March 27, 2008

New Jersey Supreme Court Rejects "General Deterrence" Theory of Punitive Damages

The New Jersey Supreme Court decided today in Tarr v. Bob Ciasulli's Mack Auto Mall, Inc. that the defendant was entitled to a new trial because the plaintiff's attorney improperly invited the jury to award punitive damages on a general deterrence theory, to "send a message to deter this particular defendant and others." The court held that, under New Jersey's Punitive Damages Act, a jury may aim only for deterrence of the specific defendant.

The court also held that jurors deciding punitive damages can properly consider the defendant's financial condition both at the time of the wrongdoing and at the time of trial. In so holding, the court rejected the defendant's argument that it cannot be subjected to punitive damages because it is now a defunct organization with no assets. Based on this holding, the plaintiff's attorney claimed victory and predicted he would obtain a larger award of punitive damages than the $85,000 he obtained in the first trial, according to this article on Law.com.

The New Jersey Supreme Court's opinion is contrary to California law on both issues. In California, numerous opinions have recognized the legitimacy of a general deterrence theory. (See, e.g., Ferguson v. Lieff, Cabraser, Heimann & Bernstein (2003) 30 Cal.4th 1037 ["Punitive damages by definition are not intended to compensate the injured party, but rather to punish the tortfeasor whose wrongful action was intentional or malicious, and to deter him and others from similar extreme conduct"].) And California courts have repeatedly held that juries can consider the defendant's financial condition only as of the time of trial. (See, e.g., Kelly v. Haag (2006) 145 Cal.App.4th 910, 915 ["A punitive damages award is based on the defendant's financial condition at the time of trial"].)

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