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GREENBAUM v. HANDELSBANKEN

September 23, 1997

VICTORIA GREENBAUM, Plaintiff, against SVENSKA HANDELSBANKEN, NY, Defendant.


The opinion of the court was delivered by: SOTOMAYOR

 SONIA SOTOMAYOR, U.S.D.J.

 The above-referenced action was tried before a jury from April 28, 1997 to May 12, 1997. On May 16, 1997, the jury rendered a verdict in favor of plaintiff on her claims of gender discrimination and retaliation and against plaintiff on her claims of sexual harassment and age discrimination. The jury awarded plaintiff $ 320,000.00 in back pay and $ 1,250,000.00 in punitive damages. The parties then filed post-trial motions, including defendant's motion regarding the correct standard of proof for punitive damages under New York law and the appropriate cap on punitive damages under Title VII, and plaintiff's motions for prejudgment interest, front pay or reinstatement. Plaintiff has also filed a motion for reasonable attorneys' fees, which motion will be addressed at a later date.

 BACKGROUND

 Plaintiff Victoria Greenbaum, age 47, was formerly an assistant vice president in the trading room of defendant Svenska Handelsbanken, New York ("SNY"). SNY is the New York branch office of a much larger banking corporation known as Svenska Handelsbanken AB ("SHB"), headquartered in Stockholm, Sweden. After repeatedly being denied promotion to vice president at SNY, plaintiff brought an action in the Southern District claiming that the defendant violated her rights under Title VII and the equivalent provisions of the New York Human Rights Law and New York City Administrative Code. Plaintiff alleged that she was denied promotions and other benefits afforded other employees because of her gender and her age. She also claimed that she was subjected to a hostile work environment and that she was retaliated against because of her filing of an administrative complaint with the New York State Division of Human Rights.

 The jury was charged on all of plaintiff's claims. Because the state of the law with respect to the appropriate burden of proof for establishing punitive damages under state law was unclear, the Court charged the jury with two evidentiary standards, charging punitive damages under a preponderance standard for plaintiff's Title VII claim and under a clear and convincing standard for plaintiff's claim under the New York City Administrative Code. As noted above, the jury found in favor of plaintiff on her gender discrimination and retaliation claims, but against her on all other claims. They awarded compensatory damages and punitive damages under the federal preponderance standard, but they declined to award punitive damages under the clear and convincing standard charged under state law. The instant post-trial motions followed.

 DISCUSSION

 I. Punitive Damages

 A. The Appropriate Standard of Proof for Punitive Damages under New York Law

 One court has recently recognized that "New York law on burden of proof in deciding punitive damages is unclear." Geressy v. Digital Equipment Corp., 950 F. Supp. 519, 522 (E.D.N.Y. 1997); see also Richard L. Blatt et al., Punitive Damages: A State-by-State Guide to Law and Practice ยง 8.42 (1993 & 1996 Supp.) ("It appears as though the New York courts themselves have not specifically addressed the burden of proof in the context of punitive damages."). The federal and state court cases on the question are mired in a morass of ambiguity. Often, both New York and federal courts applying New York law have invoked the wanton and malicious substantive standard of conduct relating to punitive damages, see, e.g., Geressy, 950 F. Supp. at 522 (discussing the high substantive standard for punitive damages under New York law), without discussing the evidentiary standard of proof applicable thereto. See, e.g., United States v. Merritt Meridian Construction Corp., 95 F.3d 153, 160 (2d Cir. 1996) (discussing type of conduct warranting punitive damages in breach of contract case, but neglecting to mention evidentiary standard applicable thereto); Cleveland v. Beltman North American Co., Inc., 30 F.3d 373, 376 (2d Cir. 1994) (discussing punitive damages at length and providing substantive standard without any discussion of applicable burden of proof), cert. denied, 513 U.S. 1110, 130 L. Ed. 2d 785, 115 S. Ct. 901 (1995); Riordan v. Nationwide Mutual Fire Ins. Co., 977 F.2d 47, 56 (2d Cir. 1992) (certifying to New York Court of Appeals question of whether provision of state insurance law preempts common law right to punitive damages and, if not, what substantive standard was applicable to recover punitive damages; no discussion of evidentiary standard), certified question withdrawn due to mootness, 984 F.2d 69 (2d Cir. 1993); MaGee v. Paul Revere Life Ins. Co., 954 F. Supp. 582, 588 (E.D.N.Y. 1997) (extensive discussion of standard of conduct warranting punitive damages but no mention of burden of proof on the question); New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 315-16, 639 N.Y.S.2d 283, 287, 662 N.E.2d 763 (Ct. App. 1995) (discussing punitive damages substantive standard of "gross" and "morally reprehensible behavior" without mentioning evidentiary standard); Rocanova v. Equitable Life Assurance Soc'y of the United States, 83 N.Y.2d 603, 613, 612 N.Y.S.2d 339, 342-43, 634 N.E.2d 940 (Ct. App. 1994) (characterizing substantive standard for punitive damages in breach of contract case as "strict" but not discussing evidentiary standard); Home Ins. Co. v. American Home Prods. Corp., 75 N.Y.2d 196, 201, 551 N.Y.S.2d 481, 484, 550 N.E.2d 930 (Ct. App. 1990) (discussing substantive standard for punitive damages in product liability case, but not providing burden of proof required for punitive damages); Mulder v. Donaldson, Lufkin & Jenrette, 208 A.D.2d 301, 308-09, 623 N.Y.S.2d 560, 564-65 (1st Dept. 1995) (discussing substantive standard of conduct warranting punitive damage without mention of evidentiary standard).

 Adding to the confusion, the Second Circuit has tacitly endorsed both instructions that charge juries with preponderance of the evidence, see, e.g., Denny v. Ford Motor Co., 42 F.3d 106, 110 (2d Cir. 1994) (quoting, without discussion, district court's verdict form that applied preponderance standard); Vasbinder v. Ambach, 926 F.2d 1333 (2d Cir. 1990) (quoting, without discussion, jury instruction which provided that in order to recover punitive damages "plaintiff has the burden of proving by a fair preponderance of the credible evidence that a defendant acted maliciously or wantonly with regard to his rights."), and instructions that charge juries with the clear and convincing standard. See, e.g., Racich v. Celotex Corp., 887 F.2d 393, 397 (2d Cir. 1989) (quoting, without discussion, district court's jury instruction that punitive damages be "clearly established"); Brink's, Inc. v. City of New York, 717 F.2d 700, 706 n.4 (2d Cir. 1983) (quoting, in a footnote and without discussion, jury instruction that conduct "tantamount to 'willful, wanton and reckless' conduct" had to be found by "clear and convincing evidence").

 Where the cases do specify a particular burden of proof with respect to punitive damages -- as opposed to merely quoting trial court jury instructions that charge either standard -- the authorities are also in conflict. Some cases call for application of the preponderance standard. See Simpson v. Pittsburgh Corning Corp., 901 F.2d 277, 282-283 (2d Cir.) (rejecting a due process claim that clear and convincing evidence standard must be applied to punitive damages and noting that "appellant acknowledges that the burden of proof under New York law for punitive damages in product liability cases is 'preponderance of the evidence.'"), cert. dismissed, 497 U.S. 1057 (1990); United States v. Hooker Chemicals & Plastics Corp., 850 F. Supp. 993, 1003 (W.D.N.Y. 1994) ("The applicable standard of proof for punitive damages is preponderance of the evidence, which the Supreme Court held suffices even in civil suits involving 'proof of acts that expose a party to criminal prosecution.'"); Lawrence v. Cade & Saunders, 149 F.R.D. 14, 17 (N.D.N.Y. 1993) (providing that "the plaintiff has the burden of proving by a fair preponderance of the credible evidence that defendants acted maliciously or wantonly."); Corrigan v. Bobbs-Merrill Co., 228 N.Y. 58, 66-67, 126 N.E. 260, 264 (1920) (libel case providing that "in order to recover punitive damages, plaintiff was bound to satisfy the jury by a fair preponderance of evidence" that defendant had ill will toward him and that defendant did not publish book in good faith and honest belief that it was fiction); In re Seventh Judicial District Asbestos Litig., 190 A.D.2d 1068, 1069, 593 N.Y.S.2d 685, 687 (4th Dept. 1993) (providing that "the trial court properly instructed the jury that the evidentiary standard for proving entitlement to punitive damages is preponderance of the evidence, not clear and convincing evidence") (citing cases and contrary authority in Camillo); Frechette v. Special Magazines, Inc., 285 A.D. 174, 176, 136 N.Y.S.2d 448, 451 (3rd Dept. 1954) (libel case noting trial court's jury instructions which provided that "plaintiff must establish" punitive damages "by a fair preponderance of the evidence.").

 Other courts have applied a clear and convincing evidence standard for punitive damages under New York law. See Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832, 850-51 (2d Cir. 1967) ("New York demands, as is might have to before punishing a defendant with fines similar to those imposed on a criminal charge, that the quality of conduct necessary to justify punitive damages must be 'clearly established.'") (citing Cleghorn v. New York Cent. & H.R.R.R., 56 N.Y. 44, 48 (1874)); West v. The Goodyear Tire & Rubber Co., 973 F. Supp. 385, 1997 WL 411929, *5 (S.D.N.Y. 1997) (citing Camillo v. Geer, 185 A.D.2d 192, 587 N.Y.S.2d 306, 309 (1st Dept. 1992) for the proposition that under New York law "an award for punitive damages 'must be supported by clear, unequivocal, and convincing evidence.'"); Schlaifer Nance & Co. v. Estate of Andy Warhol, 927 F. Supp. 650, 664 (S.D.N.Y. 1996) (noting in fraud case that plaintiff conceded that "it had to prove its entitlement to punitive damages by clear and convincing evidence."), aff'd 119 F.3d 91 (2d Cir. 1997); Sladick v. Hudson General Corp., 226 A.D.2d 263, 264, 641 N.Y.S.2d 270, 271 (1st Dept. 1996) (holding that "plaintiff failed to demonstrate by clear, unequivocal and convincing evidence that defendants' conduct was so wanton or reckless as to justify an award of punitive damages") (citing Camillo v. Geer, 185 A.D.2d 192, 193-94, 587 N.Y.S.2d 306 and Home Ins. Co. v. American Home Prods. Corp., 75 N.Y.2d 196, 201, 202-204, 551 N.Y.S.2d 481, 550 N.E.2d 930); Camillo v. Geer, 185 A.D.2d 192, 587 N.Y.S.2d 306 (1st Dept. 1992) (providing that "an award for punitive damages must be supported by 'clear, unequivocal, and convincing evidence.") (citing Cleghorn v. New York Cent. & Hudson River R.R., 56 N.Y. 44, 48 (1874)).

 This lack of a clear and consistent articulation of the appropriate evidentiary standard with respect to punitive damages impels this Court to discuss and determine the appropriate burden of proof on this question as a matter of first impression in this district. Cf. West v. The Goodyear Tire & Rubber Co., 973 F. Supp. 385, 1997 WL 411929, *2, *5 (S.D.N.Y. 1997) (citing, without discussion, Cleghorn v. New York Cent. & H.R.R.R., 56 N.Y. 44, 48 (1874) and Camillo v. Geer, 185 A.D.2d 192, 587 N.Y.S.2d 306, 309 (1st Dept. 1992) for the proposition that clear and convincing evidence is appropriate standard of proof for punitive damages); Geressy, 950 F. Supp. at 522 (Eastern district case suggesting that preponderance of the evidence is appropriate standard, but noting that issue was moot because jury found that punitive damages were not warranted under either standard).

 1. New York Court of Appeals Precedent

 On questions of state law, federal courts are obliged to look first to the opinions of the state's highest court in attempting to predict how that court would rule on a particular question. See, e.g., In re Eastern & Southern Dist. Asbestos Litig., 772 F. Supp. 1380, 1389 (E. & S.D.N.Y. 1991) (providing that a court "must carefully review available resources to predict how the New York Court of Appeals would resolve the questions at bar."), aff'd in part, rev'd in part, 971 F.2d 831 (2d Cir. 1992). Contending that the clear and convincing standard is the appropriate standard for punitive damages under New York law, the defendant rests its conclusion upon a New York Court of Appeals Case from 1874, Cleghorn v. New York Cent. & H.R.R.R., 56 N.Y. 44, 48 (1874).

 Cleghorn involved a claim brought by a person injured by a railman's negligence. On the question of whether the jury was appropriately charged on the question of exemplary damages, the Court concluded that the error was clearly erroneous to the extent that it provided no guidelines by which the jury could make such a determination. In explaining when a master could be liable in punitive damages for the negligence of his servants, the Court stated that:

 
For injuries by the negligence of a servant while engaged in the business of the master, within the scope of his employment, the latter is liable for compensatory damages; but for such negligence, however gross or culpable, he is not liable to be punished in punitive damages unless he is also charged with gross misconduct. Such misconduct may be established by showing that the act of the servant was authorized or ratified or that the master employed or retained the servant, knowing that he was incompetent, or, from bad habits, unfit for the position he occupied. Something more than ordinary negligence is requisite; it must be reckless and of a criminal nature, and clearly established. . . . I am not award of any principle which permits a jury to award exemplary damages in a cases which does not come up to this standard, or to graduate the amount of such damages by their views of the propriety of the conduct of the defendant, unless such conduct is of the character before specified.

 Id. at 47-48 (emphasis added).

 Defendant contends that this excerpt unequivocally demands that the clear and convincing standard be applied to all punitive damages determinations. Although the excerpt does provide some support for that proposition, I am not as convinced as the defendant, particularly because the Court does not expressly define the evidentiary standard as "clear and convincing," but see Addington v. Texas, 441 U.S. 418, 424, 60 L. Ed. 2d 323, 99 S. Ct. 1804 (1979) (providing that the "intermediate standard" of clear and convincing evidence "employs some combination of the words, 'clear,' 'cogent,' 'unequivocal.'"), and because it focuses all of its analysis on the substantive standard of conduct warranting punitive damages rather than any evidentiary standard applicable thereto. In this context, outside of any overt reference to evidentiary standards or burdens of proof, I cannot so easily as defendant find that the Court of Appeals intended in Cleghorn to create an evidentiary, as opposed to substantive, standard in the imposition of punitive damages.

 However, had the New York Court of Appeals thereafter remained silent on the issue, the instant question before the Court might have been clearer. But a significantly more recent Court of Appeals decision, Corrigan v. Bobbs-Merrill Co., 228 N.Y. 58, 126 N.E. 260 (1920), recommends the precise opposite result: that the preponderance standard applies to punitive damages determinations.

 In Corrigan, a libel case decided long before the United States Supreme Court's watershed opinion in New York Times v. Sullivan, 376 U.S. 254, 11 L. Ed. 2d 686, 84 S. Ct. 710 (1964), the Court of Appeals laid out the substantive and evidentiary standard necessary for recovery of punitive damages:

 
In order to recover punitive damages, plaintiff was bound to satisfy the jury by a preponderance of the evidence that defendant (1) was animated, in such publication, by conscious ill will toward him, or (2) did not publish the Cornigan chapter of the book in good faith and in honest belief that it was fiction, but was indifferent as to whether the violent and indecent abuse heaped upon the supposedly fictitious magistrate would injure some real party actually referred to by the author.

 228 N.Y. at 66-67. While the Court did not elucidate the reason for the evidentiary standard to which it referred, it nonetheless patently asserted it, without any mention of the seemingly contrary law propounded in Cleghorn.

 In the end, the New York Court of Appeals cases raise more questions than they answer. Neither case revolves around, or even pays more than a phrase's attention to, the question of the evidentiary standard applicable to a punitive damages determination. The first, Cleghorn, only vaguely suggests a clear and convincing standard. Corrigan, on the other hand, directly applies the preponderance standard, but it, too, is a rather dated opinion that has since been effectively overruled by the Supreme Court's landmark decision in New York Times v. Sullivan, which requires that the libel case be proven by clear and convincing evidence. Despite the ambiguity in these opinions, however, I conclude that the plaintiff's argument for the preponderance standard prevails, if for no other reason than its seminal case, Corrigan, was at least more recently decided.

 2. Second Circuit Case Law

 Having concluded that the more recent law in the New York Court of Appeals would suggest that the preponderance standard applies, I now turn to an examination of the three Second Circuit cases cited by defendant in which jury charges with clear and convincing language were upheld by that Court. (See Def. Pun. Dam. Mem. at 4 (citing Roginsky, Brink's, and Racich). *fn1" In Racich v. Celotex Corp., 887 F.2d 393, 397 (2d Cir. 1989), the most recent of the Second Circuit cases cited by the defendant, the Court was not clear about the appropriate evidentiary standard applicable to a punitive damages award. The Second Circuit in Racich refused to consider appellant's argument that the punitive damage award violated federal standards of due process because the argument had not been properly preserved. See Racich, 887 F.2d at 398. However, the Court did consider appellant's argument that "the standard governing the award of punitive damages is constitutionally void for vagueness." Id. For context, I quote the Court's discussion in full:

 
The indefinite phrases that will support such an award, appellant contends, do not give fair warning regarding prohibited conduct, and fail properly to confine the discretion of judges and juries in the absence of some sort of statutory limit. In this case, the jury was charged that it might, but was not required to, allow plaintiff punitive damages if it found that it was clearly established that the acts of the defendant were "wanton or reckless." These concepts were defined in apparently traditional terms under New York law, or at least there is no claim to the contrary. Rather, the claim is, as counsel for appellant made clear at oral argument, that the jury was given constitutionally deficient guidance.

 Id. at 398.

 The defendant contends that this excerpt from the Racich opinion supports its argument that the clear and convincing standard is the appropriate standard in the punitive damages context. The defendant emphasizes the Court's determination that the "concepts were defined in apparently traditional terms under New York law . . . ." Id. Obviously, however, the "concepts" that the Second Circuit deemed "traditional" under New York law were the concepts of "wanton or reckless." Those words are the only words in quotation marks in the immediately preceding sentence, and those are the words that provide some guidance to jurors, which would defeat the vagueness argument being made by the appellants therein. An evidentiary standard would not remedy a vagueness problem. Clearly, then, the Second Circuit was not claiming that the clear and convincing standard -- even if that is what the Court meant when it casually invoked the words "clearly established" out of quotation or context from the district court's charge -- was "traditional" under New York law. See Simpson v. Pittsburgh Corning Corp., 901 F.2d 277, 282-283 (2d Cir. 1990) (underscoring that Racich court ...


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