Second Circuit Permits Evidence Obtained After Firing to Limit Damages in a Discrimination Suit

Diana Uhimov, November 5, 2014.

On Oct. 9, the Second Circuit sided with Fujifilm Medical Systems USA Inc. in Weber v. Fujifilm Medical Systems USA Inc., et al., an employee discrimination case brought by John J. Weber, former executive vice president. Weber alleged he was fired because he was not Japanese, in violation of Title VII of the Civil Rights Act’s prohibition on discrimination in employment based on race and national origin. The court ruled that Fujifilm could use “after-acquired” evidence, or evidence of the employee’s misconduct during the period of employment that was found after the employee was discharged for another reason, to confirm nondiscriminatory grounds for the termination.

The appellate court’s opinion explores the rare question of the after-acquired evidence doctrine in employment discrimination cases. There are few rulings that pertain to the application of after-acquired evidence in determining damages and liability for discrimination. Case law has developed to allow employers to use evidence of misconduct discovered after discharge to significantly limit potential damages that the employee may obtain, even if the employer has been found liable for discrimination.

Thus, if an employer can show that they would have discharged the individual at a particular point in time after the misconduct came to light, then that could curtail damages, such as back pay, from the point the employee misconduct is discovered. The evidence can also preclude certain remedies altogether, such as front pay and reinstatement. Because of this powerful limit on damages, when an employer discovers evidence of misconduct that would have led to an employee’s termination during the course of a lawsuit, settlement discussions are often forthcoming.

Fujifilm asserted that it terminated Weber for mishandling the company’s finances. It sought to prove that his firing was not motivated by discrimination by using evidence of misconduct discovered after Weber was fired. Weber appealed to the Second Circuit after a jury found that Fujifilm was not liable for discrimination. He argued that the after-acquired evidence was not properly admitted in to evidence. However, the Second Circuit upheld the lower court’s decision to admit evidence regarding irregularities in a financing agreement that Weber was involved in while working for the company, for the limited purpose of demonstrating the truth of the non-discriminatory reason for the termination decision.

The court relied on a 1995 U.S. Supreme Court ruling in McKennon v. Nashville Banner Publishing Co. In McKennon, the employee, who claimed her termination violated the Age Discrimination in Employment Act, admitted to removing confidential company documents to protect her position. As a result of her wrongdoing, the company argued that it should not be held liable for discrimination, despite conceding that the employee’s age was a factor in letting her go, because it would have nevertheless fired her for taking the documents. Although the Court held that after-acquired evidence could not fully shelter the employer from liability, it could be considered with respect to damages. Weber has expanded the after-acquired evidence doctrine by allowing such evidence to be admitted to support an employer’s defense to a wrongful discharge claim.

To avail themselves of this potent limit on damages and potentially liability, employers must prove that the employee’s wrongdoing was so extreme that they would have been fired if the company had known about the conduct. Employers may have to demonstrate that they fired another employee for a similar type of misconduct, or that the behavior violated a company policy that would have resulted in the individual’s termination. This makes company policies on prohibited employee conduct essential.