Punitive Damages

Posted: May 8, 2017 By: De Novo Review Category: Contracts

By: Marty

Can a plaintiff seek leave to amend to assert punitive damages when the allegedly fraudulent conduct arises from a contractual relationship?

No. “The general rule is that punitive damages are not recoverable for breach of contract, irrespective of the motive of defendant.” Lewis v. Guthartz, 428 So. 2d 222, 223 (Fla. 1982). “It is now a well-settled rule in Florida that punitive damages are not recoverable in a breach of contract action, absent an accompanying independent tort.” Id. (emphasis added). The reason that punitive damages are not allowed for a breach of contract is that Florida courts are unwilling to introduce uncertainty and confusion into business transactions, especially when compensatory damages are an adequate remedy for a party aggrieved by a breach. Id. In Lewis, the Florida Supreme Court refused to reinstate the lower court’s allowance of punitive damages because the plaintiffs failed to allege or prove a tort that was distinguishable or separate from the defendant’s alleged breach of contract. Id. at 224. Although the trial court found that the defendant “acted intentionally, willfully, and outrageously as to the breach of contract [that] does not by itself create a tort where a tort does not otherwise exist.” Id. See also American Int’l Land Corp. v. Hanna, 323 So 2d. 567, 568 (Fla. 1976)(“The general rule is that a breach of contract cannot be converted into a tort merely by allegations of malice”). No matter how flagrantly breached a contract may be, that does not provide the elements needed for a claim of tortious fraud. Id. at 569.

Even when alleging a claim of constructive fraud, allegations of fraud that arise from the contract, will not be enough to plead punitive damages. See Taylor v. Kenco Chem. & Mfg. Corp., 465 So. 2d 581, 589 (Fla. 1st DCA 1985). In Taylor, the appellate court found that “[t]o prevail on his claim for punitive damages, Taylor must show first, that the buyers perpetrated a tort; and second, that the alleged tortious conduct arose independently of the conduct which constitutes a breach of contract.” Id. (emphasis added). When “the alleged tortious conduct of fraud and deceit arose from the same conduct which allegedly constitutes a breach of contract,” a party will be limited to contractual remedies and will not be entitled to amend a complaint to plead punitive damages Id.

Even in instances when a plaintiff pleads separate counts for breach of contract and fraud, it is incumbent upon the court to review the allegations in detail to determine whether the two counts are actually intertwined. If the allegations of fraudulent conduct are no different than the allegations surrounding the alleged contract breach, the two claims are one in the same. If the fraud allegations, however, have no bearing on the breach of contract, then it is more likely a plaintiff will be given leave to plead a claim for punitive damages, assuming an appropriate proffer of evidence is presented.

Share this post