By Dan Gildor and Alex Li
In 2021, a high-profile case involving Farmers Group, Inc. and Farmers Insurance Exchange resulted in an award of $155 million in compensatory and punitive damages to Andrew Rudniki, former Senior Vice President of Claims Litigation and 37-year employee of Farmers. While this jury-ordered award, one of the largest of its kind ever awarded in California, was later reduced by $131 million by judge Ruth Ann Kwan, the resulting $19 million in punitive damages still formed the bulk of the resulting $25 million award. How did this jaw-dropping settlement come about?
Background: Executive Had Testified in Gender Pay Discrimination Case of Coates v. Farmers (2012)
Rudnicki’s lawsuit alleged that his employer, Farmers Ins. Exchange, wrongfully terminated him in retaliation for deposition testimony he had provided in a class-action equal pay case against the Farmers, Coates v. Farmers (2012)—and in anticipation of further testimony regarding Farmers’ inaction around equal pay concerns that he was anticipated to give in the future as Coates went to trial. Coates alleged that Farmers had engaged in a practice of sex-based discrimination by paying female employees less than male colleagues for substantially similar work. As head of in-house counsel, Rudnicki was aware of past discrimination in the company’s pay group and of the withholding of certain pay data, and had provided testimony that supported the allegations of the plaintiffs in Coates.
However, mere months before Coates went to trial, Rudniki was terminated by Farmers Insurance. The company claimed that it had several reasons for terminating Rudnicki, including that he had made sexist comments to coworkers, not taken action when female employees had complained about the representation of women in management, and not properly preserved documents.
Rudniki Alleged Retaliation and Wrongful Termination for His Role as a Testifying Witness
Rudnicki sued Farmers for wrongful termination, claiming that he had been terminated not for the reasons provided by Farmers, but rather in retaliation for the testimony he had previously given in Coates, and the testimony he was anticipated to give at trial.
Wrongful termination occurs when an employer terminates an employee in violation of a law or statute. Most jobs in California, and across the U.S. more broadly, are at-will, meaning that an employer has the right to terminate an employee at any time, with or without reason. However, there are unlawful reasons that an employer might fire an employee: notably, for discriminatory reasons against a protected class [Read part 1 and part two of our blogs on affirmative action], or in retaliation against a worker who has made a protected complaint [read more about whistleblowing and other employee rights, here].
In this case, Rudniki had been testifying to conduct that was, or was suspected to be, unlawful, which is one category of protected complaint. Had Farmers’ Insurance in fact terminated Rudniki in retaliation for this activity, instead of for the reasons they had stated, this would constitute a case of unlawful retaliation and wrongful termination.
This is what the jury found in Rudniki’s lawsuit against Farmers after a three-week trial, determining that Rudniki’s role as a witness or potential witness in Coates had been a substantial motivating reason in Farmers’ decision to terminate him, and that Farmers’ stated reasons of unprofessional conduct and failure to meet expectations had not. They awarded Rudniki $5 million in compensatory damages for both economic and non-economic harms, which included approximately $3.5 million in past economic loss, $1 million in future economic loss, and $1 million in non-economic loss.
The Jury Awarded Punitive Damages of $150 Million
The jury did not stop there, however, subsequently awarding him an additional $150 million in punitive damages after only 40 minutes of deliberation. The combined award of $155 million is one of the largest ever awarded in a retaliation case.
Punitive damages are damages that are assessed in cases in which the defendant has engaged in egregiously unlawful conduct, especially in cases in which the conduct constitutes oppression, fraud, and/or malice. These are added on top of compensatory damages, which are the form of compensation a court awards a plaintiff for economic and noneconomic harms that they have suffered. Punitive damages aim to both punish egregious conduct and deter others from engaging in similar conduct.
This $150 million punitive damages award was subsequently reduced by judge Ruth Ann Kwan, resulting in a smaller punitive damages award of $19 million. Nonetheless, this decision still resulted in an overall award several times larger than the $5 million compensatory damages award based purely on economic and noneconomic harms.
So What Is the Moral of the Story?
The first lesson is that employers who retaliate against their employees will be held accountable. Though most jobs in California and across the United States are “at-will”, the termination can still be unlawful if the employee is terminated for the wrong reason. In Rudnicki’s case, the jury found Farmers terminated Rudnicki in retaliation for speaking out against the gender pay discrimination at Farmers Group—a protected activity.
If you have been retaliated against for reporting discrimination or participating in a lawsuit, you should contact an experienced employment attorney to discuss your legal options. You may be entitled to significant damages, including back pay, front pay, and emotional distress damages.
The second lesson is that punitive damages are also available as a remedy in such cases where the employer acts with oppression, fraud, or malice. Such damages can often dwarf the damages that a jury awards. In Rudnicki’s case, the punitive damages were 30 times the economic and non-economic damages that the jury awarded. This substantial penalty highlights the consequences that companies might face if they attempt to punish employees for engaging in protected whistleblowing activity, and helps to deter future unlawful retaliation against individuals who choose to report or testify to unlawful or suspected unlawful discrimination in the workplace.