Eastern Property Development LLC v. Loren C. Gill

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 13-10219
________________________
D.C. Docket No. 4:11-cv-00062-CDL
EASTERN PROPERTY DEVELOPMENT
LLC, a Utah limited liability company,
SOUTH EAST ENTERPRISE GROUP
LLC, a Georgia limited liability company,
Plaintiffs-Appellees,
versus
LOREN C. GILL,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Middle District of Georgia
________________________
(March 6, 2014)
Before TJOFLAT and WILSON, Circuit Judges, and BUCKLEW,* District Judge.
__________________________
*Honorable Susan C. Bucklew, United States District Judge for the Middle District of Florida,
sitting by designation.
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BUCKLEW, District Judge:
Following a jury trial, the jury returned a verdict in favor of Appellees-
Plaintiffs Eastern Property Development, LLC (“Eastern Property”) and South East
Enterprise Group, LLC (“SEE”) against Appellant-Defendant Loren Gill (“Gill”),
and awarded the plaintiffs $35,335.98 in compensatory damages and $250,000.00
in punitive damages. Gill appeals the punitive damages award, arguing that
punitive damages are not warranted under Georgia law and the amount of the
award is unconstitutionally excessive under the federal Constitution. Gill also
appeals the district court’s denial of his right to open and conclude the closing
argument under Georgia’s plea of justification statute, O.C.G.A. § 51-11-1. After
review, and with the benefit of oral argument, we affirm.
I. JURISDICTION
We first address whether the district court had subject matter jurisdiction in
this case. We find that it did. Although we sua sponte questioned whether the
pleadings sufficiently alleged diversity of the parties, we need not reach that issue
to find that the district court had subject matter jurisdiction. This is because the
plaintiffs’ amended complaint alleged federal question jurisdiction due to their
federal claim for infringement under section 43 of the Lanham Act, 15 U.S.C. §
1125, which was litigated through trial and arose out of the same nucleus of
operative facts as the plaintiffs’ state law claims. The district court therefore had
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federal question jurisdiction over the federal law claim under 28 U.S.C. § 1331,
and supplemental jurisdiction over the state law claims under 28 U.S.C § 1367.
II. BACKGROUND
Gill’s brother purchased residential and commercial rental properties, and in
1999, created numerous real estate holding trusts that owned each of the properties.
For each real estate holding trust, the executive trustee was Dan Van Gasken 1 and
the beneficiary was Gill Family Cornerstone Trust (“GFCT”), a trust created by
Gill’s brother. GFCT’s trustee was Kevin Hartshorn.
Gill Companies, LLC, a property management company owned by Gill’s
brother, initially handled the rental management of the trust properties. However,
Gill’s brother fled the country in 2009 after being convicted of financial crimes,
and in 2010, Van Gasken and Hartshorn formed SEE and Eastern Property, the
plaintiffs in this case, to which they transferred the management of the trust
properties from Gill Companies.
SEE’s executive officers were Van Gasken and Hartshorn. The office
manager was Marlene Blossfield (who had also been the manager at Gill
Companies). SEE’s management duties included collecting rent payments from
tenants. Tenants would make their rent checks payable to Eastern Property, SEE’s
payment entity, and Blossfield would deposit the checks into Eastern Property’s
1
At trial, Gill testified that he was also a trustee of the real estate holding trusts.
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bank account. Hartshorn would then transfer funds from Eastern Property’s
account to SEE’s operating account. Hartshorn would also, in his capacity as
GFCT’s trustee, transfer funds to GFCT.
On June 8, 2011, Gill entered the plaintiffs’ offices in Columbus, Georgia.
Gill stated that he was a trustee of the real estate holding trusts, he was taking over
the management of Eastern Property and SEE, and any employees who did not
follow his instructions would be fired. Gill went on to tell Blossfield that
Hartshorn and Van Gasken had been terminated and that she was prohibited from
contacting them. To prevent Hartshorn and Van Gasken from entering Eastern
Property and SEE’s offices, Gill posted security guards at the doors and changed
the locks and key codes.
Gill also told Blossfield to get Alabama business licenses in the names of
Eastern Property Development and South East Enterprise, LLC. Gill used these
Alabama licenses to open a new bank account in the name of Eastern Property
Development. After Gill ordered the plaintiffs’ employees to stop depositing
tenants’ rent checks into the plaintiffs’ bank account, Gill deposited the rent checks
into the new bank account.
On June 15, 2011, the plaintiffs filed suit against Gill in district court. Their
amended complaint alleged state law claims for trespass, conversion, interference
with contract and prospective business advantage, and a federal Lanham Act claim.
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The plaintiffs sought injunctive relief, compensatory damages, and punitive
damages.
Two days later, Gill fired Blossfield. Soon after, he sent a letter from “South
Eastern Enterprise Group, LLC” to the plaintiffs’ tenants, instructing them to
deliver rent payments to a new mailing address. 2
The plaintiffs filed a motion for a preliminary injunction against Gill. After
an evidentiary hearing, the district court granted the injunction on June 28, 2011.
In its injunction order, the district court required Gill to vacate the plaintiffs’
business premises, remove the security guards, reset the locks and key codes,
return any checks payable to the plaintiffs that Gill had deposited into his new
bank account, and refrain from holding himself out as or acting for the plaintiffs.
On August 24, 2011, and in violation of the injunction, Gill sent a letter to
the plaintiffs’ tenants, declaring that the plaintiffs had been terminated and were no
longer the management company for the trust properties. The letter instructed the
tenants to ignore all communications from Blossfield and her staff, to cease
delivering rent payments to the plaintiffs’ office or mailing address, and to send all
rent payments to a different mailing address. The next day, Gill sent a second
letter to the tenants, notifying them that the prior letter was sent in error and should
2
The Alabama clerk’s clerical error caused a license to issue in the name of “South Eastern
Enterprise Group, LLC” rather than “South East Enterprise Group, LLC.”
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be disregarded. Gill’s letters created confusion and concern among the tenants,
which took the plaintiffs some time to rectify.
On August 15, 2012, the district court held a pretrial conference. There,
Gill’s counsel raised a question regarding the right to open and conclude closing
argument at trial if Gill were to make a plea of justification under Georgia law.
When the district court stated that, in federal court, the plaintiffs would still have
the right to open and conclude the closing argument, Gill’s counsel announced that
they would not make the plea.
Just before trial, Gill conceded liability on the state law claims of trespass,
conversion, interference with contracts and business advantage, and the case
proceeded to trial on the issues of compensatory and punitive damages on the state
law tort claims, as well as liability and damages on the federal Lanham Act claim.
After the close of evidence, the district court granted Gill’s motion for
directed verdict on the Lanham Act claim, and the case went to the jury on
compensatory and punitive damages for the state law tort claims. The jury returned
a verdict in favor of the plaintiffs, awarding $35,335.98 in compensatory damages
and $250,000.00 in punitive damages.
Following trial, Gill moved to reduce the punitive damages award, arguing
that it was unconstitutionally excessive. The district court denied the motion,
finding that: (1) there was a legitimate state interest in punishing and deterring
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Gill’s conduct; (2) the evidence at trial—that Gill “busted into [the] plaintiffs’
offices, took over their operations, disrupted their business, and interfered with
their employees and tenants”—supported the jury’s conclusion that his conduct
was sufficiently reprehensible to warrant the amount of punitive damages awarded;
and (3) the 7:1 ratio of punitive to compensatory damages was warranted, because
the actual damages were mitigated by the district court’s preliminary injunction
order (notwithstanding Gill’s violation of that injunction on one occasion) and
understated the egregiousness of Gill’s conduct. (Dkt. 139.) Gill appeals,
challenging the punitive damages award and the order of closing argument at trial.
III. STANDARDS OF REVIEW
We review the propriety of punitive damages de novo. Myers v. Cent. Fla.
Invs., Inc., 592 F.3d 1201, 1212 (11th Cir. 2010). We review the constitutionality
of punitive damages de novo, but the district court’s findings of fact for clear error.
Action Marine, Inc. v. Cont’l Carbon Inc., 481 F.3d 1302, 1309 (11th Cir. 2007).
We review the district court’s determination regarding the right to open and
conclude at closing argument for abuse of discretion. See Martin v. Chesebrough-
Pond’s, Inc., 614 F.2d 498, 501 (5th Cir. 1980) (per curiam) (finding no abuse of
discretion in the district’s decision regarding the order of closing argument). 3
3
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), we adopted as
binding precedent all decisions of the former Fifth Circuit handed down before October 1, 1981.
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IV. DISCUSSION
A. Punitive Damages Under Georgia Law
Gill argues that no punitive damages should have been awarded under
Georgia law because there was no evidence that he acted out of aggression or
outrage or that his actions rose to the level of criminal or quasi-criminal conduct.
Gill also contends the evidence is disputed as to whether he “burst” into the
plaintiffs’ offices to take over, lied about being a trustee, and had no other purpose
but to “burn” down the business.
In Georgia, punitive damages may be awarded in tort actions when “clear
and convincing evidence” proves a defendant’s “actions showed willful
misconduct, malice, fraud, wantonness, oppression, or that entire want of care
which would raise the presumption of a conscious indifference to consequences.”
O.C.G.A. § 51-12-5.1(b). Thus, a punitive damages award is supported if there is
clear and convincing evidence that Gill’s conduct was “so reckless or so charged
with indifference to the consequences” as to show wantonness, Hendon v. DeKalb
County, 417 S.E.2d 705, 712 (Ga. Ct. App. 1992) (internal quotation marks
omitted), or that Gill acted with an “intentional disregard of the rights of another”
as to show a conscious indifference to consequences, Tyler v. Lincoln, 527 S.E.2d
180, 182-83 (Ga. 2000). A willful repetition of trespass or conversion can
authorize a claim for punitive damages. Id. at 183 (willful repetition of trespass);
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Taylor v. Powertel, Inc., 551 S.E.2d 765, 768 (Ga. Ct. App. 2001) (willful
repetition of conversion).
Here, there was clear and convincing evidence from which a jury could have
concluded that Gill repeatedly acted with an intentional disregard for the plaintiffs’
rights when he, among other things, trespassed onto the plaintiffs’ business
premises, took over their operations, fired their employees, and sent letters to their
tenants to redirect rent payments to his new bank account. Although Gill disputes
that he lied about being a trustee of the real estate holding trusts at the time of his
misconduct, there was evidence from which the jury could have concluded
otherwise.4 Because there was clear and convincing evidence that Gill’s
misconduct showed the requisite bad state of mind under Georgia law, the district
court did not err in allowing the jury’s punitive damages award to stand.
B. Constitutionality of Punitive Damages
Gill argues that the punitive damages award violates the Due Process Clause
of the Fourteenth Amendment because it is arbitrary and excessive. The Supreme
Court provides the following guideposts when determining whether a punitive
damages award is constitutionally excessive: (1) the degree of reprehensibility of
the defendant’s misconduct; (2) the disparity between the punitive damages award
4
For example, Van Gasken testified that Gill, knowing he was not a trustee of the real estate
holding trusts, requested Van Gasken make him a trustee.
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and the actual or potential harm suffered by the plaintiffs; and (3) the difference
between the punitive damages award and the civil penalties authorized or imposed
in comparable cases. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408,
418, 123 S.Ct. 1513, 1520 (2003).
1. Degree of Reprehensibility
The reprehensibility of the defendant’s conduct is the most important
indicator of the reasonableness of a punitive damages award. Campbell, 538 U.S.
at 419, 123 S.Ct. at 1521. When assessing the degree of reprehensibility, we
consider the following factors:
the harm caused was physical as opposed to economic; the tortious
conduct evinced an indifference to or a reckless disregard of the
health or safety of others; the target of the conduct had financial
vulnerability; the conduct involved repeated actions or was an isolated
incident; and the harm was the result of intentional malice, trickery, or
deceit, or mere accident.
Id.In its order denying Gill’s motion to reduce the punitive damages award, the
district court found that Gill’s conduct was sufficiently reprehensible to warrant
$250,000 in punitive damages because Gill “busted” into the plaintiffs’ offices,
took over their operations, disrupted their business, and interfered with their
employees and tenants. We find that the district court’s findings of fact and
conclusions regarding Gill’s degree of reprehensibility are supported by the
evidence and are therefore not clearly erroneous. See Johansen v. Combustion
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Eng’g, Inc., 170 F.3d 1320, 1335 (11th Cir. 1999) (a district court’s finding
regarding degree of reprehensibility is clearly erroneous if unsupported by the
record or contrary to the evidence).
Gill argues that his actions constituted a single course of conduct, not
repeated actions; however, we disagree. Gill entered the plaintiffs’ business
premises, changed the locks, obtained Alabama business licenses in the plaintiffs’
names to open up a new bank account, deposited rent checks from the plaintiffs’
tenants into that new account, fired the plaintiffs’ employees, and sent letters
redirecting rent payments away from the plaintiffs. He took each action without
regard to his authority to do so and was undeterred by the prospect of litigation.
Gill was similarly undeterred by the reality of litigation. After the district court
issued a preliminary injunction order prohibiting Gill from continuing his actions,
he nonetheless sent another letter to the plaintiffs’ tenants, again redirecting the
tenants’ rent payments.
Gill also asserts that no evidence shows he acted with intentional malice,
trickery, or deceit. As we have already discussed, there was evidence—clear and
convincing evidence—from which a jury could have concluded that Gill acted with
a bad state of mind.
Pointing to the jury’s finding that he did not act with a specific intent to
harm the plaintiffs, Gill argues that he did not act with intentional malice, trickery,
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or deceit.5 This argument is not persuasive, however, because a finding of specific
intent to harm is not necessary. Gill next argues that because the district court
never asked the jury to decide whether Gill was a trustee of the real estate trusts,
the jury did not find he acted with trickery or deceit. However, evidence of Gill’s
trustee status was before the jury in the form of testimony from witnesses,
including Van Gasken. Finally, Gill argues that even if the jury found that he was
not candid about his trustee status with the plaintiffs’ employees, his lack of candor
pales in comparison to the frauds in other punitive damages cases. However, the
different facts presented by other cases have little influence on our determination
in this case. See Action Marine, 481 F.3d at 1320 (“We decline [defendant]’s
invitation to compare its actions with those of other defendants in dissimilar
contexts and base our conclusion on the facts before us in this case alone.”).
Upon review of the record facts and evidence of this case, we cannot
conclude that the district court clearly erred in finding that the degree of Gill’s
reprehensibility supported the amount of punitive damages awarded.
5
The jury was instructed to determine whether Gill had a specific intent to harm in the event that
the punitive damages award exceeded Georgia’s punitive damages cap for tort actions. O.C.G.A.
§ 51-12-5.1(f) and (g) (capping punitive damages at $250,000.00 unless the trier of fact finds the
defendant acted with the specific intent to cause harm). Because the jury’s award did not exceed
the cap, their determination ultimately was irrelevant under Georgia law.
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2. Difference Between Actual or Likely Damages and Punitive
Damages
The ratio of punitive damages to compensatory damages is relevant but not
dispositive. Although the Supreme Court has noted that “an award of more than
four times the amount of compensatory damages might be close to the line of
constitutional impropriety,” it has repeatedly declined to impose a bright-line ratio
that a punitive damages award cannot exceed. Campbell, 538 U.S. at 425, 123
S.Ct. at 1524. This is because the “award in any case, of course, must be based
upon the facts and circumstances of the defendant’s conduct and the harm to the
plaintiff.” Id.Here, the district court acknowledged that the 7:1 ratio of $250,000.00 in
punitive damages to $35,335.98 in compensatory damages was higher than the 4:1
ratio endorsed by the Supreme Court, but concluded that the punitive damages
award “was not so disproportionate to the amount of compensatory damages
recovered that it must be reduced.” The district court found that the plaintiffs’
compensatory damages were mitigated by the preliminary injunction—which
prevented similar conduct during the pendency of the action—and that the amount
of provable damages understated the egregiousness of Gill’s conduct. The
evidence supports the district court’s findings, and we agree that the facts and
circumstances of Gill’s misconduct and the potential harm to the defendants
justifies the 7:1 ratio in this case.
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3. Civil Penalties
The disparity between the punitive damages award and the “civil penalties
authorized or imposed in comparable cases” is accorded the least weight in the
excessiveness analysis. BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 575 116
S.Ct. 1589, 1598-99 (1996); see Kemp v. Am. Tel. & Tel. Co., 393 F.3d 1354,
1364 (11th Cir. 2004). Gill argues that there is no relevant civil sanction under
Georgia law. However, even if no comparable civil penalties exist in this case, we
think that the punitive damages award is sufficiently supported by the degree of
reprehensibility of Gill’s conduct.
C. Order of Closing Argument at Trial
Under Georgia law, a defendant who enters a plea of justification is
statutorily provided the right to open and conclude closing argument:
If the defendant in a tort action was authorized to do the act
complained of, he may plead such authorization as justification. The
effect of such plea is to admit that the act was done and to entitle the
defendant to all the privileges of one holding the affirmative of the
issue. Such plea, however, shall not give the defendant the right to
open and conclude the argument before the jury unless it is filed
before the plaintiff submits any evidence to the jury.
O.C.G.A. § 51-11-1. Gill argues that he made a plea of justification and therefore
should have had the right to open and conclude the closing argument.
The record shows Gill never actually made a plea of justification. At the
pretrial conference, Gill’s counsel merely inquired into the consequences of
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making a plea of justification and, when told by the district court that the plaintiffs
would still have the right to open and conclude the closing argument, announced
that Gill would not make the plea. Gill concedes this fact. See Reply Br. at 7.
Nonetheless, Gill appears to suggest that his later decision to admit liability
on the state law claims entitled him to open and conclude the closing argument
under § 51-11-1. Even assuming without deciding that Gill’s general concession
to liability was sufficient,6 the right to open and conclude argument is a procedural
matter governed by federal law, see Lancaster v. Collins, 115 U.S. 222, 225, 6
S.Ct. 33, 34-35 (1885), which rests within the district court’s discretion, see
Martin, 614 F.2d at 501.
To the extent Gill attempts to reframe the right to open and conclude the
closing argument as a substantive right belonging to the party with the burden of
proof, he is mistaken. See Lancaster, 115 U.S. at 225, 6 S. Ct. at 35 (holding that
the order of argument “is purely a question of practice” that “does not affect the
merits of the controversy” and rejecting the plaintiff’s argument that the trial court
erred by refusing the plaintiff’s right to close at trial); see also May v. Int’l Loan &
6
We are not persuaded that Gill’s concession to liability under the circumstances of this case
was a proper plea of justification under § 51-11-1. Gill’s general concession to liability did not
admit “every material allegation which would authorize the plaintiff[s] to recover without proof
on [their] part.” Hodsdon v. Whitworth, 293 S.E.2d 70, 72 (Ga. Ct. App. 1982). Further, the
plaintiffs still had the burden to prove Gill’s misconduct caused damages and the amount of
damages. Id. (finding “no proper plea of justification . . . so as to authorize the defendants to
open and conclude” where “there was no admission of a prima facie case so as to authorize
damages to the plaintiff”).
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Trust Co., 92 F. 445, 447 (5th Cir. 1899) (“[I]t is well settled that in the federal
courts the question as to which party shall make the closing argument . . . is a
matter which should be largely left to the discretion of the trial judge.”); Martin,
614 F.2d at 501 (finding “no abuse of discretion in refusing [the co-defendant’s]
rebuttal”); Fernandez v. Corporacion Insular De Seguros, 79 F.3d 207, 210 (1st
Cir. 1996) (citing Martin, 614 F.2d at 501) (“[t]he Martin court . . . reconfirmed
that the decision to permit rebuttal is a procedural matter which rests within the
sound discretion of the trial judge”)). We cannot conclude that the district court
abused its discretion in allowing the plaintiffs to open and conclude the closing
argument.
In any event, it is difficult to see how the denial of Gill’s alleged right to
open and conclude the closing argument is not a harmless error under Rule 61 of
the Federal Rules of Civil Procedure, which requires that “[a]t every stage of the
proceeding, the court must disregard all errors and defects that do not affect any
party’s substantial rights.” Fed. R. Civ. P. 61; see also Martin, 614 F.2d at 501-02
(district court’s decision regarding the order of argument was not inconsistent with
substantial justice under Rule 61); May, 92 F. at 446 (defendant was not “injured,
materially or otherwise, by the refusal of the trial judge to allow him to open and
conclude”).
AFFIRMED.
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