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Kurnik v. The Cooper Health System

A-4686-06T1 (N.J. Super. App. Div. 2008) (Unpublished)

CONTRACTS; DAMAGES — There are only a few exceptions that would permit an award of punitive damages for a breach of contract, such as the breach in the fiduciary duty or where there is a tort related to the contract.

A cardiologist took a job with a teaching hospital following his graduation from medical school, residency, and fellowship. After a number of other cardiologists left the hospital, the cardiologist was offered a five year employment contract as head of the cardiology division. The contract was to automatically renew for a two-year period unless either party gave the other 120 days’ notice of termination. Under the agreement’s terms, the cardiologist also had the option of terminating the contract at any time upon 120 days’ notice and also had the right to terminate the contract at any time if the hospital breached the contract and failed to cure the breach within thirty days. The hospital held the right to immediately terminate the agreement only for specific reasons, such as loss of the doctor’s loss of his medical license, his failure to provide adequate patient care, or his conviction of a crime.

The hospital later encountered numerous difficulties. Relations between the cardiologist and the hospital became increasingly strained especially after the hospital decided to remove him from his position as the head of the cardiology division. He was allowed to continue practicing at the hospital. The cardiologist then sought employment at a medical university and entered into an employment contract there. On the same day he gave 30 days’ notice to the hospital that he was leaving, he asserted that he held the right to terminate on 30 days’ notice because the hospital had breached the agreement by removing him as the head of the cardiology division. In response, the hospital claimed the cardiologist was in breach of the contract for terminating the agreement with less than 120 days’ notice.

The cardiologist sued the hospital for breach of contract and breach of the implied covenant of good faith and fair dealing. His claim was that the hospital forced him to step down in violation of the terms of his contract. Claims brought by the cardiologist for wrongful interference and tortious interference were dismissed. A counterclaim of breach of contract brought by the hospital was also dismissed. A jury found the hospital liable for the cardiologist’s claims of breach of contract and breach of the implied covenant of good faith and fair dealing and awarded him more than $500,000. The jury was then reconvened before the lower court for a decision on punitive damages and awarded the cardiologist more than $4 million. On the hospital’s motion for judgment notwithstanding the verdict, the lower court reduced the punitive damages to $1.5 million. The hospital appealed the lower court’s judgment in favor of the cardiologist. The cardiologist brought a cross-appeal challenging the reduction of his punitive damage jury award.

On appeal, the Appellate Division found that the lower court incorrectly allowed the cardiologist to pursue his punitive damage claim. It held there are only few exceptions that would permit an award of punitive damages for a breach of contract, such as the breaching of a fiduciary duty or where there was a tort related to the contract. It also found that the lower court incorrectly allowed the jury to give an award to the cardiologist based on his claims of a breach of the implied covenant of good faith and fair dealing. It held these claims were made on the same factual basis as were the claims of breach of contract. It pointed out that claims for a breach of the covenant of good faith and fair dealing arise when a party complies with the terms of a contract, but in a way that deprives the other party of the fruits of the contract. Based on its findings and conclusions, the Court reversed the lower court’s rulings and remanded the matter for a new trial on the cardiologist’s breach of contract claim and for an award of compensatory damages if such a breach were found.


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