Monday, December 15, 2014

This Litigation Goes to Eleven . . . Days of Trial, That Is

Ring v. Carriage House Condominium Owners’ Assoc., 2014 VT 127

By Elizabeth Kruska

This case has to do with a “longstanding feud” (SCOV’s actual description of the situation) between a condo association and one of the individual property owners in the association. For those who have never lived in a condo association, lemme tell you, feuds are de rigeur in such associations. In fact, I wouldn’t be surprised if some had a clause in their bylaws requiring that there must be one or more ongoing feuds between various owners and the association at all times.

There are five different players in this case: Plaintiff Ring and the four defendants including the Association, Maroldt, Morrison, and Beck. Morrison and Beck were married; Mr. Morrison died.

Here’s the story. Way back in 1996, Ring buys two unfinished condo units in a building. There was an issue about development rightshe paid for the ability to develop without permission of the Association, although the neighbors thought the Association had to okay it. In any case, Ring got a permit to do some development, and the Association sued him. But he applied for a permit, and the permit was approved, so he started doing construction.

Then the neighbors in the building sued Ring and joined the Association. The Association hired an engineer to take a look at Ring’s development project. There were some issues with the construction going on. The engineer made suggestions to bring the project up to code, so Ring did that so that the project could go forward and so he could get a certificate of occupancy.

Mid-dispute, a neighbor (Maroldt) writes to the Office of Professional Regulation about Ring’s project in an effort to shut it down. It would appear that the neighbor who did this was trying to disagree with the Association’s own engineer simply to get the project to stop. Ring wins the dispute, and the project gets done, despite the neighbors’ and Association’s attempt to prevent him from doing so.

In 2006, Ring sues the Association and some neighbors saying that they, in bad faith (over several years at this point) tried to thwart his development efforts that were perfectly permissible. The parties tried the case, and it took eleven days. Eleven.

The court awarded Mr. Ring $1230 in compensatory damages and $3000 in punitive damages. Yes, this was after eleven days of trial. The Court found that although Ring had suffered some damages, he wasn’t completely blameless in this whole mess.

Mr. Ring filed a post-trial motion asking for $45,000 in compensatory damages. The court said no – some of the rates used to calculate the amount was inflated. There was also an issue relative to punitive damages. Initially only one neighbor was added as a party. Then one of the neighbors, Morrison, died, and his estate wasn’t properly added. However, Beck was Morrison’s business partner in a real estate business. The court held Mrs. Beck jointly and severally liable for the Beck-Morrison punitive damages. Since she was still living, she ended up with the whole of the punitive damage award. Punitive damages got recalculated and ultimately became $32,000.

Then Mr. Ring filed a motion for attorney’s fees, asking for $350,000. The trial court said, “no way.” The trial court awarded $90,000 in attorney’s fees, finding that the lawsuit was pretty much based on revenge and went on way longer than it should have.

What happens next? An appeal, obviously, because otherwise SCOV wouldn’t have anything to do with this.

First SCOV tackles the attorney fee issue. Vermont follows the “American Rule” which says “pay your own attorney fees unless it’s agreed otherwise or a statute says so.” We pay our own fees because this is America, and that’s what we do here. I also rather like the phrase, “this is America” and I use it liberally when doing such things as eating too much bacon and playing with sparklers on Thanksgiving.

Anyway, SCOV says that fees are calculated on the lodestar method, which is to take a reasonable hourly fee and multiply it by the time worked. Then it can be adjusted, based on various factors, like the novelty of an issue, the experience of the lawyer, and the result of the litigation. SCOV finds the trial court applied the right legal standard, so that ruling stands.

SCOV also points out that the trial court wrote a twenty-seven page opinion on attorney fees, and made findings that a lot of what happened was unnecessary. The parties clearly didn’t like each other, and engaged in litigation for the sake of litigation. The case wasn’t complicated, and the damages available were fairly limited. It’s not like someone exposed the recipe for Coca Colait was a condo construction dispute.

Finally, SCOV isn’t going to award pre-litigation attorney fees. The trial court didn’t, and SCOV doesn’t find that the refusal to do that was error.

Prejudgment interest was also an issue raised. SCOV denies Ring’s request. This is allowable when the amount is reasonably known. Here, the damage amount wasn’t known. The whole point of pre-judgment interest is to restore the party to the time before the harm occurred. SCOV points out that the amount wasn’t known. Also, the trial court found that both sides bore some responsibility for the “excessive litigation” in the case, and so the fact the trial court didn’t award pre-judgment interest was not an abuse of discretion.

The other part of this appeal was a cross-appeal. Mrs. Beck appealed the trial court’s award of punitive damages and putting them all on her. She said the court didn’t make appropriate findings to support the punitive damage award, and that the defendants didn’t engage in criminal-level activity that would make punitive damages appropriate.

SCOV shuts this down in a hurry. Punitive damages don’t have to be based on conduct that rises to the level of criminal. This isn’t now, nor has it ever been the case. It’s just got to have the character of a willful and wanton or fraudulent tort. SCOV also points out that Maroldt and Morrison definitely acted in bad faith by trying to get the construction shut down by misrepresenting what was going on with the project – contrary to their own engineer’s findings. The court wrote very detailed findings about all this, and SCOV finds it amply supported.

SCOV also examines the issue of partnership. Sometimes in a partnership, one partner acts badly. Courts are divided about how to deal with this; is it fair to impute the one partner’s bad behavior to the others? Or not? Various courts react to this differently, depending on how the common law has evolved in their respective states. In Vermont, we’ve adopted the view that partners can’t be liable for the torts of another, unless they authorized, ratified, controlled, or participated in the acts. The trial court found that Beck was responsible because Beck and Morrison plotted against Ring and tried to thwart his project.

SCOV says that the partnership of Beck and Morrison worked to interfere with Ring’s project, that Beck knew about the obstructive actions, and that she participated in those actions both as a partner and as a member of the larger Association. Her participation was enough to put the punitive damage award on her shoulders.

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