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Two (Rare) Times Punitive Damages Claims Can Succeed in NY


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3/14/2016
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A long time ago I learned that if you ever want a great summary of the current law on a particular issue in New York, get a recent Federal Court decision on the topic; it will be well-written, accurate and concise.

Raedle v. Credit Agricole Indosuez, a decision out of the Federal Court for the Southern District of New York, is no different.

In this case, the Court felt obliged to dismiss the jury's award of punitive damages that arose out of the defendants' tortious interference with the plaintiff's prospective employment with another company.

Why the Court Dismissed the Jury's Punitive Damages Award 

In so doing, the Court articulated the basis for its decision dismissing the punitive damages aspect of the case as follows:

"The purpose of punitive damages is, as the word indicates, to punish. The purpose of punitive damages is to punish a defendant for shocking conduct and to set an example in order to deter him and others from committing similar acts in the future. In order to award punitive damages, you must find circumstances of aggravation or outrage, such as spite or malice or other evil motive on the part of the defendant, and a conscious and deliberate disregard of the plaintiff's interests so that the conduct could be called willful or wanton. These are strong words, but that's what is necessary to be shown in order to obtain an award of punitive damages" [Emphasis supplied].

Two Types of Cases Where New York's Courts Have Awarded Punitive Damages

Two instances where New York's courts have allowed punitive damages are

1) in the tort (i.e., personal injury) context; and,

2) in the tortious interference with contract context.

But, as the Court made clear, the standard for a punitive damages award differs greatly from that required to prove the underlying tort or tortious interference claim.

The Critical Difference Between the Proof Required to Support a Punitive Damages Claim & That Needed to Sustain a Tortious Interference Claim 

Unlike the tortious interference claim, which is proved by evidence that but for the defendant's intentional and wrongful interference, the third party likely would have honored its agreement with the plaintiff, a punitive damages claim must also be supported by proof that the defendants' actions have "the character of outrage frequently associated with crime." Prozeralik v. Capital Cities Comm'ns, Inc., 82 N.Y.2d 466, 479 (1993).

In addition - and importantly - where the punitive damages are sought against a company based upon the actions of that company's officer, the plaintiff must prove that

 "[A] 'superior officer' ... employed in a managerial capacity participated in, authorized, consented to, or ratified the misconduct...  such that "his participation in the wrongdoing renders the employer blameworthy, and arouses the institutional conscience for corrective action."

Why Punitive Damages Awards Are Exceedingly Rare

In other words, the employee's wrongful actions have to carry the implicit blessing of the employer.

At the risk of stating the obvious, that is certainly not an easy standard to meet.



Category: Tortious Interference

Jonathan Cooper
Non-Compete, Trade Secret and School Negligence Lawyer

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