Court Opinion

ID: 9643010
Source: CourtListenerOpinion
Date Created: 2023-08-22 18:15:14.339081+00
Date Added: 2024-06-11T18:10:56.317485
License: Public Domain

O’HERN, J.,
concurring.
I agree with the majority that the award for punitive damages entered below was properly set aside. I disagree that we should use the fiction of nominal damages to decide whether such exemplary damages may be awarded for an intentional injury in tort.
I.
Fictions have traditionally served the common law’s drive to achieve justice. But a direct statement of the desirable result without figmental veneer would *55do as well, and indeed be more serviceable, for fictions tend to intrude into situations for which they were not invented. [Michaels v. Brookchester, Inc., 26 N.J. 379, 385 (1958) (Weintraub, C.J.)1.]
A direct statement of the desired result would call for a holding that punitive damages may be awarded without compensatory damages. In reality, nominal damages are not damages. Whatever common law function they once served seems irrelevant to what we must decide — what is the appropriate function of punitive damages in a developed legal system.
We begin by recognizing that the purposes of punitive damages are obscured by historical assumptions that are largely irrelevant to contemporary legal process. Early decisions conceded that “one purpose of large awards was to prevent dueling.” Note, Exemplary Damages in the Law of Torts, 70 Harv.L.Rev. 517, 522 (1957). Tort law developed as an adjunct to criminal law and it was natural to include punishment and deterrence among its objectives. 1 F. Harper & F. James, The Law of Torts, § 1.3, at 8 (1956). These concepts of private revenge and public punishment — developed in a more primitive society that sought to avoid trial by combat — are not particularly instructive today. Yet our cases have repeated these themes. The most frequently stated reasons for allowing exemplary damages are punishment and deterrence:
Punitive or exemplary damages are sums awarded apart from compensatory damages and are assessed when the wrongdoer’s conduct is especially egregious. They are awarded upon a theory of punishment to the offender for aggravated misconduct and to deter such conduct in the future. Fisher v. Volz, 496 F2d 333, 347 (3d Cir.1974); DiGiovanni v. Pessel, 55 N.J. 188, 190 (1970); Berg v. Reaction Motors Div., 37 N.J. 396, 412-13 (1962); Trainer v. Wolff, 58 *56N.J.L. 381, 382 (E. & A.1895); Belinski v. Goodman, 139 N.J.Super. 351, 359 (App.Div.1976); Cabakov v. Thatcher, 37 N.J.Super. 249, 259 (App.Div.1955); Hulbert v. Arnold, 83 N.J.L. 114, 117 (Sup.Ct.1912) * * *. [Leimgruber v. Claridge Assocs., Ltd., 73 N.J. 450, 454 (1977).]
These are obviously penal purposes and should cause us to focus clearly on precisely what it is that we wish to punish or deter. If the awarding of nominal damages means the conduct has caused no real harm, we must question why we should seek to punish or deter it.
One answer is that legal harm is not always measurable in money. The most obvious example is the insulting battery or offensive touch. To say that damages are presumed is only to say that the victim has been injured.
Although it is true that some American jurisdictions hold that punitive damages can be awarded on the basis of nominal damages, see Annot., 17 A.L.R.2d 527 at § 6 (1951); 22 Am.Jur. 2d Damages § 242 (1965), I believe that the cases are based upon an actual legal injury, that is, otherwise compensable harm, to the victim. See Fisher v. Volz, 496 FI 2d 333, 346 & n. 25 (3d Cir.1974) (unauthorized entry into homes to execute arrest warrant; punitive damages may be awarded without also awarding compensatory damages); Reynolds v. Pegler, 223 FI 2d 429 (2d Cir.), cert. denied, 350 US. 846, 76 S.Ct. 80, 100 L.Ed. 754 (1955) (columnist charged that fellow journalist cavorted in the nude, was a war profiteer, and four-flusher; nominal damages of $1.00 supported punitive award of $175,-000); Sterling Drug, Inc. v. Benatar, 99 Cal.App.2d 393, 221 P. 2d 965, 970 (1950) (deliberate sale of products below agreed resale price; nominal damages of $1.00 will sustain punitive damage award when “actual damages have been sustained, the extent of which cannot be determined”); Lassitter v. International Union of Operating Eng’rs., 349 So.2d 622, 626 (Fla. 1977) (supervisor victim of union violence; “nominal” damages are “actual” damages for purpose of supporting an award for punitive damages because “establishment of liability for a breach of duty will support an otherwise valid punitive damage *57award even in the absence of financial loss for which compensatory damages would be appropriate”); Kennedy v. Thomsen, 320 N.W.2& 657, 659 (Iowa App.1982) (claim for punitive damages may be added to action for rescission; confidential agent whose undue influence induced transaction could be held liable for punitive damages: “[Tjhomsen had sustained, actual damage, but he attempted to be made whole by a claim for rescission rather than a claim for damages”); International Brotherhood of Elec. Workers, Local 1805 v. Mayo, 281 Md. 475, 379 A. 2d 1223 (1977) (union newspaper charged supervisor falsified timecard; plaintiff can recover punitive damages without proof of actual damages; actual injury not confined to out-of-pocket loss); Snodgrass v. Headco Industries, Inc., 640 S. W. 2d 147, 156-58 (Mo.App.1982) (nominal damages of $3.00 sustained punitive damages of $185,000 for libel and slander, including statements to his girl friend and a credit company that plaintiff had raped a secretary, stolen from the company, and been involved in a murder); Russell v. Truitt, 554 S.W.2d 948, 955-56 (Tex.Ct.Civ.App.1977) (exemplary damages may be awarded as incidental to equitable relief; joint venturers fraudulently induced investment and breached fiduciary duty). See also Vratsenes v. N.H. Auto, Inc., 112 N.H. 71, 289 A.2d 66, 68 (1972) (“[N]o damages other than compensatory are to be awarded. However, when the act involved is wanton, malicious, or oppressive, the compensatory damages awarded may reflect the aggravating circumstances”).
Our cases have used the language that compensatory damages are not necessary to support an award of punitive damages. See Barber v. Hohl, 40 N.J.Super. 526, 535 (App.Div.1956) (“a wrong is established” by removing lateral support for land, “whatever the lack of showing as to the loss in pecuniary terms”). The source cases for the principle, however, demonstrate the kind of real injuries that shaped early tort law. In Hulbert v. Arnold, 83 N.J.L. 114 (Sup.Ct.1912), a teacher in a rural school district was described as a “whore” and worse by a school board member. In such a case a court could well find *58that punitive damages for the real injury are not to be measured by the victim’s economic loss. Spiegel v. Evergreen Cemetery Co., 117 N.J.L. 90 (Sup.Ct.1936), concerned awarding damages for mental • injury for the negligent burial of the plaintiff’s father. Recognizing that liability for mental or emotional distress would have to be based on an intentional wrong, not a negligent act, the court invoked by analogy the principle that “wherever there is a breach of contract, or the invasion of a legal right, the law ordinarily infers that damage has ensued. And, in the absence of actual loss, the law vindicates the right by awarding nominal damages.”2 Id. at 96-97. See also Magee v. Holland, 27 N.J.L. 86 (Sup.Ct.1858) (when children under age of six were kidnapped by brother-in-law at wife’s bidding, father could recover punitive damages for injury to his feelings; loss of children’s services supported action).
Such cases have been categorized as involving an outrageous affront to the sensibilities of society:
The reported cases from roughly the first quarter of the seventeenth century through the first quarter of the nineteenth century, in which juries awarded damages in large amounts unrelated to tangible loss, fell into a variety of legal categories. They included cases of slander, seduction, assault and battery in humiliating circumstances, criminal conversation, malicious prosecution, illegal intrusion into private dwellings and seizure of private papers, trespass onto *59private land in an offensive manner, and false imprisonment. Diverse as they may have been, all of these cases share one common attribute: they involved acts that resulted in affronts to the honor of the victims. The defendants’ acts were insults that were likely to provoke reactions of outrage. [Ellis, Fairness and Efficiency in the Law of Punitive Damages, 56 S.Cal.L.Rev. 1, 14-15 (1982) (footnotes omitted).]
The defendant’s actions evoked a compelling desire for redress or satisfaction on the part of the victim; exemplary damages avoided the disorders caused by feuds and more extreme forms of self-help. One of New Jersey’s earliest cases, Coryell v. Colbaugh, 1 N.J.L. 90, 91 (Sup.Ct.1791), viewed a putative father’s breach of contract to marry as “of the most atrocious and dishonorable nature, and called for exemplary damages.” One commentator suggests that the application of punitive damages in the products liability field is consistent with this principle since the “Kantian notion of the inherent value of the human being” is sacrificed to the interests of production line economics. Symposium Discussion, 56 S.Cal.L.Rev. 155, 160 (1982).
The United States Supreme Court has been struggling to develop organizing principles. In the area of libel law, it has apparently tied punitive and nominal damage awards for private individuals to the New York Times “actual malice” standard. Gertz v. Robert Welch, Inc., 418 U.S. 323, 348-49, 94 S.Ct. 2997, 3011, 41 L.Ed.2d 789, 810 (1974). In the civil rights field, the Court, in a 5-4 decision, allowed punitive damages in § 1983 actions when the defendant’s conduct was motivated by evil intent or a reckless indifference to the plaintiff’s constitutional rights. Smith v. Wade, 461 U.S. 30, 103 S.Ct. 1625, 75 L.Ed.2d 632 (1983); but cf. City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 101 S.Ct. 2748, 69 L.Ed.2d 616 (1981) (municipalities immune from punitive damages under § 1983). When a former agent breached his contract with the CIA, resulting in irreparable harm to the government, the Court found the only sufficient redress was a constructive trust on his book profits:
*60No one disputes that the actual damages attributable to a publication such as Snepp’s generally are unquantifiable. Nominal damages are a hollow alternative, certain to deter no one. The punitive damages recoverable after a jury trial are speculative and unusual. Even if recovered, they may bear no relation to either the Government’s irreparable loss or Snepp’s unjust gain. [Snepp v. United States, 444 U.S. 507, 514, 100 S.Ct. 763, 768, 62 L.Ed.id 704, 711 (1980).]
Finally, in Silkwood v. Kerr-McGee Corp., — U.S. -, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984), the Court, again by a 5-4 vote, held that punitive damages under state law could be recovered for violation of nuclear energy regulations absent proof of injury to Karen Silkwood.
II.
Applying the dimly perceived purposes of punitive damages to the contemporary economic facts of this case is not easy. The question should not be whether punitive damages may be awarded in the absence of compensatory damages, but rather whether commercial misrepresentation that does not result in proven economic loss is a legal injury such as should invoke the sanction of punitive damages. The case is made complex by its factual pattern. The evidence before us is that plaintiff made an interest-free loan to the development enterprise represented by the defendant law firm in return for 10% of the profits of the project. Plaintiff was unable to prove that the diversion of enterprise property caused a loss in value of his investment.
It has generally been accepted that to sustain an action for misrepresentation a claimant must have suffered damages, but this statement seems to mean nothing more than that the claimant must have received something different from what was bargained for. See McCleary, Damage as Requisite to Rescission for Misrepresentation, 36 Mich.L.Rev. 1, 227 (1937), cited in W. Prosser, J. Wade and V. Schwartz, Cases and Materials on Torts 952-53 (6th ed.1976). To support an award of punitive damages, I would require, at a minimum, that the jury find that as a result of the alleged misrepresentation, the plaintiff did not get what he or she bargained for.
*61Beyond that, I would give greater structure to the context within which a jury should assess punitive damages. Bearing in mind that the functions that we have assigned to them are penal in nature, that is, punishment and deterrence of the defendant, we should insist upon strictly structured standards as we do for such punishment in the criminal sphere, see State v. Roth, 95 N.J. 334 (1984), and not leave juries without any direction in the civil field. Perhaps juries should be advised whether criminal sanctions were pursued (as they were in this case against certain defendants), so that the juries may determine whether the purposes of punishment and deterrence of 'this kind of activity are more properly left to penal enforcement agencies using standards dictated by the Legislature. The jury should be instructed about the purposes of the doctrine, that it is not to give plaintiffs a windfall; that to recover punitive damages for fraud and deceit, plaintiff must show fraud that invokes malice, willfulness or wanton and reckless disregard of the rights of others.3
As to the measure of damages, I believe that we should define the role juries are to fulfill. Current commentators are struggling with the development of economic models for punitive damages. See, e.g., Symposium: Punitive Damages, 56 S.Cal.L.Rev. 1-203 (1982). The inability or unwillingness of courts to deal with standards for punitive damages is a residue *62of history. At early common law, parties who submitted their disputes to juries were bound by the jury’s findings; there was no measure of damages. It was only “at comparatively a recent period that the jury has relinquished its control over actions even of contract, and that any approach has been made to a fixed and legal measure of damages.” T. Sedgwick, A Treatise on the Measure of Damages 214 (1847), quoted in M. Horwitz, The Transformation of American Law, 1780-1860, at 83 (1977). Only by degrees was the principle recognized that the amount of compensation was to be regulated by the direction of the court and that the jury could not substitute its “vague and arbitrary discretion for the rules which the law lays down.” Id. “The doctrine of exemplary damages is thus seen to have originated in a survival in this limited class of cases of the old arbitrary power of the jury.” 1 T. Sedgwick, A Treatise on the Measure of Damages § 349, at 689 (9th Ed.1912).4
I am not suggesting that we can devise a system of formalistic rules that will narrowly confine awards for damages in such cases, but I am suggesting that we should not abandon the effort to give greater structure to the concepts of punitive damages. The idea that the amount of damages is measured by the wealth of the defendant is not consistent with what we have come to believe is the proper measure of damages in criminal law, that is, that the punishment should fit the crime and not the criminal. Rejection of a concept of proportionality is also, I think, unfortunate. See Leimgruber v. Claridge Associates, 73 N.J. 450, 457 (1977) (bearing in mind that what the Court was talking about in Leimgruber was $16,550 in *63punitive damages for $1700 worth of destroyed trees, not an outrageously disproportionate sum). We should take account of the Legislature’s use of treble damages as a frequently invoked method of disapproving egregious conduct. See, e.g., N.J.S.A. 56:9-12(a) (antitrust violation); N.J.S.A. 56:4-2 (unfair competition); N.J.S.A. 56:8-19 (consumer fraud); N.J.S.A. 2A:18-61.6 (wrongful removal of tenant); N.J.S.A. 46:8-21.1 (double recovery for failure to return tenant’s deposit). These statutes also allow recovery of attorney’s fees and costs. See 42 U.S.C.A. § 1988 (recovery of attorney’s fees in civil rights cases); N.J.S.A. 10:5-27.1 (same); cf. Fed.R.Civ.P. 11 (fees and costs can be assessed against attorney or party for signing paper in violation of rule).
Another factor that is frequently mentioned to give shape to the doctrine is that absent punitive damages, some claimants will in fact be undercompensated. Ellis, supra, 56 S.Cal.L.Rev., at 26-33.5 Finally, we should rethink the question of whether punitive damages may be insured against. See Morrissy, Punitive Damages—Insurability, 1981 Trial Law. Guide 257.
*64In short, I think that we must more carefully define the purposes of punitive damages and develop standards to guide the discretion of juries in discharge of this extraordinary function of punishing and deterring individuals.
O’HERN, J., concurring in the result.
For reversal in part, affirmance in part — Justices CLIFFORD, SCHREIBER, HANDLER, O’HERN and GARIBALDI —5.

 Bentham poured ridicule on legal fictions wherever he met them. (See Maine’s Ancient Law, London, 1894, p. 27.)
Pound, in his great work on jurisprudence says that while fictions have played an important part in legal history, "we must not forget that they are a clumsy device appropriate only to periods of growth in a partially developed political organization of society in which legislation on any large scale is not possible. They are not suited to later times and developed systems. * * * " [.Louisville & Nashville R.R. Co. v. Public Serv. Comm’n of Tenn., 389 F.2d 247, 250 n. 1 (6th Cir.1968).]

At common law there may have been important reasons to enter such a judgment either to establish title or otherwise to determine the rights of the parties. See New Jersey School & Church Furniture Co. v. Board of Educ. of Somerville, 58 N.J.L. 646, 648 (E. & A. 1896) ("When we consider that the doctrine of res judicata, or even the title to property, may rest upon a judgment for nominal damages as well as upon a more substantial redress, it is evident that the right to a verdict is not controlled by the incidental question of the amount of damages to be recovered."). See also 1 T. Sedgwick, A Treatise on the Measure of Damages § 99, at 168 (9th ed. 1912) ("[A] verdict and judgment for the smallest amount is as effectual as any sum, however large; for it establishes the fact of the plaintiff's title. And in the common case of trespass to lands, the main object usually being to determine the right, this principle becomes very important"). The Court downplays this historical connection when it says "it is difficult to justify permitting nominal damages in a trespass action and not in a case of a wilful and malicious intentional tort." Ante at 48.

The majority says “it is especially fitting to allow punitive damage for actions such as legal fraud, since intent rather than mere negligence is the requisite state of mind.” Ante at 50. But the Court shies away from adopting a rule that in cases of fraud, punitive damages may always be awarded. That is, is fraud one of those torts "like malicious prosecution that require a particular antisocial state of mind, [so that] the improper motive of the tortfeasor is both a necessary element in the cause of action and a reason for awarding punitive damages[?]” Restatement (Second) of Torts § 908, comment c (1977). See Smith v. Wade, 461 U.S. 30, 53, 103 S.Ct. 1625, 1638-39, 75 L.Ed.2d 632, 649-50 (1983), and cases cited therein. Whether the threshold for punitive damages should be identical to that for compensatory damages is exactly the type of question we should resolve and not leave to the discretion of juries.

Nearly a century ago, a New Jersey court wrote of punitive damages:
Without stopping to review the history of this class of so-called damages, it is sufficient to say that the right to award them rests primarily upon the single ground — wrongful motive. The engrafting of this notion on to personal suits has resulted in an anomalous rule, the doctrine of punitive damages being a sort of hybrid between a display of ethical indignation and the imposition of a criminal fine. [Haines v. Schultz, 50 N.J.L. 481, 484 (Sup.Ct.1888).]

We cannot ignore the fact that punitive damages are not welcome everywhere. As Justice Rehnquist reports:
[A] significant number of American jurisdictions refuse to condone punitive damage awards. See, e.g., Killibrew [Killebrew] v Abbott Laboratories, 359 So 2d 1275 (La 1978); Burt v Advertiser Newspaper Co., 154 Mass 238 [28 N.E. 1] (1891) (Holmes, J.): Miller v Kingsley [194 Neb. 123], 230 NW2d 472, 474 (Neb 1975); Vratsenes v New Hampshire Auto, Inc. [112 N.H. 71], 289 A 2d 66, 68 (NH 1972); Pererra v International Basic Economic Corp., 95 PRR 28 (1967); Maki v Aluminum Building Products [73 Wash.ld 23], 436 P.2d 186, 187 (Wash 1968). See also Murphy V Hobbs, 7 Colo 541 [5 P. 119] (1884) (no punitive damages at common law). Other jurisdictions limit the amount of punitive damages that may be awarded, for example, to the plaintiffs attorney’s fees, see Triangle Sheer Metal Works, Inc. v. Silver [154 Conn. 116], 222 A 2d 220 ([Conn.] 1966), or otherwise, Riggs v Fremont Insurance Co. [85 Mich.App. 203], 270 NW 2d 654 (Mich App 1978). [Smith v. Wade, 461 U.S. at 60, 103 S.Ct. at 1642, 75 L.Ed.2d at 653 (Rehnquist, J., dissenting).]