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Baker v. The National State Bank

161 N.J. 220, 736 A.2d 462 (1999)

SUCCESSOR LIABILITY; PUNITIVE DAMAGES—A successor by merger can be liable for punitive damages arising from the actions of its predecessor companies.

Two former employees successfully brought an age discrimination case against their former employer, a bank. The jury awarded compensatory and punitive damages. The lower court allowed the complaint to be amended to include the bank’s successor-in-interest. One issue raised in this appeal was whether the successor-in-interest was liable for the punitive damage award. The successor-in-interest had merged with the parent company of the original bank. The Appellate Division held that “the merger makes a successor per se liable for punitive damages.” The successor bank argued to the New Jersey Supreme Court that this holding was erroneous but, unfortunately for the bank, the Court disagreed. It pointed out that it agreed that “New Jersey courts have consistently adhered to the principle that punitive damages are meant to punish a wrongdoer’s egregious conduct and to deter that wrongdoer and others from engaging in such conduct in the future. To achieve that goal, our courts have held that it is the wrongdoer who is to be punished, and it is the wrongdoer (among others) whose future conduct is to be deterred.” The Court also pointed out that it was not proper to impose punitive damages on an innocent party because to do so would have no deterrence effect since the “punishment of an innocent actor will have no positive effect on potential wrongdoers.” Nonetheless, the Court found no policy concern to the imposition of successor liability where the successor has agreed by law to assume the liabilities of its predecessor. The merger statute provides that “the surviving or new corporation shall be liable for all the obligations and liabilities of each of the corporations so merged or consolidated… .” Therefore, to the Court, this was not a case in which successor liability had been imposed by judicial mandate, and that it was found that was appropriate under the circumstances.


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