Douglas v. Bigley, A05A1970.

• Decision Date: 08 March 2006
• Docket Number: No. A05A1970.,A05A1970.
• Citation: 628 S.E.2d 199,278 Ga. App. 117
• Parties: DOUGLAS et al. v. BIGLEY.
• Court: Georgia Court of Appeals

278 Ga. App. 117

628 S.E.2d 199

DOUGLAS et al. v. BIGLEY.

No. A05A1970.

Court of Appeals of Georgia.

March 8, 2006.

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Benjamin I. Fink, Steven A. Wagner, Berman, Fink & Van Horn, Atlanta, for appellants.

Joseph H. Fowler, Hartley, Rowe & Fowler, P.C., Douglasville, for appellee.

RUFFIN, Chief Judge.

Angela Bigley, individually and as trustee of the Angela R. Bigley Revocable Living Trust ("Bigley"), sued Michael Douglas, Pamela Douglas, Future Settlement Funding of Georgia, Inc. ("FSF"), and Expertfunding.Com Corporation ("Expertfunding") for various claims, including breach of contract, rescission, breach of fiduciary duty, and fraud. The case proceeded to trial, and the jury returned a general verdict against all defendants for damages, plus attorney fees and litigation expenses. The defendants appeal, claiming that the trial court erred in denying their motions for judgment notwithstanding the verdict. For reasons that follow, we reverse the judgment and remand for a new trial as to the tort claims against FSF and the Douglases.

In reviewing the denial of a motion for judgment notwithstanding the verdict ("j.n.o.v."), we apply the any evidence test.¹ We consider

not whether the verdict and the judgment of the trial court were merely authorized, but ... whether a contrary judgment was demanded. A [j.n.o.v.] is properly granted only when there can be only one reasonable conclusion as to the proper judgment; if there is any evidentiary basis for the jury's verdict, viewing the evidence most favorably to the party who secured the verdict, it is not error to deny the motion.²

Construed in this manner, the evidence shows that Bigley and the Douglases became neighbors in 1993, and Bigley began spending time with Mrs. Douglas, who referred to Bigley as her "best friend." Noting that the Douglases "seemed very successful," Bigley asked them about their investments and sought investment advice. In 1997, Mr. Douglas inquired whether Bigley wanted to invest in a business owned by one of his clients, and Bigley agreed to invest.

At the Douglases' invitation, Bigley attended a seminar later that year on litigation funding investment opportunities, which involv advancing money to individuals bringing personal injury claims. After the seminar, and based on advice from the Douglases, Bigley invested in a litigation funding entity known as Settlement Marketing, Inc. The Douglases then created their own company to fund personal injury cases, FSF, and approached her about investing. Believing that her other investments were performing well, Bigley decided to invest in the individual cases funded by FSF beginning in July 1998.

According to Bigley, her responsibility with respect to FSF was "just [to] come up with the money," while the Douglases invested the money in "good" personal injury cases. Bigley testified that the cases FSF invested in were "supposed to be seasoned," or pending for at least one or two years. In other words, FSF would not fund a claimant's case immediately after the injury; it would first evaluate the claim to determine whether it was a "good case or not." Mr. Douglas, who was FSF's marketing consultant, told Bigley that the injured party would pay back the money advanced by FSF, plus interest, once the case settled. Bigley would then receive a payment consisting of her original investment, plus a portion of the interest paid by the claimant.

Bigley asked Mr. Douglas whether the investments were legal, and he assured her that they were, noting that numerous attorneys were involved in the investments. Asserting that Mr. Douglas was her investment advisor, Bigley testified that she relied on this assurance. Bigley further testified that she took no part in deciding which cases FSF would fund and had no control over how her investment money was used. Mr. Douglas made such decisions for the company and, according to Bigley, "was very secretive." Mrs. Douglas, who was the president and chief executive officer of FSF, also took part in deciding whether FSF should fund a particular lawsuit.

Bigley knew that the investments were high risk and that she would not receive any money back if a case was lost. She also conceded that no one can predict an exact date when a lawsuit will be settled, won, or lost. Nevertheless, during the next 18 months, she invested over $69,000 in approximately 40 cases with FSF, receiving back $33,850 in original investment money plus $12,162.77 in profit on 21 cases. Of her remaining investments, at least six cases, and her corresponding investments, had been declared "losses" at the time of trial.

As Bigley made her investments, she was provided information about the amount invested in the case, a profit estimate for her investment, and a prediction for how long it would take the case to settle. According to Bigley, however, the cases took longer to settle than the initial estimates. And when Bigley asked Mrs. Douglas for more information about her investments, Mrs. Douglas refused to provide additional details.

Bigley made her last investment with FSF on February 3, 2000. The next day, she loaned $25,000 to Expertfunding, a new entity formed by Mr. Douglas, in exchange for a promissory note. Approximately one year later, Mr. Douglas, who served as the Expertfunding's president and chief executive officer, informed Bigley that he anticipated the company would be able to repay the loan, plus interest, within thirty to forty-five days.

By August 2001, however, Expertfunding had not fully repaid the loan, and Bigley was also concerned about her outstanding investments with FSF, which were not producing a return as quickly as she had expected. She thus began writing letters to the Douglases, asking about the status of the FSF cases, demanding a list of attorneys handling those cases, and inquiring about repayment of the Expertfunding loan. Brian Douglas, Michael Douglas' son, responded in writing that FSF could not provide her with a list of attorneys involved in the cases she had funded because of confidentiality issues. He also proposed an interest arrangement for the Expertfunding loan, which Bigley accepted.

Bigley ultimately began to question the legality of the investments with FSF, and she contacted the Georgia Secretary of State in August 2001. The Secretary of State's office conducted an investigation, concluding that FSF and Expertfunding, which, like FSF, engaged in litigation funding, had failed to register the investments with the Georgia Commissioner of Securities, in violation of several provisions of the Georgia securities laws. Accordingly, it issued a cease and desist order in 2003, directing FSF, Expertfunding, and the Douglases to stop violating these provisions. The order did not impact preexisting investments, such as Bigley's, or require the named parties to take any action with respect to those investments.

Bigley sued FSF, Expertfunding, and the Douglases in 2002, seeking return of her investment money. The trial court sent the case to the jury on the issues of breach of fiduciary duty, fraud, breach of contract, and rescission of an illegal contract. The jury returned a general verdict against all defendants, and the defendants appeal.

1. Claims against FSF and the Douglases.

(a) To support her breach of fiduciary duty claim, Bigley must prove the existence of such duty, breach of the duty, and damages proximately caused by the breach.³ A fiduciary or confidential relationship arises "where one party is so situated as to exercise a controlling influence over the will, conduct, and interest of another or where, from a similar relationship of mutual confidence, the law requires the utmost good faith, such as the relationship between partners, principal and agent, etc."⁴ Such relationship may be created by law, contract, or the facts of a particular case.⁵ Moreover, since "a confidential relationship may be found whenever one party is justified in reposing confidence in another, the existence of [this] relationship is generally a factual matter for the jury to resolve."⁶

At least some evidence supports the conclusion that a confidential relationship arose between Bigley, the Douglases, and FSF. The record shows that Bigley relied on FSF and the Douglases to control the manner in which her money was invested in litigation cases. Without input from Bigley, Mr. and Mrs. Douglas selected the lawsuits that would serve as the investment vehicle, then provided Bigley with only minimal information about the suits. When Bigley requested additional information, the Douglases and FSF declined to provide it. Furthermore, Mrs. Douglas testified that Bigley shared the risk of the investments with FSF. Under these circumstances, a jury could conclude that the Douglases and FSF controlled her interest to such an extent that a confidential relationship developed.⁷

The evidence also authorizes a finding of breach. Bigley testified that she inquired about the legality of the investments when she first began investing in FSF. According to Bigley, Mr. Douglas assured her that the investments were legal "since ... so many attorneys support[ed] the [litigation] funding." But Bigley presented evidence that the investment scheme violated the Georgia securities laws and, with respect to monetary advances to at least one personal injury litigant, required repayment at a monthly interest rate greater than five percent, in violation of OCGA § 7-4-18(a).

Although there is no evidence that FSF or the Douglases actually knew the investment scheme contravened any laws, a jury could conclude that they simply assumed the legality of FSF's conduct without investigating whether the financial arrangements complied with applicable laws. Based on this evidence, a jury could further find that FSF and the Douglases showed a reckless indifference to consequences equivalent to intent⁸ and breached a duty to Bigley by...