Scavetta v. King Soopers, Inc. et al

Filing 61

ORDER OVERRULING MAGISTRATE JUDGE'S DISCOVERY RULING, AND DENYING DEFENDANTS' MOTION FOR PROTECTIVE ORDER re: 42 and 43 . ORDERED: (1) Magistrate Judge Mix's Minute Order granting Defendants' oral Motion for Protective Order r egarding financial information with respect to Defendants' punitive damages claim is OVERRULED; and (2) Defendants' oral Motion for a Protective Order regarding its financial information is DENIED, by Judge William J. Martinez on 8/16/2012. (wjmcd, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 10-cv-02986-WJM-KLM
KAREN SCAVETTA,
Plaintiff,
v.
KING SOOPERS, INC., and
DILLON COMPANIES, INC.,
Defendants.
_____________________________________________________________________
ORDER OVERRULING MAGISTRATE JUDGE’S DISCOVERY RULING, AND
DENYING DEFENDANTS’ MOTION FOR PROTECTIVE ORDER
_____________________________________________________________________
This matter is before the Court on Plaintiff’s Appeal of the Magistrate Judge’s
Order Granting Defendants’ Oral Motion for Protective Order Regarding Financial
Information with Respect to Plaintiff’s Punitive Damages Claim (“Plaintiff’s Appeal”).
(ECF No. 43.) Defendants have filed a Response to Plaintiff’s Appeal. (ECF No. 44.)
As the title of Plaintiff’s Appeal indicates, Plaintiff asks this Court to review U.S.
Magistrate Judge Kristen L. Mix’s Minute Order granting Defendants’ oral motion for a
protective order regarding Defendants’ financial information, which Plaintiff sought
discovery of for purposes of Plaintiff’s punitive damages claim. After carefully reviewing
the issues presented, the Court finds it appropriate to OVERRULE the Magistrate
Judge’s Minute Order, DENY Defendants’ oral motion for a protective order, and allow
Plaintiff discovery of Defendants’ financial condition.

I. BACKGROUND
Plaintiff filed this action against Defendants on December 9, 2010 (ECF No. 1),
and filed the operative Amended Complaint (“Operative Complaint”) on January 5, 2012
(ECF No. 41). In the Operative Complaint, Plaintiff brings claims under the Americans
with Disabilities Act (“ADA”), the Age Discrimination in Employment Act (“ADEA”), and
Colorado common law, alleging that Defendants unlawfully terminated her employment
as a pharmacist at King Soopers in 2009. Plaintiff alleges, inter alia, that she suffers
from rheumatoid arthritis, that as a result of this disability she can not administer flu
shots, that she had a medical order from her physician not to administer flu shots due to
her disability, that Defendants were on notice of her disability and her inability to
administer flu shots, and that Defendants nevertheless terminated her employment
because of her disability and pursuant to a systematic plan to replace older pharmacists
with younger pharmacists.1 Among other relief, Plaintiff seeks an award of punitive
damages.
On January 17, 2012, Magistrate Judge Mix held a telephonic discovery hearing,
and issued a Minute Order addressing Defendants’ “oral Motion for Protective Order
regarding financial information with respect to Defendants’ punitive damages claim.”
(ECF No. 42.) Without explanation, the Minute Order states that the Court granted
Defendants’ Motion. (Id.) The court reporter’s transcript of the telephonic discovery
hearing, attached to Plaintiff’s Appeal, indicates that Defendants made an oral motion

1

Plaintiff was forty-eight years old at the time of her termination.

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for a protective order based on a discovery request from Plaintiff seeking information
pertaining to Defendants’ financial condition and net worth. (ECF No. 43-1, at 2-3.)
After hearing argument from the parties, Magistrate Judge Mix granted Defendants’
Motion on the ground that there is a statutory cap on punitive damages in this case, and
therefore Defendants’ financial condition is not relevant in the action. (Id. at 9.)
Specifically, Magistrate Judge Mix stated,
[I]n a case where the claims are brought pursuant to statutes that
have a statutory damages cap on punitive damages, the financial
condition of the defendant is not relevant. In other words, the plaintiff
doesn’t have to prove anything with respect to the financial condition of
the defendant. The plaintiff’s attempt to gain punitive damages faces a
maximum statutory limit; therefore, whether the defendant is impecunious
and has essentially no assets, or whether the defendant is the richest
company in the world and has considerable assets, is simply not relevant
to an award of punitive damages because there is a maximum statutory
cap.
So for that reason, I find . . . that the information sought by the
plaintiff in this case on an ADA claim is not relevant to the subject matter
of the litigation, and the motion for protective order is granted.
(Id. at 8-9.)
Plaintiff appeals that ruling, arguing that Defendants’ financial condition is
relevant to Plaintiff’s claim for punitive damages, that Plaintiff should therefore be
entitled to discovery of Defendants’ financial condition, and that the mere fact that
punitive damages are capped in this action does not render the financial information
irrelevant. (ECF No. 43.)
In their Response to Plaintiff’s Appeal, Defendants argue that Magistrate Judge
Mix’s order should be upheld because their financial condition is not relevant to

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Plaintiff’s claim for punitive damages, and alternatively request that, if the Court is
inclined to order disclosure of Defendants’ financial condition, Defendants should only
be required to disclose such information if Plaintiff’s case survives the summary
judgment stage. (ECF No. 44, see also ECF No. 45.)
II. LEGAL STANDARD
In considering objections to non-dispositive rulings by a Magistrate Judge, such
as that at issue here, the Court must adopt the Magistrate Judge’s ruling unless it finds
that the ruling is “clearly erroneous or contrary to law.” Fed. R. Civ. P. 72(a); 28 U.S.C.
§ 636(b)(1)(A); Hutchinson v. Pfeil, 105 F.3d 562, 566 (10th Cir. 1997); Ariza v. U.S.
West Commc’ns, Inc., 167 F.R.D. 131, 133 (D. Colo. 1996). The “clearly erroneous”
standard “requires that the reviewing court affirm unless it on the entire evidence is left
with the definite and firm conviction that a mistake has been committed.” Ocelot Oil
Corp. v. Sparrow Indus., 847 F.2d 1458, 1464 (10th Cir. 1988). The “contrary to law”
standard permits “plenary review as to matters of law,” 12 Charles Alan Wright, Arthur
R. Miller, Richard L. Cooper, Federal Practice and Procedure § 3069, at 355 (2d ed.
1997), but the Court will set aside a Magistrate Judge’s order only if it applied the wrong
legal standard or applied the appropriate legal standard incorrectly. See Wyoming v.
U.S. Dep’t of Agric., 239 F. Supp. 2d 1219, 1236 (D. Wyo. 2002). “Because a
magistrate judge is afforded broad discretion in the resolution of non-dispositive . . .
disputes, the court will overrule the magistrate judge’s determination only if his
discretion is abused.” Ariza v. U.S. West Commc’ns, Inc., 167 F.R.D. 131, 133 (D.

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Colo. 1996); see also Wright et al., supra, at 350 (noting that the “contrary to law”
standard appears to invite plenary review but noting that “many matters . . . might be
better characterized as suitable for an abuse-of-discretion analysis.”).
III. ANALYSIS
The Court begins by pointing out that, according to binding Tenth Circuit case
law, the financial condition of a defendant is relevant to the issue of the proper amount,
if any, of punitive damages to be awarded. See Deters v. Equifax Credit Information
Services, 202 F.3d 1262, 1273 (10th Cir. 2000) (“In assessing the reasonableness of
the punitive damages award in the instant case, we must consider the purposes of such
a remedy, namely to punish and deter. In this respect, the wealth and size of the
defendant are relevant considerations. We agree with the district court that Equifax’s
gross operating revenue of $1.8 billion in 1996 could be considered in levying a
substantial punitive damages award.”) (citations omitted); Continental Trend Res., Inc.
v. OXY USA Inc., 101 F.3d 634, 641 (10th Cir. 1996) (“[W]ealth must remain relevant [in
determining the proper amount of punitive damages], because $50,000 may be
awesome punishment for an impecunious individual defendant but wholly insufficient to
influence the behavior of a prosperous corporation.”).2
Because the financial condition of the defendant is relevant to a punitive
damages claim, such information is generally discoverable, with some courts holding
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For this reason, the Court questions the statement made in E.E.O.C. v. Dillon
Companies, Inc., No. 09-cv-02237, 2010 WL 3239262 (D. Colo. Aug. 13, 2010), that “the Court
does not see how Defendant’s net worth is relevant to any of Plaintiff’s claims, including its
request for punitive damages . . . .” Id. at *5.

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that to be entitled to such discovery a plaintiff must sufficiently plead allegations
providing grounds for an award of punitive damages. See Fed. R. Civ. P. 26(b)(1)
(“Parties may obtain discovery regarding any nonprivileged matter that is relevant to any
party's claim or defense . . . .”); James v. Heuberger Motors, Inc., No. 10-cv-01648,
2011 WL 334473, at *3 (D. Colo. Jan. 28, 2011) (“The Court finds that it is most
appropriate to allow discovery of financial information upon a prima facie showing that a
plaintiff will be entitled to punitive damages should he or she succeed on the merits of
his or her claim.”); E.E.O.C. v. Envtl. & Demolition Servs., Inc., 246 F.R.D. 247, 249-50
(D. Md. 2007) (“[A] majority of courts hold that pretrial discovery of financial statements
relevant to a punitive damages claim is generally permissible without any prima facie
showing of entitlement to such damages”).
Even assuming (without deciding) that Plaintiff must make a prima facie showing
of entitlement to punitive damages to be entitled to discovery regarding Defendants’
financial condition, the Court holds that Plaintiff has done so here. Plaintiff’s Operative
Complaint alleges that Defendants were on notice of Plaintiff’s disability, were on notice
of Plaintiff’s physician’s order that she not administer flu shots, but nevertheless
terminated her employment because of her disability. These allegations sufficiently
make out a prima facie showing that Plaintiff may be properly awarded punitive
damages if she succeeds on her claims. See Hampton v. Dillard Dep’t Stores, Inc., 247
F.3d 1091, 1115 (10th Cir. 2001) (“In the Tenth Circuit, the standard for punitive
damages for discrimination in violation of federal civil rights is that the discrimination

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must have been ‘malicious, willful, and in gross disregard of plaintiff’s rights.’”)
(quotation marks and brackets omitted).
The Court next turns to the basis on which Magistrate Judge Mix granted
Defendants’ motion for a protective order, namely, that the analysis above changes
when one is dealing with an employment discrimination action that involves a statutory
cap on the potential damage award. The statute governing damages in this action – 42
U.S.C. § 1981a(b)(3) – creates caps on the total amount of compensatory damages and
punitive damages that can be awarded. The caps on total damage awards range from
$50,000 to $300,000, depending on the size of the employer. See 42 U.S.C. §
1981a(b)(3). The $300,000 cap applies to employers with more than 500 employees,
which is likely the case for Defendants here.
The Court disagrees with Magistrate Judge Mix’s ruling that this cap on the sum
of compensatory and punitive damages renders Defendants’ financial situation “not
relevant” in this action. In the case of a defendant with more than 500 employees, the
Court can envision a scenario where a jury awards a plaintiff $50,000 in compensatory
damages, but might award anywhere from $50,000 to $250,000 in punitive damages
depending on the financial resources of the defendant. Under such a scenario, (1) the
financial resources of the defendant could prove to be highly relevant to the ultimate
damage award, and (2) the fact that a statutory damages cap of $300,000 exists has
absolutely no bearing on the jury’s determination of punitive damages and the court’s
ultimate damage award. Under other scenarios, certainly, the financial resources of the

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defendant ultimately prove to be not relevant (e.g., where a jury awards $300,000 in
compensatory damages alone). However, the Court finds it inappropriate to conclude
that Defendants’ financial resources will ultimately prove to be “not relevant.” At this
stage of the proceedings, the information is relevant because it could ultimately impact
the jury’s decision regarding the proper amount of punitive damages, if any. See Fed.
R. Evid. 401.3
The Court finds this conclusion to be well-supported in the case law. See, e.g.,
Britton v. Car Toys, Inc., No. 05-cv-00726, 2007 WL 1395290, at *2-*3 (D. Colo. May 9,
2007) (allowing discovery of defendant’s financial condition in case where plaintiff’s
punitive damages claim was subject to statutory damages cap); E.E.O.C. v. Klockner H
& K Machines, Inc., 168 F.R.D. 233, 235-36 (E.D. Wis. 1996) (same); E.E.O.C. v.
Staffing Network, No. 02 C 1591, 2002 WL 3147380, at *4 (N.D. Ill. Nov. 4, 2002) (“[A]
corporate defendant’s financial information may be relevant for purposes of Rule 26
regardless of the fact that punitive damages are capped under Title VII. Indeed, juries
are not permitted to know that the damages are capped.”); Richardson v. Rock City
Mechanical Co., LLC, No. 3-09-0092, 2010 WL 711830, at *5 (M.D. Tenn. Feb. 24,
2010) (“The defendant also suggests because there is a cap on punitive damages
pursuant to 42 U.S.C. § 1981a(b)(3), the plaintiff is not entitled to the defendant’s
financial information. The Court does not understand that argument.”); see also 21 Fed.
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Further, the statutory cap is not applied by the jury, it is applied by the court only if the
jury’s award exceeds the statutory cap. See 42 U.S.C. § 1981a(c)(2). This further reinforces
the conclusion that it is not appropriate to prevent disclosure of relevant information that could
be presented to the jury for consideration of its damage award, if any.

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Proc., L. Ed. § 50:868 (“The general rule that a defendant's financial status is relevant
for discovery purposes when the plaintiff seeks punitive damages is applicable [even
where the governing] statute places a cap on the defendant's liability for punitive
damages.”). Thus, the statement in E.E.O.C. v. Dillon Companies, Inc., No. 09-cv02237, 2010 WL 3239262 (D. Colo. Aug. 13, 2010), that Britton is an “anomaly” lacks
merit, and the Court finds the brief discussion of this issue in E.E.O.C. v. Dillon
Companies, Inc. to be unpersuasive.
In sum, the Court concludes that Magistrate Judge Mix’s ruling that Defendants’
financial condition is “not relevant” because a statutory damages cap applies in this
case is clearly erroneous and subject to reversal under Federal Rule of Civil Procedure
72(a).
IV. CONCLUSION
In accordance with the foregoing, the Court hereby ORDERS as follows:
(1)

Magistrate Judge Mix’s Minute Order granting Defendants’ oral Motion for
Protective Order regarding financial information with respect to Defendants’
punitive damages claim is OVERRULED; and

(2)

Defendants’ oral Motion for a Protective Order regarding its financial information
is DENIED.

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Dated this 16th day of August, 2012.
BY THE COURT:

_________________________
William J. Martínez
United States District Judge

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