November 26, 2013

Court of Appeal affirms $200,000 punitive damages award in a published opinion (Powerhouse Motorsports v. Yamaha Motor)

This published opinion affirms a judgment awarding $1.1 million in compensatory damages and $200,000 in punitive damages against Yamaha Motor Corp. in a dispute between Yamaha and a former franchisee.

Yamaha argued on appeal, among other things, that the punitive damages should be vacated under Civil Code section 3294, which provides that punitive damages cannot be awarded for the breach of obligations arising solely from a contract.  Yamaha claimed the plaintiff's various claims all arose from Yamaha's alleged breach of a franchise agreement.  The California Court of Appeal (Second Appellate District, Division Six) disagreed, finding that the plaintiff had a valid tort claim for interference with a separate contract (to which Yamaha was not a party), between the plaintiff and a third party.

Yamaha also argued that the plaintiff failed to prove, as section 3294 requires, that any misconduct was committed by an officer, director, or managing agent of Yamaha.  Again, the Court of Appeal disagreed.  It held that Yamaha's regional sales manager, who testified that he was responsible for the total well-being of between 140 and 240 dealerships, was a managing agent within the meaning of section 3294.