Opinions of the United
1996 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


7-23-1996

Gares v. Willingboro Twp
Precedential or Non-Precedential:

Docket 95-5269




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                    UNITED STATES COURT OF APPEALS
                        FOR THE THIRD CIRCUIT


                             No. 95-5269


                            MARGARET GARES

                                 v.

                        WILLINGBORO TOWNSHIP;
                    WILLINGBORO TOWNSHIP COUNCIL;
                  WILLINGBORO TOWNSHIP POLICE DEPT.;
                              GARY OWENS

                                 Willingboro Township,
                                 Appellant



           On Appeal From the United States District Court
                   For the District of New Jersey
                 (D.C. Civil Action No. 91-cv-04334)


                       Argued December 8, 1995

      BEFORE:   STAPLETON, SAROKIN and ROSENN, Circuit Judges

                    (Opinion Filed July 23, 1996)




                                                       Joseph F. Betley
(Argued)
                                                       Michael D. Markey
                                                       Capehart & Scatchard
                                                       8000 Midlantic Drive
                                                       Laurel Corporate Center,
Suite 300
                                                       Mount Laurel, NJ   08054
                                                         Attorneys for
Appellant

                                                       Lanier E. Williams
(Argued)
                                                       P.O. Box 6584
                                                       Philadelphia, PA 19138
                                                         and
                                                       Christopher Morkides
                                                       7115 Sellers Avenue
                                                  Upper Darby, PA 19082
                                                    Attorneys for Appellee



                       OPINION OF THE COURT




STAPLETON, Circuit Judge:

         This case involves a sexual harassment claim by
plaintiff Margaret Gares against her former employer Willingboro
Township and the Township's former police chief Gary Owens.
Following a trial in June of 1993, the jury returned a verdict in
favor of Gares against the Township for $20,000 in compensatory
damages and $30,000 in punitive damages pursuant to the New
Jersey Law Against Discrimination ("LAD"), N.J. Stat. Ann.
   10:5-1 to -42, and against Owens for $4,000 in compensatory
damages and $8,000 in punitive damages pursuant to 42 U.S.C.
  1983. Owens did not appeal the judgment. The Township is
appealing only the jury's award of punitive damages, arguing that
the district court erroneously denied the Township's motion for
judgment as a matter of law because: (1) punitive damages are
unavailable under the LAD against municipalities, (2) New Jersey
law requires evidence of the defendant's ability to pay as a
predicate for an award of punitive damages and the plaintiff
failed to provide such evidence, and (3) there is insufficient
evidence to support a punitive damage award. We will affirm.

                                I.
         In reviewing the denial of the defendants' motion for
judgment as a matter of law, we must view the evidence in a light
most favorable to the plaintiff. Rotondo v. Keene Corp., 

, 438 (3d Cir. 1992).
         Willingboro Township, a New Jersey municipal
corporation, is governed by a popularly-elected Town Council,
which in turn appoints a Township Manager to handle the day-to-
day operations of the Township in the manner of a chief executive
officer. The Township Manager is ultimately responsible for all
personnel actions, including hirings, promotions, terminations
and disciplinary sanctions. Additionally, under the Township's
policy on sexual harassment, employees are to direct all sexual
harassment claims to the Township Manager, who must then decide
what investigative or remedial steps to take.
         The next tier of Township officials includes the Chief
of Police, who is the head of the Township's Police Department.
The Chief of Police, in turn, directly supervises and manages two
Captains, one of whom is the Captain of the Services Division.
These two Captains supervise the various sergeants and
lieutenants within their respective divisions. The Police
Department is an integral unit of the Township government, so
that all who work in the department are in fact Township
employees.
         Margaret Gares began working for the Township's Police
Department in about 1974 as a school traffic guard in the
Services Division. From at least 1983, upon her promotion to
Lieutenant of School Traffic, Gares was under the direct
supervision and management of defendant Gary Owens, who served as
Captain of the Services Division until his promotion to Chief of
Police in October 1990. Continually over that seven-year period,
Owens subjected Gares to a sexually hostile work environment by
engaging in conduct including: calling Gares sexually offensive
names, such as "bimbo," "bimbette," "tramp," "mere woman,"
"trollop," "dumb blonde," and "Township slut," in the presence of
her fellow employees; openly condoning degrading conduct against
female employees by other male employees under Owens' direct
supervision; permitting the open display of pornographic material
in the office; encouraging the public telling of obscene jokes;
and touching Gares in an unwelcome and degrading manner,
including at one point taunting her by holding her badge up out
of her reach and pinning her body against the wall of his office
with his own body. Owens persisted in such conduct even after
Gares expressly and publicly asked him to stop. Each of the
seven other female employees under Owens' direct supervision in
the Services Division had made complaints similar to Gares' to
then Chief of Police Richard Van Sciver.
         A few specific examples of Owens' conduct will provide
ample illustration of the nature of his actions. At one point,
while Owens was Captain of Gares' division, someone left an
obscene photograph on Gares' desk of a nude, extremely large-
breasted woman, with Gares' name written across the top of the
photograph. When Gares arrived at her desk and discovered the
photograph, Owens and several other male officers laughed, much
to Gares' anger and embarrassment, and Owens compared Gares'
breasts to those depicted in the photograph. A female co-worker
testified that Owens had made rude remarks about Gares' breasts
on a number of occasions, calling them "bazooka-size" or
"elephant-size."
         In 1988, on the day after a Township-sponsored seminar
on sexual harassment in the workplace (a mandatory seminar that
Gares, but not Owens, attended), Gares was working at her desk,
which was situated with other desks in a large, main office. A
broken garage door into the building was making a lot of noise,
and one of a group of several male officers (including Captain
Owens) asked what the source of the noise was. Another male
officer replied, "Oh, just ignore it, that's [Gares'] dildo."
Angry and embarrassed by the officers' and Owens' laughter, Gares
immediately stated, as she had been instructed to do in the
previous day's seminar, that Owens and the officers were all "on
notice" that she found that conduct offensive and wanted it to
stop. She then asked Owens, as the officers' supervisor,
formally to reprimand the officer who had made the offensive
joke. Owens merely walked away, laughing, to his office, but
Gares followed him and repeated her demand. Owens then sharply
replied, "Just get out of my office, I don't have time for you."
(Supp. App. at 8.)
         Thus, by his own affirmative conduct, and by tolerating
and encouraging similarly offensive conduct on the part of other
male employees against Gares and her female co-workers, Captain
Owens created and fostered a sexually hostile work environment in
the Services Division.
         The Police Department operated on a strict "chain-of-
command" procedure for employees to register their work-related
complaints. Under this system, an employee with a complaint of
sexual harassment must first complain to her immediate
supervisor. If she is not satisfied with her immediate
supervisor's response, the employee must persuade that supervisor
to permit an appeal to the next official in the Department's
command hierarchy. Should the complaining employee's supervisor
choose not to authorize an appeal, the matter would be at an end:
a Police Department employee was not permitted to bypass her
immediate supervisor to report complaints directly to the Chief
of Police or to the Township Manager. Former Chief Van Sciver
testified that, if the Chief of Police elects not to tell the
Township Manager, the Township Manager would never learn of the
complaint. Several witnesses testified that the Police
Department had clear, standing orders, reaffirmed periodically,
that employees were to obey the chain-of-command rules and were
not to see the Township Manager without the permission of the
Chief of Police.
         The Police Department's chain-of-command policy
conflicted squarely with the Township's sexual harassment policy
which provides that all employees should direct complaints of
sexual harassment to the Township Manager. Gares and several
other long-term Police Department employees testified, however,
that they were unaware of the Township's sexual harassment
policy. Chief Van Sciver was aware of the Township policy and of
the Township Manager's personal "open door" policy, but he
nonetheless enforced his department's chain-of-command policy
because he believed it encouraged employees to work out their
problems among themselves.
         Gares' immediate supervisor was Owens, the man who was
sexually harassing her, and so the Department's chain-of-command
procedure trapped her between the Scylla of enduring Owens'
offensive conduct and the Charybdis of possible termination for
violating the chain-of-command rules by reporting Owens' conduct
directly to the Chief of Police or the Township Manager. Gares
endured Owens' conduct towards her and his dismissive responses
to her complaints for years.
         On one occasion in 1987, however, when former Chief Van
Sciver happened to observe Gares in tears after Owens had made a
sexually offensive remark to her, Van Sciver asked Gares what was
the matter. Gares complained of Owens' conduct and explained
that Owens had denied her permission to appeal to the Township
Manager. Van Sciver told Gares he would take care of the matter,
but Owens persisted in his offensive conduct. About a year
later, Van Sciver again happened to observe Gares in tears
following another of Owens' remarks, and Gares explained that
Owens' offensive conduct had not diminished. Van Sciver told
Gares that both he and the Township Manager were aware of the
situation. Van Sciver engaged Gares in a third such conversation
in 1989, repeating his assurances, yet neither Van Sciver nor the
Township Manager ever conducted any investigation or took any
remedial action.
         After Owens had been promoted to Chief of Police, and
shortly after Gares filed her discrimination charges with state
and federal agencies in the spring of 1991, Gares met with the
Township Manager to discuss Gares' allegations against Owens.
The Township Manager told Gares that she did not believe Owens
would do such things, and asked if Gares thought Owens "had a
thing" for her. (Supp. App. at 60.) Following this meeting, the
Township Manager took no steps to investigate the allegations or
to correct the situation.
         In September 1991, Gares filed this civil rights action
in the United States District Court for the District of New
Jersey, alleging violations of   1983 and the LAD. In June
1993, the jury returned a verdict in favor of Gares against the
Township for $20,000 in compensatory damages and $30,000 in
punitive damages pursuant to the LAD, and against Owens for
$4,000 in compensatory damages and $8,000 in punitive damages
pursuant to   1983. Following the entry of judgment, Gares
timely moved for an award of attorney's fees pursuant to the LAD
and   1988, and the Township moved pursuant to Fed. R. Civ. P.
50(b) for judgment as a matter of law as to both the compensatory
and punitive damages verdicts. After denying the motion for
judgment as a matter of law and granting the award of attorney's
fees, the district court entered final judgment. This timely
appeal followed.

                               II.
         The district court had jurisdiction over the   1983
claims pursuant to 28 U.S.C.    1331 and 1343, and the court had
supplemental jurisdiction over the state law discrimination
claims pursuant to 28 U.S.C.   1367. We have jurisdiction
pursuant to 28 U.S.C.   1291.

                               III.
                                A.
         The Township argues first that punitive damages are
generally unavailable against municipal corporations and that a
court should not construe a statute to allow such damages absent
clear legislative expression or intent. Gares counters that the
LAD does, by its express terms, its legislative history and the
relevant case law, clearly provide for punitive damages against
all employers, including municipalities.
         In adjudicating a case under state law, we are not free
to impose our own view of what state law should be; rather, we
are to apply state law as interpreted by the state's highest
court in an effort to predict how that court would decide the
precise legal issues before us. Kowalsky v. Long Beach Twp., 

, 388 (3d Cir. 1995); McKenna v. Pacific Rail Serv., 

, 825 (3d Cir. 1994). In the absence of guidance from
the state's highest court, we are to consider decisions of the
state's intermediate appellate courts for assistance in
predicting how the state's highest court would rule. 

; Rolick v. Collins Pine Co., 

, 664 (3d
Cir. 1991) (in predicting state law, we cannot disregard the
decision of an intermediate appellate court unless we are
convinced that the state's highest court would decide otherwise).
Our review of the district court's determination of state law is
de novo. 

.
         Although the New Jersey Supreme Court and a panel of
the superior court have, as explained below, spoken to the issue
at hand, their decisions are not controlling law: the supreme
court decision was evenly split 3-3, and, in New Jersey, a panel
of the Superior Court, Appellate Division, is not bound by a
prior decision of another panel of that court. E.g., Manturi v.
V.J.V., Inc., 

, 862 (N.J. Super. Ct. App. Div. 1981)
("A decision of an inferior court is not binding on a court of
coordinate jurisdiction."). These decisions nevertheless remain
important guides for, in determining how the New Jersey courts
would approach and solve our problem, we must consider "analogous
decisions, considered dicta, . . . and any other reliable data
tending convincingly to show how the highest court in the state
would decide the issue at hand." McGowan v. University of
Scranton, 

, 291 (3d Cir. 1985) (internal quotation
marks omitted).
         We begin with the plain language of the statute. Under
the LAD, it is unlawful for an "employer" to discriminate against
an employee on the basis of her sex. N.J. Stat. Ann.    10:5-13.
The statute expressly defines the term "employer" to include "the
State, any political or civil subdivision thereof, and all public
officers, agencies, boards or bodies." N.J. Stat. Ann.    10:5-
5(e). The LAD was amended in 1990 specifically to clarify that
it makes available jury trials and legal remedies, including
punitive damages:
         The Legislature further finds that because of
         discrimination, people suffer personal
         hardships, and the State suffers a grievous
         harm. . . . Such harms have, under the
         common law, given rise to legal remedies,
         including compensatory and punitive damages.
         The Legislature intends that such damages be
         available to all persons protected by this
         act and that this act shall be liberally
         construed in combination with other
         protections available under the laws of this
         State.
N.J. Stat. Ann.   10:5-3 (emphasis added). The statute
reiterates: "All remedies available in common law tort actions
shall be available to prevailing plaintiffs. These remedies are
in addition to any provided by this act or any other statute."
N.J. Stat. Ann.   10:5-13.
         As Gares points out, the plain language of the statute
indicates the legislature's intent to make punitive damages
available under the LAD to all plaintiffs, including those with
public employers. Gares also refers us to the legislative
history of the 1990 amendments, which were enacted to overrule a
1989 decision of the New Jersey Supreme Court by expressly
providing that jury trials and punitive damages are available
under both the LAD and the Conscientious Employee Protection Act
("CEPA"), N.J. Stat. Ann.     34:19-1 to -8 (also known as the
"Whistleblower Act"). That legislative history states that "the
LAD is to be liberally construed so that all common law remedies,
including compensatory and punitive damages, are available to
persons protected by the LAD." Assembly Judiciary, Law and
Public Safety Committee, Statement to Assembly Committee
Substitute for Assembly Nos. 2872, 2118 and 2228 (Feb. 8, 1990),
reprinted in N.J. Stat. Ann.    10:5-3 at 454 (West 1993) and in1990 N.J.
Sess. Law Serv. 70, 73 (West). Thus, the legislative
history reinforces the plain, broad and inclusive language of the
statute and nowhere indicates any intention to exempt public
entities from possible punitive damages awards.
         A review of New Jersey case law provides no reason to
imply an exception for public employers into the LAD's express
punitive damage provisions, but instead reinforces the plain
meaning of the statute. In Abbamont v. Piscataway Twp. Bd. of
Educ., 

(N.J. 1994), the New Jersey Supreme Court, in
a 3-3 decision on the issue, let stand a superior court holding
that punitive damages are available against public entities under
CEPA--a statute the state supreme court has noted is analogous in
relevant language, purpose, and legislative history to the LAD.
See 

; N.J. Stat. Ann.    34:19-5 (West
Supp. 1995) (CEPA language, analogous to LAD language, providing:
"All remedies available in common law tort actions shall be
available to prevailing plaintiffs. These remedies are in
addition to any legal or equitable relief provided by this act or
any other statute. The court may also order . . . [p]unitive
damages . . . ."). Although the decisions of the supreme court
plurality and the superior court in Abbamont are not controlling
state law, we believe the majority and dissenting opinions in
that case best demonstrate how the New Jersey courts would
approach the issue before us and, accordingly, those opinions
provide the best guidance in predicting how the supreme court
would decide our issue today.
         The plaintiff in Abbamont was a non-tenured industrial
arts teacher who sued the board of education under CEPA, alleging
that he was not rehired in retaliation for his complaints about
inadequate ventilation in his shop. The jury returned a verdict
for the teacher, but the trial court withheld the punitive
damages issue from the jury. The superior court on appeal
reversed and remanded for a jury trial on the issue of punitive
damages, holding that punitive damages are available under CEPA
against public entities. Abbamont v. Piscataway Twp. Bd. of
Educ., 

, 548 (N.J. Super. Ct. App. Div. 1993), aff'd,

(N.J. 1994). An evenly-divided New Jersey Supreme
Court affirmed.
         The plurality's analysis in Abbamont began with
observations analogous to those above about the plain language of
the statute. Like the LAD, CEPA proscribes certain conduct by
employers (specifically, retaliatory action against employees for
disclosing the employer's unlawful practices or policies), and
the statute defines "employer" to include, inter alia, "all
branches of State Government, or the several counties and
municipalities thereof . . . ." N.J. Stat. Ann.    34:19-2(a).
CEPA explicitly provides that an aggrieved employee may seek
relief including punitive damages. N.J. Stat. Ann.    34:19-5(f).
The Abbamont plurality, like the superior court majority, found
this plain language of the statute compelling, and observed that
"no specific CEPA provision exists that precludes the awarding of
punitive damages against public employers. That omission must be
deemed 

.
         The Abbamont dissenters, while conceding that CEPA can
be broadly read to permit a punitive damages award against a
public employer, observed that CEPA does not explicitly state
that punitive damages may be awarded against public employers.
The dissent then expressed doubt that, by enacting CEPA, the
state legislature intended to "overcom[e]" New Jersey's Tort
Claims Act ("TCA") insofar as the TCA provides that "[n]o
punitive or exemplary damages shall be awarded against a public
entity." N.J. Stat. Ann.    59:9-2c. "The problem," the dissent
stated, "is in reconciling the language of [the TCA] with that
[of 

(Pollock, J., dissenting in part).
The dissent, also mentioning several public policy reasons why
such punitive damages awards should not be available, concluded
that "not permitting punitive-damage awards against public
employers is more consistent with the legislative intent," and
that "[t]he best solution would be for the Legislature to revisit
the issue and resolve it definitively." 

issue that divided the supreme court in
Abbamont, then, was whether the LAD could be reconciled with the
TCA. The plurality rejected the "implied repealer" argument
because "[t]he presumption against an implied repealer is
grounded in the basic statutory construction rule 'that every
effort should be made to harmonize the law relating to the same
subject matter'" and the "TCA and CEPA involve different subject
matter." 

(quoting State v. Green, 

(N.J. 1973)) (emphasis in original). In discussing this
point, the plurality drew from precedent regarding the LAD,
relying on the strong parallels between CEPA and the LAD. Citing
Fuchilla v. Layman, 

(N.J.), cert. denied, 

(1988), the Abbamont plurality noted that the LAD's purpose
is to abolish discrimination in the workplace, a goal that serves
both public and private interests, whereas the TCA's purpose is
to provide compensation to tort victims without imposing
excessive financial burdens on the taxpaying public. 

. The LAD provides relief from conduct more akin
to the malicious or willful acts exempted from the TCA than the
negligently inflicted injuries covered thereby. "Moreover, '[the
Tort Claims] Act disavows any remedial purpose to vindicate
societal interests or to rectify public or governmental
misconduct or to protect any individual constitutional or civil
right. It thus expressly prohibits exemplary or punitive damages
under the Act.'" 

(quoting 

(Handler, J., concurring)) (alteration in
original). The LAD, by contrast, is a civil rights statute that
embraces the remedial purpose disavowed by the TCA, and as such
"should be construed liberally to effectuate its important social
goal." 

see also N.J. Stat. Ann.    10:5-3 ("The
Legislature intends that . . . this act shall be liberally
construed . . . .").
         The Abbamont plurality also recognized that punitive
damages are available under the LAD only where the offending
conduct "is particularly 

, which the
supreme court has defined, as explained more fully below, as
conduct that is intentional, malicious, and "evil-minded."
Rendine v. Pantzer, 

, 1215 (N.J. 1995). The TCA, in
contrast, explicitly provides that a public entity is not liable
thereunder "for the acts or omissions of a public employee
constituting . . . actual malice[] or willful misconduct." N.J.
Stat. Ann.   59:2-10. Thus, the TCA does not apply to
intentional wrongs such as give rise to claims under the LAD, so
that the TCA's "limitation[] on judgments" proscribing punitive
damages awards for tort claims brought thereunder, 

is simply inapplicable to the LAD. The two statutes
operate independently of one another. As the New Jersey Supreme
Court concluded in Fuchilla, because of the differences in
purpose and scope of the two statutes, "the Legislature did not
intend that the [Tort Claims] Act apply to discrimination claims
under the 

.
         We accordingly predict that the New Jersey Supreme
Court would follow its decision in Fuchilla and the plurality
opinion in Abbamont to hold that the TCA's exclusion of punitive
damages awards against public entities is not controlling in
light of the LAD's plain language and stated purpose. Because
the supreme court has held that the TCA does not apply to claims
under the LAD alleging intentional or malicious misconduct of a
public employee, there is no conflict between the two statutes,
and accordingly no implied repealer under New Jersey law.
         Not only did the supreme court plurality in Abbamontfind the TCA
no barrier to punitive damage recoveries against
municipalities in CEPA actions, it also found that the TCA
"exemplifies the Legislature's ability to exclude the
availability of punitive damages against public entities when it
so chooses. See also N.J.S.A. 59:13-3 (providing 'no recovery
against the State for punitive . . . damages arising out of
contract' allowed under the Contractual Liability 

(omission in original). But the state legislature
did not exclude such recovery under either the LAD or CEPA, and
the plurality was unwilling to attribute this result to
legislative inadvertence or oversight: "That omission must be
deemed purposeful," for the TCA "reestablished sovereign immunity
against tort claims 'except whe[n] there is a statutory
declaration of liability.'" 

v. Deiner, 

, 397 (N.J. 1984)).
         Finally, the plurality, like the superior court
majority, found that the New Jersey legislature must have
considered and rejected policy arguments such as those
articulated a decade earlier in City of Newport v. Fact Concerts,
Inc., 

(1981) (holding that punitive damages are not
available against municipalities under 42 U.S.C.   1983), when it
amended the LAD and CEPA in 1990 to make punitive damages
available to "all persons" protected under the two statutes.

; 634 A.2d at 547. The Abbamontplurality also
stated that those policy concerns are partly
alleviated by the heightened standard for imposing liability for
punitive damages under the LAD as articulated in Lehmann v. Toys
'R' Us, Inc., 

, 464 (N.J. 1993) (expressly rejecting
a theory of vicarious liability and holding that punitive damages
are available under the LAD only if the conduct of managerial or
supervisory officials is particularly egregious and involves
willful indifference or actual participation). "Based on that
kind of misuse of governmental authority," the Abbamont plurality
observed, "punitive damages serve to effectuate the goals of a
statute that is specifically designed to discourage and eradicate
vindictive action by employers and to further important interests
of both employees and the 

; see 

("We think that providing employers with
the incentive not only to provide voluntary compliance programs
but also to insist on the effective enforcement of their programs
will do much to ensure that hostile work environment
discrimination claims disappear from the workplace and the
courts."). The Abbamont plurality thus "defer[red] to the
Legislature in including punitive damages in the remedial arsenal
available against public as well as private employers for
especially virulent retaliatory 

.
         We find the analysis of the Abbamont plurality
persuasive. We agree with its ultimate conclusion: "A sensible
and unconstrained reading of the language of CEPA, a
consideration of the provisions of CEPA in light of the Tort
Claims Act (TCA), a review of CEPA's legislative history, an
understanding of the underlying policy concerns in awarding
punitive damages against public entities, and an examination of
CEPA's remedial purpose persuade us that CEPA does allow the
award of punitive damages against public entities." 

(citation omitted).
         Moreover, we conclude that the analysis of the Abbamontplurality
regarding the CEPA is equally persuasive in the context
of the LAD. The LAD and CEPA are quite similar in their broad
language, remedial purpose, and legislative history (having both
been amended by the same act to include jury trials and punitive
damages). The New Jersey Supreme Court treated them as matching
pairs in Abbamont, construing the LAD and CEPA together as
distinct from the TCA. Abbamont could as easily have been a
decision under the LAD; the same arguments apply equally to both
statutes.
         Given the plain language, legislative history and
purpose of the LAD, and considering the New Jersey courts'
interpretations of the LAD and CEPA, we predict that the Supreme
Court of New Jersey would hold that the LAD permits the recovery
of punitive damages against public entities.

                               B.
        The Township next argues that the punitive damages
award must be set aside because the plaintiff produced no
evidence of the defendant's financial condition or ability to
pay. Gares counters that there was sufficient evidence before
the jury from which it could have inferred that the Township had
the ability to pay the $30,000 punitive damages award it
assessed. She also points to the district court's assertion that
it would be "an absolute waste of judicial time and resources" to
conduct a second trial on the punitive damages issue, solely to
add evidence of the Township's ability to pay, where the
offending conduct was so egregious and the punitive damages award
was only $30,000. (Dist. Ct. Op. of June 16, 1994 at 9.) As
explained above, we exercise plenary review over the district
court's determination of state law.
         Under the general law of punitive damages in New
Jersey, the plaintiff has the burden of producing evidence of the
defendant's ability to pay a punitive damages award. Herman v.
Sunshine Chemical Specialties, Inc., 

, 1090 (N.J.
1993) (stating that the plaintiff bears the burden of proving a
defendant's financial condition in "all claims for punitive
damages"); McDonough v. Jorda, 

, 879 (N.J. Super. Ct.
App. Div. 1986) (holding that, "[i]n assessing exemplary damages,
a jury must take into consideration the wealth of the
defendants"--"an essential of [the plaintiff's] burden of proof,"
the absence of which "precluded the jury from having a proper
foundation to assess damages"), certif. denied, 

(N.J. 1988), cert. denied, 

(1989).
         In Herman, the New Jersey Supreme Court was called upon
to interpret a New Jersey Products Liability Act provision
regarding punitive damages. Although the statute, in accordance
with New Jersey common law, expressly provided that the trier of
fact "shall consider . . . [t]he financial condition of the
tortfeasor," the statute did not expressly allocate the burden of
proof on that 

(quoting N.J. Stat. Ann
  2A:58C-5d(4)). As the supreme court noted, however, the
statute does explicitly state that "[e]xcept as otherwise
expressly provided in this act, no provision of this act is
intended to establish any rule, or alter any existing rule, with
respect to the burden of proof . . . ." 

(quoting
N.J. Stat. Ann.   2A:58C-7). "Just one year before the adoption
of the act," noted the court, "the Appellate Division made clear
that the burden of proof rests on the plaintiff." 

519 A.2d at 879). Because the statute did not change
that allocation, the supreme court concluded that the plaintiff
bears the burden of proof of the defendant's ability to pay under
the Products Liability Act. 

the New Jersey Supreme Court would similarly
conclude that this rule applies to punitive damages awards under
the LAD. The LAD is silent as to the requisite proof or
instructions regarding punitive damages awards. As explained
above, the state legislature amended the LAD in 1990 to provide
for "legal remedies, including compensatory and punitive
damages," such as existed at "common law." N.J. Stat. Ann.
  10:5-3. The state legislature thus made available punitive
damages awards under the LAD with conscious reference to the
existing common law of punitive damages awards. See also 

remedies available in common law tort actions
shall be available to prevailing plaintiffs."). At the time the
LAD was enacted, New Jersey common law provided that the
plaintiff bears the burden of proof of the defendant's financial
condition to support an award of punitive damages. See 

(citing 1986 superior court decision in
McDonough). We believe the New Jersey Supreme Court would
accordingly interpret the LAD to hold that the general law of New
Jersey regarding evidence of a defendant's ability to pay applies
to LAD actions involving punitive damages.
         The plaintiff's failure to produce evidence of the
defendant's ability to pay does not necessarily require the court
to set aside a jury's award of punitive damages, however. 

(holding that, although the plaintiff
failed to produce the requisite evidence of the defendant's
financial condition, the jury ultimately heard sufficient
evidence thereof to support the punitive damages award). The
supreme court in Herman noted that a defense witness testified on
cross-examination that, during a year relevant to the litigation,
the company had had gross sales of $3.5 million and its owner had
sold 100% of its stock for 

. The
court found that this circumstantial evidence of ability to pay,
"although not overwhelming, [was] sufficient to support an award
of punitive damages" of $400,000 where the defendant did not
argue that the award was excessive. 

requires juries to take into account
evidence of the defendant's financial condition "because the
theory behind punitive damages is to punish for the past event
and to prevent future offenses, and the degree of punishment
resulting from a judgment must be, to some extent, in proportion
to the means of the guilty person." 

(citing Restatement (Second) of Torts   908 cmt. d (1977));
accord 

(noting that the purposes of
punitive damages are punishment and deterrence). The New Jersey
Supreme Court noted in Herman that the evidence of "ability to
pay" does not necessarily equate with "net worth" because,
"[d]epending on the facts of a case, a defendant's income might
be a better indicator of the ability to 

.
         The relevance of such evidence therefore goes solely to
the amount of an appropriate damage award. It is relevant to the
amount of such an award for two reasons. The amount should be
large enough in relation to the defendant's ability to pay so
that the sanction is felt, i.e., is effective. On the other
hand, the amount should be small enough in relation to the
defendant's ability to pay that it is not over-the-hill, i.e.,
beyond the defendant's ability to pay without unduly harsh
consequences. See generally 

(discussing arguments for and against having juries consider
evidence of a defendant's wealth).
         If the record in a case provides some basis for a
conclusion that the verdict is not beyond the defendant's ability
to pay, we do not believe a defendant would be heard to complain
in New Jersey about the possibility of the award being too low.
We think this is such a case. While the current record regarding
the Township's ability to pay might not support a very large
punitive damage verdict, we believe the jury could, as the
district court found that it did, infer from background evidence
bearing circumstantially on the ability to pay issue that the
Township could fairly be called upon to pay a punitive damage
award of $30,000. Trial testimony indicated that the Township
employed over 100 police officers and traffic guards (plus an
unspecified number of supervisors, secretaries and support staff)
in its police department alone, allowing the jury reasonably to
infer that, if the Township could pay normal wages to hundreds of
employees, it had the ability to pay $30,000 to one wronged
employee. "[A]lthough not overwhelming," this evidence is
sufficient to support the relatively small punitive damages award
under the facts of this case. See 

.
Like the defendant in Herman, the Township does not argue that
the award is excessive. On this basis, we predict that the
supreme court would find the award supported on the facts of this
case. Accordingly, we conclude that the district court did not
err in refusing to set aside the jury's award of punitive damages
against the Township.

                                C.
         Arguing that there is no evidence of exceptional
circumstances necessary to support a punitive damages award under
the LAD, the Township's final contention is that the district
court erred in refusing to set aside the punitive damages award
against the Township for insufficient evidence. In resolving
this issue, we must review the district court's denial of the
Township's motion for judgment as a matter of law. We apply the
same federal standard the district court should have applied:
viewing the evidence in a light most favorable to the plaintiff,
a motion for judgment as a matter of law should be denied unless
the record is critically deficient of that minimum quantum of
evidence from which a jury might reasonably afford relief.
Rotondo v. Keene Corp., 

, 438 (3d Cir. 1992).
         In the context of CEPA but drawing from precedent under
the LAD, a plurality of the New Jersey Supreme Court has stated
that punitive damages are available against public entities
         if the conduct of managerial or supervisory
         government officials is particularly
         egregious and involves willful indifference
         or actual participation. Based on that kind
         of misuse of governmental authority, punitive
         damages serve to effectuate the goals of a
         statute that is specifically designed to
         discourage and eradicate vindictive [or,
         under the LAD, discriminatory] action by
         employers and to further important interests
         of both employees and the public.

(discussing standards articulated in
Lehmann v. Toys 'R' Us, Inc., 

, 464 (N.J. 1993)
(regarding the LAD)).
         The supreme court's most recent articulation of the
standard for awarding punitive damages against an employer under
the LAD is this: the plaintiff must establish (1) that the
offending conduct was "especially egregious" and (2) that upper
management actually participated in or was willfully indifferent
towards that conduct. Rendine v. Pantzer, 

, 1215
(N.J. 1995) (citing 

).   The court stated
that, for the offending conduct to be "sufficiently egregious to
warrant a punitive-damage award," the conduct must be "wantonly
reckless or malicious," or,
         an intentional wrongdoing in the sense of an
         "evil-minded act" or an act accompanied by a
         wanton and wilful disregard of the rights of
         another. . . . Our cases indicate that the
         requirement [of willfulness or wantonness]
         may be satisfied upon a showing that there
         has been a deliberate act or omission with
         knowledge of a high degree of probability of
         harm and reckless indifference to
         consequences.

marks omitted; alteration in original).
The employer in Rendine surreptitiously replaced the plaintiff
employee while she was on maternity leave and then contrived
pretextual reasons upon her return to fire her. The court held
that the evidence was sufficient to "permit[] the jury to
conclude that defendant's decision to terminate plaintiff's
employment was accompanied by conduct that was malicious and
intentionally wrongful." 

         Applying this standard here, we must first address
whether there is sufficient evidence from which the jury might
reasonably have found that Owens' conduct was "especially
egregious." We believe that there is ample evidence to support
such a conclusion. Owens' actions are the sort of "deliberate
act[s] or omission[s] with knowledge of a high degree of
probability of harm and reckless indifference to consequences"
that warrant a punitive damages award under the LAD. 

(internal quotation marks omitted). In short, because there is
sufficient evidence that Captain Owens fostered a sexually
hostile work environment within the Services Division, and that
he persisted for years in his highly offensive conduct despite
his knowledge that it offended and upset Gares, the jury could
reasonably have found that Owens' conduct was "especially
egregious."
         The second prong of the punitive damages standard
requires us to consider whether there is sufficient evidence that
upper management actually participated in or was callously
indifferent towards the offensive conduct. We believe the jury
might reasonably have found that Owens' position qualified him as
"upper management" himself. For the first seven years of Owens'
harassment of Gares (from 1983 to 1990), Owens was the Captain in
charge of the Services Division wherein plaintiff Gares worked,
answerable only to the Chief of Police and the Township Manager
above him. As Captain of the Services Division, Owens set the
atmosphere and controlled the day-to-day operations of that
office. Because of his high rank and pervasive influence over
the employees he supervised, the jury was entitled to find that
Captain Owens was an upper management official whose outrageous
conduct subjected the Township to punitive damages liability
under the LAD.
         Although Owens may be the only supervisory official who
actually participated in the offensive conduct, the jury's award
can also be justified because there is evidence that other "upper
management" officials showed callous disregard for Owens'
conduct. The record would support a finding that Chief Van
Sciver, and perhaps even the Township Manager herself, were aware
of but willfully indifferent to Gares' complaints. On several
occasions between 1987 and 1989 when Gares complained to Chief
Van Sciver about Owens' offensive conduct, Van Sciver would
promise to "take care of" the situation and would say he had told
the Township Manager about Gares' complaints, but neither he nor
the Township Manager did anything to investigate or remedy the
situation over the next few years. The Township agreed with the
district court that Chief Van Sciver's statement's are
attributable to the Township itself (Supp. App. at 3-4)--which is
especially appropriate in light of the Police Department's chain-
of-command policy that prohibited Gares from appealing directly
to the Township Manager. When the Township Manager read Gares'
administrative complaint, she told Gares she "didn't believe
Owens would ever say such things" and asked Gares if she thought
Owens "had a thing" for Gares. Given the outrageousness of
Captain Owens' conduct towards the women in his division and
towards Gares in particular, and given the seven-year period over
which all this conduct took place on a daily or weekly basis, the
jury could reasonably have concluded that Chief Van Sciver and
the Township Manager were aware of but callously and deliberately
indifferent towards Owens' egregious conduct.
         Thus, we hold that there was sufficient evidence to
support the jury's award of punitive damages against the
Township, and that the district court accordingly did not err in
declining to set that award aside.

                               IV.
         For the foregoing reasons, we will affirm the district
court's order denying the Township's motion for judgment as a
matter of law.

GARES v. WILLINGBORO TOWNSHIP, et al.
No. 95-5269
ROSENN, Circuit Judge, dissenting.

         The immunity at common law of municipal corporations
from liability for punitive damages was generally understood when
the federal Civil Rights Act became law in 1871. Courts that had
considered the issue prior to the enactment of section 1983 "were
virtually unanimous in denying such damages against a municipal
corporation." City of Newport v. Fact Concerts, Inc., 

, 259 (1981). Judicial aversion against awarding punitive
damages against a municipality persists in the overwhelming
majority of jurisdictions even now. "The general rule today is
that no punitive damages are awarded unless expressly authorized
by statute." Id.; 18 McQuillin, Municipal Corps.    53.18.10,
p.247 (3rd Ed. 1993).
         The New Jersey Law Against Discrimination (LAD),
N.J.S.A.    10:5-1 et seq., does not expressly make a
municipality liable for punitive damages. Moreover, strong
public policy and logic militate against the assessment of such
exemplary damages. Because of these reasons, I believe the New
Jersey Supreme Court would hold that municipalities in the State
of New Jersey are immune from punitive damages in suits brought
against them under the LAD. I therefore respectfully dissent.
                                I.
         Gares, a Township employee, suffered discrimination and
harassment because of her sex. This is a violation of her civil
rights under federal and New Jersey law, and the jury
appropriately compensated her for the actual damages she
suffered. The jury also found that the offender, former police
chief Gary Owens, behaved egregiously, and assessed punitive
damages against him to punish or to teach him a lesson. But
that, in my view, is the limit of the damages which plaintiff can
recover for her injuries.
         The District Court permitted the jury to assess
punitive damages against the township of Willingboro as well,
under New Jersey's LAD. Because this raises a question
pertaining to the correct statutory interpretation, it is a
purely legal issue. Thus, this court should exercise plenary
review, giving no deference to the district court's holding.
Oritani Sav. and Loan Ass'n v. Fidelity and Deposit Co. of
Maryland, 

(3d Cir. 1993).
         The majority relies on a 3-3 decision addressing the
question of the availability of punitive damages against a
municipality in New Jersey's Conscientious Employee Protection
Act (CEPA), N.J.S.A.   34:19-1 et seq., a substantially similar
statute designed to protect "whistleblowers" from retaliatory
action by their employers. In Abbamont v. Piscataway Township
Board of Education, 

(N.J.Super. 1993), the Superior
Court of New Jersey, in a 2-1 decision, held that the issue of
punitive damages against the Township for violations of CEPA,
under a theory of vicarious liability, should be submitted to the
jury. The majority reasoned that, because public employers were
not specifically exempted from this portion of the statute, they
were impliedly included.
         The Supreme Court of New Jersey, however, split on this
issue, 3 to 3. In Abbamont v. Piscataway Township Board of
Education, 

(N.J. 1994), the opinion written by Judge
Handler adopted the reasoning of the panel majority of the
Superior Court. Judge Pollock, however, joined by two other
judges, held that "the Legislature did not intend that public
entities should be subject to payment of punitive damages under
the Conscientious Employee Protection Act." 

(Pollock, J., dissenting). Accordingly we have no
clear mandate from the New Jersey Supreme Court on this issue.
Although the majority in this case recognizes that we have no
controlling law, typescript at 10, it fully adopts the reasoning
of the Handler opinion. I believe that this reasoning ignores
important considerations of history, policy and United States
Supreme Court precedent which today would decisively influence a
majority of the New Jersey Supreme Court to the contrary.
              LAD itself is silent upon this issue. It
specifically includes the State and its political subdivisions in
its definition of employer, N.J.S.A.   10:5-5(e), and provides
that "[a]ll remedies available in common-law tort actions shall
be available to prevailing plaintiffs." N.J.S.A. 10:5-13.
Based on a tortured reading of these two provisions, Gares
asserts that the statute provides for the imposition of punitive
damages against a municipality. The majority agrees, relying
heavily on a phrase within the LAD that provides that the Act
"shall be liberally construed." N.J.S.A.    10:5-3. This phrase
is insufficient to constitute express authorization of punitive
damages against municipalities in light of history and
overwhelming case law; express authorization is what is needed to
make them available to plaintiffs.
         Municipalities were absolutely immune from suit at
common law. The New Jersey legislature may have abrogated this
immunity for purposes of the LAD, but there is no evidence in the
plain language of the Act or in the legislative history to show
that the legislature intended to abrogate immunity so far as to
make municipalities liable for punitive damages over and above
compensation to the injured employee. The majority relies on
implication to reach this conclusion, an implication which I
cannot believe the legislature intended.
         At common law, it was well-settled that municipalities
could not be subject to punitive damages. The United States
Supreme Court and the majority of states that have considered
this issue have kept this common-law rule. See, e.g., Newport v.
Fact Concerts, Inc., 

(1981)(recognizing the common
law, and extending it to exempt municipalities from punitive
damages under 42 U.S.C.   1983); Genty v. Resolution Trust Corp.,

(3d Cir. 1991)(holding that civil RICO claim,
because of the punitive nature of its damages, could not be
brought against a municipality); Fisher v. Miami, 

(Fla.App. 1964)(ruling that punitive damages against a
municipality do not serve the purpose of punitive damages against
private bodies, and unfairly punish the public).
         In fact, originally municipalities were not liable even
for compensatory damages. Rather, municipalities, as agents
solely of the public, were absolutely immune from suit. See,
Russell v. Men of Devon, 100 Eng.Rep. 359 (1789). Since that
time, absolute immunity for municipalities has been abrogated.
Judges have held that losses due to tortious conduct on the part
of municipal employees is better borne by the municipality than
by the wholly innocent injured individual. This makes sense, as
it would be unjust for a plaintiff to go completely uncompensated
after suffering compensable injuries. Compensatory damages,
then, have become part of the cost of the administration of
government.
         Such concerns, however, are not present in the realm of
punitive damages. Punitive damages are completely unrelated to
compensating and "making whole" the injured plaintiff. Rather,
they are monies awarded solely to punish the defendant, whose
conduct has been deemed egregious, and to discourage him or her
from continuing the pattern of behavior. Punitive damages, when
assessed against individuals, as they are here against Owens,
benefit the public by discouraging such behavior. See, 

.
         This rationale, however, is inapplicable to a
municipality. Punitive damages, when assessed against a
municipality, are ultimately borne by the taxpayers, who have no
control or input in the officer's offensive behavior. Thus, the
damages punish those persons who normally benefit by their
assessment. Punishing innocent taxpayers serves no purpose but
to give a windfall to the plaintiff. For this reason, the
majority of states that have considered the issue have not
assessed punitive damages against municipalities.
         In general, courts viewed punitive damages as contrary
         to sound public policy because such awards would burden
         the very taxpayers and citizens for whose benefit the
         wrongdoer was being chastised. The courts readily
         distinguished between liability to compensate for
         injuries inflicted by a municipality's officers and
         agents, and vindictive damages appropriate as
         punishment for the bad-faith conduct of those same
         officers and agents. Compensation was an obligation
         properly shared by the municipality itself, whereas
         punishment properly applied only to the actual
         wrongdoers. The courts thus protected the public from
         unjust punishment and the municipalities from undue
         fiscal constraints.

.
         When punitive damages are assessed against a private
corporation, such costs are ultimately borne by the shareholders.
However, shareholders in private corporations can demand
accountings, and can divest themselves of their shares if they
disapprove of the corporation's conduct. In contrast, citizens
of a municipal corporation have no way of demanding an
accounting, and no way of disassociating except to move to
another jurisdiction, an option that, depending on financial
ability, the housing market, availability of suitable
neighborhoods, and such, is dubious at best.
         Citizens do have the power to vote for some of their
municipal officers. However, this power can be exercised only
periodically, and even then, citizens cannot make every personnel
decision. In the present case, for example, Sadie Johnson, the
Township manager, who was appointed to her position, appointed
former chief Owens to his position. It is difficult to see what
the citizens of Willingboro could have done in the situation
before us. "While theoretically [municipal residents] have a
voice in selecting the agents who shall represent and control the
municipality, we know that practically it often happens that the
government is not of their choice, and its management not in
accordance with their judgment." 

, citingRanells v.
City of Cleveland, 

, 88-89 (Ohio 1975).
         Moreover, the reasoning that punitive damages serve as
a deterrent becomes less sensible when applied to a municipality.
As the Court stated, "it is far from clear that municipal
officials...would be deterred from wrongdoing by the knowledge
that large punitive awards could be assessed based on the wealth
of their municipality." 

. Indeed, the
individual officials are much more likely to be deterred by the
threat of punitive damages assessed specifically against them.
         I do not mean to imply by this dissent, that states may
not ignore these policies and choose to subject their
municipalities to punitive damages. However, the state
legislature must make such a choice explicitly in order to be
enforceable. In Newport v. Fact Concerts, 

, the Court
refused to impose punitive damages on municipalities under 42
U.S.C.   1983. A substantial portion of its reasoning was that
the Court found "no evidence that Congress intended to disturb
the settled common-law immunity." 

Thus, we too
should find positive evidence in LAD that the New Jersey
legislature intended to include municipalities as defendants
subject to punitive damages. The absence of an intent to exclude
them is insufficient to predicate the prediction announced by the
majority in this appeal.
         I also doubt that the Legislature, when enacting LAD,
"thought that it was overcoming the ban of the Tort Claims Act
(TCA), N.J.S.A.   59:9-2, on awarding punitive damages against
public entities. That statute provides: `No punitive or
exemplary damages shall be awarded against a public entity.' Id."
Abbamont v. Piscataway Township, 

, 972 (N.J.
1994)(Pollock, J., concurring and dissenting).
                               II.
         In sum, the better policy, and the weight of the law,
is against permitting courts to assess punitive damages against a
municipality, especially at this time when states, including New
Jersey, the local municipalities, and even the national
government have troublesome budgetary problems. Although
municipalities are liable for the actual damages suffered by
plaintiffs, and the personal offender for both actual and
punitive damages, the overwhelming majority of jurisdictions have
held that municipal liability is limited to compensatory damages.
See 18 McQuillin on Municipal Corp.   53.18.10 (3d Ed. 1993).
         New Jersey is certainly free to set contrary policy in
its municipalities. However, such policy should be expressly
stated by legislative enactment, not judicial decision. There is
no express intent in the LAD to subject municipalities to
punitive damages. Rather, the statute awards plaintiffs all the
benefits they would receive at common law. At common law, a
plaintiff could have recovered nothing from a municipality. The
New Jersey legislature has expressly broadened the definition of
employer to include municipalities, thus broadening a plaintiff's
common law remedies. But without express authorization in the
statute for also assessing punitive damages against
municipalities, I am unwilling to agree with the majority that
the New Jersey Supreme Court would agree that this was the
legislature's intent. Such a break with precedent would have to
be precisely spelled out.   Therefore, I must dissent.