UJI 13-861. Punitive damages.

In this case, ______________ (name of party making claim for punitive damages) seeks to recover punitive damages from ______________ (name of party against whom punitive damages are sought). You may consider punitive damages only if you find that ______________ (party making claim) should recover compensatory damages. Not every breach of contract warrants punitive damages. Only if you find that ______________ (name of party against whom punitive damages are sought) breached the contract and that [his] [her] [its] conduct in committing the breach was [malicious], [reckless], [wanton], [oppressive], [or] [fraudulent] [rather than being legitimate or justified in the circumstances], then you may award punitive damages against [him] [her] [it]. [Malicious conduct is the intentional doing of a wrongful act with knowledge that the act was wrongful.] [Reckless conduct is the intentional doing of an act with utter indifference to the consequences.] [Wanton conduct is the doing of an act with utter indifference to or conscious disregard for a person’s rights.] [Fraudulent conduct consists of a misrepresentation of fact that the maker knows to be untrue [or that is made recklessly], by which the maker intends to deceive another for the purpose of causing the other to act in reliance on the misrepresentation, and on which the other does rely.] Punitive damages are awarded for the limited purpose of punishment and to deter others from the commission of like offenses. The amount of punitive damages must be based on reason and justice taking into account all the circumstances, including the nature and enormity of the wrong and such aggravating and mitigating circumstances as may be shown. The property or wealth of the defendant is a legitimate factor for your consideration. The amount awarded, if any, must be reasonably related to the injury and to the damages given as compensation and not disproportionate to the circumstances. recovered for breach of contract when the defendant’s conduct was malicious, fraudulent, oppressive, or committed recklessly with a wanton disregard for the plaintiff’s rights.” Id. ¶ 23. Contract law is to be distinguished from tort law with respect to punitive damages, however, in that a breach of contract may not be a basis for punitive damages even if the breach is intentional and “even if the other party will clearly be injured by the breach.” Bogle v. Summit Inv. Co., 2005-NMCA-024, ¶ 28, 137 N.M. 80, 107 P.3d 520. New Mexico law acknowledges this fact by distinguishing “‘wrongful’ breaches . . . from those committed intentionally for legitimate business reasons.” Romero, 1989-NMSC- 081, ¶ 26; see also McGinniss v. Honeywell, Inc., 1990-NMSC-043, ¶ 31, 110 N.M. 1, 791 P.2d 452 (noting that “even if deliberate, the breach may be justified in some sense if the promisee can be fully compensated for the loss and the benefit to the promisor from the breach may provide society with a net gain -- i.e., the breach may be ‘efficient’”); Cafeteria Operators, L.P. v. Coronado-Santa Fe Assocs., L.P., 1998-NMCA- 005, ¶ 42, 124 N.M. 440, 952 P.2d 435 (Hartz, J., concurring in part and dissenting in part). Generally, the case law indicates that the kind of conduct targeted by punitive damages is “[o]verreaching, malicious, or wanton conduct” that “is inconsistent with legitimate business interests, violates community standards of decency, and tends to undermine the stability of expectations essential to contractual relationships.” Romero, 1989- NMSC-081, ¶ 34; see also Constr. Contracting & Mgmt., Inc. v. McConnell, 1991- NMSC-066, ¶ 16, 112 N.M. 371, 815 P.2d 1161 (stating that a breach that is fully compensated and results in a net social gain will not support punitive damages “unless there is an intention to inflict harm on the nonbreaching party or conduct which violates community standards of decency”). This instruction thus differs from the instruction regarding punitive damages in tort, UJI 13-1827 NMRA, by allowing for the possibility that the breaching party may offer evidence to show that the breach was committed for a legitimate or justifiable reason. New Mexico precedent indicates that “a party’s inability to perform a contract without incurring a substantial financial loss would constitute a legitimate business reason” for nonperformance. Constr. Contracting, 1991-NMSC-066, ¶ 16. Other grounds that would expose a breaching party to compensatory but not punitive damages have yet to be defined. See Cafeteria Operators, 1998-NMCA-005, ¶ 49 (Hartz, J., concurring in part and dissenting in part). In some cases, the court may be called upon to determine whether a reason offered by a breaching party to justify nonperformance of a contract is supported by sufficient evidence to be presented to the jury and whether the reason offered would, if established, provide a legally sufficient basis to avoid punitive damages for the breach. In addition to breaches that are malicious in that they are intended to cause harm, see Constr. Contracting, 1991-NMSC-066, ¶ 16, New Mexico precedent indicates that punitive damages are justified where a party breaches a contract after making the contract with knowledge it would not be performed or with a conscious disregard for whether it would be performed, Romero, 1989-NMSC-081, ¶¶ 36-37, or attempts to avoid any obligation by breaching while “believing that the wronged party cannot afford to contest the matter in court,” id. ¶ 33 & n.6, or adopts a construction of an ambiguous contract that is “unreasonable and . . . in wanton disregard of [the other party’s] rights,” Pub. Serv. Co. v. Diamond D Constr. Co., 2001-NMCA-082, ¶ 43, 131 N.M. 100, 33 P.3d 651. The language defining malicious, reckless, and wanton conduct in the bracketed parts of the instruction is taken from UJI 13-1827. The language defining fraudulent conduct is taken from Prudential Insurance Co. v. Anaya, 1967-NMSC-132, ¶ 9, 78 N.M. 101, 428 P.2d 640. Oppressive conduct is not defined in New Mexico case law. A definition will have to be added by the court where conduct alleged to be oppressive is at issue. The Committee suggests the following definition may be appropriate in some contexts: “Oppressive conduct is marked by an unjust use of power or advantage.”