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UPDATE 3-Tesla faces new race bias trial from employee whose $137 mln verdict was cut

UPDATE 3-Tesla faces new race bias trial from employee whose $137 mln verdict was cut

(Adds details from opening statements)

By Daniel Wiessner

March 27 (Reuters) - A trial kicked off in San Francisco federal court on Monday to determine how much money Tesla Inc must pay to a Black elevator operator whom a jury determined was subjected to severe racial harassment while working at the electric auto maker's flagship assembly plant.

A lawyer for plaintiff Owen Diaz told a jury during opening statements that the racist slurs, graffiti and threats his client faced were part of a "plantation mentality" at the Fremont, California factory where Black workers were treated as second-class citizens.

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"You will conclude that Tesla's conduct ... is a conscious decision not to protect African American employees inside their workplace," the lawyer, Bernard Alexander, said.

The trial is scheduled to last five days. Last year, a judge slashed the $137 million verdict that a different jury awarded in 2021 to Diaz, one of the largest ever in a U.S. workplace discrimination case, to $15 million. Diaz's lawyers rejected the lower payout and opted for a new trial on damages.

Alex Spiro, a lawyer for Tesla, told the jury that any racist conduct at the plant was indefensible. But he suggested that Diaz was exaggerating his claims and could not prove that he suffered psychological damage warranting money damages.

"There is almost no evidence of anything you just heard other than a lawyer saying it happened eight years later," Spiro said.

As at the last trial, Diaz and several employees and managers at the Fremont plant are expected to testify.

In his 2017 lawsuit, Diaz accused Tesla of failing to act when he complained to managers in 2015 that employees at the factory frequently used racist slurs and scrawled swastikas, racist caricatures and epithets on walls and workstations.

Diaz sued Tesla for causing him emotional distress under a California law prohibiting employers from failing to prevent hostile work environments based on race and other protected traits.

The jury in 2021 awarded Diaz nearly $7 million in compensatory damages for emotional distress, and $130 million in punitive damages, designed to punish unlawful conduct and deter it in the future.

U.S. District Judge William Orrick last year reduced the compensatory damages to $1.5 million and the punitive damages to $13.5 million. He said that sum acknowledged the pervasive harassment Diaz faced while reflecting that he had worked at the factory for only nine months and had not alleged any physical injury or illness.

Employment discrimination cases rarely yield verdicts of more than $1 million, let alone nine-figure sums. The U.S. Supreme Court has said punitive damages typically should be no more than 10 times compensatory damages.

Tesla also faces claims of tolerating widespread race bias at the Fremont plant in a class action in California state court and a separate lawsuit by the state's civil rights watchdog making similar allegations. Both cases are still in early stages.

The outcome of Diaz's trial will not directly affect those lawsuits or other court cases, but could encourage workers to file new lawsuits against the company as it battles mounting challenges to its dominance of the electric car market. (Reporting by Daniel Wiessner in Albany, New York, Editing by Alexia Garamfalvi, David Gregorio and Richard Chang)