Treble Damages For Diversion Of Partnership Funds

Treble Damages For Diversion Of Partnership Funds

The California Supreme Court decided on July 21, 2022, in the case of SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR a trial court may award treble damages and attorney’s fees under Penal Code section 496, subdivision (c) in a case involving (not trafficking of stolen goods – the usual basis for treble damages) fraudulent diversion of a partnership’s cash distributions.  Treble damages means three times (3x) the amount of the actual stolen property, here, partnership funds.

Section 496(a) of the California Penal Code criminalizes the receipt of stolen property that “has been obtained in any manner constituting theft” and section (c) says that a person injured by a violation of Section 496(a) may “bring an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney’s fees.”  Notably, not all commercial or consumer disputes where a defendant obtained money or property through fraud, misrepresentation, or breach of contract will amount to theft.  According to the Court, the plaintiff must establish criminal intent beyond mere proof of nonperformance or actual falsity.

We very much expect that there will be an increasing number of cases alleging company theft and demanding 3x the amount of what was supposedly stolen.  We’re on it for you here at Epps and Coulson, LLP.  We work to remain up to date with the changes to the laws as they occur.  We can help you – please contact dawn at: dcoulson@eppscoulson.com

Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.  It is likely considered advertising.  Epps & Coulson, LLP encourages you to call to discuss these matters as they apply to you or your business.

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