineering positions” for which plaintiff could not apply). There was evidence
from which a jury could conclude that New York Life showed a conscious disregard for
the rights of Morgan, which resulted in a great probability of causing substantial harm.
We are unable to conclude that the punitive damages award violates Ohio law.
Next, we will consider whether the $10 million award violates the United States
Constitution’s Due Process Clause.
(2)
New York Life contends that the $10,000,000 punitive damages award violates
due process. The three “guideposts” courts look to in evaluating the constitutionality
of a punitive damages award are (1) the degree of reprehensibility of the defendant’s
misconduct; (2) the disparity between the harm to the plaintiff and the award; and (3)
the comparison between the award and civil penalties in comparable cases. See
Bridgeport Music, Inc. v. Justin Combs Pub., 507 F.3d 470, 486 (6th Cir. 2007) (citing
State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418 (2003)).
In assessing the reprehensibility of a defendant’s conduct in cases such as this
where the harm is economic and not physical, we have stated that “the primary
considerations to be addressed are [the plaintiff’s] financial vulnerability, whether [the
defendant’s] conduct was repeated, and the culpability of [the defendant’s] actions.” See
Chicago Title Ins. Corp. v. Magnuson, 487 F.3d 985, 999 (6th Cir. 2007). New York
Life asserts that Morgan is not financially vulnerable, noting that he earned between
$500,000 and $1,000,000 during each of his five years in the Cleveland office.
Moreover, the case is about a single instance of age discrimination, not repeated
misconduct.
Morgan counters by asserting that the focus is on a plaintiff’s “financial
vulnerability” before trial, not after the verdict. Otherwise, compensatory damages
would obviate the need for punitive damages, whose purpose is to “punish[] unlawful
conduct and deter[] its repetition.” Philip Morris USA v. Williams, 127 S. Ct. 1057,
1062 (2007) (citations omitted).
No. 07-4186 Morgan v. New York Life Ins. Co. Page 23
Based on Morgan’s salary when he was employed at New York Life, it would
not be accurate to describe him as financially vulnerable. However, it is important to
note that he was terminated a few years before his pension would have fully vested.
Morgan was approximately 50 years old when his employment was terminated. If
Morgan were to have difficulty obtaining other employment, then it might be
conceivable for him to become financially vulnerable. Based on the salary Morgan
received at New York Life and the $6,000,000 compensatory damages award, however,
it would seem to be a stretch to describe him as financially vulnerable.
When this factor is applied, it would appear that at least a reduction of the award
is appropriate, even if New York Life should be punished to some extent. New York
Life correctly points out that this case does not involve a nationwide policy of
discrimination. However, it does include repeated misconduct, though the district court
found the references to the circumstances of other managing partners to be “minor.”
Although there is little evidence of a policy of treating older workers more harshly, the
record shows that at least three other managing partners were either encouraged to retire
or held to different standards than younger workers. Although this case could be said
to involve the repeated misconduct of at least some company officials, the conduct of a
few New York Life executives in this case would not appear to be so reprehensible as
to justify a high punitive damages award, especially given Morgan’s apparent financial
status.
New York Life asserts that the punitive damages award is grossly
disproportionate to whatever harm resulted to Morgan. Morgan notes that the ratio of
punitive damages to the compensatory damages awarded is only 1.67:1, which is at the
very low end of the “single digit” range endorsed in Campbell, 538 U.S. at 425.
However, this Court has observed that the Supreme Court “has made clear that ‘[w]hen
compensatory damages are substantial, then a lesser ratio, perhaps only equal to
compensatory damages, can reach the outermost limit of due process guarantees.’”
Bridgeport Music, Inc., 507 F.3d at 488 (quoting Campbell, 538 U.S. at 425). The Court
went on to note that when it previously had found a $400,000 compensatory damages
No. 07-4186 Morgan v. New York Life Ins. Co. Page 24
award to be substantial, it instructed the district court to “enter an order of remittitur
reducing the punitive damages award [of more than $2.6 million] to no more than
$400,000.” Id. at 488-89 (citing Bach v. First Union Nat. Bank, 486 F.3d 150, 156-57
(6th Cir. 2007)). The $6,000,000 compensatory award is fifteen times more than the
amount that we previously found to be substantial. We conclude that an order of
remittitur reducing the award by a significant amount is appropriate in this case.7
New York Life contends, moreover, that the award is disproportionate to the
maximum comparable civil penalty authorized under Ohio law. It notes Morgan could
have brought his age discrimination complaints to the Ohio Civil Rights Commission
and, if successful, could have been reinstated with back pay. See Ohio Rev. Code Ann.
§ 4112.05(G)(1); Ohio Admin. Code § 4112-3-10(B)(1)(a). There is no provision for
punitive damages before that entity in employment discrimination cases such as this.
See Ohio Rev. Code Ann. § 4112.05(G)(1).
As Morgan notes, however, the administrative scheme noted above is but one
option available to a victim of discrimination and the back pay/reinstatement remedy
does not address in any way the type or size of civil damages available in court.
Moreover, “R.C. § 4112.99 authorizes an award of punitive damages in civil
employment discrimination actions.” Rice, 704 N.E.2d at 1218. The court observed that
the Ohio legislature had removed the $5,000 punitive-damages cap. Id. at 1219 n.1. The
Ohio Supreme Court has stated that, regarding the third guidepost of comparable civil
penalties, “the most relevant civil penalty in cases like these is the potential civil damage
award in a lawsuit.” Dardinger v. Anthem Blue Cross & Blue Shield, 781 N.E.2d 121,
143 (Ohio, 2002).
The Ohio legislature has authorized punitive damages awards and juries have
awarded such damages in employment discrimination cases. Thus, New York Life’s
comparison of the jury’s award to a legislative grant of authority to award back pay and
7
Morgan claims that New York Life has impliedly waived any argument regarding the disparity
between the harm and the punitive damages award because it makes no specific argument regarding the
1.67:1 ratio. However, New York Life did raise the issue of whether the award violated the Due Process
Clause.
No. 07-4186 Morgan v. New York Life Ins. Co. Page 25
reinstatement is not a very good analogy. This factor does not appear to strongly favor
either party.
The first two factors in the due process analysis favor a reduction of the
$10,000,000 punitive damages award. Accordingly, we will vacate the award and
remand the case to the district court for an order of remittitur that will set the punitive
damages in an amount that it determines is compatible with due process, not to exceed
the amount of compensatory damages. See Campbell, 538 U.S. at 425.
III. CONCLUSION
The district court did not abuse its discretion in allowing certain statements of
alleged age animus, even though the statements did not relate to Morgan and were not
proximate in time to his termination. Moreover, the court’s refusal to give New York
Life’s proposed jury instruction does not constitute reversible error. Because there was
sufficient evidence supporting the verdict in favor of Morgan on his age discrimination
claim, the district court neither erred in denying New York Life’s motion for judgment
as a matter of law nor did it abuse its discretion in denying the motion for a new trial.
The judgment will be affirmed as to the $6,000,000 compensatory damages award.
The $10,000,000 punitive damages will be vacated on the basis that it is
excessive and does not comport with due process. The district court shall enter an order
of remittitur on remand in an amount not to exceed the award of compensatory
damages.
Affirmed in part; Vacated in part and Remanded with instructions.