FRESNO, Calif. — The California Court of Appeals for the 5th District has ruled that Federal Credit Unions are not immune from paying punitive damages by virtue of their being federally chartered credit unions.
The decision stems from a 2003 dispute between the $193 million Tucoemas Federal Credit Union, headquartered in Visalia, Calif., and one of its former employees, Kim McGee.
According to the appellate decision, McGee had been the credit union's Vice President of Lending when, in May 2003, she contracted breast cancer at age 43. The situation wound up in court when McGee sued the CU, charging that its leadership had violated the Fair Employment and Housing Act.
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A lower court agreed with McGee that there had been violations and awarded her $1.99 million in compensatory damages (later negotiated to $1.24 million) and $1.2 million in punitive damages as well as $7,000 in punitive damages from Tucoemas' CEO, Linda Reese. Tucoemas paid the compensatory damages and appealed the punitive damages on the grounds that the FCU cannot be held liable for punitive damages because it is an entity of the federal government. The appeals court disagreed and found the punitive award permitted by law and justified by the facts of the case.
"Appellants' conduct was reprehensible," the court wrote. "Following McGee's cancer surgery, appellants engaged in a pattern of behavior aimed at humiliating McGee and forcing her to quit. Appellants refused to provide McGee with medical accommodation, threatened to fire her if she did not return after four months and, when McGee did timely return, appellants demoted her, cut her pay in half and canceled her medical coverage."
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