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Two ex-Kentucky Lottery employees hit it big in court

09.01.2007

Jury verdicts against employers can be quite substantial — especially when the facts aren't particularly pleasant. Let's learn what facts caused a Kentucky jury to return $1 million-plus verdicts in favor of two African-American former employees of the Kentucky Lottery Corporation.

Facts

Ursella Riles, who worked in the lottery's marketing department as the promotions coordinator, alleged that she experienced discrimination by her immediate supervisor, Dawn Nelms, and the department director, Leslie Pehlke. Riles claimed that Nelms treated her like her personal assistant, having her act as a chauffeur and run errands. She also contended that Nelms required her to act as an escort when Nelms visited the lottery's warehouse because she felt uncomfortable being alone among its predominately black male workforce.

In addition, Riles said Pehlke routinely greeted her subordinates and invited them to meet in her office — with the exception of Riles. Pehlke also allegedly told Riles that the reason for the treatment was that she wanted "no blacks" in her department.

After Riles complained to the affirmative action coordinator, she was transferred her to the sales department with reduced job responsibilities. She said Nelms continued to use her as a personal assistant, however, and subjected her to racial taunts and insults. As a result, Riles eventually resigned.

After Riles' resignation, Pehlke sought to replace her with a white employee with virtually no work experience — until the affirmative action coordinator pointed to qualified black Kentucky Lottery employees who could fill the job. Pehlke instead hired James Maddox, an African-American lottery warehouse employee who was unqualified for the job. He accepted the offer with the understanding that he would receive on-the-job training.

Maddox also claimed that he was subjected to racial insults from Nelms, who made comments about his mixed-race children and said his speech was "too black." He complained to the affirmative action coordinator and the Equal Employment Opportunity Commission (EEOC). At a subsequent meeting on the matter, the HR director called him "boy" and said he was a liar, placing him on a 60-day work improvement program. Halfway through the program, however, the lottery fired Maddox for incompetence and insubordination.

Riles and Maddox initially filed separate lawsuits against the lottery in Jefferson Circuit Court in 1999, but the court consolidated the cases because the two former employees presented similar claims against the quasi-state agency on related facts. Their claims went to trial in 2004, and a jury returned a verdict of more than $1 million for each, granting emotional distress damages for each of their three claims: constructive discharge, harassment, and retaliation. Kentucky Lottery appealed.

Court's decision

The court of appeals found enough evidence to support the verdict. "Riles's proof indicated that she was constantly shunned, constantly harassed, and also retaliated against during her employment with the Lottery for reasons of her race," the court explained. As for Maddox, the court pointed out that Kentucky Lottery knew he was unqualified and terminated him halfway through a work improvement program — only after he complained about race discrimination.

With regard to the emotional distress damages, the court said the trial court wasn't required to order a mental examination of Riles. The court of appeals reasoned that she wasn't claiming permanent mental injury but rather temporary mental anguish and emotional distress, a matter it said a jury could resolve. It added that she didn't call an expert witness about her emotional distress damages. Therefore, Kentucky Lottery wasn't harmed by the denial of the mental exam.

Finally, the court of appeals upheld the trial court's rulings on admissibility of evidence. In particular, it found that the trial court properly excluded the right-to-sue letters that the EEOC sent to Riles and Maddox because the evidence had the potential to unduly influence a jury that no civil rights violation had occurred. It reasoned that the agency's determination only represented its determination, not the legitimacy of the claim itself.

In contrast, the court of appeals allowed the admission of the EEOC complaints because it said Kentucky Lottery opened the door to that information by calling a witness who claimed that a class-action case against it was filed at the urging of a controversial civil rights leader. The court explained: "We find that the trial court did not err in allowing this line of cross-examination, as it fairly rebutted the Lottery's attempt to imply that all civil-rights claims against it were the result of hysteria or frenzy."

Dissenting viewpoint

Judge Jeff S. Taylor dissented, saying the two cases shouldn't have been consolidated and that the trial court shouldn't have allowed multiple emotional distress damages based on each claim. He reasoned that Riles and Maddox worked for Kentucky Lottery at different times, filed different state-law claims, and experienced different adverse actions. He added that the trial judge indicated that the claims arose out of separate sets of facts.

Taylor also disagreed with the majority's conclusion that the emotional distress damages issue wasn't preserved for appellate review. Even if not preserved, he said, the multiple awards wronged Kentucky Lottery because state law only permits awards of "actual damages," and multiple emotional distress damages for each claim are punitive in nature. Kentucky Lottery Corp. v. Riles, 2007 WL 1785451 (Ky. App., 2007).

Bottom line

This case presented bad facts for Kentucky Lottery. The jury found that it failed to investigate and effectively resolve discrimination complaints. If an employer believes that a discrimination complaint is valid, it must take remedial action to stop the conduct and ensure that it doesn't occur in the future. It also should refrain from taking any adverse employment action, such as demoting an employee, based on such a complaint.

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If you have any questions or need help, please contact any member of the Greenebaum Doll & McDonald Labor and Employment Department. 

Copyright 2007 M. Lee Smith Publishers LLC 
KENTUCKY EMPLOYMENT LAW LETTER does not attempt to offer solutions to individual problems but rather to provide information about current developments in Kentucky employment law.  Questions about individual problems should be addressed to the employment law attorney of your choice.

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