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United States District Court, S.D. New York

December 16, 2005.


The opinion of the court was delivered by: KEVIN FOX, Magistrate Judge



Stephanie Jowers ("Jowers"), who is white, brought this action against DME Interactive Holdings ("DME") and Darien Dash ("Dash") to recover damages she suffered when the defendants failed to negotiate an employment contract with her and, ultimately, terminated her employment, because of her race, in violation of 42 U.S.C. § 1981, as well as state and municipal human rights laws.

  By order of the court dated September 22, 2004, the defendants' counsel was relieved of the obligation of continuing to represent the defendants. Since that time, the defendants have failed to defend against this action. Therefore, on March 16, 2005, your Honor ordered that a default judgment be entered against them. Thereafter, your Honor referred the matter to the undersigned to conduct an inquest and to report and recommend the amount of damages, if any, to be awarded to the plaintiff. The Court directed Jowers to serve and file proposed findings of fact and conclusions of law, and an inquest memorandum setting forth her proof of damages, costs of this action, and attorney's fees. The Court also directed the defendants to serve and file any opposing memoranda, affidavits and exhibits, as well as any alternative findings of fact and conclusions of law it deemed appropriate. The Court received the parties' respective submissions and has considered them.


  Based upon the submissions made by the parties, the complaint filed in the instant action and the Court's review of the entire court file in this action, the following findings of fact are made:

  On May 5, 2000, Jowers was terminated from her position as a senior manager in DME's Places of Color Division ("PCD"). At the time, DME was a high-profile minority-managed Internet company, led by Dash. Dash is a black man, who is the company's chief executive officer and its principal shareholder. Jowers began her tenure at DME as an independent contractor. It was agreed that her annual salary would be $75,000, pending the execution of a written employment contract. However, no such contract was ever provided to Jowers.

  Jowers was responsible for the day-to-day management of PCD's staff, most of whom were persons of color. In the weeks preceding Jowers's termination, PCD staff members were openly hostile towards her. DME employees assigned to PCD refused to be managed by Jowers because of her race, and voiced their discontent with having to work under her supervision.

  Jowers' direct supervisor, Wendy Dubit ("Dubit"), and DME officers, including Dash, were aware of PCD's racially hostile work environment. During staff meetings attended by Dash, PCD staff members announced that they refused to work for Jowers because of her race. In addition, Dubit told Jowers that DME's chief operating officer, Thomas O'Rourke ("O'Rourke"), wanted a black person in the plaintiff's job because it would improve the company.

  Approximately one week before the plaintiff's employment was terminated, O'Rourke restructured Jowers' position so that her direct contact with PCD's staff would be reduced. On May 5, 2000, O'Rourke informed Jowers that her employment was terminated. O'Rourke explained that the decision to terminate Jowers' employment was an economic one, since Jower had been an excellent employee. Later that day, Dash told Jowers that her termination was not the result of DME's financial condition, but rather, was a consequence of Jowers not being a "good fit." Dash alluded to the complaints made by PCD staff. Jowers maintains that her employment by DME was terminated because of her race.

  Jowers was not paid for the last 12 days she was employed by DME. Moreover, Jowers was not reimbursed for the expenses she incurred during that twelve-day period. Jowers' submissions aver that she is entitled to recover: $3,461.54 for unpaid wages owed to her for the last 12 days she was employed by the defendants, plus 25 percent of that amount in liquidated damages; $358.51 for employment-related expenses she incurred during the same twelve-day period; $50,000 in back pay; $100,000 in compensatory damages for emotional distress; prejudgment interest; and $250,000 in punitive damages.

  Dash maintains that he is not personally liable to the plaintiff for any damages she seeks to recover. However, notwithstanding Dash's assertion, the defendants contend that the plaintiff is entitled to recover: $3,819.95 for unpaid salary and expenses; $11,538.48 in back pay; nominal damages for pain and suffering; prejudgment interest; and, should the Court determine that an award of punitive damages is warranted, minimal punitive damages.


  When a defendant defaults in an action, by failing to defend against the allegations made in a complaint, the defendant is deemed to have admitted every well-pleaded allegation in that complaint except those relating to damages. See Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993); Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992). In addition, the plaintiff is entitled to all reasonable inferences from the evidence presented. See Au Bon Pain Corp. v. Artect, Inc., et al., 653 F.2d 61, 65 (2d Cir. 1981). Damages must be established by the plaintiff in a post-default inquest. In conducting an inquest, the court need not hold a hearing "as long as it [has] ensured that there [is] a basis for the damages specified in the default judgment." Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997). The court may rely on affidavits or documentary evidence in evaluating the fairness of the sum requested. See Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 54 (2d Cir. 1993).

  Unpaid Wages Under New York Labor Law

  Pursuant to New York Labor Law § 190 et seq., an employee is entitled to recover unpaid wages. Moreover, if the failure to pay wages to an employee is willful, the employee is also entitled to recover liquidated damages in an amount that is 25 percent of the unpaid wages. See New York Labor Law § 198(1)(a). Willfulness may be demonstrated by "knowingly, deliberately and voluntarily" failing to pay an employee. P & L Group, Inc. v. Garfinkel, 150 A.D.2d 663, 664, 541 N.Y.S.2d 535, 537 (App.Div. 2d Dep't 1989).

  In their inquest submissions, the defendants admit that they knowingly failed to pay Jowers the wages she was owed. The defendants attribute their failure to compensate Jowers to DME's financial problems. Based on the defendants' admission of their liability, the Court finds that the plaintiff is entitled to recover $3,820.03,*fn1 plus prejudgment interest calculated from May 5, 2000, at the rate of nine percent per year. See New York Civil Practice Law and Rules ("CPLR") § 5004.

  Based on the defendants' admission, the Court also finds that their failure to pay Jowers was willful. Therefore, Jowers would appear to be entitled to recover liquidated damages. However, the defendants contend that Rule 54 of the Federal Rules of Civil Procedure bars Jowers from recovering liquidated damages. That Rule provides that "[a] judgment by default shall not be different in kind from or exceed in amount that prayed for in the demand for judgment." Fed.R.Civ.P. 54(c); see Marina B Creation S.A. v. Ada de Maurier, 685 F. Supp. 910, 912-13 (S.D.N.Y. 1988) (denying treble damages because no demand for treble damages was made in the complaint). Although, through her complaint, Jowers requested "a money judgment for her damages, including but not limited to unpaid salary," she failed to make a specific request for liquidated damages. Moreover, the complaint did not give notice that Jowers was seeking liquidated damages by making a citation to the applicable provisions of New York's Labor Law. Jowers also failed to give notice of her intention to seek liquidated damages in her motion for a default judgment. See Marina B Creation S.A., 685 F. Supp. at 912 (noting the possibility of permitting increased damages on default, if the motion for default judgment contains the increase). Consequently, the Court finds that Fed.R.Civ.P. Rule 54(c) bars an award of liquidated damages to Jowers.

  Accordingly, the Court finds that Jowers is entitled to recover $3,461.52 in unpaid wages and $358.51 in employment-related expenses, plus prejudgment interest calculated from May 5, 2000, at a rate of nine percent per year.

  Back Pay and Prejudgment Interest

  Claims brought under 42 U.S.C. § 1981 are established using the framework set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817 (1973) for Title VII cases. See Fowler v. Transit Supervisors Org., No. 96 Civ. 6796, 2000 WL 303283, at *5 (S.D.N.Y. March 23, 2000). Moreover, Jowers' claims brought under state and municipal human rights laws are also evaluated using the McDonnell Douglas framework. See Reeves v. Johnson Controls World Servs., Inc., 140 F.3d 144, 156 n. 9 (2d Cir. 1998); Farias v. Instructional Sys., Inc., 259 F.3d 91, 101 (2d Cir. 2001).

  The record before the Court established that the defendant violated § 1981, as well as provisions of applicable state and municipal human rights laws. "An individual who establishes a cause of action under § 1981 is entitled to both equitable and legal relief, including compensatory . . . damages." See Johnson v. Railway Express Agency, 421 U.S. 454, 460, 95 S. Ct. 1716, 1720 (1975). Similar relief is available under New York state and municipal anti-discrimination laws. See New York Executive Law § 297(4)(c); New York City Administrative Code § 8-107. However, a victim of employment discrimination has the duty to mitigate his damages by "us[ing] reasonable diligence in finding other suitable employment." Clarke v. Frank, 960 F.2d 1146, 1152 (2d Cir. 1992); see also New York City Bd. of Educ. v. Simley, 96 A.D.2d 947, 949, 466 N.Y.S.2d 401, 404 (App.Div. 2d Dep't 1983) (holding plaintiff has a duty to mitigate under New York Executive Law § 296).

  Jowers contends that she is entitled to back pay for one year, that is, for the period May 2000 to May 2001, at her annual salary of $75,000, offset by her post-termination earnings of $25,000. In support of her request for back pay through May 2001, the plaintiff offers the following facts to demonstrate that, had she not been the victim of unlawful discrimination, she would have been extended an employment contract and would have remained employed by the defendants for one year after her termination: (1) the defendants promoted a black employee, who was Jowers' subordinate, to assume Jowers' responsibilities, following Jowers' termination and (2) an April 2001 magazine article reported that the defendants continued to employ staff even after extensive layoffs had been affected. In addition, in a declaration Jowers submitted to the Court in connection with the inquest, Jowers states that she learned from DME employees and published reports that a large number of employees continued to work for DME through mid-2001. However, except for the magazine article, Jowers has failed to present any other published reports to the Court, or any competent evidence from the employees who are alleged to have provided her the information upon which she relied when she prepared her declaration, to support her back pay request.

  The defendants maintain that, notwithstanding any alleged discriminatory conduct, Jowers' employment would have been terminated by June 30, 2000, due to mass layoffs DME had to effect to remain in business. The defendants contend that administrative employees, such as Jowers, were the first employees whom DME terminated. In support of their position that any award of back pay should be limited to the date of June 30, 2000, the defendants submitted to the Court payroll records indicating that 83 employees worked at DME in 2000, exclusive of independent contractors, such as the defendants contend Jowers was. Furthermore, according to the defendants, by the third quarter of 2000, only 31 employees remained in DME's employ. Moreover, in a declaration submitted to the Court, O'Rourke explains that, by the end of the summer of 2000, only a "skeleton crew" was employed in DME's PCD and, by the end of that year, DME was primarily winding up its business.

  Although it is clear that DME reduced its workforce drastically between May 2000 and early 2001, the defendants have not demonstrated that Jowers' employment would have been terminated by June 30, 2000, regardless of their unlawful discriminatory behavior. For example, the defendants have not provided the Court with any evidence showing: (i) the actual number of administrative staff members whose employment was terminated; (ii) the specific functions these employees performed; or (iii) the dates on which administrative staff members were dismissed. Evidence of this nature might have enabled the Court to determine, with greater particularity, the probable date on which Jowers would have been terminated as a result of DME's reduction of its workforce.

  Under the circumstances, the Court finds that Jowers is entitled to compensation beyond June 30, 2000, since it is clear from the parties' submissions that approximately thirty individuals remained employed through December 2000, and that Jowers' responsibilities were assumed by another DME employee after Jowers was dismissed. Furthermore, the assignment of Jowers' responsibilities to another employee who is black, supports a strong inference that DME's reduction in its workforce did not diminish its need for the services Jowers had provided to the defendants prior to her termination and lends credence to Jowers' contention that her dismissal was race-based. Based on the record before the Court, it is reasonable to conclude, that had Jowers not been the victim of unlawful discrimination, she would have remained employed with DME through December 2000. Therefore, Jowers is entitled to an award of $50,000 in back pay (eight months at an annual salary of $75,000).

  The rate at which prejudgment interest is to be calculated is within the court's discretion. See Endico Potatoes, Inc. v. CIT Group/Factoring, Inc., 67 F.3d 1063, 1071 (2d Cir. 1995). Where a judgment is based on violations of both federal and state law, courts in this circuit have set the rate of prejudgment interest at the 52-week Treasury bill yield rate referred to in 28 U.S.C. § 1961(a). See Robinson v. Instructional Sys., Inc., 80 F. Supp. 2d 203, 208 (S.D.N.Y. 2000). In Robinson, the court used the following three-step formula to determine how prejudgment interest should be calculated:

First, the [award] should be divided pro rata over the appropriate time period . . . Second, once the award is divided, the average annual United States treasury bill rate of interest referred to in 28 U.S.C. § 1961 will be applied . . . Third and finally, in order to guarantee complete compensation to the plaintiff, the interest will be compounded annually.
Robinson, 80 F. Supp. 2d at 208 (citations omitted).

  The plaintiff is entitled to prejudgment interest on her back pay award of $25,000. The average annual Treasury bill rate of interest, referred to in 28 U.S.C. § 1961, for the years 2000 through 2005, should be applied to the backpay award; the interest should be compounded annually. Pain and Suffering

  In a discrimination action brought under both federal and state law, a prevailing party may be awarded compensatory damages for an emotional injury. However, "[a] plaintiff must introduce evidence of actual mental or emotional injury in order to recover compensatory damages." McIntosh v. Irving Trust Co., 887 F. Supp. 662, 665 (S.D.N.Y. 1995). "Under the New York Human Rights Law . . . proof of mental anguish or emotional distress does not have to include medical testimony and it may consist of the plaintiff's testimony, alone, as corroborated by reference to the circumstances of the alleged misconduct." Id. at 666.

  A broad spectrum of damages has been awarded for pain and suffering under New York law, but the case law provides little guidance in determining what an excessive award of damages for such an injury might be. See Courtney v. City of New York, 20 F. Supp. 2d 655, 661 (S.D.N.Y. 1998). In cases involving a "garden variety" emotional distress claim, that is, a claim for which medical treatment was not sought, awards have ranged from $5,000 to $30,000. See Kuper v. Empire Blue Cross & Blue Shield, No. 99 Civ. 1190, 2003 WL 359462, at *12 (S.D.N.Y. Feb. 18, 2003) (collecting cases); see also Epstein v. Kalvin-Miller, 139 F. Supp. 2d 469, 480 (S.D.N.Y. 2001) (listing cases that fall within the $5,000 and $20,000 range, while also noting that cases have exceeded this range without distinguishable facts). Important factors in assessing an appropriate amount to award for emotional suffering include "the amount, duration, and consequences of [the claimant's] emotional distress." See Kuper, 2003 WL 359462, at *14.

  Jowers requests $100,000 in damages for her pain and suffering. Jowers' declaration recounts that she suffered "stress, anger, sadness . . . frustration" and public humiliation as a result of the defendants' discrimination. Moreover, Jowers contends that for one year following her departure from DME, she suffered from panic attacks, physical illness and depression. Jowers also reports that she experienced insomnia, a condition that she says continues to this day Jowers maintains that she was reluctant to tell her family and friends — especially her friends of color — about the racial hostility she experienced at DME because she did not want to be seen as a "victim." This, she says, caused her to experience an increased level of emotional turmoil.

  In opposing Jowers' request for damages for emotional injury, the defendants contend that if any such damages are awarded, they ought to be nominal damages because the period of discrimination Jowers endured was of short duration and Jowers did not present evidence of medical treatment for her emotional injury.*fn2

  The plaintiff has presented sufficient evidence to the Court that establishes that she experienced emotional distress over several months. The emotional distress Jowers experienced affected her daily activities and interfered with her relationships with her family and friends. Although no evidence of medical treatment for Jowers' emotional injury was provided to the Court, such evidence is not needed for a plaintiff to secure an award of damages for pain and suffering under New York's Human Rights Law. However, in light of the amount, duration and consequences of the plaintiff's emotional distress, see Kuper, supra, the Court finds that an award of $15,000 is sufficient to compensate Jowers for the emotional injury she suffered as a result of the defendants' discriminatory conduct. Punitive Damages

  Punitive damages are available under § 1981 and the relevant municipal anti-discrimination law. Punitive damages are not available under New York's Human Rights Law. See Farias, 259 F.3d at 101. "An award of punitive damages is `a discretionary moral judgment' that the defendant has engaged in conduct that is so reprehensible that it warrants punishment." Tolbert v. Queens College, 242 F.3d 58, 77 (2d Cir. 2001) (quoting Smith v. Wade, 461 U.S. 30, 52, 103 S. Ct. 1625, 1638 [1983]). In order for a plaintiff to receive punitive damages in an employment discrimination action, the record must demonstrate that the employer acted with malice or with reckless indifference to the [plaintiff's] federally protected rights." Kolstad v. American Dental Ass'n, 527 U.S. 526, 535, 119 S. Ct. 2118, 2124 (1999); see also Luciano v. Olsten Corp., 110 F.3d 210, 220 (2d Cir. 1997) ("[p]unitive damages are available under [Section 1981a] to the same extent and under the same standards that they are available to plaintiffs under 42 U.S.C. § 1981" [citation omitted]). The terms malice and reckless indifference, as used in connection with an analysis concerning punitive damages, "pertain to the employer's knowledge that it may be acting in violation of federal law, not its awareness that it is engaging in discrimination." Kolstad, 527 U.S. at 535, 119 S. Ct. at 2124. Although a party seeking punitive damages does not need to prove egregious or outrageous misconduct by the defendants, such evidence supports a strong inference of the requisite intent. See id.

  Jowers requests $250,000 in punitive damages based on the defendants' malice or reckless indifference to her protected rights. The record before the Court contains the following evidence from which a strong inference of malice or indifference can be drawn: (1) Jowers' position was restructured because the office "needed someone black in a leadership role"; (2) Dash told Jowers that her termination was not a consequence of DME's financial condition, but rather, was necessitated because she was not a "good fit." As Dash told Jowers this, he alluded to complaints made by PCD staff members regarding Jowers' race; and (3) the defendants promoted a black woman to assume Jowers' duties and responsibilities following her termination. In the circumstances of this case, given the short period in which the defendants engaged in discriminatory behavior, the Court finds that $10,000 in punitive damages is an appropriate award for the defendants' reprehensible conduct.

  Dash's Personal Liability

  In order to hold an individual liable for racial discrimination under § 1981, the specific allegations of discrimination "must demonstrate some affirmative link to causally connect the actor with the discriminatory action." Evans-Gadsden v. Bernstein Litowitz Berger & Grossman LLP, 332 F. Supp. 2d 592, 596 (S.D.N.Y. 2004) (citation omitted). "In `each of the cases that have allowed individual liability [under § 1981], the individuals have been supervisors who were personally involved in the discriminatory activity.'" Id. (quoting Hicks v. IBM, 44 F. Supp. 2d 593 [S.D.N.Y. 1999] [alteration in original]). However, under New York's Human Rights Law, an individual employee, including a corporate officer, may be liable for the discriminatory conduct of other employees, if that individual has an ownership interest or has the power to make, rather than carry out, personnel decisions. See Patrowich v. Chemical Bank, 63 N.Y.2d 541, 542, 483 N.Y.S.2d 659, 660 (1984); Evans-Gadsden, 332 F. Supp. 2d at 597-98.

  Dash is the chief executive officer and principal shareholder of DME. As an owner, Dash is liable, under New York's Human Rights Law, for the discriminatory actions of DME's employees. See Evans-Gadsden, 332 F. Supp. 2d 597. However, the record does not support a finding of personal liability under federal law because it is unclear what role, if any, Dash played in the decision to terminate Jowers' employment. Therefore, under state law, the Court finds that Dash may be held personally liable to Jowers for the damages Jowers suffered when the defendants failed to extend an employment contract to her and terminated Jowers' employment because of her race.


  For the reasons set forth above, the Court recommends that Jowers be awarded: (1) her unpaid salary of $3,461.52 and work-related expenses of $358.51, plus prejudgment interest on these amounts calculated by the Clerk of Court from May 5, 2000, at the rate of nine percent per annum, pursuant to CPLR § 5004; (2) $25,000 in back pay, plus prejudgment interest calculated by the Clerk of Court from May 5, 2000, pursuant to 28 U.S.C. § 1961, as described supra; (3) $15,000 in damages for emotional pain and suffering; (4) $10,000 in punitive damages; and (5) post-judgment interest calculated by the Clerk of Court from March 16, 2005, at the rate prescribed by 28 U.S.C. § 1961(a).


  Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties have ten (10) days from service of the Report to file written objections. See also Fed.R.Civ.P. 6. Such objections, and any responses to objections, shall be filed with the Clerk of Court, with courtesy copies delivered to the chambers of the Honorable Laura Taylor Swain, United States District Judge, 40 Centre Street, Room 1205, New York, New York 10007, and to the chambers of the undersigned, 40 Centre Street, Room 540, New York, New York 10007. Any requests for an extension of time for filing objections must be directed to Judge Swain. FAILURE TO FILE OBJECTIONS WITHIN TEN (10) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See Thomas v. Arn, 474 U.S. 140 (1985); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); Wesolek v. Candair Ltd., 838 F.2d 55, 57-59 (2d Cir. 1998); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983).


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