Title: Lockley v. N.J. Dept. of Corrections
Citation: N/A
Docket Number: a-108-01
State: new-jersey
Issuer: new-jersey Supreme Court
Date: August 11, 2003

This case arises out of a series of interactions between Robert Lockley and Ronda Turner, who worked as corrections officers in Mid-State Correctional Facility. Lockley and Turner worked on the same shift but in different areas of the prison. In about 1988, Turner began making flirtatious comments to Lockley, who never indicated he found the comments offensive. Beginning in 1990, however, Turner began to be more aggressive. Eventually, Turner s comments escalated to harassment and abuse. She and others spoke in graphic language about the inadequacies of Lockley s anatomy and used vulgar terms to describe his alleged sexual orientation and lack of sexual prowess. Turner also interfered repeatedly with Lockley s ability to perform his job. In 1992, Lockley reported Turner s conduct to his supervisors who responded by suggesting that he should agree to a sexual relationship with Turner. In July 1993, Lockley filed a formal sexual harassment complaint with the DOC against Turner. An employee in the DOC s equal opportunity/affirmative action office investigated the allegations and concluded there was probable cause to believe they had merit. This employee prepared a probable cause letter, signed by William H. Fauver, the former Commissioner of the DOC, recommending that the matter proceed to consideration of the appropriate discipline for Turner. The DOC charged Turner with, among other things, violations of the Civil Service laws and the corrections officers collective bargaining agreement. Turner was assigned to a different shift against her wishes, where she remained for several months. However, Turner was permitted to transfer back to Lockley s shift after she prevailed on a grievance claim. Turner s disciplinary hearing took place six months after the DOC issued its letter. At the hearing, the officer assigned to present the case on behalf of the DOC failed to produce any witnesses. As a result, the hearing officer dismissed all charges against Turner. Lockley instituted this litigation in 1994, asserting claims that included sexual harassment, retaliation, and aiding and abetting under the LAD. He sought compensatory and punitive damages. Prior to trial, Lockley settled with all defendants except the DOC and Commissioner Fauver. The case was tried to a jury in May 1999. Because Lockley was seeking punitive damages, the trial court bifurcated the proceedings, deferring determination of the damage amount, if any, to a separate proceeding. The jury returned a verdict exonerating Fauver, but found the DOC responsible for sexual harassment and unlawful retaliation. It awarded Lockley $750,000 in compensatory damages, and determined he was entitled to punitive damages. The trial court prohibited testimony in the damages portion of the trial in respect of DOC s ability to pay punitive damages. The trial court instructed the jury that it was pure speculation as to whether an award of punitive damages would affect taxes, and that the jury could not consider how the amount of an award might affect taxes or anything of that nature. The jury returned a verdict of $3 million in punitive damages against the DOC. The Appellate Division found the trial court s instructions to the jury on punitive damages fatally flawed and reversed the punitive damages verdict, remanding for further proceedings. The Appellate Division explained that the trial court did not ask the jury to assess whether the harassment and retaliation were perpetrated by upper management. In addition, it held that the trial court did not sufficiently appreciate or explain to the jury the complexity of assessing punitive damages against a governmental entity. The Supreme Court granted Lockley s petition for certification. HELD: The trial court s jury instructions failed to explain and expound on the term upper management. The instructions also did not explain the appropriate standards by which punitive damages should be calculated and assessed in an LAD case against a public entity. 1. Public sector employers may be held liable for punitive damages only in the event of actual participation by upper management or willful indifference. In Cavuoti v. New Jersey Transit Corporation, 161 N.J. 107 (1999), decided after the jury trial in this case, this Court suggested the factors to be considered when deciding whether certain individuals are part of an organization s upper management. The trial court s instructions here gave no guidance to the jury as to the scope of its inquiry. The matter must be remanded for retrial in respect of the conduct of upper management within the framework established in Cavuoti. (pp. 14-18) 2. The Punitive Damages Act (PDA), N.J.S.A. 2A:15-5.9 to 5.17, established the calculus to be employed in the assessment of a punitive damage award. In Baker v. National State Bank, 161 N.J. 220 (1999), a case involving an LAD claim against a private entity, this Court held that the PDA is relevant in addressing the disparity between the harm suffered and the amount of the damage award. Baker also recognized that the determination of a punitive damages award is bound by substantive constitutional limits defined by the United States Supreme Court in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1986). In combination with the PDA, the BMW standards are designed to ensure that any award of punitive damages bears some reasonable relation to the injury inflicted. (pp. 18-23) 3. Among other things, the PDA requires consideration of the financial condition of the defendant. The Court holds today that in an assessment of punitive damages against a public entity, the financial condition of the defendant is not useful. This is because public entities do not create their own wealth and are not driven by a profit motive. With this exception, the provisions of the PDA provide sufficient guidance in cases involving public sector defendants. In addition, reviewing courts should consider the reasonableness of any award of punitive damages against a public entity within the constitutional framework embraced by this Court in Baker. That responsibility is heightened in such cases, requiring the judge to scrutinize with great care the amount of the award to determine whether it is proportionate to the harm suffered by the plaintiff. (pp. 23-30) Judgment of the Appellate Division is MODIFIED and AFFIRMED. JUSTICES VERNIERO, LaVECCHIA and ALBIN have filed a separate, concurring opinion, expressing the view that if the issue squarely had been raised, they would have been inclined to address whether Cavuoti erroneously interpreted the LAD to permit punitive damages against public entities. JUSTICES COLEMAN and LONG, join in CHIEF JUSTICE PORITZ s opinion. JUSTICES VERNIERO, LaVECCHIA, and ALBIN have filed a separate, concurring opinion. JUSTICE ZAZZALI did not participate. Plaintiff-Appellant, v. STATE OF NEW JERSEY, DEPARTMENT OF CORRECTIONS, Defendant-Respondent, and POLICE BENEVOLENT ASSOCIATION, LOCAL 105, and individually, and in their official capacities, COMMISSIONER WILLIAM H. FAUVER, RONDA TURNER and JACQUELINE JONES, Defendants. Argued January 6, 2003 Decided August 11, 2003 On certification to the Superior Court, Appellate Division, whose opinion is reported at 344 N.J. Super. 1 (2001). Linda Wong argued the cause for appellant (Wong Fleming, attorneys; Ms. Wong and Daniel C. Fleming, of counsel; Ms. Wong, James K. Haney and Robert G. Feldman, on the briefs). Patrick DeAlmeida, Deputy Attorney General, argued the cause for respondent (David Samson, Attorney General of New Jersey, Nancy Kaplen and Allison E. Accurso, Assistant Attorneys General, of counsel). Jon W. Green submitted a brief on behalf of amicus curiae, National Employment Lawyers Association of New Jersey (Green, Lucas, Savits, &amp; Marose, attorneys). The opinion of the Court was delivered by PORITZ, C.J. This Court has held that a plaintiff who seeks punitive damages based on an alleged violation of the Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49, by a public or private entity must prove that upper level management acted in such manner as to warrant the imposition of those damages. This case presents two questions: whether the trial court s instructions (1) sufficiently informed the jury in respect of the upper level management determination, and (2) properly described the considerations relevant to the calculation of a punitive damages award against a public entity. the only legal issue here is what instruction, if any, should be given to the jury with respect to the financial capacity of the State . . . to pay punitive damages . . . . [T]here are probably many different ways this could be handled. I don t believe there s any case law on it. There s no statute on it. There s no rule on it, that I m aware of. It s . . . not a matter of constitutional dimensions. Ultimately, the trial court prohibited testimony in respect of DOC s ability to pay punitive damages and gave the following instruction to the jury: In determining the amount of punitive damages, you must consider all of the circumstances in this case, including: the nature of the wrongdoing; the extent of the injury or harm inflicted by the wrongdoing; the intent of the party committing the wrongdoing; the financial condition or wealth of the defendant; . . . the defendant s ability to pay any award of punitive damages; [and] the effect the judgment will have on the defendant and others. You may also consider any mitigating circumstances which you find may justify a reduction of the amount of damages, including any punishment the defendant has received or will receive from other sources for the same misconduct. Finally, you should be sure that there is a reasonable relationship between the actual injury and the punitive damages. Punitive damages, however, may be higher than, equal to or lower than the compensatory damages of $750,000, which you have already awarded. Money that the State of New Jersey obtains is obtained by using its power of taxation, by . . . user fees, [etc.]. Of course, there s a budget that . . . not only raises money [but] sometimes . . . expends less than it raises, [creating] a surplus. Sometimes it spends more than it has raised, [running] a deficit. So that s in broad terms how the State functions. Any monies that the State is required to expend for whatever purpose it may be, may or may not affect taxes. [It is p]ure speculation as to whether any amount of money that the State has to pay would affect taxes, and you [may] not in your consideration of punitive damages . . . focus at all [on] how the amount of your award might affect taxes or anything of that nature. You should determine the punitive damages based solely on the criteria that I have given you without focusing on how this is going to affect the tax rate or anything one way or the other anything of that nature. The State did not object to those instructions. The jury returned a verdict of $3 million in punitive damages against the DOC. Thereafter, the DOC renewed its motion to dismiss the punitive damages claim and also moved for judgment notwithstanding the verdict or, alternatively, a new trial or remittitur of the damages awards. The trial court rejected those motions, concluding that the awards, although high and surprising, did not shock the judicial conscience. In addition, the court awarded over $850,000 in attorney s fees and costs. On appeal, the State argued that the amount of compensatory and punitive damages awarded to Lockley was excessive [and] that there was error in submitting the question of punitive damages to the jury. The State also argued that the evidence presented at trial had not demonstrated the type of egregious conduct by upper management required by Cavuoti v. New Jersey Transit Corporation and Baker v. National State Bank, which were decided after the trial had concluded. See Cavuoti, supra, 161 N.J. 107, 113, 117-18 (1999) (discussing Lehmann v. Toys R Us, Inc., 132 N.J. 587, 624-25 (1993)); Baker, supra, 161 N.J. 220, 223 (1999). Finally, the State asserted that under Baker, supra, 161 N.J. at 230-31, and BMW of North America, Inc. v. Gore, 517 U.S. 559, 575, 116 S. Ct. 1589, 1598-99, 134 L. Ed. 2d 809, 826 (1996), the punitive damages award of $3 million was disproportionate to both the harm inflicted and the underlying conduct. The Appellate Division upheld both the compensatory damages and counsel fees awards, but found that the trial court s instructions to the jury on punitive damages [were] fatally flawed and reversed the punitive damages verdict. Lockley v. Turner, 344 N.J. Super. 15, 18-19, 28-30 (App. Div. 2001). The case was remanded for further proceedings. Id. at 31. In the court s view, the trial judge s instructions were defective in two important ways. Id. at 18-26. First, the judge did not ask the jury to assess the roles of [the] particular staff members [involved] and their resultant conduct so that the jury then could determine whether the harassment and retaliation were perpetrated by upper management. Id. at 19. The panel believed that such an instruction was essential in light of Cavuoti, supra, wherein this Court reaffirmed Lehmann, supra, and held that punitive damages for employment discrimination are only appropriate [when] there is . . . actual participation in or willful indifference to the wrongful conduct on the part of upper management. Id. at 19 (quoting Cavuoti, supra, 161 N.J. at 113 (citation and internal quotation omitted)). The Appellate Division found that nothing resembling the factors established by Cavuoti regarding the upper management determination had been communicated to the jury. Id. at 20-21. The court also found significant the jury s exoneration of Commissioner Fauver, the only remaining named defendant who would be considered upper management. Id. at 21. In view of the testimony concerning the DOC s hierarchical structure, and the testimony of DOC employees whose responsibilities . . . varied widely, as did their responses to Lockley s complaints, the court concluded that the lack of guidance regarding upper management was reversible error. Id. at 19, 21. In respect of the trial judge s instructions concerning the method for calculating a punitive damages award against the State, the Appellate Division found that they were equally defective. Id. at 19, 23. The court reasoned that punitive damages against the State cannot be computed in the same manner as against a private individual or entity because the State has no net worth[, has] no [year-end] bottom line . . . to which one could point as profit earned from wrongful actions, [and has] no assets purchased from funds wrongfully generated and held as capital to generate further profit. 1) Should a distinction be drawn between the Department of Corrections and the State as a whole? At first blush, it is difficult to perceive why the State s activities in areas other than the Department of Corrections should be considered when setting the quantum of an award. 2) If the Department s budget is the proper measure, what are the relevant budget years? 3) If the Department s budget has increased significantly over that time frame, what are the causes for the increase? If the budget has increased because changes in the sentencing provisions of the criminal code increased the number of persons incarcerated, should [the] Department s exposure to a large punitive damages award be concomitantly increased or is an adjustment appropriate? 4) If the Department s budget is the appropriate measure, is the allocation made by the Department among different line items a relevant factor? For example, does the Department spend a sufficient amount on employee training and awareness? Or, on the other hand, would consideration of such a factor represent an unwarranted judicial intrusion into executive decision making? 5) Should the jury be told that the State cannot incur a deficit and that an award of punitive damages may have to be satisfied through adjustments to another budget line item? [a]t the margins, defining upper management is easy. A chief executive officer, chief operating officer, or a member of the board of directors satisfies the definition. At the other extreme, an assembly line worker or clerk with no supervisory responsibilities does not. Our task is to provide guidance for identifying upper management between those extremes. 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 . . ., 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. We have proceeded 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 -- 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. Stated generally, the award of punitive damages must bear some reasonable relation to the injury inflicted and the cause of the injury. [i]n addition to bearing a reasonable relationship to [the] actual injury, the amount of punitive damages should account for the profitability of the defendant s . . . misconduct, the plaintiff s litigation expenses, the punishment the defendant will probably receive from other sources, the defendant s financial condition, and the effect on its condition of a judgment for the plaintiff. [Id. at 338-39 (citing Fischer, supra, 103 N.J. at 673).] Two years later, the New Jersey Legislature enacted the PDA. By that statute, the Legislature stepped into the fray and established the calculus to be employed in the assessment of a punitive damage award: If the trier of fact determines that punitive damages should be awarded, the trier of fact shall then determine the amount of those damages. In making that determination, the trier of fact shall consider all relevant evidence, including, but not limited to, the following: (1) All relevant evidence relating to the factors [used to determine whether punitive damages are to be awarded]; (2) The profitability of the misconduct to the defendant; (3) When the misconduct was terminated; and (4) The financial condition of the defendant. (1) The likelihood, at the relevant time, that serious harm would arise from the defendant s conduct; (2) The defendant s awareness o[r] reckless disregard of the likelihood that the serious harm at issue would arise from the defendant s conduct; (3) The conduct of the defendant upon learning that its initial conduct would likely cause harm; and (4) The duration of the conduct or any concealment of it by the defendant. [N.J.S.A. 2A:15-5.12b.] The PDA also sets a cap on the amount that may be assessed against a defendant of five times the liability of that defendant for compensatory damages or $350,000, whichever is greater. N.J.S.A. 2A:15-5.14b. Although LAD actions specifically are excluded from the statutory cap, N.J.S.A. 2A:15-5.14c, its general requirements for procedural and substantive fairness are mandat[ory] in future LAD cases. Baker, supra, 161 N.J. at 229. In 1999, contemporaneously with Cavuoti, supra, this Court decided Baker, supra. Baker involved a claim under the LAD in which punitive damages were sought against a private entity for age and sex discrimination. 161 N.J. at 224. After trial, the plaintiffs decided that they would share equally in a $4 million punitive damages award against the defendant that far exceeded the amount of compensatory damages. Id. at 225. In reversing and remanding on the question of punitive damages, the Court held that the trial court had not sufficiently considered the requirements of the PDA when it permitted the $4 million award. Id. at 229, 231-32. Although the PDA had been enacted after the commencement of the action in Baker, supra, (as in this case), we found that the statute was relevant in addressing the disparity between the harm suffered by plaintiffs and the amount of the award. Id. at 231. We opined that the policy judgment [underlying] the statute [was] sound, and that reviewing courts may, but are not required to, use the ratio provision of the Act as a normative measure of the limits of proportion. Id. at 229, 231. Baker recognized that the determination of a punitive damages award against a private entity is bound by substantive constitutional limits, id. at 229, defined by the United States Supreme Court in BMW, supra, 517 U.S. at 575. Although the BMW standards derive from Fourteenth Amendment due process considerations that apply to private and not public entities, they serve a limiting function that is relevant to our analysis. They include the degree of reprehensibility of the conduct that formed the basis of the civil suit; the disparity between the harm or potential harm suffered by the injured party who was the plaintiff in the civil case and the plaintiff s punitive damages award; and the difference between this remedy and the civil penalties authorized or imposed in comparable cases. [Id. at 230 (quoting BMW, supra, 517 U.S. at 575, 116 S. Ct. at 1598-99, 134 L. Ed 2d at 826).] In combination with the criteria set forth in the PDA, the BMW standards are designed to ensure that any award of punitive damages bears some reasonable relation to the injury inflicted. Id. at 229, 231. Before entering judgment for an award of punitive damages, the trial judge shall ascertain that the award is reasonable in its amount and justified in the circumstances of the case, in light of the purpose to punish the defendant and to deter that defendant from repeating such conduct. If necessary to satisfy the requirements of this section, the judge may reduce the amount of or eliminate the award of punitive damages. 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. [Baker, supra, 161 N.J. at 231.] As the Supreme Judicial Court of Massachusetts has cogently observed, [t]he same considerations that require scrutiny and control by the trial judge or a reviewing court to meet the requirements of due process apply here even though no constitutional due process rights are implicated. [Bain, supra, 678 N.E.2d at 162-63 (citations omitted).] Indeed, the court s responsibility to review awards of punitive damages for reasonableness is heightened when such damages are awarded against a public entity. The judge in the ordinary case acts as a check on the jury s calculation of punitive damages; in the case of a governmental entity, when public monies are the source of the award, the judge must scrutinize with great care the amount of the award to determine whether it is proportionate to the harm suffered by the plaintiff. JUSTICES COLEMAN and LONG join in CHIEF JUSTICE PORTIZ s opinion. JUSTICES VERNIERO, LaVECCHIA, and ALBIN have filed a separate, concurring opinion. JUSTICE ZAZZALI did not participate. ROBERT L. LOCKLEY, JR., Plaintiff-Appellant, v. STATE OF NEW JERSEY, DEPARTMENT OF CORRECTIONS, Defendant-Respondent, and POLICE BENEVOLENT ASSOCIATION, LOCAL 105, and individually, and in their official capacities, COMMISSIONER WILLIAM H. FAUVER, RONDA TURNER and JACQUELINE JONES, Defendants. VERNIERO, LaVECCHIA, and ALBIN, JJ., concurring. We concur in the Court s affirmance of the Appellate Division s holding that the punitive award cannot stand in this matter due to the trial court s failure to charge the jury properly on upper management. So long as punitive damages are available against public entities, we cannot say that there is a better standard than the one proposed by the Court. This case illustrates the difficulty -- and perhaps the impossibility -- of fashioning jury instructions that will allow the rational assessment of punitive damages against a public entity. Had the issue squarely been raised, we would have been inclined to address a more fundamental question -- whether Cavuoti v. New Jersey Transit Corp., 161 N.J. 107 (1999), erroneously interpreted the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 to 49 (LAD), to permit punitive damages to be assessed against public entities. Today, in Green v. Jersey City Board of Education, __ N.J. __ (2003) (slip op. at 14) , the Court has construed the Conscientious Employee Protection Act, N.J.S.A. 34:19-1 to 9 (CEPA), to allow an award of punitive damages against a public entity. We respectfully dissented in Green. The judicial debate over the proper interpretation of the CEPA and LAD in respect of the availability of punitive damages against public entities has come to an end. If the Court has misconstrued those statutes, as we believe it has, the Legislature is not without a remedy to correct the mistake. NO. A-108 SEPTEMBER TERM 2001 ON CERTIFICATION TO Appellate Division, Superior Court ROBERT L. LOCKLEY, JR., Plaintiff-Appellant, v. STATE OF NEW JERSEY, DEPARTMENT OF CORRECTIONS, Defendant-Respondent. DECIDED August 11, 2003 Chief Justice Poritz PRESIDING OPINION BY Chief Justice Poritz CONCURRING OPINION BY J.J. Verniero, LaVecchia, Albin DISSENTING OPINION BY