Business Falsehoods Can Cost Plenty — Court

SAN FRANCISCO — Businesses — mainstream as well as adult — have a new incentive to be honest in the state of California.

The California Supreme Court ruled last week that they could be slapped with punitive damages for fraudulently breaching contracts.

The far-reaching decision could, in essence, threaten the predictability of risk in commercial contracts, whether it involves deals with adult webmaster affiliate programs or, in the case decided, faulty helicopter clutches.

The court affirmed $6 million in punitive damages against Dana Corp., a company that supplied helicopter equipment to Robinson Helicopter Co. The ruling was separate of $1.5 million in compensatory damages awarded to Robinson.

Robinson sued Dana for intentionally concealing that its sprag clutches — parts that keep helicopter blades rotating through a loss of power — weren't up to FAA specifications.

California justices ruled, 6-1, that Dana could be slapped with punitive damages because its fraudulent conduct was separate from breaching a contract.

Writing for the majority, Justice Janice Rogers Brown said Robinson had proven “dispositive fraudulent conduct” independent of the breach of contract — continuing to provide written certificates to Robinson with each delivery, falsely asserting that the clutches had been manufactured in conformance with Robinson’s written specifications.

Brown rejected the argument that limiting the buyer to a contract remedy under such circumstances would be consistent with public policy encouraging commercial transactions with predictable results.

“No rational party would enter into a contract anticipating that they are or will be lied to,” Brown wrote. “[D]ana’s argument therefore proposes to increase the certainty in contractual relationships by encouraging fraudulent conduct at the expense of an innocent party. No public policy supports such an outcome.”

But Justice Kathryn Mickle Werdegar, with the lone dissent, said the majority of the court was prescribing “a cure worse than the disease.”

“Today's decision greatly enhances the ease with which every breach of contract claim can don tort clothes,” Werdeger wrote. “I fear that in doing so, it opens a Pandora's box better left sealed.”

The ruling is Robinson Helicopter vs. Dana, No. S114054.

Copyright © 2024 Adnet Media. All Rights Reserved. XBIZ is a trademark of Adnet Media.
Reproduction in whole or in part in any form or medium without express written permission is prohibited.

More News

Orion Unveils 2 New Ergonomic Dual Vibrators

Orion Wholesale has introduced two new ergonomic dual vibrators from its Sweet Smile line.

California Republicans, Democrats Team Up to Advance Age Verification for Porn

Both Republicans and Democrats in the California Assembly’s Privacy and Consumer Protection Committee voted last week to move forward a version of the age verification bills being sponsored around the country by anti-porn religious conservative activists.

Hazel Grace Debuts New Membership Site InMelanin

Hazel Grace has launched her new membership site, InMelanin.

XR Brands Releases 'Pup Teddy Bear' BDSM Plush

XR Brands has expanded its Master Series collection of BDSM-themed teddy bears with the Pup Teddy Bear Plush.

Cosplayground Releases 'Furiosa XXX: A Porn Parody'

Cosplayground has released its seventh original production, “Furiosa XXX: A Porn Parody.”

Vixen Media Group Debuts 2nd Season of 'Hotel Vixen'

Vixen Media Group (VMG) has launched the second season of its Greece-set series "Hotel Vixen."

Ada Lapiedra Toplines Private's 'Hot Girls in Hot Cars'

Ada Lapiedra headlines "Hot Girls in Hot Cars," the latest release from Private.

Anna de Ville Headlines Proxy Paige's 'Gape Expectations'

Anna de Ville headlines director Proxy Paige's "Gape Expectations," from Evil Angel.

Washington Post Profiles ECP VP Solomon Friedman's Appearance at XBIZ LA

The Washington Post published this weekend a lengthy feature about Pornhub and Aylo, focusing on Ethical Capital Partners’ VP of Compliance Solomon Friedman’s keynote address and other appearances at XBIZ Los Angeles in January.

Sexperts Business Community Launches Platform for Promoting Counseling Services

The Sexperts Business Community (SBC) has launched a new platform for sex and relationships experts.

Show More