Case Title: Cavuoti v. New Jersey Transit Corporation

Citation: 

Docket Number: a-17-98

State: new-jersey

Court: New Jersey Supreme Court

Date: 1999-08-10T00:00:00Z

Document:
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). PER CURIAM The primary issue in this employment discrimination appeal, as in the companion case of Baker v. The National State Bank, __ N.J. __ (1999), decided today, is the recovery of punitive damages by victims of workplace discrimination. The Court established in earlier decisions that to recover punitive damages against an employer it must be established that there was actual participation in or willful indifference to the wrongful conduct on the part of upper management and proof that the offending conduct [is] 'especially egregious'. Because the employer in this appeal is a public entity, the Court also addresses the question of whether a public entity may be liable for punitive damages under the New Jersey Law Against Discrimination (LAD). Joseph Cavuoti was fifty-one years old and had worked for New Jersey Transit Corporation (NJT) for eight years when he filed suit against NJT alleging that he had been discriminated against on the basis of age. Although he received several promotions during his years at NJT, Cavuoti was unsuccessful in his applications for five other promotions, three of which went to younger candidates, whom Cavuoti considered less qualified than he. After Cavuoti filed an internal grievance with NJT in 1993 alleging discrimination, his superintendent, Deborah Finn, told him that employees are not to file such grievances, that those who do will face problems, and that he had to get her approval before contacting the Equal Opportunity/Affirmative Action Office again. From that point forward, Cavuoti made numerous complaints about Finn's alleged harassment of him to Finn's immediate supervisor, Robert Smith, General Superintendent of the Newark Division. Finn gave Cavuoti unfavorable performance evaluations for 1994-1995 and 1995-1996, and Cavuoti was fired on August 6, 1996, by Finn, Smith, and Joseph Allen, NJT's Director of Human Resources. The termination notice said Cavuoti had failed to supervise employees, had shown poor judgment, and did not follow management's direction despite continuing advice and counseling. Cavuoti filed his age discrimination complaint in the Superior Court, Law Division. Shortly before trial he amended the complaint to add a retaliatory discharge claim against NJT, Finn, and Smith. The case was tried and the jury returned a verdict in favor of Cavuoti, finding age discrimination in connection with two of his unsuccessful promotional applications and that his termination from his position as general foreman was an act of retaliation for his filing an age discrimination claim. The jury awarded compensatory damages of $222,323 and assessed punitive damages of $1 million. On appeal, the Appellate Division remanded the issue of punitive damages for a new trial, but affirmed the judgment below in all other respects. The Appellate Division ordered the remand because the trial court had not instructed the jury that punitive damages can be imposed only on a finding of actual participation in or willful indifference to the discriminatory conduct. The court concluded that the failure to so instruct the jury had a clear capacity to produce an unjust result. The Supreme Court granted the petition and cross-petition for certification. HELD: Because the employees who engaged in discriminatory conduct were not so clearly members of upper management, the unobjected-to failure of the trial court to give the jury charge on the participation of upper management required for deciding punitive damages, was an error capable of producing an unjust result, and a retrial is necessary. Punitive damages may be recovered against a public entity under the LAD. 1. Under the LAD an employer is liable for punitive damages only if upper management has actually participated in or been willfully indifferent to the discrimination and if the misconduct is especially egregious. Because a part of a supervisor's job is to prevent, avoid, and correct workplace harassment, discriminatory treatment of an employee by the employee's supervisor may be viewed as increasing the severity of the conduct. An employer that develops policies reflecting a lack of tolerance for harassment will have less concern about hostile work environment or punitive damages claims if it includes among its good-faith efforts to satisfy its obligations to its employees periodic publication of its anti-harassment policy; an effective and practical grievance process; and training sessions for all employees about how to recognize and eliminate harassment. (pp.6-15) 2. The term upper management is not limited to the highest levels of an organization and should be defined in a way that will apply to large, national corporations as well as to small, local employers. In the analysis, which is fact sensitive, culpable employees are those with sufficient authority in the execution of the employer's employment policies so that it is fair and reasonable to impute punitive damages against the employer. This description would include those charged with formulating the employer's anti-discrimination policies, providing compliance programs, and insisting on performance and those to whom the employer has delegated the responsibility to execute its policies in the workplace, who set the atmosphere or control day-to-day operations. For a second-tier employee to be deemed upper management, the employee should have either broad supervisory powers over the involved employee or be delegated responsibility to execute the employer's policy for ensuring a safe, productive, discrimination-free workplace. (pp. 16-27) 3. Finn, as the Superintendent of NJT's Raritan Valley Line, and Smith, as General Superintendent of the Newark Division, could be found by a jury to be regional managers for NJT. At a retrial, focus should be on whether Finn or Smith had the authority to execute NJT's employment practices. Because the issues of liability for the acts of upper management are intertwined with the qualitative nature of the misconduct, the issues of both liability and damages should be retried. (pp.28-32) 4. The policy concerns regarding the imposition of punitive damages against public entities for LAD violations were addressed to some extent by the heightened standard adopted by the Court for imposing punitive damages. A sensible reading of the LAD, a consideration of provisions of the LAD in light of the Tort Claims Act, a review of the legislative history of the LAD, an examination of the remedial purposes of the LAD, and an understanding of the underlying policy concerns in awarding punitive damages lead to the conclusion that the LAD permits the award of punitive damages against public entities. (pp. 32-35) The judgment of the Appellate Division is AFFIRMED. JUSTICE POLLOCK, concurring in part and dissenting in part, is of the view that the declaration of the Tort Claims Act that [n]o punitive or exemplary damages shall be awarded against a public entity is unaffected by any provision of the LAD and is more expressive of legislative intent in this regard. Justice Pollock would dissent on the issue of the award of punitive damages against public entities. JUSTICES HANDLER, O'HERN, STEIN, and COLEMAN join in the opinion of the COURT. JUSTICE POLLOCK filed a separate opinion, concurring in part and dissenting in part, in which CHIEF JUSTICE PORITZ and JUSTICE GARIBALDI join. SUPREME COURT OF NEW JERSEY A-17/ 18 September Term 1998 JOSEPH CAVUOTI and LINDA L. CAVUOTI, Plaintiffs-Appellants and Cross-Respondents, v. NEW JERSEY TRANSIT CORPORATION, DEBORAH FINN, and R.J. SMITH, Defendants-Respondents and Cross-Appellants, and ED McGITTIGAN, JOHN DOE and RICHARD DOE (Fictitious names of persons whose identities are presently unknown), Defendants. Argued March 15, 1999 -- Decided August 10, 1999 On certification to the Superior Court, Appellate Division. Anthony M. Mahoney argued the cause for appellants and cross-respondents(Mahoney & Mahoney, attorneys; Mr. Mahoney, Dennis M. Mahoney and Teresa A. Kazista, on the briefs). Robert A. Shire, Deputy Attorney General, argued the cause for respondents and cross appellants (Peter Verniero, Attorney General of New Jersey, attorney; Andrea M. Silkowitz, Assistant Attorney General, and Jeffrey C. Burstein, Deputy Attorney General, of counsel). PER CURIAM The central issue in this employment discrimination case concerns when victims of workplace discrimination may recover punitive damages. Our decision in Lehmann v. Toys 'R' Us, Inc., 132 N.J. 587 (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 (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. 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 the offending employees were not so clearly members of upper management, the error was capable of producing an unjust result. Another issue presented is whether a public entity may be liable for punitive damages under the New Jersey Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49. We answer that question concerning recovery of punitive damages against a public entity in the affirmative on the basis of the reasoning of the three-member affirmance in Abbamont v. Piscataway Township Board of Education, 138 N.J. 405 (1994), appeal after remand, 314 N.J. Super. 293 (App. Div. 1998). We will only briefly discuss other issues raised in this case. See also Grozdanich v. Leisure Hills Health Center, Inc., 25 F. Supp 2d (D. Minn. 1998), recons. denied, --- F. Supp.2d --- (D. Minn. 1999) (citing Canutillo Ind. Sch. Dist. v. Leija, 101 F.3d 393, 401-02 (5th Cir. 1996) (the agent "'need not have ultimate authority to hire or fire to qualify as an employer, as long as he or she has significant input into such personnel decisions.'"), cert. denied, 520 U.S. 1265, 117 S. Ct. 2434, 138 L. Ed. 2d 195 (1997) (quoting Paroline v. Unisys Corp., 879 F.2d 100, 104 (4th Cir. 1989), modified, 900 F.2d 27 (4th Cir. 1990)); Savino v. C.P. Hall Co., 988 F. Supp. 1171, 1185 (N.D. Ill. 1997) (manager who had authority to recommend only termination could be supervisor under Title VII because apparent authority existed); Saville v. Houston County Healthcare Auth., 852 F. Supp. 1512, 1527 (M.D. Ala. 1994) ("A supervisor need not be 'high in the business structure' or have 'the authority to hire, fire, or promote' to be considered an agent" under Title VII)(quoting Sims v. Montgomery County Comm'n, 766 F. Supp. 1052, 1069 (M.D. Ala. 1990)) . The Bayer language is a bit stilted, but the concepts are reasonably straightforward and can be adapted to our purposes. Using the concepts, upper management can be defined in a way that will apply to large, national corporations in the same manner that it applies to small, local employers. For example, a definition of upper management should apply with equal force to one such as Wal-Mart (if discrimination occurs in an individual Wal-Mart store), as it would to a local, family-owned market. If a Wal-Mart store manager were not considered upper management for LAD purposes, that classification could produce skewed results because the Wal-Mart store manager has many of the same responsibilities as the local market owner. If a Wal-Mart store manager were not considered "upper management," many large, national corporate employers could escape punitive damages liability simply because of size and corporate structure. We thus disagree with the Eleventh Circuit's holding in Dudley, supra, 166 F.3d at 1323, that punitive damages were not recoverable when a store's co-manager and assistant manager discriminated against two employees on the account of their race. That case is of doubtful precedential value after Kolstad. We prefer the formulation of a Washington state court which has defined "manager" thus: A "manager" is one who has the authority to hire employees, terminate employees, discipline employees, promote employees or otherwise exercise independent judgment and discretion over a certain area of the business, including the authority to take adequate steps to deal effectively with the actions or conduct which allegedly created the hostile work environment: An employer's use of the label "manager" or "management" may, but need not be, considered by you, along with all other evidence pertaining to the question of whether any particular person had the authority to deal effectively with the actions or conduct which allegedly created the hostile work environment. [Parker-Jones v. Eagle Hardware & Garden, Inc., 1 999 WL 169994, at *3 (Wash. App. Div. 1 Mar. 22, 1999) (unpublished).] To aid the litigants and the trial court on remand, we offer the following suggestions on the definition of "upper management." A court should instruct the jury that the purpose of the definition of upper management" is to provid[e] employers with the incentive not only to provide voluntary compliance programs but also to insist on the effective enforcement of their programs. . . . Lehmann, supra, 132 N.J. at 626. In order to justify the imposition of punitive damages on an employer, the employees who acted wrongfully must have had sufficient authority to make the imposition of punitive damages fair and reasonable. For these purposes, it is fair and reasonable to conclude that upper management would consist of those responsible to formulate the organization's anti-discrimination policies, provide compliance programs and insist on performance (its governing body, its executive officers), and those to whom the organization has delegated the responsibility to execute its policies in the workplace, who set the atmosphere or control the day-to-day operations of the unit (such as heads of departments, regional managers, or compliance officers). 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. Obviously such instructions should be tailored to the facts of the case and might be accompanied by special interrogatories when several officers are presented as members of "upper management. Finn or Smith could be found by a jury to be regional managers for NJT. At a retrial, focus should be on whether Finn or Smith had the authority to execute the organization's employment practices.See footnote 55 One or both appear to be the person or persons whom the jury could find controlled the day-to-day operations of the Raritan Valley branch; could hire, fire and discipline employees; and set the atmosphere of work. In addition, Smith could be found to be the person to whom Cavuoti should bring his employment problem and who would have the power to do something about it, or at least relay the complaints to someone who could. Because the issues of liability for the acts of upper management are intertwined with the qualitative nature of the misconduct, the issues of both liability and damages should be retried. We acknowledged the strength of the considerations militating against punitive damages against governmental bodies. Nevertheless, as the Appellate Division observed in Abbamont, the Legislature obviously considered these reasons when it enacted CEPA; yet the legislature made no exception for public entities regarding punitive damages relief. 269 N.J. Super. at 30. That same reasoning applies with equal force to the LAD, and we adopt it for the reasons more fully stated in Abbamont. Our holding in Abbamont reflected our understanding of the LAD. In Fuchilla v. Layman, 109 N.J. 319, 330-332, cert. denied sub nom., University of Med. and Dent. of N.J. v. Fuchilla, 488 U.S. 826, 109 S. Ct. 75, 102 L. Ed. 2d 51 (1988), the Court had ruled that the notice provisions of the Tort Claims Act [TCA], N.J.S.A. 59:8-8 and -9, did not apply to LAD actions. The Fuchilla holding was based, in part, on the different purposes of the two statutes. Awards under the LAD are intended to serve not only individual interests but the public interest, whereas the purpose of the TCA is to provide compensation to tort victims without imposing excessive financial burdens on the taxpaying public. Abbamont, supra, 138 N.J. at 430 (quoting Fuchilla, supra, 109 N.J. at 135). Discrimination claims are dissimilar to claims envisioned by the Legislature to be included within the coverage of the [TCA] in part because [d]iscriminatory conduct actionable under the [LAD] is more akin to the malicious or willful acts exempted from the [TCA] than the negligently or similarly inflicted injuries covered thereby. Ibid. (quoting Fuchilla v. Layman, 210 N.J. Super. 574, 579 (1986)). Finally, we observed that the policy concerns regarding the imposition of punitive damages against public entities for LAD violations were addressed, in some measure, by the heightened standard that we adopted in Lehmann for imposing punitive damages. In sum, a sensible and unconstrained reading of the language of the LAD, a consideration of the provisions of the LAD in light of the TCA, a review of the LAD's legislative history, an understanding of the underlying policy concerns in awarding punitive damages and an examination of LAD's remedial purposes persuade us that the LAD allows the award of punitive damages against public entities. We are sustained in that conclusion by the Legislature's five-year acquiescence in the Abbamont interpretation of CEPA. There is ample precedent in New Jersey to support the proposition that, when a statute has been judicially construed, the failure of the Legislature subsequently to act is evidence of legislative acquiescence in the construction given to the statute. See, e.g., Lemike v. Bailey, 41 N.J. 295, 301 (1963), Egan v. Erie R.R. Co., 29 N.J. 243, 250 (1959); Caputo v. Best Foods, Inc., 17 N.J. 259, 267 (1955); Miller v. Board of Chosen Freeholders of Hudson Cty., 10 N.J. 398, 413 (1952). JUSTICES HANDLER, O'HERN, and COLEMAN join in this PER CURIAM opinion. JUSTICE POLLOCK has filed a separate opinion opinion, concurring in part and dissenting in part, in which CHIEF JUSTICE PORITZ and JUSTICE GARIBALDI join. JOSEPH CAVUOTI AND LINDA L. CAVUOTI, Plaintiffs-Appellants and Cross-Respondents, v. NEW JERSEY TRANSIT CORPORATION, DEBORAH FINN AND R.J. SMITH, Defendants-Respondents and Cross-Appellants, AND ED MC GITTIGAN, JOHN DOE AND RICHARD DOE, ETC., Defendants. POLLOCK, J., concurring in part and dissenting in part. Except for its holding that a public entity is subject to an award for punitive damages under the Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -42, I join in the Court's opinion. The Tort Claims Act (TCA) provides that "[n]o punitive or exemplary damages shall be awarded against a public entity." N.J.S.A. 59:9-2. Nothing in the LAD expressly or impliedly repeals that provision. As the Court acknowledges, the LAD simply provides that "[a]ll remedies available in common law tort actions shall be available to prevailing plaintiffs." N.J.S.A. 10:5-13. The absence of an exception for public entities suggests not that the Legislature intended that public entities would be subject to claims for punitive damages, but that the TCA, including its ban on punitive damage awards, would continue to apply to such entities. Five years ago, in Abbamont v. Piscataway Board of Education, 138 N.J. 405, 435-36, I likewise dissented from the Court's holding that under the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -9, claimants are entitled to punitive damages. The authorization for the award of punitive damages under CEPA, which specifically authorize such damages, N.J.S.A. 34:19-5f, is even clearer than that in the LAD. Then, as now, I doubt that in either the CEPA or the LAD the Legislature intended to saddle taxpayers with the ultimate obligation for paying punitive damage awards. Also, I doubt that the Legislature intended in either statute to impose on rate payers, such as the people who ride the New Jersey Transit trains and buses, the ultimate cost of paying punitive damage awards. Such awards in CEPA and LAD cases can be substantial. Here, for example, plaintiff was awarded $1,000,000 in punitive damages. Another recent case, which involved the sexual harassment of one prison guard by another, resulted in the award of $3,750,000 against the State, consisting of $750,000 for compensatory damages and $3,000,000 in punitive damages. Brian Donahue & Kathy Barrett Carter, $3.75M for Guard in No-sex Lawsuit, Star Ledger, May 29, 1999. Such awards, which represent sums in addition to those needed to compensate claimants, can impose a heavy burden on the public. As in Abbamont, "I believe that not permitting punitive damage awards against public employers is more consistent with the legislative intent. The best solution would be for the Legislature to revisit the issue and resolve it definitively." 138 N.J. at 436. Accordingly, I respectfully dissent from that part of the Court's opinion construing the LAD to subject New Jersey Transit to a claim of punitive damages. Chief Justice Poritz and Justice Garibaldi join in this opinion. NO. A-17/18 JOSEPH CAVUOTI and LINDA L. CAVUOTI, Plaintiffs-Appellants and Cross-Respondents, v. NEW JERSEY TRANSIT CORPORATION, DEBORAH FINN, and R.J. SMITH, Defendants-Respondents and Cross-Appellants, and ED McGITTIGAN, JOHN DOE and RICHARD DOE (Fictitious names of persons whose identities are presently unknown), Defendants. DECIDED