In tort actions, punitive damages are allowable where this threshold of moral culpability and blameworthiness is satisfied.7 In breach-of-contract actions, however, the party seeking punitive damages must make additional showings.
A party seeking punitive damages in a breach-of-contract action must demonstrate that: (1) the defendant’s conduct is actionable as an independent tort; (2) the tortious conduct is sufficiently egregious to satisfy the moral culpability and blameworthiness threshold; (3) the egregious conduct was directed at the plaintiff; and (4) the conduct was part of a pattern aimed at the public generally.8 According to Court of Appeals case law, the aimed-at-the-public requirement is imposed in breach-of-contract actions because punitive damages, unlike breach-of-contract actions, are meant to vindicate public rights.9
Burden of Proof
While the law is relatively settled with respect to the type of conduct that will give rise to a punitive damages award, “New York law on the burden of proof [for establishing] punitive damages is unclear,”10 and currently is dependent on the venue of the action. The lack of clarity flows not only from the previously noted north-south split among the departments of the Appellate Division but also from the lack of discussion in the cases supporting each standard.
This split is important because the issue of burden of proof is entirely a question of state law. Despite the many substantive and procedural due process constraints placed on punitive damages awards by the U.S. Supreme Court in recent years,11 the Court has expressly rejected the assertion that the Due Process Clause of the federal Constitution requires a burden of proof higher than preponderance of the evidence.12 Therefore, this issue of New York law will finally be resolved if and when it reaches the Court of Appeals again.
The function of a burden of proof “‘is to instruct the fact-finder concerning the degree of confidence our society thinks he [or she] should have in the correctness of factual conclusions for a particular type of adjudication.’”13 The typical burden of proof in a civil action between private parties for damages is preponderance of the evidence.14 Preponderance of the evidence means “the greater part” of the evidence before the trier of fact, and the trier of fact may find for the plaintiff if “the evidence favoring the plaintiff’s claim outweighs the evidence opposed to it.”15 The preponderance of the evidence standard endorsed by the Third and Fourth departments ultimately draws its strength from an 88-year-old Court of Appeals decision.
The ‘Corrigan’ Case
In 1920, the Court of Appeals declared in Corrigan v. Bobbs-Merrill Co. that “[i]n order to recover punitive damages, plaintiff was bound to satisfy the jury by a fair preponderance of evidence” that the defendant engaged in certain conduct in defaming the plaintiff.16 Remarkably, the Court did not mention its 1874 precedent Cleghorn v. New York Cent. & Hudson River R.R.17 that, as discussed below, went the other way. Thirty-four years after Corrigan was decided, in Frechette v. Special Magazines,18 the Appellate Division, Third Department, without citing Corrigan, specifically endorsed a charge that asserted that “before you can find a verdict of exemplary damages th[e] plaintiff must establish to you by a fair preponderance of the evidence that the defendant [engaged in certain types of conduct].” In Seventh Judicial District Asbestos Litigation, the Fourth Department followed Corrigan and concluded that preponderance of the evidence is the correct standard.19
Thus, on the preponderance side of the ledger there is an 88-year-old Court of Appeals case and one decision from each of the upstate departments. With respect to federal case law, even if not authoritative, there is a 1990 U.S. Court of Appeals for the Second Circuit case that endorses the preponderance standard;20 however, that 1990 case is the only one of several Second Circuit opinions on the issue that comes down on that side.21 Additionally, multiple district court decisions have endorsed the preponderance standard.22
‘Clear and Convincing’
The clear and convincing standard is less commonly used in civil cases than the preponderance standard, but it is particularly appropriate in civil actions involving allegations of fraud or other quasi-criminal conduct.23
Clear and convincing evidence is evidence that satisfies the fact-finder that there is a high degree of probability that the defendant engaged in exceptional misconduct.24 In 1874, in the course of reviewing a jury instruction regarding punitive damages, the Court of Appeals in Cleghorn v. New York Cent. & Hudson River R.R.25 declared that “something more than ordinary negligence is requisite; [the conduct] must be reckless and of a criminal nature, and clearly established.”
As previously noted, when the Court reached the opposite conclusion 46 years later in Corrigan it failed to mention Cleghorn. Both the First and Second departments have consistently held that the correct standard is clear and convincing evidence, although it took them approximately 120 years to adopt the standard endorsed by Cleghorn. Indeed, in Camillo v. Geer, the lead First Department case on the issue, the primary citation was to a Second Circuit case,26 with Cleghorn listed as a “see also.” There is no extensive discussion of the burden of proof issue in any of the five First and Second department decisions enumerating or sustaining the clear and convincing concept, and none of those decisions cites Corrigan.27
Notably, however, the standard endorsed by the First and Second departments – clear and convincing evidence – is also the standard applied by the majority of New York’s sister states. In fact, 23 states have statutes requiring awards of punitive damages to be supported by clear and convincing evidence;28 several others require such evidence pursuant to judicial decisions.29
The elevated burden of proof entailed by the clear and convincing standard may have its best rationale in the fact that claims for punitive damages, which are designed to punish and deter wrongdoers, involve allegations of exceptional misconduct. As discussed above, punitive damages may be awarded only where a party’s conduct
The interests of the party against whom punitive damages are sought are “more substantial than mere loss of money” since that party’s reputation could be tarnished if a fact-finder determined that the party engaged in exceptional misconduct.31 A heightened burden of proof, such as clear and convincing evidence, serves to reduce the risk that the party against whom punitive damages are sought will have its reputation erroneously tarnished.
The ‘Parasitic’ Theory
As if the debate regarding the appropriate burden of proof for an award of punitive damages is not complicated enough, another burden of proof has been suggested, one that attempts to place the burden of proof in harmony with the parasitic nature of punitive damages. In Greenbaum v. Svenska Handelsbanken, N.Y., then-District Judge Sonya Sotomayor observed that her conclusion, based principally on Corrigan and a Second Circuit decision,32 that preponderance of the evidence was the appropriate burden of proof for an award of punitive damages was bolstered by the facts that (1) punitive damages are not a separate cause of action and are inextricably linked to an underlying, substantive cause of action, and (2) the burden of proof on the plaintiff’s substantive causes of action was preponderance of the evidence.33 She further observed that “it is more reasonable to apply the same burden of proof with respect to [an award of punitive damages] as is applied to other aspects of the claim.”
Thus, Greenbaum articulated a new theory concerning the burden of proof on an award of punitive damages – the “parasitic” theory. The “parasitic” theory suggests that the same burden of proof on the substantive cause of action should be applied to the claim for punitive damages. This theory has some appeal since it recognizes the inextricable nature of the relationship between a substantive cause of action and punitive damages.34 However, no New York appellate court has embraced it.35
Conclusion
The appropriate burden of proof for an award of punitive damages remains an unsettled issue that awaits resolution by the Court of Appeals. In the meantime, a lawyer confronted with the issue must look to the law in his or her judicial department. Although the possibility of change can never be discounted, the decisions of the downstate departments are relatively recent and there is nothing to indicate that the upstate departments are inclined to alter their less-recent views. Thus, it is more likely that all departments will, pursuant to stare decisis, adhere to their own precedents. Therefore, resolution of the issue, if it does occur, will flow at the onset from the efforts of a diligent practitioner who, by appropriate objection and request to charge,36 creates the path to the Court of Appeals.37
Leon D. Lazer is a retired associate justice of the Appellate Division, Second Department and professor of law at Touro College Jacob D. Fuchsberg Law Center. John R. Higgitt is the law clerk to associate justice James M. McGuire, of the First Department, and an adjunct assistant professor of law at Benjamin N. Cardozo School of Law.
Endnotes:
1. See e.g. Philip Morris U.S.A v. Williams, 549 U.S. 346 (2007).
2. Ross v. Louise Wise Serv., 8 NY3d 478 (2007).
3. Ross, 8 NY3d at 489. In a tort action, compensatory damages are meant to provide the injured party with fair and just compensation for the injuries the party sustained as a result of the tortious conduct (see id.). In a breach-of-contract action, compensatory damages are designed to place the nonbreaching party in as good a position as it would have been had the contract been performed (Brushton-Moira Cent. School Dist. v. Fred H. Thomas Assoc., 91 NY2d 256, 261 [1998]).
4. Ross, 8 NY3d at 489; see Exxon Shipping Co. v. Baker, U.S., 128 S.Ct. 2605, 2621 (2008), citing PJI 2:278.
5. Randi A.J. v. Long Is. Surgi-Ctr., 46 AD3d 74, 80 (2007), quoting Rocanova v. Equit. Life Assur. of U.S., 83 NY2d 603, 616 (1994).
6. Ross, 8 NY3d at 489 (internal quotation marks, citations and ellipsis omitted); see Randi A.J., 46 AD3d at 82 (punitive damages may be imposed absent evidence that misconduct was done with evil motive or in bad faith; evidence that defendant engaged in grossly negligent or reckless conduct evincing an utter disregard for the safety or rights of others can provide basis for award of punitive damages).
7. Giblin v. Murphy, 73 NY2d 769, 772 (1988). The particular type of conduct giving rise to a punitive damages award may vary depending upon the nature of the action (e.g., defamation, automobile accidents, medical malpractice). For a discussion of the nuances in the type of conduct required to sustain an award of punitive damages in these and other actions, see the comment to PJI 2:278.
8. New York Univ. v. Continental Ins. Co., 87 NY2d 308, 316 (1995).
9. Rocanova, 83 NY2d at 613 (“Punitive damages are not recoverable for an ordinary breach-of-contract as their purpose is not to remedy private wrongs but to vindicate public rights . . . . Thus, a private party seeking to recover punitive damages [in a breach-of-contract action] must not only demonstrate egregious tortious conduct by which he or she was aggrieved, but also that such conduct was part of a pattern of similar conduct directed at the public generally”).
10. Greenbaum v. Svenska Handelsbanken, NY, 979 F.Supp. 973 (Sotomayor, J., SDNY 1997).
11. Philip Morris, 549 U.S. 127 S.Ct. at 1063 (Due Process Clause prohibits punitive damages award from being based, in any part, upon fact-finder’s desire to punish defendant for harming persons who are not before the court); State Farm, 538 U.S. at 425 (Due Process Clause prohibits grossly excessive punitive damages awards; punitive damages award of $145 million, in light of $1 million in compensatory damages, was neither reasonable nor proportionate to wrong committed by defendant).
12. Pac. Mut. Life. Ins. Co. v. Haslip, 499 U.S. 1, 23 n 11 (1991).
13. Addington v. Texas, 441 U.S. 418, 423 (1979), quoting In re Winship, 397 U.S. 358, 370 (1970, Harlan, J., concurring).
14. Id.
15. PJI 1:23
16. 228 NY 58 (1920).
17. 56 NY 44 (1874).
18. 285 App Div 174, 176 (1954).
19. 190 AD2d 1068 (1993).
20. Simpson v. Pittsburgh Corning Corp., 901 F.2d 277 (1990).
21. Roginsky v. Richardson-Merrell Inc., 378 F.2d 832, 850-851 (2d Cir. 1967).
22. Greenbaum, supra note 10; Geressy v. Digital Equipment Corp., 950 F.Supp. 519 (Weinstein, J., EDNY 1997).
23. Addington, 441 U.S. at 423.
24. See PJI 1:64.
25. Supra note 17.
26. Roginsky, 378 F2d at 850-851. The panel in Roginsky, quoting the “clearly established” language from Cleghorn, essentially prophesied that the Court of Appeals would determine, as a matter of New York law, that punitive damages must be established by clear and convincing evidence.
27. Randi A.J., 46 AD3d at 80 (2d Dept).
28. Alabama Code §6-11-20; Alaska Statutes §09.17.020(b); California Civil Code §3294(a); Florida Statutes §768.725; Georgia Code §51-12-5.1(b); Idaho Code §6-1604(1); Indiana Code §34-51-3-2; Iowa Code §668A.1(1)-(2) (“preponderance of clear, convincing, and satisfactory evidence”); Kansas Statutes §60-3702(c); Kentucky Revised Statutes §411.184(2); Minnesota Statutes §549.20(1)(a); Mississippi Code §11-1-65(1)(a); Montana Code §27-1-221(5); Nevada Revised Statutes 42.005(1); New Jersey Statutes 2A:15-5.12(a); North Carolina General Statutes §1D-15(b); North Dakota Century Code 32-03.2-11(1); Ohio Revised Code 2315.21(D)(4); Oklahoma Statutes, title 23, §9.1.B-D; Oregon Revised Statutes §31.730(1); Code of the Laws of South Carolina §15-33-135; Texas Civil Practice & Remedies Code §41.003; Utah Code §78B-8-201(1)(a); cf. Colorado Revised Statutes §13-25-127(2) (punitive damages must be established beyond a reasonable doubt).
Congress has determined that clear and convincing evidence must support awards of punitive damages under certain federal causes of action it has recently created or refined (see 15 U.S.C §6604 ["Y2K" actions under 15 U.S.C §6601, et seq.]; 20 U.S.C §6763[c] [claims for punitive damages against certain teachers in public and private kindergarten, elementary and secondary schools]; 42 U.S.C §14503 [claims for punitive damages against certain volunteers covered by the Volunteer Protection Act]; 49 U.S.C §28103 [claims for punitive damages against certain rail road owners and operators]).
29. Tritschler v. Allstate Ins. Co., 213 Ariz. 505 (2006).
The following states utilize a preponderance of the evidence standard: Connecticut, Delaware, Louisiana, Massachusetts, New Mexico, Rhode Island, Pennsylvania, West Virginia, and Wyoming.
Punitive damages are not permitted in Nebraska. In New Hampshire, punitive damages cannot be awarded unless a statute expressly allows for their imposition (Revised Statutes of the State of New Hampshire §507:16). Similarly, punitive damages are not available in Massachusetts or Washington absent express statutory authorization (Dailey v. N. Coast Life Ins. Co., 129 Wash2d 572 [1996]).
Our research uncovered no authority regarding the appropriate burden of proof for an award of punitive damages in the following jurisdictions: Illinois, Michigan (but cf. Green v. Evans, 156 Mich.App. 145, 151-152 [1985] [approving jury instruction using preponderance standard without discussing burden of proof issue]), New Hampshire, Vermont and Washington.
Federal courts have held that, where compensatory damages are awarded pursuant to certain causes of action created by federal law, the appropriate burden of proof for an award of punitive damages is preponderance of the evidence (see Dang v. Cross, 422 F.3d 800, 807 [9th Cir. 2005] [cause of action under 42 U.S.C §1983]; Tisdale v. Federal Exp. Corp., 415 F.3d 516, 531 [6th Cir. 2005] [claim under Title VII of Civil Rights Act of 1991].
30. Ross, 8 NY3d at 489.
31. Addington, 441 U.S. at 424; see Matter of Storar, 52 NY2d 363 (1981).
32. Simpson, supra note 20.
33. Greenbaum, 979 F.Supp. at 982.
34. The utility of the parasitic theory is limited in New York since the burden of proof for the overwhelming majority of causes of action is preponderance of the evidence. Two notable exceptions are causes of action for fraud and certain claims for defamation, both of which require clear and convincing evidence.
35. Cf. Rose v. Brown & Williamson Tobacco Corp., 10 Misc3d 680, 705 (Sup Ct., New York County 2005, Smith, J. [applying parasitic theory]), revd on other grounds 53 AD3d 80 (1st Dept. 2008).
36. While a trial court will presumably follow the law established by the Appellate Division department in which the trial court is sited (Ross Bicycles Inc. v. Citibank, N.A., 149 AD2d 330, 331 [1989] ["The doctrine of stare decisis requires that courts of original jurisdiction follow the decisions and precedents of the Appellate Division"]), a timely and specific objection is required before the trial court to preserve an issue for appellate review (see CPLR 4110-b; see also Up-Front Industries Inc. v. U.S. Industries Inc., 63 NY2d 1004, 1006 [1984] [charge to which no objection is lodged becomes the law applicable to the determination of the case]).
37. See 22 NYCRR 500.22(b)(4).
