Illinois Appellate Court Orders Punitive Damages Against Decedent’s Estate

F. Gary Kovac, the plaintiff in this matter, sued the estate of Kenneth L. Barron Jr. for compensatory damages and exemplary or punitive damages. In the majority of jurisdictions, punitive damages are not allowed after the death of the defendant tortfeasor.

Kovac and Barron owned 50% of three different corporations. In his original lawsuit, Kovac accused Barron of a pattern of serious misconduct, which included diverting millions of dollars from the businesses. Kovac sued Barron in Kane County, Ill. When Barron died, Kovac continued the lawsuit against the administrator of Barron’s estate who was his widow, Sandra Barron.

At the end of the bench trial, the trial judge ordered Barron’s estate to pay $3,220,702 for fraud and an additional $450,000 in punitive damages.

Sandra Barron appealed to the appellate court arguing that it was improper to order a decedent’s estate to pay punitive damages. The Illinois Appellate Court affirmed the punitive damages award and explained:

“Barron deliberately violated multiple, specific court orders to cease his misconduct including diverting the operating companies’ business income, destroying business records and denying Kovac full access to the business. Additionally, Barron misappropriated millions of dollars from Kovac through fraud, deception and manipulation of his various businesses, which, as the trial court found, ‘shocked the conscience.’ Barron secretly used KES [a payroll company he owned] to funnel funds away from the operating companies and to pay blatantly outrageous amounts to himself and Sandra for their part-time work.”

The appellate court also stated that Barron violated a strong and clearly articulated public policy by disobeying the court’s orders. In addition, he was found guilty of defrauding his equal partner out of millions of dollars.

“Accordingly, we cannot say that the trial court’s determination to award punitive damages was an abuse of discretion.”

In response to Sandra Barron’s argument that punitive damages were improperly awarded, the court responded by pointing to the case of Penberthy v. Price, 281 Ill.App.3d 16 (1996). Penberthy is the only case in Illinois in which a claim for punitive damages survived the defendants’ death. However, Penberthy, which was decided by the Appellate Court in the Fifth District, is not binding by another district of the Illinois Appellate Court.

Punitive damages serve as punishment for the defendant and are designed to promote three rationales: (1) to act as retribution against the defendant; (2) to deter the defendant from committing similar wrongs in the future; and (3) to deter others from similar conduct. Kochan v. Owens¬-Corning Fiberglass Corp., 242 Ill.App.3d 781 (1993).

In Penberthy, the lawsuit was brought by a motorist and passenger who sued an intoxicated driver’s estate for injuries from that collision, which killed the intoxicated driver. In that case, the plaintiffs were awarded compensatory damages as well as punitive damages. The Penberthy court found the award of punitive damages did not have a statutory basis but did find that driving under the influence of alcohol violated a strong and clearly articulated public policy and because the underlying conduct was a crime, the court concluded that strong equitable considerations weighed in favor of survival of the claims for punitive damages.

In this case, the appellate court found that given all of these facts, Barron’s conduct was so egregious in that he disobeyed court orders and violated a strong and clearly articulated public policy in disobeying those orders and he defrauded his equal partner out of millions of dollars that punitive damages were appropriate against his estate. The court also noted that it was not disposed to promulgate a sweeping rule of law that would permit punitive damages against deceased tortfeasor defendants in all circumstances. Accordingly, the court affirmed the punitive damages award as not being an abuse of discretion.

Kovac v. Barron, 2014 IL App (2d) 121100 (March 7, 2014).

Kreisman Law Offices has been handling wrongful death actions, fraud and misrepresentation cases and commercial litigation matters for individuals and businesses for more than 38 years in and around Chicago, Cook County and its surrounding areas, including Cicero, Oak Park, Chicago Heights, Harwood Heights, Park Ridge, Deerfield, Prospect Heights, Palatine, Palos Park, Palos Hills, Bridgeview, Joliet, Waukegan, Wheaton, Calumet City and Blue Island, Ill.

Related blog posts:

Illinois Appellate Court Finds That a Non-Shareholder Can Be Held Liable for Corporate Debts

U.S. Court of Appeals Finds that Tying Arrangement Did Not Violate Federal Antitrust Law

Illinois Appellate Court Affirms Dismissal of Trial Court’s Decision Dismissing Condominium Association Lawsuit Against Contractors for Defective Construction Work