Bains LLC v. ARCO Products Co.

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BAINS LLC, dba Flying B, 
Plaintiff-Appellee,
No. 02-35906
v.
 D.C. No.
ARCO PRODUCTS COMPANY, a CV-01-00235-TSZ
division of Atlantic Richfield Co.,
Defendant-Appellant.

BAINS LLC, dba Flying B, 
Plaintiff-Appellee, No. 02-35993
v.
 D.C. No.
CV-01-00235-TSZ
ARCO PRODUCTS COMPANY, a
division of Atlantic Richfield Co., OPINION
Defendant-Appellant.

Appeal from the United States District Court
for the Western District of Washington
Thomas S. Zilly, District Judge, Presiding
Argued and Submitted
December 4, 2003—Seattle, Washington
Filed April 19, 2005
Before: Andrew J. Kleinfeld, Ronald M. Gould, and
Richard C. Tallman, Circuit Judges.
Opinion by Judge Kleinfeld
4361
BAINS LLC v. ARCO PRODUCTS CO. 4365
COUNSEL
Scott W. Fowkes (argued and briefed) and Richard C. God-
frey (briefed), Kirkland & Ellis, Chicago, Illinois, and
Michael Reiss (briefed) and Paula Lehmann (briefed), Davis
Wright Tremaine LLP, Seattle, Washington, for the appellant.
Erik J. Heipt (argued and briefed) and Edwin S. Budge
(briefed), Budge & Heipt, PLLC, Seattle, Washington, for the
appellee.
OPINION
KLEINFELD, Circuit Judge:
This is a punitive damages case involving nominal compen-
satory damages brought by a corporation for racial discrimi-
nation.
Facts
This case went to trial before a jury, so we state the facts
and interpret the evidence most favorably to the party that was
successful at trial.1
The facts are well laid out in the published decision of the
district court.2 In 1999 an Olympic Pipeline Company petro-
leum pipeline ruptured, interfering with the transportation of
1
See In re Exxon Valdez, 270 F.3d 1215, 1221 (9th Cir. 2001).
2
Bains LLC v. ARCO Prods. Co., 220 F. Supp. 2d 1193 (W.D. Wash.
2002).
4366 BAINS LLC v. ARCO PRODUCTS CO.
fuel from refineries in Northwest Washington to a distribution
center in Seattle. It took two years to fix the pipeline. During
that period ARCO hired a number of companies to truck fuel
from its Blaine, Washington refinery to the distribution cen-
ter.
Paul, Gary, and Deep Bains are American citizens who
were born in the Punjab region of India. The Bains brothers
bought a gas station and convenience store in Okanogan,
Washington. They were the first Sikh family in the area. They
did business under the name “Flying B,” signifying that the
Bains brothers were flying high in the American business
world. Flying B soon owned five gas stations and employed
thirty people. The brothers bought a tanker truck for about
$100,000 and got the necessary permits to haul gasoline to
their stations. That investment put the Bains brothers in an
excellent position to make some money when the Olympic
pipeline ruptured and ARCO needed help. In March 2000
they signed a contract with ARCO to haul fuel. By then Fly-
ing B was doing business as a corporation, the stock of which
was owned solely by the three Bains brothers.
In June 2000, Flying B started hauling fuel for ARCO, and
in August, after getting the necessary permits and safety clear-
ances from ARCO, the company bought three more trucks
and hired more drivers, although the Bains brothers them-
selves continued to drive trucks as well. But after four and a
half months, about 600 loads (or 6.5 million gallons of gaso-
line), and 130,000 miles, Flying B’s work ended on October
30, 2000, when ARCO terminated it.
During the period that Flying B transported fuel for ARCO,
the Bains brothers and their drivers had to endure a consider-
able measure of abuse from Bill Davis, the lead man at
ARCO’s Seattle terminal where the drivers dropped off their
fuel. Davis did not like the Flying B drivers and purposely
made their unloading work at the Seattle terminal difficult. He
made a point of delaying the Flying B drivers by ignoring
BAINS LLC v. ARCO PRODUCTS CO. 4367
their presence when they needed their papers signed after a
delivery. Because ARCO paid by the load (about $460 for
each load), the delays meant that Flying B’s drivers could
haul fewer loads and make less money. Davis made them
stand out in the rain while other drivers were allowed to stay
in their trucks or seek shelter. Davis also falsely accused Fly-
ing B drivers of various safety violations and made them
clean up spills left by other drivers instead of making those
responsible clean up their own spills.
Davis’s rudeness included — and by inference arose from
— his ethnic animus against Sikhs. Paul and Deep Bains, and
many of the other Flying B drivers, were religiously observant
Sikhs who wore turbans and long beards. Davis started his
relationship with Paul Bains by refusing to shake his hand. He
called Paul a “diaperhead” to his face despite Paul’s protest
that his turban was an important religious symbol. “Mr.
Bains” or “Paul” were apparently too hard for Davis to say —
he preferred “raghead.” One of Flying B’s hired drivers said
Davis commonly called him “stupid Indian,” “motherfucking
Indian,” and similar sobriquets, and when he asked for a rag
after Davis had told him to clean up a spill, Davis refused and
told him to take the “fucking rag from your head and clean
it.”
After months of Davis’s abuse, the morale of Flying B
drivers suffered and drivers threatened to quit. Even the non-
Sikh Flying B drivers felt degraded by Davis’s attitude toward
their association with their company. Davis asked both Pat-
rick Dauer and A. C. Morgan, the only two Caucasian Flying
B drivers, “How did you get hooked up with these fuckers?”
Eventually the Bains brothers decided to report Davis’s
abuse to Al Lawrence, the manager of the Seattle terminal and
Davis’s boss. The brothers decided that Deep would talk to
Lawrence. Deep told Lawrence all about Davis’s behavior,
such as the names that Davis had called them — “diaper-
head,” “stupid fucking Indian,” “raghead,” and “towelhead”
4368 BAINS LLC v. ARCO PRODUCTS CO.
— as well as how Davis had told them to go back to India,
and how he made the Flying B drivers use slower pumps and
stand outside in the rain. Deep told Lawrence that the Flying
B drivers were threatening to quit because of the hostile atmo-
sphere. Lawrence responded that perhaps Davis was upset
about something and asked Deep to let him know if anything
happened in the future.
But the problems continued and Davis kept up his abuse.
The Flying B drivers were subjected to lengthy security
checks when other drivers were not. Deep complained to
Lawrence again, but it did not do any good. Davis continued
his ethnic abuse, and the security delays reserved exclusively
for Flying B drivers continued. Gary Bains went to Lawrence
and advised him yet again of the continuing abuse. But
instead of stopping Davis’s abuse, Lawrence and ARCO
stopped Flying B. ARCO terminated Flying B without giving
a reason and without notice, not even the thirty-day minimum
notice required by their contract. Flying B was forced to lay
off a number of employees and to sell their now superfluous
trucks. Deep Bains contacted Tim Reichert, the Los Angeles
central dispatch manager, who was above Lawrence in the
ARCO hierarchy, to contest the termination, but to no effect.
Reichert claimed that there were too many trucks for the job.
After this litigation had begun, ARCO claimed that Flying B
had committed various safety violations, including driving
unsafe trucks, drivers smoking or using cell phones while
delivering fuel, and drivers failing to clean up spills.
An important part of the case was whether the ethnic nasti-
ness and coarse language was only Davis’s independent foray
into obnoxiousness, or whether ARCO, through Davis’s
supervisor, Al Lawrence, ought to have known about Davis’s
behavior and done something about it. The parties also dis-
puted whether ARCO’s termination of Flying B had anything
to do with the racism. In addition to the Bains’ testimony that
they had complained to Lawrence, a driver for another com-
pany, Torrance Holmes, testified that once he started chatting
BAINS LLC v. ARCO PRODUCTS CO. 4369
with the Bains brothers, Lawrence quit talking to him.
Holmes also testified that he heard Davis brag that “we kicked
those ragheads out of here and they’re never coming back.”
In his own testimony, Bill Davis admitted that he had used
the term “raghead” “once in a while” when referring to the
Bains brothers in conversations with coworkers, typically
when other people complained about Flying B drivers. Davis
had admitted during discovery that he had used the term “rag-
head” with his boss Al Lawrence, but later clarified that this
was when Lawrence had asked him whether he had called the
Flying B drivers “ragheads,” and Davis responded that he had
not. Thus, the gist of Davis’s testimony was that he called the
Flying B drivers “ragheads” only behind their backs, not to
their faces. Lawrence never disciplined or reprimanded Davis,
but Davis claimed that he quit using the term after his chat
with Lawrence. Davis said he knew about ARCO’s policy that
prohibited racial discrimination and discriminatory language.
Of course the jury may have disbelieved any or all of
ARCO’s exonerating testimony.
An economist testified that Flying B suffered a $576,000
loss on account of the termination. He calculated this based
solely on the profits the company would have made from
November 1, 2000, when Flying B was terminated, to June
30, 2001, when the pipeline was fixed and ARCO no longer
needed drivers to move the fuel.
Tim Reichert, the manager above Lawrence who had the
authority to terminate Flying B and did so, testified that he
knew nothing about the ethnicity of Flying B’s owners or
drivers. Reichert said that his motivations for terminating the
contract were Al Lawrence’s assertions that Flying B had a
large number of safety violations, and his own concern that
there were too many carriers transporting fuel to the terminal.
Al Lawrence testified that Bill Davis had advised him of
numerous infractions by Flying B, such as not using buckets
4370 BAINS LLC v. ARCO PRODUCTS CO.
to catch spills, leaving valves open, using cell phones while
pumping, and lining up trucks improperly so as to inconve-
nience other drivers. Almost all the complaints he heard about
involved Flying B, even though they were the smallest carrier
ARCO used. Lawrence said that he suspended Flying B
exclusively because of safety violations, and that race was
never a factor. But Lawrence conceded he had not docu-
mented any of these safety concerns when they occurred.
Lawrence had final authority over safety issues at the Seattle
terminal and made the decision to lock Flying B out of the ter-
minal facility, while Tim Reichert had final authority and
made the decision to terminate the contract.
The jury delivered a special verdict. It found that ARCO
had breached Flying B’s contract, a state law claim, and
awarded $50,000 in compensatory damages for the breach.
The verdict also established that ARCO had discriminated
against Flying B on account of race, in violation of 42 U.S.C.
§ 1981, but that the actual damages to the corporation on
account of this discrimination were nominal. The jury there-
fore awarded only one dollar in compensatory damages on the
§ 1981 claim. In addition, however, the jury awarded five mil-
lion dollars in punitive damages for the racial discrimination.
ARCO moved for judgment as a matter of law or a new trial,
or alternatively, to set aside or remit the punitive damages.
The district court denied the motions. The district court
awarded $392,065 in attorneys’ fees and $10,017.40 in costs,
plus $50,000 in additional fees and $916.36 in additional
costs, based on the post-trial proceedings. ARCO appeals.
Analysis
I. Judgment as a Matter of Law or New Trial on § 1981
ARCO argues that it was entitled to judgment as a matter
of law, or alternatively, a new trial, because a corporation
cannot suffer racial discrimination actionable under 42 U.S.C.
BAINS LLC v. ARCO PRODUCTS CO. 4371
§ 1981,3 and because even if that is incorrect, the award of
only nominal damages establishes that firing Flying B was not
motivated by race discrimination.
A. Corporate Plaintiff
ARCO argues that it is entitled to judgment as a matter of
law because, to establish a § 1981 claim, a plaintiff must
establish that it is a member of a racial group, and Flying B
cannot meet this requirement because a corporation “has no
racial identity.”4 We review a denial of a renewed motion for
judgment as a matter of law de novo.5
[1] Contrary to ARCO’s interpretation of § 1981, our deci-
sions hold that a corporation has standing to bring a § 1981
claim against a defendant that employs the corporation as a
contractor, but imposes ethnic discrimination against the cor-
poration’s employees. In Parks School of Business, Inc. v.
Symington6 we held that a school, which was organized as a
3
42 U.S.C. § 1981(a)-(b) states:
(a) Statement of equal rights
All persons within the jurisdiction of the United States shall have
the same right in every State and Territory to make and enforce
contracts, to sue, be parties, give evidence, and to the full and
equal benefit of all laws and proceedings for the security of per-
sons and property as is enjoyed by white citizens, and shall be
subject to like punishment, pains, penalties, taxes, licenses, and
exactions of every kind, and to no other.
(b) “Make and enforce contracts” defined
For purposes of this section, the term “make and enforce con-
tracts” includes the making, performance, modification, and ter-
mination of contracts, and the enjoyment of all benefits,
privileges, terms, and conditions of the contractual relationship.
4
See Vill. of Arlington Heights v. Metro. Hous. Dev. Corp., 429 U.S.
252, 263 (1977).
5
White v. Ford Motor Co., 312 F.3d 998, 1010 (9th Cir. 2002).
6
Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1488 (9th Cir.
1995); cf. Monterey Mech. Co. v. Wilson, 125 F.3d 702, 707-08 (9th Cir.
1997) (holding that a corporation, even if it had no ethnic identity, had
standing to bring an antidiscrimination claim if compelled to discriminate
by race or sex when it hired subcontractors).
4372 BAINS LLC v. ARCO PRODUCTS CO.
corporation and mostly enrolled minority students, had stand-
ing to bring a § 1981 claim because racial discrimination
against its students would damage the corporation’s business
by interfering with its right to contract with minority students.
We went even further in Thinket Ink Information Resources,
Inc. v. Sun Microsystems, Inc.,7 where Thinket, a corporation
owned entirely by African Americans, alleged that Sun
Microsystems had deliberately refused to contract with Thin-
ket based solely on its status as an African-American business.8
We found that when a corporation has acquired an “imputed”
racial identity, it can be the direct target of discrimination and
has standing to pursue a claim under § 1981.9 Here, as in
Thinket, the corporation is owned entirely by Sikh sharehold-
ers, and while not all of its drivers were Sikhs, even the non-
Sikh drivers testified that they were treated poorly by Davis
based on their association with what Davis saw as a Sikh
company. Flying B undoubtedly acquired an imputed racial
identity, and its allegation that its contract with ARCO was
terminated due to the effects of racial discrimination clearly
gives it standing to pursue a § 1981 claim against ARCO.
B. Economic Injury
ARCO argues that the jury verdict — awarding one dollar
in nominal damages for the § 1981 violation — establishes
that the ethnic discrimination caused no economic harm (as
opposed to the breach of contract, for which $50,000 was
awarded), and that there can be no injury to a corporation
without economic damages. ARCO moved for a new trial,
which the district court denied. We review the district court’s
denial of a motion for a new trial for abuse of discretion.10
7
Thinket Ink Info. Res., Inc. v. Sun Microsystems, Inc., 368 F.3d 1053
(9th Cir. 2004).
8
See id. at 1056.
9
Id. at 1059.
10
See McEuin v. Crown Equip. Corp., 328 F.3d 1028, 1032 (9th Cir.
2003).
BAINS LLC v. ARCO PRODUCTS CO. 4373
Because we are reviewing a case that resulted in a jury ver-
dict, we interpret the evidence, and state our account, most
favorably to the parties successful at trial.11
First, the district court instructed the jury that, because the
plaintiff was a corporation, the jury could award damages,
even nominal damages, only for harm to the corporation, not
for the emotional distress to its owners or employees. We
must presume that the jury followed that instruction.12
[2] Second, the one dollar in nominal damages for the
§ 1981 violation was not the whole of the jury’s verdict. The
jury also found that ARCO had in fact discriminated against
Flying B because of race, that it caused a $50,000 loss by
breaking its contract with Flying B, and that ARCO deserved
to be punished for its racial discrimination to the extent of $5
million. These verdicts could be viewed as inconsistent, but,
as we held in White v. Ford Motor Co., a court has a duty
under the Seventh Amendment to harmonize a jury’s seem-
ingly inconsistent answers if a fair reading allows for it.13 The
district court was therefore obligated to ask “not whether the
verdict necessarily makes sense under any reading, but
whether it can be read in light of the evidence to make sense.”14
[3] We agree with the district court that the verdict is not
inconsistent and does not establish the absence of economic
harm. The district court correctly held that the jury may have
found that Flying B’s claimed damages for lost profits were
not “shown with reasonable certainty” as required by jury
instruction number 18. On the evidence in this record, the jury
could well have concluded that (1) racial discrimination had
11
In re Exxon Valdez, 270 F.3d at 1221.
12
See Weeks v. Angelone, 528 U.S. 225, 234 (2000); Richardson v.
Marsh, 481 U.S. 200, 211 (1987); Martinez v. Garcia, 379 F.3d 1034,
1035 (9th Cir. 2004); Ho v. Carey, 332 F.3d 587, 594 (9th Cir. 2003).
13
See White, 312 F.3d at 1005.
14
Id.
4374 BAINS LLC v. ARCO PRODUCTS CO.
caused lost profits by delaying Flying B’s drivers and thereby
reducing the number of loads Flying B hauled; but (2) the jury
did not have testimony that would enable it to put a number
on how many loads were lost; so (3) even though lost profits
were proved, the “amount” of lost profits could not be estab-
lished “with reasonable certainty,” as the jury instruction
required.
[4] The damages to Flying B, as a predicate for punitive
damages, do not have to be from the termination. Section
1981 extends its prohibition against racial discrimination in
the making and enforcement of contracts to cover all phases
and incidents of the contractual relationship, not just the ter-
mination of a contract.15 The testimony established that
ARCO employees made Flying B’s drivers wait longer to fill
their trucks and to use slower pumps than other drivers, and
that Flying B drivers suffered damaged morale. The jury
could have concluded that Flying B suffered economic harm
during the contractual relationship from the intentional delays
and its drivers’ damaged morale, which resulted in a reduced
number of loads — and therefore less money under a contract
that paid by the load — and that all of this was caused by
Davis’s racial harassment. Flying B’s economics expert testi-
fied that Flying B would have made $576,000 if it had contin-
ued to haul the same number of loads it did until the broken
pipeline was fixed, but he did not offer testimony on how
much money Flying B lost because of the slowdowns caused
by Davis’s racial harassment. The jury could reasonably have
concluded that Flying B had made less money while it was
hauling because of Davis’s racial harassment, yet reasonably
have found no number that it could attach to the harm, and
therefore awarded nominal damages.
Flying B was terminated by a manager who did not know
that the company’s principals and most of its drivers were
15
See 42 U.S.C. § 1981(b); Rivers v. Roadway Express, Inc., 511 U.S.
298, 302 (1994).
BAINS LLC v. ARCO PRODUCTS CO. 4375
Sikhs, so the jury could have found that the breach of contract
damages compensated for the harm from the contract’s termi-
nation. But the jury could have concluded from the evidence
that, had Reichert not terminated Flying B for safety viola-
tions, Davis and Lawrence would have found a way to termi-
nate Flying B anyway. The jury could have found that routine
or debatable safety violations were flagged for Reichert
because of Davis’s racial animus, whereas the same violations
committed by a non-Sikh company would be ignored. Possi-
bly the jury found that under the contract Flying B was enti-
tled to thirty-days notice, that ARCO’s immediate termination
of the contract without notice cost Flying B around $50,000
in damages, and that putting the same $50,000 under both the
§ 1981 and the breach of contract causes of action would be
double counting. The jury might therefore have put the dam-
ages under the breach of contract claim, but signified its
agreement with Flying B on the § 1981 claim with its affirma-
tive verdict on that claim.
[5] The district court, having heard all the evidence, was
able to reconcile the verdicts, and on our review of the evi-
dence and arguments, we find no irreconcilable conflict.16
C. Pure Motive
ARCO argues that because Tim Reichert terminated Flying
B for reasons that the verdict establishes were nondiscrimina-
tory, there can be no § 1981 liability. That argument necessar-
ily fails for the reasons explained above. Even if Reichert
terminated Flying B for non-racial reasons, that does not
mean that ARCO, through Davis and Lawrence, did not none-
theless cause economic harm to Flying B for racial reasons.
ARCO also makes a “mixed motive” argument, that if it
can be shown that ARCO would have done what it did with-
out the racial animus, then there can be no § 1981 remedy.
16
See White, 312 F.3d at 1006.
4376 BAINS LLC v. ARCO PRODUCTS CO.
We need not resolve this argument because the jury verdict
establishes that ARCO did harm Flying B for racial reasons
by mistreating and delaying its drivers, and that ARCO
deserved to be punished for it, regardless of whether the ter-
mination of the contract was for the safety reasons urged by
ARCO. The verdict does not establish that ARCO would have
terminated Flying B had there been no racial animus.
An award of nominal damages does not mean that there
were not actual economic damages, just that the exact amount
of damages attributable to the improper conduct was not prov-
en.17 The court instructed the jury to award nominal damages
if it found that ARCO had harmed Flying B in violation of
§ 1981, but that Flying B “failed to prove damages as defined
in these instructions.” And that is exactly what the jury did.
D. Jury Instructions
In jury instruction number 15, the court instructed the jury
that it should find in favor of ARCO if it found that ARCO
had proven that it would have made the decision to terminate
the contract even if the race of the Flying B’s owners and
employees had played no role. ARCO argues that the instruc-
tion erroneously allowed the jury to find for Flying B even if
it concluded that Flying B would have been terminated with-
out any ethnic discrimination. ARCO objects to the sentence
in the instruction that states “This defense does not apply to
any other forms of adverse treatment in the contractual rela-
tionship.” As we explained above, however, the sentence was
a correct statement of law. Even if ARCO terminated Flying
B entirely for good, legitimate reasons, with no mixed
motives at all, it would not have a defense to the entirety of
Flying B’s § 1981 claim, if, for racially discriminatory rea-
sons, ARCO imposed delays (slow pumps, extra security
checks, etc.) on Flying B that reduced the amount of profits
17
See Schneider v. County of San Diego, 285 F.3d 784, 795 (9th Cir.
2002); Weinberg v. Whatcom County, 241 F.3d 746, 752 (9th Cir. 2001).
BAINS LLC v. ARCO PRODUCTS CO. 4377
it could earn. There can, of course, be no legitimate reason for
disparate treatment that imposes costly delays on account of
the race of Flying B’s owners and drivers. A § 1981 claim lies
on behalf of a corporation that is harmed economically in the
performance of its contract because of race, even if neither the
hiring nor the firing of the corporation was affected by race.
II. Managerial Misconduct and § 1981 Liability
ARCO argues that all the racial harassment of Flying B
people was done by Bill Davis, and that since Davis was not
a managerial employee (ARCO portrays Davis as a mere gas
station attendant), the jury cannot award punitive damages
against ARCO as the corporation that employed Davis.
[6] ARCO correctly argues that it is not enough for an
award of punitive damages to show that an ARCO employee
acted maliciously to deprive Flying B of its constitutional
rights on account of ethnicity. Kolstad v. American Dental Asso-
ciation18 establishes, in the context of Title VII punitive dam-
ages, that an employee’s conduct must be imputed to his
employer to give rise to punitive damages liability.19 Agency
principles limit vicarious liability for punitive damages
awards.20 Under Swinton v. Potomac Corp.,21 an employer has
a good faith defense to vicarious liability for discrimination if
it undertakes appropriate steps to prevent and correct discrim-
inatory conduct by its employees. If the harasser is a supervi-
sor, the employer may be held vicariously liable, but if the
harasser is a coworker, the plaintiff must prove that the
employer knew or should have known of the harassment and
18
Kolstad v. Am. Dental Ass’n, 527 U.S. 526 (1999).
19
Id. at 539.
20
Id. at 541-44; see Costa v. Desert Palace, Inc., 299 F.3d 838, 864 (9th
Cir. 2002), aff’d 539 U.S. 90 (2003); Swinton v. Potomac Corp., 270 F.3d
794, 810 (9th Cir. 2001); Passantino v. Johnson & Johnson Consumer
Prods., Inc., 212 F.3d 493, 516 (9th Cir. 2000).
21
Swinton v. Potomac Corp., 270 F.3d 794 (9th Cir. 2001).
4378 BAINS LLC v. ARCO PRODUCTS CO.
did not take adequate steps to correct it.22 ARCO offers no
reason why
Kolstad and Swinton should not be applied in the context of
a corporation that discriminates on account of ethnicity
against another corporation that it hires as an independent
contractor, and our decision to apply this body of law to
§ 1981 liability in Swinton23 and other cases24 would foreclose
such an argument. Agency principles limit vicarious liability
in § 1981 claims as in Title VII claims.
ARCO does not challenge the instructions that the district
court gave on vicarious liability, just the sufficiency of the
evidence to establish it. We review ARCO’s challenge to the
sufficiency of evidence supporting the punitive damages
award under the “substantial evidence” standard.25 “The test
is whether ‘the evidence, construed in the light most favorable
to the nonmoving party, permits only one reasonable conclu-
sion, and that conclusion is contrary to that of the jury.’ ”26
The district court reviewed the evidence with care, and con-
cluded, correctly, that the jury could find that Davis was not
a mere gas station attendant, but a supervisor. While ARCO
claims that Davis had no managerial responsibilities, the evi-
dence demonstrated that Davis had direct control over the
daily fuel hauling operation and fuel carriers. Moreover,
22
Id. at 803.
23
See id. at 803 n.3.
24
See Jurado v. Eleven-Fifty Corp., 813 F.2d 1406, 1412 (9th Cir. 1987)
(“An employee may seek relief under both Title VII and section 1981 for
racial discrimination in employment. Lowe [v. City of Monrovia], 775
F.2d [998,] 1010 [(9th Cir. 1986)]. . . . The same standards apply, and
facts sufficient to give rise to a Title VII claim are also sufficient for a sec-
tion 1981 claim. Id.”); see also Nichols v. Azteca Restaurant Enters., 256
F.3d 864, 875 n.9 (9th Cir. 2001).
25
See Fair Hous. of Marin v. Combs, 285 F.3d 899, 907 (9th Cir. 2002).
26
White, 312 F.3d at 1010 (quoting Johnson v. Paradise Valley Unified
Sch. Dist., 251 F.3d 1222, 1226 (9th Cir. 2001)); In re Exxon Valdez, 270
F.3d at 1237.
BAINS LLC v. ARCO PRODUCTS CO. 4379
immediately after the termination of the contract, Davis him-
self took credit for getting Flying B terminated, bragging to
non-Flying B drivers about his part in “kick[ing] those rag-
heads out” of the facility.27
[7] Even were Davis not a supervisor, there can be no ques-
tion under the evidence that Lawrence was. Lawrence was
ARCO’s official in charge of the Seattle terminal and, as Tim
Reichert testified, Lawrence had full authority over safety
issues at the terminal, including the power to lock Flying B
out of the facility. The jury could conclude that when Flying
B first complained to Lawrence about Davis’s racial harass-
ment, Lawrence simply made excuses for Davis’s behavior
and did nothing about it. And when Flying B repeated its
complaints several times, Lawrence did nothing to restrain
Davis, but instead terminated Flying B without even the
thirty-days notice required by the contract.
[8] Davis testified that Lawrence was present on occasions
when he called the Flying B drivers “ragheads.” The jury did
not have to conclude, as ARCO urges, that Lawrence locked
out Flying B only for safety violations. The jury could con-
clude, to the contrary, that Lawrence perceived a conflict
between Flying B and Davis — over Davis’s harassment and
intentional delays of those he called “ragheads” — and that
Lawrence chose to back up Davis. That suffices for corporate
liability. If a company official with sufficient authority to sub-
ject the company to vicarious liability backs-up a racist
employee’s racially-motivated conduct instead of protecting
the victim from the employee, then the company is liable,
even if the supervisor’s motivation is non-racial, such as loy-
alty to his subordinate or a desire to avoid conflict within the
company. A written antidiscrimination policy does not insu-
late a company from liability if it does not enforce the
27
Bains, 220 F. Supp. 2d at 1199 (alteration in original).
4380 BAINS LLC v. ARCO PRODUCTS CO.
antidiscrimination policy and, by its actions, supports discrimi-
nation.28
III. Amount of Punitive Damages
[9] ARCO argues that the $5 million in punitive damages
awarded by the jury was excessive in light of BMW of North
America, Inc. v. Gore29 and In re Exxon Valdez.30 We review
the excessiveness of punitive damages de novo.31 The guide-
posts we follow are: (1) the degree of reprehensibility, (2) the
disparity between the harm suffered and the punitive damages
award, and (3) the difference between this remedy and the
civil penalties authorized or imposed in comparable cases.32
The gist of ARCO’s argument is that the harm to Flying B
was purely economic, and that the amount of punitive dam-
ages is too great relative to the amount of economic damages
awarded. As to the amount of punitive damages, ARCO’s
argument is partially correct.
[10] State Farm Mutual Automobile Insurance Co. v. Camp-
bell33 enumerates the factors to be used when evaluating the
reprehensibility of a defendant’s conduct. We look to whether
“the harm caused was physical as opposed to economic; the
tortious conduct evinced an indifference to or a reckless disre-
gard of the health or safety of others; the target of the conduct
had financial vulnerability; the conduct involved repeated
actions or was an isolated incident; and the harm was the
result of intentional malice, trickery, or deceit, or mere acci-
dent.”34 Here the harm to Flying B was economic and did not
28
Swinton, 270 F.3d at 810-11.
29
BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996).
30
In re Exxon Valdez, 270 F.3d 1215 (9th Cir. 2001).
31
Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424,
436 (2001).
32
BMW, 517 U.S. at 574-75.
33
State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003).
34
Id. at 419 (citing BMW, 517 U.S. at 576-77).
BAINS LLC v. ARCO PRODUCTS CO. 4381
evince reckless disregard of health or safety. More than in
Exxon Valdez, where we noted that the wrongdoing did not
kill anyone,35 here there was no threat of physical harm. That
reduces reprehensibility. On the other hand, the conduct was
not an isolated incident but repeated, the target was highly
vulnerable financially, and the harm resulted from intentional
malicious conduct. An Exxon oil tanker that performs a
socially valuable task can accidentally run aground causing
damage. By contrast there can be no excuse for intentional,
repeated ethnic harassment, so the reprehensibility here is
worse than conduct that might have some legitimate purpose.
In Exxon Valdez, we held that “[r]eprehensibility should be
discounted if defendants act promptly and comprehensively to
ameliorate any harm they cause in order to encourage such
socially beneficial behavior.”36 Here, given ARCO’s clear
failure to remedy or even address the discriminatory effects of
its employee’s conduct, the jury could properly have con-
cluded that punitive damages were necessary to prevent such
discrimination from occurring in the future.37
As to the other two BMW factors, the disparity between the
harm suffered and the punitive damages award, and the differ-
ence between this remedy and civil penalties authorized or
imposed in comparable cases,38 ARCO is on stronger ground.
On the facts of this case, in determining the correct amount
of punitive damages, the jury could properly consider not only
the one dollar in nominal damages awarded for discrimination
under § 1981, but also the $50,000 in compensatory damages
awarded for breach of contract. The conduct was intertwined
and the jury could conclude that, even if Tim Reichert would
have terminated Flying B based on the safety reports that Al
Lawrence gave him, those safety reports would never have
35
In re Exxon Valdez, 270 F.3d at 1242-43.
36
Id. at 1242.
37
See State Farm, 538 U.S. at 419.
38
BMW, 517 U.S. at 574-75.
4382 BAINS LLC v. ARCO PRODUCTS CO.
come to Reichert had Lawrence not decided to back up his
racist leadman or to exercise his authority to lock Flying B
out of the terminal. Thus we take $50,000 as the harm suf-
fered.
Flying B argues that because “potential harm” may prop-
erly be considered under TXO Production Corp. v. Alliance
Resources Corp.,39 a much higher punitive damages award is
appropriate. But TXO was speaking of the potential harm “if
the wrongful plan had succeeded, as well as the possible harm
to other victims.”40 Here the wrongful conduct did succeed. It
is not as though Davis had fired a shot at Flying B and
missed. Davis bragged that he had “gotten rid of those rag-
heads.” As for the harm to the individual drivers, the award
to Flying B did not impair their own rights to sue for whatever
common law or state statutory torts that might lie, such as
intentional infliction of mental distress. Potential harm to oth-
ers is best considered when victims are not in a position to
vindicate the wrongs against themselves, not where, as here,
they are in such a position.
[11] In State Farm, the Supreme Court held that “in prac-
tice, few awards exceeding a single-digit ratio between puni-
tive and compensatory damages, to a significant degree, will
satisfy due process.”41 The rare exception might be a case
where “a particularly egregious act has resulted in only a
small amount of economic damages.”42 This is not a “small
amount” case because the economic damages were substantial
— $50,000. The controlling Supreme Court authority there-
fore implies a punitive damages ceiling in this case of, at
most, $450,000 (nine times the compensatory damages) —
not anywhere near the $5,000,000 (100 times the compensa-
tory damages) that was awarded by the jury.
39
TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443 (1993).
40
Id. at 460.
41
State Farm, 538 U.S. at 425.
42
Id. (quotation and citation omitted).
BAINS LLC v. ARCO PRODUCTS CO. 4383
Flying B argues that we should sustain the $5 million
amount under Swinton, because there we upheld a $1 million
punitive damages for racial harassment where the compensa-
tory damages award was $35,600.43 That argument is not per-
suasive for several reasons. First, Swinton involves a much
lower award, $1 million instead of $5 million, and less than
one-third the ratio — punitive damages that were only 28, not
100, times the compensatory damages. Second, we decided
Swinton before the Supreme Court decided State Farm, which
limits Swinton. State Farm emphasizes and supplements the
BMW limitation by holding that “[w]hen compensatory dam-
ages are substantial, then a lesser ratio, perhaps only equal to
compensatory damages, can reach the outermost limit of the
due process guarantee.”44 In Zhang v. American Gem Sea-
foods, Inc.,45 a post-State Farm § 1981 race discrimination
case, we took note that “few awards exceeding a single digit
ratio” will satisfy due process, although this is not a “bright-
line rule,” and upheld the award because it was only seven
times the amount of compensatory damages.46
[12] We need not rely solely on the ratio, because the third
BMW guidepost — which looks to the difference between the
amount of punitive damages awarded and the civil penalties
authorized or imposed in comparable cases47 — provides us
with another measure that restrains the permissible amount.
Both pre-State Farm in Swinton, and post-State Farm in
Zhang, we noted that the $300,000 statutory limitation on
punitive damages in Title VII cases was an appropriate bench-
mark for reviewing § 1981 damage awards, even though the
statute did not apply to § 1981 cases.48
43
Swinton, 270 F.3d at 818.
44
State Farm, 538 U.S. at 425.
45
Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020 (9th Cir. 2003).
46
Id. at 1044 (quoting State Farm, 538 U.S. at 425).
47
BMW, 517 U.S. at 574-75.
48
See Zhang, 339 F.3d at 1045; Swinton, 270 F.3d at 820.
4384 BAINS LLC v. ARCO PRODUCTS CO.
Flying B argues that the huge corporate assets of ARCO
justify a higher award than might be justified for a defendant
less able to pay it. A punitive damages award is supposed to
sting so as to deter a defendant’s reprehensible conduct, and
juries have traditionally been permitted to consider a defen-
dant’s assets in determining an award that will carry the right
degree of sting. But there are limits. “The wealth of a defen-
dant cannot justify an otherwise unconstitutional punitive
damages award,” and “cannot make up for the failure of other
factors, such as ‘reprehensibility,’ to constrain significantly an
award that purports to punish a defendant’s conduct.”49
[13] Thus what we are left with is a case of highly repre-
hensible conduct, though not threatening to life or limb, that
caused economic harm to a corporation. The jury found
$50,000 of actual harm, and, as this is not the “rare case” for
which State Farm leaves room, the ratio approach suggests
that punitive damages could not, consistent with due process,
exceed $450,000. Comparing the award to the civil penalty
authorized in Title VII for comparable harm suggests that
Congress regards $300,000 as the highest appropriate amount
in somewhat comparable cases. The conclusion we reach is
that the district court must, to comply with State Farm (which
came down after the district court had ruled) and BMW,
reduce the amount of punitive damages to a figure somewhere
between $300,000 and $450,000.
CONCLUSION
[14] We affirm the jury verdict and the rulings of the dis-
trict court on all issues, except for the amount of punitive
damages, which we vacate. The award exceeds constitutional
limits, so on de novo review, we are required to reduce it or
to remand so that the district court may order a new trial,
unless the plaintiff accepts a remittitur. The level of punitive
damages is not a finding of “fact” that must be determined by
49
State Farm, 538 U.S. at 427-28 (quotation and citation omitted).
BAINS LLC v. ARCO PRODUCTS CO. 4385
the jury; it may be determined de novo by the court.50 Because
the district court tried the case and has greater understanding
of the facts than we do, we remand the case and leave the
amount, within the $300,000 to $450,000 range, to the district
court.
Each party shall bear its own costs on appeal.
AFFIRMED in part, VACATED in part, and
REMANDED.
50
See Cooper Indus., 532 U.S. at 437.