May 20, 2010 – Novartis Hit With $250 Million in Punitives in Gender Bias Case

He asked the jury, “How offensive is it?” for male supervisors to urge female sales representatives to seduce doctors, and “How offensive is it?” to “allow managers to mistreat female employees” or “sandbag and blindside pregnant women on leave.”

Schnadig tried and failed to convince the jury that the company had gotten the “message” with the finding Monday that Novartis had a pattern and practice of paying women less, failing to promote them according to merit and punishing them for getting pregnant.

The company on Wednesday released a statement saying it “strongly disputes claims of past discrimination in the sales force during the period of 2002 to 2007.”

“We are disappointed in the jury’s verdict,” said Andy Wyss, president of Novartis Pharmaceuticals Corp. “For more than 10 years the company has developed and implemented policies setting high standards with regards to diversity and inclusion for the development of our employees.”

Judge McMahon still has decisions to make in the case, including whether to award up to $37 million in back pay. She also has the authority to impose injunctive relief.

Sanford said the plaintiffs are seeking “sweeping changes” to the performance appraisal system, to the human resources department, to pay and promotion systems and to the pregnancy policy.

Notices will go out to the 5,600 eligible class members who could also be in line for compensatory damages.

These class members, Sanford said, “will have the opportunity to come to New York and tell their stories one at a time.”

Between punitive and compensatory damages, the most an individual class member can recover is $300,000.

McMahon has the option of appointing a special master or having a magistrate judge oversee the disbursement of awards.

Theoretically, the amount of total damages the company will have to pay could easily clear $1 billion, but Sanford said he expects the final number to be just under $1 billion.

Because the size of the compensatory damages could “dwarf” the size of the punitive damages award, Sanford said the possibility that the punitive award could be reduced in conformity with recent U.S. Supreme Court rulings is a “non-issue.”

Should McMahon approve all or some of the injunctive relief sought by the plaintiffs, Sanford said there would be three years of judicial supervision to insure compliance, a time when he said the company would be “under a microscope.”

Michael Delikat, the chair of global employment law practice at Orrick Herrington & Sutcliffe who is not involved in the Novartis case, said in an interview Wednesday the punitive damages award “is a huge number that will grab the attention of a lot of companies.”

Delikat said the verdict should be seen as part of a sea change or a “perfect storm” on the gender discrimination front. He noted that it comes as the Obama administration has taken a “very aggressive stance on gender discrimination and equal pay issues” and following closely an April decision by the 9th U.S. Circuit Court of Appeals upholding class certification in a suit against Wal-Mart, the largest gender discrimination case in the nation.

“At the very least, this will completely change the settlement dynamic in existing cases,” said Delikat. “And at the very least, it will certainly lead to more litigation given the economic potential for the trial bar.”

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