The typical civil lawsuit consists of two elements: liability and damages.

Liability means that the person or entity that brings the lawsuit (called the “plaintiff”) must prove that the person or entity against whom the lawsuit is brought (called the “defendant”) is legally responsible or “liable” for the consequences of their actions or their failures to act.

Damages refers to the various losses - - financial, physical or emotional - - suffered by the plaintiff, that the defendant is charged with paying. Types of damages are “compensatory”, “nominal” and “punitive.”

The purpose of this article is to explain the nature of punitive damages and the standards with respect to the awarding of them in civil cases under New Jersey’s Punitive Damages Act (“the Act”), which can be found at N.J.S.A. 2A:15-5.9 et. seq.

PURPOSE
In general, the purpose of punitive damages is to punish the defendant and deter the defendant from repeating the conduct.

PUNITIVE DAMAGES ACT
The Punitive Damages Act provides that in order to recover punitive damages, the plaintiff must prove that the harm they suffered was the result of the defendant’s acts or failures to act, and such acts or failures to act were caused by “actual malice or accompanied by a wanton and willful disregard of persons who foreseeably might be harmed by those acts or [failures to act].”

Although these legal terms are defined with more legal terms, the definitions are important.
Actual malice is defined as “an intentional wrongdoing in the sense of an evil-minded act.” Wanton and willful disregard means “a deliberate act or omission with knowledge of a high degree of probability of harm to another and reckless indifference to the consequences of such act or omission.”

Punitive damages can only be awarded if compensatory damages have been awarded by the jury or judge. Compensatory damages are damages “intended to make good the loss of an injured party, and no more.” Examples are pain and suffering; lost wages and losses from contractual claims.

CAP ON AMOUNT
Under New Jersey’s Punitive Damages Act, there is a cap on the amount of punitive damages, i.e., five times the liability of the defendant for compensatory damages or $350,000, whichever is greater. In other words, if a jury or judge awards a plaintiff $25,000 in compensatory damages, the highest amount of punitive damages, if proven, will be $350,000. The total damages - - compensatory and punitive - - cannot then exceed $375,000.

If, however, an award of $1,000,000 in compensatory damages is made, the amount of punitive damages is capped at $5,000,000 and the total damages will not then exceed $6,000,000.

There is no cap on punitive damages for bias crimes, discrimination, sexual abuse, drunk driving and certain other claims.

PROCEDURE
Procedurally, the jury or judge first determines whether compensatory damages should be awarded to the plaintiff. During this stage, evidence regarding the amount of punitive damages, if any, is not permitted.

Next, the jury or judge determines whether punitive damages should be awarded by considering all relevant evidence. If a determination is made that punitive damages should be awarded, the jury or judge determines the amount. In doing so, all relevant evidence is considered, including the profitability of the defendant’s misconduct; when the misconduct stopped, and the financial condition of the defendant.

NEW JERSEY CASE LAW
Recently, the New Jersey Supreme Court decided that punitive damages cannot be awarded as a general deterrent to those other than the defendant, but only to deter and punish the defendant who committed the wrong. In that case, the plaintiff’s attorney had argued to the jury that the amount of punitive damages presented an opportunity to send a message to the defendant “and others.” The Supreme Court said that was inappropriate. The court also said that the defendant’s financial condition should be considered not only at the time of the verdict, but also at the time of the wrongdoing. That decision was relevant in that case because at the time of the verdict, the defendant had gone out of business and apparently had been succeeded by another company.

To summarize, punitive damages are designed to punish the defendant and deter the defendant from repeating the wrongful conduct. At least in New Jersey, punitive damages cannot be awarded as a way of deterring and sending a message to those other than the defendant.

Jeffrey W. Pompeo, Esq. is an attorney with the law firm of DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, P.C. with offices in Warren, Somerset County (908-757-7800) and Clifton, Passaic County (973-458-9174). Jeff was the Co-Founder and Chairman of the Board of Trustees of the Passaic County Interfaith Hospitality Network, a non-profit organization for homeless families; Chairman of the "Paul VI High School Reunion for the Classes of 1971 to 1990 and Rededication of Suchon Field", an event in 2003 that drew 750 people; and host and producer of the television show "Close Up".