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9th Circuit

Lionel Simon must have been pretty dejected in March 1998 when a California jury announced it was awarding him only $5,000 in actual damages at the conclusion of his case against Sao Paolo U.S. Holding Co. Inc. for fraudulently backing out of a real estate deal.

But when the jury tacked on $1.7 million in punitive damages, it was the defendant who was dismayed.

Here, Simon claimed uncompensated harm of $400,000 for profits he lost when the sale fell through. His lawyer, Andr?? 1/2 Jardini of Knapp Petersen & Clarke's Glendale, Calif. office, also argued that had his client given up his leased premises with the expectation of moving into the new building, he would have "found himself on the street" when Sao Paolo refused to close. This added to the potential harm Simon could have suffered due to Sao Paolo's fraud.

As the Court of Appeal saw it, the jury must have taken the $400,000 claim into account in awarding $1.7 million in punitives. The court reasoned that Civil Code Sec. 3343--which limits damages for attempted purchasers of real estate to the actual expenses they incur--prevented the jury from awarding the $400,000. It did not, however, prevent the jury from taking that sum into account in assessing punitives.

Also significant was the court's ruling that juries could take potential harm into account.

"Defendants cannot sit back and say that regardless of their conduct, no substantial harm came to the plaintiff," Mason explains. "It remains open to plaintiffs to take foreseeable potential harm into account as a basis for calculating punitive damages."


Julius Melnitzer

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