Court shoots down appeal of $300K sex harassment verdict

Four lessons and one novel issue for employers.

In November 2024, a jury awarded Sarah Budd $170,000 in compensatory damages, and $2,000,000 in punitive damages, for her claims of sex harassment against SkyWest Airlines.

Because of the damage caps imposed by Title VII, the award was reduced to $300,000, plus interest, costs and attorney fees. Had Ms. Budd been able to assert uncapped state law claims for harassment, she probably would have become a millionaire rather than a “hundred-thousandaire.”

The airline tried (and failed) to get a new trial, as well as judgment in its favor on the issue of punitive damages. The airline appealed, but on July 9, 2026, the U.S. Court of Appeals for the Fifth Circuit ruled against the airline.

The Fifth Circuit opinion has been publicized for its holding that victims of discrimination under Title VII are not required to mitigate their emotional distress damages. That’s what drew my attention to the case at first.

But once I started digging into it, I quickly realized that the entire saga is loaded with lessons for employers.

Before discussing the novel mitigation issue, I want to share some of those lessons with you. I do so with the following mea culpa.

After 50 years of dealing with the good, bad, ugly, and flat-out ridiculous of employment discrimination claims, I confess to being a wee bit judgmental. But what follows involves no such judgments since a jury of Ms. Budd’s peers has made them for me.

The saga, and four lessons

Ms. Budd transferred into the employer’s maintenance facility at Dallas-Fort Worth Airport. Within nine days of her arrival, a supervisor began making unwelcome, offensive sexual comments and jokes to her, including suggestions that she prostitute herself.

It did not take long for employees in the department to follow the example set by their supervisor. Ms. Budd was subjected to comments from co-workers about sex positions, and even rape.

Lesson No. 1: Don’t be naïve. Just because Title VII has been around for more than 60 years, do not assume that your employees “know better.” There are people in this world who will bring sexist, racist, and other discriminatory attitudes and behavior into the workplace. You may even employ some of them.

Ms. Budd reported the sexually harassing conduct to her immediate supervisor in Oklahoma. At that point, she had been at DFW for less than one month.

The Oklahoma supervisor did not ask for any details. Instead, he suggested that Ms. Budd sit tight and “see how it goes” since pursuing it would “just put a larger target on [her] back.”

Lesson No. 2: An employer’s legal fate is in the hands of the managers and supervisors who act for the company on matters within the scope of their authority. When a corporation entrusts people with responsibilities (like enforcement of a harassment policy), their actions or failures to act within the scope of that authority can bind the corporation.

Ms. Budd did not sit tight. Instead, she took a 10-day, unpaid medical leave of absence. But the day she returned to work the conduct continued, and Ms. Budd wound up in a bathroom “hysterically crying.”

She then sent an email to the Vice President of Maintenance complaining about the “salacious environment,” filed a formal complaint of harassment with Human Resources, and identified multiple witnesses to the harassing conduct.

Rather than follow its normal practice of interviewing all witnesses identified in a complaint, HR randomly selected a sampling of witnesses to interview.

Several witnesses described hearing “sex talk” in the shop, but HR did not follow up on what exactly that meant. The maintenance supervisor who first suggested that Ms. Budd prostitute herself, confirmed hearing the “sex talk” and admitted participating in it but said he would stop it if it went too far.

At the end of the investigation HR required some employees to undergo training and issued some written warnings. But no discipline was issued to the maintenance supervisor in DFW or to Ms. Budd’s immediate supervisor in Oklahoma.  

Meanwhile, back at the ranch, Ms. Budd was on leave and waiting to be informed about the outcome of the investigation. While she was waiting the COVID-19 pandemic forced the airline to offer early retirement to some employees.

Ms. Budd waited until the deadline and then accepted the offer of early retirement. She did so because she was never informed about the result of the investigation, had not heard that anyone was fired, and feared that if she returned the environment would be the same.

Lesson No. 3: This lesson is best summarized by quoting from the trial judge’s Order denying SkyWest’s motion for a new trial:

[HR] did not interview many of the employees implicated . . . ; did not subject [them] to fulsome questioning; did not follow standard practice of writing an investigative summary…[and, in the case of employees who were found to have violated the policy, issued only] lenient corrective action or, in one case, no corrective action at all.

Note that HR was responsible for these particular problems.

When is the last time your HR employees were trained on how to investigate and resolve claims of harassment?

While the harassment and poor employer response were going on, Ms. Budd was regularly texting her husband, sister-in-law, and friends about it.

In their closing comments to the jury, Ms. Budd’s attorneys argued that the text messages were circumstantial evidence supporting her claims of sexual harassment. The trial court judge, and the Fifth Circuit, rejected the airline’s arguments that the text messages should not have been admitted into evidence.

Lesson No. 4: I won’t make your hair hurt by explaining why the texts were not improper hearsay evidence. Rather, the lesson is that in today’s electronic world you must assume that everything you say is capable of being contemporaneously recounted, if not actually recorded. When meeting with employees to talk about matters important to their employment, be prepared. Have an outline. Prepare contemporaneous notes of what was said. Dueling notes are better than no duel at all.

The novel issue of mitigation

The airline also claimed on appeal that the trial judge should have instructed the jury that Ms. Budd had a duty to mitigate her emotional distress damages.

Based on its motion for a new trial, the airline wanted to argue to the jury that, when determining Ms. Budd’s damages for emotional distress, it should consider that she ended her psychiatric treatment after one visit, and prematurely discontinued the use of antidepressants.

The duty to mitigate damages is not a novel concept. It is regularly applied to claims for back pay. But applying it to emotional injuries can implicate thorny issues about medication and medical treatment, as well as personal, moral, and religious issues.

The Fifth Circuit did not address those issues. Nor did it determine that the facts were insufficient to let the jury decide whether Ms. Budd could have done more to mitigate her emotional trauma.

Rather, the court rejected the airline’s arguments because there was no duty to mitigate emotional distress damages under Title VII or under common law.

As I understand the opinion, the court held as a matter of law that a plaintiff in a Title VII case has no duty to mitigate emotional distress damages.

Someday a case may come along where the facts reflect a “reckless disregard” for mental health treatment that might allow a court to instruct a jury about mitigation. But for now, that is precluded as a matter of law in the Fifth Circuit and in other jurisdictions.

In this day and age . . .

I’m no scientist, and the foregoing lessons do not involve any unique legal revelations or theories. If anything, it is shocking that a modern employer would have such a weak response to credible allegations of sexual harassment.

But unfortunately there are lessons some employers still need to learn or remember.