In a big win for employers, the New Jersey Supreme Court unanimously ruled that a jury instruction that excluded the requirement that a member of "upper management" must engage in or be willfully indifferent to egregious conduct in order to award punitive damages, constituted plain error that produced an unjust result. The incorrect jury instruction coupled with an inappropriate closing argument that excacerbated the confusion by referring to indivduals who were clearly not members of upper management, lead the jury in Longo v. Pleasure Productions, Inc. to award punitive damages based upon improper considerations. As a result, the matter was reversed and remanded for a new trial on the issue of punitive damages.
In CEPA and LAD cases, punitive damages are only meant to be awarded in extreme circumstances and are designed to punish an employer for especially egregious conduct directed toward the employee. In order to impute such conduct to the employer, it must have been committed by a member of upper management who has the power to hire and fire and set company policy, among other factors. Punitive damages can also be awarded based upon the willful indifference of a member of upper management – meaning that if a member of upper management is aware of such egregious conduct but willfully ignores it, then that would equate to if they engaged in the conduct. However, without specifically instructing the jury that upper management must be involved in the conduct that was found to be egregious, a jury could award punitive damages for any LAD or CEPA claim.
Also significant in the opinion was that the Supreme Court ruled that the incorrect standard of proof was used. While liability can be found based upon a "preponderance of the evidence," punitive damages requires the higher standard of "clear and convincing evidence." The trial court ruled that the upper management jury instruction was not necessary because a member of upper management was found to be individually liable for the underlying CEPA claim. In doing so, however, the court essentially transposed that lower standard of proof into the punitive damage portion of the trial because the underlying liability was found using that lower standard.
Fox Rothschild handled the case for the Defendant/Appellant and is extremely pleased with the result. A copy of the opinion can be found here: A-37-11 Doreen Longo v. Pleasure Productions, Inc. Opinion
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