Article by: Michael Thompson

On the Tuesday before Thanksgiving, a Los Angeles jury hit billionaire Alki David and two of his media companies, FilmOn and Alki David Productions, with an $8.25 million verdict on claims of battery, sexual battery, and sexual harassment brought by Mahim Khan, a former employee. After turkey and stuffing, the jury returned the next Monday, deliberated for one hour, and awarded Khan $50 million in punitive damages against David.

The case featured lurid allegations and was punctuated by shocking courtroom antics from David, but there are lessons that employers big and small can learn and apply to manage risk and address sexual harassment claims.

1. Get a Lawyer

David chose to act as his own lawyer at trial. But after he made numerous procedural missteps on the first day of trial, the court revoked his right to act as his own attorney. He never retained an attorney, and thus was unrepresented (and frequently absent) through most of the trial.

Now, most people would know to get a lawyer long before trial, but you don’t have to wait until you are served with a court summons to call up your employment counsel. Pre-litigation legal advice can help you make informed, strategic decisions that have enormous implications in court. A great trial lawyer may be able to explain away a problematic email to the jury, but an experienced attorney can make recommendations that may keep you out of the courtroom altogether.

So don’t hesitate to calling your lawyer when you receive that threatening demand letter. Or when the employee requests a copy of her personnel file. Or when you are thinking about terminating an employee who previously made a complaint to HR. Or when you get that note about something that happened at the company holiday party.

2. Individuals Can Be Personally Liable For Harassment

Take note that David was held personally liable for the $50 million punitive damages verdict, in addition to being jointly liable with his companies for the $8.25 compensatory award. In California, supervisors and coworkers can be held personally liable for harassment that they perpetrate. And while your employer may pay for your defense, any damages awarded against you are likely not insurable.

3. Consider the Stakes

The chances you will ever face a multi-million dollar verdict are (hopefully) remote. But that hefty price tag can obscure the very real costs and liability any employer could face. Many claims that employees bring, including sexual harassment under California’s Fair Employment and Housing Act, entitle prevailing employees (but frequently not prevailing employers) to recover attorney’s fees and court costs. Thus, you can expect the final judgment against David to be even higher than $58.25 million.

Beyond that, an employer has to retain attorneys to defend the lawsuit. Although certain insurance policies, such as EPLI, may cover the cost of defense, these policies frequently require the insured to cover some amount as a retention or deductible. Moreover, insurers consider past claims when determining the insurance premium to charge.

The point? An ounce of prevention is worth a pound of cure. Invest in your business by getting your employees trained on sexual harassment and other issues. (California law already requires most employers to provide two hours of sexual harassment training to supervisors and one hour to non-supervisors.) Develop written policies that inform your employees of expected standards of behavior and how they can report violations of those standards. Take complaints seriously and make sure they are timely investigated by someone (whether internally or externally) experienced and knowledgeable in conducting workplace investigations.

These steps may feel today like distractions and costs that are not tied to growing your business, but consider the $58.25 million-plus cost of not doing those things.

4. Harassment Can’t Be a Feature of Your Business

David’s companies produce extreme and graphic content, and the defendants argued that anyone who worked in the office had to expect an environment consistent with this product. David admitted to many antics, such as walking naked around the office, but attributed it to legitimate business interests of creativity. Do we think the jury bought that?

Again, this was an extreme case, but don’t assume that a jury will share your worldview on pranks and jokes in the workplace.

5. Give Mature Thought to Settlement

Trial can be unpredictable. Jury trials even more so. This was David’s fourth such trial this year. He suffered defeats of $5 million and $11 million in previous trials, but nearly won another trial where a jury reportedly split 8-4 in his favor. (A fifth trial and a retrial of that hung jury await.)  No two claims are exactly the same, but $0, $5 million, $11 million, and $58.25 million represents a wide range of outcomes.

David maintains his innocence, has vowed to continue fighting, and insists that he will never pay a penny of these verdicts. As a billionaire, he can likely afford to take that defiant stand, including appellate fees and the 10% interest that is likely to run on each judgment pending appeal.

Can your business afford that? We don’t know what amounts these plaintiffs demanded to settle with David, but employers are frequently faced with the prospect of paying way more than seems fair to settle claims, even seemingly frivolous claims. And sometimes settlement just isn’t possible because what the plaintiff wants is simply far beyond what is reasonable or possible.

But settlement represents a management of risk and cost. And those costs include time and attention. Khan sued David in March 2017. Even if an employer hires outside counsel, a lawsuit demands time and attention to respond to discovery requests, sit for depositions, and attend trial. Keep those costs in mind before you reject the prospect of early resolution.

6. Consider Arbitration

Khan v. David played out publicly in court and was covered daily by various publications. There was extensive coverage of the allegations and David’s various outbursts. Not ideal.

Private arbitration could have avoided this publicity. Additionally, many plaintiff’s counsel view juries as more sympathetic and likely to award outsized verdicts than arbitrators, and may value settlement accordingly. Give serious thought to whether arbitration agreements with your employees makes sense for your business.

Of course, you will want to talk with employment counsel about the downsides of arbitration, including the increased costs borne by the employer. And don’t forget the various changes to California law regarding arbitration coming into effect in 2020.