Damages in Defamation Suits Restricted by NJ Supreme Court Ruling

Damages in Defamation Suits Restricted by NJ Supreme Court Ruling

The Supreme Court of New Jersey recently held that plaintiffs in a defamation suit couldn’t recover both actual and presumed damages. The case is NuWave Investment Corp. v. Hyman Beck & Co.

The Facts of the Case

Plaintiffs Troy Buckner and John Ryan, who served as principles of NuWave Investment Corporation (NuWave) filed a New Jersey defamation suit against First Advantage Litigation Consulting, LLC, formerly BackTrack Reports, Inc. (BackTrack), regarding the content of background investigative reports prepared for clients considering investment opportunities. The reports on Buckner, Ryan and NuWave included many statements attributed to Hyman Beck & Company (Hyman Beck) and its employees, Alexander Hyman and Richard DeFalco, all of whom were also named as defendants in the suit.

The plaintiffs’ initial complaint asserted various causes of action, including trade libel and defamation, against all defendants. Summary judgment proceedings and dismissals left only the defamation claim against BackTrack for trial. The jury found BackTrack liable and awarded the following amounts as “presumed damages”: $1 million (NuWave), $150,000 (Buckner); $50,000 (Ryan). The jury further determined that NuWave suffered $1.406 million in “actual damages” as a proximate result of BackTrack’s defamatory statements, but neither Buckner nor Ryan suffered actual damages.

>On appeal, the Appellate Division agreed with the trial court that the challenged statements were largely defamatory, but determined that a jury cannot award both presumed nominal damages and other “actual damages.” Its decision largely relied on W.J.A. v. D.A., 210 N.J. 229 (2012), a decision entered while the appeal was pending in which the New Jersey Supreme Court confirmed the limited role of presumed damages.

The Court’s Decision – Damages in Defamation Suits

The New Jersey Supreme Court upheld the Appellate Division’s decision. As explained by the court, “Presumed damages is a procedural device that allows a defamation case to go to the jury in the absence of proof of actual damages. If the jury finds the statement defamatory, without proof of actual damages, only nominal damages can be awarded. Presumed damages may not be awarded in any higher amount.

In reaching its decision, the court clarified the distinctions between actual, punitive, and nominal damages with regard to defamation suits. As explained by the panel:

Actual damages can include harm caused by “impairment to reputation and standing in the community,” along with personal humiliation, mental anguish, and suffering to the extent that they flow from the reputational injury. All compensatory damages, whether considered special or general, depend on showings of actual harm, demonstrated through competent evidence, and may not include a damage award presumed by the jury. By way of contrast, “nominal” damages, including those that may be presumed, are not to be awarded as compensation and are not appropriate when compensatory damages are otherwise available to the plaintiff.

Because the court deemed it was “unclear whether the entirety of the jury award was influenced by the inadequate instruction on the proper roles of the various categories of damages and the circumstances under which they are available to plaintiffs,” it remanded the case for a new trial on damages.