In McCarter & English, LLP v. Jarrow Formulas, Inc., 329 A.3d 898 (Conn. 2025), the Connecticut Supreme Court adopted the rule followed by the Restatements of the Law and the majority of jurisdictions in holding that a law firm may not recover common-law punitive damages for a client’s breach of contract unless it pleads and proves the existence of an independent tort for which punitive damages are available.
In that case, a law firm sued its client in the U.S. District Court for the District of Connecticut for, among other things, breach of contract, claiming more than two million dollars in outstanding legal fees and expenses incurred in representing the client in a contentious Kentucky action; the law firm later amended its complaint to add a claim for punitive damages for willful and wanton breach of contract, alleging that the client terminated its engagement with the law firm following a jury verdict in favor of its adversary, but did not inform the law firm of that decision until weeks later while continuing to ask the law firm to perform legal work, and refused to pay the law firm’s last five monthly invoices. The client counterclaimed for breach of fiduciary duty, negligent and intentional misrepresentation, unfair trade practices, and legal malpractice.
Before trial, the parties stipulated that the jury would determine whether either party was entitled to punitive damages, and that the court would determine the amount of those damages. Following trial, the jury returned a verdict in favor of the law firm on all claims and counterclaims. After receiving a jury instruction that punitive damages could be awarded if a party’s conduct intended to violate the rights of the other party, the jury determined that the client’s conduct in breaching the contract for legal services was willful and malicious.
The client moved for judgment as a matter of law, arguing that no punitive damages could be awarded to the law firm on its breach-of-contact claim because Connecticut law did not recognize bad faith breach of contract except when there was a strong public policy involved. Because Connecticut law was unsettled on that issue and resolving the issue required weighing competing public-policy concerns, the district court certified a question to the Connecticut Supreme Court and denied without prejudice the law firm’s motion for punitive damages, noting that the motion could be renewed if the Connecticut Supreme Court determined that punitive damages were available for the client’s willful and malicious breach of contract.
The Connecticut Supreme Court answered the certified question, holding that, as a matter of first impression, a law firm could not recover common-law punitive damages for its client’s breach of contract unless it pleaded and proved the existence of an independent tort for which punitive damages might be recoverable. The court noted that it frequently “relied on the Restatement (Second) of Contracts when evaluating novel issues of contract law” and found that multiple Restatements supported the majority rule. First, the court observed that § 355 of the Restatement of the Law Second, Contracts, followed the majority approach, providing that punitive damages were not recoverable for breach of contract unless the conduct constituting the breach was tortious and permitted the recovery of punitive damages. Restatement of the Law Second, Torts § 908, Comment b, similarly explained that an award of punitive damages was not permitted merely for a breach of contract; the fact that a party’s act or omission amounted to a breach of contract did not preclude the award of punitive damages if a tort action was concurrently filed and the tort was one for which an award of punitive damages was proper. The court also pointed out that Restatement of the Law Third, Torts: Remedies § 39, Comment n (Tentative Draft No. 3, 2024) aligned with the majority rule in that it did not permit the recovery of punitive damages for even egregious breaches of contract, but noted that the contractual context of an action did not preclude an award of punitive damages for an “independent” tort that a defendant committed in the course of the negotiation, performance, enforcement, or breach of the contract.
The court explained that the approach adopted by the majority of jurisdictions and the Restatements was strongly supported by the different purposes for which breach-of-contract damages and punitive damages were awarded in Connecticut. Breach-of-contract damages provided compensation to a party for the loss of the bargain, while punitive damages were awarded to punish and deter certain behavior and generally were “not a remedy to private wrongs, but to vindicate public rights.” Recognizing that Connecticut was unique in that it was one of only two jurisdictions that limited the award of common-law punitive damages to litigation expenses less taxable costs, the court was persuaded that this nuance in Connecticut law did not warrant a departure from the majority rule.
After looking at case precedent, the law of other jurisdictions, and the Restatements, the Connecticut Supreme Court concluded that “the rule adopted by a majority of jurisdictions and the Restatements, which require[d] the existence of an independent tort for which punitive damages [could be] recoverable, provide[d] adequate protection for plaintiffs while also providing clear guidance as to the circumstances in which punitive damages [could be] recovered.”