Luther, Collier, Hodges & Cash, LLP – Attorneys at Law

Alabama Legal Update October 2014

Appealing a punitive damage award after intentionally defrauding another? Court says don’t waste your breath…

Court focuses on reprehensibility of Defendants’ conduct in affirming a punitive damage award that was three times greater than the compensatory damage award.

Target Media Partners Operating Company, LLC, and Ed Leader v. Specialty Marketing Corporation d/b/a Truck Market News, (Supreme Court of Alabama; No. 1091758; August 29, 2014).

Defendants appealed from a judgment entered in favor of Plaintiff. Plaintiff sued Defendants Target Media and its employee Ed Leader alleging breach of contract and fraud claims. A verdict was returned in favor of Plaintiff on the breach of contract claim, awarding compensatory damages of $851,552. The Plaintiff was further awarded compensatory damages on Plaintiff’s promissory fraud claim in the amount of $210,000 and punitive damages in the amount of $630,000. Finally, Plaintiff was awarded compensatory damages of $167,800 on its fraudulent misrepresentation claim and punitive damages of $503,400. The evidence showed that Defendants had entered into a business relationship with Plaintiff, continuing that relationship for four years while knowing that they never intended to perform the services which had been promised.

A Hammond/Green Oil hearing was held, where the punitive damage awards were reaffirmed. On appeal the Court was asked to address whether the punitive damage awards were excessive. The Court cited to the trial court’s order affirming the verdict and analyzing the award under the appropriate factors considered in determinations of whether punitive damages awards are excessive. Among those factors, the trial court noted the reprehensibility of Target Media’s conduct, stating “there can be no more reprehensible conduct than to lie and defraud the other party and to utterly fail–intentionally—to perform the duties promised.” While Target Media claimed that the verdict would have a significant impact on its financial position, the trial court noted that the company had annual revenues in the millions of dollars. The court further recognized that the punitive to compensatory ratio of three to one was not excessive. In affirming the award, the Court noted that the punitive damages were “sufficient to punish Target Media and Leader and to deter them from further misconduct, without compromising their due-process rights.”

Read the full decision.


Door-Closing Statute Dismissal Determination
Deemed Improper

CAG MLG, L.L.C.  v. Bart Smelley and Smelley Family Investments, L.L.C., (Supreme Court of Alabama; No. 1130659; September 19, 2014).

Alabama Supreme Court finds that a dismissal of Plaintiff’s Complaint for failure to register pursuant to Alabama’s door closing statute was improper as the failure to register was not apparent from the Complaint.

CAG sued Smelley alleging counts of fraud, misrepresentation, unjust enrichment and injunctive relief. Smelley filed a Motion to Dismiss alleging that CAG was “not registered or qualified to do business in the State of Alabama.” The motion to dismiss was granted upon application of Alabama’s door-closing statute which provides that “A foreign entity transacting business in this state, except a corporation or other organization formed under federal law, may not maintain any action, suit, or proceeding in any court of this state until it has registered in this state.” Code of Ala. § 10A-1-7.01.

On appeal, the Alabama Supreme Court noted that, had the exhibits to the motion to dismiss indicating that CAG was not registered in the State of Alabama been considered, the motion to dismiss would have been converted to a motion for summary judgment. The Court reasoned that, because the motion to dismiss had not been converted to a motion for summary judgment, dismissal of CAG’s complaint was proper only if CAG’s alleged lack of capacity pursuant to the door-closing statute was evident from the face of CAG’s complaint. As it was not so evident, the Court found that the dismissal of the complaint was due to be reversed.

Read the full decision.

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