TORTS / REMEDIES Copyright July, State Bar of California

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Merilyn Christal Skinner
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1 Copyright July, State Bar of California Dan operates a plant where he makes pottery. To provide a special high-capacity power source to his pottery kilns, Dan recently installed on the electric company's power pole outside of his building an electrical transformer that would increase the electrical current entering his plant from the main power line. He did this without the knowledge or consent of the electric company. Dan did not know that the power line on which he installed the transformer also feeds power to the adjacent office buildings. Peter occupies one of those adjacent office buildings. In the building, he has an extensive computer network that he uses in his business of providing advanced computer services to local commercial enterprises. Peter has been in this business for ten years. He employs several highly paid computer operators and technicians. Dan's installation of the transformer caused power surges each time his kilns were turned on and off. Soon after Dan had installed the transformer, Peter's computers began to malfunction and eventually were severely damaged by the repeated power surges. As a result, Peter lost a large amount of data stored in his computers. He laid off some employees without pay and shut down his business for two weeks while the computers were repaired and while the remaining employees restored the lost data. During the shutdown, Peter lost considerable income because he was unable to furnish computer services to his customers. Peter and the laid-off employees have filed suit against Dan. 1. In an action against Dan, what theories, if any, might Peter assert and what defenses might Dan raise if Peter seeks to recover: a. The cost of repairing his computers? Discuss. b. The cost of restoring the lost data? Discuss. c. His lost income? Discuss. d. Loss of goodwill and other incidental effects of the disruption of his business? Discuss. 2. May Peter recover punitive damages? Discuss. 3. May the laid-off employees recover lost wages and benefits from Dan under any theory? Discuss.

2 Copyright July, Scott F. Pearce, Esq. Outline I. Peter v. Dan A. Recklessness / Negligence 1. Duty 2. Breach 3. Causation 4. Damages a. Cost to Repair b. Cost to Restore Data c. Lost Income d. Loss of Goodwill e. Punitive Damages 5. Defenses 6. Conclusion B. Strict Liability C. Trespass / Conversion D. Conclusion II. III. May Peter Recover Punitive Damages? Employees v. Dan for Lost Wages

3 Copyright July, Scott F. Pearce, Esq. Answer I. Peter v. Dan Peter s computer services business was forced to shut down for two weeks because of the illicit transformer Dan installed on the power line he and Peter shared. Peter can seek relief under several theories. A. Recklessness / Negligence To prove recklessness, Peter will have to show negligence plus wanton and willful conduct by Dan. 1. Duty Dan must operate his pottery plant with due care towards all foreseeable parties. 2. Breach Dan installed an electrical transformer to increase the electrical current entering his building without the knowledge or consent of the electric company. This act is not merely a breach of the duty of reasonable care. As discussed below, electrical power is ultrahazardous. When Dan secretly tampered with the power line, his conduct was extreme and outrageous. Dan s conduct is wanton and willful. 3. Causation But for Dan s egregious conduct, Peter s computers would not have been damaged by power surges whenever Dan s kiln was turned on or off. No intervening acts took place to break the chain of causation, so proximate cause also is established. 4. Damages a. Cost to Repair Peter s computers were damaged by the power surges. These damages are foreseeable and are recoverable in negligence or recklessness.

4 b. Cost to Restore Data It is entirely foreseeable that a computer services company might lose data as a result of a tortious interference with the electrical power supply. Peter can recover these damages under both recklessness and negligence theories. c. Lost Income Peter has been providing his advanced computer services to local commercial enterprises for ten years. It is foreseeable that Dan s conduct would cause Peter to suffer lost income, and it is likely Peter will be able to prove his losses well enough to recover them via recklessness or negligence theories. d. Loss of Goodwill Peter seeks damages for loss of goodwill and other incidental effects of the disruption of his business. He must prove up these damages if he is to recover them. The court cannot require a defendant to pay damages that are speculative. 5. Defenses Dan does not have any strong defenses. Although it is true that Dan did not specifically intend to hurt Peter, Dan s conduct was outrageous. No facts are present to suggest Peter assumed the risk or in any way contributed to his own injuries. 6. Conclusion Peter will win compensatory damages for Dan s recklessness. As discussed below, Peter is entitled to punitive damages as well. B. Strict Liability The electrical power grid is ultrahazardous, because high voltage can cause death or great bodily harm. Dan installed the transformer without the electric company s knowledge or consent so his high power kiln could draw more current. Dan will be held strictly liable for all provable damages, as discussed above. C. Trespass / Conversion Dan s intentional acts substantially interfered with Peter s use and enjoyment of his property. These deliberate acts damaged Peter s equipment and caused him to lose data. These theories of liability are weaker than recklessness / negligence and strict liability because Dan did not even know the

5 power line on which he installed the transformer also feeds power to Peter s building, much less specifically intend to damage Peter s business. D. Conclusion Peter will prevail on his recklessness, negligence and strict liability theories. II. May Peter Recover Punitive Damages? As discussed above, Peter should prevail on his recklessness cause of action. Punitive damages are available to Peter for this cause of action to further compensate him and to deter this type of wanton and willful misconduct. Although Peter is likely to allege intentional tort claims, these are unlikely to succeed. If Peter did successfully establish trespass or conversion claims, he would be able to claim punitive damages. There is little doubt that Peter could establish strict liability and negligence claims against Dan. Punitive damages are unavailable for these theories of liability. III. Employees v. Dan for Lost Wages These plaintiffs were employed by Peter s company and were laid off because of the harm caused by Dan s misconduct. It is unclear whether or not these employees have been rehired. Unfortunately, Peter s employees may have no recourse against Dan for their damages. The employees losses are pure economic damages because these plaintiffs did not suffer personal injuries or property damage. Consequently, Peter s laid-off employees may not recover lost wages and benefits from Dan under a negligence theory. The employees chances of recovery improve if Dan s conduct is characterized as reckless. The layoffs are a foreseeable consequence of Dan s outrageous conduct. The employees should be able to collect damages from Dan.

Example: Swimming pools, ladders, refrigerators with doors left on, trampolines, and other kinds of property around a business or home.

Example: Swimming pools, ladders, refrigerators with doors left on, trampolines, and other kinds of property around a business or home. Chapter Three Casualty (Liability) Basics LEARNING OBJECTIVES Upon the completion of this chapter, you will be able to: 1. Define basic casualty or liability insurance terms 2. Recognize the liability