8.61 PUNITIVE DAMAGES — LAW AGAINST DISCRIMINATION (LAD) CLAIMS (3/10)
NOTE TO JUDGE
This charge incorporates pertinent statutory provisions of the Punitive Damages Act (PDA), N.J.S.A. 2A:15-5.9 et seq., which are mandatory as to claims commenced on or after October 27, 1995. Differences in the instructions to be given in cases subject to the PDA and pre-PDA cases are noted in the footnotes. Also note that the PDA contains the following procedural requirements applicable to NJLAD claims subject to the PDA:
1. Punitive damages must be specifically prayed for in the complaint. N.J.S.A. 2A:15-5.11.
2. Under the PDA, if requested by a defendant the trial court must bifurcate trial of punitive damages issues from trial of underlying liability and compensatory damages, with the punitive damages issues tried at the second stage of the bifurcated trial. Evidence relevant only to punitive damages is inadmissible in the liability and compensatory damages phase. N.J.S.A. 2A:15‑5.13. Trial judges should account for the added length of a bifurcated trial when discussing the potential length of trial during jury selection.
3. Punitive damages may be awarded only if compensatory damages have been awarded. A verdict of only nominal damages cannot support an award of punitive damages. N.J.S.A. 2A:15-5.13.
4. When there are two or more defendants, an award of punitive damages must be specific as to each defendant and each defendant is liable only for the award made against him or her. N.J.S.A. 2A:15-5.13(e).
5. Before entering judgment for punitive damages, the trial judge must determine that the award is reasonable and justified in light of the purposes of punitive damages. The judge may reduce or eliminate the award if the judge considers such action necessary to satisfy the requirements of the PDA. N.J.S.A. 2A:15-5.14(a).
You will now consider the issue of punitive damages. Specifically, you must first decide whether to award punitive damages against the [employer defendant], and if you decide to award such damages, you must then further decide on the amount to be awarded.
What are Punitive Damages?
The purpose of punitive damages is different from the purpose of compensatory damages. Compensatory damages are awarded to plaintiffs to compensate them for any actual injury or loss they have suffered as a result of a defendant's misconduct. In contrast, punitive damages are not to be awarded as a routine manner in every case; they can be awarded only in exceptional cases, to punish a defendant who has acted in an especially egregious or outrageous manner, and to discourage the defendant from engaging in similar misconduct in the future. The plaintiff is not entitled to punitive damages simply because you have found that the defendant has engaged in unlawful [discrimination/sexual harassment] or because you have awarded damages to compensate the plaintiff for [his/her] injury. You may award punitive damages to the plaintiff only if you find that plaintiff has proved certain additional matters that I will explain to you.
The Standard of Proof
You will recall that when I gave you instructions concerning the elements of plaintiff's [discrimination/sexual harassment] claims, I instructed you that the plaintiff had to prove [his/her] claims by a "preponderance of the evidence". Under that standard, the plaintiff was required to prove that the facts alleged by [him/her] were more likely than not true. To be entitled to punitive damages, however, the plaintiff must meet a higher standard of proof.
To recover punitive damages against [employer defendant], plaintiff must prove that [he/she] is entitled to them by "clear and convincing evidence." Clear and convincing evidence means evidence that leaves no serious or substantial doubt about the correctness of the conclusions drawn from that evidence. This standard does not require plaintiff to persuade you beyond a reasonable doubt, but it does require stronger proofs than are required under the preponderance of evidence standard.
Punitive Damages Against [Employer Defendant]
You must first decide whether an award of punitive damages is justified against [employer defendant] in this case. To award punitive damages against [employer defendant], you must find that both of the following factors are present:
First, you must find that the [discrimination/sexual harassment] was "especially egregious." If you do not find that the [discrimination/sexual harassment] was especially egregious, then you must not award punitive damages. In a moment, I will instruct you as to what constitutes "especially egregious" behavior.
Second, if you do find that the [discrimination/sexual harassment] was especially egregious; you must then also find that at least one of [employer defendant's] "upper management" employees actually participated in, or was willfully indifferent to, the wrongful conduct.
You cannot award punitive damages against [employer defendant] unless there was some involvement by a member of its upper management.
What Constitutes "Especially Egregious" Conduct?
"Especially egregious" conduct is conduct that was motivated either by actual malice, or that was done with a willful and wanton disregard of the rights of the plaintiff. "Actual malice" means that [individual discriminator/sexual harasser] engaged in intentional wrongdoing in the sense of an evil‑minded act designed, intended and done specifically to injure the plaintiff. "Willful and wanton disregard of the rights of the plaintiff" means that [individual discriminator/sexual harasser] deliberately acted with knowledge of a high degree of probability of harm to the plaintiff, and reckless indifference to the consequences of that act.
In making your determination as to whether the [discriminatory/sexually harassing] conduct of [individual discriminator/sexual harasser] was especially egregious or outrageous, you must consider all of the evidence surrounding the wrongful conduct, including:
1. the likelihood that serious harm would arise from the [discrimination/sexual harassment];
2. [individual discriminator/sexual harasser's] awareness or reckless disregard of the likelihood that serious harm would arise;
3. [individual discriminator/sexual harasser's] conduct after learning that [his/her] initial conduct would likely cause harm; and
4. the duration of the wrongful conduct and any concealment of that conduct by [individual discriminator/sexual harasser].
You may not award punitive damages based solely on a finding of negligence or even gross negligence by [name of individual discriminator/sexual harasser]. Nor may you award punitive damages solely because you have determined that [discrimination/sexual harassment] occurred. Rather, as I have explained, punitive damages are to be awarded only in those exceptional cases where the [discrimination/sexual harassment] was especially egregious or outrageous.
What is "Upper Management"?
The second factor you must find is that at least one of [employer defendant's] "upper management" employees was involved with the [discrimination/sexual harassment]. In a moment I will define the kind of involvement that you must find occurred. As an initial matter, though, you must decide whether certain of [employer defendant's] employees were part of its "upper management". Specifically, plaintiff contends that [names of alleged upper management employees] were members of [employer defendant's] "upper management" who had some involvement with the wrongdoing at issue.
To decide whether those employees of [employer defendant] were part of its upper management, you must consider the following. The purpose of the definition of “upper management” is to give employers the incentive not only to provide voluntary compliance programs, but also to insist on the effective enforcement of their programs. The employees who acted wrongfully must have had sufficient authority to make the imposition of punitive damages fair and reasonable.
Clearly, upper management includes the corporation's board of directors and its highest-level executive officers. In addition, upper management consists of those employees responsible to formulate the corporation’s anti-discrimination policies, provide compliance programs and insist on performance of such programs, and those employees to whom the corporation has delegated responsibility to execute its policies in the workplace, who set the atmosphere or control the day-to-day operations of the unit. This group includes heads of departments, regional managers, or compliance officers.
Not all managerial employees, however, constitute "upper‑level" management. To decide which employees below the highest levels of management are included in "upper management" is a fact sensitive question that requires you to weigh consider all of the surrounding facts and circumstances.
For an employee on the second tier of management to be considered a member of "upper management," the employee should have either (1) broad supervisory powers over the involved employees, including the power to hire, fire, promote and discipline, or (2) the delegated responsibility to execute the employer's policies to ensure a safe, productive and discrimination-free workplace.
After you have decided whether the employees identified by plaintiff were part of the upper management of [employer defendant], you must then consider whether any of those upper management employees actually participated in, or were willfully indifferent to, the [discrimination/sexual harassment] that occurred.
What Constitutes "Actual Participation"?
To find that upper management "actually participated" in wrongful conduct, you must find that upper management employees not only knew about the wrongful conduct, but also engaged in affirmative acts to accomplish that wrongful conduct. This factor would be satisfied, for example, if you find that [individual discriminator/sexual harasser] is a member of [employer defendant's] upper management, or if you find that a member of upper management affirmatively assisted or otherwise participated directly in [individual discriminator/sexual harasser's] wrongdoing.
What Constitutes "Willful Indifference"?
To find "willful indifference" to wrongful conduct on the part of upper management, you must find that upper management employees knew about the wrongful conduct, but chose to disregard or ignore it rather than stop it. In other words, you cannot award punitive damages against [employer defendant] simply because upper management employees may have been negligent in failing to learn of or reasonably respond to the allegations of [discrimination/sexual harassment]; you must instead find that upper management employees actually knew about those allegations, and consciously chose to ignore them.
In summary, to award punitive damages against [employer defendant], you must find by clear and convincing evidence both that [name of individual discriminator/sexual harasser] engaged in especially egregious conduct, and that the upper management of [employer defendant] either actively participated in the wrongful conduct, or was willfully indifferent to it.
The Amount of Punitive Damages
If you find that plaintiff has proved that [employer defendant] has engaged in the type of wrongdoing that justifies awarding punitive damages, you must then decide the amount of punitive damages that should be awarded. The amount of punitive damages, if awarded, must be determined based on your sound judgment as to what is a fair and reasonable amount under all the circumstances. As I earlier instructed you, punitive damages are not to be awarded to compensate the plaintiff for injuries, but to punish the defendant and to deter the defendant from similar future wrongful conduct.
I cannot provide you with any mathematical formula to calculate the amount of punitive damages, but the amount of punitive damages, if any, that you award must bear some reasonable relationship to the actual injury inflicted and the cause of the injury. You will have to use your sound discretion in deciding this issue.
In exercising your discretion, you must consider all of the relevant evidence surrounding the wrongful conduct, including the following factors:
1. the likelihood, at the relevant time, that serious harm would arise from the conduct;
2. [employer defendant's] awareness or reckless disregard of the likelihood that such serious harm would arise from the conduct;
3. the conduct of [employer defendant] upon learning that its initial conduct would likely cause harm;
4. the duration of the conduct or any concealment of it by [employer defendant];
5. the profitability, if any, of the misconduct to [employer defendant];
6. when the misconduct was terminated; and
7. [employer defendant's] financial condition and ability to pay the punitive damages award.
In addition, you may also take into consideration:
1. the nature of the wrongful conduct;
2. the extent of harm inflicted;
3. the intent of [employer defendant];
4. whether [employer defendant] had adequate policies, procedures, training or monitoring measures designed to prevent discrimination;
5. whether [employer defendant] took sufficient steps after learning of the wrongful conduct to investigate and address the wrongful conduct; and
6. any other mitigating or aggravating circumstances that you believe should reduce or increase the amount of the damages awarded.
To summarize, on the issue of punitive damages, you must decide whether punitive damages should be awarded in this case, and if so, you must then decide on the proper amount of such an award, based on the factors that I described to you.
 This charge covers claims for punitive damages only as against employers. The law is currently unsettled as to whether a co-worker or supervisor can be held personally liable under NJLAD. Therefore, this charge does not address such claims.
 Other than with respect to its damages cap provisions, the PDA generally applies to LAD claims.
 The Appellate Division in the case of Tarr v. Ciasulli, 390 N.J. Super. 557 (App. Div. 2007), aff’d, 194 N.J. 212, 224 (2008) found that the New Jersey Punitive Damages Act, N.J.S.A. 2A:15-15-5.9, et al. does not permit counsel to urge the jury to increase a punitive damage award in order to enhance the general deterrence of others. Accordingly the language in the original charge which allowed punitive damages to be awarded as a “deterrence to others” was deleted.
 Cavuoti v. New Jersey Transit Corp., 161 N.J. 107, 113 (1999).
 See N.J.S.A. 2A:15-5.12(b). Section 5.12(b) provides that the trier of fact must consider these four factors in determining whether punitive damages should be awarded. Additional factors may also be considered, because the four statutory factors are not exclusive. The four statutory factors were derived from existing New Jersey case law, under which the jury was allowed, but not mandated, to consider them. In cases commenced prior to the effective date of the PDA, the jury should be instructed that it may consider these four factors. In cases subject to the PDA, the jury should be instructed that it must consider these four factors.
 Cavuoti, supra at 128.
 Cavuoti, supra at 122.
 Cavuoti, supra at 129.
 Lehmann v. Toys 'R Us, 132 N.J. 587, 624 (1993) ("a greater threshold than mere negligence should be applied").
 Fischer v. Johns-Manville Corp., 103 N.J. 643, 675 (1987).
 See N.J.S.A. 2A:15-5.12(c) and note 4 above. With regard to the "financial condition" factor, see Herman v. Sunshine Chemical Specialties, Inc., 133 N.J. 329, 341 (1993), which states that consideration of the defendant's financial condition is relevant to ensure that the amount of punitive damages is sufficient to punish and deter, but not so great as to cause financial ruin. In cases commenced prior to the effective date of the PDA, the instructions should be modified as discussed in note 5 above.