In a recent ruling in David v. Signal Int’l, LLC, No. 2:08-CV-01220 (E.D. La. Jan. 28, 2015), Judge Susie Morgan of the U.S. District Court for the Eastern District of Louisiana held that punitive damages could be awarded in actions brought under the Trafficking Victim Protection Act (“TVPA”) even though the TVPA does not explicitly provide for such damages. Judge Morgan further held that defendants in TVPA actions cannot raise the in pari delicto doctrine as a defense.

As the plaintiffs’ bar is increasingly turning to novel claims – like those asserted here under the TVPA – in workplace class actions involving foreign-based workers, the ruling in David is important for employers.

Case Background

Signal International, LLC (“Signal”) provides shipbuilding, ship and rig repair, and offshore services to businesses from its facilities along the Gulf of Mexico. In 2006, after Hurricane Katrina and Hurricane Rita caused devastating damage to the Gulf of Mexico, Signal was not able to meet the demand for oil rig and ship repair that resulted from the hurricanes using local workers alone. Because of this, Signal retained two recruiting agencies to recruit workers from India to meet this demand.

These recruiting agencies asked workers in India to pay as much as $25,000 in recruiting fees in exchange for jobs at Signal. Many of the workers took out loans to pay this fee. The recruiting agencies also promised the workers green cards so that they could remain in the United States permanently.

The workers were brought in under “guest worker” H2B visas, and were thus not eligible for green cards. Moreover, workers on H2B visas cannot work for any employer other than the one that petitioned for the visa. The plaintiffs claimed that Signal and the recruiters lied to them, and that they charged this exorbitant fee and brought them in under H2B visas to force them to continue to work for Signal even if they no longer wanted to do so.

Signal asserted that its attorney and the recruiting agencies misled Signal by telling Signal that the workers were going to be granted green cards. In addition, Signal claimed that the recruiters told Signal that the workers would pay recruiting fees of between $3,000 and $4,000 and that, when it heard about the much larger recruiting fees these firms were actually charging, it tried unsuccessfully to convince the recruiters to return money to the workers.

After the workers arrived in the United States, they needed to live in housing provided by Signal because there was a lack of housing in the wake of Hurricane Katrina. The plaintiffs contended that the housing was intolerably poor, that the workers were charged exorbitant amounts for the housing, and that they were not allowed to come and go as they pleased. Signal asserted that it strived to provide quality housing for the workers, that its housing fees were more than reasonable, and that the workers were free to come and go as they pleased.

The plaintiffs further claimed that they were paid less than Signal’s non-Indian workers. While Signal denies that this is true, the Equal Employment Opportunity Commission (“EEOC”) filed suit against Signal on April 20, 2011, claiming that Signal discriminated against the Indian workers. This is not surprising, since the EEOC has a long and tortured history of pursuing what it calls “human trafficking discrimination” claims.

Trial began in the David matter on January 12, 2015. On January 22, 2015, the Court asked both parties to brief whether punitive damages can be awarded in TVPA actions. On January 28, 2015, the Court issued its decision.

The Court’s Ruling

The Court began its analysis by stating that, though “[t]he TVPA does not explicitly allow punitive damages in civil cases. . . . every court to consider the issue has held that punitive damages are available.” Id. at 2. Based on that alone, the Court held that punitive damages were available. See id. (citing Ditullio v. Boehm, 662 F.3d 1091, 1098 (9th Cir. 2011); Francisvo v. Susano, 525 F. App’x 828, 835 (10th Cir. 2013); Carazani v. Zegarra, 972 F. Supp. 2d 1, 26 (D.D.C. 2012); Doe v. Howard, No. 1:11-CV-1105, 2012 WL 3834867, at *4 (E.D. Va. Sept. 24, 2012)).

The Court also broke new ground in deciding that an in pari delicto defense is not available in TVPA actions. The in pari delicto defense provides that, when both parties in a lawsuit are at fault, neither party can recover against the other. Signal argued that the defense should be available because “[o]ne Plaintiff has conceded lying knowingly to embassy officials to leave the country without interference from the visa office. Others were prepared to do the same. They testified that they were given ample notice of quite significant reason to suspect that there was much amiss concerning their basis for leaving India for the purposes of employment in the United States.” David, at 8. The Court disagreed, finding that, since the purpose of the TVPA is to punish traffickers, allowing an in pari delicto defense would be contrary to the goal of the statute. Id. at 3-4.

Implications For Employers

As an initial matter, employers that recruit workers from oversees using outside recruiters should make sure that they know exactly what the foreign workers are being told and what the foreign workers and recruiters are agreeing to before starting their jobs. They should also independently verify that what they are being told by their recruiters is true to ensure that they are not unwillingly dragged into a TVPA suit based on the actions of their outside recruiters.

For the time being, this case also gives additional leverage to plaintiffs’ counsel in TVPA actions. This case also may be used by the EEOC as leverage in related “human trafficking discrimination” cases.  As we recently reported here, the EEOC received its largest judgment of 2014 in a “human trafficking discrimination” case that, despite being almost certainly unenforceable, will likely be used by the EEOC as leverage in settlement discussions. This case may also be used by the EEOC to claim that large damage awards are appropriate in “human trafficking discrimination” cases.

If punitive damages are awarded in David, we expect an appeal and de novo review of the issue in the Fifth Circuit. Moreover, if Signal is found liable in the case, we expect a de novo review of the applicability of the in pari delicto defense in TVPA cases by the Fifth Circuit, which will be the first federal circuit court to address the question. Stay tuned.