Estate of Lemington for the Aged v. Baldwin (In re Lemington Home for the Aged Official Comm. of Unsecured Creditors) - 777 F.3d 620 (3d Cir. 2015)

Rule:

Punitive damages may be awarded for conduct that is outrageous, because of a defendant's evil motive or his reckless indifference to the rights of others. Punitive damages are not awarded to compensate the plaintiff for her damages but rather to heap an additional punishment on a defendant who is found to have acted in a fashion which is particularly egregious. The state of mind of the actor is vital. The act, or the failure to act, must be intentional, reckless or malicious.

Facts:

Defendants were the officers and directors of a nursing home that was closed due to bankruptcy. The Bankruptcy Court granted the request made by the Committee of Unsecured Creditors to bring this adversary proceeding against defendants claiming breach of fiduciary duty, breach of the duty of loyalty, and deepening insolvency. The district court granted summary judgment in favor of defendants on all claims. The court of appeals vacated the summary judgment and the case was remanded to the district court. The jury awarded punitive damages individually against the defendants.

Issue:

Were the defendants properly found liable for breach of fiduciary duties?

Answer:

No.

Conclusion:

The jury improperly imposed punitive damages on the defendants because the award was not supported by evidence sufficient to establish that they acted with malice, vindictiveness, and a wholly wanton disregard of the rights of others.