Tesla’s $137M Race Bias Verdict Slashed to $15M

A California federal judge shrank a recent judgement against Tesla from $137 million to $15 million, calling the original award excessive. The massive suit was brought by a Black worker who said he endured constant racial slurs and harassment.

On April 13th, U.S. District Judge William H. Orrick rejected Tesla’s request for a holding that it wasn’t liable for Owen Diaz’ claims of harassment and abuse. However, Judge Orrick agreed to reduce the October 2021 award, narrowing a $6.9 million compensatory damages payout to $1.5 million and a $130 million punitive damages award to $13.5 million.

The court determined that Tesla's challenge to any and all punitive damages was improper, noting that "attempting to pawn off responsibility for a safe and discrimination-free workplace would seem to be precisely the sort of extraordinary behavior punitive damages are built for."

"Not only does the evidence support a finding of recklessness or indifference to Diaz' health and safety, it supports a finding that Tesla intentionally built an employment structure that allowed it to take advantage of Diaz' (and others') labor for its benefit while attempting to avoid any of the obligations and responsibilities that employers owe employees," Judge Orrick said.

However, the court held that the "award of $130 million is grossly disproportionate" and flouted constitutional limitations. As a result, Judge Orrick curbed the award to keep with a nine-to-one ratio of the modified compensatory damages award.

And while Judge Orrick slammed Tesla's characterization of Diaz' emotional distress as relatively mild, calling it "watered-down revisionism" stemming from an ignorance of evidence, he did conclude that the compensatory damages award as-is must be narrowed to the highest possible award backed by the record.

"Great deference is owed to the jury's verdict, but after careful review of the record, I conclude that the award of compensatory damages was excessive," Judge Orrick said.

Diaz filed suit in 2017, claiming he felt threatened while working at Tesla's factory in Fremont, California, after a supervisor said a racial slur more than 60 times and told him to "go back to Africa."

The case went to a jury trial in October 2021, and during the trial, the jury heard testimony from several former Tesla subcontractors, who said they heard the racial slur used daily at the factory. Diaz also took the stand, recounting persistent racial harassment that went unabated despite his complaints to his supervisors.

Diaz testified that he suffered emotional distress after he and his son were called a racial slur by co-workers and supervisors and that complaints to management failed to end the harassment.

Lawrence A. Organ of the California Civil Rights Law Group and counsel for Diaz told Law360 that he was pleased with the court's decision to grant the highest possible ratio of punitive damages, and his acknowledgment of the disturbing evidence of a hostile work environment.

"The judge basically rejected almost every argument that Tesla made, so that was gratifying," he said.

However, he said the issue now at hand — which would determine whether Diaz accepts the remittitur in the next 30 days or requests a new trial on damages — was whether the court's approach to its compensatory damages award based on other, similar cases was the correct path, and whether the Ninth Circuit might rule differently.

Determining a damages award based on a comparison between Diaz' case and other, similar cases effectively "puts a cap on compensatory damages in race harassment cases. The statute doesn't provide for that … so that's the real legal issue," he said.

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