Punitive damages are damages awarded to a party in addition to the damages which will actually compensate the party for the loss where the wrong done to the party was a result of oppressive, malicious, fraudulent or wanton conduct on the part of the defendant. While punitive damages typically are available to parties in the personal injury context, many recent cases have held punitive damages may also be awarded to plaintiffs involved in commercial cases.
In Mathias v. Accor Economy Lodging, Inc., Plaintiffs, Burl and Desiree Mathias, hotel guests, were bitten by bedbugs. They were awarded punitive damages of almost $400,000 in a suit against the hotel chain, claiming that the hotel’s failure to deal with bedbug infestation problems in its hotel rooms constituted willful and wanton conduct. The court found that the hotel’s failure to either warn its guests or to take steps to eliminate the bedbug infestation amounted to fraud and possibly battery. Consequently, the court found there was sufficient evidence of willful and wanton conduct to permit the award of punitive damages.
In addition to tortious conduct similar to that described in Mathias, courts have awarded punitive damages against defendants who engage in fraudulent conduct. In Bank of Illinois v. Bill’s King City Stationery, Inc., the court affirmed an award of punitive damages to the seller of stock where the purchaser engaged in fraudulent conduct rendering the stock worthless. In Cox v. Doctors Associates, Inc., a court affirmed the imposition of punitive damages where there was evidence that the defendant made fraudulent misrepresentations to induce the plaintiff to enter into a franchisor-franchisee relationship.
Courts have also awarded punitive damages in the employment context. In Kolstad v. American Dental Association, the Supreme Court held that punitive damages may be imposed in an employment discrimination case where the supervisor engaged in intentional discrimination while acting within the scope of his or her employment and where there was no evidence of the employer’s good faith efforts to comply with employment discrimination laws.
Additionally, in Medow v. Flavin, a former employee of a travel agency filed suit against the vice president of the travel agency for slander, libel and conversion of personal property. The appellate court affirmed a jury’s award of punitive damages on the employee’s conversion count, noting punitive damages were justified since the evidence that the vice president barred the employee from retrieving her personal belongings indicated the vice president acted with malice, as required to support an award of punitive damages.
Punitive damages may also arise from a breach of fiduciary duties, particularly where the breach is intentional. In Levy v. Markal Sales Corp., Plaintiff, Kenneth Levy (“Levy”), a shareholder in a closely held corporation, brought claims of breach of fiduciary duty against the company’s two remaining shareholders asserting they conspired to secretly terminate Levy’s employment and usurped a valuable business opportunity through a corporation they established. The court held that punitive damages were justified since defendants intentionally breached their fiduciary duties to Levy.
These cases demonstrate that punitive damages maybe awarded when the conduct at issue is fraudulent, malicious or involves intentional discrimination or a breach of fiduciary duty. Litigants in commercial cases should, therefore, consider, when developing a litigation strategy, whether the defendant’s conduct was such that a judge may impose punitive damages.