“Punitive damages” is one of those legal concepts that you certainly do not need to have gone to law school to understand. The phrase inspires lavish dreams for plaintiffs hoping to hit defendants where it hurts and collect an enormous payout in the process, and terror in defendants who understand that the entire point of punitive damages is to hit their bottom line hard enough so as to be made an example of to other similarly situated market players. You may associate punitive damages with particularly egregious wrongful death and product liability lawsuits between injured individuals and deep-pocketed corporate defendants – and there is truth to that connection – but punitive damages can also be awarded in business litigation disputes in California.
Fraud, Malice, and Oppression: The Keys to Punitive Damages
Most business disputes are based off of causes of action rooted in an alleged breach of contract. In essence, one party is saying that there was a contract between the plaintiff and the defendant – whether it be a purchase and sale agreement, a real estate contract, an employment agreement, etc. – and that the defendant failed to live up to its obligations. In typical breach of contract actions, the plaintiff can sue for the financial losses suffered due to the defendant’s breach, but punitive damages (which, by definition, go above and beyond a plaintiff’s actual losses and are there to punish and deter the defendant from acting egregiously) will not be awarded in a typical breach of contract action.
But, under California law, a business plaintiff can pursue punitive damages from a defendant based on an agreement when the defendant acted with fraud, malice, or oppression. Of these three, fraud is the most common cause of action brought against business defendants in pursuit of punitive damages, and is defined as, “an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.”
While less commonly pled in the business context, malice is defined as “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others,” and oppression is defined as, “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.”
Business Dispute Situations in Which Punitive Damages Might Be Awarded
Based on those definitions of fraud, malice, and oppression – and keeping in mind that fraud is the one most applicable to a typical business-to-business dispute – it is thus the case that the difference between a regular breach of contract action in which punitive damages are not available and a situation where punitive damages might be awarded is generally going to focus on the defendant’s conduct rather than the plaintiff’s financial injury.
With the case of fraud or intentional misrepresentation, a California court will look at whether there are sufficient facts to show that the defendant did indeed act intentionally to deceive a plaintiff and thereby obtain property or a legal right via that deception. We see these cases arise in the real estate context when a defendant allegedly lies about the features of qualities of real estate, or fails to provide information about the property that should have been provided, and the plaintiff decides to buy the property based on this false representation or omission.
Fraud cases must meet high pleading requirements at the outset to make it to trial, and whether you are considering bringing a fraud action or defending against one, working with an experienced business dispute attorney can be critical to pursuing your interests in such cases.
Contact the Commercial Contract Attorneys at Wagenseller Law Firm
At Wagenseller Law Firm in downtown Los Angeles, we provide full legal services to individuals and businesses in business and real estate litigation matters. Contact Wagenseller Law Firm today to schedule a consultation to discuss your commercial contract matter.