Recovery of Punitive Damages
When a contract is breached it can cause damages and headache for all parties involved. If this unfortunate event does occur, the damages can be mitigated by arranging a settlement with the party in violation before the breach has occurred. Another option, which may be more arduous, is to resolve the matter in court. In the most extreme circumstances, the court can grant punitive damages paid to the plaintiff, hopefully preventing the defendant from repeating their behavior in future agreements.
Punitive Damages Defined
Punitive damages are paid as a punishment to the defendant and their actions. These differ from compensatory damages, which reimburse a victim for losses directly attributable to a breach of contract, returning the victim to their original standing. While compensatory damages have long been a widely accepted purpose of the US civil court system, punitive damages are a widely debated subject. They are so divisive that laws surrounding punitive damages differ greatly from one state to the next. Some critics see them as a “windfall” to the plaintiff that extends beyond the original loss he or she has incurred. Proponents claim that heinous behavior must be discouraged.
When a defendant is found guilty of oppression, fraud, or malice, the California Civil Code makes general provisions for the resulting punitive damages. The amount of these damages will be determined by the details of the case. The Code directs courts to examine (a) the financial advantages the defendant received as a result of its wrongful behavior, and (b) the defendant’s financial status when establishing the amount of punitive damages.
The amount of punitive damages available to civil plaintiffs is restricted by federal law. The Supreme Court ruled State Farm v. Campbell in 2003, finding that punitive damages are limited by the Constitution’s due process clause. Punitive damages that are more than nine times the sum of compensatory damages are banned by due process.