(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that,
in the interests of brevity, portions of any opinion may not have been summarized).
Argued March 14, 1994 -- Decided July 6, 1994
HANDLER, J., writing for a unanimous Court.
On May 21, 1987, Todd Kehler, who was operating a car owned by Alice Kehler, struck the rear end
of a disabled vehicle at or near the shoulder of the Pulaski Skyway. The disabled car was owned by Deloris
Haynes. Paul Caldwell was a passenger in Haynes' car and was injured as a result of the impact. Caldwell sued
the Kehlers, Haynes, and in a separate action that was later consolidated, State Farm Insurance Company, the
personal injury protection (PIP) carrier.
Prior to the accident, Caldwell had been employed for two to three years as a general laborer for a
construction company. At the time of the accident, Caldwell earned $25.65 per hour and worked forty to forty-five hours per week, although his hours varied because of the seasonal nature of his work. After the accident,
Caldwell missed three months of work.
At trial, Caldwell testified that he earned an average gross weekly income of about $1,000. He claimed
that his pre-accident salary before taxes had been about $44,000. After the accident, Caldwell continued working
for the company with lighter work assignments until he was fired in July 1990. He then remained unemployed
for a period of eighteen or nineteen months. In February or March 1992, Caldwell found work driving a senior
citizens' van twenty hours a week at $5.50 per hour. Thus, at the time of trial, Caldwell was earning just over
$6,000 per year.
The trial court consolidated the PIP and personal-injury claims for trial. On the personal-injury claims,
the trial court instructed the jury to calculate Caldwell's lost income based on his net income after taxes. With
respect to future lost income, the trial court failed to instruct the jury about present value or work-life
expectancy.
The jury found Todd Kehler 100" at fault for the accident and awarded Caldwell a total of $1,950,000:
$200,000 for past lost wages, $1.5 million for future lost wages, and $250,000 for pain and suffering. Kehler
moved for a new trial on both liability and damages. The trial court affirmed the liability verdict, but ordered
a new trial on damages, concluding that the jury's award was irrational and shocked the judicial conscience. The
trial court refused to grant a remittitur, which would have denied Kehler a new trial motion on the condition
that Caldwell consent to a specified reduction in the jury award.
On appeal, the Appellate Division reversed in part and affirmed in part. The Appellate Division
affirmed the trial court's denial of a new trial on liability and the trial court's order for a new trial on damages
but only with respect to past lost income. The Appellate Division reversed the trial court's grant of a new trial
relating to the future-lost-income award and the pain-and-suffering award, and ordered that Caldwell be offered
the choice of either a new trial on past lost income or entry of judgment for the reduced amount of $1,750,000
(plus interest).
The Supreme Court granted Caldwell's petition for certification.
HELD: Plaintiffs in personal-injury and wrongful-death actions bear the burden of proving net income when
seeking recovery for diminished earning capacity based on lost wages. In addition, the trial court must
instruct the jury with respect to the relevance of work-life expectancy in the calculation of an award
based on future lost income and the determination of the present or current value of such an award.
1. An injured party has the right to be compensated for diminished earning capacity, which includes lost
wages as well decreased future earning capacity. Such wages must be calculated to reflect, as nearly as possible,
actual earnings. In this case, none of the parties presented any evidence of Caldwell's net income, yet the court
instructed the jury to use net income as the measure of lost wages. In the future, to ensure that juries have
sufficient evidence to use net income in their determination of damages, in personal-injury and wrongful-death
actions, a plaintiff has the burden of proving net income when seeking recovery for diminished earning capacity
based on lost wages. (pp. 9-17)
2. The lack of net-income evidence in this case clearly influenced the jury's past-lost-wages award and the
future lost-wages verdict was also distorted by evidence that was limited to gross income. Thus, the damage
awards based on lost income, past and future, were clearly excessive, must be set aside, and the matter remanded
for a retrial on those damages. The burden of proof should be borne by Caldwell on retrial to establish net
income as a basis for damages measured by both claimed lost-past and lost-future income.
(pp. 18-20)
3. The jury based its future-lost-income award on Caldwell's life expectancy (34.55 years), not work-life
expectancy (arguably twenty-five years). However, a jury should consider a plaintiff's work-life expectancy, as
well as life-expectancy, in determining future lost income. Here, the jury should have been instructed regarding
work-life as well as life expectancy to guide its deliberations on future lost income. (pp. 20-22)
4. The Appellate Division improperly upheld the jury's pain-and-suffering verdict. In the context of all of
the evidence, the excessive lost wages awards are not separable from the pain-and-suffering award. (pp. 22-24)
5. The matter is remanded for a new trial on damages only. On remand, the trial court is encouraged to
consider a motion for remittitur. Although the Appellate Division appropriately has made remittitur available,
its proposed remittitur must be modified in light of the determination that the damages in their entirety are
subject to a new trial. The remittitur on remand should offer the choice of a reduction of damages or a new
trial on all damages. (pp. 24-26)
The judgment of the Appellate Division reversing the trial court's grant of a new trial relating to the
future-lost income award and the pain and suffering-award is REVERSED. The judgment of the Appellate
Division upholding liability and affirming the trial court's order for a new trial on damages with respect to past
lost income is AFFIRMED and the matter is REMANDED to the Law Division for further proceedings consistent
with this opinion.
JUSTICES CLIFFORD, POLLOCK, O'HERN, GARIBALDI, and STEIN join in JUSTICE HANDLER's
opinion. CHIEF JUSTICE WILENTZ did not participate.
SUPREME COURT OF NEW JERSEY
A-
108 September Term 1993
PAUL CALDWELL,
Plaintiff-Respondent,
v.
DELORIS HAYNES,
Defendant,
and
TODD KEHLER and ALICE S.
KEHLER,
Defendants-Appellants.
Argued March 14, 1994 -- Decided July 6, 1994
On certification to the Superior Court,
Appellate Division.
W. Stephen Leary argued the cause for
appellants (Leary Bride, Tinker & Moran,
attorneys).
Raymond T. Roche argued the cause for
respondent (Roche & Carter, attorneys; Mr.
Roche and M. Roy Oake, on the brief).
The opinion of the Court was delivered by
HANDLER, J.
Plaintiff was injured while seated in a disabled car on the Pulaski Skyway when the car was struck in the rear by defendants'
car. Plaintiff suffered back injuries, for which he sued the
Kehlers and Deloris Haynes, the owner of the disabled car. He
also brought a separate action, which was later consolidated,
against the personal injury protection ("PIP") insurance carrier.
The jury found Todd Kehler 100" liable and awarded damages
based on lost past wages, lost future income, and pain and
suffering. However, the trial court, finding the damages award
to be excessive, granted Kehler's motion for a new trial on
damages only. The Appellate Division, in an unreported opinion,
agreed with the trial court that the past-lost-income award was
excessive but upheld the jury verdicts for future lost income as
well as pain and suffering.
We granted Todd Kehler's petition for certification,
134 N.J. 559 (1993), which challenged the Appellate Division's
refusal to set aside the damages award in its entirety.
On May 21, 1987, Todd Kehler (hereinafter defendant), who was operating a car owned by Alice Kehler, struck the rear end of a disabled vehicle at or near the shoulder of the Pulaski Skyway. The disabled car had stalled in the right lane of the roadway and its owner, co-defendant Deloris Haynes, had left the car to seek help. Plaintiff, Paul Caldwell, who remained in the disabled vehicle, was injured by the impact. He sued the Kehlers, Haynes, and, in a separate action that was later consolidated, State Farm Insurance Company, the PIP carrier.
Caldwell, who was thirty-five-years-old at the time of the
accident, was examined and treated over the years by various
doctors and hospitals. For almost a year after the May 1987
accident, Caldwell continued treatment with Dr. Sherman, a board-certified internist, who initially treated Caldwell for a spasm,
tenderness, and a reduced range of motion in his back. Despite
Caldwell's treatment, he remained in pain. Eventually, Dr.
Sherman suspected the "possibility of tuberculosis of the spine."
Dr. Sherman testified that in his opinion "the accident unmasked
or reactivated latent tuberculosis" because he could find no
other provoking factors, and medical literature indicated that
"significant auto trauma can be a provoking factor."
Later, Caldwell began treatment with Dr. Lee, an orthopedic
surgeon. In late 1990, Dr. Lee admitted Caldwell to the hospital
because Caldwell was still experiencing back pain and his "right
leg was still getting numb every now and then." Caldwell
testified that Dr. Lee told him he had tuberculosis of the spine.
Dr. Lee's discharge summary indicated the final diagnosis as
post-traumatic lumbosacral sprain with spasms, psoas abscess with
multiple lumbar abscesses, suspected tuberculosis, and
osteomyelitis with destruction of certain vertebrae. Apparently,
Dr. Lee's antibiotic treatment of Caldwell ended the progress of
the disease. No evidence suggested that further destruction of
spinal bone or other increase in disability had occurred or would
occur in the future.
However, according to defendant's expert, Dr. William Burke,
the automobile impact was not severe enough to cause the
tuberculosis to spread; and because the appearance of
tuberculosis in the spine had been diagnosed so much later, it
was improbable that the tuberculosis was related to the accident,
if that was indeed a correct diagnosis of plaintiff's condition.
Caldwell testified that his back pain was "sharp," he was
"in constant pain every day," and "everything became a problem,"
including tying his shoes, walking, and driving. Caldwell denied
ever having had any back pain before the accident.
Before the accident, plaintiff had been employed for two to
three years as a general laborer by a construction company that
repaired bridges and tunnels. At the time of the accident,
Caldwell earned $25.65 per hour and worked forty or forty-five
hours per week, although his hours varied, seemingly due to the
seasonal nature of the work. After the accident Caldwell missed
three months of work.
Caldwell testified that at the construction company he
earned an average gross weekly income of about $1,000. His
testimony suggested that his pre-accident annual salary before
taxes had been about $44,000. Caldwell stated that in 1987, the
year of the accident in which he missed three months of work, he
had earned $33,000. However, Caldwell estimated that his gross
wages for the previous year in his work for the same company were
only "twenty something" thousand.
After the accident and the three-month absence, Caldwell
continued working for the company, with lighter work assignments
but at the same salary, until July 1990, more than three years
after the accident. In July 1990, the company discharged
Caldwell. Caldwell testified that he had been fired because he
could no longer "do the strenuous work that it would take to do
. . . the lifting, and other things like that." Caldwell also
stated that "[b]eing terminated with a construction company means
you can be fired one day and back at work the next day just
because, you know . . . [t]here's quite a few they would fire one
week, hire back the next week. So I was just one of them." That
was the first time the company fired Caldwell. He did not seek
to be rehired.
Caldwell remained unemployed for a period of eighteen or
nineteen months. In February or March 1992, he found work
driving a senior citizens' van twenty hours a week at $5.50 per
hour. At the time of trial, Caldwell was earning a little over
$6,000 per year. He said he was capable of driving a full week,
but the job offered only twenty hours. Thus, in addition to the
initial three-month absence from work, Caldwell missed eighteen
or nineteen months between the construction and the driving job.
Then, he worked part-time during a five- or six-month period
during which he had the twenty-hour-per-week driving job.
As noted, the court consolidated the PIP and personal-injury
claims for trial. On the personal-injury claim, the trial court
instructed the jury to calculate Caldwell's lost income based on
his net income after taxes. With respect to future lost income,
the trial court did not instruct the jury about present value or
work-life expectancy.
Ultimately, the jury found defendant Todd Kehler 100" liable
and awarded Caldwell a total of $1,950,000: $200,000 for past
lost wages, $1.5 million for future lost wages, and $250,000 for
pain and suffering. The owner of the car in which plaintiff had
been sitting, co-defendant Haynes, and the owner of the car in
which Todd Kehler had been driving, co-defendant Alice Kehler,
were cleared of responsibility.
Defendant Todd Kehler moved for a new trial on both
liability and damages. The trial court affirmed the liability
finding, but ordered a new trial on damages. It stated: "I
don't know what was going on in this jury's mind at all but it
certainly was not anything approaching a coherent evaluation of
the case before it." The court had "never seen a case that's
clearer than this of excessive damages; totally irrational on its
face and it obviously shocks the conscience of the Court."
Specifically, the trial court found the jury's award of
$200,000 for past lost wages improper because "plaintiff's
counsel had properly admitted that at most the plaintiff was out
of work for two years, three months and three weeks plus or
minus." Therefore, the trial court found that if Caldwell's net
income was $720 (based on Caldwell's testimony that he earned
$1,000 gross weekly income), $200,000 for five years "would
require that the plaintiff not have worked a day for those five
years . . . [, which was] obviously inconsistent with the
testimony."
The trial court determined the future-lost-wages award
similarly flawed. It noted that the jury would have to have used
gross income and to have concluded that plaintiff would work
steadily without a break until reaching eighty-years of age.
The trial court also stated that the pain-and-suffering
award of $250,000 "shock[ed] the conscience of the [c]ourt in
relation to the testimony." The trial court rejected the option
of separating and sustaining the damages for pain and suffering
because with "the other damage awards . . . so alien to the
evidence," it had "no confidence in setting the damages for pain
and suffering." The trial court refused to grant a remittitur.
The Appellate Division granted both Caldwell and the Kehlers
leave to appeal the interlocutory order. On appeal, plaintiff
sought reinstatement of the jury's entire damages award, and
defendants sought an order for a new trial on liability as well
as damages. The Appellate Division partially affirmed and
partially reversed the trial court judgment. It affirmed the
trial court's denial of a new trial on liability because the
evidence provided a reasonable basis on which the jury could
conclude that Todd Kehler was 100" liable. That no longer poses
an issue on appeal.
The Appellate Division also affirmed the trial court's order
for a new trial on damages but only with respect to past lost
income. The Appellate Division noted that although the trial
court had properly instructed the jury that Caldwell's lost
income was to be based on his net income after taxes, "[e]xactly
how the jury was to perform the calculation is hard to imagine,
since there was no information in the evidence before [it] to
equip [it] to do so." Based on its calculations derived from
Caldwell's testimony of his past earnings, the Appellate Division
concluded that the $200,000 award for a maximum of two years and
three months of lost time to the date of trial was "almost twice
what any calculation accepting plaintiff's biggest numbers would
produce."
However, the Appellate Division reversed the trial court's
grant of a new trial relating to the $1.5 million future-lost-income award and the $250,000 pain-and-suffering award, noting
that a "sympathetic view of plaintiff's condition for the nearly
forty years of his expected life from the date of the accident
would clearly justify such a verdict."
The Appellate Division further ordered that plaintiff be
offered the choice of either a new trial on past lost income or
entry of judgment for the reduced amount of $1,750,000 (plus
interest), "which would constitute an abandonment of the claim as
to which the new trial was ordered." It concluded that except
for the past-lost-wages award, the jury verdict indicated an
acceptance of Caldwell's version of the accident and resultant
injuries: "Neither the surprising size of the verdicts, nor the
fact that they demonstrated a sympathetic and total acceptance of
Caldwell's evidence makes them unjust or reversible."
A trial court may order a new trial when, "having given due
regard to the opportunity of the jury to pass upon the
credibility of the witnesses, it clearly and convincingly appears
that there was a miscarriage of justice under the law." R. 4:49-1. A trial court should set aside excessive verdicts only in
"clear cases." Fritsche v. Westinghouse Elec. Corp.,
55 N.J. 322, 330 (1970). In assessing whether the quantum of damages
assessed by the jury is excessive, a trial court must consider
the evidence in the light most favorable to the prevailing party
in the verdict. Taweel v. Starn's Shoprite Supermarket,
58 N.J. 227, 236 (1971); see Baxter v. Fairmont Food Co.,
74 N.J. 588,
597 (1977) (holding that trial court's findings of fact entitled
to respect). Therefore, a trial court should not interfere with
a jury verdict unless the verdict is clearly against the weight
of the evidence. Horn v. Village Supermarkets, Inc.,
260 N.J.
Super. 165, 178 (App. Div. 1992), certif. denied,
133 N.J. 435
(1993). The verdict must shock the judicial conscience. Carey v.
Lovett,
132 N.J. 44, 66 (1993).
In reviewing a trial court's ruling on a motion for a new
trial, an appellate court shall not reverse a trial court "unless
it clearly appears that there was a miscarriage of justice under
the law." R. 2:10-1. Accordingly, "The standard for appellate
review of a trial court's decision on a motion for a new trial is
substantially the same as that controlling the trial court except
that due deference should be made to its 'feel of the case,'
including credibility." Feldman v. Lederle Lab.,
97 N.J. 429,
463 (1984) (quoting Dolson v. Anastasia,
55 N.J. 2, 6 (1969)).
At the same time, a trial court's determination is "not entitled
to any special deference where it rests upon a determination as
to worth, plausibility, consistency or other tangible
considerations apparent from the face of the record with respect
to which he is no more peculiarly situated to decide than the
appellate court." Dolson, supra, 55 N.J. at 7.
In this case, the trial court's granting of the motion for a
new trial does not appear to have rested on the worth or
plausibility of evidence or the credibility or demeanor of
witnesses or other intangible factors not clearly reflected in
the record. Ibid. Rather, the trial court granted the new trial
based on the illogical mathematical calculations of the lost-wages awards. Similarly, the trial court's criticism of the
pain-and-suffering award was based on its characterization of the
evidence that the testimony relating to that aspect of damages
disclosed "occasional problems from time to time." That
observation does not indicate clearly or even suggest any
reliance on considerations within the "peculiar" knowledge of the
trial court. See ibid. Therefore, this Court may review for
excessiveness the jury's awards based on an independent review of
the record.
The principal goal of damages in personal-injury actions is to compensate fairly the injured party. Deemer v. Silk City Textile Mach. Co., 193 N.J. Super. 643, 651 (App. Div. 1984). Fair compensatory damages resulting from the tortious infliction of injury encompass no more than the amount that will make the plaintiff whole, that is, the actual loss. Ruff v. Weintraub, 105 N.J. 233, 238 (1987). "The purpose, then[,] of personal injury compensation is neither to reward the plaintiff, nor to punish the defendant, but to replace plaintiff's losses." Domeracki v. Humble Oil & Ref. Co., 443 F.2d 1245, 1250 (3d Cir.), cert. denied, 404 U.S. 883, 92 S. Ct. 212, 30 L. Ed.2d 165 (1971).
An injured party has the right to be compensated for diminished earning capacity. Smith v. Red Top Taxicab Corp., 111 N.J.L. 439, 443 (E. & A. 1933). The measure of damages for tort recovery encompassing diminished earning capacity can be based on the wages lost as a result of the defendant's wrongdoing. Ibid. That measure includes the value of the decrease in the plaintiff's future earning capacity. Coll v. Sherry, 29 N.J. 166, 176 (1959) (holding that plaintiff has right to be compensated for any future earnings that will probably be lost as result of injuries caused by defendant's wrongdoing). When the effects of injury will extend into the future, "the plaintiff is
entitled to further compensation -- for [the] capacity to earn in
the future has been taken from [the plaintiff], either in whole
or in part." Robert J. Nordstrom, Income Taxes and Personal
Injury Awards,
19 Ohio St. L.J. 213, 217 (1958).
However, the evaluation of such a decrease in future earning
capacity is necessarily complicated by the uncertainties of the
future. Because resort to future wages serves only as a measure
or indicator of lost earning capacity, those wages must be
calculated to reflect as nearly as possible actual earnings. See
Tenore v. Nu Car Carriers, Inc.,
67 N.J. 466, 494 (1975). Hence,
the "proper measure of damages for lost income in personal-injury
cases is net income after taxes." Ruff, supra, 105 N.J. at 238.
The net-income rule embodies the principle that "damages in
personal-injury actions should reflect, as closely as possible,
the plaintiff's actual loss." Ibid.; see Tenore, supra, 67 N.J.
at 477. Hence, "If plaintiff gets, in tax-free damages, an
amount on which he would have had to pay taxes if he had gotten
it as wages, then plaintiff is getting more than he lost." 4
Fowler V. Harper et al., The Law of Torts § 25.12 (2d ed. 1986);
see Ruff, supra, 105 N.J. at 238. The measurement of after-tax
income is the "more accurate, and therefore proper, measure of
damages," Ruff, supra, 105 N.J. at 241, because personal-injury
damage awards are subject to neither federal nor state taxes.
26 U.S.C. §104(a)(2); N.J.S.A. 54A:6-6. See generally Annotation,
John E. Theuman, Propriety of Taking Income Tax into
Consideration in Fixing Damages in Personal Injury or Death
Action,
16 A.L.R.4th 589, 611 (1982 & Supp. 1993) (reviewing
courts' treatment of income-tax liability in personal-injury
actions). For that reason, courts instruct juries that an award
for damages is not taxable. See Bussell v. DeWalt Prods. Corp.,
105 N.J. 223, 229 (1987).
In this case, the jury apparently based its future-lost-income award of $1.5 million only on Caldwell's gross income,
given that neither plaintiff nor defendants presented any
evidence of net income. The Appellate Division observed that the
jury probably had calculated the future lost wages award by
multiplying the gross income figure of $1,000 per week by the
number of weeks of Caldwell's life expectancy. The court below
surmised that the jury "may have reasonably concluded that
plaintiff used to make $1,000 per week but, despite his
demonstrated desire to work steadily and hard, he was now doomed
to jobs paying no more than his current earnings of $120 per week
for the rest of his life."
Despite the absence of evidence of plaintiff's net income,
the trial court instructed the jury to use net income as the
measure of lost wages. Nevertheless, the jury seemingly did not
attempt to ascertain or apply net income in its calculations as a
matter of common sense and ordinary experience even in the
absence of evidence of net income. See Lesniak v. County of
Bergen,
117 N.J. 12, 28-29 (1989) (ruling that based on jury's
"common sense and experience," future-income-earning potential
for injured infant allowed despite uncertainty). The Appellate
Division speculated that "[t]he jury was supposed to award only
lost net earnings, [but it] . . . may well have given up the
effort to do so in the absence of the smallest shred of
information on the subject of taxes."
Plaintiff responds that when a defendant does not challenge
plaintiff's evidence of gross income, a defendant may be liable
for damages for lost wages based on gross income. The Appellate
Division noted that under current law, "[i]f the parties do not
take the opportunity to produce [net-income evidence], they may
have to live with their disappointment if the jury does not
supply the information out of their own common knowledge."
Consequently, notwithstanding its finding that "this jury was as
uninformed and unguided as any jury considering a potentially
heavy case could be," the appellate court reversed the trial
court's order for a new trial on lost future income.
Under our law, as the Appellate Division correctly observed,
neither party actually has the burden to provide net-income
evidence for a claim based on lost wages. The current practice
in terms of the burden of proof is rather loose. Thus, either
party is permitted, but not required, to introduce evidence of a
plaintiff's income tax obligation. Ruff, supra, 105 N.J. at 241-42 ("[P]arties may introduce evidence and cross-examine witnesses
with regard to plaintiff's future tax liability.").
This case exemplifies the uncertainties and confusion that
surround the current practice with respect to proving damages for
diminished earning capacity based on lost income and the
relevance of net earnings as an element of that proof. We are
convinced that the practice should be clarified and modified. To
ensure that juries have sufficient evidence to use net income in
their determination of damages, we now hold that in personal-injury and wrongful-death actions, a plaintiff has the burden of
proving net income when seeking recovery for diminished earning
capacity based on lost wages.
Generally, plaintiffs have the burden of proving damages.
See, e.g., Lane v. Oil Delivery, Inc.,
216 N.J. Super. 413, 420
(App. Div. 1987) ("It is . . . sufficient that the plaintiff
prove damages with such certainty as the nature of the case may
permit, laying a foundation which will enable the trier of the
facts to make a fair and reasonable estimate."); Huddell v.
Levin,
537 F.2d 726, 743 (3d Cir. 1976) ("The plaintiff . . .
bears the burden of proof and it is the responsibility of the
plaintiff to provide for the jury some evidentiary and logical
basis for calculating or, at least, rationally estimating a
compensatory award."); Caputo v. United States,
157 F. Supp. 568,
569 (D.N.J. 1957) ("The burden rests upon the plaintiff to prove
. . . damages . . . by the preponderance of the evidence.").
However, in practice, plaintiffs often shun and defendants
tend to assume the "permissive" burden of presenting net-income
evidence in establishing lost wages. See Ruff, supra, 105 N.J.
at 238 ("[E]vidence of the plaintiff's future tax liability may
be introduced by the defendant."); Tenore, supra, 67 N.J. at 484
(holding that in wrongful-death case "fairness requires that
defendant have an opportunity to introduce evidence of deceased's
tax liability"); Nordstrom, supra,
19 Ohio St. L.J. at 212
(noting that defense attorneys seek to introduce plaintiffs' tax
liabilities to reduce final awards). Plaintiffs have an
incentive to withhold such evidence to exaggerate their actual or
real earnings. Defendants seek to elicit such evidence because
they generally benefit when a jury excludes income taxes from
lost-wages awards. Randall G. Vaughan, Note, Tax Issues of
Personal Injury and Wrongful Death Awards,
19 Tulsa L.J. 702, 709
(1984) ("Plaintiffs introduce gross earnings evidence as the
basis for calculation of damages while defendants attempt to
prove that the actual 'take home' salary would have been much
less because of tax liabilities.").
To rectify the uncertainties that surround the application
of the net-income-evidence rule and the confusion that arises
from the unstructured current practice, the burden of proving net
income in personal-injury and wrongful-death actions should be
placed clearly and squarely on the plaintiff. In so doing, we
note that such a burden on the plaintiff should not be difficult
to sustain because he or she should have easy access to proof of
net income. Most of that evidence, such as pay stubs or tax
returns, is readily at hand and will not involve complicated
calculations.
The plaintiff in such actions can more easily establish the
amount of taxes paid on gross income than can the defendant.
See, e.g., J.E. ex rel. G.E. v. State,
131 N.J. 552, 569 (1993)
("We generally have imposed the burdens of persuasion and
production on the party best able to satisfy those burdens.");
Lascari v. Board of Educ.,
116 N.J. 30, 45 (1989) ("[B]urdens of
persuasion and of production should be placed on the party better
able to meet those burdens."). Imposing the burden on the
plaintiff coincides with the plaintiff's responsibility at trial
to prove that damages are ascertainable. Charles T. McCormick,
Damages § 14 (1935) (noting that "plaintiff has the burden of
proving . . . loss or damage"); see, e.g., Lane, supra, 216 N.J.
Super. at 420; Huddell, supra, 537 F.
2d at 743; Caputo, supra,
157 F. Supp. at 569. More important, such an allocation of the
burden of proof ensures that the jury has the net-income evidence
needed to perform its duties and reduce the risk of speculative
awards. See Ruff, supra, 105 N.J. at 240 (noting that "some
testimony on the plaintiff's future tax liability will be
necessary"); see also Goodman v. Fairlawn Garden Assocs.,
253 N.J. Super. 299, 306 (App. Div.) (ruling harmful error where no
evidence introduced about issue on which jury was instructed),
certif. denied,
130 N.J. 7 (1992). Therefore, even if a
defendant's trial strategy may be to avoid the entire issue of
net income by refusing to elicit such evidence in an effort to
weaken the plaintiff's liability claims, which arguably happened
in this case, a jury will "be enabled to make an informed
estimate" under a rule that requires the production of net income
evidence. See Tenore, supra, 67 N.J. at 494.
In this case, neither party assumed the proper burden of
proof; neither presented the jury with evidence of plaintiff's
net income. The deficiencies in the evidence led the jury to
reach exaggerated awards for both past and future income. In
addition, even plaintiff's evidence of his gross income was, at
best, inconsistent. As the trial court observed, "There was some
contradiction as to what his yearly [gross] income was." As
noted, Caldwell testified that his pre-accident annual salary
before taxes had been about $44,000, but also stated that he had
earned only "twenty something" thousand the year before the
accident in the same job. The Appellate Division observed that
"no one asked him why that year's figure was so low."
With respect to Caldwell's claim based on past lost income,
the Appellate Division calculated that Caldwell had grossed
$1,000 per week, and had lost twenty-seven months or 117 weeks of
work. At $1,000 per week, a figure that somewhat overstated
Caldwell's actual earnings in 1986 and 1987 based on Caldwell's
annual salary, Caldwell's gross earnings would have been
$117,000, less about $2,640 for twenty-two weeks at $120 as a van
driver, for a loss to the date of trial of $114,360. As the
trial court noted, the jury awarded plaintiff more than double
what he could have earned, even if gross income were the
standard. See Hudgins v. Serrano,
186 N.J. Super. 465, 481 (App.
Div. 1982) (ruling that jury verdict on wages that was close to
twice plaintiff's actual loss constituted manifest injustice).
Thus, the lack of net-income evidence clearly influenced the
jury's past-lost-wages award.
With respect to future lost wages the verdict obviously was
also distorted by evidence that was limited to gross income. In
a fifty-week year, Caldwell would lose gross earnings of $880 per
week or $44,000 per year. The Appellate Division surmised that
the jury had multiplied Caldwell's life expectancy of 34.55 years
by the $44,000 in lost gross earnings to arrive at $1,520,000,
which was rounded down to $1,500,000. The trial court reasoned
that that award contemplated plaintiff working for 2,083 straight
weeks without vacation, or over forty years until the age of
eighty, again based on defendant's gross, not net, income.
A verdict based on evidence of net income would clearly have
brought the jury to a different result. Assuming the Appellate
Division's hypothesis was correct, the jury simply multiplied
Caldwell's gross income by his life expectancy to reach an award
of $1.5 million. Accepting Caldwell's testimony that he had
earned $1,000 in gross weekly income, and assuming federal and
state tax liability to be 28%, his after-tax income would have
been $720. Plaintiff was forty-years-old at the date of the
verdict. If the net income figure were multiplied by Caldwell's
life expectancy of 34.55 years, even assuming plaintiff worked
all fifty-two weeks a year, at most the verdict would approximate
$1,290,000. Furthermore, if the jury had based its calculations
using work-life expectancy, twenty-five years, again assuming
plaintiff worked fifty-two weeks a year, his future lost wages
based on net income would equal $936,000 ($37,440 net annual
income multiplied by twenty-five years). Moreover, the income
award would have been reduced even further based on plaintiff's
earnings as a van driver.
We conclude that the damages awards based on lost income,
past and future, were clearly excessive and must be set aside.
We therefore remand for a retrial of those damages. The burden
of proof should be borne by Caldwell in the new trial to
establish net income as a basis for damages measured by both
claimed lost past and lost future income.
Defendant also contends that with respect to future earnings, the trial court committed reversible error because it did not instruct the jury to discount the award for future lost income to establish its present or current value or to base its determination of future lost income on plaintiff's work-life, as opposed to life, expectancy. On remand, the trial court should correct those errors.
In ordering a new trial on damages, the trial court commented that it did not charge the jury on present value because "[n]obody asked for it" and "[n]obody thought it necessary." Similarly, the Appellate Division noted that "no one said anything to the jury about discounting future earnings, or about the effects of inflation, or about plaintiff's chances of promotion or raises, or about the concept of work-life expectancy (except a passing reference in plaintiff's attorney's summation), or about the likelihood that plaintiff's construction work might
be seasonal and not likely to produce a fifty-week work year."
A defendant is "entitled to have the [economic-damages]
recovery discounted to present value, a procedure [that]
recognizes that the deceased [or injured party] would have had
his income spread out over the remaining years of his working
life." Tenore, supra, 67 N.J. at 474; see also Glowacki v.
Underwood Memorial Hosp.,
270 N.J. Super. 1, 16 (App. Div. 1994)
(finding that trial court properly instructed jury on future lost
wages "to account for inflation and present value"); McKenna v.
Pacific Rail Serv.,
817 F. Supp. 498, 516 (D.N.J. 1993) (stating
that Ruff "made clear that proper measure of damages is net
income after taxes . . . discounted to present value").
Similarly, we have recognized that "in wrongful death actions,
the jury should be instructed that it is permissible for [it] to
consider the impact of inflation upon the survivor's future
losses." Tenore, supra, 67 N.J. at 481. Thus, the Model Civil
Jury Instructions provide for discounting awards to reflect their
present value and considering the effects of inflation and
interest. Model Jury Instructions (Civil), Loss of Earnings §
6.11D (May 1990).
Seemingly, the jury also mistakenly based its future-lost
income award on Caldwell's life expectancy (34.55 years), not
work-life expectancy (arguably twenty-five years). As the
Appellate Division hypothesized, the jury probably used
Caldwell's life-expectancy years in its calculations because it
was provided on the verdict sheet. A jury should consider a
plaintiff's work-life expectancy as well as life expectancy in
determining future lost income "if there is appropriate evidence
received on the subject." Ibid. Accordingly, the jury should
have been instructed regarding work-life as well as life
expectancy to guide its deliberations on future lost income.
In summary, we affirm the trial court's order to conduct a new trial on damages for diminished earning capacity based on lost income. We hold that plaintiffs in personal-injury and wrongful-death actions bear the burden of proving net income, and we rule in this case that that burden of proof shall be applied on remand. In addition, we direct that the trial court instruct the jury with respect to the relevance of work-life expectancy in the calculation of an award based on future lost income and the determination of the present or current value of such an award.
Defendant also argues that the Appellate Division improperly upheld the jury's pain-and-suffering verdict. We agree.
Assigning a monetary value to pain-and-suffering compensation is difficult because that kind of harm is "not gauged by any established graduated scale." Cermak v. Hertz Corp., 53 N.J. Super. 455, 465 (App. Div. 1958), aff'd, 28 N.J. 568 (1959); accord Glowacki, supra, 270 N.J. Super. at 15. Nevertheless, pain-and-suffering awards must be reviewed to
determine whether they are "fair and reasonable." Botta v.
Brunner,
26 N.J. 82, 92 (1958); see Lewis v. Read,
80 N.J. Super. 148, 175 (App. Div.), certif. denied,
41 N.J. 121 (1963). "The
law abhors damages based on mere speculation." Lewis, supra, 80
N.J. Super. at 174.
The trial court found that the pain-and-suffering award
could not be separated "from the other damages and be sustained."
However, the Appellate Division found that "[a] sympathetic view
of plaintiff's condition for the nearly forty years of his
expected life from the date of the accident would clearly justify
such a verdict." Apparently, defendant and the trial court
"expressed skepticism [that] the jury did not share."
That personal-injury awards are not generally divisible is
well established. Dan B. Dobbs, Remedies § 8.1 (1973) (noting
that personal-injury awards, which include lost earning capacity,
medical expenses, and pain and suffering, comprise lump sum);
McCormick, supra, § 16 ("[T]he customary form of general verdict
[for damages] when the plaintiff is successful is a simple
statement . . . to the effect that the jury finds for the
plaintiff and assesses his damages at a [lump] sum named.").
In this case, we agree with the trial court. We cannot
conclude in the context of all of the evidence relating to
damages that the excessive lost wages awards are "fairly
separable" from the pain-and-suffering award. See Terminal
Constr. Corp. v. Bergen County Hackensack River Sanitary Sewer
Dist. Auth.,
18 N.J. 294, 341 (1955). Although the trial errors
related only to past and future lost income, the excessiveness of
those awards and the "interrelationship of the various items of
plaintiffs' claim undermine[] the continued reliability of the
separate awards," including that of pain and suffering. Ruff,
supra, 105 N.J. at 243. Therefore, we reverse the Appellate
Division's judgment that reinstated the jury's $250,000 verdict
on pain and suffering.
We remand for a new trial on damages only. On remand we encourage the trial court to consider a motion for remittitur under Rule 4:49-1. See Ruff, supra, 105 N.J. at 243.
Remittitur denies a defendant a new-trial motion on the condition that a plaintiff consent to a specified reduction in the jury's award. Henker v. Preybylowski, 216 N.J. Super. 513, 516 (App. Div. 1987). The practice of remittitur is encouraged at both trial and appellate levels in cases involving excessive damages. Baxter, supra, 74 N.J. at 595; Fritsche, supra, 55 N.J. at 330-31. The practice "gives plaintiff the choices of accepting the reduced verdict or suffering a new trial on damages." Mulkerin v. Somerset Tire Serv., Inc., 110 N.J. Super. 173, 176 (App. Div. 1970); see Taweel, supra, 58 N.J. at 231. However, the practice is available if the only issue is the quantum of damages, the claimant's right to relief is clear, and "the verdict was not the result of compromise or otherwise tainted." Sylvia B. Pressler, Current N.J. Court Rules, comment
1 on R. 4:49-1 (1994).
In this case, the Appellate Division appropriately has made
remittitur available. However, its proposed remittitur must be
modified in light of our determination that the damages in their
entirety are subject to a new trial. Thus, the remittitur on
remand should offer the choice of a reduction of damages or a new
trial on all damages. See, e.g., Hudgins, supra, 186 N.J. Super.
at 479-83 (upholding pain-and-suffering award of $7,500, but
finding lost-wages award of $1,150,000 shocking because evidence
supported lost-wages award of $650,000 only; granting plaintiff
remittitur for all damages not to exceed $750,000 or a new trial
on damages only). In addressing the feasibility of a remittitur,
the trial court should take into account the jury's determination
to view plaintiff's claims sympathetically and to credit
plaintiff's testimony with respect to damages and the ability of
the parties to proffer competent evidence relating to such
matters as net income, work-life expectancy, and the current
value of any awards based on future losses. Those considerations
indicate that the trial court should be able to determine a
realistic and fair calculation of damages as a basis for an order
of remittitur.
We reverse the Appellate Division's judgment, except for its ruling on past lost wages, and remand to the Law Division for further proceedings consistent with this opinion.
Justices Clifford, Pollock, O'Hern, Garibaldi, and Stein join in this opinion. Chief Justice Wilentz did not participate.