This had partly do to do with the fact that the employee quit her job because of the discrimination, but the jury felt that a reasonable person would not have quit. For an appeals court to uphold as 300,000:1 ratio of punitive damages to compensatory damages is highly unusual.
The Ninth Circuit specifically upheld the lower court's reasoning.
In its decision, the district court noted that ASARCO did have an anti-discrimination policy in force. But it also recounted particular evidence in the record, specifically that ASARCO's management “did not provide prompt and effective remedial action” when made aware of Aguilar's complaints. Instead, the court pointed to evidence that ASARCO “treated Aguilar's claims dismissively, did nothing to investigate Aguilar's claims, or took steps that were not reasonably calculated to and did not stop the harassment.” The court noted that, based on its evaluation of the evidence, ASARCO repeatedly, over the course of months, failed to adequately respond to discrete instances of harassment against Aguilar. Moreover, the court reasoned, because the evidence demonstrated that ASARCO “is a serial violator of antidiscrimination laws” (as evidenced by the sexually explicit graffiti targeting other employees), the deterrence aim of punitive damages awards warranted a significant award that would discourage future misconduct by ASARCO.The Court also noted, as have several other courts, that Title VII has a strict statutory scheme that holds damages down within certain limits. Therefore, the normal rules about making sure there is a reasonable ratio between compensatory and punitive damages do not apply.
This is something very important to keep in mind, particularly where there are problems with the evidence of compensatory damages, but there is other evidence showing malicious intent or reckless disregard of an employee's civil rights.
This also shows the importance of en banc review in cases involving controversial law. An en banc hearing is a relatively rarely-granted procedure. In most Circuits, en banc review means a hearing before all the Circuit's judges, which requires a certain percentage of judges voting for it. However, in the 9th Circuit, since they have a large number of appellate judges, the en banc review consists of a hearing before 11 randomly selected appellate judges, a procedure which has some critics. In any event, the employee initial lost on appeal before a three-judge panel of the 9th Circuit, but the en banc review yielded a different result.
Update: And then there's this: "Law360, New York (December 17, 2014, 8:28 PM ET) -- The Second Circuit on Wednesday said a New York federal judge did not go far enough in cutting a $24 million punitive damages award against ArcelorMittal SA in a steelworker's racial discrimination case to $5 million, saying the reduced award was still excessive." The plaintiff had received a $1.32 million verdict for compensatory damages, and the appellate panel said that a roughly 2-to-1 ratio of punitive to compensatory damages “constitutes the maximum allowable in these circumstances.” The case is Turley v. ISG Lackawanna Inc. et al., case number 13-561, in the U.S. Court of Appeals for the Second Circuit.
