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A VICTORY FOR By Edward F. Morrison, Jr., Esq.;
In another consequential decision dealing with the recovery of damages for emotional distress resulting from an economic loss, the California Court of Appeals, First District, ruled in the case of Lili Butler-Rupp v. Roseanna Lourdeaux (2005) 134 Cal.App. 1220, that a commercial property landlord was not liable for emotional distress damages allegedly suffered by a commercial tenant who had sued the landlord for breach of contract and various tort causes of action. In Butler-Rupp, the tenant plaintiff filed suit against her landlord over the alleged failure by the landlord to provide a proper heating system for the leased space, which was used as an office and showroom for the tenant’s clothing design and manufacturing business. After a jury trial, the tenant was awarded damages in the amount of $855,000 predicated on breach of contract, negligent misrepresentation and/or interference with the tenant’s quiet enjoyment of the leased premises. Additionally, the tenant was awarded $500,000 for negligent infliction of emotional distress caused by the landlord’s conduct toward the tenant. The Court of Appeal rejected the award for emotional distress damages citing the 1999 published opinion in Erlich v. Menezes (1999) 21.Cal.4th 543 (reversing an award of damages for emotional distress based on breach of a contract to build a house). Relying on the Erlich case and its progeny, the Court acknowledged that conduct amounting to a breach of contract could become tortious when that conduct also violates a duty independent of the contract arising from principles of tort law (which would then permit an award of damages for emotional distress). The Court further noted that such situations could include contract cases where a breach of duty directly causes physical injury, where a contract was fraudulently induced and in certain other “highly unusual” situations. However, the Court noted that in each of these situations, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm. In Butler-Rupp, the Court noted in its opinion that the jury found the landlord did not intentionally cause emotional distress and that no physical injury was proved to have occurred. On that basis, the Court ruled that any breach of duty on the part of the landlord rested in contract and that damages for emotional distress could not be recovered. Stated differently, since the tenant’s damages arose solely from the landlord’s non-intentional failure to perform its contractual obligations, the Court found that the tenant could recover only in contract for actual economic loss. Butler-Rupp provides an important, albeit probably limited victory for owners and managers of commercial property. Essentially, if the tenant’s damages arise from non-intentional, negligent conduct involving property management, the court will be required to essentially treat any dispute as a breach of contract case where emotional distress damages will not be available unless there is some actual, bodily injury or highly unusual circumstances. In short, while the question of emotional distress damages in the context of a commercial landlord-tenant dispute is not quite resolved, the Butler-Rupp case provides some protection against tenant claims for such damages. About the Authors: Edward F. Morrison and Larry A. Schwartz are partners and Christina S. Karayan is an associate in the Los Angeles office of Lewis Brisbois Bisgaard and Smith, LLP. Their biographies can be viewed at www.lbbslaw.com. Note: The article above is intended for informational purposes only, and should not be construed as legal advice on any matter.
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