Opinion ID: 2976290
Heading Depth: 2
Heading Rank: 3

Heading: Responses to Pepsi’s Remaining Arguments

Text: First, Pepsi argues that Koehler should not receive punitive damages because his conversion claim is directly related to his contract claim. The Appellant states that punitive damages are generally not recoverable for breach of contract claims. Id. Because Koehler’s conversion victory arguably depends on his breach of contract claim, Pepsi says that “the district court indirectly awarded Koehler a windfall to which he was not entitled.” Id. Pepsi is correct that under Ohio law, courts generally do not award punitive damages upon findings of breach of contract. In re: Graham Square, Inc., 126 F.3d 823, 828 (6th Cir. 1997). However, Pepsi’s cited case on this point also provides the exception to the rule: “Because the sole purpose of contract damages is to compensate the nonbreaching party for losses suffered as a result of a breach, ‘[p]unitive damages are not recoverable for a breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are recoverable.’” Id. (citations omitted) (emphasis added). In an action involving both tort and breach of contract -18- No. 07-3093 Koehler v. PepsiAmericas, Inc. claims, a plaintiff may recover punitive damages if the “breach of contract is accompanied by a connected, but independent tort involving fraud, malice or oppression.” E.g., McMahon v. Alternative Claims Servs., Inc., 2007 WL 4119163,  (N.D. Ohio 2007) (permitting potential punitive damages recovery for intentional infliction of emotional distress tort tied to breach of contract claim); Burns v. Prudential Secs., Inc., 167 Ohio App. 3d 809, 857 N.E.2d 621 (Ohio App. 2006) (permitting punitive damages recovery for breach of fiduciary duty and negligent supervision in a breach of contract action). The exception “permits punitive damages not for the breach of contract, but for the tortious conduct.” Mabry-Wright v. Zlotnik, 165 Ohio App. 3d 1, 7, 844 N.E.2d 858, 863 (Ohio App. 2005) (citations omitted). Here, conversion is such an independent tort that allows punitive damage recovery upon a showing of malice. E.g., Drayton v. Jiffee Chem. Corp., 591 F.2d 352, 365 (6th Cir. 1978) (noting that punitive damage recovery has “become commonplace in actions involving . . . conversion, and other wrongs of a similar nature”). Pepsi does not contest the District Court’s legal conclusion finding conversion. As described above, this Court finds sufficient evidence of malice to affirm the District Court’s award of punitive damages to Koehler based on Pepsi’s conversion. Under the exception to the rule described above, Pepsi cannot escape punitive damages just because the same conduct is also a breach of contract. Pepsi also argues that the punitive damages award is excessive because Koehler is in effect receiving “double punitive damages” in the form of both liquidated damages under the USERRA and punitive damages under his conversion claim. Pepsi provides no additional legal or factual argument on this point. Although some courts have considered the USERRA’s liquidated damages to be punitive, the case law is not settled on this point. Compare Duarte v. Agilent Tech., Inc., 366 -19- No. 07-3093 Koehler v. PepsiAmericas, Inc. F.Supp.2d 1036, 1037-38 (D.Colo.2005) (noting and agreeing with the decisions by several courts that liquidated damages based on willfulness constitute a punitive remedy), with Vander Wal v. Sykes Enters., Inc., 377 F.Supp.2d 738, 746 (D.N.D. 2005) (describing the USERRA as awarding liquidated damages and not punitive damages, thereby distinguishing between the two). Assuming, without deciding, that the USERRA’s liquidated damages provision is punitive in nature, we cannot agree with Pepsi that the instant award is excessive just because it includes both liquidated damages and punitive damages components. The USERRA limits its award of liquidated damages to double the actual damages owed. 38 U.S.C. § 4323(d)(1)(C). The Court finds that it would be reasonable for a district court to award punitive damages, beyond the liquidated damages amount, to effectuate the purposes of punitive damages: “to punish the guilty party and deter tortious conduct by others.” Digital & Analog Design Corp. v. North Supply Co., 63 Ohio St. 3d 657, 660 (Ohio 1992), overruled on other grounds; see also Winkler, 124 Fed.Appx. at 936. Also, the case was tried to the District Court without a jury, and the Judge would have known that both liquidated and punitive damages would be awarded. With no argument as to why the particular amount of punitive damages awarded is excessive, we will not find that the award is excessive just because it grants both liquidated and punitive damages in the same case.