In 2022, the California Supreme Court extended the applicability of California Penal Code § 496(c)'s claims for special damages and attorneys' fees to theft-related business tort cases. As this ruling and its progeny become more well known, there will likely be a significant rise in cases seeking recovery of treble damages and attorneys' fees for your run-of-the-mill business litigation disputes that may involve fraud, concealment, conversion, or diversion of money or property during the course of the parties’ business interactions. 

The California Supreme Court in Siry Investment, L.P. v. Farkhondehpour (2022) 13 Cal.5th 333 established that a cause of action for treble damages and attorneys' fees under Section 496(c) extended and applied to theft-related business tort cases. Section 496(c) articulates special civil remedies when a person is injured by a violation of Section 496(a), including "three times the amount of actual damages, if any, sustained by the plaintiff, cost of suit, and reasonable attorneys' fees." Section 496(a) defines the criminal offense of receipt of stolen property as:

Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained.

In Siry Investment, the Court of Appeal found that Section 496(c) “applies generally when there is evidence that 'property' has been the subject of theft—but the statute does not apply in 'theft-related tort cases.'" However, the California Supreme Court reversed and found that Section 496(c) is "unambiguous" and "[a] plaintiff may recover treble damages and attorney's fees under section 496(c) when property has been obtained in any manner constituting theft." The California Supreme Court went on to explain that the unambiguous language of Section 496(c) applies to situations including the fraudulent diversion of monies belonging to a partnership. In so doing, the Court extended the application of Section 496(c)’s remedies for special damages and attorneys' fees to all theft-related business torts. Also, it affirmed that criminal conviction is not a prerequisite to the recovery of Section 496(c) damages through a civil suit. The decision notes that proof that the person who committed theft or concealed it did so with “criminal intent” is required, but that proof only needs to be met by the civil preponderance of evidence standard. Further, the decision notes that "criminal intent" can be established with facts showing "defendants acted not innocently or inadvertently, but with careful planning and deliberation reflecting the requisite criminal intent." 

Any company doing business in California and their insurers will need to be aware of this development.