Punitive damages against fiduciaries: Leaving Hoppe behind and allowing punitive damages where equitable relief is sought, Part II.

AuthorPankauski, John
PositionTrial Lawyers Forum

In last month's issue, the first part of this article explored Florida's cases involving both the traditional rule and the modern rule of whether punitive damages are available for actions traditionally cognizable in equity. Part two explains why punitive damages are indeed available for actions traditionally cognizable in equity and dispels the dated and incorrect notion that exemplary damages have not been, or should not be, available in such a setting.

Section III

Arguments supporting the traditional rule are not compelling. First, although equity courts historically lacked statutory authorization to award punitive damages, (1) the distinction between law and equity no longer exists in Florida and does not provide a cogent basis for denying punitive relief. (2) Some commentators, however, have argued that the law/equity merger has affected only procedural rights, not substantive ones, and, thus questioned whether the right to a jury trial on punitive damages is procedural or substantive:

If the defendant's misconduct is sufficient in law courts to justify a punitive damage award, it could reasonably be expected that equity courts would have the same power to make such an award. This expectation would seem appropriate in light of the fact that in Florida, law courts and equity courts have merged so that trial courts of general jurisdiction exercise both law and equity powers.... But the merger of law and equity courts only abolished the procedural differences between law and equity; it did not abolish the substantive differences. (3)

Thus, the question whether the abolition of the equity/law distinction can justify the modern rule may partly turn on whether the right to have a jury determines whether and in what amount punitive relief should be awarded is a procedural or substantive issue. (4) Courts which consider the merger to be a matter of procedure frequently conclude substantive differences between law and equity survived the merger and, therefore, favor the traditional rule. (5) However, many of the substantive rules of equity were assimilated into the unified court system created by the merger, undermining the substance/procedure distinction and, as one commentator arguing this point explains:

[T]he law has in the past, and will probably continue in the future, to move carefully in the reception of moral principles. But such caution cannot justify the law's refusal in one part of its judicial system to receive those moral principles which through the course of centuries have been received, tried, and proved in another part of the system. When law and equity were administered by separate and distinct tribunals, many equitable principles were able to travel the gulf and find their way into legal rules. Now that we have the one court, the trip is shorter and should be easier; but such has not proven to be the case. While conceding the validity of equitable principles when specific relief is sought, most courts deny the applicability of these principles when the same plaintiff seeks substitutional relief. Indeed, they deny the applicability of even those principles which have been reduced to more or less concrete rules. Our courts are so enamored with the accident of history which truncated our judicial system and entrusted the two remedies to the different courts that they fail to see the propriety of questioning whether there is anything inherently different about the two remedies which demands the application of different rules to each. (6)

"Because courts have adopted equitable principles in some legal actions, it would appear to be reasonable that they should unequivocally merge the principles of the two systems." (7) The right to have the "collective conscience"--as expressed through a jury determination --render its judgment as to the quantum of punishment, if any, (8) continues to be an important factor which traditional rule apologists cite in favor of their position.

Second, traditional rule advocates have long argued that refusal to award punitive damages on equitable causes is consistent with the principle that equity will award only what is due in justice and fairness without regard to the reprehensibility of defendant's conduct. (9) In a merged system of law and equity, however, the rule against splitting a cause of action would deprive plaintiff of a form of relief: (10)

It is the height of legal paradox for a court to inform a litigant that he is estopped from asserting a legal claim for punitive damages because he cannot split his cause of action when in the prior proceeding for equitable relief he was not permitted to raise that very issue. The notion that a plaintiff "waives" his right to punitive damages by suing for equitable relief is, as the instant court observed, a constructive fiction based on nothing more than equity's reluctance to provide a forum of vengeance... a plaintiff should not be precluded from pursuing his legal claim for punitive damages by reason of a prior equitable proceeding, but it would be anomalous to suggest that the law-equity dichotomy should be preserved in the disposition of claims for punitive damages which may be administered as effectively by the judiciary as other legal claims that are cognizable in an equitable action... Adherence to the old equity rule for punitive damages would pro tanto subvert the very purpose of the merger of law and equity which is to...

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