The U.S. Court of Appeals for the 4th Circuit today vacated a $10 million punitive damages award in a racial discrimination suit brought in Alexandria against defense contractor DynCorp International. The court affirmed liability against DynCorp in its contract dispute with a minority-owned technology services company Worldwide Network Services.
The suit, filed in October 2006 in the U.S. District Court for the Eastern District of Virginia, alleged discrimination and breach of contract, among other claims, against DynCorp. The plaintiff, Worldwide, which provided communications and information-technology services in Iraq and in Afghanistan, held a subcontract under DynCorp.
A jury in 2008 deliberated for several days before rendering a split verdict that in large part favored Worldwide, which was awarded $10 million in punitive damages and nearly $5 million in compensatory damages. Akin Gump Strauss Hauer & Feld represented the company. DynCorp appealed. The 4th Circuit heard oral argument last September.
In the appeals court, two heavyweights of the appellate bar went head to head. Sidley Austin partner Carter Phillips argued for Dyncorp, and Akin Gump partner Patricia Millett represented Worldwide. Circuit Judges Paul Niemeyer and Allyson Duncan heard the case with Chief Judge James Jones of the U.S. District Court for the Western District of Virginia. Duncan wrote the majority opinion. (Phillips and Millet were not immediately available this afternoon.)
At issue on appeal was the extent to which DynCorp, as a corporation, could be held liable for the racial motivation of a mid-level manager who did not have the authority to end the company’s contract with Worldwide.
The majority ruling affirmed on liability but remanded the case for a retrial on punitive damages on a single count, tortious interference with contract. Punitive damages on that count are capped at $350,000 under Virginia state law.
Niemeyer, who wrote partly in dissent, called for a new trial for a jury to resolve who DynCorp’s decisionmakers were and whether they were actually motivated by racism. Niemeyer disagreed with the majority holding that found DynCorp itself liable.
DynCorp maintained it refused to renew its contract with Worldwide because of the subcontractor’s poor performance record and not because of racial motivation.
Jones, who also wrote partly in dissent, said he would also affirm the $10 million punitive damages award.