## Facts

- Carole Kolstad worked for the American Dental Association (ADA) in its Washington, D.C. office as Director of Federal Agency Relations.
- When the ADA’s Director of Legislation and Legislative Policy retired in 1992, Kolstad and another internal candidate sought the promotion.
- After interviews and internal recommendations, the ADA selected the other candidate for the position.
- Kolstad asserted the promotion process was a pretextual “sham,” including alleged tailoring of the job description to favor the selected candidate and evidence of sexually derogatory remarks by a supervisor.
- Kolstad sued under Title VII for sex discrimination in the promotion decision.
- A jury found intentional discrimination and awarded backpay, but the trial court refused to instruct the jury on punitive damages under 42 U.S.C. § 1981a(b)(1).

## Issues

1. Whether § 1981a(b)(1) requires proof of “egregious” or “outrageous” discrimination, separate from the employer’s state of mind, before punitive damages may be considered for intentional discrimination under Title VII.
2. What “malice” or “reckless indifference” means under § 1981a(b)(1) in the Title VII punitive damages context.
3. When an employer may be held vicariously liable for punitive damages based on discriminatory acts of managerial employees, including the effect of the employer’s good-faith compliance efforts.

## Decision

- The Supreme Court vacated the D.C. Circuit’s judgment and remanded.
- The Court held that punitive damages under § 1981a(b)(1) do not require an independent showing that the discrimination was “egregious” or “outrageous.”
- The Court ruled that “malice” and “reckless indifference” focus on the employer’s state of mind regarding the employee’s federally protected rights.
- The Court directed lower courts to apply agency principles to punitive damages and to consider whether the employer’s good-faith efforts to comply with Title VII limit vicarious punitive liability.
- The Court did not decide whether Kolstad was entitled to punitive damages on the record; it required reconsideration under the correct legal standard.

## Legal Principles

- Title VII punitive damages under 42 U.S.C. § 1981a(b)(1) require proof that the employer acted “with malice or with reckless indifference” to federally protected rights, not proof of a separate “egregiousness” element.
- “Malice” and “reckless indifference” concern whether the employer knew it may be acting in violation of federal law, including acting despite a perceived risk of illegality.
- Evidence of particularly offensive or extreme conduct may support an inference of the required state of mind, but it is not a standalone prerequisite for punitive damages.
- An employer may face punitive damages for the acts of a managerial agent acting within the scope of employment and with the requisite state of mind, subject to limits grounded in agency principles.
- An employer’s good-faith efforts to comply with Title VII may preclude vicarious punitive liability for a managerial agent’s discriminatory employment decision that is contrary to those compliance efforts.

## Conclusion

The Court clarified that Title VII punitive damages turn on the employer’s knowledge-based state of mind—malice or reckless indifference to federal rights—rather than an independent requirement that the discrimination be especially egregious, and it remanded for application of that standard along with agency and good-faith compliance limits on vicarious liability.


Kolstad v. Am. Dental Ass’n, 527 U.S. 526 (1999)