Title: Baker v. The National State Bank
Citation: N/A
Docket Number: a-29-98
State: new-jersey
Issuer: new-jersey Supreme Court
Date: August 10, 1999

(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 As in Cavuoti v. New Jersey Transit Corporation, __ N.J. __ (1999), decided today, the primary issue in this appeal is the recovery of punitive damages by victims of discrimination in the workplace. A secondary issue in this appeal, not present in Cavuoti, concerns the liability of a successor corporation for punitive damages assessed against the predecessor. Ann Baker and Barbara Hausleiter were branch managers of The National State Bank (the Bank) whose positions were terminated in 1991, supposedly as part of a reduction in force (RIF) the Bank undertook because of its failing financial condition. Baker was fifty-four years old at the time of termination and Hausleiter was forty nine. These women were chosen for termination by Leo Ahern, a regional manager, and Arthur Campbell, the Bank's vice-president in charge of branch banking and community relations. Each woman was a career employee and had received generally favorable performance evaluations, although the branch each managed was performing less well. Each woman was assured her termination was not due to performance and was due solely to the RIF and the elimination of her job. Each, however, was replaced in the same job by a younger, less experienced person. Baker and Hausleiter filed suit against the Bank, Ahern, and Campbell, alleging age and sex discrimination in violation of the New Jersey Law Against Discrimination (LAD). At the time of the terminations, the parent company of the Bank was Constellation Bancorp. In March 1994 Corestates/New Jersey National Bank (Corestates) merged with Constellation by acquiring Constellation's stock. When the discrimination suit was tried in 1996, Corestates was the successor-in-interest to the Bank. The jury found that Baker's dismissal was due to age and gender discrimination, and that Hausleiter's dismissal was the result of age discrimination. In addition to awarding compensatory damages of $135,740 to Baker and $102,241 to Hausleiter, the jury found the Bank liable for punitive damages of $4 million, which the two women agreed to share equally. The trial court awarded attorneys' fees and costs totaling $331,741. The court also ordered that the complaint be amended to include Corestates as a defendant, on the basis of its status as the Bank's successor-in-interest. On appeal, the Appellate Division affirmed the jury verdict and the awards of punitive damages and attorneys' fees in all respects. The Supreme Court granted the petition for certification. HELD: The employees who committed the discriminatory acts were so obviously members of upper management that the failure of the trial court to give the jury charge required for consideration of punitive damages could not possibly have prejudiced the employer or have been clearly capable of producing an unjust result. The successor business entity may be held liable for punitive damages assessed against the predecessor because by law the successor had agreed to assume the liabilities of its predecessor. 1. Ahern and Campbell were the sole actors against Baker and Hausleiter and given their positions as top management of the Bank, no rational jury could have concluded anything but that they were upper management. The failure to charge the jury regarding the actions of upper management was not capable of producing an unjust result. (pp.6-7) 2. There should not be a per se rule for successor liability under the LAD, but rather a fact-specific and equitable analysis. Such an analysis was performed, so there is no policy concern in the imposition of punitive damages here. Corestates and Constellation Bancorp merged under N.J.S.A. 14A:10-6, and by law Corestates agreed to assume the liabilities of its predecessor. Proof of the merger is sufficient to establish liability. ( pp.7-11) 3. Because the two plaintiffs agreed to share equally the lump sum award of punitive damages, the Court will not disturb the verdict on that basis. In future LAD cases, courts should pay close attention to the requirements of the Punitive Damages Act (except for the statutory cap, which does not apply to LAD cases) and the substantive standards established by the United States Supreme Court in BMW of North America, Inc.v. Gore to ensure that any award of punitive damages bears some reasonable relation to the injury inflicted. In this case, the Court remands to the trial court for reconsideration because compliance with the BMW standards was inadequately addressed. (pp.11-15) The judgment of the Appellate Division is AFFIRMED, except in respect of the amount of punitive damages, which issue is REMANDED to the Law Division for reconsideration in light of this opinion. CHIEF JUSTICE PORITZ and JUSTICES HANDLER, O'HERN, GARIBALDI, STEIN, and COLEMAN join in this PER CURIAM opinion. JUSTICE POLLOCK did not participate. 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. Argued March 15, 1999 --Decided August 10, 1999 On certification to the Superior Court, Appellate Division, whose opinion is reported at 312 N.J. Super. 268 (1998). Cynthia M. Jacob argued the cause for appellants (Collier, Jacob &amp; Mills, attorneys; Ms. Jacob and Allan G. Lesnewich, of counsel; Ms. Jacob, Mr. Lesnewich, David H. Ganz and Sandra N. Fears, on the briefs). Patricia Breuninger argued the cause for respondents (Breuninger &amp; Fellman, attorneys; Ms. Breuninger and Laura LeWinn, on the brief). In Armstrong v. Lockheed Martin Beryllium Corp., 990 F. Supp. 1395, 1403 n.9 (M.D. Fla. 1997), the court made a similar finding: Under no circumstances can this court envision the imposition of punitive damage liability against an innocent successor. The conflicting interests of the parties and policies justifying successor liability and punitive damages all militate in favor of the successor company on such a claim. We agree that a per se rule under the LAD imposing liability for punitive damages on successors would reflect a misunderstanding of successor liability in the discrimination context. Courts that have considered successor liability under the federal anti-discrimination laws have rejected the idea of "automatic" successor liability in favor of a fact-specific and equitable analysis. See, e.g., EEOC v. MacMillan Bloedel Containers, Inc., 503 F.2d 1086, 1091 (6th Cir. 1974), on remand, 1 976 WL 553 (N.D. Ohio Mar. 2, 1976) (successor's liability "is not automatic, but must be determined on a case by case basis"); Coleman v. Keebler Co., 997 F. Supp. 1094 (N.D. Ind. 1988) ("Successor liability is an equitable doctrine rather than an 'inflexible command,'and emphasis on the facts of each case . . . is especially appropriate."); EEOC v. Local 638, 700 F. Supp. 739, 740 (S.D.N.Y. 1988) ("[N]o definite set of obligations flows from any determination that one entity is a successor."); see also Musikiwamba, supra, 760 F.2d at 751 ("Imposing liability on a successor when a predecessor could have provided no relief whatsoever is likely to severely inhibit the reorganization or transfer of assets of a failing business.") Because there was a fact-specific and case-by-case analysis made here, we find no policy concern for the imposition of successor liability. This is not a case in which successor liability has been imposed by judicial mandate.See footnote 11 Successor liability falls on CoreStates Bank because it agreed by law to assume the liabilities of its predecessor. There is no dispute that CoreStates and Constellation Bancorp., the parent company of the Bank, merged under N.J.S.A. 14A:10-6. When such a merger or consolidation becomes effective: [T]he surviving or new corporation shall be liable for all the obligations and liabilities of each of the corporations so merged or consolidated . . . ." N.J.S.A. 14A:10-6(e). Proof of a merger is sufficient to establish liability under N.J.S.A. 14A:10-6. See Brotherton v. Celotex Corp., 202 N.J. Super. 148 (Law Div. 1985). Justice Pollock once observed: We have proceeded [in this area] with an appreciation that at the core of punitive damages lurks a volatile dilemma: the same findings necessary for the award of punitive damages can incite a jury to act irrationally. A condition precedent to a punitive-damages award is the finding that the defendant is guilty of actual malice. The purposes of the award -- the deterrence of egregious misconduct and the punishment of the offender, Leimgruber v. Claridge Assocs., Ltd., 73 N.J. 450, 454 (1977) -- when mixed with a finding that the defendant is malicious, can readily inflame an otherwise dispassionate jury. Essential to a fair and reasonable award therefore is the consideration of all relevant circumstances, including the nature of the defendant's misconduct and the harm to the plaintiff. Id. at 456. Stated generally, the award of punitive damages "must bear some reasonable relation to the injury inflicted and the cause of the injury." Id. at 457. [Herman v. Sunshine Chem. Specialties, Inc., 133 N.J. 329, 337-38 (1993).] In future LAD cases, courts reviewing punitive damages awards should apply both the requirements of the PDA (with the exception of the statutory cap) and the substantive standards of BMW v. Gore in order to ensure that any award of punitive damages bears "some reasonable relation" to the injury inflicted. In this case we find that compliance with the substantive standards of BMW v. Gore was inadequately addressed by the trial court. At the motion for a new trial, the trial judge simply stated that [a]warding $4 million in punitive damages against a $400 million entity does not offend the conscience of this court, especially considering tax ramifications. In the interests of justice, we remand the matter to the Law Division to reconsider and apply the standards of BMW v. Gore. The trial court should assess whether the award was either appropriate in light of the degree of reprehensibility of the [wrongful conduct,] the disparity between the harm or potential harm [suffered by the plaintiff] and the plaintiff's punitive damages award[,] and the difference between this remedy and the civil penalties authorized or imposed in comparable cases, BMW v. Gore, supra, 517 U.S. at 575, 116 S. Ct. at 1598-99, 134 L. Ed. 2d at 826, or whether the award reflects prejudice, passion, or mistake warranting a new trial on the amount of punitive damages. In this respect, an appellate court must accord deference to a trial court's feel of the case in assessing whether a miscarriage of justice occurred. Carrino v. Novotny, 78 N.J. 355, 361 (1979). In considering the disparity between the harm suffered by plaintiffs and the amount of the award, the court may consider, but is not bound by, the Legislature's judgment of five times compensatory damages as a normative measure of the limits of proportion. Because some acts of discrimination cause unquantifiable harm, the assessment of proportion to harm may take into account whether there has been an outrageous affront to human dignity that warrants departure from a normative punishment. CHIEF JUSTICE PORITZ and JUSTICES HANDLER, O'HERN, GARIBALDI, STEIN, and COLEMAN join in this PER CURIAM opinion. JUSTICE POLLOCK did not participate. NO. A-29 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. DECIDED