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Tort/Negligence — Defamation & Breach of Fiduciary Duty – Attorneys’ Fees – First Impression – Punitive Damages – Trusts & Estates

Lacey v. Kirk (Lawyers Weekly No. 15-07-0017, 50 pp.) (Sam Ervin IV, J.) Appealed from Alamance County Superior Court (G. Wayne Abernathy, J.) N.C. App.

Holding: The fact that plaintiffs received a large punitive damages award does not justify a reduction in the amount of attorneys’ fees awarded to them.

We affirm the judgment in favor of plaintiffs and the denial of defendant’s post-trial motions. We vacate the award of attorneys’ fees and remand for reconsideration.

Facts

Mary Longest was defendant’s mother and plaintiffs’ grandmother. In her will, she left half of her estate to defendant and half to plaintiffs. She named defendant as executrix.

Defendant accused plaintiff Lacey of murdering Longest by poison, and defendant accused both plaintiffs of stealing from Longest. Police investigated plaintiff’s assertions and determined that they had no merit. Defendant stipulated that her murder accusations were untrue.

Defendant delayed administration of Longest’s estate, despite her knowledge that plaintiff Lucas was in financial distress and in danger of losing his home. She failed to place the estate’s cash ($160,000) in an interest-bearing account. Even after she was removed as executrix, she failed to cooperate with the estate’s administration.

On plaintiffs’ breach of fiduciary duty claim, the jury awarded each plaintiff $6,569.02 in compensatory damages and $300,000 in punitive damages. The trial court reduced the punitive damage awards to $250,000 in accordance with G.S. § 1D-25.

On plaintiff Lacey’s defamation claim, the jury awarded her $50,000.

Finally, the trial court awarded plaintiffs $93,709 in attorneys’ fees.

Analysis

The trial court’s statements to defendant (“Tell the truth” and “Answer the question first”) were within the court’s authority to control the examination of witnesses. Taken in context, they did not prejudice defendant.

Although the trial court exhibited some impatience during the trial, the court meted out equal treatment to counsel for both parties. Defendant’s argument – that the trial court made inappropriate comments to defense counsel that tainted the atmosphere of the trial to the detriment of defendant – lacks merit.

Evidence of defendant’s failure to place the estate’s cash and other assets in interest-bearing accounts for more than two years supports the jury’s award of $6,569.02 in compensatory damages to each plaintiff for defendant’s breach of fiduciary duty. Even though plaintiff Lucas was entitled to more of the estate’s assets than plaintiff Lacey, defendant has no right to complain about the manner in which the jury elected to apportion the damage amount between plaintiffs.

Damages

With no legitimate reason, defendant denied plaintiffs access to property that had been bequeathed to them for an extended period of time and engaged in this conduct at a time when one of them was suffering from significant financial difficulties. Defendant made baseless accusations that plaintiffs had committed murder, attempted murder, and larceny in an attempt to avoid making any distribution of the assets of the estate to plaintiffs.

In the course of depriving plaintiffs of their rightful inheritance, defendant ignored official determinations that Longest had died of natural causes and that there was no evidence that any theft had taken place.

Finally, defendant refused to cooperate with the estate administration process even after her removal as executrix.

Defendant’s conduct was exceedingly reprehensible.

The 38 to 1 ratio of punitive to compensatory damages is similar to ratios that this court has upheld in other cases.

The trial court did not err by denying defendant’s motion for a new trial with respect to the amount of the punitive damage award.

Defendant falsely told numerous third parties – including several of the parties’ relatives – that plaintiff Lacey had caused Longest’s death. Since this was slander per se, plaintiff Lacey was not required to plead or prove special damages. In any event, plaintiff Lacey’s testimony established that she experienced significant emotional trauma stemming from defendant’s false accusations. The trial court did not err by denying defendant’s motion for a new trial based on the defamation damage award.

Attorneys’ Fees

Plaintiffs sought attorneys’ fees of at least $262,744.64.

The trial court found that, despite the fact that the evidence clearly established defendant’s liability for breach of fiduciary duty and defamation, defendant had persisted in defending against plaintiffs’ claims, thereby necessitating a four-day jury trial. In addition, the trial court found that defendant’s conduct during the course of the litigation caused plaintiffs to unnecessarily incur substantial additional attorneys’ fees.

The trial court found that plaintiffs had incurred more than $255,000 in reasonable attorney’s fees and expenses that could properly be taxed pursuant to G.S. § 7A-305(d). Nevertheless, the trial court only awarded plaintiffs $93,709 in attorneys’ fees, noting that it would have awarded a much greater amount except for the fact that defendant had been ordered to pay a substantial amount of punitive damages.

A substantial punitive damages award has no reasonable bearing on the making of a proper attorneys’ fee award. Consequently, the use of a substantial punitive damages award as the sole reason for reducing an otherwise reasonable attorney’s fee award constitutes an abuse of discretion.

The purposes of awarding punitive damages and awarding attorneys’ fees are different. Punitive damages are awarded as punishment for a wrongdoer’s outrageous conduct. An attorney’s fee award (1) restores plaintiffs to the same position they would have been in had no breach of fiduciary duty occurred, G.S. § 6-20, or (2) discourages frivolous legal action, G.S. § 6-21.5.

Allowing the trial court to reduce the amount of attorney’s fees awarded to a prevailing plaintiff in this situation punishes, rather than rewards, a successful litigant.

Affirmed in part; vacated and remanded for reconsideration in part.


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