Delaware Business Litigation Report

Superior Court Holds Punitive Damages Are Not Precluded Where Separate Tort Claim Exists Alongside Contract Claims

Data Mgmt. Int’l v. Saraga, C.A. No. 05C-05-108, 2007 WL 2142848 (Del. Super. Ct. July 25, 2007).

Generally, a plaintiff bringing a claim based entirely upon the breach of a contract must sue in contract and is limited to contract remedies. No tort exists merely because a party breaches a contract—even if intentionally. But, the same conduct upon which the breach of contract claim is grounded may give rise to a tort claim if the conduct independently amounts to the breach of such an independent duty imposed by law. And with a tort claim comes the availability of punitive damages.

Here, a commercial tenant brought an action against its landlord for conversion, breach of contract, and breach of the covenant of good faith and fair dealing after the landlord disposed of the tenant’s property. The commercial tenant held over the expiration date of its lease by over a week (allegedly with the permission of the new tenant) upon which time the landlord entered the premises and disposed of the tenant’s property. The tenant sought punitive and compensatory damages.

The landlord moved for summary judgment on the claim for punitive damages, arguing that if the contract was still in effect when the landlord entered the premises, as the tenant argued, then the tenant only had a contract claim and thus could not seek punitive damages. The tenant countered that the conversion claim could be separately maintained.

The court agreed with the tenant, denying summary judgment and holding that the continuation of the lease would not bar the conversion claim: the lease was not the source of the conversion claim. And, since the conversion claim could be separately maintained, the tenant could appropriately seek punitive damages.

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