Punitive Damages Awarded in Sexual Harassment Case

By Jeffrey Rhodes September 7, 2016

Punitive damages should be awarded against a car dealership for failing to properly address a female employee's sexual harassment claim, the Supreme Judicial Court of Massachusetts recently held.

Lexus of Watertown Inc., and Post Motors Inc. (Lexus) hired Emma Gyulakian in 2003. In June 2010, the company promoted Gyulakian to finance manager, at which time Emmanuel Ferreira, Lexus' finance director, became her direct supervisor. Ferreira assigned hours, vacations and workflow and carried out performance evaluations for all of the finance managers. Ferreira recommended Gyulakian for the finance manager position but was later included in the decision to fire her.

Despite Gyulakian's success in her role as finance manager, Lexus terminated her employment on Jan. 4, 2012, claiming that her relationship with co-workers had deteriorated. When told of her discharge, Gyulakian reported to Vincent Liuzzi, the general manager, and Michael O'Connell, the general sales manager, that Ferreira had sexually harassed her.

Among other things, Gyulakian claimed that Ferreira would often comment on her anatomy; that Ferrerira asked Gyulakian if they would one day sleep together so he could actually see her breasts; and that, at a sexual harassment training, Ferreira commented to Gyulakian that "harassment" sounds like "her ass." Gyulakian claimed that Ferreira once touched her buttocks and, on other occasions, would try to throw coins down her blouse. Gyulakian also claimed that she saw Ferreira, O'Connell and Tony Bruno, an assistant general sales manager and Ferreira's supervisor, looking at naked photographs of Gyulakian's co-worker on a cellphone.

After her termination meeting, Gyulakian reported the harassing conduct to an HR manager. Although Gyulakian had not previously reported the harassment, she had informed Bruno several times of various sexually offensive incidents over the previous 18 months.

Liuzzi said he conducted an investigation of Gyulakian's claims following her termination. Liuzzi did not believe Gyulakian but claimed he interviewed Ferreira, O'Connell, Bruno and Joe Tieuli, the Lexus comptroller who had worked with Ferreira for 20 years. According to Liuzzi, Tieuli told him that there had never been another allegation against Ferreira. (Tieuli later denied that he was ever questioned by Liuzzi.)

The HR manager said she conducted her own investigation into Gyulakian's complaints, but neither she nor Liuzzi could present any notes of their alleged investigations.

On Jan. 10, 2013, Gyulakian filed a lawsuit against Lexus in the Middlesex, Mass., Superior Court for harassment based on sex and national origin as well as for retaliation and wrongful discharge. At trial, Gyulakian presented evidence that Lexus' former office manager had circulated a memorandum regarding Ferreira's inappropriate behavior after he heard Ferreira discussing anal intercourse in the office. Additionally, she presented testimony that O'Connell witnessed Ferreira attempt to throw coins down her blouse and that she complained on several occasions to Bruno concerning Ferreira's conduct.

The jury returned a verdict in Gyulakian's favor on the sexually hostile work environment claim, awarding Gyulakian $40,000 in compensatory damages and $500,000 in punitive damages. The jury returned verdicts in favor of Lexus on the remaining claims. Lexus sought to have the trial court throw out the verdict, and it did as to the punitive damages award. Gyulakian appealed the decision; Lexus cross-appealed, arguing that Gyulakian's evidence was insufficient to warrant compensatory damages.

On appeal, the Massachusetts Supreme Judicial Court found that the evidence was sufficient to support a finding that Gyulakian was subjected to a hostile work environment that caused her to suffer emotional distress, interfered with her work performance and would have interfered with a reasonable person's work performance. Concerning punitive damages, the court found that a supervisor's creation of a sexually hostile work environment alone was not enough to impose punitive damages on the employer. However, punitive damages were appropriate because Lexus was on notice of the sexual harassment and failed to remedy it, and thus its actions were egregious. However, the court sent the case to the trial court to consider whether the $500,000 punitive damages award was excessive.

Gyulakian v. Lexus of Watertown Inc., Mass., No. SJC-11959 (Aug. 24, 2016).

Professional Pointer: Employers are not automatically liable for the harassing conduct of their employees, even supervisors. However, they can be liable for damages—including punitive damages—for failing to remedy harassment when put on notice about it.

Jeffrey Rhodes is an attorney with Doumar Martin in Arlington, Va.



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