Business Law 13th Edition by Frank Cross, Kenneth Clarkson, Roger LeRoy Miller

Exercise 1

Company Profile?Chrysler Group, LLC, is the parent company of Fiat, Chrysler, Dodge, Jeep, and several other automobile manufacturers. (An LLC is a limited liability company.) Chrysler Group was created in 2009 to manage the consolidation of the different automobile companies during the economic downturn of the late 2000s. The company employs more than 64,000 people at thirty-two manufacturing facilities. Its 2013 revenue was estimated to be $60 billion.
Background and Facts?Between 2002 and 2005, Otto May, Jr., a pipefitter at Chrysler's Belvedere Assembly Plant, was the target of more than fifty racist, homophobic, and anti-Semitic messages and graffiti. He found six death-threat notes in his toolbox, his bike and car tires were punctured, and someone poured sugar into the gas tank of his car twice. At one point, a dead bird wrapped in toilet paper to look like a member of the Ku Klux Klan (including the white pointed hat) was left at his work station. May complained to Chrysler. The director of human resources met with May, documented the complaints, and initiated an internal investigation. As part of that investigation, records were checked to determine who was in the building when the incidents occurred, and the handwriting on the notes and graffiti was analyzed.
The director held two meetings with about sixty employees (out of more than a thousand plant employees). At the meetings, the director reminded the workers that harassment was not acceptable. The harassers were never caught, and the harassment continued after the meetings. Chrysler's headquarters became involved only after the Anti-Defamation League wrote a letter on May's behalf. May sued Chrysler for hostile work environment harassment and was awarded $709,000 in compensatory damages and $3.5 million in punitive damages (or punishment). The judge overturned the punitive damages award, and May appealed.
IN THE LANGUAGE OF THE COURT
TINDER, Circuit Judge.
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May can recover punitive damages only if he presented sufficient evidence for the jury to conclude that Chrysler acted with "malice or with reckless indifference to [his] federally protected rights." * * * No evidence of "egregious" or "outrageous" conduct by the employer is required, although, of course, such a showing could support a conclusion that the employer acted with the requisite
mental state. [Emphasis added.]
We have already explained why it was appropriate for Chrysler to be held responsible for the hostile work environment. Its response was shockingly thin as measured against the gravity of May's harassment.
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* * *[A]lthough the district court did not rule on whether the jury's $3.5 million award of punitive damages is "grossly excessive" and therefore violates due process, * * * we asked the parties for supplemental briefing so that we might consider that question now. After reviewing the parties' submissions, we are convinced that the punitive damage award does not violate the Constitution and should therefore be reinstated in full. The award is substantial- five times the original compensatory damages and eleven times the remitted amount-but Chrysler's long-term recklessness in the face of repeated threats of violence against May and his family is sufficiently reprehensible [shameful] to support it.
Decision and Remedy? The federal appellate court reinstated the punitive damages award based on the reprehensible and unethical nature of Chrysler's failure to sufficiently address the harassment.
The Ethical Dimension Does an organization have an ethical obligation to secure a safe and harassment-free workplace for its employees? Why or why not? Discuss.
MANAGERIAL IMPLICATIONS It is clear from this opinion that employers have a significant duty to take complaints of harassment seriously. Even if Chrysler believed that May was harassing himself (perhaps in order to obtain compensation from the company), as the company implied at the trial, it had an obligation to do a serious investigation, to set up clear policies and procedures, and to follow those procedures when a complaint was made.