(CN) - The 4th Circuit vacated a $10 million punitive damages award against defense contractor DynCorp International in a lawsuit accusing it of discriminating against the minority-owned subcontractor Worldwide Network Services.
Worldwide sued DynCorp in October 2006, alleging breach of contract and discrimination over the failure to renew its subcontract for communications and information technology services in Iraq and Afghanistan.
In 2006, after relations between the companies had deteriorated, DynCorp refused to renew Worldwide's subcontract, stopped payment for work already completed, and replaced Worldwide with a non-minority-owned subcontractor.
DynCorp's IT manager, Leon DeBeer, allegedly told others that "the proper role of the black man was to go out and kill a lion, proving his manhood, at which point in time he should be put to work to feed his family ... and mated with a woman so that he would have more children, who could then be put to work feeding their family."
DeBeer, a white South African, also called Worldwide executive Walter Gray a "nigger," a "bush native" and a "kaffir," according to the lawsuit.
A jury in 2008 awarded Worldwide nearly $5 million in actual damages and $10 million in punitive damages.
The Richmond, Va.-based appeals court upheld DynCorp's liability, but said the punitive damages based on discrimination should not stand.
"Worldwide has been unable to cite any evidence that DynCorp terminated the [subcontract] 'in the face of a perceived risk that [its] decision would violate federal law,'" Judge Allyson Duncan wrote for the majority. "Accordingly, we conclude that the award of punitive damages should be vacated."
The court ordered a retrial on punitive damages for the tortious interference with contract claim, because the verdict didn't specify how much of the $10 million was allocable to that claim versus the racial discrimination claim.
In a dissenting opinion, Judge Paul Niemeyer said a new trial was needed to resolve whether DynCorp's executives were actually motivated by racial discrimination.
Chief Judge James Jones wrote separately to say he would have upheld the $10 million punitive damages award.
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