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neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” Schonfeld,
218 F.3d at 178. Lost profits “must be capable of measurement based upon known reliable factors without undue
speculation.” This is a difficult hurdle, especially when the lost profits are based on projections of future profit.
Punitive Damages
Punitive damages are awarded to punish and deter the defendant. They are not generally recoverable for breach of
contract. Topps Co. v. Cadbury Stani S.A.I.C., 380 F. Supp. 2d 250, 261 (S.D.N.Y. 2005). Punitive damages are intended to
vindicate public rights. Rocanova v. Equitable Life Assur. Soc. of U.S., 83 N.Y.2d 603, 613 (1994). As such, they are available
only “in those limited circumstances where it is necessary to deter defendant and others like it from engaging in conduct
that may be characterized as ‘gross’ and ‘morally reprehensible,’ and of ‘such wanton dishonesty as to imply a criminal
indifference to civil obligations.’” New York Univ. v. Cont'l Ins. Co., 87 N.Y.2d 308, 315-16 (1995) (quoting Rocanova, 83
N.Y.2d at 614). The plaintiff must show the breaching party engaged in conduct that was actionable as an independent tort,
of an egregious nature, directed at the plaintiff, and “part of a pattern directed at the public generally.” Tort claims that can
qualify include claims that a party fraudulently induced the plaintiff to enter into a contract, or that the party engaged in
conduct outside the bounds of the contract designed to defeat it.
In Rocanova, the plaintiff sued an insurer for unfair settlement practices in connection with a disability income policy. The
plaintiff claimed punitive damages, alleging the insurance company had engaged in a pattern of publicly-directed bad-
faith conduct in evading insurance claims. The Court of Appeals rejected the punitive damages claim because the
insurance company's alleged settlement practices did not constitute “a fraud evincing a ‘high degree of moral turpitude’
and demonstrating ‘such wanton dishonesty as to imply a criminal indifference to civil obligations.’” 83 N.Y.2d at 615
(quoting Walker v. Sheldon, 10 N.Y.2d 401, 405 (1961)).
A rare breach of contract case in which punitive damages were held available was Skibinsky v. State Farm Fire & Casualty
Co., 6 A.D.3d 975 (3d Dep't 2004). There, the plaintiff alleged the defendant had engaged in a pattern of deceptive
conduct by selling lesser policies than those requested by members of the public, while representing the desired coverage
had been provided. The Appellate Division held that the widespread nature of the alleged misrepresentations could
constitute a fraud on the public that justified punitive damages.
Contractual Limitation of Damages
New York has adopted a freedom of contract approach to clauses that limit parties’ damages: they are generally
enforceable, subject to certain limited exceptions. The exceptions include fraud or gross negligence by the party relying
on the limitation or the existence of a special relationship between the parties, such as employer and employee. Colnaghi,
U.S.A., Ltd. v. Jewelers Prot. Servs., Ltd., 81 N.Y.2d 821, 823 (1993); Ryan v. IM Kapco, Inc., 88 A.D.3d 682, 683 (2d Dep't
2011); Johnston v. Fargo, 184 N.Y. 379 (1906). Moreover, absent language to the contrary, a limitation clause does not apply
to misrepresentations made to induce a party to enter the agreement. Sear-Brown Grp. v. Jay Bldrs, Inc., 244 A.D.2d 966,
967 (4th Dep't 1997). There are also statutory prohibitions on damages limitations for certain types of contracts, such as
those involving work done to real property. §§ 5-322.1 et seq., 5-323.
The identity of the parties is important. Courts are more likely to enforce liability limitations agreed upon by sophisticated
parties represented by counsel. See Metro. Life Ins. Co. v. Noble Lowndes Int'l, Inc., 84 N.Y.2d 430, 436 (1994). The courts
can refuse to enforce a limitation that resulted from unconscionable conduct or a drastic inequality in bargaining power.
In re Lyondell Chem. Co., 544 B.R. 75, 85 (Bankr. S.D.N.Y. 2016). But the courts will not void a limitation clause merely
because a party has acted in its own economic self-interest. Morgan Stanley & Co. Inc. v. Peak Ridge Master SPC Ltd., 930
F. Supp. 2d 532, 544-45 (S.D.N.Y. 2013).
Consequential Damage Waivers
Courts will generally enforce contract provisions that exclude consequential damages so long as they are not
unconscionable. See MG Hotel, LLC v. Bovis Lend Lease, LMB, Inc., 133 A.D.3d 519, 520 (1st Dep't 2015); U.C.C. § 2-719(3).
To demonstrate unconscionability, a party needs to show that the contract was “both procedurally and substantively
unconscionable when made”—i.e., that one of the parties lacked a meaningful choice, and the contract terms were
unreasonably favorable to the other party. McNally Wellman Co., a Div. of Boliden Allis v. New York State Elec. & Gas Corp.,
63 F.3d 1188, 1198 (2d Cir. 1995). Under the New York Uniform Commercial Code, absent unconscionability, clauses that
exclude consequential damages will be enforced even if the limited remedy that remains available to the non-breaching