O'Shields v. Columbia Automotive, LLC

THE STATE OF SOUTH CAROLINA
In The Court of Appeals
Daniel O'Shields and Roger W. Whitley, a Partnership
d/b/a O&W Cars, Appellants,
v.
Columbia Automotive, LLC d/b/a Midlands Honda,
Respondent.
Appellate Case No. 2017-000902
Appeal From Richland County
R. Ferrell Cothran, Jr., Circuit Court Judge
Opinion No. 5845
Heard March 1, 2021 – Filed August 11, 2021
AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED
C. Steven Moskos, of C. Steven Moskos, PA, and Brooks
Roberts Fudenberg, of the Law Office of Brooks R.
Fundenberg, LLC, both of Charleston, for Appellants.
James Y. Becker and Robert Lawrence Reibold, both of
Haynsworth Sinkler Boyd, PA, of Columbia; Sarah
Patrick Spruill, of Haynsworth Sinkler Boyd, PA, of
Greenville; and Harry Clayton Walker, Jr., of
Haynsworth Sinkler Boyd, PA, of Charleston, all for
Respondent.
KONDUROS, J.: This case arises out of the sale of a 2003 Honda Civic by
Columbia Automotive, LLC d/b/a Midlands Honda (Midlands) to Daniel O'Shields
and Roger W. Whitley, together d/b/a O&W Cars (O&W), at the Automobile
Dealer Exchange Services of America (ADESA) auction in North Carolina. After
becoming aware the car had been "clipped"—reconstructed from two cars—O&W
brought claims against Midlands in South Carolina for breach of contract,
negligent misrepresentation, violation of the North Carolina Unfair Trade Practices
Act (NCUTPA), and fraud.1 After trial, the jury returned a verdict for O&W in the
amount of $6,645 in actual damages with respect to O&W's NCUTPA claim, and
$6,645 actual damages and approximately $2.38 million in punitive damages for
fraud.2 The circuit court required O&W to elect between the punitive damages
award and any attorney's fees award under the NCUTPA claim, and O&W elected
to recover under the NCUTPA verdict. In its orders regarding post-trial motions,
the circuit court reduced the punitive damages award to $46,515; awarded
attorney's fees in the amount of $21,264; and denied offer of judgment interest to
O&W. O&W appeals the rulings therein and the circuit court's ruling on election
of remedies. We affirm in part, reverse in part, and remand.
FACTS/PROCEDURAL HISTORY
Sandra Gaskins bought the new 2003 Honda Civic in August 2003. In July 2004,
Gaskins' daughter had an accident while driving the car, and it was deemed a total
loss. Gaskins's insurer, Nationwide Mutual Insurance Company (Nationwide),
bought the car and sold it at a salvage auction. An undetermined person modified
the damaged car by welding the front half of the car to the back half of another car,
and put it back into the stream of commerce. In June of 2008, Nancy Watkins sold
the car to Midlands, and the car had a clean title. In July, the car underwent a 159-
point inspection at Midlands, including an oil change, and was placed in Midlands'
1
The parties and the circuit court agreed North Carolina's substantive law would
apply in the case because North Carolina was the place of the contract at issue and
the location of the alleged injury. See Lister v. NationsBank of Del., NA., 329 S.C.
133, 144, 494 S.E.2d 449, 155 (Ct. App. 1997) ("in contract actions, South
Carolina courts apply substantive law of place where contract at issue was formed
and this rule applies where contract's formation, interpretation, or validity is at
issue; however, where performance is at issue, law of place of performance
governs." (citing Witt v. Am. Trucking Ass'n, Inc., 860 F.Supp. 295, 300 (D.S.C.
1994))).
2
The other claims were dismissed prior to trial.
certified preowned vehicle inventory. In August, Charles Ecklund purchased the
car without knowledge of its modification.
In March 2010, Ecklund had an accident while driving the car and in having the
vehicle repaired discovered it was clipped. Ecklund's wife notified Midlands of the
issue by phone message. Near the end of the month, Ecklund traded the car in to
Midlands. Within the next few days, Midlands placed the vehicle for sale at the
ADESA auction in North Carolina under a red-light designation, which indicates
the sale is "as is," but which also includes rules regarding disclosure as to certain
types of defects or damage. Midlands did not notify the auction the car was
clipped. An employee of the auction completed the disclosure form as power of
attorney for Midlands.
O&W purchased the car for $5,200 at the auction on April 1, 2010. In late June,
O&W sold the car to the White family for $6,800. In July, the Whites brought the
car back to replace the timing belt and water pump, as they had discussed with
Whitley, who agreed at the time of sale to provide the labor for those repairs.
When the car was placed on the lift at a nearby garage, the technician was able to
clearly see the car had been clipped, and indicated it was "a chopped up mess
underneath." O&W refunded the purchase money to the Whites and retook
possession of the car when the defect was discovered.
O&W sought to arbitrate the issue through the ADESA auction but was told the
time period to seek arbitration had passed. Eventually, O&W filed the subject
litigation in January of 2013. The matter proceeded to trial on April 18, 2016, in
Richland County, and the jury returned a verdict for O&W for actual damages in
the amount of $6,645 on each of O&W's causes of action. In a bifurcated punitive
damage hearing, the jury rendered a verdict for O&W for punitive damages in the
amount of $2,381,888.
Both parties filed posttrial motions. O&W moved to treble the verdict under the
NCUTPA and for attorney's fees and costs. O&W also moved for offer of
judgment interest under section 15-35-400 of the South Carolina Code (Supp.
2020), and for prejudgment interest. Midlands moved for judgment
notwithstanding the verdict (JNOV) or in the alternative a new trial.
Midlands also filed a motion to require O&W to elect a remedy and moved for an
order to reduce the punitive damages award to comply with section 1D-25 of the
North Carolina General Statute and for an order to set off the judgment with the
amount previously paid by Nationwide.3 The circuit court granted Midlands'
motion to require O&W to elect a remedy on May 18, 2016. On May 23, 2016,
O&W moved to request reconsideration, asking the circuit court to allow it to elect
a remedy after the court made its decision on the other motions, the rulings of
which would impact O&W's election decision.
The circuit court heard posttrial motions on July 27, 2016. The circuit court
reduced the punitive damages award to $46,515 and granted $21,264 in attorney's
fees and $529.07 in costs. The court also denied O&W's motion for offer of
judgment interest.
By email on August 29, 2016, the circuit court notified counsel for the parties of its
decision to direct O&W to elect from the following remedies: (1) treble damages
of $19,935 ($6,645 in actual damages times three) and attorney's fees of $21,264
for the NCUTPA cause of action, for a combined total of $41,199 or (2) actual
damages of $6,645 and punitive damages reduced to $46,515 for the fraud cause of
action, for a total of $53,160.
Without waiving its assertion it should not be required to elect between attorney's
fees under the NCUTPA and actual and punitive damages on the fraud cause of
action, O&W elected the first option, choosing treble damages and attorney's fees
pursuant to the NCUTPA. Thereafter, O&W sought additional attorney's fees for
work performed for additional time periods. This appeal followed.
LAW/ANALYSIS
I. Punitive Damages4
3
Midlands later withdrew its motion for setoff.
4
Midlands argues O&A waived its right to complain about the reduction in
punitive damages by electing its remedy under the NCUTPA instead of its fraud
cause of action. This argument is without merit. While "acts inconsistent with
the continued assertion of a right may constitute waiver," O&A did not elect a
remedy of its own accord but was required to by the circuit court. MailSource,
LLC v. M.A. Bailey & Assocs., Inc., 356 S.C. 370, 375, 588 S.E.2d 639, 642 (Ct.
App. 2003). Additionally, Midlands continued to assert its position at trial and on
appeal.
O&A contends the circuit court erred in reducing the jury's punitive damages
award to $46,515 on the basis that the jury's award of $2,381,888 was excessive by
constitutional standards.5 We disagree.
"Whether a punitive damages award is unconstitutionally excessive is a question of
law reviewed de novo on appeal." Everhart v. O'Charley's Inc., 683 S.E.2d 728,
740 (N.C. Ct. App. 2009). When a punitive damages award is "grossly excessive,"
it violates the due process clause of the Fourteenth Amendment. BMW of N. Am.,
Inc. v. Gore, 517 U.S. 559, 568 (1996). Gore set out three "guideposts" for
evaluating whether a punitive damages award is grossly excessive: "the degree of
reprehensibility of the nondisclosure; the disparity between the harm or potential
harm suffered by [the plaintiff] and his punitive damages award; and the difference
between this remedy and the civil penalties authorized or imposed in comparable
cases." Id. at 574-75. We will address each of the Gore guideposts in turn.
A. Reprehensibility
"[T]he most important indicium of the reasonableness of a punitive damages award
is the degree of reprehensibility of the defendant's conduct." State Farm Mut.
Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419 (2003) (quoting Gore, 517 U.S. at
575).
We have instructed courts to determine the
reprehensibility of a defendant by considering whether:
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. The
existence of any one of these factors weighing in favor of
a plaintiff may not be sufficient to sustain a punitive
5
North Carolina law provides that "[p]unitive damages awarded against a
defendant shall not exceed three times the amount of compensatory damages or
two hundred fifty thousand dollars ($250,000), whichever is greater." N.C. Gen.
Stat. § 1D-25(b) (Westlaw through S.L. 2021-17 of the 2021 Legis. Sess.). O&A
acknowledges this statutory cap on a punitive damages award.
damages award; and the absence of all of them renders
any award suspect. It should be presumed a plaintiff has
been made whole for his injuries by compensatory
damages, so punitive damages should only be awarded if
the defendant's culpability, after having paid
compensatory damages, is so reprehensible as to warrant
the imposition of further sanctions to achieve punishment
or deterrence.
Id. (citation omitted).
The harm in this case to the plaintiff was economic. The "target" of the conduct
was ADESA auction buyers as opposed to the general consumer.6 No evidence
demonstrated other instances in which Midlands had failed to make disclosures on
an ADESA auction form or sold a clipped car through its certified program, and no
direct evidence established the harm to O&W was intentional.
O&W rests its reprehensibility argument on the premise that Midlands, knowingly
and intentionally, put a "Frankencar" on the road with no regard to the safety of
others. O&W contends it strains credulity for Midlands to claim it was unaware
the car had been clipped when Midlands originally sold it to Ecklund. However,
Midlands obtained the car with a clean title because Nationwide failed to have the
title marked "salvage." See N.C. Gen .Stat. § 20-71.3 (Westlaw through S.L. 2021-
17 of the 2021 Legis. Sess.) (indicating a title of a salvage, rebuilt, or reconstructed
vehicle must be so branded). In the absence of notice the car was salvaged,
Midlands would not have been anticipating a clipped vehicle.7 O&A asserts the
damage to the car would have been obvious. However, O&A's examination of the
vehicle was two years and approximately 30,000 miles after Midlands' original
inspection. Once Ecklund returned the car to Midlands, Midlands did not put the
vehicle back on its lot, but sold it "as is" at auction, under a red light. While it
failed to disclose the damage, such disclosure requirement had only been added at
the auction several months prior without notice to Midlands of the change in
6
"Most ADESA auctions are for licensed, registered car and specialty dealers
only." ADESA, https://www.adesa.com/public-auctions (last visited June 14,
2021).
7
The mechanic who performed the original inspection on Midlands' behalf was
deceased at the time of trial.
terms.8 Ignorance is not an excuse for negligent conduct, but the record does not
bear out a deliberate, willful, or repeated violation of the disclosure requirements.
Accordingly, we agree with the circuit court's assessment that the reprehensibility
of Midlands' conduct is less than that required for such a large punitive award.
B. Amount of Actual Harm v. Punitive Damages Amount
The United State Supreme Court has declined on multiple occasions "to impose a
bright-line ratio which a punitive damages award cannot exceed." Campbell, 538
U.S. at 424. "Our jurisprudence and the principles it has now established
demonstrate, however, that, in practice, few awards exceeding a single-digit ratio
between punitive and compensatory damages, to a significant degree, will satisfy
due process." Id. at 425. "While these ratios are not binding, they are instructive.
They demonstrate what should be obvious: Single-digit multipliers are more likely
to comport with due process, while still achieving the State's goals of deterrence
and retribution, than awards with ratios in range of 500 to 1." Id. "Nonetheless,
because there are no rigid benchmarks that a punitive damages award may not
surpass, ratios greater than those we have previously upheld may comport with due
process where a 'particularly egregious act has resulted in only a small amount of
economic damages.'" Id. (quoting Gore, 517 U.S. at 582). "The precise 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.In the instant case, the punitive damages award by the jury constituted a 358:1
ratio. A reduction to the $250,000 statutory cap would result in a 37.5:1 ratio, and
a reduction to the circuit court's punitive award amount would result in a 7:1 ratio.
Because O&A essentially concedes the statutory cap applies, the real question is
whether a 37.5:1 ratio violates due process; on its face, and under North Carolina
law, not necessarily so.
In Lacey v. Kirk, 767 S.E.2d 632, 646-47 (N.C. Ct. App. 2014), the court upheld a
38:1 ratio when an executrix had, without basis, denied the testator's heirs their
bequeathed property and accused them of murder, finding the executrix's conduct
8
The ADESA auction changed its required disclosure form approximately four
months prior to the sale at issue. Under the terms of Midlands' agreement with
ADESA, ADESA is to notify any auction participants in writing regarding any
changes to their procedures. Midlands did not receive notice of the change to the
disclosure form.
extremely reprehensible and obviously willful. In Rhyne v. K-mart Corp., 562
S.E.2d 82, 94 (N.C. Ct. App. 2002), the court upheld a 30:1 and 23:1 ratio in favor
of a husband and wife respectively who were violently and wrongfully detained
and prosecuted by K-mart employees. In Everhart, 683 S.E.2d at 741, the court
found a 25:1 ratio did not violate due process when the plaintiff had accidentally
ingested bleach in the restaurant and the O'Charley's company policy placed the
health and safety of the customer behind the corporation's need to complete
paperwork in anticipation of litigation.
These cases are distinguishable from the case sub judice. In Everhart and Rhyne,
the harm to plaintiffs was physical. In Lacey, the damage was economic, but
extremely willful. In this case, as discussed under the first guidepost, the damage
to plaintiff was economic and the conduct, while reckless, was not as demonstrably
willful nor intended to harm as that in Lacey. Based on the circumstances of this
case, we agree with the circuit court that the objectionable conduct in this case is
more commensurate with a 7:1 ratio.
C. Criminal or Civil Penalties in Comparable Cases
"The third BMW 'guidepost' requires consideration of civil or criminal penalties
that could be imposed for comparable misconduct, giving 'substantial deference' to
legislative judgments concerning appropriate sanctions for the conduct at issue.'"
Rhyne, 562 S.E.2d at 94 (quoting BMW, 517 U.S. at 584).
The conduct for which Midlands was found liable could subject it to both civil and
criminal penalties. A violation of the NCUTPA exposes the defendant to treble
damages. See N.C. Gen. Stat. § 75-16 (Westlaw through S.L. 2021-17 of the 2021
Legis. Sess.) (stating a party injured under the NCUTPA "shall have a right of
action on account of such injury done, and if damages are assessed in such case
judgment shall be rendered in favor of the plaintiff and against the defendant for
treble the amount fixed by the verdict"). A failure to disclose also constitutes a
Class 2 misdemeanor. See N.C. Gen. Stat. § 20-71.4. (a)(2) ("It shall be unlawful
for any transferor of a motor vehicle to . . . [t]ransfer a motor vehicle when the
transferor has knowledge that the vehicle is, or was . . . a salvage motor vehicle,
without disclosing that fact in writing to the transferee prior to the transfer of the
vehicle."); see also N.C. Gen. Stat. § 20-71.4. (a)(2)(d) ("Violation of subsections
(a) and (b) of this section shall constitute a Class 2 misdemeanor.") A Class 2
misdemeanor with no prior convictions is subject to one [to] thirty days of a
community punishment that may be executed as a fine. N.C. Gen. Stat. § 15A-
1340.23 (c)(1) to (2) (Westlaw through S.L. 2021-17 of the 2021 Legis. Sess.).9 If
the punishment is a fine, it shall not exceed $1,000. N.C. Gen. Stat. § 15A-
1340.23 (b) (Westlaw through S.L. 2021-17 of the 2021 Legis. Sess.).
In this case, Midlands' failure to disclose constitutes a misdemeanor offense not
punishable by imprisonment and with civil penalties limited to three times the
amount of actual damages. This factor tends to support a punitive damages award
that is closer to a trebling of the actual damages, which in this case would be in
line with the circuit court's reduction to a 7:1 ratio.
In sum, based on a review of the guideposts in Gore, we affirm the circuit court's
reduction of punitive damages based on the facts of this case to $46,515.
II. Attorney's Fees
In this case, O&W has requested a total of $476,194.12 in attorney's fees. The
circuit court awarded $21,264 in fees and $529.07 in costs. The circuit court made
this reduction for several reasons and O&W raises numerous points on appeal. We
will address each in turn.10
9
In Everhart, the court noted the United States Supreme Court recognized conduct
that subjected the defendant to imprisonment may justify a larger punitive damages
award. 683 S.E.2d at 741. The criminal statute at issue in Everhart involved the
adulteration of food and was considered a Class 2 misdemeanor. At that time this
subjected the defendant to up to 60 days imprisonment. Id. However, the
sentencing statute has been adjusted, and now, a Class 2 misdemeanor imposes a
community-only sentence as opposed to imprisonment. N.C. Gen. Stat. § 15A-
1340.23 (c)(1) to (2).
10
As an initial matter, the South Carolina standard of review will apply to the
consideration of the attorney's fee award. See e.g., Boswell v. RFD-TV the
Theather, LLC, 498 S.W.3d 550, 557 (Tenn. Ct. App. 2016) (holding standard of
review is procedural and will governed by forum law); Moore v. Bi-State Dev.
Agency, 87 S.W.3d 279, 285 (Mo. Ct. App. 2002) (finding the standard of review
is a procedural issue and forum law governs the standard of review for uses raised
on appeal). Under South Carolina law, the determination of the amount of
attorney's fees awarded pursuant to a statute is addressed to the sound discretion of
the trial court and will not be reversed absent an abuse of that discretion. EFCO
Corp. v. Renaissance on Charleston Harbor, LLC, 370 S.C. 612, 621, 635 S.E.2d
922, 926 (Ct. App. 2006).
First, O&W argues the circuit court erred by apportioning attorney's fees between
its NCUTPA and fraud claims. We agree.
Under the NCUTPA, the circuit court has the discretion to award attorney's fees if
it determines "[t]he party charged with the violation has willfully engaged in the
act or practice, and there was an unwarranted refusal by such party to fully resolve
the matter which constitutes the basis of such suit." N.C. Gen. Stat. § 75-16.1(1).
In some cases, apportioning attorney's fees between claims made by the plaintiff is
appropriate. "However, where all of plaintiff's claims arise from the same nucleus
of operative facts and each claim [is] 'inextricably interwoven' with the other
claims, apportionment of fees is unnecessary." Whiteside Ests., Inc. v. Highlands
Cove, L.L.C., 553 S.E.2d 431, 443 (N.C. Ct. App. 2001) (quoting Okwara v.
Dillard Dep't. Stores, Inc., 525 S.E.2d 481, 487 (N.C. Ct. App. 2000)). When
competent evidence in the record supports a finding that claims arose from a
common nucleus of operative facts, attempting to separate the fees may be
unrealistic. Id.In this case, the circuit court attempted to carve out hours O&W's attorneys billed
for work on the fraud claim for two reasons: (1) the attorney's fees award is
authorized under the NCUTPA, not the common law claim of fraud, and (2) a fair
portion of hours billed related to the pursuit of punitive damages, again, something
not allowed under the NCUTPA. However, North Carolina cases do not appear to
limit recovery of attorney's fees in this manner, provided the nucleus of operative
facts test is met. In Okwara, the court declined to apportion fees between the
plaintiff's § 1983 claim, which provided for attorney's fees, and her common law
tort claim when both arose from a common nucleus of operative facts. 525 S.E.2d
at 486-87. Likewise, in Whiteside, the court declined to apportion fees authorized
by the Sedimentation Pollution and Control Act of 1973 and plaintiff's common
law actions for nuisance and trespass, finding such division both "unnecessary and
unrealistic" when the claims arose from the same nucleus of facts. 553 S.E.2d at
443. More recently, in Philips v. Pitt County Memorial Hospital, Inc., the court
declined to apportion fees awarded to the defendant for defending a frivolous
punitive damages claim when the same nucleus of operative facts gave rise to the
plaintiff's punitive damages claims as well as the underlying tortious conduct. 775
S.E.2d 882, 884-85 (N.C. Ct. App. 2015).
Based on the relevant case law and facts of this case, we conclude the circuit court
erred in apportioning attorney's fees between the NCUTPA claim and the fraud
claim which necessarily includes the pursuit of punitive damages. The underlying
conduct in the case was overlapping and the services could not reasonably and
readily be separated.
Next, O&W appeals the trial court's ruling that Midlands had no longer refused to
fully resolve the matter when it made a settlement offer to O&W on September 14,
2016. The NCUTPA only provides for attorney's fees when "there was an
unwarranted refusal . . . to fully resolve the matter which constitutes the basis of
such suit." N.C. Gen. Stat. § 75-16.1. The conduct of both the defendant and the
plaintiff are relevant in determining this issue. See DENC, LLC v. Phila. Indem.
Ins. Co., 454 F. Supp. 3d 552, 566-67 (M.D.N.C. 2020) (evaluating both parties'
conduct during settlement negotiations when determining whether the defendant
unreasonably refused to resolve the matter at issue).
The settlement offer, made after the trial and rulings on posttrial motions, was
based on paying O&A the actual damages amount awarded ($6,645), the attorney's
fees awarded ($21,264), and the reduced punitive damages awarded ($46,515).
Midlands made a mathematical error in adding these awards and offered $81,069.
In response to the settlement offer, O&A noted the mathematical error and flatly
declined the offer. Midlands acknowledged its mistake, indicated there may be
some room to negotiate, and twice asked O&A for a counteroffer. O&A did not
respond. While we understand O&A believed its claims to be worth more than the
offered amount, the summary dismissal of the offer to negotiate tempers any
finding of an unreasonable refusal to resolve the case on Midlands' part.
Therefore, the circuit court did not abuse its discretion in concluding Midlands was
no longer unwilling to fully resolve the matter at that point. Consequently, we
affirm the circuit court's finding that attorney's fees accrued after this date would
be excluded from the circuit court's calculation of fees.11
11
The court also denied the final supplemental request for attorney's fees on the
basis that O&A's attorneys were not expending time to "protect the judgment." See
Faucette v. Carmel Road, LLC, 775 S.E.2d 316, 326 (N.C. Ct. App. 2015)
(indicating a trial court may award attorney's fees for posttrial or appellate work by
a prevailing party on an unfair trade practices claim when such work is expended
in an effort to protect the judgment); see also Cotton v. Stanley, 380 S.E.2d 419,
422 (N.C. Ct. App. 1989) ("Fees are authorized for the prevailing party and may be
awarded for all time, including appeal, reasonably expended in obtaining or
sustaining the status of prevailing party."). This is an additional ground that
sustains the circuit court's decision not to award those requested fees. I'On, L.L.C.
v. Town of Mt. Pleasant, 338 S.C. 406, 420, 526 S.E.2d 716, 723 (2000) ("[I]f
Third, O&W maintains the circuit court erred in excluding time for travel. We
agree.
The circuit court excluded some hours, with no legal citation for its decision, based
on "Plaintiff's choice to use a Charleston lawyer to bring suit in Richland County,
rather than bringing the action in North Carolina. While Plaintiff was free to file
suit in South Carolina, the [c]ourt will not impose the extra cost of this decision on
the Defendant." The purpose of the fee award is to encourage private enforcement
of the NCUTPA. See Cotton, 380 S.E.2d at 421 ("One purpose for the statute
authorizing attorneys' fees is to encourage individuals to bring valid actions to
enforce the statute by making such actions economically feasible.").
O&W was free to use counsel of its choice and should not be penalized for
selecting a permissible forum and attorneys licensed to practice therein.
Finally, O&W claims the circuit court erred in applying a percentage reduction to
effectuate a "reasonable attorney's fee" under Hensley v. Eckerhart, 461 U.S. 424(1983). We disagree.
In North Carolina cases discussing reasonable attorney's fees, no matter the
outcome, the touchstone is Hensley.12 Hensley, a civil rights case, prompted the
following discussion by the court.
The product of reasonable hours times a reasonable rate
does not end the inquiry. There remain other
considerations that may lead the district court to adjust
the fee upward or downward, including the important
factor of the "results obtained." This factor is particularly
crucial where a plaintiff is deemed "prevailing" even
though he succeeded on only some of his claims for
relief. In this situation two questions must be addressed.
First, did the plaintiff fail to prevail on claims that were
convinced it is proper and fair to do so," the appellate court may rely on an
additional ground to affirm the lower court's judgment.).
12
See DENC, LLC, 454 F. Supp. 3d at 563 ("The Court may only award
'reasonable' attorneys' fees [under the NCUTPA]. Federal courts routinely apply
the considerations set forth in Hensley . . . and North Carolina courts have cited
and applied Hensley in a number of cases involving state statutes with fee-shifting
provisions.")
unrelated to the claims on which he succeeded? Second,
did the plaintiff achieve a level of success that makes the
hours reasonably expended a satisfactory basis for
making a fee award?
....
If . . . a plaintiff has achieved only partial or limited
success, the product of hours reasonably expended on the
litigation as a whole times a reasonable hourly rate may
be an excessive amount. This will be true even where the
plaintiff's claims were interrelated, nonfrivolous, and
raised in good faith. Congress has not authorized an
award of fees whenever it was reasonable for a plaintiff
to bring a lawsuit or whenever conscientious counsel
tried the case with devotion and skill. Again, the most
critical factor is the degree of success obtained.
....
There is no precise rule or formula for making these
determinations. The district court may attempt to
identify specific hours that should be eliminated, or it
may simply reduce the award to account for the limited
success. The court necessarily has discretion in making
this equitable judgment. This discretion, however, must
be exercised in light of the considerations we have
identified.
Id. at 433-37.
In an attempt to synthesize this calculation process, the Fourth Circuit Court of
Appeals has said:
To determine the appropriate amount [of attorney's fees
to be awarded], a district court should first identify the
number of hours reasonably expended on the litigation
and multiply that number by a reasonable rate. The court
then should subtract fees for hours spent on unsuccessful
claims unrelated to successful ones. Once the court has
subtracted the fees incurred for unsuccessful, unrelated
claims, it then awards some percentage of the remaining
amount, depending on the degree of success enjoyed by
the plaintiff.
Johnson v. City of Aiken, 278 F.3d 333, 336-37 (4th Cir. 2002) (citations omitted).
As noted in the discussion on apportionment, several more recent North Carolina
state cases indicate that fees do not have to be apportioned if they arise from a
common nucleus of operative facts. Nevertheless, the final step as discussed in
Hensley and Johnson, means the circuit court retains discretion—after making a
decision about apportionment—to reduce the amount of fees based on the partial or
limited success of the litigation, whether the claims are related or not.13
To summarize, we remand the issue of attorney's fees to the circuit court. On
remand, the circuit court should not seek to apportion requested fees between the
fraud and the NCUTPA claims. The circuit court may exclude fees incurred after
the date of the September 2016 settlement offer. The circuit court should eliminate
any redundant fees, improper cost, and paralegal fees as it had in the previous
award. However, the court should not exclude fees for travel. Finally, the circuit
court may—or may not—reduce the remaining amount of requested fees by a
percentage it finds is appropriate to reflect reasonable attorney's fees based on the
13
Morris v. Scenera Research, LLC, 747 S.E.2d 362, 379 (N.C. Ct. App.
2013), aff'd in part, rev'd in part, 788 S.E.2d 154 (N.C. 2016), cited to by O&A,
muddied the waters a bit on this issue. In it, the court "reverse[d] the business
court's award of attorneys' fees and remand[ed] to the trial court for further
findings of fact and conclusions of law regarding whether Morris's claims arose
from a common nucleus of operative fact and, thus, whether he is entitled to all of
his attorneys' fees." This truncated mandate suggests that if the claim entitling the
plaintiff to attorney's fees and any additional claims arose from a common nucleus
of facts, then the plaintiff should be awarded all the requested fees. The court of
appeals so directed the lower court because it believed the trial court's fee
reduction rested on apportionment that was made without factual findings to
support such division. Id. at 378-79. On remand, the trial court issued an
unpublished opinion stating it believed the discretion to reduce the attorney's fees
to a "reasonable amount" by a percentage pursuant to Hensley was usurped by the
court of appeals' mandate. Morris v. Scenera Rsch., LLC, No. 09 CVS 19678,
2017 WL 2380230 at *2 (N.C. Super. Ct. May 31, 2017). However, the court of
appeals opinion cites to Hensley as authoritative, and Hensley provides for a
reduction in fees based on partial or limited success even if the claims are related.
success of the litigation. This percentage may be impacted by the decision of the
court regarding the election of remedies, which will be addressed in the next
section.
III. Election of Remedies
O&W argues the circuit court erred in requiring it to elect between attorney's fees
and punitive damages. We agree.
In United Laboratories, Inc. v. Kuykendall, 437 S.E.2d 374 (1993), United Labs
brought both NCUTPA and common law tortious interference claims against
Share, a company that hired its former employee, Kuykendall, contrary to a
noncompete agreement. 437 S.E.2d at 375. United prevailed on both its claims.
The issue thus became whether United could recover "both punitive damages under
its common law claim and untrebled compensatory damages and attorneys' fees in
its unfair practices claim." Id. at 378.
The decision noted one purpose of the election of remedies doctrine is to "prevent
double redress for a single wrong." Id. at 379 (quoting Smith v. Oil Corp., 79
S.E.2d 880, 885 (N.C. 1954)). Therefore, "a party may not recover punitive
damages for tortious conduct and treble damages for a violation of Chapter 75
based on that same conduct." Id. However, the imposition of punitive damages
and an award of attorney's fees serve entirely different purposes. Id. at 380.
Punitive damages are designed to punish willful conduct and to deter others from
committing similar acts. Rhyne, 594 S.E.2d at 6. The purpose of attorney's fees in
Chapter 75, however, is to "encourage private enforcement" of Chapter 75.
Kuykendall, 437 S.E.2d at 379. An award limited to attorney's fees plus treble
damages will often prove inadequate to punish and deter the type of willful
conduct that leads to punitive damages at common law. Id. Consequently, the
court determined that although treble damages and punitive damages were
redundant, an award of attorney's fees under the NCUTPA and punitive damages
under the plaintiff's common law claim was permissible. Id. at 380-81.
O&W contends the enactment of section 1D-20 of the North Carolina General
Statutes (Westlaw through S.L. 2021-17 of the 2021 Legis. Sess.) represents the
legislature's rejection of Kuykendall. Contrastively, Midlands argues section 1D-
20 represents the codification of Kuykendall in that it provides treble damages and
punitive damages may not both be recovered. The statute provides that "[a]
claimant must elect, prior to judgment, between punitive damages and any other
remedy pursuant to another statute that provides for multiple damages." Id.Section 1D-20 was enacted in 1995, and Kuykendall has not been abrogated or
overruled. In a recent unpublished decision by the Fourth Circuit, Driskell v.
Summit Contracting Group, Inc., 828 F. App'x 858 (4th Cir. 2020), two of the
three judges indicated section 1D-20 does not affect Kuydendall's holding as to
punitive damages and attorney's fees.
Our dissenting colleague would hold that [section] 1D-
20 effectively overruled [Kuykendall's] 'mix-and-match
approach' and thus blocks Driskell from recovering both
awards. But that provision—which was enacted in 1995
in an act establishing standards for punitive damages, . . .
has never been construed to apply to attorney's fees . . . .
It's true that Driskell's request for attorney's fees is
"pursuant to" REDA [the Retaliatory Employment
Discrimination Act], which provides for treble damages.
But we think it doubtful that the Supreme Court of North
Carolina would hold that REDA's separate allowance for
an award of attorney's fees is a "remedy" in the way
that § 1D-20 uses that term. After all, § 1D-20's title is
"Election of extracompensatory remedies," and attorney's
fees are strictly compensatory in that they reimburse a
prevailing plaintiff's costs. The title of a statutory
subsection, while "not controlling, [ ] does shed some
light on the legislative intent underlying the enactment of
that provision." State v. Fletcher, [ ]807 S.E.2d 528, 539
(2017). And that light is (we think) sufficient here to
reject the dissent's view.
Id. at 871 n.8.
While not binding precedent, we find the Fourth Circuit's majority position on this
issue persuasive. See Cothran v. Brown, 357 S.C. 210, 218, 592 S.E.2d 629, 633
(2004) (finding the reasoning of federal case law persuasive).
Additionally, South Carolina has taken a similar position on the issue. In Austin v.
Stokes-Craven Holding Corp., 387 S.C. 22, 691 S.E.2d 135 (2010), the buyer of a
truck brought an action against the dealership for multiple claims, including fraud
and various statutory claims. Id. at 35, 691 S.E.2d at 141-42. The jury awarded
actual damages, punitive damages, and attorney's fees under a combination of
theories. Id. On appeal, our supreme court held that the buyer, Austin, could
recover punitive damages, as well as attorney's fees and costs under the South
Carolina Dealer's Act:
[A] plaintiff may recover attorney['s] fees under a
statutory claim in addition to punitive damages under a
common law claim. The rationale for this position is that
an award for both does not amount to double recovery for
a single wrong given attorney's fees are intended to make
such claims economically viable for private citizens
whereas an award of punitive damages is designed to
punish wrongful conduct and deter future misconduct.
Id. at 56, 691 S.E.2d at 153.
The majority further opined:
Furthermore, given the recovery of attorney's fees under
the Dealer's Act is not duplicative of the award of
punitive damages, we do not believe a decision in favor
of Austin would violate the election of remedies
doctrine's prevention of double redress for a single
wrong. As its name states, the doctrine applies to the
election of "remedies" not the election of "verdicts."
Thus, an award of attorney's fees and costs would merely
serve to fully compensate Austin for pursuing his
statutorily-authorized private right of action under the
Dealer's Act, which we believe epitomizes the definition
of a remedy. See Black’s Law Dictionary 1163 (5th ed.
1979) (defining "remedy" as "[t]he means by which a
right is enforced or the violation of a right is prevented,
redressed, or compensated").
Id. at 57, 691 S.E.2d at 153.
Based on all of the foregoing, we conclude the circuit court erred in requiring
O&W to elect between punitive damages and attorney's fees. Therefore, on
remand, the final award should include actual damages, punitive damages, and
attorney's fees in an amount to be determined by the circuit court.
IV. Offer of Judgment Interest
Finally, O&W maintains the circuit court erred in denying its request for interest
on the offer of judgment—$280,000—to settle the case in April of 2015. The
circuit court denied O&W's interest request because, while O&W made an offer of
judgment of $280,000, O&W elected recovery under the NCUTPA, and the
amount of the attorney's fees award was lower than the offer to settle.14 O&W
contends the amount the jury returned in its verdict—$2.38 million—should be
used to decide whether O&W was entitled to offer of judgment interest, as opposed
to using the reduced punitive damages award—$46,515—the court determined was
appropriate.
Section 15-35-400(B) of the South Carolina Code (Supp. 2020) provides:
Consequences of NonAcceptance. If an offer of
judgment is not accepted and the offeror obtains a verdict
or determination at least as favorable as the rejected
offer, the offeror shall be allowed to recover from the
offeree: (1) any administrative, filing, or other court costs
from the date of the offer until judgment; (2) if the
offeror is a plaintiff, eight percent interest computed on
the amount of the verdict or award from the date of the
offer; . . . [15]
This court recently addressed this issue in Garrison v. Target Corp., 429 S.C. 324,
377, 838 S.E.2d 18, 46 (2020) (cert. granted, S.C. Sup. Ct. Order dated October
19, 2020). The court indicated the use of the term "determination" in the first
sentence of Rule 68(b) in combination with the last phrase "eight percent interest
14
The circuit court suggested O&W may not be entitled to offer of judgment
interest under North Carolina law because only a defendant may make an offer of
judgment there. See Rule 68, NCRCP ("At any time more than 10 days before the
trial begins, a party defending against a claim may serve upon the adverse party
an offer to allow judgment to be taken against him for the money or property or to
the effect specified in his offer . . . ."). However, because the issue would be
procedural, not substantive, South Carolina law governs this question. See Nash v.
Tindall Corp., 375 S.C. 36, 39, 650 S.E.2d 81, 83 (Ct. App. 2007) (stating
procedural matters are determined in accordance with the law of the forum).
15
Rule 68 of the South Carolina Rules of Civil Procedure contains identical
language.
computed on the amount of the verdict or award from the date of the offer to the
entry of judgment" indicated the final, posttrial award was the proper amount for
computing offer of judgment interest. Id. at 378-79, 838 S.E.2d at 47. Likewise,
we conclude the circuit court's analysis should have been performed using the
posttrial award as opposed to the jury's verdict. However, because we reverse the
circuit court's decision as to the election of remedies and remand the issue of
attorney's fees, we instruct the court to reevaluate its decision as to the offer of
judgment interest as may be necessary in light of the final award.
CONCLUSION
We affirm the circuit court's reduction of the punitive damages award and reverse
the circuit court's determination that O&W is required to elect between its punitive
damages award and attorney's fees. We remand the issue of attorney's fees to the
circuit court for analysis in accordance with the directives in this opinion. Because
the award of offer of judgment interest may be affected by the decisions herein, we
remand that issue to the circuit court as well. Consequently, the matter is
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
GEATHERS and MCDONALD, JJ., concur.