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AUSTIN, Texas—A plaintiff who is fired for refusing to perform an illegal act cannot collect punitive damages unless the employer has acted with malice, says the Texas Supreme Court.
Attorneys say the ruling joins other court rulings nationally that limit circumstances under which punitive damages can be awarded.
According to Friday's unanimous decision in Safeshred Inc. vs. Louis Martinez, Mr. Martinez was terminated from his job as a truck driver for the Austin, Texas-based firm in 2007 after he refused several requests to drive a truck, stating it had safety violations.
Mr. Martinez filed suit against the company, claiming wrongful termination. A jury subsequently awarded him $7,569 in lost wages, $10,000 in mental anguish damages and $250,000 in exemplary or punitive damages, which the trial judge reduced to $200,000 to comply with a statutory cap.
A state appellate court subsequently dismissed the mental anguish damages award, but upheld the other two awards.
The state Supreme Court's ruling said under Texas law, the “at-will employment doctrine generally holds that employment for an indefinite term may be terminated at will and for any reason.”
However, in a 1985 case, Sabine Pilot Service Inc. vs. Hauck, “we recognized a narrow exception to the at-will employment doctrine allowing employees to sue their employers if they are discharged ‘for the sole reason that the employee refused to perform an illegal act.'” This is “because of the public policies expressed in our criminal laws” and “to prevent employers from forcing employees to choose between illegal acts and their livelihoods,” said the ruling.
However, to collect punitive damages, the plaintiff must establish the employer had acted with malice, and this was not the case here, said the court, in overturning the appellate decision.
Mr. Martinez “did not present legally sufficient evidence for a reasonable trier of fact to form a belief or conviction that Safeshred acted with malice in firing him,” said the ruling by Justice Debra H. Lehrmann.
Safeshred attorney Craig A. Morgan, an Austin-based solo practitioner, said he was pleased with the decision.
“There seems to be a widespread perception among the plaintiffs' bar that a plaintiff can recover punitive damages if they can get the jury mad at the defendant about anything the defendant did, whether it's related to harm to the plaintiff or not, and I think the Texas Supreme Court has clearly shut down that perception, which is good for the state….It's always struck me as a bit odd, as it was with this case in the court of appeals, that we have a legal system nationwide where you sue someone for conduct that did not hurt you.”
Michael W. Fox, a shareholder with law firm Ogletree Deakins Nash Smoak & Stewart P.C. in Austin, said the ruling was expected. The court made it clear once again punitive damages is “not going to be a concept they're going to be expanding on, and I think they really went to some pains to point out that it has to be more than consequences that just would normally result from the termination that leads to a finding of malice.”
Mr. Fox said also “The court did a good job of, while allowing punitive damages, making it clear that it was a pretty high standard for you to get there.”
Messrs. Morgan and Fox said the issue of punitive damages is one courts nationwide are dealing with. Mr. Fox said it is a “big concern because (punitive damages) are basically an outlet for jurors who kind of want to send a message, and so they're an easy way for a jury to vent steam.”
There is a movement across the country to not eliminate punitive damages, but “to make sure they are kept to a fairly confined role,” Mr. Fox said.
Mr. Martinez's attorney could not immediately be reached for comment.