A successful lawsuit can result in various forms of relief – including an injunction (usually stopping someone from doing something), a declaration (adjudging the parties’ respective rights and obligations), disgorgement (forfeiting money obtained illegally), compensatory damages (making an injured party whole), consequential damages (for the losses that flowed from the harm), and punitive damages (punishing the wrongdoer and deterring others who may engage in the same conduct).
In my March 2024 column, I wrote about a lawsuit brought by CPI Security Systems, one of the largest privately held security providers in the Southeast, against security giant Vivint that alleged Vivint used deceptive sales practices.
The case was brought in 2020. In 2023, a jury rendered a verdict in favor of CPI and against Vivint for more than $189 million. Punitive damages made up $140 million of the verdict, while $29.3 million was for violations of the North Carolina Unfair and Deceptive Trade Practices Act; $13.5 million for unfair competition; $5.4 million for trademark violations; and $1.5 million for interfering with the contracts of seven identified CPI customers.
As I wrote in my original column, the size of the punitive damage award reflected the jury’s intention to punish what it perceived to be intentional misconduct.
Update: The Appeal
Vivint appealed, and an appellate argument was held on Jan. 28, 2025. Among other issues, Vivint argued the verdict violated North Carolina's statutory cap on punitive damages, which maxes out punitive damages at three times the amount of compensatory damages. The non-punitive damage award totaled $49 million. Vivint argued that amount is not all compensatory damages, but some is disgorgement. If correct, then the $140 million punitive damage award may be deemed excessive by the appellate court. It then could be reduced, set aside for further proceedings at the trial court, or struck in its entirety (which is unlikely here).
However, because the general verdict form at trial did not differentiate between disgorgement and compensatory damages, it is not clear how the appellate court will or can calculate the amount from which North Carolina’s statutory damage cap can be measured. One of the three judges on the appellate panel suggested that, if that distinction was known, Vivint might have a case for arguing a portion of the non-punitive award was attributable to disgorgement and not compensatory damages; therefore, Vivint would have a basis to argue the punitive damages exceeded the three-times statutory cap.
CPI argued that both sides agreed to the verdict form at trial – and neither side addressed whether disgorgement is eligible for calculating the statutory cap on punitive damages. Also, CPI argued that this was not a “runaway jury” – but a case worthy of punitive damages due to the extensive evidence of misconduct found by the jury.
Vivint’s appeal may succeed in part, but its path surely would have been easier if the amount of the compensatory damages vs. disgorgement was addressed at trial.
Ultimately, the lesson of my original column remains – do not use deception to make sales. If you use deception to make a sale, you may find yourself on the wrong side of a punitive damage award – with limited appellate options to reduce or overturn the award.
