Waiver of Damages

The case Khatabi v. Car Auto Holdings LLC arose from allegations made by the plaintiff of sexual harassment and unpaid minimum wages at the car dealership where she worked. The woman claimed her supervisor and colleagues at Car Auto Holdings made several lewd comments. She was called “hot for an 18-year-old,” told to hand out business cards in a bikini, and asked her to “use her good looks” while accompanying male customers on test drives. The plaintiff also said her supervisor and other managers touched her backside, massaged her shoulders, and grabbed and kissed her in the parking lot after work.

After four months of disgusting behavior, the woman resigned and sued the dealership under the Fair Labor Standards Act for minimum wages, and under Title VII of the Civil Rights Act of 1964 and the Florida Civil Rights Act (FCRA) for sexual discrimination.

Because of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFFA), employers cannot compel arbitration in sexual assault or sexual harassment cases. As a result, the trial was then brought before a jury, which was advantageous for the plaintiff, as juries are often more sympathetic than arbitrators in awarding damages.

Indeed, the jury awarded a staggering $831,028 for the plaintiff, with $81,028 in compensatory damages and $750,000 in punitive damages relating to the sexual harassment faced. However, the US District Court judge for the Southern District of Florida ruled that a punitive damage cap should apply.

Under the FCRA, the maximum punitive damages is $100,000, while Title VII of the Civil Rights Act of 1964, the employee-headcount damages cap is $50,000 for employers with 15 to 100 employees.

Car Auto Holdings had around 20 employees, so the judge ruled that the plaintiff was entitled to receive only $100,000 in punitive damages, in reference to the FRCA, which offered “the larger of the two caps.”

On appeal though, the Eleventh Circuit Court ruled that the caps were a waivable affirmative defense. As Car Auto Holdings did not raise the issue of damage caps, the Eleventh Circuit ruled that the defense was not preserved and that damages had been miscalculated.

The appeal held that both state (FRCA) and federal (Title VII) caps should apply. This meant that punitive damages amounted to $400,000. With compensatory damages added in, the correct damages were said by the circuit court to be $481,028.

This case highlights the fact that the defense must plead an affirmative defense for damage caps in order for the defense to be preserved. As the defense failed to do this, the plaintiff was rewarded with substantial damages for the suffering she endured.