Alston & Bird LLP v. Hatcher Mgmt. Holdings, LLC

• Decision Date: 21 May 2020
• Docket Number: A20A0217, A20A0218
• Citation: 843 S.E.2d 613,355 Ga.App. 525
• Court: Georgia Court of Appeals
• Parties: ALSTON & BIRD LLP v. HATCHER MANAGEMENT HOLDINGS, LLC; and vice versa.

355 Ga.App. 525

843 S.E.2d 613

ALSTON & BIRD LLP

v.HATCHER MANAGEMENT HOLDINGS, LLC; and vice versa.

A20A0217, A20A0218

Court of Appeals of Georgia.

May 21, 2020

Reconsideration Denied June 16, 2020

Robbins Ross Alloy Belinfante Littlefield, Richard L. Robbins, Jason S. Alloy, Jeremy U. Littlefield, Rachel F. Gage, for Alston & Bird, LLP.

Caldwell Propst & DeLoach, Harmon W. Caldwell, Jr., Harry W. MacDougald, Jeremy M. Moeser, Christine D. Buckler, for Hatcher Management Holdings, LLC.

Colvin, Judge.

This is the second appearance of this legal malpractice matter before this Court. In a prior interlocutory appeal, we held that to the extent that defendant Alston & Bird LLP, could prove that nonparties such as Maury Hatcher, the former manager of plaintiff Hatcher Management Holdings, LLC (HMH), breached a duty proximately causing injury to HMH, the jury would be allowed "to assign ‘fault’ to" Maury. (Punctuation omitted.) Alston & Bird LLP v. Hatcher Management Holdings , 336 Ga. App. 527, 530, 785 S.E.2d 541 (2016) (" Hatcher I "), quoting Zaldivar v. Prickett , 297 Ga. 589, 604 (2), 774 S.E.2d 688 (2015). After finding Maury 60 percent at fault, a jury awarded HMH compensatory damages, interest, and attorney fees totaling more than $2.1 million. On the rationale that the jury had found Alston & Bird only 32 percent at fault, the trial court reduced HMH's award to $683,522.07.

On appeal in Case No. A20A0217, Alston & Bird argues that the evidence was insufficient on the issue of proximate cause and that the trial court erred when it submitted the issue of prejudgment interest to the jury. On cross-appeal in Case No. A20A0218, HMH argues that the trial court's reduction of HMH's compensatory and attorney fee awards was erroneous and that the court erred in granting Alston & Bird's motion in limine concerning proceedings in prior litigation involving Maury. We affirm the jury's verdict, but we reverse and remand with direction as to prejudgment interest, compensatory damages, and attorney fees.

Where a jury returns a verdict and it has the approval of the trial judge, the same must be affirmed on appeal if there is any evidence to support it as the jurors are the sole and exclusive judges of the weight and credit given the evidence. The appellate court must construe the evidence with every inference and presumption in favor of upholding the verdict, and after judgment, the evidence must be construed to uphold the verdict even where the evidence is in conflict. As long as there is some evidence to support the verdict, the denial of defendant's motion for new trial will not be disturbed.

(Citation and punctuation omitted.) Quay v. Heritage Financial , 274 Ga. App. 358, 362-363 (4), 617 S.E.2d 618 (2005).

Thus viewed in favor of the verdict, the record shows that in 2000, Maury hired Alston & Bird and its partner, Jack Sawyer, to form and represent HMH, a holding company for the Hatcher family fortune. Sawyer prepared HMH's operating agreement and presented it to family members at a March 2001 organizational meeting. The operating agreement included provisions that any member "shall have the right at any time, for any purpose reasonably related to such [m]ember's [m]embership [i]nterest, to inspect and copy from [the company's] books and documents," and that the manager(s) would be responsible for delivering a yearly "profit and loss statement" and "a balance sheet" representing the "financial condition of the [c]ompany as of the date indicated[,]" as well as quarterly "statement[s] showing the amounts distributed to each [m]ember during [each] calendar quarter " of the fiscal year. (Emphasis supplied.) The family members signed the operating agreement even though it did not list the individual members’ ownership interests (as was the norm in such agreements), but did allow Maury to see such information (as empowered at Maury's request). Sawyer did not point out these features to the members present at the organizational meeting.

For the next seven years, Maury managed HMH and was the only member in regular contact with Sawyer. Starting in 2005, however, Maury began embezzling company funds, eventually paying himself $876,500 in compensation and $218,000 in distributions. In the spring of 2008, other family members, including Maury's brother Jerry, raised concerns about a lack of information about company affairs. In response to these concerns, and at Maury's request, Sawyer issued a May 2008 letter describing Maury's broad authority but not responding to members’ requests to see company records.

On June 5, 2008, Maury sent a letter to Jerry asking him to withdraw from HMH. On July 21, Maury sent a second letter to Jerry saying that Sawyer had "indicated" that Jerry was not entitled to information about members’ ownership interests and income. At trial, HMH's expert witness testified that this statement was incorrect and that the members’ ownership interests should have been disclosed to Jerry.

At a family meeting held on August 2, 2008, Maury's brother Barry asked Maury why members "weren't being allowed to see information" about members’ draws or pay, objecting that "we have no way [of] having checks and balances" over Maury's management and "simply take your word for it." When Maury assured Barry that the operations of the company were "reconciled," Barry said that "all the members except you have tunnel vision and cannot know" whether the company's affairs were being conducted equitably and in accordance with "the rules and bylaws." Barry then raised the possibility of calling in his own accountant to ask Maury about the company's affairs, but Maury said that he would "not necessarily" respond to such inquiries. Barry again asked for a listing of the members' "percentage ownership and the amount they draw every year," but Maury again responded that this was "not appropriate."

In the course of and following this exchange, Sawyer confirmed that members could have the information only if there were majority approval for replacing Maury or full disclosure, or if the other members "went to [c]ourt" and obtained a ruling to "compel Maury to turn that information over." Sawyer also suggested that "full disclosure" would cost the family "$25,000 a year." As we have noted, however, the operating agreement required the manager to provide members with "a statement showing the amounts distributed to each [m]ember ... for each previous calendar quarter during the fiscal year." Sawyer testified at trial that he did not recall this provision and its reporting requirements when he advised the members as he did, and that he did not refer to the agreement or its terms at the August 8 meeting.

In the weeks following the meeting, Maury discussed redeeming his and his immediate family's interest in HMH with Sawyer at least three times, and also told Sawyer that he planned to move to Florida. On October 31, Maury redeemed his family's interests, paying himself $397,000 more than they were worth. Neither Sawyer nor Maury disclosed the redemption to the rest of the members before Maury announced his resignation on January 2, 2009, soon after which he moved to Florida and bought a house. At trial, Barry testified that if he and other family members "[had] known [at the time of the August 2008 meeting] that we were entitled to [HMH's] records ..., we would have seen that Maury had been stealing money from the company" and "could have filed suit against Maury to have the funds recovered." Sawyer admitted at trial that HMH could have used Maury's membership interest to repay much of what had been stolen.

On January 16, 2009, the members fired Maury as manager and appointed Jerry and Barry in his stead. On February 2, and despite a warning from a junior attorney about an actual conflict of interest, Alston & Bird sent Jerry and Barry a cease-and-desist letter demanding that they stop interfering with HMH's interests. In early February, as they worked on a second cease-and-desist letter, the junior attorney again warned Sawyer of the conflict between the firm's representation of Maury and that of the company under new management. On February 27, Maury and Sawyer presented Jerry and Barry with a universal release from any claims or litigation, to be signed in exchange for the return of HMH's records. Jerry refused to sign the release, however.

In August 2009, HMH hired an accountant, Mark Zyla, to examine the company's records. Although Maury refused to provide what appeared to be missing documents, Zyla determined that Maury had misappropriated approximately $1.492 million from the company by means including improper distributions, improper compensation, and overvaluation of his interest in HMH at the time of redemption. Zyla also calculated the interest due on this sum, from Maury's October 2008 redemption to trial, at $971,044. In December 2009, HMH sued Maury, eventually receiving a judgment of over $4 million, which HMH has not been able to collect.

In May 2012, HMH filed this action against Alston & Bird for legal malpractice and breach of fiduciary duty. The law firm moved for summary judgment on grounds including that HMH's damages were not proximately caused by the firm. After a hearing, the trial court denied the motion. The law firm's motion for a directed verdict was taken under advisement. At trial, HMH introduced evidence in support of a jury award (including compensatory damages, interest, and litigation expenses, but not including punitive damages) of over $2.5 million. The jury found Alston & Bird liable for both legal malpractice and breach of fiduciary duty and awarded compensatory damages of $697,614, prejudgment interest of $341,831, and attorney fees and costs of $1,096,561.48, for a total award of $2,136,006.48.¹ The jury also apportioned fault for Alston & Bird at 32 percent, HMH at 8 percent, and nonparty Maury at 60 percent. The trial court then reduced the verdict by 68 percent and entered judgment accordingly. After a...