Argued October 22, 2012
On appeal from the Superior Court, Appellate Division.
Francis V. Cook argued the cause for appellant (Fox Rothschild, attorneys; Mr. Cook, Jonathan D. Weiner, Abbey True Harris, and Jonathan D. Ash, on the briefs).
Andrew W. Dwyer argued the cause for respondent (The Dwyer Law Firm, attorneys; Mr. Dwyer and La Toya L. Barrett, on the brief).
RODRÍGUEZ, P.J.A.D. (temporarily assigned), writing for a unanimous Court.
In this appeal, the Court addresses whether an "upper management" jury instruction is required when deciding punitive damages in the context of a claim pursuant to the New Jersey Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -8, as well as what standard should be used.
Plaintiff Doreen Longo was hired by defendant East Coast News Corp. (East Coast) to work in the sales department under defendant David "Bo" Pezzullo. East Coast is co-owned by defendant Frank Koretsky and his brother, who also own defendants Pleasure Productions, Inc. and International Video Distributors, L.L.C., which are involved in the adult entertainment industry. Longo initially had a pleasant relationship with her co-worker, defendant March Kercheval, but it deteriorated after Kercheval allegedly threatened to sexually assault her, suggested she trade sexual favors with a client, threw a chair, and told her he wanted to gouge out Pezzullo's eyes. On several occasions, Longo told Pezzullo she was terrified, but nothing was done. She later sent two e-mails to Pezzullo asking for his help and explaining that she feared Kercheval was becoming dangerous. Longo sent a copy of her last e-mail to the general manager, Michael Savage, who told her he was too busy to do anything. One week later, Longo met with Kercheval, Koretsky, and the head of Human Resources. Koretsky screamed at Longo and Kercheval, each of whom later received employee warning notices, which Longo rebutted. Kercheval was fired. Shortly thereafter, Longo was told that her complaints about Kercheval disrupted the laid back office environment, and she was let go.
Longo sued East Coast and the related businesses, as well as several former co-employees, alleging that her position was terminated because of her complaints that Kercheval had sexually harassed and intimidated her. Following the dismissal of several defendants, the jury returned a no-cause verdict in favor of Pezzullo and Savage, but found East Coast and Koretsky liable in the amount of $120, 000 for economic loss and $30, 000 in emotional distress damages. During the jury charge for the subsequent punitive damages phase of the trial, East Coast objected to the court's instruction because it neither defined upper management nor explained that liability hinged on upper management's involvement in or willful indifference to the retaliatory action against Longo. The court also did not explain that Koretsky's involvement had to be weighed against the clear and convincing evidence standard in contrast to the preponderance of the evidence standard used during the compensatory damages phase of the trial. The jury returned a $500, 000 punitive damages verdict against East Coast.
East Coast appealed, and a majority of the Appellate Division panel affirmed the punitive damages award. The majority explained that only "some" involvement by upper management was necessary to support the award. Relying on precedent, the dissenting judge concluded that the trial court was required to instruct the jury that a precondition to an award of punitive damages is a finding that upper management either actively participated or was willfully indifferent to the violation of Longo's rights. East Coast appealed as of right. R. 2:1-1(a)(2).
HELD: In cases arising under CEPA, an upper management jury charge is required to support an award of punitive damages against an employer, which can only be awarded if the jury finds wrongful conduct under the clear and convincing evidence standard.
1. Based on the doctrine of respondeat superior, a CEPA plaintiff may recover punitive damages from an employer based on the actions of its upper management employees. Recovery requires a showing of especially egregious misconduct, as well as upper management's actual participation or willful indifference. Identifying upper management is a fact-sensitive task, requiring a determination of whether the employee who acted wrongfully had sufficient authority over the involved employees to warrant the imposition of punitive damages. In the context of upper management, sufficient authority exists when an employee has either broad supervisory powers, including the power to hire, fire, promote, and discipline, or the delegated responsibility to execute the employer's policies ensuring, among other things, a discrimination-free workplace. (pp. 11-14)
2. A fair trial on punitive damages in CEPA claims requires the issuance of an upper management charge explaining the necessity of upper management participation or willful indifference and including the definition of upper management. The charge is particularly important when the wrongful conduct was allegedly committed by many different employees with varying job titles and responsibilities. Failure to issue the upper management charge is a fundamental flaw. (pp. 14-19)
3. Here, the jury instructions were flawed because the court failed to issue an upper management charge. The jury was never instructed that it only could consider the conduct of upper management employees and was not advised as to the standard of conduct required for an award. This lack of guidance could have caused an unjust result. Additionally, although the jury found Koretsky individually liable during the compensatory damages phase of the trial, it did so under a preponderance of the evidence standard. Punitive damages require a finding of wrongful conduct under the clear and convincing evidence standard, and the court failed to instruct the jury to assess Koretsky's involvement under the higher standard of proof. These combined errors warrant a new trial on punitive damages, during which the trial court must provide an upper management charge, as well as an instruction emphasizing that the jury's findings on punitive damages must be made pursuant to the clear and convincing standard. (pp. 19-21)
The judgment of the Appellate Division is REVERSED, and the matter is REMANDED to the trial court for further proceedings consistent with the Court's opinion.
CHIEF JUSTICE RABNER; JUSTICES LaVECCHIA, ALBIN, HOENS, and PATTERSON; and JUDGE CUFF (temporarily assigned) join in JUDGE RODRÍGUEZ's opinion.
In this appeal, we address the adequacy of a jury instruction on punitive or exemplary damages in the context of a claim pursuant to the New Jersey Conscientious Employee
Protection Act (CEPA), N.J.S.A. 34:19-1 to -8. Specifically, we address the necessity of an "upper management" jury instruction as defined in Cavuoti v. New Jersey Transit Corp., 161 N.J. 107, 122-28 (1999), in order to sustain such an award. Our analysis leads to the conclusions that: (1) an upper management jury instruction was necessary in this case to support such an award; and (2) the same standard for awarding punitive damages that applies to claims pursuant to the Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49, applies to CEPA claims.
Therefore, we vacate the punitive damages award and remand for a new trial solely on such damages.
Plaintiff Doreen Longo sued her former employer, East Coast News Corp. (East Coast) and several former co-employees, some of whom could be part of East Coast's upper management echelon. Her complaint alleged that she was terminated from her position by East Coast management because she had complained of acts of sexual harassment and intimidation by former co-employee Marc Kercheval. East Coast answered the complaint and counterclaimed.
Longo testified that she was hired by East Coast in March 2002 to work in the sales department. Defendant David "Bo" Pezzullo was her direct supervisor. He reported to defendant Michael Savage, East Coast's general manager. East Coast is owned by two brothers, Frank and Michael Koretsky,  who are its co-presidents and owners of Pleasure Productions, Inc. (Pleasure Productions) and International Video ...