New London Tobacco Market, Inc. v. Ky. Fuel Corp., No. 20-5565 (6th Cir. 2022)
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The Sixth Circuit affirmed in part and reversed and remanded in part the judgment of the district court entering default judgment against Defendants in this breach of contract and fraud action and awarding damages to Plaintiffs on all counts, holding that there was error in the damages award.
During the underlying litigation, Defendants committed a string of "egregious" discovery violations, and the district court entered default judgment as a sanction. After a hearing, the district court awarded Plaintiffs two types of breach-of-contract-related damages. The Court then awarded fraud and punitive damages. The Sixth Circuit reversed in part, holding (1) Plaintiffs' fraud claim failed because it did not plead fraud with particularity as required by Fed. R. Civ. P. 9(b); (2) Kentucky's choice-of-remedies rule and the economic-loss doctrine barred Plaintiffs from recovering for both breach of contract and fraud; and (3) because Plaintiffs could not recover fraud damages, the punitive damages award could not stand.
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