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Business Owners … Learn a Little About Punitive Damages

I represent some small businesses who are worried about being exposed to punitive damages and, to some extent, they should be. I think there have been a couple of Grisham books which involved a plaintiff suing the defendant for 100 billion or perhaps 500 katrillion dollars. This brings up the concept of tort reform, whereby businesses would receive statutory protection to limit companies from the potential for massive liability through punitive damages designed to “teach them a lesson.” However, North Carolina actually has a statute which limits recovery under punitive damages.

North Carolina law sets forth that punitive damages may be awarded to punish a defendant for egregiously wrongful acts and to deter the defendant and others from committing similar wrongful acts. Think about it this way – you have a claim against a Fortune 500 company for $20,000.00. That’s a lot of money to individuals, but to these big companies… chump change. Punitive damages are designed to keep defendants from doing certain wrongful acts; if $20,000.00 doesn’t deter you, perhaps $100,000.00 will.

But, unlike many states, North Carolina has set forth a cap on punitive damages. One cannot recover more than three times the actual damages, or $250,000.00, whichever is more. So our $20,000.00 claim could recover $250,000.00, at the most. A $100,000.00 claim could recover $300,000.00 in punitives.

Is that enough to deter Big Company X? Unfortunately, probably not. But more importantly, small and medium sized businesses get some protection from a potentially limitless punishment. Small and medium sized businesses, do not be intimidated by the thought of punitive damages, you can get some certainty as to what your potential exposure might be.

Another factor that most people don’t know about punitive damages: A claimant must select between punitive and some other remedies before you go to trial. For example, many statutes call for treble – or triple – damages. I have written about some of these before, the Consumer Protection Act is one of them. You can have punitive or treble damages… but not both.

Small businesses, one other thing to note: If you can establish that the plaintiff’s claim for punitive damages was frivolous, you could be awarded your attorney fees in response.

So don’t always believe what you see on TV, there is protection for the small and business owner from limitless lawsuits. . Sorry to Matt Damon, or whichever lawyer won the katrillion dollars in a Grisham movie.

If you have been sued or threatened with suits for punitive damages, Maginnis Law, PLLC can help. Maginnis Law is a firm based in Raleigh that serves Cary, Morrisville, Wake Forest, Holly Springs and the rest of the Triangle. Please contact Ed Maginnis at 919-526-0450 or visit the firm’s website at