The Goldberg Law Firm Co., LPA

The Goldberg Law Firm Co., LPA

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Punitive Damage Cap

In a terse opinion, the Ohio Supreme Court holds that the punitive damage cap of two-times actual damages applies to breach of a landlord-tenant agreement.  As the court recounted:

A fire destroyed Building 3 of the Village Green Apartments, located in Beachwood, Ohio. At the request of the Beachwood Fire Department, the fire was investigated by Ralph Dolence, an experienced fire investigator and consultant, who determined that the fire originated between the ceiling of the second story and the floor just above it as a direct result of construction defects.

On October 23, 2007, a fire broke out in another building, Building 8, of the apartment complex. Dolence conducted an investigation and concluded that the fire originated in the space between the floor and ceiling of apartments 210 and 310. Dolence detailed various National Electric Code violations, including unsecured feeder cables, wires double stapled, and wires placed against metal gusset places with insulation damage. Dolence also saw extensive infiltration of water within the building. At trial, Dolence testified that he was 100 percent certain that the fire was caused by “faulty electrical wiring contaminated by water leaks” within the building.

Several tenants sued claiming the building was negligently constructed and maintained in violation of the Ohio Landlord-Tenant Act.  A jury awarded compensatory damages of $582,146, punitive damages of $2,000,000, and attorney fees of $1,040,000.  The trial court's judgment entry included an additional $186,631.95 compensatory award.  The appellate court affirmed the award in total, in part holding that the punitive damage cap for torts did not apply because the claims stemmed from landlord-tenant agreement.

The Ohio Supreme Court disagreed, holding that "injurious conduct arising between parties to a contract does not always sound in tort, but it can, as in this case."  The harm caused was created not from any breach of the landlord tenant agreement, but rather, as a result of the violation of R.C. 5321.04, which creates tort liability upon the breach of the landlord's duty.  The opinion is terse probably because the Ohio Legislature left little room in drafting the punitive damage cap for tort liability.  Accordingly, the punitive damage tort cap applies to contractual violations that sound in tort, and the punitive damages must be limited to two-times the compensatory damages.  In this case, the difference isn't as extreme as it could have been.  The plaintiffs will still receive over 1.5 million on the punitive damage claim.  This may not always be the result though, the punitive damage cap could have severely limited the total amount awarded by the jury.  Punitive damages are meant to punish and deter certain conduct.  Limiting those damages arbitrarily to two-times compensatory damages would seem to lessen the deterrence available.