Hoffmann v. Clark
Decision Date | 17 June 2022 |
Docket Number | 19–2086 |
Citation | 975 N.W.2d 656 |
Parties | Jerry HOFFMANN and Hoffmann Innovations, Inc., d/b/a DIY AutoTune, Appellees, v. Scott CLARK and RealTuners, LLC, Appellants. |
Court | Iowa Supreme Court |
Matthew G. Sease (argued) and Kylie E. Crawford (until withdrawal) of Sease & Wadding, Des Moines, for appellants.
Seth N. Katz (argued) of Shepherd Law, LLC, Atlanta, Georgia, and Robert M. Livingston of Stuart Tinley Law Firm, LLP, Council Bluffs, for appellees.
McDermott, J., delivered the opinion of the court in which all participating justices joined. Christensen, C.J., took no part in the consideration or decision of the case.
A jury awarded Hoffmann Innovations, Inc., and its owner Jerry Hoffmann $11 million in compensatory and punitive damages against a fired employee, Scott Clark, and his new competing company based mainly on defamatory statements that Clark made on social media, online forums, and in podcasts. During the course of the litigation, the district court sanctioned Clark for violating a consent order that prevented both sides from making any statements about one another—particularly online statements—outside the litigation. But the court's contempt orders and sanctions for Clark's violations of the consent order didn't stop Clark from continuing to disparage Hoffmann. After several failed attempts to secure compliance with increasing sanctions, the court struck Clark's pleadings—most importantly, his answer and affirmative defenses. Without any defense pleaded to the petition's claims, trial proceeded on the only outstanding issue: the amount of damages.
Clark and his business appealed the $11 million verdict, arguing principally that the district court erred in striking their pleadings and that the verdict was excessive. We transferred the case to the court of appeals, which affirmed the district court's judgment. Clark and his business sought further review, which we granted.
Jerry Hoffmann is the CEO and part-owner of Hoffmann Innovations, Inc., a Georgia-based corporation that does business as DIY AutoTune. The company provides products and training for do-it-yourself "car tuning," a general term that refers to modifications to improve the appearance, performance, or handling of a vehicle from its original design. Hoffmann Innovations during times relevant to this case employed around twenty people. Clark was hired based on his acknowledged car tuning abilities. At Hoffmann Innovations, he conducted tuning classes for Hoffmann's customers on how to use Hoffmann's highest-end products, all in an effort to "create an army" of tuning enthusiasts who knew how to use the company's offerings. Clark also performed engine tuning for Hoffmann Innovations’ sponsored racers. Clark signed a noncompete agreement with Hoffmann Innovations that prevented him from owning or managing any competing entity for two years after ending employment and that prevented him from disclosing any of Hoffmann Innovations’ confidential business information or trade secrets.
Hoffmann fired Clark in August 2016, about a year and a half into Clark's tenure with Hoffmann Innovations, citing workplace misconduct and insubordination. Hoffmann claimed that Clark had conducted secret training classes using Hoffmann Innovations’ products and materials and kept the profits for himself. Hoffmann recorded the phone call when he fired Clark. During the call, Clark requested a severance package and suggested that if he didn't receive one, he might make a "social media stink." About seven months after he was fired, Clark created his own entity, RealTuners, LLC, which would compete with Hoffmann Innovations’ tuning classes.
In July 2017, Hoffmann and Hoffmann Innovations sued Clark and RealTuners for defamation, civil extortion, breach of the employee duty of loyalty, breach of contract, and unjust enrichment. Clark's and RealTuner's answer denied these claims; asserted an affirmative defense that the statements were truthful; counterclaimed for defamation, intentional interference with prospective business advantage, and invasion of privacy (false light); and requested an injunction.
The consent order also prevented the parties from providing a platform for third parties to make disparaging comments about the other party and from filing any new complaints against each other. And finally, the order instructed that if they were asked by a third party about the other's abilities, products, employees, or services, they would respond, The order stated that a violation of its terms may result in sanctions, including reasonable attorney fees.
Starting within about two months of the court's entry of the consent order, Hoffmann and Hoffmann Innovations started bringing separate motions for sanctions against Clark and RealTuners for violations of the consent order—twelve in total over the next year. Most of the motions alleged that Clark or RealTuners made disparaging statements on Facebook about Hoffmann personally, Hoffmann Innovations’ products, Hoffmann Innovations’ business practices, and even the judges assigned to the case. One day after Hoffmann and Hoffmann Innovations’ second motion for sanctions, Clark's attorney moved to withdraw from the case, citing a breakdown in the attorney–client relationship. The court of appeals opinion in this case provides a detailed summary of each of the motions for sanctions. Hoffmann v. Clark , No. 19-2086, 2021 WL 1907746, at *3–11 .
Clark proceeded pro se for a time, representing himself on about a half-dozen motions for sanctions and several contempt proceedings for violating the district court's orders. A pattern developed in which Clark would agree at a sanctions hearing to stop posting comments in violation of the consent order, and then shortly thereafter would post on social media or racing industry forums that Hoffmann Innovations’ products were faulty or that Hoffmann was paying people to lie about the products. Some of Clark's more egregious violations over the year include the following:
After Hoffmann's fourth motion for sanctions and after the court had held two other hearings for sanctions, the court sanctioned Clark by striking his answer and counterclaims. With his answer and counterclaims struck, Hoffmann's allegations in the petition were deemed admitted, and the only remaining issue for trial was Hoffmann's and Hoffmann Innovations’ damages.
The district court also ruled that Clark had committed a bevy of discovery violations for refusing to turn over social media information from his personal, business, and two alias accounts. The district court held Clark in contempt at least six times. He was repeatedly fined and, several times, even sentenced to jail for his contempt: once for thirty days, once for an indefinite term until he complied with discovery, and once for sixty days. Indeed, Clark failed to appear at a hearing because he feared incarceration. He stated that he needed to leave Iowa and posted online that it was "because some shady judges, lawyers, and a hyper-wealthy stalker who believes Jesus told him to kill me, are winning." This caused the court to issue a warrant for his arrest. Clark never paid any of the fines or attorney fees for his court-ordered sanctions.
Before trial, the plaintiffs submitted with their proposed jury instructions a list of "undisputed facts for trial" from the facts in the petition. Over an objection from Clark's new lawyer at trial, the district court read these facts to the jury and later provided them to the jury with the jury instructions. Hoffmann also filed, and the court granted, a motion in limine to...
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