Punitive Damages Threaten the Hospitality, Manufacturing, and Oil and Gas Industries

In a recent, but now consistent, turnaround, the Mexican Supreme Court of Justice decided to walk away from over 60 years of consistent precedents that denied the existence of punitive damages.

The First Chamber of the Supreme Court ruled that punitive damages are legal whenever a non-pecuniary damage (daño moral) claim (pain and suffering, or personal injury) is asserted. Moreover, the chair of that chamber has declared to the media that millions could now be awarded in favor of plaintiffs. In the case at hand, the Supreme Court upheld the decision of a federal judge, confirming the condemnation by a local judge, of punitive damages to a hotel chain for the wrongful death of a minor due to negligence in providing proper maintenance to a water pump that resulted in electrocution and death.

This decision comes along with other precedents dealing with non-pecuniary damage (daño moral), which includes both pain and suffering and personal injury, and reiterates the possibility of piercing the corporate veil, which may ultimately entice a personal injury practice that was not relevant in the Mexican market.

Mexican law does not provide a clear distinction between negligence, contributory negligence and gross negligence. In order to diminish companies’ risk-exposure, hospitality, manufacturing and oil and gas companies should implement operational and preventive manuals, and verify their corporate structure to operate in Mexico.

If you wish to further discuss the referred risks or potential impact to your business, please contact Daniel Aranda ([email protected] or +52.55.52.01.45.18) or Roberto Arena ([email protected] or +52.55.5.284.8542) in Gardere’s Mexico City office.