Lowery v. Circuit City Stores, Inc.

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

RENEE LOWERY; LISA S. PETERSON,
Plaintiffs-Appellees,

and

SHELBY MCKNIGHT; GREGORY FLEMING;
SONYA HAIRSTON; DYNELLE JOHNSON;
NADRA SMITH; PONNETTE SMITH; SHEILA
SMITH; PATRICIA SPENCER; EDWARD
STOKES,
Plaintiffs,

v.
No. 97-1372
CIRCUIT CITY STORES, INCORPORATED,
Defendant-Appellant.

CHAMBER OF COMMERCE OF THE UNITED
STATES OF AMERICA; WASHINGTON
LEGAL FOUNDATION; EQUAL
EMPLOYMENT ADVISORY COUNCIL;
NATIONAL RETAIL FEDERATION; EQUAL
EMPLOYMENT OPPORTUNITY COMMISSION;
NAACP LEGAL DEFENSE AND
EDUCATION FUND, INC.,
Amici Curiae.

SHELBY MCKNIGHT; GREGORY FLEMING;
RENEE LOWERY; NADRA SMITH;
PONNETTE SMITH; SHEILA SMITH;
PATRICIA SPENCER; EDWARD STOKES;
No. 97-1470
LISA S. PETERSON,
Plaintiffs-Appellants,

and
SONYA HAIRSTON; DYNELLE JOHNSON,
Plaintiffs,

v.

CIRCUIT CITY STORES, INCORPORATED,
Defendant-Appellee.

CHAMBER OF COMMERCE OF THE UNITED

STATES OF AMERICA; WASHINGTON
LEGAL FOUNDATION; EQUAL
EMPLOYMENT ADVISORY COUNCIL;
NATIONAL RETAIL FEDERATION; EQUAL
EMPLOYMENT OPPORTUNITY COMMISSION;
NAACP LEGAL DEFENSE AND
EDUCATION FUND, INC.,
Amici Curiae.

SHELBY MCKNIGHT; RENEE LOWERY;
LISA S. PETERSON,
Plaintiffs-Appellees,

and

GREGORY FLEMING; SONYA HAIRSTON;
DYNELLE JOHNSON; NADRA SMITH;
PONNETTE SMITH; SHEILA SMITH;
PATRICIA SPENCER; EDWARD STOKES,
No. 97-1917
Plaintiffs,

v.

CIRCUIT CITY STORES, INCORPORATED,
Defendant-Appellant.

EQUAL EMPLOYMENT OPPORTUNITY
COMMISSION; NAACP LEGAL
DEFENSE AND EDUCATION FUND, INC.,
Amici Curiae.

2
RENEE LOWERY,
Plaintiff-Appellee,

and

SHELBY MCKNIGHT; GREGORY FLEMING;
SONYA HAIRSTON; DYNELLE JOHNSON;
NADRA SMITH; PONNETTE SMITH; SHEILA
No. 98-1170
SMITH; PATRICIA SPENCER; EDWARD
STOKES; LISA S. PETERSON,
Plaintiffs,

v.

CIRCUIT CITY STORES, INCORPORATED,
Defendant-Appellant.

Appeals from the United States District Court
for the Eastern District of Virginia, at Richmond.
James R. Spencer, District Judge.
(CA-95-964)

Argued: December 1, 1999

Decided: March 14, 2000

Before MURNAGHAN and WILKINS, Circuit Judges,
and HAMILTON, Senior Circuit Judge.

_________________________________________________________________

Affirmed in part, vacated in part, and remanded with instructions by
published opinion. Senior Judge Hamilton wrote the opinion, in
which Judge Murnaghan and Judge Wilkins joined.

_________________________________________________________________

COUNSEL

ARGUED: Donald Manwell Falk, MAYER, BROWN & PLATT,
Washington, D.C., for Appellant. David Jay Cynamon, SHAW, PITT-

3
MAN, POTTS & TROWBRIDGE, Washington, D.C., for Appellees.
Paul D. Ramshaw, EQUAL EMPLOYMENT OPPORTUNITY
COMMISSION, Washington, D.C., for Amicus Curiae EEOC. ON
BRIEF: Andrew L. Frey, Kenneth S. Geller, Peter C. Choharis, Mark
S. Davies, MAYER, BROWN & PLATT, Washington, D.C.; W. Ste-
phen Cannon, Pamela G. Parsons, Teri C. Miles, CIRCUIT CITY
STORES, INC., Richmond, Virginia, for Appellant. James B. Hamlin,
Duane K. Young, Phillip D. Bostwick, Atina S. Harley, SHAW,
PITTMAN, POTTS & TROWBRIDGE, Washington, D.C.; Avis
Buchanan, Roderick V.O. Boggs, THE WASHINGTON LAWYERS'
COMMITTEE FOR CIVIL RIGHTS AND URBAN AFFAIRS,
Washington, D.C.; John A. Gibney, Jr., SHUFORD, RUBIN & GIB-
NEY, P.C., Richmond, Virginia; Joseph M. Sellers, COHEN, MIL-
STEIN, HAUSFELD & TOLL, P.L.L.C., Washington, D.C., for
Appellees. C. Gregory Stewart, General Counsel Designate, Philip
Sklover, Associate General Counsel, J. Ray Terry, Jr., Deputy Gen-
eral Counsel, Vincent J. Blackwood, Assistant General Counsel,
Gwendolyn Young Reams, Associate General Counsel, EQUAL
EMPLOYMENT OPPORTUNITY COMMISSION, Washington,
D.C., for Amicus Curiae EEOC. Robert J. Smith, Harry A. Rissetto,
Mona C. Zeiberg, MORGAN, LEWIS & BOCKIUS, L.L.P., Wash-
ington, D.C.; Stephen A. Bokat, Robin S. Conrad, Sussan Mahallati
Kysela, NATIONAL CHAMBER LITIGATION CENTER, INC.,
Washington, D.C., for Amicus Curiae Chamber of Commerce. Robert
E. Williams, Ann Elizabeth Reesman, Todd B. Castleton, MC-
GUINESS, NORRIS & WILLIAMS, Washington, D.C., for Amicus
Curiae Advisory Council. Elaine R. Jones, Director-Counsel, Theo-
dore M. Shaw, Norman J. Chachkin, Charles Stephen Ralston,
NAACP LEGAL DEFENSE AND EDUCATIONAL FUND, INC.,
New York, New York, for NAACP Fund.

_________________________________________________________________

OPINION

HAMILTON, Senior Circuit Judge:

In this employment discrimination case, Renee Lowery (Lowery)
and Lisa Peterson (Peterson), among others, alleged that Circuit City
intentionally refused to promote them on account of their race,

4
African-American, in violation of 42 U.S.C. § 1981 and Title VII of
the Civil Rights Act of 1964 (Title VII), 42 U.S.C.§ 2000e-2(a)(1).
The jury found in Lowery and Peterson's favor, awarding Lowery
$12,500 in compensatory damages and $225,000 in punitive damages,
and awarding Peterson $4,200 in compensatory damages and $47,000
in punitive damages. The district court entered judgments in confor-
mity with the jury's verdict. Circuit City then made a renewed motion
for judgment as a matter of law pursuant to Federal Rule of Civil Pro-
cedure 50(b) (Rule 50(b)), which the district court denied. Circuit
City noted a timely appeal to this court.1 On appeal, Circuit City
argued, inter alia, that the district court erred in denying its Rule
50(b) motion with respect to Lowery and Peterson's prayer for puni-
tive damages.

On appeal, inter alia, we upheld the compensatory damage awards
with respect to both Lowery and Peterson, but vacated the award of
punitive damages in favor of each on the ground that the record con-
tained insufficient evidence "to conclude that Circuit City's conduct
toward Lowery and Peterson was so egregious that it was appropriate
to submit the issue of punitive damages to the jury." Lowery v. Circuit
City Stores, Inc. (Lowery I), 158 F.3d 742, 766 (4th Cir. 1998). The
Supreme Court subsequently granted the Plaintiffs' petition for writ
of certiorari, vacated our judgment, and remanded the case to this
court for further consideration in light of Kolstad v. American Dental
Ass'n, 119 S. Ct. 2118 (1999). See Lowery v. Circuit City Stores, Inc.,
119 S. Ct. 2388 (1999).

In Kolstad, the Court clarified the circumstances under which a
jury may consider a request for punitive damages under Title VII. See
Kolstad, 119 S. Ct. at 2121. In so doing, the Supreme Court rejected
the District of Columbia Circuit's holding that eligibility for punitive
damages can only be described in terms of an employer's "`egre-
gious' misconduct." See id. at 2124.

Our chief substantive task on remand is to revisit the issue of
whether the district court erred in denying Circuit City's Rule 50(b)
_________________________________________________________________
1 Lowery, Peterson, and the other plaintiffs (collectively the Plaintiffs)
noted a timely cross appeal raising various issues decided adversely to
them.

5
motion for judgment as a matter of law with respect to Lowery and
Peterson's prayer for punitive damages, but to do so in light of the
legal principles annunciated by the Court in Kolstad, 119 S. Ct. at
2118. See Kotler v. American Tobacco Co., 981 F.2d 7, 13 (1st Cir.
1992) ("The general rule is that, when the Supreme Court remands a
civil case, the court of appeals should confine its ensuing inquiry to
matters coming within the specified scope of the remand."). On this
issue, we hold the district court did not err. Thus, we affirm the judg-
ments in favor of Lowery and Peterson with respect to the jury's
awarding of punitive damages.

With one exception, Kolstad and our disposition on remand of the
punitive damages issue leave untouched our resolution of the remain-
ing issues in Lowery I. The one exception is the issue of the appropri-
ateness of the district court's general award of attorneys' fees and
costs totaling nearly $4 million upon application by the Plaintiffs.
Given our disposition on remand in favor of Lowery and Peterson on
the punitive damages issue, we slightly modify our instructions to the
district court regarding redetermination on remand of its general
award of attorneys' fees and costs. For all other issues unrelated to
these modified instructions and unrelated to the issue of punitive dam-
ages, we reaffirm our holdings and analysis as stated in Lowery I
without further discussion.

I

The full panoply of facts involved in and procedural history of this
case are set forth in our now vacated opinion. See Lowery I, 158 F.3d
at 749-57. Here, we only include the facts relevant to the punitive
damages issue set forth in the light most favorable to Lowery and
Peterson. See In re Wildwood Litig., 52 F.3d 499, 502 (4th Cir. 1995).

Circuit City owns and operates a rapidly growing chain of retail
consumer electronic stores that by January 1996 employed 37,000
"associates" nationwide. By November 1996, Circuit City employed
3,500 people at its Richmond, Virginia headquarters, about 800 of
whom were African-Americans. Several hundred other Circuit City
employees work for a wholly-owned subsidiary called First North
American National Bank (FNANB), which provides consumer credit
to Circuit City's customers.

6
Lowery joined Circuit City in October 1989 as a management
recruiter in the Management Recruiting Department in the Human
Resources Division. The title "Management Recruiting Department"
is a misnomer, because the purpose of the Management Recruiting
Department was to recruit employees for non-managerial positions at
Circuit City. The title apparently derives from the notion that the
department helps managers at Circuit City fill non-managerial posi-
tions.

Lowery held both an undergraduate and masters degree in business
administration. The manager of the Management Recruiting Depart-
ment from 1989 until mid-1994, Catharine Madden, consistently gave
Lowery high performance reviews. Lowery consistently exceeded her
numerical recruiting goals through July 1995, and became Circuit
City's most senior and highly paid recruiter. Despite this success,
however, Lowery unsuccessfully sought approximately seven promo-
tions in seven years.

In October 1994, Cynthia Turner (Turner) became manager of the
Management Recruiting Department, responsible for supervising nine
recruiters. Circuit City gave Turner authority to expand the depart-
ment such that by October 1996, the department had twenty-one
recruiter positions. Turner had authority to hire persons to fill bud-
geted positions in her sole discretion without first consulting her boss,
Senior Vice President William Zierden (Zierden), the head of Circuit
City's Human Resources Division from 1984 to 1996. 2 Circuit City
_________________________________________________________________
2 Zierden believed that large companies were hampered by bureau-
cracy, including "rigid systems of job descriptions and rigid [qualifica-
tions]" for people to fill job openings. (J.A. 2680). In accordance with
this belief, Zierden implemented a company-wide system for promotions
that bestowed upon promoters the ability to use widely subjective criteria
in their decision-making processes. Specifically, the evidence, when
viewed in the light most favorable to Lowery and Peterson, establishes
that, at all times relevant to this case, Circuit City: (1) had no written pro-
cedures indicating how managers and supervisors should go about pro-
moting employees; (2) had no written procedures or practices requiring
a review, either by the Human Resources Department or anyone else, of
any promotion decision; (3) did not require promoters to post or adver-
tise job openings, but permitted them to announce an opening to a single

7
also allowed Turner the discretion to organize her department in any
way she wanted.

Shortly after Turner became manager of the Management Recruit-
ing Department, she decided to create a new position titled Supervisor
of Management Recruiting. Turner interviewed everyone in the
department for the new position, including Lowery and Paige Bell
(Bell), who, along with Lowery, had expressed interest in the posi-
tion. Bell is white. Ultimately, Turner offered the new position to
Bell, who had less seniority than Lowery, less supervisory experience
before joining Circuit City than Lowery, and held neither an under-
graduate nor a masters degree in business administration. At trial in
this case, Circuit City claimed Bell received the promotion because
she was more organized than Lowery.

Peterson joined FNANB in February 1993 as an account manage-
ment representative. In July 1993, she entered FNANB's training pro-
gram, which rotates associates through different departments every
few months. In May 1994, Peterson rotated into an acting assistant
supervisor position in the Customer Service Mail Department. It
appears that Peterson again rotated into that department some time
later. When a permanent position as Assistant Supervisor became
available in the Customer Service Mail Department, Peterson applied
for the position. Until this time, Peterson had consistently received
high performance evaluations.

Peterson's supervisor, Jodi Bischoff (Bischoff), rejected Peterson
for the promotion in favor of Janet Whalen (Whalen), who is white.
According to Peterson, Whalen had less experience than she did
because Whalen had only one rotation as an FNANB trainee; Whalen
never received supervisory experience in the Customer Service Mail
Department; and Whalen had no familiarity with the reports and mon-
_________________________________________________________________
candidate of the promoter's own choosing without notifying anyone else
of the vacancy; and (4) when a job opening was posted, had no require-
ments about what the posting should contain. Dr. Beatty, an expert in the
field of human resources, testified during the trial in this case that the
kind of subjective criteria system implemented by Zierden could easily
result in discrimination against racial minorities.

8
itoring expected of an Assistant Supervisor in that department. When
offered the promotion, Whalen turned it down. Nevertheless, Circuit
City did not then offer the promotion to Peterson, but chose another
white employee, Denise Ramos, for the position. According to Peter-
son, Ramos had no prior customer service experience, no knowledge
of the operating functions of FNANB, no background contacting cus-
tomers, and no knowledge of the company's computer system. Wit-
nesses for Circuit City also admitted that, when Ramos was selected
for the position, she was struggling in her current assistant supervi-
sory position in another department and could not keep pace with her
duties. Peterson left FNANB soon after she was rejected for the pro-
motion.

At trial, Lowery and Peterson demonstrated racial animus on the
part of Circuit City by introducing evidence that certain Circuit City
executives had made comments evincing racially discriminatory
attitudes.3 First, in 1991, when Lowery approached Austin Ligon, Cir-
cuit City's Vice President of Corporate Planning, about a position in
his department, he suggested that she "could do better someplace
else," at a company that was "more receptive to minorities and
women." (J.A. 2091). He mentioned that Lowery should go to a com-
pany like Pepsi Cola, which "put [minorities] in decision-making
roles," (J.A. 2091). Second, in 1993, Zierden told Lowery that he
believed that sales decreased in stores with black managers. Third,
Zierden advised Larry Jones, an applicant for a position in Circuit
City's Human Resources Division, that "the caliber of minorities and
blacks who are in the company, in Circuit City, would not meet the
standards for a corporate headquarters type job, and in particular this
type [of] job." (J.A. 3145). Fourth, Zierden also told Jones there were
"few, if any," blacks in decision-making roles at Circuit City and "he
didn't see that situation changing anytime soon because . . . those
people who would be maybe [sic] eligible to be promoted upward just
weren't there." (J.A. 3148). Fifth, Zierden said that blacks who
worked in Circuit City's retail stores "had a propensity to steal." (J.A.
3145-46).
_________________________________________________________________
3 For the purposes of this appeal, the parties treat FNANB as a division
of Circuit City rather than a separate legal entity or a separate employer.
We do likewise.

9
Lowery and Peterson also demonstrated racial animus on the part
of Circuit City by introducing evidence that Zierden"buried" two
internal reports, known as the Booth and Cook Reports, that were crit-
ical of Circuit City's promotion policies and diversity results. In
December 1990, Zierden instructed Karen Booth, an employee in the
Human Resources Division, to perform a study of how well Circuit
City managed diversity in its workplace. Booth's January 1991 report
noted, among other things, that statistics on Circuit City's store
employees showed that "[t]he promotion ratio for male and non-
minority [sales] counselors are [sic] significantly higher than those for
women and minorities." (J.A. 838). Booth concluded that "[i]t is my
assumption that many female and minority associates look up the lad-
der and see no one there like themselves. They perceive no upward
mobility beyond a certain level and they look for opportunities out-
side the company." (J.A. 864, 2641). Zierden directed Booth to
retrieve all copies of the report that she had given to other managers,
and never discussed the report with any other Circuit City executives.

In May 1995, Circuit City retained Sarah Cook, a graduate student
in psychology at the University of Virginia, to conduct a survey and
prepare a written report on employee job satisfaction at FNANB.
Cook worked on the project for approximately seven months and pro-
duced a written report in January 1996. Cook's report noted, inter
alia, employee concerns that one had to belong to certain cliques in
order to get promoted, and that minorities felt excluded. Comments
by survey respondents included: "I hate to express this but race affects
promotions" and "Minorities are constantly overlooked for promo-
tions and will continue to be overlooked until someone takes legal
action against FNANB." (J.A. 1106). Cook's report concluded that a
sizeable number of associates perceived that minority associates are
not treated equal when compared to majority associates. Cook had
recommended that Circuit City review its company policies and prac-
tices, but noted that the company's response was defensive and dis-
missive.

Circuit City never distributed the Cook report to its employees, but
instead circulated a short memorandum purporting to summarize the
survey's results. The memorandum said nothing about Cook's find-
ings and recommendations about promotion procedures. Moreover,

10
Circuit City took no action concerning the complaints about promo-
tions and made no changes in its promotion practices.

The record does contain evidence that Circuit City engaged in
efforts to comply with federal anti-discrimination laws. For example,
Circuit City requires all of its managers to attend a week-long seminar
entitled "Managing Through People" that instructs them in appropri-
ate supervision. According to Circuit City, managers are warned not
to use impermissible selection criteria in hiring and promotions, and
are admonished that Circuit City firmly believes all associates and
customers should be treated with respect, Circuit City has policies in
place to achieve this goal, and Circuit City is an equal opportunity
employer which has set policies and standards to comply with all fed-
eral and state laws forbidding discrimination.

The record also contains evidence that Circuit City had a company-
wide policy entitled "Treating Associates with Respect," which in part
embodied Circuit City's alleged commitment not to discriminate
against its employees on account of factors made illegal by federal
anti-discrimination statutes such as § 1981 and Title VII. The record
contains evidence that Circuit City sent out posters reflecting this pol-
icy to its retail stores, included the policy in its 1991 employee hand-
book, and conducted some individual training sessions regarding the
policy with employees in 1991 or 1992.

The record also contains evidence that Circuit City's employee
handbook described three avenues for employees to express com-
plaints on all topics and bring problems to the company's attention:
the Open Door Policy, the Associate Cool Line, and Coffee Confer-
ences. The Open Door Policy encourages non-management employ-
ees to discuss any employment complaints or problems with members
of management, beginning with an employee's immediate supervisor,
moving to that supervisor's supervisor if the employee did not feel
that he or she had yet received a satisfactory response, and ultimately
conferring with the President of Circuit City if need be. The Associate
Cool Line is a phone line reserved for calls from non-management
employees wishing to express concerns regarding problems that can-
not be resolved by their immediate supervisor or by others whom they
have contacted for help.

11
The Coffee Conferences are annual meetings held by a member of
the Human Resources Department with a group of non-management
employees from the same department or location where those
employees could discuss individual or common concerns and offer
suggestions for improving the work environment. The member of the
Human Resources Department in charge of each Coffee Conference
prepares a written report of the topics discussed for review by Circuit
City's CEO and others in top management. Finally, the record con-
tains evidence that in some instances, Circuit City investigated
employee complaints of discrimination and that some of those investi-
gations led to discipline of the targets of the investigations.

II

The jury held Circuit City liable for intentionally refusing to pro-
mote Lowery and Peterson on account of their race in violation of
§ 1981 and Title VII and awarded Lowery and Peterson compensatory
and punitive damages. The district court entered judgment in confor-
mity with the jury's verdict, and Circuit City renewed its Rule 50(b)
motion, which the district court denied. As noted earlier, the chief
substantive issue before us is whether the district court erred in deny-
ing Circuit City's Rule 50(b) motion for judgment as a matter of law
with respect to Lowery and Peterson's prayer for punitive damages.
Before directly addressing this issue, it is necessary that we discuss
the close relationship between § 1981 and Title VII in regard to the
availability of punitive damages under each statute.

A. Availability of Punitive Damages in General With Respect to
Causes of Action for Intentional Discrimination Under 42
U.S.C. § 1981 and Title VII.

Section 1981 "affords a federal remedy against discrimination in
private employment on the basis of race." Johnson v. Railway Express
Agency, Inc., 421 U.S. 454, 460 (1975). So does Title VII. See 42
U.S.C. § 2000e-2(a)(1); Johnson, 421 U.S. at 457-58. Nearly twenty-
five years ago, the Supreme Court sanctioned the prosecution of both
of these causes of action by the same plaintiff based upon the same
facts. See Johnson, 421 U.S. at 459-62; Stephens v. South Atlantic
Canners, Inc., 848 F.2d 484, 489 (4th Cir. 1988).

12
A prevailing plaintiff in a cause of action under§ 1981 is entitled
under the common law to punitive damages "under certain circum-
stances," Johnson, 421 U.S. at 460; specifically, "for conduct [by the
defendant] exhibiting malice, an evil motive, or recklessness or cal-
lous indifference to a federally protected right," Stephens, 848 F.2d
at 489. This standard comes directly from the Supreme Court's opin-
ion in Smith v. Wade, 461 U.S. 30 (1983), in which the Court held
that punitive damages are available under the common law in an
action under 42 U.S.C. § 1983 "when the defendant's conduct is
shown to be motivated by evil motive or intent, or when it involves
reckless or callous indifference to the federally protected rights of
others." Smith, 461 U.S. at 56.

Punitive damages have only been recoverable with respect to an
intentional discrimination claim under Title VII since the passage of
the Civil Rights Act of 1991, 42 U.S.C. § 1981a. Now, a prevailing
plaintiff on an intentional discrimination claim under Title VII may
recover punitive damages upon demonstration that the defendant "en-
gaged in a discriminatory practice or discriminatory practices with
malice or with reckless indifference to [his or her] federally protected
rights," 42 U.S.C. § 1981a(b)(1), provided the plaintiff cannot recover
punitive damages under § 1981, see 42 U.S.C. § 1981a(a)(1).

Notably, in adopting the language embodying the punitive damages
standard set forth in § 1981a, Congress looked to the Court's decision
in Smith. See Kolstad, 119 S. Ct. at 2124. Furthermore, the legislative
history of the Civil Rights Act of 1991 makes clear that Congress
intended passage of the Civil Rights Act of 1991 to permit the imposi-
tion of punitive damages with respect to an intentional discrimination
claim under Title VII "to the same extent and under the same stan-
dards that they are available to plaintiffs under 42 U.S.C. § 1981. No
higher standard may be imposed." 137 Cong. Rec. H9527 (daily ed.
Nov. 7, 1991) (Rep. Edwards' Interpretive Memorandum); see H.R.
Rep. No. 102-40(I), at 64-65, 74 (1991), reprinted in 1991
U.S.C.C.A.N. 549, 602-03, 612. Thus, any case law construing the
punitive damages standard set forth in § 1981a, for example Kolstad,
is equally applicable to clarify the common law punitive damages
standard with respect to a § 1981 claim. This fact is significant in the
case before us, because given that Lowery and Peterson prevailed
under both § 1981 and Title VII, the Civil Rights Act of 1991 only

13
allows them to recover punitive damages under § 1981. See 42 U.S.C.
§ 1981a(a)(1).

B. Kolstad.

We now turn to consider the legal principles set forth by the
Supreme Court in Kolstad. In Kolstad, the Supreme Court carefully
examined the language of § 1981a in order to elucidate the circum-
stances under which punitive damages may be awarded with respect
to an intentional discrimination claim under Title VII. Initially, the
Court flatly rejected the notion that eligibility for punitive damages
can only be described in terms of an employer's"egregious miscon-
duct." See 119 S. Ct. at 2124. In this regard, the Court stated:

While egregious misconduct is evidence of the requisite
mental state, § 1981a does not limit plaintiffs to this form of
evidence, and the section does not require a showing of
egregious or outrageous discrimination independent of the
employer's state of mind. Nor does the statute's structure
imply an independent role for "egregiousness" in the face of
congressional silence.

Id. (internal citations omitted). Additionally, the Supreme Court
opined that "§ 1981a's focus on the employer's state of mind gives
some effect to Congress' apparent intent to narrow the class of cases
for which punitive awards are available to a subset of those involving
intentional discrimination." Id.

The Court then turned to an examination of the terms"malice" and
"reckless indifference" as found in § 1981a(b)(1). Critically, the Court
emphasized that these terms "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 , 119 S. Ct. at 2124. Relying
on how it previously interpreted the terms "malice" and "reckless
indifference" in its prior precedent, the Court held that "an employer
must at least discriminate in the face of a perceived risk that its
actions will violate federal law to be liable in punitive damages." Id.
at 2125.

14
The Supreme Court then gave examples of when intentional dis-
crimination does not give rise to punitive damages liability under this
standard:

In some circumstances, the employer may simply be
unaware of the relevant federal prohibition. There will be
cases, moreover, in which the employer discriminates with
the distinct belief that its discrimination is lawful. The
underlying theory of discrimination may be novel or other-
wise poorly recognized, or an employer may reasonably
believe that its discrimination satisfies a bonafide occupa-
tional qualification defense or other statutory exception to
liability.

Id.

After explaining the import of the terms "malice" and "reckless
indifference," the Court made clear that the inquiry as to whether an
employer found liable for intentional discrimination under Title VII
is subject to punitive damages liability "does not end with a showing
of the requisite `malice or . . . reckless indifference' on the part of cer-
tain individuals." Id. at 2126 (quoting 42 U.S.C. § 1981a(b)(1)) (ellip-
sis in original). Rather, if it cannot be said that a principal of the
employer actually engaged in the discriminatory conduct at issue, the
plaintiff must offer evidence sufficient to impute liability for punitive
damages from the individual who did so engage to the employer. See
id. at 2126-27.

The Supreme Court then went on to address the proper legal stan-
dards for imputing liability to an employer in the punitive damages
context. See id. at 2127. Of relevance to the appeal presently before
us, the Court held that an employer may be held vicariously liable for
a punitive damage award in a Title VII case for the intentionally dis-
criminatory conduct of its employee, where the employee served the
employer in a managerial capacity, committed the intentional discrim-
ination at issue while acting in the scope of employment, and the
employer did not engage in good-faith efforts to comply with Title
VII. See id. at 2129. The Court specified that in determining whether
an employee is in a managerial capacity, a court should review the
type of authority that the employer has given to the employee and the

15
amount of discretion that the employee has in what is done and how
it is accomplished. See id. at 2128. The Court added that the examples
provided in the Restatement (Second) of Torts "suggest that an
employee must be important but perhaps need not be the employer's
top management, officers or directors to be acting in a managerial
capacity." Id. (internal quotation marks omitted).

C. Lowery and Peterson.

Circuit City challenges the district court's refusal to grant its Rule
50(b) motion for judgment as a matter of law with respect to Lowery
and Peterson's prayer for punitive damages in regard to their respec-
tive failure to promote claims. We review the district court's ruling
de novo. See Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655,
661 (4th Cir. 1993). In so doing, we must affirm the district court's
ruling unless we conclude, viewing all the evidence in the light most
favorable to Lowery and Peterson, and giving them the benefit of all
reasonable inferences, that no reasonable juror could have returned
the challenged verdict assessing punitive damages against Circuit
City. See id. at 660-61.

In determining whether, taking all the evidence in favor of Lowery
and Peterson and giving them the benefit of all reasonable inferences,
a reasonable juror could have found Circuit City liable for punitive
damages, Kolstad teaches that we must answer a series of questions
with respect to each plaintiff. We must first ask whether the record
contains sufficient evidence for a reasonable juror to find that in
intentionally refusing to promote the plaintiff to the position at issue,
the decision maker did so in the face of a perceived risk that her deci-
sion would violate federal law. See Kolstad, 119 S. Ct. at 2125. If the
answer is no, we should vacate the portion of the judgment awarding
the plaintiff punitive damages and direct entry of judgment as a mat-
ter of law in favor of Circuit City on that issue. If the answer is yes
and, as here in both instances, the decision maker was not a principal,
we should next ask whether a reasonable juror could find the decision
maker served the employer in a managerial capacity. See id. at 2128-
29. Again, if the answer is no, Circuit City prevails. However, if the
answer is yes, we must ask whether a reasonable juror could find that
the decision maker acted within the scope of her employment in mak-
ing the challenged decision. See id. at 2129. If the answer is no, Cir-

16
cuit City prevails. Finally, if the answer to this question is yes, we
must ask whether a reasonable juror could only conclude that Circuit
City engaged in good-faith efforts to comply with§ 1981. See id. at
2129; Deffenbaugh-Williams v. Wal-Mart Stores, Inc., 188 F.3d 278,
286 (5th Cir. 1999) (analyzing evidence of employer's good-faith
efforts of anti-discrimination in context of Rule 50(b) motion). If the
answer to this question is yes, Circuit City prevails. If the answer is
no, we must affirm the district court's refusal to grant Circuit City's
motion for judgment as a matter of law on the issue of punitive dam-
ages with respect to that plaintiff.

We now proceed to answer this series of questions with respect to
Lowery and Peterson individually.

1. Lowery.

a. Perceived Risk of Violating Federal Law.

We conclude the record contains sufficient evidence, when viewed
in the light most favorable to Lowery and giving her the benefit of all
reasonable inferences, for a reasonable juror to find that in intention-
ally refusing to promote Lowery to the position of Supervisor of Man-
agement Recruiting, Turner did so in the face of a perceived risk that
her decision would violate federal law. See Kolstad, 119 S. Ct. at
2125. The record contains evidence that Turner knew taking race into
account in making significant employment decisions such as denying
promotions violates federal law. Specifically, a reasonable juror could
infer that Turner had knowledge of the existence of federal anti-
discrimination laws from Circuit City's evidence that it required
every person in management to attend a week-long training seminar
that included education on the federal anti-discrimination laws. See
EEOC v. Wal-Mart Stores, Inc., 187 F.3d 1241, 1246 (10th Cir. 1999)
(holding in a post-Kolstad case that a reasonable jury could have
found that the employer intentionally discriminated against its
employee on account of his disability in the face of a perceived risk
that its action would violate federal law from evidence that the store
manager who approved employee's suspension was familiar with the
accommodation requirements of the Americans With Disabilities Act
and its prohibition against discrimination and retaliation in the work-
place).

17
 b. Managerial Capacity.

We also conclude that, when the evidence is viewed in the light
most favorable to Lowery, and she is given the benefit of all reason-
able inferences, a reasonable juror could find that Turner served Cir-
cuit City in a managerial capacity. In making this determination, we
must consider the type of authority that Circuit City gave Turner and
the amount of discretion that she had in what was done and how it
was accomplished. See Kolstad, 119 S. Ct. at 2128. Turner managed
the entire department responsible for recruiting potential employees
to fill non-managerial positions at Circuit City. 4 At the time Turner
first assumed the position of manager of the Management Recruiting
Department she supervised nine recruiters. Circuit City gave Turner
authority to expand the department such that by the time of trial,
October 1996, Turner's department had twenty-one recruiter posi-
tions. Turner had authority to hire persons to fill budgeted positions
in her sole discretion without first consulting her boss Zierden. Circuit
City also allowed Turner the discretion to organize her department
any way she wanted. From this evidence, a reasonable juror could
find that Turner served Circuit City in a managerial capacity for pur-
poses of vicarious liability in the punitive damages context. Although
Turner was not top management, nor an officer or director of the cor-
poration, she nonetheless held an important position at Circuit City.
See Wal-Mart Stores, Inc., 187 F.3d at 1247 (holding in a post-
Kolstad case that Wal-Mart assistant store manager occupied manage-
rial position for purposes of vicarious liability in the punitive damages
_________________________________________________________________
4 In addition to the responsibility of recruiters to attend job fairs and
engage in other recruitment efforts, Turner testified that her department
performs the following functions:

Managers will call to ask for assistance in filling positions. Other
Human Resources Associates throughout the country will call for
assistance in designing and placing recruitment advertising,
designing fliers, designing posters. We also provide phone-
screening support, phone interviews, for all of our new stores
around the country. So we might have District Managers or Per-
sonnel Managers on the phone asking for assistance. It is a wide
variety of Associates within the company whom we consider a
customer.

(Plaintiff's Supplemental Appendix on Remand 136).

18
context where assistant manager had independent authority to suspend
her subordinates and could also make hiring and firing recommenda-
tions; and holding that Wal-Mart store manager occupied managerial
position for purposes of vicarious liability in the punitive damages
context where responsibilities of store manager include ensuring the
smooth operation of the store and making hiring and firing decisions).

c. Scope of Employment.

Under Kolstad, the next inquiry is whether Turner acted within the
scope of her employment in refusing to promote Lowery on account
of her race. See Kolstad, 119 S. Ct. at 2128. Under Kolstad, the appli-
cable test is whether Turner's conduct is of the kind Turner was
employed to perform, occurred substantially within the authorized
time and space limits, and is actuated, at least in part, by a purpose
to serve the employer. See id. (adopting Restatement (Second) of
Agency's scope of employment test for intentional torts but modify-
ing it to provide a good-faith exception). The evidence, when viewed
in the light most favorable to Lowery, and giving Lowery the benefit
of all reasonable inferences, is more than sufficient to meet this test.5
Selecting persons for promotion is the kind of conduct Circuit City
employed Turner to perform. Furthermore, Turner's failure to pro-
mote Lowery occurred during working hours and on company prop-
erty. Finally, the evidence supports a finding that Turner failed to
promote Lowery at least in part for the purpose of serving Circuit
City.

d. Good-Faith Efforts to Comply with Title VII.

Thus far, the evidence, when viewed in the light most favorable to
Lowery, and giving her the benefit of all reasonable inferences, is suf-
ficient to establish: (1) that Turner, acting as an agent for Circuit City,
intentionally refused to promote Lowery on account of her race (as
found by the jury) in the face of a perceived risk that doing so would
violate federal law; (2) that Turner served Circuit City in a managerial
capacity; and (3) that Turner acted within the scope of her employ-
ment in refusing to promote Lowery. Nonetheless, we must vacate the
_________________________________________________________________
5 Circuit City does not seriously dispute that the scope of employment
test, without considering the good-faith exception, is met here.

19
punitive damages portion of the judgment in favor of Lowery, if we
conclude, after viewing the evidence in the light most favorable to
Lowery, and giving her the benefit of all reasonable inferences, that
a reasonable juror could only conclude that Circuit City engaged in
good-faith efforts to comply with § 1981. See Kolstad, 119 S. Ct. at
2129; Deffenbaugh-Williams, 188 F.3d at 286 (analyzing evidence of
employer's good-faith efforts of anti-discrimination in context of Rule
50(b) motion). This good-faith exception rests on the notion that the
existence and enforcement of an anti-discrimination policy shows that
the employer itself "never acted in reckless disregard of federally pro-
tected rights." Kolstad, 119 S. Ct. at 2129 (internal quotation marks
omitted). On the issue of its alleged good-faith efforts to comply with
§ 1981, Circuit City chiefly points us to its efforts to educate its
employees about its company-wide policy entitled"Treating Asso-
ciates with Respect" and the three avenues of complaint allegedly
available to Circuit City employees suspicious of illegal employment
discrimination in the workplace--the Open Door Policy, the Asso-
ciate Cool Line, and Coffee Conferences. According to Circuit City's
"Treating Associates with Respect" policy, Circuit City allegedly
committed not to discriminate against its employees on account of
factors made illegal by federal anti-discrimination statutes such as
§ 1981 and Title VII. The record contains evidence that Circuit City
sent out posters reflecting this policy to its retail stores, included the
policy in its 1991 employee handbook, conducted some individual
employee training sessions regarding the policy in 1991 or 1992, and
required every managerial and supervisory employee to attend a
week-long training seminar called "Managing Through People," a
small part of which included education on the federal anti-
discrimination in employment laws.

Countering Circuit City's evidence of its alleged good-faith efforts
to comply with § 1981 is evidence in the record: (1) that two top Cir-
cuit City executives harbor racial animosity toward African-
Americans;6 (2) that one of these top executives buried two internal
_________________________________________________________________
6 Here, we are referring to Zierden and Ligon. When the following
comments by Zierden are viewed in the light most favorable to Lowery,
a reasonable juror could find that Zierden harbored racial animus toward
African-Americans: (1) "the caliber of minorities and blacks who are in

20
reports reflecting a negative attitude on behalf of Circuit City against
racial minorities and failed to take any remedial action in response to
the negative findings in the reports; (3) that African-American
employees feared retaliation by Circuit City for use of the Open Door
Policy, the Associate Cool Line, and Coffee Conferences to complain
about discrimination; and (4) that several African-American employ-
ees and former employees of Circuit City felt intimidated by Circuit
City in response to their complaints to management about racial ani-
mus in promotion procedures. Finally, while the fact that Circuit City
had a very subjective and unstructured promotional system in place
does not alone suggest a secret corporate policy at Circuit City to
keep African-Americans in low level positions, see Vaughan v.
Metrahealth Cos., 145 F.3d 197, 204 (4th Cir. 1998), when this fact
is coupled with the fact that the Circuit City executive responsible for
the system harbors racial animus towards African Americans, a rea-
sonable juror could infer that the system was implemented in an effort
to mask such a corporate policy, see Barnett v. W.T. Grant Co., 518
F.2d 543, 550 (4th Cir. 1975) (recognizing the capacity of non-
objective hiring standards to mask employer's refusal to hire because
of race).

After considering the conflicting evidence just set forth regarding
the good-faith efforts issue, we are not persuaded that a reasonable
juror could only conclude that Circuit City engaged in good-faith
_________________________________________________________________
the company, in Circuit City, would not meet the standards for a corpo-
rate headquarters job," (J.A. 3145); (2) blacks who worked for Circuit
City "had a propensity to steal," (J.A. 3145-46); (3) "he didn't see th[e]
situation [of few if any African-Americans in decision making roles at
Circuit City] changing anytime soon because . . . those people who
would be maybe [sic] eligible to be promoted just weren't there," (J.A.
3148), and (4) "when you hire a black store manager, sales go down, cus-
tomers come in and wonder what's going on," (J.A. 2135).

When the following comments by Ligon are viewed in the light most
favorable to Lowery, a reasonable juror could find that Ligon harbored
racial animus toward African-Americans: (1) Lowery, an African-
American, "should go to a company that's more receptive to minorities,"
(J.A. 2091-92); and (2) Lowery should go to a company like Pepsi Cola
that "put [minorities] in decision-making roles," (J.A. 2091).

21
efforts to comply with § 1981. While an employer's institution of a
written policy against race discrimination may go a long way toward
dispelling any claim about the employer's reckless or malicious state
of mind with respect to racial minorities, such a policy is not automat-
ically a bar to the imposition of punitive damages. See Harris v. L &
L Wings, Inc., 132 F.3d 978, 983-84 (4th Cir. 1997). Here, the sincer-
ity of Circuit City's commitment to a company-wide policy against
racial discrimination in the workplace is called into question when
one considers the racially discriminatory attitudes of two top Circuit
City executives and the implementation of a promotional system by
one of those executives having the capacity to mask race discrimina-
tion in promotional decisions. Furthermore, the positive nature of Cir-
cuit City's Open Door Policy, Associate Cool Line, and Coffee
Conferences in reflecting Circuit City's attempt to offer employees an
avenue to complain about racial discrimination without intimidation
or fear of retaliation is countered by evidence of employees who testi-
fied they felt ignored or intimidated for complaining about promotion
procedures and feared retaliation if they used one of these venting
procedures to complain about racial animus among Circuit City man-
agement. Other evidence suggesting that Circuit City's purported
efforts to comply with § 1981 were not taken in good-faith, but with
the intent to cover-up a corporate policy of keeping African-
Americans in low level positions, is Zierden's burying of the Booth
and Cook reports. Because we are unable to conclude that a reason-
able juror could only find that Circuit City engaged in good-faith
efforts to comply with § 1981, and because we conclude that in inten-
tionally failing to promote Lowery, Turner acted in the face of a per-
ceived risk that her action violated federal law, in a managerial
capacity, and within the scope of her employment, we hold the district
court did not err in denying Circuit City's Rule 50(b) motion with
respect to Lowery's prayer for punitive damages on her § 1981 claim.
Accordingly, we affirm the portion of the judgment entered in favor
of Lowery awarding her punitive damages.

2. Peterson.

a. Perceived Risk of Violating Federal Law.

We conclude the record contains sufficient evidence, when viewed
in the light most favorable to Peterson, and drawing all reasonable

22
inferences in her favor, for a reasonable juror to find that in intention-
ally refusing to promote Peterson to the position of Assistant Supervi-
sor of the Customer Service Mail Department, Bischoff did so in the
face of a perceived risk that her decision would violate federal law.
See Kolstad, 119 S. Ct. at 2125. Specifically, a reasonable juror could
infer that Bischoff had knowledge of the existence of federal anti-
discrimination laws from Circuit City's evidence that it required
every person in management to attend a week-long training seminar
that included education on the federal anti-discrimination in employ-
ment laws. See Wal-Mart Stores, Inc., 187 F.3d at 1246.

b. Managerial Capacity.

We also conclude that, when the evidence is viewed in the light
most favorable to Peterson, and all reasonable inferences are drawn
in her favor, a reasonable juror could find that Bischoff served Circuit
City in a managerial capacity. In making this determination, we must
consider the type of authority that Circuit City gave Bischoff and the
amount of discretion that she had in what was done and how it was
accomplished. See Kolstad, 119 S. Ct. at 2128. Bischoff managed the
Customer Service Mail Department at FNANB, the wholly-owned
subsidiary of Circuit City. She had three supervisors reporting to her;
each supervisor had an assistant supervisor; and approximately fifteen
employees reported to each assistant supervisor. Bischoff had the
authority to make personnel decisions, including promotional deci-
sions, without guidelines or review, and thus was able to make per-
sonnel decisions without any objective criteria or accountability.
Although several layers of management existed above Bischoff at
FNANB, a reasonable juror could find from this evidence that Bisch-
off served FNANB in a managerial capacity for purposes of vicarious
liability in the punitive damages context. See Wal-Mart Stores, Inc.,
187 F.3d at 1247.

c. Scope of Employment.

Under Kolstad, the next inquiry is whether Bischoff acted within
the scope of her employment in refusing to promote Peterson on
account of her race. See Kolstad, 119 S. Ct. at 2128. The applicable
test is whether Bischoff's conduct is of the kind she was employed
to perform, occurred substantially within the authorized time and

23
space limits, and is actuated, at least in part, by a purpose to serve the
employer.7 See id. The evidence, when viewed in the light most favor-
able to Peterson, is sufficient to meet this test. Selecting employees
for promotion is the kind of conduct Circuit City employed Bischoff
to perform. Furthermore, her failure to promote Peterson occurred
during working hours and on company property. Finally, the evidence
supports an inference that Bischoff failed to promote Peterson at least
in part for the purpose of serving Circuit City.

d. Good-Faith Efforts.

Given our treatment of Circuit City and FNANB as a single
employer, our analysis of the good-faith efforts issue with respect to
Lowery applies equally with respect to Peterson. Accordingly, we
hold the district court did not err in denying Circuit City's Rule 50(b)
motion with respect to Peterson's prayer for punitive damages on her
§ 1981 claim. We, therefore, affirm the portion of the judgment
entered in favor of Peterson awarding her punitive damages.

III

Our resolution of the punitive damages issue on remand from the
Supreme Court necessitates our revisiting the propriety of the district
court's general award of attorneys' fees and costs due the Plaintiffs.
In part VII of Lowery I, we held that viewing the case as a whole,
including the fact that Lowery and Peterson recovered only $16,700
in compensatory damages, the Plaintiffs achieved a very low degree
of success. See id. at 767-68. In light of this, we held that the district
court abused its discretion in awarding the Plaintiffs all of their
accrued attorneys' fees and costs amounting to nearly $4 million. See
id. at 768. We then vacated the district court's general award of attor-
neys' fees and costs and remanded the case to the district court for a
redetermination of the award in light of our opinion. See id.

While we still believe the district court abused its discretion in
granting the Plaintiffs a general award of attorneys' fees and costs in
the amount of nearly $4 million, we acknowledge that our affirmance
_________________________________________________________________
7 Circuit City does not seriously dispute that this scope of employment
test, without considering the good-faith exception, is met here.

24
on remand of the judgments in favor of Lowery and Peterson with
respect to the award of punitive damages means the Plaintiffs
achieved a higher degree of success in the case than we first deter-
mined. Accordingly, we vacate the district court's general award of
attorneys' fees and costs, remand the case to the district court for a
redetermination of the amount of the award in light of the same senti-
ments we expressed on the issue in Lowery I, with the modification
that the Plaintiffs have achieved a higher degree of success than we
determined in Lowery I.

IV

In conclusion, we hold the district court did not err in refusing to
grant Circuit City's Rule 50(b) motion with respect to Lowery and
Peterson's prayer for punitive damages in regards to their § 1981
claims. Accordingly, we affirm the judgments in favor of Lowery and
Peterson to the extent they award Lowery and Peterson punitive dam-
ages. We vacate the district court's general award of attorneys' fees
and costs in favor of the Plaintiffs and remand the case for a redeter-
mination of the award in accordance with this opinion. Finally, with-
out further discussion, we reaffirm our holdings and analysis as stated
in Lowery I with respect to the issues raised on appeal by Circuit City
and on cross appeal by the Plaintiffs that are unrelated to the issue of
punitive damages and the general award of attorney's fees and costs.

AFFIRMED IN PART, VACATED IN PART,
AND REMANDED WITH INSTRUCTIONS

25