Novartis Braces For Punitive Damages After Jury Finds It Liable for Class-wide Gender Discrimination, Awards $3.36 Million To 12 Named Plaintiffs

We know more than a few folks who scratched their heads when Novartis made the decision to take a class action sex discrimination case to trial. The allegations were extremely nasty, and the certified class consisted of more than 5,600 current and former Novartis sales representatives. Second-guessing is cheap, but it sure seemed justified on Monday when a Manhattan federal district court jury found the pharmaceutical company liable for all of the class's three claims of gender discrimination. The five men and four women on the jury awarded the 12 named plaintiffs more than $3.3 million in compensatory damages. (Here's their verdict form, which specifies compensatory damages for each of the 12.)

But that's not the really bad news. The jury found that the class of female sales reps is entitled to punitive damages as well. Both sides will make closing arguments on punitive damages to the jury Tuesday morning.

Lead plaintiffs' counsel David Sanford of Sanford, Wittels & Heisler told us Monday that he will be asking the jury to award the class a percentage of Novartis's net worth, which the parties have stipulated to be more than $9 billion. Sanford said he had not yet decided on the number, but he assured us he'd have one Tuesday morning. (If you want a refresher on the case, here's the transcript of Sanford's closing argument, which we previously covered. And for the sake of fairness, here's the Novartis closing, delivered by Richard Schnadig of Vedder Price.)

Barbara Johnson of Paul, Hastings, Janofsky & Walker, who has been following the case, told us that Novartis should probably expect to be socked with big punitive damages, given the jury's compensatory damages findings. But, ironically, that could be a good thing for the Swiss pharma giant, she said.

"If runaway punitives are assessed, I think a court of appeals would take a close look at that," said Jones.

Sanford, however, told us he's anticipated Novartis's potential appellate arguments against an outsized punitive damages award. "We're aware of the limitations given the law," he said. "We'll be mindful of them during the closing."

Novartis can't feel especially good about its chances for a bailout from the U.S. Court of Appeals for the Second Circuit. As we've previously reported, the Second Circuit declined to take the company's interlocutory appeal of class certification. The judge who first certified the class, then-federal district court judge Gerard Lynch, has since been elevated to the appellate court. And the jury spoke loudly and clearly in its verdict, finding that the company discriminated against women in pay and promotions and violated legal protection for pregnant women. The named plaintiffs received awards between $50,000 and $598,500. (Marjorie Salame, who testified that her Novartis career was derailed after she was raped by a physician at a Novartis-sponsored event, was awarded $540,500.)

Novartis also faces the prospect of many millions more in compensatory damage awards. According to Sanford, each member of the class will be allowed to come to New York federal district court to present her claim for back pay to Judge Colleen McMahon, who presided over the month-long class action trial. Since it's unclear how many members will participate in that process and how much Judge McMahon will award in back pay, it's impossible to estimate Novartis's total liability.

In response to our request for comment, Novartis sent us this e-mail statement: "The US subsidiary of Novartis, Novartis Pharmaceuticals Corporation, is disappointed in the jury's verdict and the $3.3 million award to the plaintiffs, as we believe the plaintiffs' claims were unfounded. We will appeal this decision. Throughout our history and, in particular, in the timeframe of this lawsuit, NPC has developed and implemented policies setting the highest standards with regards to diversity and inclusion for the development of our employees....We are proud of the public honor and recognition we have received for the policies and programs we have in place to support the advancement of women in the sales force."

SOURCE: Sanford, Wittels & Heisler, LLC