An astronomical $137 million jury verdict against Tesla has again been reduced, for a second (and potentially final) time. Last Monday, following a five-day trial on damages, a federal court jury awarded Owen Diaz, a former Tesla elevator operator, $175,000 in emotional distress damages and $3 million in punitive damages, totaling nearly $3.2 million—almost $134 million shy of the award he originally obtained in 2021.
We covered the original verdict in Diaz v. Tesla, No. 3:17-cv-06748-WHO (N.D. Cal. 2021) here, in which a San Francisco jury awarded Diaz $130 million in punitive damages and $6.9 million in emotional distress damages for racial harassment he suffered at a Tesla factory in Fremont, California. Almost a year ago (reported here), the federal judge in the case ruled that the jury’s verdict was excessive and gave Diaz a choice: Either accept a reduced award of $15 million in damages, or face a new damages trial before a different jury. Diaz chose the latter—a decision he may now regret.
Although the reduced damages award must be welcome news to Tesla, it may still be too high in that the punitive damages are more than 17 times the amount of compensatory damages, which therefore exceed constitutional limits. For some time now, we’ve called for updated standard jury instructions that inform juries before they render a verdict about the strict constitutional limits that apply to punitive damage awards in civil cases such as this. See, e.g., State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 424-25 (2003) (“Our jurisprudence and the principles it has now established demonstrate [that] few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process”); Roby v. McKesson Corp., 47 Cal. 4th 686, 719 (2009) (a one-to-one punitive to compensatory damages ratio is most appropriate because of the low level of reprehensibility and the substantial amount of the compensatory damages award); Contreras-Velasquez v. Family Health Ctrs. of San. Diego, Inc., 62 Cal. App. 5th 88, 108 (2021) (“When compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee. A lesser ratio may also be warranted where the compensatory damages award appears to contain a punitive element—for example, a substantial award of emotional distress damages”) (internal quotations omitted).
While Monday’s verdict may seem like a comparative win for Tesla as measured against the 2021 verdict, which was over 40 times higher, it underscores the preposterous unpredictability—and lengthy duration—of the traditional litigation process for cases like this.
Even before the original $137 million verdict two years ago, another Black employee sued Tesla for similarly offensive racial harassment that occurred at the same location. However, that employee (unlike Diaz) had signed an arbitration agreement. The arbitrator ruled in the employee’s favor and awarded him $1 million in damages, which was obviously still a very large amount of money, but that amount pales in comparison to the $137 million or even the $3.2 million jury verdicts that Diaz obtained in his jury trials.
Employers and employees alike can reap the time and cost-saving benefits of arbitration agreements (as we’ve written about here), which remain enforceable in California despite the persistent efforts of certain politicians and courts to outlaw arbitration. We will continue to monitor and provide updates on developments in Diaz v. Tesla and other major California jury verdicts involving employers in the days to come.