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COA split over whether damages are punitive

January 29, 2014

The Indiana Court of Appeals released a divided opinion Wednesday on the issue of whether damages awarded under the Indiana Sales Representative Act are punitive in nature. The majority affirmed the trial court’s ruling that damages awarded under the Act would be subject to the evidentiary standard, limitation and diversion provisions of Indiana’s punitive damages statute.

Ralph Andrews sued Mor/Ryde International for breach of contract, alleging the company materially breached the agreement and had done so in an “egregious manner.” Andrews worked as an independent sales representative who performed services on behalf of the company from 1996 until Mor/Ryde terminated the agreement in 2008.

The trial court ruled that the ISRA applied to Andrews’ claim, and it issued an order following a pleading from Mor/Ryde that the exemplary damages awarded under the Act are punitive in nature, and subject to the procedures outlined in I.C. 34-51-3-2 and -6, the punitive damages statutes, including the requirement of proof by clear and convincing evidence.

On interlocutory appeal in Ralph Andrews v. MOR/Ryde International, Inc., 20A04-1303-PL-141, Judges Rudolph Pyle III and Terry Crone affirmed the trial court, noting that the term “exemplary” as used in the Act, as it refers to damages, is also defined as “punitive damages” by Black’s Law Dictionary. The majority held that if the Legislature intended that the damages awarded under the Act were to be something other than punitive in nature, it could have specifically exempted those damages from the requirements of I.C. 35-51-3-1, et. seq., Pyle wrote.

“Therefore, when a plaintiff has alleged bad faith under the Act, the plaintiff must show bad faith by clear and convincing evidence, and any exemplary damages awarded are subject to the requirements of I.C. § 35-51-3-1 et. seq.,” he wrote.

Judge Michael Barnes dissented because he didn’t believe that the general statutes and principles governing “punitive” damages control an express statutory award of “exemplary” damages under the Act, even if those two words are sometimes used interchangeably.

“The treble damages are a matter of statutory entitlement, not common law discretion. If the legislature had intended these exemplary damages to be controlled by punitive damages limitations, it could have expressly said so, but it did not,” he wrote.
 

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