FORT LAUDERDALE BUSINESS LITIGATION: FRAUD DAMAGES VERSUS BREACH OF CONTRACT DAMAGES

A prevalent issue in business litigation is whether a party can recover damages for fraud if the party also sues for breach of contract. “Under Florida law, ‘one can sue for breach of contract and fraudulent inducement to enter the very same contract, and obtain two recoveries.’” Guarantee Ins. Co. v. Brand Management Servs., Inc., 2014 WL 11531365 (S.D. Fla. Sept. 15, 2014). However, “[a] plaintiff . . . may not recover damages for fraud that duplicate damages awarded for breach of contract.” Novak v. Gray, 469 F. App’x 811 (11th Cir. 2012). Florida’s independent tort doctrine “prohibits claims in tort for damages, which are the same as for breach of contract so prevent plaintiffs from recovering duplicative damages for the same wrongdoing.” Perez v. Scottsdale Ins. Co., 2019 WL 5457746 (S.D. Fla. Oct. 24, 2019). Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

“It is well settled that a party may not recover damages for both breach of contract and fraud unless the party first establishes that the damages arising from the fraud are separate or distinguishable from the damages arising from the breach of contract.” Williams v. Peak Resorts Intern. Inc., 676 So. 2d 513 (Fla. 5th DCA 1996). A “fraud claim may not be pursued if its damages merely duplicate the damages recoverable for breach of a related contract.” Huie v. Dent & Cook, P.A., 635 So. 2d 111 (Fla. 2d DCA 1994). “Where the compensatory damages requested in a count for tort are identical to the compensatory damages sought in a count for breach of contract, compensatory damages and punitive damages for tort are not recoverable.” Rosen v. Marlin, 486 So. 2d 623 (Fla. 3d DCA 1986).

For breach of contract claims arising under Florida law, there is a difference between general damages and consequential damages. General damages are “those damages which naturally and necessarily flow or result from the injuries alleged.” Hutchison v. Tompkins, 259 So. 2d 129 (Fla. 1972). In other words, general damages are those that “may fairly and reasonably be considered as arising in the usual course of events from the breach of contract itself.” Fla. E. Coast Ry. v. Beaver St. Fisheries, Inc., 537 So. 2d 1065 (Fla. 1st DCA 1989). By contrast, consequential damages are not likely to occur in the usual course of events, but “may reasonably be supposed to have been in contemplation of the parties at the time they made the contract.” Fla. E. Coast Ry. v. Beaver St. Fisheries, Inc., 537 So. 2d 1065 (Fla. 1st DCA 1989). Consequential damages are sometimes referred to as special damages as well. “Special damages consist of items of loss which are peculiar to the party against whom the breach was committed and would not be expected to occur regularly to others in similar circumstances.” Hardwick Properties, Inc. v. Newbern, 711 So. 2d 35 (Fla. 1st DCA 1998).

Florida law makes it clear that the fraud damages are not recoverable if they mirror a party’s breach of contract damages. However, a party may recover both fraud and breach of contract damages if they prove the fraud damages claims are separate and distinct from damages arising from the party’s contractual breaches. In determining whether the damages are separate and distinct from each other, Florida courts analyze whether the fraud allegations are “inextricably intertwined with the alleged breach of contract.” Perez v. Scottsdale Ins. Co., 2019 WL 5457746 (S.D. Fla. Oct. 24, 2019).

For example, in Technolojoy, LLC v. BHPH Consulting Servs., LLC, the United States District Court for the Southern District of Florida found that the plaintiff’s “fraud counts [were] separate and distinct from the allegations supporting the breach of contract, unjust enrichment, and quantum meruit claims.” 2021 WL 3080078 (S.D. Fla. July 21, 2021). Technolojoy held that the “allegedly fraudulent actions [were] the issuance of fraudulent invoices meant to confuse the Plaintiff, the cancellation of refunds after Defendants sent messages saying they were being processed, the instruction to Plaintiff to initiate chargeback requests with the credit card companies, and the statements to American Express discrediting those same requests.” Technolojoy, LLC v. BHPH Consulting Servs., LLC, 2021 WL 3080078 (S.D. Fla. July 21, 2021). Technolojoy distinguished these fraudulent acts from the alleged contractual breaches because the contractual allegations stemmed only from the defendant’s failure to provide goods after receiving payment. Thus, Technolojoy allowed the plaintiff to seek recovery of damages under both fraud and breach of contract damages theories.

Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.