Chatman v. Lawlor, 01-CV-854, 01-CV-861.

• Decision Date: 04 September 2003
• Docket Number: No. 01-CV-854, 01-CV-861.,01-CV-854, 01-CV-861.
• Parties: Lavern J. CHATMAN, Appellant, v. James L. LAWLOR, et al., Appellees. James L. Lawlor, et al., Appellants, v. Lavern J. Chatman, Appellee.
• Court: D.C. Court of Appeals

831 A.2d 395

Lavern J. CHATMAN, Appellant, v. James L. LAWLOR, et al., Appellees.

James L. Lawlor, et al., Appellants, v. Lavern J. Chatman, Appellee.

No. 01-CV-854, 01-CV-861.

District of Columbia Court of Appeals.

Argued December 17, 2002.

Decided September 4, 2003.

David J. Cynamon, with whom Matthew A. Anzaldi was on the brief, Washington, DC, for Lavern Chatman.

Paul H. Zukerberg, Washington, DC, for James L. Lawlor, et al.

Before TERRY, RUIZ, and GLICKMAN, Associate Judges.

TERRY, Associate Judge:

Appellant, Lavern Chatman, seeks reversal of the trial court's decision to hold her jointly and severally liable for $1.4 million in punitive damages because of her involvement in a fraudulent conveyance. Appellant argues (1) that there was insufficient evidence of malice to permit the court to award punitive damages, and insufficient evidence of her net worth to support an award in that amount; (2) that the trial court abused its discretion by refusing to hear testimony—which was available but not presented at trial—about her net worth before denying her post-trial Rule 60(b) motion; and (3) that the award of punitive damages was so excessive that it violated her due process rights. We affirm the trial court's finding of liability and its denial of appellant's post-trial motion, but remand for further proceedings to determine her net worth and the appropriate measure of damages. Because appellant's net worth was not adequately established at trial, we do not reach her due process argument.

I

In 1996, a group of 297 plaintiff-employees of the J.B. Johnson Nursing Home ("the employees") brought a class action against Urban Shelters & Healthcare, Inc., the company that managed the nursing home, alleging violations of the District of Columbia wage payment law. See D.C.Code § 36-108 (1997). Urban Shelters was a private corporation of which Roy Littlejohn owned all the stock. Also named as defendants were Roy Littlejohn, his wife and daughter, and another corporation which he controlled.¹ On May 6, 1998, at the end of a non-jury trial, the trial judge announced in open court that the corporate veil was to be pierced and found each defendant—the two corporations, Roy Littlejohn, his wife Marilyn, and their daughter Robin—jointly and severally liable for $1,447,651.99 in damages.

Instead of immediately entering judgment, the judge asked each party to draft written findings of fact and conclusions of law consistent with his oral ruling. On May 20, 1998, the judge issued his written findings and signed the judgment. However, on May 8, only two days after the Littlejohns heard that they would be held personally liable for over $1.4 million (but before the judgment was entered), they conveyed all of their personal property to appellant, a longtime friend and associate with whom Roy Littlejohn had had a friendship and business relationship spanning fifteen years.² Roy Littlejohn and appellant prepared a Bill of Sale and a Lease Agreement to document the transaction. According to the Bill of Sale, appellant paid $16,640 for all personal property contained in the Littlejohns' residence, $3,400 for their jointly owned 1988 Volvo, and $6,500 for Roy Littlejohn's individually owned 1991 Jaguar—a total of $26,500.

Appellant never took actual possession of this property, but immediately "leased" it back to the Littlejohns. Under the Lease Agreement, appellant was to receive $500 per month for the Littlejohns' use of the cars, and $500 per month for their use of the household property. Roy Littlejohn cashed appellant's $26,500 check, and then immediately gave her $10,000 for what he later described as a ten-month "pre-payment" on the lease. Thereafter, however, Littlejohn never made another payment to appellant, nor did she attempt to enforce the lease once the payments stopped.

On August 21, 1998, a Deputy United States Marshal arrived at the Littlejohns' home to execute a writ of attachment on their personal property to enforce the court's judgment. Roy Littlejohn greeted the marshal with the aforementioned documents and informed him that he was no longer the owner of the property. A few days later, on August 26, the employees filed a second suit (the instant case) against the Littlejohns and appellant, alleging that the purported sale of the Littlejohns' property to appellant was a fraudulent conveyance made with the "intent to hinder, delay, and defraud the plaintiff/creditors," in violation of D.C.Code §§ 28-3104(a) and 28-3105 (1996), and that the defendants had engaged in a conspiracy to violate these statutes. The employees asked the court to invalidate the sale and sought the value of the transferred assets in actual damages and $1.4 million in punitive damages.³

On March 6, 2001, almost three years after the second suit was filed, the case went to trial before a different judge. The crux of appellant and Littlejohn's defense was that the property had been transferred to appellant as collateral for a series of loans appellant made to Roy Littlejohn throughout 1998.⁴ When questioned about the peculiar nature of this transaction, appellant testified that she had never seen a bill of sale or a lease, nor did she know how a lease worked despite her substantial education and business experience.⁵

After a three-day non-jury trial, the court found appellant and Roy Littlejohn liable on all three counts of the complaint, but also found that "the evidence was not sufficient to show that Mrs. Littlejohn was involved in the fraudulent transfer ...." The court explicitly rejected appellant's testimony, finding it to be "patently incredible." It further found that "the papers drawn up by the parties were entirely bogus, and that anyone with Ms. Chatman's background and sophistication knew it." The court was therefore satisfied that "the plaintiffs have demonstrated by the preponderance of the evidence that the two were engaged in a civil conspiracy to defraud."⁶ The court also found appellant and Littlejohn jointly and severally liable for $1.4 million in punitive damages, ruling that there was "clear and convincing evidence that Mr. Littlejohn and Ms. Chatman acted with evil motive, actual malice and with willful disregard for the rights of the plaintiffs." The court characterized their behavior as "outrageous and grossly fraudulent," especially considering the disparity in wealth between appellant and Littlejohn and the "people whom they scammed." The court also described the transaction as a "deliberate scheme to get around a lawful judgment," and stated that in its opinion "each defendant needs to be punished for their conduct [and] each defendant needs to serve as an example to prevent others from acting in a similar way."

Following the trial, appellant filed a "motion to remit or, in the alternative, set aside the punitive damage award," citing Superior Court Civil Rules 59(a), 59(e), and 60(b). The court denied that motion after a hearing, and appellant noted the instant appeal, contesting both the award of punitive damages and the amount awarded.⁷

II

Appellant makes a twofold challenge to the sufficiency of the evidence supporting the award of punitive damages. First, she argues that there was no clear and convincing evidence of malice because she did not have specific knowledge about the judgment against Littlejohn when she entered into the allegedly fraudulent transaction. Second, she argues that the employees did not adequately establish her net worth. We reject appellant's argument that there was no clear and convincing evidence of malice, but we agree that there was insufficient evidence of her net worth to sustain the punitive damages award.

A. Malice

Punitive damages may be awarded "only if it is shown by clear and convincing evidence that the tort committed by the defendant was aggravated by egregious conduct and a state of mind that justifies punitive damages." Jonathan Woodner Co. v. Breeden, 665 A.2d 929, 938 (D.C.1995), cert. denied, 519 U.S. 1148, 117 S.Ct. 1080, 137 L.Ed.2d 215 (1997). The requisite state of mind has been described by this court on numerous occasions. See, e.g., Vassiliades v. Garfinckel's, Brooks Brothers, Miller & Rhoades, Inc., 492 A.2d 580, 593 (D.C.1985) ("outrageous conduct which is malicious, wanton, reckless, or in willful disregard for another's rights" (citations omitted)). When dealing specifically with cases in which the underlying tort is fraud, we have required, for punitive damages, that the tort be accompanied by "outrageous conduct such as maliciousness, wantonness, gross fraud, recklessness and willful disregard of another's rights." Riggs Nat'l Bank v. Price, 359 A.2d 25, 28 (D.C.1976).⁸ The record in this case supports the trial court's finding, by clear and convincing evidence, that appellant's conduct was outrageous, grossly fraudulent, and in willful disregard of the employees' rights. We cannot overlook the massive scale of the fraud, which was designed to defraud not just one, but 297 persons. Another factor making appellant's actions particularly egregious and oppressive was the enormous disparity of wealth between appellant and the employees. While her exact net worth may be a matter of debate, as we shall discuss later in this opinion, she is indeed a very wealthy woman.⁹ As for the employees, the trial court described their situation by stating, "based on the type of employment that [they] had ... people in that economic situation ... literally suffer when they don't get a paycheck." Yet, despite the employees' precarious financial situation, which was attributable in large part to Mr. Littlejohn and the collapse of Urban Shelters (as the first lawsuit showed), appellant willingly engaged in a fraudulent transaction with Mr. Littlejohn that prolonged their financial distress by forcing them to endure yet another lawsuit in order to receive their due compensation.

Although appellant does not challenge the court's finding that she...