Baker v. National State Bank

• Decision Date: 10 August 1999
• Citation: 161 N.J. 220,736 A.2d 462
• Parties: Ann BAKER and Barbara Hausleiter, Plaintiffs-Respondents, v. The NATIONAL STATE BANK, New Jersey National Bank (a/k/a CoreStates) its successor-in-interest, Leo Ahern, Reg. Mgr. of NSB and individually, Arthur Campbell, formerly Exec. V.P. of NSB and individually, Defendants-Appellants.
• Court: New Jersey Supreme Court

736 A.2d 462

161 N.J. 220

Ann BAKER and Barbara Hausleiter, Plaintiffs-Respondents, v. The NATIONAL STATE BANK, New Jersey National Bank (a/k/a CoreStates) its successor-in-interest, Leo Ahern, Reg. Mgr. of NSB and individually, Arthur Campbell, formerly Exec. V.P. of NSB and individually, Defendants-Appellants.

Supreme Court of New Jersey.

Argued March 15, 1999.

Decided August 10, 1999.

Cynthia M. Jacob, Somerset, for defendants-appellants (Collier, Jacob & Mills, attorneys; Ms. Jacob and Alan G. Lesnewich, of counsel; Ms. Jacob, Mr. Lesnewich, David H. Ganz and Sandra N. Fears, on the briefs).

Patricia Breuningere for plaintiffs-respondents (Breuninger & Fellman, attorneys; Ms. Breuninger, Fanwood, and Laura LeWinn, Princeton Junction, on the brief).

PER CURIAM.

The central issue in this employment discrimination case concerns when victims of workplace discrimination may recover punitive damages. That issue is similar to the primary issue in Cavuoti v. New Jersey Transit Corp., 161 N.J. 107, 735 A.2d 548 (1999), also decided today. The relevant principles set forth in that case will be applied here. See Cavuoti, supra, at 116-29

, 735 A.2d 548.

Our decision in Lehmann v. Toys 'R' Us, Inc., 132 N.J. 587, 626 A.2d 445 (1993), "established two distinct conditions that must be met as prerequisites to the award of punitive damages in a discrimination suit under the [the New Jersey Law Against Discrimination]." Rendine v. Pantzer, 141 N.J. 292, 313, 661 A.2d 1202 (1995). Those two requirements are (1) "actual participation in or willful indifference to the wrongful conduct on the part of upper management" and (2) "proof that the offending conduct [is] `especially egregious.' " Id. at 314, 661 A.2d 1202.

In this case the jury awarded substantial punitive damages to the prevailing party. The pivotal issue is whether the instruction to the jury insured that the Lehmann prerequisites for punitive damages were met. Without objection, the trial court submitted the case to the jury without a specific instruction that jurors were required to find that there had been actual participation in, or willful indifference to, the wrongful conduct on the part of upper management. Because the issue arises as plain error under Rule 2:10-2, the question is whether the omission of the Lehmann upper-management charge was clearly capable of producing an unjust result. We find that because wrongful conduct was committed by employees who were so clearly members of upper management, the error could not have produced an unjust result. There is also a question of whether a successor business entity may be held liable for punitive damages assessed against the predecessor. We answer that question in the affirmative on the basis that the successor had, by law, agreed to assume the liabilities of its predecessor. We will only briefly discuss other issues raised in this case.

I

When they were terminated in 1991, plaintiffs Ann Baker and Barbara Hausleiter were branch managers of The National State Bank (the Bank). The Bank allegedly terminated them as part of a reduction in force (RIF) that the Bank implemented because of its failing financial condition. Defendants Leo Ahern, one of the Bank's regional managers, and Arthur Campbell, the Bank's vice-president in charge of branch operations and community banking, chose plaintiffs for termination. At the time of their terminations, plaintiff Baker was fifty-four years old, and plaintiff Hausleiter was forty-nine years old.

Each of the plaintiffs had been career employees of the Bank. Each had received generally favorable performance ratings, although their branches had been performing less satisfactorily. At the time of the RIF, each was assured that her termination had nothing to do with job performance; it was simply that their jobs had been eliminated. Each, however, was replaced in the same job by a younger and less experienced person.

Both plaintiffs filed complaints with the Law Division under the LAD, alleging age and sex discrimination. At trial, the Bank officer testified that the Bank had reported operating losses of $60 million in the first quarter of 1991. In order to comply with Directives of the Office of Comptroller of the Currency, the Bank was forced to implement a plan that required reorganization, consolidation, branch closings, and a RIF. In September 1991, Campbell told Ahern that about ten percent of the Bank's workforce had to be eliminated, and that Ahern had to review personnel files in his region for termination. Ahern testified that after discussing plaintiffs Baker and Hausleiter in relation to the RIF, Campbell said that both plaintiffs "have to go." In total, the Bank terminated 147 employees.

The Bank's parent company at the time of plaintiffs' terminations was Constellation Bancorp. In March 1994, CoreStates merged with Constellation by acquiring Constellation's stock. At the time of the 1996 trial, CoreStates/New Jersey National Bank was the successor-in-interest to the Bank.

The jury found that Baker's dismissal was the result of age and gender discrimination, and that Hausleiter's dismissal was the result of age discrimination. The jury awarded Baker a total of $135,740 in compensatory damages, and awarded Hausleiter a total of $102,241 in compensatory damages. The jury also found that the Bank was liable to plaintiffs for punitive damages in the amount of $4 million. Baker and Hausleiter agreed to share equally in the punitive damages award, at $2 million each. The trial court also awarded plaintiffs attorneys' fees and costs, totaling $331,741.00. After the entry of the verdict, the trial court ordered that plaintiffs' complaint be amended to include CoreStates/New Jersey National Bank as the successor-in-interest to the Bank.

Both parties appealed to the Appellate Division. The Appellate Division affirmed the jury's verdict, the award of punitive damages, and the award of counsel fees in all respects. 312 N.J.Super. 268, 711 A.2d 917 (1998). It ruled that CoreStates was incorrect in its assertion that a successor corporation may not be liable for punitive damages assessed against its predecessor. Additionally, the Appellate Division acknowledged that the charge below omitted the proper upper management instruction. However, it concluded that this omission was not capable of producing an unjust result due to the overwhelming evidence that the party or parties responsible for plaintiffs' terminations were members of the Bank's upper management. We granted the Bank's petition for certification. 156 N.J. 425, 719 A.2d 1023 (1998).

II Application of the Lehmann Principles

In Maiorino v. Schering-Plough Corp., 302 N.J.Super. 323, 695 A.2d 353 (App.Div.), certif. denied, 152 N.J. 189, 704 A.2d 19 (1997), the court observed that "a jury charge on punitive damages must include the instruction that upper management has to have ... participated in or shown willful indifference to the situation." Id. at 354-55, 695 A.2d 353 (emphasis added) (citing Rendine, supra, 141 N.J. at 315, 661 A.2d 1202). In fact, the court held that this concept is so essential to a fair trial that "the failure to charge the jury with the necessity of finding upper management's involvement to justify a punitive award is such a fundamental flaw that [an appellate court] must recognize it as a matter of plain error." Id. at 354, 695 A.2d 353 (citation omitted). Although Maiorino is persuasive authority regarding the substantive correctness of a jury charge, it is well established that the question of whether plain error occurred depends on whether the error was clearly capable of producing an unjust result. Relief under the plain error rule, R. 2:10-2, at least in civil cases, is discretionary and "should be sparingly employed." Ford v. Reichert, 23 N.J. 429, 435, 129 A.2d 439 (1957).

Applying those principles, we can find no basis for concluding that the absence of an upper-management charge could have prejudiced the Bank. Campbell and Ahern were indisputably upper management because they were "top management" of the bank. See Kolstad, ___ U.S. ___, 119 S.Ct. 2118, 2128, 1999 WL 407481 (U.S.Dist.Col.1999). Campbell was the Bank's Senior Vice-President in Charge of Branch Operations, and Ahern was the Bank's Regional Manager in charge of branch operations. No rational jury could have but concluded that they (the sole actors in the conduct) were part of upper management.

III Successor Liability

We granted certification in large measure to address the concerns expressed in the Bank's assertion that the Appellate Division erroneously held that "the merger makes a successor per se liable for punitive damages."

We agree that New Jersey courts have consistently adhered to the principle that punitive damages are meant to punish a wrongdoer's egregious conduct and to deter that wrongdoer and others from engaging in such conduct in the future. To achieve that goal, our courts have held that it is the wrongdoer who is to be punished, and it is the wrongdoer (among others) whose future conduct is to be deterred.

Punishment, as a justification for punitive damages, is not proper when imposed on an innocent party. In addition, neither specific nor general deterrence is effective when used in this context. Specific deterrence is effective only when punitive damages are imposed on the guilty party. General deterrence also is frustrated.... The punishment of an innocent actor will have no positive effect on potential wrongdoers.

[Keith A. Ketterling, A Proposal for the Proper Use of Punitive Damages Against a Successor, 11 J. Corp. L., 765, 774 (1986) (footnotes omitted).]

The Seventh Circuit in Musikiwamba v. ESSI, Inc., 760 F.2d 740, 749 (7th Cir.1985), used this approach to decide that a plaintiff in a discrimination case could not recover punitive damages from a successor. There, the court weighed the competing interests and found fairness dictated against punitive damages.

The...