Whether you are a potential plaintiff or a potential defendant, in a business dispute, determining whether punitive damages can be successfully added to the claim is an important part of the legal analysis and should be considered as early in the process as possible.  If you are a potential plaintiff, it is important to analyze whether a claim for punitive damages can be added. Successfully adding a claim for punitive damages will likely increase the potential value of the claim.  If you are a potential defendant, it is important to understand whether a plaintiff can successfully move to add a claim for punitive damages based upon the causes of action pled.

WHEN CAN A PLAINTIFF SEEK PUNITIVE DAMAGES IN A BUSINESS DISPUTE

1. The General Rule

In Florida, prior to pleading a claim for punitive damages a plaintiff must seek leave to amend to add such a claim and must make a profer that would demonstrate a reasonable basis for the recovery of punitive damages.  Fla. Stat. 768.72(1) (“In any civil action, no claim for punitive damages shall be permitted unless there is a reasonable showing by evidence in the record or proffered by the claimant which would provide a reasonable basis for recovery of such damages…”) Claims for punitive damages are often underutilized in the context of business litigation.  However, it is important to acknowledge that punitive damages claims in business disputes are often disfavored by the courts.

A defendant may be held liable for punitive damages only if the trier of fact, based on clear and convincing evidence, finds that the defendant was personally guilty of intentional misconduct or gross negligence.

Fla. Stat. 768.72 (2)

Generally, punitive damages claims are appropriate when there are allegations of gross negligence or intentional misconduct that are substantiated by a proffer of evidence.

2. Punitive Damages Arising through Allegations of Gross Negligence

It is rare that a business dispute would support amendment on the basis of gross negligence.  The Florida Supreme Court has held that the conduct necessary to support a claim for punitive damages for gross negligence was the same as that necessary to support a conviction of manslaughter.

Punitive damages are imposed in order to punish the defendant for extreme wrongdoing and to deter others from engaging in similar conduct.  They are not intended as a means by which a plaintiff, to recover extra damages.  Thus, punitive damages are warranted only where there is egregious wrongdoing of the defendant, although perhaps not covered by criminal law, nevertheless constitutes a public wrong.  Therefore, the questions that must be answered utilizing the Carraway standard is whether Chrysler exhibited a reckless disregard for human life equivalent to manslaughter by designing and marketing the Volare.

Chrysler Corp. v. Wolmer, 499 So.2d 823, 825 (Fla. 1986) (citations omitted)

3. Punitive Damages Arising through Allegations of Intentional Misconduct

Intentional misconduct is expressly defined by Florida Statutes:

“Intentional misconduct” means that the defendant had actual knowledge of the wrongfulness of the conduct and the high probability that injury or damage to the claimant would result and, despite that knowledge, intentionally pursued that course of conduct, resulting in injury or damage.

Fla. Stat. 768.72(2)(a) (emphasis added)

A cursory review of the language of the statute would lead one to believe many claims, including but not limited to, fraud, breach of fiduciary duty, conversion, tortious interference, misappropriation of assets, and shareholder oppression would support a claim for punitive damages.  Understanding the breadth of potential claims that can support a claim for punitive damages in a business dispute is necessary to properly value a claim. [1]  Once a plaintiff is granted leave to amend to add a claim for punitive damages they will seek financial discovery and the settlement value of the case will undoubtedly increase.  Understanding the plaintiff’s burden in a hearing to add a claim for punitive damages is essential to both prosecuting and defending such a claim.

PLAINTIFF’S ROAD MAP TO ADD A CLAIM FOR PUNITIVE DAMAGES

It is important from the start to remind the Court that the proffered evidence is the only evidence that is to be considered and that counter proffers should either be ignored or not accepted by the Court.  A proffer of evidence is best defined in State of Wisconsin Investment Board v.  Plantations Square Associates, which states:

Indeed a “proffer” according to traditional notions of the term, connotes merely an “offer” of evidence and neither the term standing alone nor the statute itself calls for an adjudication of the underlying veracity of that which is submitted, much less for countervailing evidentiary submissions.

State of Wisconsin Investment Board v. Plantation Square Associates, Ltd, 761 F. Supp. 1569, 1581 n. 21 (S.D. Fla. 1991)

A full scale adversarial assault on the evidence proffered is not appropriate.  Royal Marco Point One Condominium Assoc. v. QBE Ins. Corp., 2010 WL 2609367 (M.D. Fla. 2010) Generally, the trial court will apply the same standard as that in a motion to dismiss a complaint and will view the proffered evidence in a light most favorable to the movant.  Estate of Despain v. Avante Group, Inc., 900 So.2d 637 (Fla. 5th DCA 2005) (“We are of the view that the standard that applies to determine whether a reasonable basis has been shown to plead a claim for punitive damages should be similar to the standard that is applied to determine whether a complaint states a cause of action…We will review the record evidence and the proffer in the light most favorable to Despain and accept it as true.”) (emphasis added); Wayne Frier Home Ctr. Of Pensacola, Inc. v. Cadlerock Joint Venture, 16 So.3d 1006, 1010 (Fla. 1st DCA 2009) citations omitted (“In evaluating the sufficiency of the evidence proffered in support of a punitive damages claim, the evidence is viewed in a light favorable to the moving party.  When a claim for punitive damages is made, the trial court must decide, whether there is a legal basis for the recovery of punitive damages shown by any interpretation of the evidence favorable to the plaintiff.”) (emphasis added).  Furthermore, fraud, by its nature, is generally proven by circumstantial evidence.  S & S Toyota, Inc. v. Kirby, 649 So.2d 916, 919 (Fla. 5th DCA 1995) (“A wrongdoer’s intent to defraud is ordinarily proved by circumstantial evidence.”)

In conclusion, the Court should be reminded that the burden is relatively low and that counter proffers should be ignored unless they completely negate a proffer.  If the Court is concerned that the plaintiff will not ultimately succeed on the count alleging intentional misconduct it is important to clarify that the standard is not whether the Judge believes the plaintiff will prevail but rather the standard is whether the fact finder could award punitive damages if they were to take the plaintiff’s proffer as true.  Often the Courts are very comfortable with the motion to dismiss analogy found in the Estate of Despain case.

DEFENDANT’S ROAD MAP IN DEFENDING A CLAIM IN WHICH PUNITIVE DAMAGES MAY BE SOUGHT

As one can see from the last section, the plaintiff’s burden is not a high one.  However, punitive damage claims in business disputes are generally disfavored.  It is important to remember that despite the plaintiff’s relatively low burden, the defendant has a substantive legal right to be free from a punitive damages claim.

Section 768.72 create[s] a substantive legal right not to be subject to a punitive damages claim and ensuing financial worth discovery until the trial court makes a determination that there is a reasonable evidentiary basis for recovery of punitive damages.

Globe Newspaper Co. v. King, 658 So.2d 518, 519 (Fla. 1995) citations omitted

The purpose of requiring the evidentiary proffer is to protect the defendant from the increased litigation expense and increased settlement value of a case without at least some showing that there is a reasonable basis for a punitive damages claim.  Neill v. Gulf Stream Coach, Inc., 966 F. Supp. 149 (M.D. Fla. 1997).  It is through this prism you want the Court to analyze the appropriateness of adding a punitive damages claim.

After focusing on the defendant’s substantive right not to be subjected to punitive damages, it is important that the defendant also focus on the language of Fla. Stat. 768.72 which requires that the plaintiff’s proffer reasonably demonstrate “actual knowledge” and that “despite that knowledge, [the plaintiff] intentionally pursued that course of conduct.”  Intent is one of the most difficult things to prove.  It is very rare that the plaintiff will have direct evidence of intent.  Although circumstantial evidence can be relied upon to prove intent, the Court is often much more skeptical of claims predicated on circumstantial evidence.  Furthermore, defendant should attack circumstantial evidence that relies upon improper stacking of multiple inferences.  Additionally, a proffer of counter-evidence is appropriate if it completely negates the plaintiff’s proffer.  Lastly, there are cases that note that it is possible for record evidence to support an intentional tort but not an award of punitive damages.  Air Ambulance Professionals, Inc. v. Thin Air, 809 So.2d 28 (Fla. 4th DCA 2002).  These cases can be particularly persuasive when the Court believes the proffered evidence may be legally sufficient to avoid summary judgment but also believes the claim is unlikely to be successful after a full adjudication of the merits.

One of the most effective methods of preventing a punitive damages claim is to attempt to kill the claim before it gets started.  Generally, any intentional tort claim should be attacked by motion to dismiss if there is also a claim for breach of contract.  Although the economic loss doctrine is now abolished for business torts, the independent tort doctrine still requires a tort independent of the contract.  Tiara Condominium Assoc., Inc. v. Marsh & McLennan Co., Inc., 110 So.3d 399 (Fla. 2013).  A persuasive argument for dismissal can be made when an intentional tort claim is predicated on the same facts that are alleged in a breach of contract count

CONCLUSION

This blog is intended to be a brief overview of the law in Florida, as it applies to punitive damages in business or commercial torts.  For the plaintiff, a claim for punitive damages can be an effective tool that helps to resolve a complicated business dispute.  For the defendant, the granting of leave to add a punitive damages claim can lead to the requirement to disclose financial assets.  Often the requirement to disclose financial assets results in settlement of a claim at a number much higher than the defendant believes the claim is worth.  This is particularly true when the claim for punitive damages has little chance of prevailing at trial but is likely to survive summary judgment.  Regardless of whether you are a plaintiff or defendant in a business dispute, you should consider the potential of a punitive damages claim in any business or commercial litigation that alleges intentional wrongdoing.