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Sporn v. Celebrity Inc.

Decided: May 3, 1974.


Petrella, J.c.c., Temporarily Assigned.


Plaintiff sued for wrongful discharge from his New York employment in violation of an alleged oral one-year employment contract and claimed damages of $9,750 for five months' salary and $700 as unreimbursed expenses. The jury found in favor of plaintiff on all issues, including the term of the contract being not more than one year.

Defendant moved pursuant to R. 4:49 and R. 4:50 on several grounds for a new trial and for certain other relief, including mitigation of damages as a matter of law, i.e. (1) reduction of the jury award by the amount of New York unemployment compensation benefits received by plaintiff, and (2) for deduction of federal withholding and social security taxes.*fn1 There was no jurisdictional issue presented and the applicability of New York law was not raised before or during trial. Defendant, after trial, argued that New York law applies to the question of offset or mitigation of damages on a New York unemployment contract.

(The issues raised on the motion for a new trial have been considered by the court and denied in an oral decision.

Except for the matters herein, the discussion of those issues has been omitted.)

One legal issue appears novel in New Jersey and warrants consideration. That is, whether the defaulting or breaching party to an employment contract can, in addition to the usual mitigation of damages, require, as a matter of law, abatement or mitigation by the amount plaintiff received from unemployment compensation. Application of the "collateral source rule" to funds received from unemployment compensation by a wrongfully discharged employee in a contract action does not appear in any New Jersey reported opinion and has been scantily commented on elsewhere.

Although Evid. R. 9(2)(a) would allow judicial notice of New York law, the court was not furnished with an adequate or timely basis for taking notice of New York law and has applied the law of the forum. Under Evid. R. 9(3) the court can apply New Jersey common law and public policy. See Donnelly v. United Fruit Co., 75 N.J. Super. 383, 397 (App. Div. 1962), aff'd 40 N.J. 61 (1963), and Breslin v. Liberty Mut. Ins. Co., 125 N.J. Super. 320, 326 (Law Div. 1973). Donnelly held that New Jersey law governed where an employee sued for wrongful discharge, and challenged the refusal of his employer to arbitrate his claim, and for inducing him to resign by means of an unfulfilled promise, and the New York law was not pleaded or notice thereof given at or before the pretrial conference.

Parenthetically, New York has apparently not dealt specifically with the issue of whether unemployment compensation benefits received by employees may be offset against an employee's claim for damages.*fn2 Hence this court can look to New Jersey law. The general New York mitigation

rule is stated in Silinsky v. State-Wide Ins. Co., 30 App. Div. 2d 1, 289 N.Y.S. 2d 541, 546-547 (App. Div. 1968): "It is the policy of New York to prevent double recoveries and unjust enrichment by an injured party." But even if it is concluded New York would probably apply that general minority rule as to collateral payments on mitigation, this court need not follow it if the public policy of the State of New Jersey would be violated.

New Jersey follows the majority rule in the United States today, that receipt of benefits from a source collateral to the defendant, while lessening the effect of the financial losses of plaintiff, will not diminish damages otherwise recoverable from the wrongdoer in tort cases. Thus, for example, gratuitous medical care, continued salary or wage payments, proceeds from insurance policies, or welfare and pension benefits, are not taken into account in computing damages. Benefits from such collateral sources conferred on the victim of a tort have not been applied in mitigation against the gross amount of damages recovered. Long v. Landy, 35 N.J. 44, 55-56 (1961) (insurance benefits); Cornish v. North Jersey St. Ry. Co., 73 N.J.L. 273 (Sup. Ct. 1906) (insurance benefits); Skillen v. Eagle Motor Co., 107 N.J.L. 211 (Sup. Ct. 1930) (gratuitous payments by relatives); Rusk v. Jeffries, 110 N.J.L. 307 (E. & A. 1932) (pension benefits). See also, Kurta v. Probelske, 324 Mich. 179, 36 N.W. 2 d 889, 893 (Sup. Ct. 1949) (unemployment compensation); Annotation, "Receipt of Public Relief or Gratuity as Affecting Recovery in Personal Injury Action," 19 A.L.R. 2d 557 (1951); Annotation, "Collateral Source Rule," 75 A.L.R. 2d 885 (1961); and cf. Note, "The Mitigating Effect on Damages of Social Welfare Programs," 63 Harv. L. Rev. 330 (1949).

There are two lines of opinion as to whether unemployment compensation should diminish a contract damage award. Defendant relies on the Wisconsin case of Dehnart v. Waukesha Brewing Co., 21 Wis. 2d 583, 124 N.W. 2d 664, 669-671 (Sup. Ct. 1963) (contract action), in arguing for such

mitigation. See also United Protective Workers v. Ford Motor Co., 223 F. ...

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