Chicago Business Litigation Lawyer Blog
Yes, punitive damages can be awarded in derivative actions, but these awards often come with certain conditions. Punitive damages are typically awarded when the tort committed involves fraud, actual malice, deliberate violence or oppression, or when the defendant displays willful or grossly negligent behavior that shows a wanton disregard for the rights of others. This means that the defendant’s conduct must show a high degree of moral culpability for such damages to be awarded.
There are specific cases in which courts have allowed for punitive damages in derivative actions. For instance, in Caparos v. Morton, punitive damages were awarded in a derivative action for a breach of fiduciary duty against general partners.
It’s important to note that punitive damages are generally only awarded in the presence of compensatory damages. As established in Groshek v. Trewin and reaffirmed in Epic Systems Corp. v. Tata Consultancy Services Ltd., punitive damages cannot be awarded when the recovery of compensatory damages is not justified. This suggests that the availability of punitive damages is governed by whether compensatory damages are recoverable, not by whether an “actual injury” has been inflicted.
The case of Exxon Shipping Co. v. Baker also suggests that a punitive award should be limited to an amount equal to compensatory damages.
In Illinois, punitive damages have certain restrictions. For instance, they may not be recovered in cases of medical or legal malpractice.
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