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Third Circuit Affirms $5 Million Punitive Damages Award in Negligent Misrepresentation Case

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The U.S. Court of Appeals for the Third Circuit affirmed a $5 million punitive damages award in a dispute involving safety testing and certification of commercial heaters.  In Brand Marketing Group LLC v. Intertek Testing Services, No. 14-3010 (Sept. 10, 2015), the Court held that: (1) juries may award punitive damages in negligent misrepresentation claims; and (2) in awarding punitive damages, courts may consider harm to the general public rather than solely harm to the plaintiff.

Plaintiff manufacturer developed vent-free heaters which it provided to defendant testing company to perform safety testing and certification pursuant to American National Standards Institute (ANSI) standards.  Defendant testing company performed the testing on the heaters in China using standards written in English and certified that the heaters met ANSI standards.  Plaintiff manufacturer then delivered the heaters to its retail store customer.  Plaintiff manufacturer’s retail store customer subsequently discovered that the heaters did not meet ANSI standards and stopped sales.  The retailer then filed a claim against Plaintiff manufacturer and obtained a judgment in the amount of $611,060.  Plaintiff manufacturer then brought suit against defendant testing company including a negligent misrepresentation claim.

The jury awarded a judgment in favor of plaintiff manufacturer in the amount of $1,045,000 in compensatory damages in addition to $5 million in punitive damages.  The jury found that defendant testing company negligently misrepresented that it had the necessary expertise to determine whether the heaters met ANSI standards.

The Third Circuit affirmed the award including punitive damages holding that the jury may award punitive damages for negligent misrepresentation claims.

Aside from the application of punitive damages in negligent misrepresentation cases, the Third Circuit also addressed the broader issue of whether courts could consider harm to the general public rather than simply harm to plaintiffs.  In the case at bar, plaintiff manufacturer sustained financial damages, but no consumers were harmed by an accident or injury caused by the heaters.  However, the court held that the fact that no consumers were actually injured was irrelevant.  The court further held that the potential public harm was “directly tied” to the harm to plaintiff manufacturer.  Therefore, it was appropriate for the trial court to consider the harm to the general public in addition to the harm to plaintiff manufacturer.

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